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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2022
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to             
Commission File Number: 001-33500
JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter) 
Ireland98-1032470
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Fifth Floor, Waterloo Exchange,
Waterloo Road, Dublin 4, Ireland D04 E5W7
011-353-1-634-7800
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary shares, nominal value $0.0001 per shareJAZZThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.






Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 
As of April 27, 2022, 62,318,745 ordinary shares of the registrant, nominal value $0.0001 per share, were outstanding.


Table of Contents
JAZZ PHARMACEUTICALS PLC
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

INDEX
 
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

We own or have rights to various copyrights, trademarks, and trade names used in our business in the U.S. and/or other countries, including the following: Jazz Pharmaceuticals®, Xyrem® (sodium oxybate) oral solution, Xywav® (calcium, magnesium, potassium, and sodium oxybates) oral solution, Epidiolex® (cannabidiol) oral solution, Epidyolex® (the trade name in Europe for Epidiolex), Sunosi® (solriamfetol), Defitelio® (defibrotide sodium), Defitelio® (defibrotide), CombiPlex®, Vyxeos® (daunorubicin and cytarabine) liposome for injection, Vyxeos® liposomal 44 mg/100 mg powder for concentrate for solution for infusion, Zepzelca® (lurbinectedin), Rylaze® (recombinant Erwinia asparaginase) and Sativex® (nabiximols) oral solution. This report also includes trademarks, service marks and trade names of other companies. Trademarks, service marks and trade names appearing in this Quarterly Report on Form 10‑Q are the property of their respective owners.





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PART I – FINANCIAL INFORMATION
 
Item 1.Financial Statements

JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$490,835 $591,448 
Accounts receivable, net of allowances572,392 563,360 
Inventories985,454 1,072,721 
Prepaid expenses117,399 131,413 
Other current assets243,888 252,392 
Assets held for sale90,888  
Total current assets2,500,856 2,611,334 
Property, plant and equipment, net257,632 256,837 
Operating lease assets83,412 86,586 
Intangible assets, net6,783,057 7,152,328 
Goodwill1,782,444 1,827,609 
Deferred tax assets, net314,672 311,103 
Deferred financing costs11,336 12,029 
Other non-current assets35,508 40,813 
Total assets$11,768,917 $12,298,639 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$73,336 $100,298 
Accrued liabilities604,710 666,304 
Current portion of long-term debt31,000 31,000 
Income taxes payable26,677 9,608 
Deferred revenue1,686 2,093 
Total current liabilities737,409 809,303 
Deferred revenue, non-current347 463 
Long-term debt, less current portion5,992,868 6,018,943 
Operating lease liabilities, less current portion83,078 87,200 
Deferred tax liabilities, net1,222,084 1,300,541 
Other non-current liabilities124,644 116,998 
Commitments and contingencies (Note 9)
Shareholders’ equity:
Ordinary shares6 6 
Non-voting euro deferred shares55 55 
Capital redemption reserve472 472 
Additional paid-in capital3,239,327 3,534,792 
Accumulated other comprehensive loss(590,720)(400,360)
Retained earnings959,347 830,226 
Total shareholders’ equity3,608,487 3,965,191 
Total liabilities and shareholders’ equity$11,768,917 $12,298,639 



The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended
March 31,
 20222021
Revenues:
Product sales, net$809,837 $603,531 
Royalties and contract revenues3,884 4,050 
Total revenues813,721 607,581 
Operating expenses:
Cost of product sales (excluding amortization of acquired developed technologies)115,284 40,189 
Selling, general and administrative308,813 260,508 
Research and development129,981 76,573 
Intangible asset amortization172,094 68,192 
Total operating expenses726,172 445,462 
Income from operations87,549 162,119 
Interest expense, net(70,684)(27,376)
Foreign exchange gain (loss)(10,540)943 
Income before income tax expense and equity in loss (gain) of investees6,325 135,686 
Income tax expense 536 18,019 
Equity in loss (gain) of investees4,142 (4,165)
Net income $1,647 $121,832 
Net income per ordinary share:
Basic$0.03 $2.16 
Diluted$0.03 $2.09 
Weighted-average ordinary shares used in per share calculations - basic61,865 56,468 
Weighted-average ordinary shares used in per share calculations - diluted62,907 58,393 















