What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-03 · 156 added, 102 removed, 811 unchanged (24% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

2022 December 31,

43 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

8 unchanged sentences

Acquired in-process research and development — — 69,148 —

Impairment charge 133,648 — 133,648 —

Total operating expenses 915,889 809,746 2,489,393 2,076,609

Income (loss) from operations 85,546 ( 69,590 ) 173,095 92,529

Income from operations 24,763 28,369 197,858 120,898

Interest expense, net ( 80,244 ) ( 93,372 ) ( 214,117 ) ( 190,168 )

Foreign exchange gain (loss) ( 4,649 ) ( 2,631 ) ( 16,532 ) 1,262

Income (loss) before income tax expense (benefit) and equity in loss (gain) of investees 21,014 ( 136,060 ) 27,339 ( 374 )

Loss before income tax expense (benefit) and equity in loss (gain) of investees ( 60,130 ) ( 67,634 ) ( 32,791 ) ( 68,008 )

Income tax expense (benefit) ( 43,027 ) ( 18,057 ) ( 58,603 ) 228,583

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

5 unchanged sentences

— 153 — 2,482

Unrealized gain (loss) on cash flow hedging activities, net of income tax provision (benefit) of $ — , $ 1 , $ — and ($ 2 ), respectively

Unrealized loss on fair value hedging activities, net of income tax benefit of $ — , $ 125 , $ — and $ 125 , respectively

Unrealized loss on cash flow hedging activities, net of income tax benefit of $ — , $ — , $ — and $ 2 , respectively

Unrealized gain (loss) on fair value hedging activities, net of income tax provision (benefit) of $ — , $ 28 , $ — and ($ 97 ), respectively

— 84 — ( 291 )

30 unchanged sentences

Balance at June 30, 2022 62,623 $ 6 4,000 $ 55 $ 472 $ 3,312,319 $ ( 1,106,029 ) $ 993,958 $ 3,200,781

Issuance of ordinary shares in conjunction with exercise of share options 207 — — — — 21,260 — — 21,260

Issuance of ordinary shares in conjunction with vesting of restricted stock units 60 — — — — — — — —

Shares withheld for payment of employee's withholding tax liability — — — — — ( 2,567 ) — — ( 2,567 )

Share-based compensation — — — — — 56,985 — — 56,985

Other comprehensive loss — — — — — — ( 511,617 ) — ( 511,617 )

Net loss — — — — — — — ( 19,648 ) ( 19,648 )

Balance at September 30, 2022 62,890 $ 6 4,000 $ 55 $ 472 $ 3,387,997 $ ( 1,617,646 ) $ 974,310 $ 2,745,194

JAZZ PHARMACEUTICALS PLC

26 unchanged sentences

Balance at June 30, 2021 61,115 $ 6 4,000 $ 55 $ 472 $ 3,403,482 $ ( 190,935 ) $ 918,410 $ 4,131,490

Issuance of ordinary shares in conjunction with exercise of share options 202 — — — — 14,822 — — 14,822

Issuance of ordinary shares in conjunction with vesting of restricted stock units 63 — — — — — — — —

Shares withheld for payment of employee's withholding tax liability — — — — — ( 2,431 ) — — ( 2,431 )

Share-based compensation — — — — — 54,011 — — 54,011

Other comprehensive loss — — — — — — ( 206,582 ) — ( 206,582 )

Net loss — — — — — — — ( 52,833 ) ( 52,833 )

Balance at September 30, 2021 61,380 $ 6 4,000 $ 55 $ 472 $ 3,469,884 $ ( 397,517 ) $ 865,577 $ 3,938,477

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities

5 unchanged sentences

Deferred tax expense (benefit) ( 146,874 ) 96,593

Impairment charge 133,648 —

Acquired in-process research and development 69,148 —

33 unchanged sentences

Net proceeds from issuance of Senior Secured Notes, due 2029 — 1,471,533

Payments for repurchase of Exchangeable Senior Notes, due 2021 — ( 218,812 )

Net cash (used in) provided by financing activities ( 549,087 ) 4,217,131

24 unchanged sentences

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;

• Sativex® (nabiximols) oral solution , a product approved and marketed in more than 29 markets outside the U.S.

