What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-04 · 193 added, 153 removed, 347 unchanged (50% of the section changed)

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When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business.

In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q.

These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends.

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Sunosi ® (solriamfetol)***

Improve wakefulness in adult patients with EDS associated with narcolepsy or obstructive sleep apnea, or OSA.

Improve wakefulness and reduce EDS in adult patients with narcolepsy (with or without cataplexy) or adult patients with OSA whose EDS has not been satisfactorily treated by primary OSA therapy, such as continuous positive airway pressure, or CPAP.

Improve wakefulness and reduce EDS in adult patients with narcolepsy (with or without cataplexy) or adult patients with obstructive sleep apnea, or OSA, whose EDS has not been satisfactorily treated by primary OSA therapy, such as continuous positive airway pressure, or CPAP.

Treatment of EDS in adult patients with narcolepsy or OSA.

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Vyxeos ® Daunorubicin and cytarabine liposome for injection Powder, 44 mg daunorubicin and 100 mg cytarabine per vial, intravenous infusion

Treatment of newly-diagnosed therapy-related therapy-related acute myeloid leukemia, or t-AML or AML with myelodysplasia-related changes (AML-MRC) in adults and pediatric patients one year and older.

Treatment of newly-diagnosed therapy-related acute myeloid leukemia, or t-AML or AML with myelodysplasia-related changes (AML-MRC) in adults and pediatric patients one year and older.

Treatment of adults with newly-diagnosed t-AML or AML-MRC.

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**TSC approval pending in certain markets

***In March 2022, we announced that we had entered into a definitive agreement to divest Sunosi to Axsome Therapeutics, or Axsome

***In May 2022, we completed the U.S.

divestiture of Sunosi to Axsome Therapeutics, or Axsome;

we expect to complete the ex-U.S.

divestiture to Axsome later this year.

For more information, see Note 2, Disposition and License Agreements, of the Notes to Condensed Consolidated Financial Statements, included in Part I of this Quarterly Report on Form 10‑Q.

****Accelerated approval received from the U.S.

Food and Drug Administration, or FDA

*****Conditional approval received from Health Canada

We are the global leader in the development and commercialization of oxybate therapy for patients with sleep disorders.

Xyrem was approved by the U.S.

Food and Drug Administration, or FDA, in 2002, and has become a standard of care for treating EDS and cataplexy in narcolepsy.

Xyrem was approved by FDA in 2002, and has become a standard of care for treating EDS and cataplexy in narcolepsy.

In 2020, we received FDA approval for Xywav for the treatment of cataplexy or EDS, in patients seven years of age and older with narcolepsy.

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Our commercial efforts are focused on educating patients and physicians about the lifelong impact of high sodium intake, and how the use of Xywav enables them to address what is a modifiable risk factor.

In June 2021, FDA recognized seven years of Orphan Drug Exclusivity (ODE) for Xywav in narcolepsy.

In June 2021, FDA recognized seven years of Orphan Drug Exclusivity, or ODE, for Xywav in narcolepsy.

ODE extends through July 2027.

In connection with granting ODE, FDA stated that "Xywav is clinically superior to Xyrem by means of greater safety because Xywav provides a greatly reduced chronic sodium burden compared to Xyrem." FDA's summary also stated that "the differences in the sodium content of the two products at the recommended doses will be clinically meaningful in reducing cardiovascular morbidity in a substantial proportion of patients for whom the drug is indicated."

In connection with granting ODE, FDA stated that "Xywav is clinically superior to Xyrem by means of greater safety because Xywav provides a greatly reduced chronic sodium burden compared to Xyrem.

"FDA's summary also stated that "the differences in the sodium content of the two products at the recommended doses will be clinically meaningful in reducing cardiovascular morbidity in a substantial proportion of patients for whom the drug is indicated."

We view the adoption of Xywav in narcolepsy as a positive indication that physicians and patients appreciate the benefits of a lower sodium oxybate option.

We continue to see Xywav adoption among both existing and new-to-oxybate narcolepsy patients.

We now have agreements in place for Xywav with all three major pharmacy benefit managers, or PBMs, in the U.S.

To date, we have entered into agreements with various entities and have achieved benefit coverage for Xywav for approximately 90% of commercial lives.

We continue to see Xywav adoption among existing Xyrem patients, as well as the majority of new-to-oxybate narcolepsy patients.

On August 12, 2021, FDA approved Xywav for the treatment of IH in adults.

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commercial launch of Xywav for the treatment of IH in adults on November 1, 2021.

In January 2022, FDA recognized seven years of ODE for Xywav in IH that extends through August 2028.

IH is a debilitating neurologic sleep disorder characterized by chronic EDS, the inability to stay awake and alert during the day resulting in the irrepressible need to sleep or unplanned lapses into sleep or drowsiness.

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have been diagnosed with IH and are actively seeking healthcare.

We have seen strong adoption of Xywav in narcolepsy since its launch in November 2020.

Exiting the first quarter of 2022, there were approximately 7,800 patients taking Xywav, including approximately 7,050 patients with narcolepsy and approximately 750 patients with IH.

With respect to Xywav and Xyrem in the aggregate, the average number of active oxybate patients on therapy was approximately 16,650 in the first quarter of 2022.

Sunosi was launched in the U.S.

in 2019 as a therapy to improve wakefulness in adult patients with EDS associated with narcolepsy or OSA.

Sunosi was approved in Europe in 2020, and the rolling launch is ongoing.

Sunosi was approved in Canada in 2021.

In March 2022, we announced that we had entered into a definitive agreement to divest Sunosi to Axsome.

Under the terms of the agreement, Axsome will receive the rights to Sunosi in all of the existing territories available to us and we will receive an upfront payment of $53 million, a high single-digit royalty on Axsome’s U.S.

net sales of Sunosi in current indications and a mid-single-digit royalty on Axsome’s U.S.

net sales of Sunosi in future indications.

The divestiture of Sunosi to Axsome is intended to enable us to sharpen our focus on our highest strategic priorities designed to deliver sustainable growth and enhanced shareholder value.

In assessing the positioning of Sunosi in the overall treatment landscape, we believe that Axsome is well positioned to deliver access to this important medicine and to maximize the value of Sunosi to us through future growth.

The respective obligations of the companies to consummate the transactions contemplated by the definitive agreement are subject to the satisfaction or waiver of a number of customary conditions.

The transaction is structured to be completed in sequential closings for the U.S.

Subject to the satisfaction or waiver of the closing conditions, the companies expect the U.S.

transaction to close in the second quarter of 2022 and the ex-U.S.

transaction close to occur within 60 days following the close of the U.S.

We acquired Epidiolex (Epidyolex outside the U.S.) in May 2021 as part of the acquisition of GW Pharmaceuticals plc, or GW, which we refer to as the GW Acquisition, which expands our growing neuroscience business with a global, high-growth childhood-onset epilepsy franchise.

We now have agreements in place for Xywav with all three major pharmacy benefit managers, or PBMs, in the U.S.

To date, we have entered into agreements with various entities and have achieved benefit coverage for Xywav in both narcolepsy and IH indications for approximately 90% of commercial lives.

We have seen strong adoption of Xywav in narcolepsy since its launch in November 2020, and increasing adoption in IH since its launch in November 2021.

Exiting the second quarter of 2022, there were approximately 8,700 patients taking Xywav, including approximately 7,550 patients with narcolepsy and approximately 1,150 patients with IH.