The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 Three Months Ended
March 31,
 20222021
Net income $1,647 $121,832 
Other comprehensive income (loss):
Foreign currency translation adjustments(190,488)(46,220)
Loss on fair value hedging activities reclassified from accumulated other comprehensive income (loss) to foreign exchange gain (loss), net of income tax benefit of $43 and $, respectively
128  
Loss on cash flow hedging activities reclassified from accumulated other comprehensive income (loss) to interest expense, net of income tax benefit of $ and $166, respectively
 1,160 
Unrealized loss on cash flow hedging activities, net of income tax benefit of $ and ($3), respectively
 (16)
Other comprehensive loss(190,360)(45,076)
Total comprehensive income (loss)$(188,713)$76,756 






















The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
 Ordinary SharesNon-voting Euro DeferredCapital
Redemption
Reserve
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Equity
SharesAmountSharesAmount
Balance at December 31, 202161,633 $6 4,000 $55 $472 $3,534,792 $(400,360)$830,226 $3,965,191 
Cumulative effect adjustment from adoption of ASU 2020-06— — — — — (333,524)— 127,474 (206,050)
Issuance of ordinary shares in conjunction with exercise of share options207 — — — — 21,729 — — 21,729 
Issuance of ordinary shares in conjunction with vesting of restricted stock units404 — — — — — — — — 
Shares withheld for payment of employee's withholding tax liability— — — — — (33,776)— — (33,776)
Share-based compensation— — — — — 50,106 — — 50,106 
Other comprehensive loss— — — — — — (190,360)— (190,360)
Net income— — — — — — — 1,647 1,647 
Balance at March 31, 202262,244 $6 4,000 $55 $472 $3,239,327 $(590,720)$959,347 $3,608,487 


 Ordinary SharesNon-voting Euro DeferredCapital
Redemption
Reserve
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Equity
SharesAmountSharesAmount
Balance at December 31, 202056,171 $6 4,000 $55 $472 $2,633,670 $(134,352)$1,159,894 $3,659,745 
Issuance of ordinary shares in conjunction with exercise of share options408 — — — — 50,407 — — 50,407 
Issuance of ordinary shares in conjunction with vesting of restricted stock units294 — — — — — — — — 
Shares withheld for payment of employee's withholding tax liability— — — — — (23,784)— — (23,784)
Share-based compensation— — — — — 34,565 — — 34,565 
Other comprehensive loss— — — — — — (45,076)— (45,076)
Net income— — — — — — — 121,832 121,832 
Balance at March 31, 202156,873 $6 4,000 $55 $472 $2,694,858 $(179,428)$1,281,726 $3,797,689 