• Sativex® (nabiximols) oral solution , a product approved and commercialized in 29 countries 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.

Nabiximols is investigational and currently not approved for any indication in the U.S.

• Zepzelca® (lurbinectedin) , a product approved by FDA in June 2020 under FDA's accelerated approval pathway and launched in the U.S.

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i n Canada, Zepzelca received conditional approval 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.

• Rylaze® (asparaginase erwinia chrysanthemi (recombinant)-rywn) , a product approved by FDA in June 2021 and launched in the U.S.

coli -derived asparaginase;

• Vyxeos® (daunorubicin and cytarabine) liposome for injection , a product approved in the U.S., Canada, EU, Great Britain, Switzerland, Israel and Australia (marketed as Vyxeos® liposomal in the EU, Great Britain, Switzerland and Israel) 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.

14 unchanged sentences

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 and six months ended June 30, 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.

The results for the three and nine months ended September 30, 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.

24 unchanged sentences

Additional paid-in capital 3,534,792 ( 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 and six months ended June 30, 2022 the effect of adoption reduced interest expense, net and increased net income by approximately $ 12 million and $ 24 million, respectively, and increased basic and diluted EPS by approximately $ 0.19 per share and $ 0.38 per share, respectively.

The Exchangeable Senior Notes were determined to be anti-dilutive for the three and six months ended June 30, 2022.

Interest expense on the Exchangeable Senior Notes is lower as a result of adoption of this guidance.

During the three and nine months ended September 30, 2022 the effect of adoption reduced interest expense, net and increased net income by approximately $ 12 million and $ 36 million, respectively, and increased basic and diluted EPS by approximately $ 0.20 per share and $ 0.57 per share, respectively.

The Exchangeable Senior Notes were determined to be anti-dilutive for the three and nine months ended September 30, 2022.

The adoption of ASU 2020-06 did not impact our cash flows or compliance with debt covenants.

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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 IH in adults and adoption in that indication;

competition from the near-term 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.

competition from the near-term introduction of authorized generic versions of sodium oxybate and from 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;

6 unchanged sentences

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;

effectively commercializing our approved or acquired products such as Epidiolex, Zepzelca and Rylaze;

obtaining and maintaining adequate coverage and reimbursement for our products;

4 unchanged sentences

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

our products, loss of single source suppliers or failure to comply with manufacturing regulations;

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 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;

18 unchanged sentences

All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes.

As of June 30, 2022, we had foreign exchange forward contracts with notional amounts totaling $ 667.0 million.

As of June 30, 2022, the outstanding foreign exchange forward contracts had a net liability fair value of $ 20.3 million.

As of September 30, 2022, we had foreign exchange forward contracts with notional amounts totaling $ 608.6 million.

As of September 30, 2022, the outstanding foreign exchange forward contracts had a net liability fair value of $ 34.4 million.

The counterparties to these contracts are large multinational commercial banks, and we believe the risk of nonperformance is not significant.

4 unchanged sentences

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 June 30, 2022 and December 31, 2021, allowances on receivables were not material.

As of June 30, 2022, three customers accounted for 74 % of gross accounts receivable, Express Scripts Specialty Distribution Services, Inc.

and its affiliates, or ESSDS, which accounted for 54 % 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 10 % of gross accounts receivable.

Historically, we have not experienced significant credit losses on our accounts receivable and as of September 30, 2022 and December 31, 2021, allowances on receivables were not material.

As of September 30, 2022, three customers accounted for 75 % of gross accounts receivable, Express Scripts Specialty Distribution Services, Inc.

and its affiliates, or ESSDS, which accounted for 55 % of gross accounts receivable, Cardinal Health, Inc., or Cardinal, which accounted for 11 % of gross accounts receivable, and McKesson Corporation and affiliates, or McKesson, 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.