With respect to Xywav and Xyrem in the aggregate, the average number of active oxybate patients on therapy was approximately 17,100 in the second quarter of 2022.

We acquired Epidiolex (Epidyolex outside the U.S.) in May 2021 as part of the acquisition of GW Pharmaceuticals plc, or GW, which we refer to as the GW Acquisition, which expanded our growing neuroscience business with a global, high-growth childhood-onset epilepsy franchise.

Epidiolex was approved in the U.S.

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The clobazam restriction is limited to EU and Great Britain.

Epidyolex was also approved for adjunctive therapy of seizures associated with TSC for patients 2 years of age and older in the EU in April 2021 and Great Britain in August 2021, and is approved or under review for this indication in other markets.

Outside the U.S.

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We market Sativex directly in the U.K.

and through licensing agreements with partners across other countries.

and through licensing agreements with partners in other countries.

We are working toward potential approval of nabiximols in the U.S.

with multiple Phase 3 clinical trials in progress.

In addition to our currently-marketed products, we previously marketed Sunosi® (solriamfetol) in the U.S.

and, pending the completion of the ex-U.S.

divestiture of Sunosi to Axsome Therapeutics, or Axsome, we continue to market Sunosi in Europe and Canada.

In this regard, in March 2022, we entered into a definitive agreement to divest Sunosi to Axsome.

In May 2022, we completed the U.S.

divestiture of Sunosi to Axsome and we expect to complete the ex-U.S.

divestiture to Axsome later this year.

Under the terms of the sale agreement with Axsome, Axsome received the rights to Sunosi in all of the existing territories available to us.

We received an upfront payment of $53.0 million, and will receive a high single-digit royalty on Axsome’s U.S.

net sales of Sunosi in current indications and a mid-single-digit royalty on Axsome’s U.S.

net sales of Sunosi in future indications.

The divestiture of Sunosi to Axsome is intended to enable us to sharpen our focus on our highest strategic priorities designed to deliver sustainable growth and enhanced shareholder value.

We acquired U.S.

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We are also developing Zepzelca in additional indications.

Rylaze was approved by FDA in June 2021 under the Real-Time Oncology Review (RTOR) program, and was launched in the U.S.

Rylaze was approved by FDA in June 2021 under the Real-Time Oncology Review, or RTOR, program, and was launched in the U.S.

in July 2021 for use as a component of a multi-agent chemotherapeutic regimen for the treatment of patients with ALL or LBL in pediatric and adult patients one month and older who have developed hypersensitivity to E.

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We developed Rylaze to address the needs of patients and health care providers for an innovative, high-quality erwinia asparaginase with reliable supply.

The current indication is for an intramuscular (IM) dosing regimen of 25 mg/m 2 every 48 hours.

We submitted a supplemental Biologics License Application (sBLA) with additional data in support of a Monday/Wednesday/Friday (M/W/F) IM dosing schedule in January 2022 and submitted a separate sBLA for intravenous administration in April 2022, both which have been granted review under the RTOR program.

We anticipate that data from the current development program will support regulatory filings in Europe in mid-2022, with potential for approval in 2023.

The Company is also working with a partner for potential submission, approval and launch in Japan, as well as planning additional submissions in other markets.

The current indication is for an intramuscular, or IM, dosing regimen of 25 mg/m 2 every 48 hours.

We submitted a supplemental Biologics License Application, or sBLA, with additional data in support of a Monday/Wednesday/Friday, or M/W/F, IM dosing schedule in January 2022 and submitted a separate sBLA for intravenous, or IV, administration in April 2022, both of which have been granted review under the RTOR program with Prescription Drug User Fee Act, or PDUFA, action dates in 2022 and 2023, respectively.

We also completed a Marketing Authorization Application, or MAA, submission to the European Medicines Agency, or EMA, in May 2022 for M/W/F and every 48-hour dosing schedules and IV and IM administration, with potential for approval in 2023.

In addition, we submitted a New Drug Submission, or NDS, to Health Canada in September 2021.

We are also advancing the program for potential submission, approval and launch in Japan, as well as planning additional submissions in other markets.

Vyxeos is a treatment for adults with newly-diagnosed t-AML, or AML-MRC.

In March 2021, FDA approved a revised label to include a new indication to treat newly-diagnosed therapy-related acute myeloid leukemia (t-AML) or AML with myelodysplasia-related changes in pediatric patients aged one year and older.

In March 2021, FDA approved a revised label to include a new indication to treat newly-diagnosed t-AML, or AML with myelodysplasia-related changes in pediatric patients aged one year and older.

We have a number of ongoing development activities and continue to expand into new markets internationally.

Despite an ongoing trend in the U.S.

towards lower-intensity treatments and away from Vyxeos that accelerated due to COVID-19 pandemic, we continue to see recovery in demand for Vyxeos and expect future demand for appropriate secondary AML patients to remain steady.

towards lower-intensity treatments and away from Vyxeos that accelerated due to the COVID-19 pandemic, we continue to see recovery in demand for Vyxeos and expect future demand for appropriate secondary AML patients to remain steady.

In Europe, we continue to expect a negative impact on demand for and utilization of Vyxeos compared to historical periods due to COVID-19.

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Research and Development Progress

Our development activities encompass all stages of development and currently include clinical testing of new product candidates and activities related to clinical improvements of, or additional indications or new clinical data for, our existing marketed products.

Our research and development activities encompass all stages of development and currently include clinical testing of new product candidates and activities related to clinical improvements of, or additional indications or new clinical data for, our existing marketed products.

We also have active preclinical programs for novel therapies, including precision medicines in hematology and oncology and the GW cannabinoid platform.

We are increasingly leveraging our growing internal research and development function, and we have also entered into collaborations with third parties for the research and development of innovative early-stage product candidates and have supported additional investigator-sponsored trials, or ISTs, that are anticipated to generate additional data related to our products.

We also seek out investment opportunities in support of development of early- and mid-stage technologies in our therapeutic areas and adjacencies.

We also seek out investment opportunities in support of the development of early- and mid-stage technologies in our therapeutic areas and adjacencies.

We have a number of licensing and collaboration agreements with third parties, including biotechnology companies, academic institutions and research-based companies and institutions, related to preclinical and clinical research and development activities in hematology and in precision oncology, as well as in neuroscience.

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We have taken both Rylaze and Xywav from concept to commercialization.

Our neuroscience R&D efforts include the planned initiation of a pivotal Phase 3 clinical trial of Epidiolex for the treatment of Epilepsy with Myoclonic-Atonic Seizures, or EMAS, also known as Doose syndrome, in the first half of 2022.

This trial is expected to evaluate Epidiolex in a fourth childhood-onset epileptic encephalopathy with high unmet need.

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Seizure types including atonic, tonic, clonic, tonic-clonic and partial onset seizures are seen in LGS, DS, and TSC.

For nabiximols, we have three ongoing Phase 3 clinical trials in MS-related spasticity.

For nabiximols, we have multiple Phase 3 clinical trials in MS-related spasticity in progress.

Spasticity occurs in up to 84% of MS patients, and approximately one-third of those who experience spasticity live with uncontrolled symptoms.

The first trial is a smaller, shorter trial relative to the other two.

If results from this first trial are supportive, there is the potential for a New Drug Application, or NDA, submission in the U.S.

by the end of 2022.

Additionally, in December 2021 we initiated Phase 2 clinical trials for suvecaltamide (JZP385) for essential tremor, or ET, and for JZP150 for post-traumatic stress disorder, or PTSD.