The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 
 Three Months Ended
March 31,
 20222021
Operating activities
Net income $1,647 $121,832 
Adjustments to reconcile net income to net cash provided by operating activities:
Intangible asset amortization172,094 68,192 
Acquisition accounting inventory fair value step-up adjustment63,943  
Share-based compensation 50,070 34,485 
Deferred tax benefit(45,339)(19,110)
Non-cash interest expense12,168 15,688 
Depreciation7,617 4,779 
Provision for losses on accounts receivable and inventory2,170 1,083 
Other non-cash transactions(14,701)7,766 
Changes in assets and liabilities:
Accounts receivable(9,723)(18,245)
Inventories(24,812)(22,014)
Prepaid expenses and other current assets23,170 (2,897)
Operating lease assets3,095 3,690 
Other non-current assets979 157 
Accounts payable(27,617)51,292 
Accrued liabilities(23,241)13,719 
Income taxes payable16,767 24,625 
Deferred revenue(523)(637)
Operating lease liabilities, less current portion(3,915)(4,182)
Other non-current liabilities5,130 4,774 
Net cash provided by operating activities208,979 284,997 
Investing activities
Proceeds from maturity of investments 760,000 
Purchases of property, plant and equipment(12,292)(2,168)
Acquisition of intangible assets(25,000) 
Acquisition of investments (20,700)
Net cash (used in) provided by investing activities(37,292)737,132 
Financing activities
Proceeds from employee equity incentive and purchase plans21,729 50,407 
Payment of employee withholding taxes related to share-based awards(33,776)(23,784)
Repayments of long-term debt(258,764)(8,347)
Net cash (used in) provided by financing activities(270,811)18,276 
Effect of exchange rates on cash and cash equivalents(1,489)(641)
Net (decrease) increase in cash and cash equivalents(100,613)1,039,764 
Cash and cash equivalents, at beginning of period591,448 1,057,769 
Cash and cash equivalents, at end of period$490,835 $2,097,533 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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JAZZ PHARMACEUTICALS PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. The Company and Summary of Significant Accounting Policies
Jazz Pharmaceuticals plc is a global biopharmaceutical company whose purpose is to innovate to transform the lives of patients and their families. We are dedicated to developing life-changing medicines for people with serious diseases - often with limited or no therapeutic options. We have a diverse portfolio of marketed medicines and novel product candidates, from early- to late-stage development, in neuroscience and oncology. Within these therapeutic areas, we strive to identify new options for patients by actively exploring small molecules and biologics, and through innovative delivery technologies and cannabinoid science.
Our lead marketed products are:
Neuroscience
Xywav® (calcium, magnesium, potassium, and sodium oxybates) oral solution, a product approved by the U.S. Food and Drug Administration, or FDA, in July 2020 and launched in the U.S. in November 2020 for the treatment of cataplexy or excessive daytime sleepiness, or EDS, in patients with narcolepsy aged seven years of age and older, and also approved by FDA in August 2021 for the treatment of idiopathic hypersomnia, or IH, in adults and launched in the U.S. in November 2021. Xywav contains 92% less sodium than Xyrem®;
Xyrem (sodium oxybate) oral solution, a product approved by FDA and distributed in the U.S. for the treatment of both cataplexy and EDS in patients seven years of age and older with narcolepsy; Jazz also markets Xyrem in Canada for the treatment of cataplexy in patients with narcolepsy. Xyrem is also approved and distributed in the EU, Great Britain and other markets through a licensing agreement;
Epidiolex® (cannabidiol) oral solution, a product approved by FDA and launched in the U.S. in 2018 by GW Pharmaceuticals plc, or GW, and currently indicated for the treatment of seizures associated with Lennox-Gastaut syndrome, or LGS, Dravet syndrome, or DS, or tuberous sclerosis complex, or TSC, in patients one year of age or older; in the EU (where it is marketed as Epidyolex®) and other markets, it is approved for adjunctive treatment of seizures associated with LGS or DS, in conjunction with clobazam (EU and Great Britain only), in patients 2 years of age and older and for adjunctive treatment of seizures associated with TSC in patients 2 years of age and older;
Sunosi® (solriamfetol), a product approved by FDA and marketed in the U.S., Canada, EU and Great Britain to improve wakefulness in adult patients with EDS associated with narcolepsy or obstructive sleep apnea, or OSA; and
Sativex® (nabiximols) oral solution, a product approved and marketed in more than 25 markets outside the U.S. as treatment for symptom improvement in adult patients with moderate to severe spasticity due to multiple sclerosis, or MS, who have not responded adequately to other anti-spasticity medication and who demonstrate clinically significant improvement in spasticity-related symptoms during an initial trial of therapy.
Oncology
Zepzelca® (lurbinectedin), a product approved by FDA in June 2020 and launched in the U.S. in July 2020 for the treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy; in Canada, Zepzelca was approved in September 2021 for the treatment of adults with Stage III or metastatic SCLC, who have progressed on or after platinum-containing therapy;
Rylaze® (recombinant Erwinia asparaginase), a product approved by FDA in June 2021 and launched in the U.S. in July 2021 for use as a component of a multi-agent chemotherapeutic regimen for the treatment of acute lymphoblastic leukemia, or ALL, or lymphoblastic lymphoma, or LBL, in adults and pediatric patients who have developed hypersensitivity to E. coli-derived asparaginase;
Vyxeos® (daunorubicin and cytarabine) liposome for injection, a product approved in the U.S., Canada, EU, Great Britain, and recently in Switzerland (marketed as Vyxeos® liposomal in the EU and Great Britain) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia, or t-AML, or AML with myelodysplasia-related changes (AML-MRC). An expanded indication was granted in the U.S. for the treatment of newly diagnosed t-AML or AML-MRC in pediatric patients aged 1 year and older; and