16 unchanged sentences

net sales of Sunosi in future indications.

Upon closing, we recognized a loss on disposal of $ 40.8 million within selling, general and administrative expenses in our condensed consolidated statements of income (loss) for the three and six months ended June 30, 2022.

Upon closing, we recognized a loss on disposal of $ 40.8 million within selling, general and administrative expenses in our condensed consolidated statements of income (loss) in the nine months ended September 30, 2022.

We are accounting for the contingent consideration in the form of the future royalty as it is earned.

3 unchanged sentences

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

Under the terms of the agreement, we made an upfront payment of $ 15.0 million to Werewolf, which was recorded as acquired in-process research and development, or IPR&D, expense in our condensed consolidated statements of income (loss) for the three and six months ended June 30, 2022.

Werewolf is eligible to receive development, regulatory and commercial milestone payments of up to $ 1.26 billion and, if JZP898 is approved, a tiered, mid-single-digit percentage royalty on net sales of JZP898.

1 unchanged sentence

JZP441 is 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 $ 50.0 million to Sumitomo, which was recorded as acquired IPR&D expense in our condensed consolidated statements of income (loss) for the three and six months ended June 30, 2022.

Sumitomo is eligible to receive development, regulatory and commercial milestone payments of up to $ 1.09 billion and, if JZP441 is approved, a tiered, low double-digit royalty on Jazz's net sales of JZP441.

1 unchanged sentence

Cash, cash equivalents and investments consisted of the following (in thousands):

June 30, 2022

September 30, 2022

Losses Estimated

16 unchanged sentences

Interest income from available-for-sale securities was $ 3.5 million and $ 4.4 million

in the three and six months ended June 30, 2022, respectively, and $ 0.4 million and $ 1.5 million in the three and six months ended June 30, 2021, respectively.

in the three and nine months ended September 30, 2022, respectively, and $ 0.1 million and $ 1.7 million in the three and nine months ended September 30, 2021, respectively.

Fair Value Measurement

The following table summarizes, by major security type, our available-for-sale securities and derivative contracts as of June 30, 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):

June 30, 2022 December 31, 2021

The following table summarizes, by major security type, our available-for-sale securities and derivative contracts as of September 30, 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):

September 30, 2022 December 31, 2021

(Level 1) Significant

11 unchanged sentences

Totals $ — $ 37,742 $ 37,742 $ — $ 18,419 $ 18,419

As of June 30, 2022, our available-for-sale securities included money market funds and time deposits and their carrying values were approximately equal to their fair values.

As of September 30, 2022, our available-for-sale securities included money market funds and time deposits 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 and time deposits were measured at fair value using Level 2 inputs.

3 unchanged sentences

There were no transfers between the different levels of the fair value hierarchy in 2022 or 2021.

As of June 30, 2022, the carrying amount of investments measured using the measurement alternative for equity investments without a readily determinable fair value was $ 5.5 million.

As of September 30, 2022, the carrying amount of investments measured using the measurement alternative for equity investments without a readily determinable fair value was $ 5.5 million.

The carrying amount, which is recorded within other non-current assets, is based on the latest observable transaction price.

As of June 30, 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 $ 571 million, $ 1.2 billion, $ 1.3 billion and $ 2.9 billion respectively.

As of September 30, 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 $ 545 million, $ 1.1 billion, $ 1.3 billion and $ 2.7 billion respectively.

The fair values of each of these debt facilities was estimated using quoted market prices obtained from brokers (Level 2).

4 unchanged sentences

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 seven-year € 625.0 million term loan B facility, or the 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.

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.

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 (loss).

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Cross-Currency Interest Rate Contract:

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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 June 30, 2022 and December 31, 2021, the notional amount of foreign exchange contracts where hedge accounting is not applied was $ 667.0 million and $ 347.2 million, respectively.