In June 2022, we announced top-line results from the first and smallest trial, which evaluated the safety and efficacy of nabiximols in 68 patients with MS spasticity.

The trial did not meet the primary endpoint of change in Lower Limb Muscle Tone-6, or LLMT-6, between baseline and Day 21, as measured by the Modified Ashworth Scale, or MAS.

The safety profile of nabiximols in this trial was consistent with previously reported adverse events, with no new safety signals attributable to

nabiximols oromucosal spray observed in this population.

We continue to assess the trial results, which will be presented at a future medical meeting.

Additionally, in December 2021 we initiated Phase 2 clinical trials for suvecaltamide, or JZP385, for essential tremor, or ET, and for JZP150 for post-traumatic stress disorder, or PTSD.

These are both patient populations that suffer significant impacts to their quality of life and for whom there are limited current treatment options.

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In 2022, we initiated a Phase 2 basket trial to explore Zepzelca monotherapy in patients with select advanced or metastatic solid tumors.

Cohorts will include advanced urothelial cancer, large cell neuroendocrine tumor of the lung, and homologous recombination deficient (HRD) cancers.

Cohorts will include advanced urothelial cancer, large cell neuroendocrine tumor of the lung and homologous recombination deficient, or HRD, cancers.

In addition, we have initiated a Phase 4 observational study to collect real world safety and outcome data in adult Zepzelca monotherapy patients with SCLC who progress on or after prior platinum-containing chemotherapy.

For Rylaze, in January 2022 we submitted an sBLA with data in support of a M/W/F IM dosing schedule and submitted a separate sBLA for intravenous administration in April 2022, both of which have been granted review under the RTOR program.

We are planning regulatory submissions in Europe in mid-2022.

In the second quarter of 2022, we acquired development and commercialization rights to two preclinical compounds, consistent with our objective to expand our pipeline.

We completed a MAA submission to the EMA in May 2022.

In June 2022, we announced the FDA had cleared our Investigational New Drug, or IND, application for JZP815.

JZP815 is an investigational, pre-clinical stage pan-RAF kinase inhibitor that targets specific components of the mitogen-activated protein kinase, or MAPK, pathway that, when activated by oncogenic mutations, can be a frequent driver of human cancer.

In the second quarter of 2022, we acquired development and commercialization rights to two early-stage molecules, consistent with our objective to expand our pipeline.

In April 2022, we announced that we had entered into a licensing agreement with Werewolf Therapeutics, Inc., or Werewolf, to acquire exclusive global development and commercialization rights to Werewolf's investigational WTX-613, now referred to as JZP898.

JZP898 is a differentiated, conditionally-activated interferon alpha (IFNα) INDUKINE™ molecule.

JZP898 is a differentiated, conditionally-activated interferon alpha, or IFNα, INDUKINE™ molecule.

Under the terms of the agreement, we made an upfront payment of $15.0 million to Werewolf, and Werewolf is eligible to receive development, regulatory and commercial milestone payments of up to $1.26 billion.

Pending approval, Werewolf is eligible to receive a tiered, mid-single-digit percentage royalty on net sales of JZP898.

If approved, Werewolf is eligible to receive a tiered, mid-single-digit percentage royalty on net sales of JZP898.

This transaction underscores our commitment to enhancing our pipeline to deliver novel oncology therapies to patients, and also provides us with an opportunity to expand into immuno-oncology.

In May 2022, we announced that we had entered into a licensing agreement with Sumitomo Pharma Co., Ltd, or Sumitomo, to acquire exclusive development and commercialization rights in the United States, Europe and other territories for DSP-0187, which we have designated JZP441, a potent, highly selective oral orexin-2 receptor agonist with potential application for the treatment of narcolepsy, IH and other sleep disorders.

Under the terms of the agreement, we will make an upfront payment of $50 million to Sumitomo, and Sumitomo is eligible to receive development, regulatory and commercial milestone payments of up to $1.09 billion.

Pending approval, Sumitomo is eligible to receive a tiered, low double-digit royalty on Jazz's net sales of JZP441.

In May 2022, we announced that we had entered into a licensing agreement with Sumitomo Pharma Co., Ltd, or Sumitomo, to acquire exclusive development and commercialization rights in the United States, Europe and other territories for DSP-0187, now referred to as JZP441, a potent, highly selective oral orexin-2 receptor agonist with potential application for the treatment of narcolepsy, IH and other sleep disorders.

Under the terms of the agreement, we made an upfront payment of $50 million to Sumitomo, and Sumitomo is eligible to receive development, regulatory and commercial milestone payments of up to $1.09 billion.

If approved, Sumitomo is eligible to receive a tiered, low double-digit royalty on Jazz's net sales of JZP441.

Below is a summary of our key ongoing and planned development projects related to our products and pipeline and their corresponding current stages of development:

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PTSD (ongoing study)

Product Candidates Description

Additional cannabinoids Autism spectrum disorders (ongoing study)

JZP324 Oxybate extended-release formulation (planned study)

JZP441 (DSP-0187) Potent, highly selective oral orexin-2 receptor agonist (Japan)

Additional cannabinoids Neonatal hypoxic-ischemic encephalopathy (ongoing study)

Neuropsychiatry targets (ongoing study)

JZP441 (DSP-0187) Potent, highly selective oral orexin-2 receptor agonist

Undisclosed targets Neuroscience

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FDA approval in June 2021;

submitted sBLA in January 2022 seeking approval for Monday/Wednesday/Friday intramuscular dosing schedule;

submitted sBLA in January 2022 seeking approval for M/W/F IM dosing schedule;

submitted separate sBLA seeking approval for intravenous administration;

regulatory submission planned for Europe in mid-2022

completed MAA submission to EMA in May 2022

Zepzelca First-line extensive stage SCLC in combination with Tecentriq (collaboration with Roche) (ongoing study)

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Vyxeos AML or high-risk Myelodysplastic Syndrome, or MDS (AML18) (cooperative group studies) (ongoing study) Newly diagnosed adults with standard- and high-risk AML (AML Study Group cooperative group study) (ongoing study) Newly diagnosed pediatric patients with AML (Children’s Oncology Group cooperative group study) (ongoing study)

Product Candidates Description

Zepzelca Basket trial including urothelial cancer, large cell neuroendocrine tumor of the lung, and HRD (homologous recombination deficient) cancers (ongoing study)

Zepzelca Basket trial including urothelial cancer, large cell neuroendocrine tumor of the lung, and HRD cancers (ongoing study)

Vyxeos High-risk MDS (European Myelodysplastic Syndromes (cooperative group study) (ongoing study)

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ALL and other hematological malignancies (collaboration with Ligand)

JZP815/Pan-Raf inhibitor program Raf and Ras mutant tumors (acquired from Redx, which is continuing development)

JZP815/Pan-Raf inhibitor program Raf and Ras mutant tumors (acquired from Redx)

JZP898 Conditionally-activated interferon alpha (IFNα) INDUKINE™ molecule

Undisclosed targets Ras/Raf/MAP kinase pathway (collaboration with Redx)

Exosome targets (up to 4) Hematological malignancies/solid tumors (collaboration with Codiak BioSciences, Inc., or Codiak)

Undisclosed target Ras/Raf/MAPK pathway (collaboration with Redx)

Exosome targets (up to 3 targets) Hematological malignancies/solid tumors (collaboration with Codiak BioSciences, Inc., or Codiak)

Undisclosed targets Oncology

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These initiatives mark a significant operational evolution that is directly linked to our corporate strategy and are designed to better enable our teams to work collaboratively on an aligned and shared agenda through both virtual and in-person interactions.