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Defitelio® (defibrotide sodium), a product approved in the U.S. and Brazil for the treatment of hepatic veno-occlusive disease, or VOD, with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Japan for the treatment of hepatic sinusoidal obstruction syndrome (hepatic-veno occlusive disease). It is currently approved in the EU, Great Britain and other markets for the treatment of severe hepatic VOD, also known as sinusoidal obstructive syndrome, or SOS, in HSCT therapy. It is indicated in adults and pediatric patients over 1 month of age.
Throughout this report, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the registrant,” "the Company", “we,” “us,” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries. Throughout this report, all references to “ordinary shares” refer to Jazz Pharmaceuticals plc’s ordinary shares.
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared following the requirements of the U.S. Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by U.S. generally accepted accounting principles, or U.S. GAAP, can be condensed or omitted. The information included in this Quarterly Report on Form 10‑Q should be read in conjunction with our annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10‑K for the year ended December 31, 2021.
In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of our financial position and operating results. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, for any other interim period or for any future period.
Our significant accounting policies have not changed substantially from those previously described in our Annual Report on Form 10‑K for the year ended December 31, 2021, other than as described below.
These condensed consolidated financial statements include the accounts of Jazz Pharmaceuticals plc and our subsidiaries, and intercompany transactions and balances have been eliminated.
Our operating segment is reported in a manner consistent with the internal reporting provided to the chief operating decision maker, or CODM. Our CODM has been identified as our chief executive officer. We have determined that we operate in one business segment, which is the identification, development and commercialization of meaningful pharmaceutical products that address unmet medical needs.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.
Adoption of New Accounting Standards
In August 2020, the Financial Accounting Standards Board, or FASB, issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, or ASU 2020-06. ASU 2020-06 simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. The Company adopted ASU 2020-06 on January 1, 2022, on a modified retrospective basis. This impacted the accounting for our 1.50% exchangeable senior notes due 2024, or the 2024 Notes, and our 2.00% exchangeable senior notes due 2026, or the 2026 Notes, collectively known as the Exchangeable Senior Notes. As a result of the adoption of ASU 2020-06, the Exchangeable Senior Notes are now accounted for entirely as liabilities measured at amortized cost. ASU 2020-06 also removes certain settlement conditions that are required for contracts to qualify for equity classification and eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method.
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The adoption of ASU 2020-06 resulted in the following adjustments to the condensed consolidated balance sheet (in thousands):
Balance Sheet Item:December 31, 2021Adoption of ASU 2020-06January 1, 2022
Deferred tax assets, net$311,103 $109 $311,212 
Long-term debt, less current portion6,018,943 206,159 6,225,102 
Retained earnings830,226 127,474 957,700 
Additional paid-in capital3,534,792 (333,524)3,201,268 
Interest expense on the Exchangeable Senior Notes will be lower as a result of adoption of this guidance. During the three months ended March 31, 2022 the effect of adoption reduced interest expense, net and increased net income by approximately $12 million and increased basic and diluted EPS by approximately $0.19 per share. For the three months ended March 31, 2022, the Exchangeable Senior Notes were determined to be anti-dilutive. The adoption of ASU 2020-06 did not impact our cash flows or compliance with debt covenants.
Significant Risks and Uncertainties
We have implemented a comprehensive response strategy designed to manage the ongoing impact of the COVID-19 pandemic on our employees, patients and our business. The prolonged nature of the pandemic is negatively impacting our business in a varied manner due to the emergence of the Delta and Omicron variants and other variants with increased transmissibility, even in some cases in vaccinated people, limited access to health care provider offices and institutions and the willingness of patients or parents of patients to seek treatment. We believe these dynamics have negatively impacted new patient starts in the U.S. and Europe. We expect that our business, financial condition, results of operations and growth prospects may continue to be negatively impacted by the pandemic on a limited basis that may vary depending on the context. However we have begun to observe, and expect to continue to observe, a gradual normalization in patient and health care provider practices, as providers and patients have adapted their behaviors and procedures to the evolving circumstances and as COVID-19 vaccines continue to be administered. With respect to our commercialization activities, while there continues to be some negative impact on demand, new patient starts and treatments for our products arising from the pandemic, primarily due to the inherent limitations of telemedicine and a reprioritization of healthcare resources toward COVID-19, we have seen improvements as healthcare systems have adapted to cope with the ongoing situation. The extent of the impact on our ability to generate sales of approved products, execute on new product launches, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our ordinary shares, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time.