As of September 30, 2022 and December 31, 2021, the notional amount of foreign exchange contracts where hedge accounting is not applied was $ 608.6 million and $ 347.2 million, respectively.

The foreign exchange gain (losses) in our condensed consolidated statements of income (loss) included the following gains (losses) associated with foreign exchange contracts not designated as hedging instruments (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Foreign Exchange Forward Contracts:

2022 2021 2022 2021

Gain (loss) recognized in foreign exchange gain (loss) $ ( 34,180 ) $ 3,017 $ ( 55,205 ) $ ( 10,033 )

The cash flow effects of our derivative contracts for the six months ended June 30, 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.

Loss recognized in foreign exchange gain (loss) $ ( 40,331 ) $ ( 8,231 ) $ ( 95,536 ) $ ( 18,264 )

The cash flow effects of our derivative contracts for the nine months ended September 30, 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.

1 unchanged sentence

The interest rate swap agreements matured in July 2021.

The impact on accumulated other comprehensive income (loss) and earnings from interest rate swap contracts for the three and six months ended June 30, 2021 was as follows (in thousands):

The impact on accumulated other comprehensive income (loss) and earnings from interest rate swap contracts for the three and nine months ended September 30, 2021 was as follows (in thousands):

Interest Rate Contracts:

Three Months Ended

June 30, 2021 Six Months Ended

June 30, 2021

Gain (loss) recognized in accumulated other comprehensive income (loss), net of tax $ 2 $ ( 14 )

September 30, 2021 Nine Months Ended

September 30, 2021

Loss recognized in accumulated other comprehensive income (loss), net of tax $ — $ ( 14 )

Gain reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax 153 2,482

The following tables summarize the fair value of outstanding derivatives (in thousands):

Classification June 30,

Classification September 30,

2022 December 31,

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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):

June 30, 2022

September 30, 2022

Gross Amounts of Recognized Assets/ Liabilities Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet Gross Amounts Not Offset in the Consolidated Balance Sheet

8 unchanged sentences

Inventories consisted of the following (in thousands):

September 30,

2022 December 31,

3 unchanged sentences

Total inventories $ 728,074 $ 1,072,721

As of June 30, 2022 and December 31, 2021 inventories included $ 606.0 million and $ 811.3 million, respectively, related to the purchase accounting inventory fair value step-up on inventory acquired in the GW Acquisition.

As of September 30, 2022 and December 31, 2021 inventories included $ 487.3 million and $ 811.3 million, respectively, related to the purchase accounting inventory fair value step-up on inventory acquired in the GW Acquisition.

Goodwill and Intangible Assets

3 unchanged sentences

Foreign exchange ( 222,047 )

Balance at June 30, 2022 $ 1,687,648

Balance at September 30, 2022 $ 1,592,635

________________________

1 unchanged sentence

The gross carrying amounts and net book values of our intangible assets were as follows (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Average Useful

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Total intangible assets $ 7,064,245 $ ( 1,493,851 ) $ 5,570,394 $ 8,365,678 $ ( 1,213,350 ) $ 7,152,328

The decrease in the gross carrying amount of intangible assets as of June 30, 2022 compared to December 31, 2021 primarily reflects the sale of the Sunosi acquired developed technology asset to Axsome and the negative impact of foreign currency translation adjustments due to the weakening of sterling and euro against the U.S.

The decrease in the gross carrying amount of intangible assets as of September 30, 2022 compared to December 31, 2021 primarily reflects the negative impact of foreign currency translation adjustments due to the weakening of sterling and euro against the U.S.

dollar, the impairment of our acquired IPR&D asset of $ 133.8 million as a result of the decision to discontinue our nabiximols program and the sale of the Sunosi acquired developed technology asset to Axsome.

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.