We anticipate that our teams will increase the frequency of in-person interactions as medical congresses and healthcare practices begin to resume in-person activities, taking into account applicable public health authority and local government guidelines which are designed to ensure community and employee safety.

In most geographies, our teams are increasing the frequency of in-person interactions as medical congresses and healthcare practices begin to resume in-person activities, taking into account applicable public health authority and local government guidelines which are designed to ensure community and employee safety.

COVID-19 Business Update

We have implemented a comprehensive response strategy designed to manage the 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, including limited access to health care provider offices and institutions and the willingness of patients or parents of patients to seek treatment or change existing treatments.

The prolonged nature of the pandemic is negatively impacting our business in a varied manner due to the emergence of variants with increased transmissibility, even in vaccinated people, including limited access to health care provider offices and institutions and the willingness of patients or parents of patients to seek treatment or change existing treatments.

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.

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We support broad public health strategies designed to prevent the spread of COVID-19 and are focused on the health and welfare of our employees.

Our global organization has mobilized to enable our employees to accomplish our most critical goals through a combination of remote work and in-person initiatives.

Our global organization has mobilized to enable our employees to accomplish our most critical goals through a combination of virtual and in-person work.

In addition to rolling out new technologies and collaboration tools, we have implemented processes and resources to support our employees in the event an employee receives a positive COVID-19 diagnosis.

We have begun reopening some of our sites to enable our employees to return to our global offices, which take into account applicable public health authority and local government guidelines and which are designed to ensure community and employee safety.

We are moving to a more flexible mix of virtual and in-person working to advance our culture, drive innovation and agility and enable greater balance and well-being for our workforce.

This will also enable us to reconfigure our physical workspaces to optimize the footprint of our company-owned or leased office spaces.

We have reopened our sites to enable our employees to return to our global offices, which takes into account applicable public health authority and local government guidelines, and which is designed to ensure community and employee safety.

We have moved to a more flexible mix of virtual and in-person working designed to advance our culture, drive innovation and agility and enable greater balance and well-being for our workforce.

This should also enable us to reconfigure our physical workspaces to optimize the footprint of our company-owned or leased office spaces.

Commercialization

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The lack of access to health care providers has caused, and may continue to cause, delays in appropriate diagnosis, treatment and ongoing care for some patients, which has negatively impacted, and could continue to impact, prescribing and use of our products.

Our manufacturing facilities in Athlone, Ireland, which produces Xywav and Xyrem, Villa Guardia, Italy, which produces defibrotide, and Kent Science Park, U.K., which produces Epidiolex/Epidyolex and Sativex, are operational with essential staff onsite and office-based staff working onsite and remotely as business needs require.

We currently expect to have adequate global supply of all of our products for 2022.

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With respect to our clinical trial activities, we have taken measures to implement remote and virtual approaches, including remote data monitoring where possible, to maintain patient safety and trial continuity and to preserve study integrity.

We have seen limited COVID-19-related impact to our mid- and late-stage clinical trial activity, despite delays in initiating trial sites.

We rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the evolving effects of the COVID-19 pandemic.

Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as health care providers, may have heightened exposure to COVID-19, may adversely impact our clinical trial operations.

Supply chain disruptions related to the pandemic may also impact our ability to initiate clinical trials in a timely manner.

We have seen some COVID-19-related impact to our mid- and late-stage clinical trial activity.

We rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will perform their contractual duties in a timely and satisfactory manner as a result of the evolving effects of the COVID-19 pandemic.

Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as health care providers, have heightened exposure to COVID-19, is adversely impacting our clinical trial operations.

Supply chain disruptions related to the pandemic have also impacted our ability to initiate clinical trials as originally planned.

Corporate Response

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Our future plans assume that Xywav, with 92% lower sodium compared to Xyrem, depending on the dose, absence of a sodium warning and dosing titration option, will become the treatment of choice for patients who can benefit from oxybate treatment, including current Xyrem patients and patients who previously were not prescribed Xyrem for whom sodium content is a concern.

In June 2021, FDA recognized seven years of

ODE for Xywav in narcolepsy through July 21, 2027 stating that Xywav is clinically superior to Xyrem by means of greater safety due to reduced chronic sodium burden.

In June 2021, FDA recognized seven years of ODE for Xywav in narcolepsy through July 21, 2027 stating that Xywav is clinically superior to Xyrem by means of greater safety due to reduced chronic sodium burden.

While we expect that our business will continue to be substantially dependent on oxybate product sales from both Xywav and Xyrem, there is no guarantee that we can maintain oxybate sales at or near historical levels, or that oxybate sales will continue to grow.

Our ability to successfully commercialize Xywav will depend on, among other things, our ability to maintain adequate coverage and reimbursement for Xywav and acceptance of Xywav by payors, physicians and patients, including of Xywav for the treatment of idiopathic hypersomnia in adults.

In an effort to support strong adoption of Xywav, we are focused on providing robust patient copay and savings programs and facilitating payor coverage for Xywav.

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Entering into agreements with PBMs and payors to ensure patient access has and will likely continue to result in higher gross to net deductions.

In addition to the COVID-19 related impacts described above, in the future, we expect our oxybate products to face competition from generic and authorized generic versions of sodium oxybate pursuant to the settlement agreements we have entered into with multiple abbreviated new drug application, or ANDA, filers.

In addition to the COVID-19-related impacts described above, we expect our oxybate products to face near-term competition from generic and authorized generic versions of sodium oxybate pursuant to the settlement agreements we have entered into with multiple abbreviated new drug application, or ANDA, filers.

Generic competition can decrease the prices at which Xywav and Xyrem are sold and the number of prescriptions written for Xywav and Xyrem.

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Our financial condition, results of operations and growth prospects are also dependent on our ability to maintain or increase sales of Epidiolex/Epidyolex in the U.S.

and Europe, which is subject to many risks and there is no guarantee that we will be able to continue to successfully commercialize Epidiolex for its approved indications.

and Europe, which is subject to many risks and there is no guarantee that we will be able to continue to successfully commercialize Epidiolex/Epidyolex for its approved indications.

The commercial success of Epidiolex depends on the extent to which patients and physicians accept and adopt Epidiolex as a treatment for seizures associated with LGS, DS and TSC, and we do not know whether our or others’ estimates in this regard will be accurate.

Physicians may not prescribe Epidiolex and patients may be unwilling to use Epidiolex if coverage is not provided or reimbursement is inadequate to cover a significant portion of the cost.

Additionally, any negative development for Epidiolex in the market after launch, in clinical development for additional indications, or in regulatory processes in other jurisdictions, may adversely impact the commercial results and potential of Epidiolex.

Additionally, any negative development for Epidiolex in the market, in clinical development for additional indications, or in regulatory processes in other jurisdictions, may adversely impact the commercial results and potential of Epidiolex.

Thus, significant uncertainty remains regarding the commercial potential of Epidiolex.

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Failure to identify and acquire, in-license or develop additional products or product candidates, successfully manage the risks associated with integrating any products or product candidates into our portfolio or the risks arising from anticipated and unanticipated problems in connection with an acquisition or in-licensing, such as the GW Acquisition, could have a material adverse effect on our business, results of operations and financial condition.