Our business has been substantially dependent on Xyrem and while we expect that our business will continue to be substantially dependent on oxybate product sales from both Xyrem and Xywav, there is no guarantee that we can maintain oxybate revenues at or near current levels, or that oxybate revenues will continue to grow. Our ability to maintain or increase oxybate revenues and realize the anticipated benefits from our investment in Xywav are subject to a number of risks and uncertainties including, without limitation, those related to the launch of Xywav for the treatment of idiopathic hypersomnia in adults and adoption in that indication; competition from the introduction of authorized generic and generic versions of sodium oxybate and new products for treatment of cataplexy and/or EDS in narcolepsy in the U.S. market and from other competitors; the current and potential impacts of the COVID-19 pandemic, including the current and expected future negative impact on demand for our products; increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third party payors, including our ability to maintain adequate coverage and reimbursement for Xywav and Xyrem; increased rebates required to maintain access to our products; challenges to our intellectual property around Xywav and/or Xyrem, including pending antitrust and intellectual property litigation; and continued acceptance of Xywav and Xyrem by physicians and patients.
In addition to risks related specifically to Xywav and Xyrem, we are subject to other challenges and risks related to successfully commercializing a portfolio of oncology products and other neuroscience products, and other risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: ongoing clinical research activity and related outcomes, obtaining regulatory approval of our late-stage product candidates; effectively commercializing our recently approved or acquired products such as Epidiolex, Zepzelca and Rylaze; obtaining and maintaining adequate coverage and reimbursement for our products; contracting and rebates to pharmacy benefit managers that reduces our net revenue; increasing scrutiny of pharmaceutical product pricing and resulting changes in healthcare laws and policy; market acceptance; regulatory concerns with controlled substances generally and the potential for abuse; future legislation, action by the U.S. Drug Enforcement Administration, or DEA, or FDA action authorizing the sale, distribution, use, and insurance reimbursement of non-FDA approved cannabinoid products; delays or problems in the supply of
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our products, loss of single source suppliers or failure to comply with manufacturing regulations; delays or problems with third parties that are part of our manufacturing and supply chain; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements; and possible restrictions on our ability and flexibility to pursue certain future opportunities as a result of our substantial outstanding debt obligations. In addition, the success of the GW Acquisition will depend, in part, on our ability to realize the anticipated benefits from successfully combining our and GW's historical businesses and the integration of our business practices and operations with GW's so that we can fully realize the anticipated benefits of the acquisition. The anticipated benefits to us of the GW Acquisition may not be realized fully within the expected timeframe or at all or may take longer to realize or cost more than expected, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.
Concentrations of Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, investments and derivative contracts. Our investment policy permits investments in U.S. federal government and federal agency securities, corporate bonds or commercial paper issued by U.S. corporations, money market instruments, certain qualifying money market mutual funds, certain repurchase agreements, and tax-exempt obligations of U.S. states, agencies and municipalities and places restrictions on credit ratings, maturities, and concentration by type and issuer. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and investments to the extent recorded on the balance sheet.
We manage our foreign currency transaction risk and interest rate risk within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes. As of March 31, 2022, we had foreign exchange forward contracts with notional amounts totaling $610.1 million. As of March 31, 2022, the outstanding foreign exchange forward contracts had a net liability fair value of $4.7 million. The counterparties to these contracts are large multinational commercial banks, and we believe the risk of nonperformance is not significant.
We are also subject to credit risk from our accounts receivable related to our product sales. We monitor our exposure within accounts receivable and record a reserve against uncollectible accounts receivable as necessary. We extend credit to pharmaceutical wholesale distributors and specialty pharmaceutical distribution companies, primarily in the U.S., and to other international distributors and hospitals. Customer creditworthiness is monitored and collateral is not required. We monitor economic conditions in certain European countries which may result in variability of the timing of cash receipts and an increase in the average length of time that it takes to collect accounts receivable outstanding. Historically, we have not experienced significant credit losses on our accounts receivable and as of March 31, 2022 and December 31, 2021, allowances on receivables were not material. As of March 31, 2022, three customers accounted for 74% of gross accounts receivable, Express Scripts Specialty Distribution Services, Inc. and its affiliates, or ESSDS, which accounted for 55% of gross accounts receivable, McKesson Corporation and affiliates, or McKesson, which accounted for 10% of gross accounts receivable, and Cardinal Health, Inc., or Cardinal, which accounted for 9% of gross accounts receivable. As of December 31, 2021, three customers accounted for 74% of gross accounts receivable, ESSDS, which accounted for 52% of gross accounts receivable, McKesson, which accounted for 12% of gross accounts receivable, and Cardinal, which accounted for 10% of gross accounts receivable.
We depend on single source suppliers for most of our products, product candidates and their active pharmaceutical ingredients, or APIs. With respect to our oxybate products, the API is manufactured for us by a single source supplier and the finished products are manufactured both by us in our facility in Athlone, Ireland and by our U.S.-based supplier.
Recent Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The new standard is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. The new guidance is not expected to have a material impact on our results of operations, financial position, or cash flows.