Based on finite-lived intangible assets recorded as of June 30, 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):

Based on finite-lived intangible assets recorded as of September 30, 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

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Property, plant and equipment consisted of the following (in thousands):

September 30,

2022 December 31,

Construction-in-progress $ 79,599 $ 86,511

Manufacturing equipment and machinery $ 67,201 $ 69,079

Leasehold improvements 62,956 66,318

Construction-in-progress 67,088 86,511

Land and buildings 60,720 64,008

Leasehold improvements 60,315 66,318

Computer software 32,876 25,646

5 unchanged sentences

Other current assets consisted of the following (in thousands):

September 30,

2022 December 31,

3 unchanged sentences

Accrued liabilities consisted of the following (in thousands):

September 30,

2022 December 31,

1 unchanged sentence

Employee compensation and benefits 152,049 158,870

Accrued interest 34,992 48,640

Clinical trial accruals 25,380 25,612

Derivative instrument liabilities 37,742 18,419

Clinical trial accruals 24,036 25,612

Sales return reserve 22,637 15,814

Consulting and professional services 21,858 22,507

Accrued interest 21,371 48,640

Accrued royalties 20,831 20,345

Sales return reserve 18,708 15,814

Current portion of lease liabilities 14,877 15,763

1 unchanged sentence

Inventory-related accruals 6,237 16,166

Accrued milestones 5,000 25,000

Accrued construction-in-progress 3,978 2,894

Accrued milestones 750 25,000

Other 62,103 59,311

1 unchanged sentence

The following table summarizes the carrying amount of our indebtedness (in thousands):

September 30,

2022 December 31,

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In 2021, we made voluntary prepayments on the Euro Term Loan totaling € 416.7 million, or $ 502.0 million, and in March 2022 we repaid the remaining outstanding principal of € 208.3 million, or $ 251.0 million.

In September 2022, we made a voluntary repayment on the Dollar Term Loan totaling $ 300.0 million.

Exchangeable Senior Notes Due 2026

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The exchange rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

In addition, following certain make-whole fundamental changes occurring prior to the maturity date of the 2026 Notes or upon our issuance of a notice of redemption, we will in certain circumstances increase the exchange rate for holders of the 2026 Notes who elect to exchange their 2026 Notes in connection with that make-whole fundamental change or during the related redemption period.

March 15, 2026, the 2026 Notes will be exchangeable only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

their 2026 Notes in connection with that make-whole fundamental change or during the related redemption period.

Prior to March 15, 2026, the 2026 Notes will be exchangeable only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

Following the adoption of ASU 2020-06, the 2026 Notes are accounted for as a single liability measured at its amortized cost.

1 unchanged sentence

The effective interest rate of the 2026 Notes is 2.26 %.

During the three and six months ended June 30, 2022, we recognized interest expense of $ 5.6 million and $ 11.1 million, respectively, of which $ 5.0 million and $ 10.0 million, related to the contractual coupon rate and $ 0.6 million and $ 1.1 million, related to the amortization of debt issuance costs.

During the three and nine months ended September 30, 2022, we recognized interest expense of $ 5.7 million and $ 16.8 million, respectively, of which $ 5.0 million and $ 15.0 million, related to the contractual coupon rate and $ 0.7 million and $ 1.8 million, related to the amortization of debt issuance costs.

Please see Note 1 for further information on the adoption of ASU 2020-06.

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The effective interest rate of the 2024 Notes is 1.79 %.

During the three and six months ended June 30, 2022, we recognized interest expense of $ 2.5 million and $ 5.0 million, respectively, of which $ 2.1 million and $ 4.2 million related to the contractual coupon rate and $ 0.4 million and $ 0.8 million, related to the amortization of debt issuance costs.

During the three and nine months ended September 30, 2022, we recognized interest expense of $ 2.5 million and $ 7.6 million, respectively, of which $ 2.1 million and $ 6.4 million related to the contractual coupon rate and $ 0.4 million and $ 1.2 million, related to the amortization of debt issuance costs.

Please see Note 1 for further information on the adoption of ASU 2020-06.

4 unchanged sentences

There is no assurance that in the future such restrictions will not be adopted.