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 businesses and we plan to continue to devote substantial management attention and resources to integrating our business practices and operations with GW’s in an effort to fully realize the anticipated benefits of the GW Acquisition.

The success of the GW Acquisition will depend, in part, on our ability to realize the anticipated benefits from our and GW’s businesses.

Nonetheless, Epidiolex and the other products and technologies acquired may not be successful or continue to grow at the same rate as if our companies operated independently or they may require significantly greater resources and investments than originally anticipated.

Conversely, the liabilities assumed in the GW Acquisition may be greater than originally anticipated.

In addition, difficulties may arise during the process of combining the operations of our companies that could result in the failure to achieve the synergies or free cash flow that we anticipate, the failure to integrate operations and internal systems, programs and controls, the loss of key employees that may be difficult to replace in the very competitive pharmaceutical field, the failure to harmonize both companies’ corporate cultures, and the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers, suppliers, distributors, collaboration partners, clinical trial investigators or managers of our clinical trials.

As a result, the anticipated benefits 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.

As a result, the anticipated benefits 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.

Our industry has been, and is expected to continue to be, subject to healthcare cost containment and drug pricing scrutiny by regulatory agencies in the U.S.

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If we become the subject of any future government investigation with respect to our business practices, including as they relate to the Xywav and Xyrem REMS, the launch of Xywav, our Xyrem patent litigation settlement agreements or otherwise, we could incur significant expense and could be distracted from operation of our business and execution of our strategy.

From June 2020 to February 2022, a number of lawsuits were filed on behalf of purported direct and indirect Xyrem purchasers, alleging that the patent litigation settlement agreements we entered with certain generic companies violate state and federal antitrust and consumer protection laws.

From June 2020 to May 2022, a number of lawsuits were filed on behalf of purported direct and indirect Xyrem purchasers, alleging that the patent litigation settlement agreements we entered with certain generic companies violate state and federal antitrust and consumer protection laws.

For additional information on these lawsuits, see Note 10, Commitments and Contingencies-Legal Proceedings of the Notes to Condensed Consolidated Financial Statements, included in Part I of this Quarterly Report on Form 10‑Q.

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In addition, to the extent the COVID-19 pandemic continues to adversely affect our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described above.

All of these risks and uncertainties are discussed in greater detail, along with other risks and uncertainties, in “Risk Factors” in Part I, Item 1A of the annual report on Form 10-K for the year ended December 31, 2021.

All of these risks and uncertainties are discussed in greater detail, along with other risks and uncertainties, in “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Results of Operations

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Three Months Ended

March 31, Increase/

June 30, Increase/ Six Months Ended

June 30, Increase/

2022 2021 (1)

(Decrease) 2022 2021 (1)

Product sales, net $ 928,300 $ 748,340 24 % $ 1,738,137 $ 1,351,871 29 %

Royalties and contract revenues 4,578 3,471 32 % 8,462 7,521 13 %

Cost of product sales (excluding amortization of acquired developed technologies) 115,284 40,189 N/A(2)

Cost of product sales (excluding amortization of acquired developed technologies) 124,208 119,194 4 % 239,492 159,383 50 %

Selling, general and administrative 366,473 429,031 (15) % 675,286 689,539 (2) %

Research and development 139,047 132,696 5 % 269,028 209,269 29 %

Intangible asset amortization 172,094 68,192 N/A(2)

Interest expense, net 70,684 27,376 N/A(2)

Foreign exchange loss (gain) 10,540 (943) N/A(2)

Income tax expense 536 18,019 N/A(2)

Equity in loss (gain) of investees 4,142 (4,165) N/A(2)

Intangible asset amortization 148,456 140,480 6 % 320,550 208,672 54 %

Acquired in-process research and development 69,148 — N/A(2) 69,148 — N/A(2)

Interest expense, net 63,189 69,420 (9) % 133,873 96,796 38 %

Foreign exchange loss (gain) 1,343 (2,950) N/A(2) 11,883 (3,893) N/A(2)

Income tax expense (benefit) (16,112) 228,621 N/A(3) (15,576) 246,640 N/A(3)

Equity in loss (gain) of investees 2,461 (1,365) (280) % 6,603 (5,530) (219) %

____________________________

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(2) Comparison to prior period not meaningful.

(3) The fluctuations in the income tax expense (benefit) for the three and six months ended June 30, 2022 and 2021 are as a result of changes in the mix of pre-tax income and losses across our jurisdictions and the impact of the change in the statutory tax rate in the U.K.

on the 2021 periods.

The following table presents our net product sales, royalties and contract revenues, and total revenues (in thousands, except percentages):

Three Months Ended

March 31, Increase/

June 30, Increase/ Six Months Ended

June 30, Increase/

2022 2021 (1)

(Decrease) 2022 2021 (1)

Xyrem $ 269,421 $ 334,182 (19) % $ 516,918 $ 669,732 (23) %

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Total Oxybate 504,446 458,346 10 % 938,023 869,312 8 %

Epidiolex/Epidyolex 157,893 — N/A(2)

Sunosi 15,878 11,606 37 %

Sativex 4,742 — N/A(2)

Epidiolex/Epidyolex 175,289 109,481 N/A(3) 333,182 109,481 N/A(3)

12,966 12,124 7 % 28,844 23,730 22 %

Sativex 4,142 1,961 N/A(3) 8,884 1,961 N/A(3)

Total Neuroscience 696,843 581,912 20 % 1,308,933 1,004,484 30 %

Zepzelca 68,285 55,924 22 % 127,623 110,258 16 %

Rylaze 54,220 — N/A(2)

Rylaze 72,954 — N/A(3) 127,174 — N/A(3)

Vyxeos 33,890 31,453 8 % 67,647 64,608 5 %

Defitelio/defibrotide 54,696 48,096 14 % 104,185 97,715 7 %

Erwinaze/Erwinase — 41,068 N/A(2)

Erwinaze/Erwinase — 28,314 N/A(3) — 69,382 N/A(3)

Total Oncology 229,825 163,787 40 % 426,629 341,963 25 %

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(1) The results of operations of the GW business have been included from the closing of the acquisition of GW on May 5, 2021.

(2) Net product sales for Sunosi U.S.

are included until the date of divestment to Axsome of May 9, 2022.

(3) Comparison to prior period not meaningful.

Product Sales, Net

Total oxybate product sales increased by $22.6 million in the three months ended March 31, 2022 compared to the same period in 2021.

Total o xybate revenue bottle volume increased by 3% in the three months ended March 31, 2022 compared to

the same period in 2021 reflecting our continued investment in patient access programs during the launch of Xywav.

Average active oxybate patients on therapy were approximately 16,650 in the first quarter of 2022, an increase of approxima tely 6% compared to the same period in 2021.

Xyrem product sales decreased in the three months ended March 31, 2022 compared to the same period in 2021 primarily due to a decrease in sales volume, reflecting the continued adoption of Xywav by existing Xyrem patients, and higher gross to net deductions, partially offset by a higher average net selling price.

Total oxybate product sales increased by $46.1 million and $68.7 million in the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

Total o xybate revenue bottle volume increased by 5% and 4% in the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

Average active oxybate patients on therapy were approximately 17,100 in the second quarter of 2022, an increase of approxima tely 8% compared to the same period in 2021.