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2. Cash and Available-for-Sale Securities
Cash and cash equivalents consisted of the following (in thousands): 
March 31, 2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash and
Cash
Equivalents
Cash$410,125 $ $ $410,125 $410,125 
Money market funds80,710   80,710 80,710 
Totals$490,835 $ $ $490,835 $490,835 
December 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash and
Cash
Equivalents
Cash$510,747 $ $ $510,747 $510,747 
Money market funds80,701   80,701 80,701 
Totals$591,448 $ $ $591,448 $591,448 
Cash equivalents are considered available-for-sale securities. We use the specific-identification method for calculating realized gains and losses on securities sold and include them in interest expense, net in the condensed consolidated statements of income. Interest income from available-for-sale securities was $0.2 million and $1.2 million in the three months ended March 31, 2022 and 2021, respectively.

3. Fair Value Measurement
The following table summarizes, by major security type, our available-for-sale securities and derivative contracts as of March 31, 2022 and December 31, 2021 that were measured at fair value on a recurring basis and were categorized using the fair value hierarchy (in thousands): 
March 31, 2022December 31, 2021
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Total
Estimated
Fair Value
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Total
Estimated
Fair Value  
Assets:
Available-for-sale securities:
Money market funds$80,710 $ $80,710 $80,701 $ $80,701 
Foreign exchange forward contracts 3,712 3,712  580 580 
Totals$80,710 $3,712 $84,422 $80,701 $580 $81,281 
Liabilities:
Cross-currency interest rate contracts$ $ $ $ $15,232 $15,232 
Foreign exchange forward contracts 8,418 8,418  3,187 3,187 
Totals$ $8,418 $8,418 $ $18,419 $18,419 
As of March 31, 2022, our available-for-sale securities included money market funds and their carrying values were approximately equal to their fair values. Money market funds were measured using quoted prices in active markets, which represent Level 1 inputs.
Our derivative assets and liabilities include foreign exchange derivatives that are measured at fair value using observable market inputs such as forward rates and based on these inputs, the derivative assets and liabilities are classified within Level 2 of the fair value hierarchy. The cross-currency interest rate swap contract matured on March 31, 2022.
There were no transfers between the different levels of the fair value hierarchy in 2022 or 2021.
As of March 31, 2022 and December 31, 2021, the carrying amount of investments measured using the measurement alternative for equity investments without a readily determinable fair value was $5.0 million. The carrying amount, which is recorded within other non-current assets, is based on the latest observable transaction price.
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As of March 31, 2022, the estimated fair values of the 2024 Notes, the 2026 Notes, the 4.375% senior secured notes, due 2029, or the Secured Notes, and the seven-year $3.1 billion term loan B facility, or the Dollar Term Loan, were approximately $594 million, $1.2 billion, $1.5 billion and $3.1 billion respectively. The fair values of each of these debt facilities was estimated using quoted market prices obtained from brokers (Level 2).
As of March 31, 2022, assets measured at fair value on a non-recurring basis subsequent to initial recognition included assets classified as held for sale on the condensed consolidated balance sheet. These assets related to an asset purchase agreement with Axsome Therapeutics, or Axsome, pursuant to which Axsome will purchase certain assets related to Sunosi. Refer to Note 15, Assets Held for Sale, for additional information. The carrying amount of $90.9 million for assets held for sale is equal to estimated fair value, which is based on the sales price agreed less costs to sell, and represents a Level 3 input.

4. Derivative Instruments and Hedging Activities
We are exposed to certain risks arising from operating internationally, including fluctuations in foreign exchange rates primarily related to the translation of sterling and euro-denominated net monetary liabilities, including intercompany balances, held by subsidiaries with a U.S. dollar functional currency. We manage these exposures within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes.
In order to hedge our exposure to foreign currency exchange risk associated with our Euro Term Loan, we entered into a cross-currency interest rate swap contract in May 2021, which matured on March 31, 2022. The terms of this contract converted the principal repayments and interest payments on the Euro Term Loan into U.S. dollars. The carrying amount of the Euro Term Loan and the fair value of the cross-currency interest rate swap contract were remeasured on a monthly basis, with changes in the euro to U.S. dollar foreign exchange rates recognized within foreign exchange gain (loss) in the condensed consolidated statements of income.
The impact on accumulated other comprehensive income (loss) and earnings from the cross-currency interest rate swap contract was as follows (in thousands):
Cross-Currency Interest Rate Contract:Three Months Ended
March 31, 2022
Loss reclassified from accumulated other comprehensive income (loss) to foreign exchange gain (loss), net of tax$128 
Loss recognized in foreign exchange gain (loss)(2,646)
We also enter into foreign exchange forward contracts, with durations of up to 12 months, designed to limit the exposure to fluctuations in foreign exchange rates related to the translation of certain non-U.S. dollar denominated liabilities, including intercompany balances. Hedge accounting is not applied to these derivative instruments as gains and losses on these hedge transactions are designed to offset gains and losses on underlying balance sheet exposures. As of March 31, 2022 and December 31, 2021, the notional amount of foreign exchange contracts where hedge accounting is not applied was $610.1 million and $347.2 million, respectively.
The foreign exchange gain (loss) in our condensed consolidated statements of income included the following losses associated with foreign exchange contracts not designated as hedging instruments (in thousands):
Three Months Ended
March 31,
Foreign Exchange Forward Contracts:20222021
Loss recognized in foreign exchange gain (loss)$(21,025)$(13,050)
The cash flow effects of our derivative contracts for the three months ended March 31, 2022 and 2021 are included within net cash provided by operating activities in the condensed consolidated statements of cash flows, except for the settlement of notional amounts of the cross-currency interest rate contract, which are included in net cash provided by (used in) financing activities.
To achieve a desired mix of floating and fixed interest rates on our variable rate debt, we entered into interest rate swap agreements in March 2017. In May 2021, we repaid the term loan to which these interest rate swap agreements related, at which point the interest rate swap contracts were de-designated as cash flow hedges. The interest rate swap agreements matured in July 2021.
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The impact on accumulated other comprehensive income (loss) and earnings from interest rate swap contracts for the three months ended March 31, 2021 was as follows (in thousands):
Interest Rate Contracts:Three Months Ended
March 31, 2021
Loss recognized in accumulated other comprehensive income (loss), net of tax$(16)
Loss reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax1,160 
The following tables summarize the fair value of outstanding derivatives (in thousands):
ClassificationMarch 31,
2022
December 31,
2021
Assets
Derivatives not designated as hedging instruments:
Foreign exchange forward contractsOther current assets$3,712 $580 
Liabilities
Derivatives not designated as hedging instruments:
Foreign exchange forward contractsAccrued liabilities$8,418 $3,187 
Derivatives designated as hedging instruments:
Cross-currency interest rate contractAccrued liabilities 15,232 
Total fair value of derivative liability instruments$8,418 $18,419 
Although we do not offset derivative assets and liabilities within our condensed consolidated balance sheets, our International Swap and Derivatives Association agreements provide for net settlement of transactions that are due to or from the same counterparty upon early termination of the agreement due to an event of default or other termination event. The following tables summarize the potential effect on our condensed consolidated balance sheets of offsetting our cross-currency interest rate contracts and foreign exchange forward contracts subject to such provisions (in thousands):
March 31, 2022
Gross Amounts of Recognized Assets/ LiabilitiesGross Amounts Offset in the Consolidated Balance SheetNet Amounts of Assets/ Liabilities Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet
DescriptionDerivative Financial InstrumentsCash Collateral Received (Pledged)Net Amount
Derivative assets$3,712 $ $3,712 $(3,100)$ $612 
Derivative liabilities(8,418) (8,418)3,100  (5,318)
December 31, 2021
Gross Amounts of Recognized Assets/ LiabilitiesGross Amounts Offset in the Consolidated Balance SheetNet Amounts of Assets/ Liabilities Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet
DescriptionDerivative Financial InstrumentsCash Collateral Received (Pledged)Net Amount
Derivative assets$580 $ $580 $(567)$ $13 
Derivative liabilities(18,419) (18,419)567  (17,852)

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5. Inventories
Inventories consisted of the following (in thousands): 
March 31,
2022
December 31,
2021
Raw materials$26,335 $21,550 
Work in process775,804 886,849 
Finished goods183,315 164,322 
Total inventories$985,454 $1,072,721 
As of March 31, 2022 and December 31, 2021 inventories included $727.4 million and $811.3 million, respectively, related to the purchase accounting inventory fair value step-up on inventory acquired in the GW Acquisition.

6. Goodwill and Intangible Assets
The gross carrying amount of goodwill was as follows (in thousands):
Balance at December 31, 2021$1,827,609 
Goodwill allocated to assets held for sale (1)
(12,927)
Foreign exchange(32,238)
Balance at March 31, 2022$1,782,444 
________________________
(1) In March 2022, we entered into a definitive agreement to divest Sunosi to Axsome. See Note 15 for further information relating to this transaction.

The gross carrying amounts and net book values of our intangible assets were as follows (in thousands): 
 March 31, 2022December 31, 2021
 Remaining
Weighted-
Average Useful
Life
(In years)
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Acquired developed technologies11.2$7,948,903 $(1,316,734)$6,632,169 $8,195,675 $(1,198,333)$6,997,342 
Manufacturing contracts11,883 (11,883) 12,124 (12,124) 
Trademarks2,887 (2,887) 2,893 (2,893) 
Total finite-lived intangible assets7,963,673 (1,331,504)6,632,169 8,210,692 (1,213,350)6,997,342 
Acquired in-process research and development assets150,888 — 150,888 154,986 — 154,986 
Total intangible assets$8,114,561 $(1,331,504)$6,783,057 $8,365,678 $(1,213,350)$7,152,328 
The decrease in the gross carrying amount of intangible assets as of March 31, 2022 compared to December 31, 2021 primarily reflects the reclassification of the Sunosi intangible asset to assets held for sale as a result of the execution of the definitive agreement to divest Sunosi to Axsome in March 2022, partially offset by the negative impact of foreign currency translation adjustments due to the weakening of sterling and euro against the U.S. dollar.
The assumptions and estimates used to determine future cash flows and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by various factors, including external factors, such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for specific product lines.
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Based on finite-lived intangible assets recorded as of March 31, 2022, and assuming the underlying assets will not be impaired and that we will not change the expected lives of the assets, future amortization expenses were estimated as follows (in thousands): 
Year Ending December 31,Estimated Amortization Expense
2022 (remainder)$455,447 
2023607,262 
2024607,262 
2025607,262 
2026607,262 
Thereafter3,747,674 
Total$6,632,169 

7. Certain Balance Sheet Items
Property, plant and equipment consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Construction-in-progress$88,111 $86,511 
Manufacturing equipment and machinery72,387 69,079 
Leasehold improvements65,425 66,318 
Land and buildings63,562 64,008 
Computer software29,604 25,646 
Computer equipment20,937 16,234 
Furniture and fixtures10,302 14,412 
Subtotal350,328 342,208 
Less accumulated depreciation and amortization(92,696)(85,371)
Property, plant and equipment, net$257,632 $256,837 
Other current assets consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Deferred charge for income taxes on intercompany profit$205,233 $203,480 
Other38,655 48,912 
Total other current assets$243,888 $252,392 
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Accrued liabilities consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Rebates and other sales deductions$258,649 $215,397 
Employee compensation and benefits126,479 158,870 
Clinical trial accruals27,741 25,612 
Accrued interest21,228 48,640 
Accrued royalties19,441 20,345 
Sales return reserve18,749 15,814 
Inventory-related accruals18,708 16,166 
Consulting and professional services17,527 22,507 
Current portion of lease liabilities16,155