Scheduled maturities with respect to our long-term debt principal balances outstanding as of June 30, 2022 were as follows (in thousands):

Scheduled maturities with respect to our long-term debt principal balances outstanding as of September 30, 2022 were as follows (in thousands):

Year Ending December 31, Scheduled Long-Term Debt Maturities

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Assuming the applicability of coverage, the willingness of the insurer to assume coverage, and subject to certain retention, loss limits and other policy provisions, we believe the fair value of these indemnification obligations is not significant.

Accordingly, we did not recognize any liabilities relating to these obligations as of June 30, 2022 and December 31, 2021.

Accordingly, we did not recognize any liabilities relating to these obligations as of September 30, 2022 and December 31, 2021.

No assurances can be given that the covering insurers will not attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these insurers, in which case we may incur substantial liabilities as a result of these indemnification obligations.

Other Commitments

As of June 30, 2022, we had $ 59.1 million of noncancelable purchase commitments due within one year, primarily related to agreements with third party manufacturers.

As of September 30, 2022, we had $ 49.5 million of noncancelable purchase commitments due within one year, primarily related to agreements with third party manufacturers.

Legal Proceedings

18 unchanged sentences

In December 2020, the above cases were centralized and transferred to the United States District Court for the Northern District of California, where the multidistrict litigation will proceed for the purpose of discovery and pre-trial proceedings.

In January 2021, the United States District Court for the Northern District of California issued a Case Management Order that schedules this case for trial in February 2023.

On March 18, 2021, United Healthcare Services, Inc.

7 unchanged sentences

filed a lawsuit in the United States District Court for the Northern District of California against the Company Defendants, Hikma Pharmaceuticals plc, Hikma Pharmaceuticals USA Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations.

On February 17, 2022, Health Care Service Corporation filed a lawsuit in the United States District Court for the Northern District of California against the Company Defendants, Hikma Pharmaceuticals plc, Hikma Pharmaceuticals USA Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations.

On May 9, 2022, Aetna Inc.

filed a lawsuit in the Superior Court of California for the County of Alameda against the Company Defendants, Hikma Pharmaceuticals plc, Hikma Pharmaceuticals USA Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations.

A hearing on class certification in the consolidated multi-district litigation referenced above is scheduled for March 2023.

Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations.

On May 9, 2022, Aetna Inc., or Aetna, filed a lawsuit in the Superior Court of California for the County of Alameda against the Company Defendants, Hikma Pharmaceuticals plc, Hikma Pharmaceuticals USA Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations.

On November 7, 2022, the court in the Aetna case issued a tentative ruling granting in part and denying in part our motion to dismiss.

A hearing is scheduled for November 29, 2022.

A hearing on class certification in the consolidated multi-district litigation referenced above is scheduled for April 2023.

A trial date will be set following a ruling on class certification.

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Avadel filed an answer to the complaint and counterclaims asserting that the patents are invalid or not enforceable, and that its product, if approved, will not infringe our patents.

Avadel filed a motion for partial judgment on the pleadings on its counterclaim that one of our patents should be delisted from the Orange Book.

The Court scheduled a hearing on that motion for November 15, 2022.

On August 4, 2021, we filed an additional patent infringement suit against Avadel in the United States District Court for the District of Delaware.

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The suit seeks an injunction to prevent Avadel from launching a product that would infringe the patent, and an award of damages if Avadel does launch an infringing product.

Avadel filed an answer to the complaint and counterclaims asserting that the patent is invalid, that its product, if approved, would not infringe, and that by listing the patent in the Orange Book, we engaged in unlawful monopolization in violation of the Sherman Act.

On July 21, 2022, Avadel filed a lawsuit against FDA in the United States District Court for the District of Columbia, challenging FDA’s determination that Avadel was required to file a paragraph IV certification regarding one of our Orange Book listed patents.

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On July 27, 2022, we filed a motion to intervene in that case, which the Court granted.

The Court held a hearing on the parties’ respective motions for summary judgment on October 7, 2022.

On November 3, 2022, the Court granted our and FDA’s motions for summary judgment and denied Avadel’s motion.

Canopy Patent Litigation

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GW has filed papers with the Court of Appeal seeking leave to challenge the Patents Court’s decision.

The Court of Appeal held a hearing on GW’s appeal on October 12, 2022.

On November 8, 2022, the Court of Appeal ruled against GW on the jurisdictional challenge, so the case will continue in the Patents Court.

In January 2022, we filed a lawsuit against Otsuka in the Supreme Court of the State of New York, County of New York, seeking a declaration that Otsuka is not entitled to any royalties on sales of Epidiolex under the Research Collaboration and License Agreement.

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Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

The components of accumulated other comprehensive loss as of September 30, 2022 and December 31, 2021 were as follows (in thousands):

Net Unrealized

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Other comprehensive income (loss), net 128 ( 1,217,414 ) ( 1,217,286 )

Balance at June 30, 2022 $ — $ ( 1,106,029 ) $ ( 1,106,029 )

During the six months ended June 30, 2022, other comprehensive loss primarily reflects foreign currency translation adjustments, primarily due to the weakening of the sterling and the euro against the U.S.

Balance at September 30, 2022 $ — $ ( 1,617,646 ) $ ( 1,617,646 )

During the nine months ended September 30, 2022, other comprehensive loss primarily reflects foreign currency translation adjustments, primarily due to the weakening of the sterling and the euro against the U.S.

Net Income (Loss) per Ordinary Share

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Potentially dilutive ordinary shares from the Exchangeable Senior Notes are determined by applying the if-converted method to the assumed issuance of ordinary shares upon exchange of the Exchangeable Senior Notes.

The potential issue of ordinary shares upon exchange of the Exchangeable Senior Notes was anti-dilutive and had no impact on diluted net income per ordinary share for the three and six months ended June 30, 2022.

The potential issue of ordinary shares upon exchange of the Exchangeable Senior Notes was anti-dilutive and had no impact on diluted net income (loss) per ordinary share for the three and nine months ended September 30, 2022.

The following table represents the weighted-average ordinary shares that were excluded from the calculation of diluted net income (loss) per ordinary share for the periods presented because including them would have an anti-dilutive effect (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

23 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Contract Liabilities - Deferred Revenue

The deferred revenue balance as of June 30, 2022 primarily related to deferred upfront fees received from Nippon Shinyaku Co., Ltd., or Nippon Shinyaku, in connection with two license, development and commercialization agreements

The deferred revenue balance as of September 30, 2022 primarily related to deferred upfront fees received from Nippon Shinyaku Co., Ltd., or Nippon Shinyaku, in connection with two license, development and commercialization agreements

granting Nippon Shinyaku exclusive rights to develop and commercialize each of Defitelio and Vyxeos in Japan.

We recognized contract revenues of $ 0.5 million and $ 1.0 million during the three and six months ended June 30, 2022, respectively, relating to these upfront payments.

We recognized contract revenues of $ 0.5 million and $ 1.6 million during the three and nine months ended September 30, 2022, respectively, relating to these upfront payments.

The deferred revenue balances are being recognized over an average of four years representing the period over which we expect to perform our research and developments obligations under each agreement.

The following table presents a reconciliation of our beginning and ending balances in contract liabilities from contracts with customers for the six months ended June 30, 2022 (in thousands):

The following table presents a reconciliation of our beginning and ending balances in contract liabilities from contracts with customers for the nine months ended September 30, 2022 (in thousands):

Contract Liabilities

1 unchanged sentence

Amount recognized within royalties and contract revenues ( 1,569 )

Balance as of June 30, 2022 $ 1,509

Balance as of September 30, 2022 $ 987

Share-Based Compensation

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

6 unchanged sentences

Share Options

There were no share options granted in the three and six months ended June 30, 2022.

The table below shows the number of shares underlying options granted to purchase our ordinary shares, the weighted-average assumptions used in the Black-Scholes option pricing model and the resulting weighted-average grant date fair value of share options granted for the three and six months ended June 30, 2021:

Three Months Ended

June 30, 2021 Six Months Ended

June 30, 2021

There were no share options granted in the three and nine months ended September 30, 2022 and the three months ended September 30, 2021.

Nine Months Ended

September 30, 2021

Shares underlying options granted (in thousands) 110

7 unchanged sentences

During the second quarter of 2021, we issued nominal strike price share options to replace certain unvested GW awards in connection with the GW Acquisition.

There were no nominal strike price share options granted in the three and six months ended June 30, 2022.

There were no nominal strike price share options granted in the three and nine months ended September 30, 2022.

The table below shows the number of nominal strike price options granted covering an equal number of our ordinary shares and the weighted-average grant date fair value:

Three and Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2021

Nominal strike price share options granted (in thousands)

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

3 unchanged sentences

The Company evaluated the performance targets in the context of its current long-range financial plan and its product candidate development pipeline and recognized expense based on the probable number of awards that will ultimately vest.

As of June 30, 2022, compensation cost not yet recognized related to unvested share options, RSUs and PRSUs was $ 23.1 million, $ 377.0 million and $ 50.4 million, respectively, which is expected to be recognized over a weighted-average period of 1.4 years, 3.0 years and 2.1 years, respectively.

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.

As of September 30, 2022, compensation cost not yet recognized related to unvested share options, RSUs and PRSUs was $ 16.5 million, $ 342.0 million and $ 45.2 million, respectively, which is expected to be recognized over a weighted-average period of 1.2 years, 2.8 years and 1.8 years, respectively.

Our income tax benefit was $ 43.0 million and $ 58.6 million for the three and nine months ended September 30, 2022, respectively, compared to an income tax benefit of $ 18.1 million and an income tax expense of $ 228.6 million for the same periods in 2021.

Our income tax benefit for the three and nine months ended September 30, 2022 included the tax impacts of

the impairment of our acquired IPR&D asset and restructuring costs.

Our income tax expense for the nine months ended September 30, 2021 included an expense of $ 250.6 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.

1 unchanged sentence

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.

Excluding these impacts, the decrease in the income tax benefit in the three months ended September 30, 2022 compared to the same period in 2021 resulted primarily from the mix of pre-tax income and losses incurred across tax jurisdictions.

The income tax benefit in the nine months ended September 30, 2022 is in line with the prior period.

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.

15 unchanged sentences

Certain of our German subsidiaries are currently under examination by the German taxing authorities for the years ended December 31, 2017, 2018 and 2019.

Subsequent Events

In October 2022, we announced an exclusive licensing agreement with Zymeworks Inc., or Zymeworks, under which we have the right to acquire development and commercialization rights to Zymeworks' zanidatamab across all indications in the U.S., Europe, Japan and all other territories except for those Asia/Pacific territories previously licensed by Zymeworks.

Zanidatamab is a bispecific antibody that can simultaneously bind two non-overlapping epitopes of HER2, known as biparatopic binding.

Under the terms of the agreement, following clearance relating to the U.S Hart-Scott Rodino Antitrust Improvements Act of 1976, or HSR Clearance, Zymeworks is eligible to receive an upfront payment of $ 50.0 million, and should we decide to continue the collaboration following readout of the top-line clinical data from HERIZON-BTC-01, a second, one-time payment of $ 325 million.

Zymeworks is also eligible to receive regulatory and commercial milestone payments of up to $ 1.4 billion, for total potential payments of $ 1.76 billion.

Pending approval, Zymeworks is eligible to receive tiered royalties between 10 % and 20 % on our net sales.

Subject to HSR Clearance, the upfront payment of $ 50.0 million would be expensed to acquired IPR&D in the fourth quarter of 2022.

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 1. Financial Statements