Xyrem product sales decreased in the three and six months ended June 30, 2022 compared to the same periods in 2021 primarily due to a decrease in sales volume, reflecting the continued adoption of Xywav by existing Xyrem patients, partially offset by a higher average net selling price.

Price increases were instituted in January 2021 and January 2022.

Xywav product sales increased in the three months ended March 31, 2022 compared to the same period in 2021 primarily due to higher sales volumes, with bottle volume increasing by 148%.

Epidiolex/Epidyolex product sales in the three months ended March 31, 2022 were $157.9 million.

On a pro forma basis, Epidiolex/Epidyolex product sales increased by 6% in the three months ended March 31, 2022 compared to the same period in 2021, primarily due to an increase in commercial sales volumes and higher average net selling price.

Xywav product sales increased in the three and six months ended June 30, 2022 compared to the same periods in 2021 primarily due to higher sales volume, with bottle volume increasing by 81% and 106%, respectively.

Xywav product sales were positively impacted by the launch of Xywav for IH and continued strong adoption in narcolepsy driven by educational initiatives around the benefit of lowering sodium intake.

Epidiolex/Epidyolex product sales in the three and six months ended June 30, 2022 were $175.3 million and $333.2 million, respectively.

On a pro forma basis, Epidiolex/Epidyolex product sales increased by 12% and 10% in the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021, primarily due to an increase in commercial sales volume and a higher average net selling price, partially offset by higher gross to net deductions.

Price increases were instituted in January 2021 and January 2022.

S unosi product sales increased in the three months ended March 31, 2022, compared to the same period in 2021 primarily due to an increase in sales volume.

Zepzelca product sales increased in the three months ended March 31, 2022 compared to the same period in 2021 primarily due to a higher average net selling price .

Price increases were instituted in July 2021 and January 2022.

Rylaze product sales were $54.2 million in the three months ended March 31, 2022 , following its U.S.

We completed the U.S divestiture of Sunosi in May 2022.

Sunosi product sales increased in the three months ended June 30, 2022 compared to the same period in 2021 primarily due to lower gross to net deductions, driven by the release of the product returns reserve upon completion of the U.S.

divestment, partially offset by lower sales volume, and increased in the six months ended June 30, 2022 compared to the same period in 2021 primarily due to lower gross to net deductions.

Zepzelca product sales increased in the three and six months ended June 30, 2022 compared to the same periods in 2021 primarily due to an increase in sales volume resulting from continued adoption of Zepzelca in the treatment of second-line SCLC and a higher average net selling price.

P rice increases were instituted in July 2021 and January 2022.

Rylaze product sales were $73.0 million and $127.2 million in the three and six months ended June 30, 2022, respectively, following its U.S.

launch in July 2021.

Vyxeos and Defitelio/defibrotide product sales for the three months ended March 31, 2022 were in line with the same period in 2021 .

Vyxeos product sales increased in the three and six months ended June 30, 2022 compared to the same periods in 2021 primarily due to an increase in sales volume, partially offset by the negative impact of foreign exchange rates.

Defitelio/defibrotide product sales increased in the three and six months ended June 30, 2022 compared to the same periods in 2021 primarily due to a higher average net selling price and an increase in sales volume, partially offset by the negative impact of foreign exchange rates.

We distributed our final Erwinaze inventory in June 2021 following expiration of our license and supply agreement.

We expect total product sales, net will increase in 2022 over 2021, primarily due to an increase in sales of Xywav partially offset by a decrease in Xyrem as patients continue to transition to Xywav, expected growth in, and the inclusion of a full year sales of, Epidiolex and Rylaze and expected growth in Zepzelca, partially offset by an expected reduction in Sunosi upon completion of the sale to Axsome.

We expect total product sales, net will increase in 2022 over 2021, primarily due to an increase in product sales of Xywav partially offset by a decrease in Xyrem, as patients continue to transition to Xywav, expected growth in, and the inclusion of a full year sales of, Epidiolex and Rylaze and expected growth in Zepzelca, partially offset by a reduction in Erwinaze following expiration of our license and supply agreement and a reduction in Sunosi following completion of the sale to Axsome.

Cost of Product Sales

Cost of product sales increased in the three months ended March 31, 2022 compared to the same period in 2021 primarily due to the cost of product sales acquired in the acquisition of GW, including the acquisition accounting inventory fair value step-up expense, or fair value step-up expense of $63.9 million.

Gross margin as a percentage of net product sales was 85.8% for the three months ended March 31, 2022 compared to 93.3% for the same period in 2021.

The decrease in our gross margin percentage was primarily due to the impact of the fair value step-up expense.

Cost of product sales increased in the three and six months ended June 30, 2022 compared to the same periods in 2021 primarily due to the cost of product sales acquired in the acquisition of GW, including increases in the acquisition accounting inventory fair value step-up expense, or fair value step-up expense, of $2.3 million and $66.3 million in the three and six months ended June 30, 2022, respectively.

Gross margin as a percentage of net product sales was 86.6% and 86.2% for the three and six months ended June 30, 2022 compared to 84.1% and 88.2% for the same periods in 2021.

The increase in our gross margin percentage in the three months ended June 30, 2022 was primarily due to a change in product mix.

The decrease in our gross margin percentage in the six months ended June 30, 2022 was primarily due to the impact of the fair value step-up expense.

We expect our cost of product sales to increase in 2022 compared to 2021 primarily driven by the inclusion of a full year of fair value step-up expense.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased in the three months ended March 31, 2022 compared to the same period in 2021, primarily due to an increase in compensation-related expenses driven by higher headcount due to the acquisition of GW.

We expect selling, general and administrative expenses in 2022 to decrease compared to 2021, primarily due to a reduction in transaction and integration-related expenses and a reduction in costs associated with Sunosi upon completion of the sale to Axsome, together with synergies expected to be realized in connection with the acquisition of GW, partially offset by the inclusion of a full year of expense related to the acquired GW business.

Selling, general and administrative expenses decreased in the three and six months ended June 30, 2022 compared to the same periods in 2021, primarily due to lower transaction and integration expenses related to the acquisition of GW and lower Sunosi U.S.

marketing related costs in the 2022 periods, offset by the loss on disposal of Sunosi and an increase in compensation related expenses driven by the inclusion of GW related headcount costs for the full periods in 2022.

selling, general and administrative expenses in 2022 to decrease compared to 2021, primarily due to a reduction in transaction and integration expenses, together with synergies expected to be realized in connection with the acquisition of GW, partially offset by the inclusion of a full year of expense related to the acquired GW business.

Research and Development Expenses

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Clinical studies and outside services $ 57,150 $ 67,165 $ 113,579 $ 98,211

Personnel expenses 56,304 47,929 111,605 84,155

Milestone expense 5,500 2,000 5,500 2,000

Other 20,093 15,602 38,344 24,903

Total $ 139,047 $ 132,696 $ 269,028 $ 209,269

Research and development expenses increased by $53.4 million in the three months ended March 31, 2022, compared to the same period in 2021.

Clinical studies and outside services costs increased in the three months ended March 31, 2022 compared to the same period in 2021 primarily due to the addition of costs related to clinical programs for Epidiolex, nabiximols, cannabinoids and an increase in costs related to JZP150 and suvecaltamide (JZP385).

Personnel expenses increased by $19.1 million in the three months ended March 31, 2022, compared to the same period in 2021 due to increased headcount primarily driven by the acquisition of GW.

Research and development expenses increased by $6.4 million and $59.8 million in the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

Clinical studies and outside services costs decreased in the three months ended June 30, 2022 compared to the same period in 2021 primarily due to a reduction in costs related to JZP458 (Rylaze) and JZP385 and increased in the six months ended June 30, 2022 compared to the same period in 2021 primarily due to the addition of costs related to clinical programs for Epidiolex, nabiximols and cannabinoids and an increase in costs related to JZP150.

Personnel expenses increased in the three and six months ended June 30, 2022, compared to the same periods in 2021 due to the inclusion of GW-related headcount costs for the full periods in 2022.

For 2022, we expect that our research and development expenses will continue to increase from previous levels due to the inclusion of a full year of expense with respect to the acquired GW business and as we prepare for anticipated data read-outs from clinical trials, initiate and undertake additional clinical trials and related development work and potentially acquire rights to additional product candidates.

Intangible Asset Amortization

Intangible asset amortization increased by $103.9 million in the three months ended March 31, 2022, compared to the same period in 2021 primarily due to the inclusion of the amortization of the intangible assets arising from the acquisition of GW, primarily related to Epidiolex.

Intangible asset amortization increased by $8.0 million and $111.9 million in the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021 primarily due to the inclusion of the amortization of the intangible assets arising from the acquisition of GW, primarily related to Epidiolex, offset by a decrease relating to the Erwinaze intangible asset that was fully amortized in June 2021.

Intangible asset amortization is expected to increase in 2022 compared to 2021 primarily as a result of the inclusion of a full years amortization on the intangible assets acquired in the acquisition of GW.

Acquired In-Process Research and Development

Acquired in-process research and development, or IPR&D, expense in the three and six months ended June 30, 2022 primarily related to the upfront payments made in connection with our licensing agreements with Sumitomo and Werewolf of $50.0 million and $15.0 million, respectively.

Interest Expense, Net

Interest expense, net increased by $43.3 million in the three months ended March 31, 2022, compared to the same period in 2021, primarily due to higher interest expense from (i) a seven-year $3.1 billion term loan B facility, or the Dollar Term Loan and (ii) a seven-year $625.0 million term loan B facility, or the Euro Term Loan, together with the Dollar Term Loan, collectively known as the Term Loan and 4.375% senior secured notes, due 2029, or the Secured Notes.

Interest expense, net in the three months ended June 30, 2022, was in line with the same period in 2021.

Interest expense, net, increased by $37.1 million in the six months ended June 30, 2022, compared to the same periods in 2021, primarily due to higher interest expense from the seven-year $3.1 billion term loan B facility, or the Dollar Term Loan, the seven-year €625.0 million term loan B facility, or the Euro Term Loan, together with the Dollar Term Loan known as the Term Loan, and the 4.375% senior secured notes, due 2029, or the Secured Notes.

We expect interest expense, net for 2022 to be broadly in line with 2021.

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dollar functional currency and related foreign exchange forward contracts not designated as hedging instruments.

Income Tax Expense

Our income tax expense was $0.5 million for the three months ended March 31, 2022, compared to $18.0 million for the same period in 2021.

The decrease in the income tax expense resulted primarily from the mix of pre-tax income and losses incurred across tax jurisdictions.

Income Tax Expense (Benefit)

Our income tax benefit was $16.1 million and $15.6 million for the three and six months ended June 30, 2022, respectively, compared to an income tax expense of $228.6 million and $246.6 million for the same periods in 2021.

Our income tax expense for the three and six months ended June 30, 2021 included an expense of $251.4 million arising on the remeasurement of our U.K.

net deferred tax liability, which arose primarily in relation to the GW Acquisition, due to a change in the statutory rate in the U.K.

following enactment of the U.K.

Finance Act 2021.

Excluding this impact, the increase in the income tax benefit resulted primarily from the mix of pre-tax income and losses incurred across tax jurisdictions.

We do not provide for Irish income taxes on undistributed earnings of our foreign operations that are intended to be indefinitely reinvested in our foreign subsidiaries.

Liquidity and Capital Resources

As of March 31, 2022, we had cash and cash equivalents of $490.8 million, borrowing availability under our revolving credit facility of $500.0 million and long-term debt principal balance of $6.2 billion.

As of June 30, 2022, we had cash, cash equivalents and investments of $771.3 million, borrowing availability under our revolving credit facility of $500.0 million and long-term debt principal balance of $6.1 billion.

Our long-term debt included $3.1 billion in aggregate principal amount of the Dollar Term Loan, $1.5 billion in aggregate principal amount of the Secured Notes , $1.0 billion principal amount of the 2.00% exchangeable senior notes due 2026, or the 2026 Notes and $575.0 million principal amount of the 1.50% exchangeable senior notes due 2024, or the 2024 Notes.

We generated cash flows from operations of $209.0 million during the three months ended March 31, 2022, and we expect to continue to generate positive cash flows from operations which will enable us to operate our business and de-lever our balance sheet over time.

We generated cash flows from operations of $512.0 million during the six months ended June 30, 2022, and we expect to continue to generate positive cash flows from operations which will enable us to operate our business and de-lever our balance sheet over time.

In the first quarter of 2022, we repaid €208.3 million, or $251.0 million which represents the remaining principal amount of the Euro Term Loan.

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For a more detailed description of our debt arrangements, including information relating to our scheduled maturities with respect to our long-term debt, see Note 9, Debt, of the notes to the condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.

This substantial level of debt could have important consequences to our business, including, but not limited to the factors set forth in “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading "We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position, and our business would be adversely affected if we are unable to service our debt obligations.”

We believe that our existing cash and cash equivalents, cash we expect to generate from operations and funds available under our Revolving Credit Facility will be sufficient to fund our operations and to meet our existing obligations for the foreseeable future.

The adequacy of our cash resources depends on many assumptions, including primarily our assumptions with respect to product sales and expenses, as well as the other factors set forth in “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021 under the headings “Risks Related to our Lead Products and Product Candidates” and “To continue to grow our business, we will need to commit substantial resources, which could result in future losses or otherwise limit our opportunities or affect our ability to operate and grow our business.” Our assumptions may prove to be wrong or other factors may adversely affect our business, and as a result we could exhaust or significantly decrease our available cash resources, and we may not be able to generate sufficient cash to service our debt obligations which could, among other things, force us to raise additional funds and/or force us to reduce our expenses, either of which could have a material adverse effect on our business.

This substantial level of debt could have important consequences to our business, including, but not limited to the factors set forth in “Risk Factors” of this Quarterly Report on Form 10-Q under the heading “We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position, and our business would be adversely affected if we are unable to service our debt obligations.”

We believe that our existing cash, cash equivalents and investments balances, cash we expect to generate from operations and funds available under our Revolving Credit Facility will be sufficient to fund our operations and to meet our existing obligations for the foreseeable future.

The adequacy of our cash resources depends on many assumptions, including primarily our assumptions with respect to product sales and expenses, as well as the other factors set forth in in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q under the headings “Risks Related to our Lead Products and Product Candidates” and “To continue to grow our business, we will need to commit substantial resources, which could result in future losses or otherwise limit our opportunities or affect our ability to operate and grow our business.” Our assumptions may prove to be wrong or other factors may adversely affect our business, and as a result we could exhaust or significantly decrease our available cash resources, and we may not be able to generate sufficient cash to service our debt obligations which could, among other things, force us to raise additional funds and/or force us to reduce our expenses, either of which could have a material adverse effect on our business.

To continue to grow our business over the longer term, we plan to commit substantial resources to product acquisition and in-licensing, product development, clinical trials of product candidates and expansion of our commercial, development, manufacturing and other operations.

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Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations or for general corporate purposes.

Raising addit ional capital could be accomplished through one or more public or private debt or equity financings, collaborations or partnering arrangements.

However, as a result of the COVID-19 pandemic the global financial markets have experienced significant volatility.

If this volatility persists and deepens, we could experience an inability to access additional capital or our liquidity could otherwise be impacted, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments.

In addition, as a matter of Irish law, when an Irish public limited company issues ordinary shares to new shareholders for cash, the company must first offer those shares on the same or more favorable terms to existing shareholders on a pro rata basis, unless this statutory pre-emption obligation is dis-applied, or opted-out of, by approval of its shareholders.

At our extraordinary general meeting of shareholders in September 2021, our shareholders voted to approve our proposal to dis-apply the statutory pre-emption obligation on terms that are substantially more limited than our general preemption opt-out authority that had been in effect prior to August 4, 2021, which could adversely affect our ability to effectively use our unissued share capital to fund in-licensing or acquisition opportunities, or to otherwise raise additional capital for our business.

Raising additional capital could be accomplished through one or more public or private debt or equity financings, collaborations or partnering arrangements.

However, global economic conditions have been worsening, with disruptions to, and volatility in, the credit and financial markets in the U.S.

and worldwide resulting from the effects of COVID-19 and otherwise.

If these conditions persist and deepen, we could experience an inability to access additional capital or our liquidity could otherwise be impacted, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments.

In addition, under Irish law we must have authority from our shareholders to issue any ordinary shares, including ordinary shares that are part of our authorized but unissued share capital.

Moreover, as a matter of Irish law, when an Irish public limited company issues ordinary shares to new shareholders for cash, the company must first offer those shares on the same or more favorable terms to existing shareholders on a pro-rata basis, unless this statutory pre-emption obligation is dis-applied, or opted-out of, by approval of its shareholders.

At our recent annual general meeting of shareholders in July 2022, our shareholders voted to approve our proposal to dis-apply the statutory pre-emption obligation on terms that are substantially more limited than our general pre-emption opt-out authority that had been in effect prior to August 4, 2021.

This current pre-emption opt-out authority is due to expire in December 2023.

If we are unable to obtain further pre-emption authorities from our shareholders in the future, or otherwise continue to be limited by the terms of new pre-emption authorities approved by our shareholders in the future, our ability to effectively use our unissued share capital to fund in-licensing, acquisition or other business opportunities, or to otherwise raise capital, could be adversely affected.

In any event, an inability to borrow or raise additional capital in a timely manner and on attractive terms could prevent us from expanding our business or taking advantage of acquisition opportunities, and could otherwise have a material adverse effect on our business and growth prospects.

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The following table presents a summary of our cash flows for the periods indicated (in thousands):

Three Months Ended

Six Months Ended

Net cash provided by operating activities $ 512,015 $ 326,692

Net cash (used in) provided by investing activities (37,292) 737,132

Net cash used in investing activities (126,454) (5,175,238)

Net cash (used in) provided by financing activities (260,034) 4,682,312

Effect of exchange rates on cash and cash equivalents (5,710) (135)

Net (decrease) increase in cash and cash equivalents $ (100,613) $ 1,039,764

Net increase (decrease) in cash and cash equivalents $ 119,817 $ (166,369)

Operating activities

Net cash provided by operating activities decreased by $76.0 million in the three months ended March 31, 2022 compared to the same period in 2021, primarily due to a decrease in net cash inflow related to changes in operating assets and liabilities.

Net cash provided by operating activities increased by $185.3 million in the six months ended June 30, 2022 compared to the same period in 2021, primarily due to decreased transaction and integration-related costs associated with the GW Acquisition.

Investing activities

Net cash (used in) provided by investing activities decreased by $774.4 million in the three months ended March 31, 2022 compared to the same period in 2021, primarily due to the following:

• $739.3 million in net proceeds from maturity of investments, primarily time deposits, in the three months ended March 31, 2021;

• $25.0 million milestone payment to PharmaMar in relation to our first sales-based milestone for Zepzelca in the three months ended March 31, 2022.

Net cash used in investing activities decreased by $5,048.8 million in the six months ended June 30, 2022 compared to the same period in 2021, primarily due to the following:

• $6,234.8 million outflow related to the net cash paid for the GW Acquisition in the six months ended June 30, 2021;

• $53.0 million upfront payment from Axsome relating to the Sunosi U.S.

disposition in the six months ended June 30, 2022;

• $1,129.6 million decrease in net proceeds from maturity of investments, primarily time deposits in the six months ended June 30, 2022;

• $69.1 million in upfront payments for acquired IPR&D primarily driven by the $50.0 million and $15.0 million payments to Sumitomo and Werewolf, respectively, in connection with our licensing agreements in the six months ended June 30, 2022;

• $25.0 million milestone payment to PharmaMar in relation to our first sales-based milestone for Zepzelca in the six months ended June 30, 2022.

Financing activities

Net cash (used in) provided by financing activities decreased by $289.1 million in the three months ended March 31, 2022 compared to the same period in 2021, primarily due to:

• Repayment of long-term debt of $258.8 million in the three months ended March 31, 2022, compared to $8.3 million in the three months ended March 31, 2021;

Net cash (used in) provided by financing activities decreased by $4,942.3 million in the six months ended June 30, 2022 compared to the same period in 2021, primarily due to:

• Net proceeds from issuance of borrowings under the Credit Agreement of $3,719.9 million and the Secured Notes of $1,471.5 million in the six months ended June 30, 2021;

• A decrease of $55.7 million in proceeds from employee equity incentive and purchase plans;

• An increase of $12.9 million in payment of employee withholding taxes related to share-based awards;

• Repayment of long-term debt of $266.5 million in the six months ended June 30, 2022, compared to $584.3 million in the six months ended June 30, 2021.

The summary of our outstanding indebtedness under our financing arrangements is included in Note 9, Debt, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

During the three months ended March 31, 2022, there were no changes to the credit agreement, as set forth in Note 12, Debt, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

During the six months ended June 30, 2022, there were no changes to the credit agreement, as set forth in Note 12, Debt, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Contractual Obligations

During the three months ended March 31, 2022, there were no material changes to our contractual obligations as set forth in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.

During the six months ended June 30, 2022, there were no material changes to our contractual obligations as set forth in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Critical Accounting Estimates

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Significant estimates and assumptions are required in determining the amounts to be deducted from gross revenues and also with respect to the acquisition and valuation of intangibles and income taxes.

Some of these judgments can be subjective and complex, and,

consequently, actual results may differ from these estimates.

Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.

For any given individual estimate or assumption we make, there may also be other estimates or assumptions that are reasonable.

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In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “propose,” “intend,” “continue,” “potential,” “possible,” “foreseeable,” “likely,” “unforeseen” and similar expressions intended to identify forward-looking statements.

These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements.

We discuss many of these risks, uncertainties and other risk factors in greater detail in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, time frames or

achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements.

We discuss many of these risks, uncertainties and other risk factors in greater detail under Part II, Item 1A of this Quarterly Report on Form 10-Q.

Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements.

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Quantitative and Qualitative Disclosures About Market Risk

During the three months ended March 31, 2022, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A“Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2021.

During the six months ended June 30, 2022, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A“Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis