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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 441 added, 304 removed, 365 unchanged (67% of the section changed)

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In addition, we leverage our efficient, scalable operating model and integrated capabilities across our global infrastructure to effectively reach patients around the world.

At the 40th Annual J.P.

Morgan Healthcare Conference in January 2022, we announced our Vision 2025, which aims to deliver sustainable growth and enhanced value, driving our continued transformation to an innovative, high-growth global pharmaceutical leader.

In January 2022, we announced our Vision 2025, which aims to deliver sustainable growth and enhanced value, driving our continued transformation to an innovative, high-growth global pharmaceutical leader.

The three core components of our Vision 2025 focus on commercial execution, pipeline productivity and operational excellence.

Our lead marketed products are:

• Xywav® (calcium, magnesium, potassium, and sodium oxybates) oral solution , a product approved by the U.S.

Food and Drug Administration, or FDA, in July 2020 and launched in the U.S.

in November 2020 for the treatment of cataplexy or excessive daytime sleepiness, or EDS, in patients with narcolepsy aged seven years of age and older, and also approved by FDA in August 2021 for the treatment of idiopathic hypersomnia, or IH, in adults and launched in the U.S.

in November 2021.

Xywav contains 92% less sodium than Xyrem®;

• Xyrem (sodium oxybate) oral solution , a product approved by FDA and distributed in the U.S.

for the treatment of both cataplexy and EDS in patients seven years of age and older with narcolepsy;

Jazz also markets Xyrem in Canada for the treatment of cataplexy in patients with narcolepsy.

Xyrem is also approved and distributed in Europe, Great Britain and other markets through a licensing agreement;

• Epidiolex® (cannabidiol) oral solution , a product approved by FDA and launched in the U.S.

in 2018 by GW Pharmaceuticals plc, or GW, and currently indicated for the treatments of seizures associated with Lennox-Gastaut syndrome, Dravet syndrome, or tuberous sclerosis complex (TSC) in patients one year of age or older;

in Europe (where it is marketed as Epidyolex®) and other markets, it is approved for adjunctive treatment of seizures associated with Lennox-Gastaut syndrome or Dravet syndrome, in conjunction with clobazam (EU and Great Britain only), in patients 2 years of age and older and for adjunctive treatment of seizures associated with TSC in patients 2 years of age and older;

• Sunosi® (solriamfetol) , a product approved by FDA and marketed in the U.S., Canada, Europe and Great Britain to improve wakefulness in adult patients with EDS associated with narcolepsy or obstructive sleep apnea, or OSA;

• Sativex® (nabiximols) oral solution , a product approved and marketed in the U.K., Canada and other markets 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.

• Zepzelca® (lurbinectedin) , a product approved by FDA in June 2020 and launched in the U.S.

in July 2020 for the treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy;

i n Canada, Zepzelca was approved in September 2021 for the treatment of adults with Stage III or metastatic SCLC, who have progressed on or after platinum-containing therapy;

• Rylaze™ (recombinant Erwinia asparaginase), a product approved by FDA in June 2021 and launched in the U.S.

in July 2021 for use as a component of a multi-agent chemotherapeutic regimen for the treatment of acute lymphoblastic leukemia, or ALL, or lymphoblastic lymphoma, or LBL, in adults and pediatric patients who have developed hypersensitivity to E.

coli -derived asparaginase;

• Vyxeos® (daunorubicin and cytarabine) liposome for injection , a product approved in the U.S., Canada, Europe and Great Britain (marketed as Vyxeos® liposomal in Europe and Great Britain) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia, or t-AML, or AML with myelodysplasia-related changes (AML-MRC).

An expanded indication was granted in the U.S.

for the treatment of newly diagnosed t-AML or AML-MRC in pediatric patients aged 1 year and older;

• Defitelio® (defibrotide sodium) is a product approved in the U.S.

and Brazil for the treatment of hepatic veno-occlusive disease, or VOD, with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Japan for the treatment of hepatic sinusoidal obstruction syndrome (hepatic-veno occlusive disease).

It is currently approved in the EU, Great Britain, Canada, Israel, South Korea, Australia and Switzerland for the treatment of severe hepatic VOD, also known as sinusoidal obstructive syndrome, or SOS, in HSCT therapy.

It is indicated in adults and pediatric patients over 1 month of age.

Our strategy to deliver sustainable growth and enhanced value is focused on:

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For a summary of our ongoing research and development activities, see “Business—Research and Development” in Part I, Item 1 of this Annual Report on Form 10-K.

Our lead marketed products, listed below, are approved in countries around the world to improve patient care.

Product Indication(s) Initial Approval Date Market(s)

Xywav ® (calcium, magnesium, potassium, and sodium oxybates)

Treatment of cataplexy or excessive daytime sleepiness, or EDS, in patients seven years of age and older with narcolepsy.

Treatment of idiopathic hypersomnia, or IH, in adults.

Xyrem ® (sodium oxybate)

Treatment of cataplexy or EDS in patients seven years of age and older with narcolepsy.

For the treatment of cataplexy in patients with narcolepsy.

Treatment of narcolepsy with cataplexy in adult patients, adolescents and children from age of 7 years.

October 2005 U.S.

EU, Great Britain, other markets (through licensing agreement)

Epidiolex ® (cannabidiol)

Epidyolex ® (cannabidiol)

Treatment of seizures associated with Lennox-Gastaut syndrome, or LGS, Dravet syndrome, or DS, or tuberous sclerosis complex, or TSC, in patients 1 year of age and older.

For adjunctive therapy of seizures associated with LGS or DS, in conjunction with clobazam, for patients 2 years of age and older.*

For adjunctive therapy of seizures associated with TSC for patients 2 years of age and older.

September 2019

April 2021 U.S.

EU, Great Britain, Israel, Australia and New Zealand

EU, Great Britain, Israel

Zepzelca ® (lurbinectedin)

Treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy.

Treatment of adults with Stage III or metastatic SCLC who have progressed on or after platinum-containing therapy.

September 2021 U.S.

(licensed from PharmaMar)**

Canada (licensed from PharmaMar)***

Rylaze ® (asparaginase erwinia chrysanthemi (recombinant)-

A component of a multi-agent chemotherapeutic regimen for the treatment of acute lymphoblastic leukemia, or ALL, and lymphoblastic lymphoma, or LBL, in adult and pediatric patients 1 month or older who have developed hypersensitivity to E.

coli -derived asparaginase.

A component of a multi-agent chemotherapeutic regimen for the treatment of ALL and LBL, in adults and pediatric patients 1 year or older who have developed hypersensitivity to

coli -derived asparaginase.

September 2022 U.S.

Vyxeos ® (daunorubicin and cytarabine) liposome for injection

Vyxeos ® liposomal 44 mg/100 mg powder for concentrate for solution for infusion

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 acute myeloid leukemia, or t-AML or AML-MRC in adults and pediatric patients one year and older.

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

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

EU, Great Britain, Switzerland, Israel, Australia, South Korea

Defitelio ® (defibrotide)

Defitelio ® (defibrotide sodium)

Defitelio ® (defibrotide)

Treatment of severe hepatic VOD, also known as SOS, following HSCT therapy.

Treatment of adult and pediatric patients with hepatic VOD, also known as SOS, with renal or pulmonary dysfunction following HSCT.

Treatment of severe hepatic VOD, also known as SOS, following HSCT therapy.

Treatment of haptic sinusoidal obstruction syndrome (hepatic VOD) October 2013

EU, Great Britain, Switzerland, Israel, Australia, South Korea, Saudi Arabia

*The Clobazam restriction limited to EU and Great Britain

**Accelerated approval received from 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 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.

In August 2021, Xywav became the first and only therapy approved by FDA for the treatment of IH in adults.

Xywav is an oxybate therapy that contains 92% less sodium than Xyrem.

Since there is no cure for narcolepsy and long-term disease management is needed, we believe that Xywav represents an important new therapeutic option for patients with this sleep disorder.

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, 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."

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 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.

Xywav is the first and only FDA-approved therapy to treat IH.

We initiated the U.S.

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.

An estimated 37,000 people in the U.S.

have been diagnosed with IH and are actively seeking healthcare.

We 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 fourth quarter of 2022, there were approximately 10,300 patients taking Xywav, including approximately 8,550 patients with narcolepsy and approximately 1,750 patients with IH.

With respect to Xywav and Xyrem in the aggregate, the average number of active oxybate patients on therapy was approximately 18,000 in the fourth 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.

in June 2018 for the treatment of seizures associated with two rare and severe forms of epilepsy, LGS and DS, in patients two years of age and older, and subsequently approved in July 2020 for the treatment of seizures associated with TSC in patients one year of age and older.

FDA also approved the expansion of all existing indications, LGS and DS, to patients one year of age and older.

The rolling European launch of Epidyolex is also underway following European Commission approval in September 2019 for use as adjunctive therapy of seizures associated with LGS or DS, in conjunction with clobazam, for patients two years of age and older.

Epidyolex is now launched in all five key European markets:

United Kingdom, Germany, Italy, Spain and France.

The clobazam restriction is limited to the European Union, or 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.

and Europe, Epidiolex/Epidyolex is approved in Israel, Australia and New Zealand.

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

and in Europe and Canada.

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

In May 2022, we completed the U.S.

divestiture of Sunosi and in November 2022 we completed the ex-U.S.

divestiture to Axsome.

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 have the right to 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.

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.

We acquired U.S.

development and commercialization rights to Zepzelca in early 2020, and launched six months thereafter, with an indication for treatment of patients with SCLC with disease progression on or after platinum-based chemotherapy.

Our education and promotional efforts are focused on SCLC-treating physicians.

We are continuing to raise awareness of Zepzelca across academic and community cancer centers, and see continued opportunities for growth in second-line share and overall demand, reflecting the significant unmet need and favorable Zepzelca product profile.

In collaboration with F.

Hoffmann-La Roche Ltd, or Roche, we have initiated a Phase 3 pivotal clinical trial in first-line extensive stage SCLC of Zepzelca in combination with Tecentriq ® (atezolizumab).

We are also developing Zepzelca in additional indications.

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.

coli -derived asparaginase.

Rylaze is the only recombinant erwinia asparaginase manufactured product that maintains a clinically meaningful level of asparaginase activity throughout the entire course of treatment.

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

The initial approved recommended dosage of Rylaze was for an intramuscular, or IM, administration of 25 mg/m2 every 48 hours.

In November 2022, FDA approved a supplemental Biologics License Application, or sBLA, for a Monday/Wednesday/Friday, or M/W/F, IM dosing schedule.

In April 2022, we submitted a separate sBLA for intravenous, or IV, administration.

In February 2023, we received a complete response letter from FDA requesting additional clinical data on the IV administration of Rylaze.

There is no impact on the approved product labeling for Rylaze IM administration.

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.

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 t-AML, or AML-MRC, 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 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.

Defitelio is the first and only approved treatment for patients with VOD following HSCT.

There was a significant decline in the number of patients receiving HSCT due to the effects of the COVID-19 pandemic.

We anticipate the use of Defitelio will increase to the extent that hospital systems globally are able to continue moving forward with HSCT procedures.

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 are increasingly leveraging our growing internal research and development function, and our proprietary GW Cannabinoid Platform, 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 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.

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

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

EMAS is characterized by generalized myoclonic-atonic seizures, and this trial is designed to provide the first randomized, controlled clinical data with Epidiolex in this syndrome type.

Seizure types including atonic, tonic, clonic, tonic-clonic, and partial onset seizures are seen in Lennox-Gastaut syndrome, or LGS, Dravet syndrome, or DS, and tuberous sclerosis complex, or TSC.

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

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 positive, 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.

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

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

We enrolled the first patient in a Phase 3 trial of Epidyolex for LGS, DS and TSC in Japan in October 2022.

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.

Additionally, in November 2022, we initiated a Phase 2 trial of suvecaltamide in patients with Parkinson's disease tremor.

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

We are also pursuing early-stage activities related to the development of JZP324, an extended-release low sodium, oxybate formulation that we believe could provide a clinically meaningful option for narcolepsy patients.

On June 28, 2022, we announced the nabiximols Phase 3 RELEASE MSS1 trial in multiple sclerosis related, or MS-related, spasticity did not meet the primary endpoint of change in Lower Limb Muscle Tone-6 between baseline and Day 21, as

measured by the Modified Ashworth Scale.

The analysis of the MSS1 trial has been completed.

We have assessed the nabiximols program's potential to support regulatory approval for MS-related spasticity in the U.S., as well as in the context of our broader pipeline opportunities, and have made the decision to discontinue the program.

Sativex (nabiximols) was approved outside the U.S.

for the treatment of MS-related spasticity based on a comprehensive clinical trial program, including multiple late-stage randomized, controlled trials completed in Europe.

We will continue to support the availability of Sativex in the 29 markets outside the U.S.

where it is approved.

We remain committed to the GW Cannabinoid Platform and are working to advance multiple early-stage cannabinoid programs with the potential to address critical unmet patient needs.

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 JZP441, also known as DSP-0187, a potent, highly selective oral orexin-2 receptor agonist with potential application for the treatment of narcolepsy, IH and other sleep disorders.

In November 2022, the first participant was enrolled in a Phase 1 development program to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of JZP441 in sleep-deprived healthy volunteers.

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.

Within our oncology R&D program, there is a robust development plan being executed for Zepzelca.

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In December 2021, our licensor PharmaMar initiated a confirmatory trial in second-line SCLC.

This is expected to be a three-arm trial comparing Zepzelca as either monotherapy or in combination with irinotecan to investigator's choice of irinotecan or topotecan.

Data from this trial, if positive, could confirm the benefit of Zepzelca in the treatment of SCLC when patients progress following first-line treatment with a platinum-based regimen.

This is a three-arm trial comparing Zepzelca as either monotherapy or in combination with irinotecan to investigator's choice of irinotecan or topotecan.

Data from either the first-line trial of Zepzelca in combination with Tecentriq or the PharmaMar trial could serve to confirm clinical benefit of Zepzelca and secure full approval in the U.S.

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 recombinant deficient positive (HRD+) cancers.

Cohorts include advanced urothelial cancer, poorly differentiated neuroendocrine carcinomas, or PD-NECs, 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 a sBLA with data in support of a Monday/Wednesday/Friday (M/W/F) IM dosing schedule, which has been granted review under the Real-Time Oncology Review, or RTOR, program.

Part two of the ongoing Rylaze study is evaluating intravenous administration.

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

A summary of our key ongoing and planned development projects is provided under “Business—Research and Development” in Part I, Item 1 of this Annual Report on Form 10‑K.

For Rylaze, in November 2022, FDA approved an sBLA, with a M/W/F, IM dosing schedule.

In April 2022, we submitted a separate sBLA for IV administration.

In February 2023, we received a complete response letter from FDA requesting additional clinical data on the IV administration of Rylaze.

There is no impact on the approved product labeling for Rylaze IM administration.

We completed a MAA submission to the EMA in May 2022 for M/W/F and every 48-hour dosing schedules and IV and IM administration.

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

In December 2022, we exercised the option to continue with the exclusive development and commercialization rights to zanidatamab.

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, Zymeworks received an upfront payment of $50.0 million, and following the exercise of our option to continue the collaboration, 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.

In June 2022, we announced the FDA had cleared our Investigational New Drug, or IND, application for JZP815 and in October 2022, we enrolled the first patient in a Phase 1 trial.

JZP815 is an investigational 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 April 2022, we announced that we had entered into a licensing and collaboration 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, 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.

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.

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:

Product Candidates Description

Epidiolex EMAS, also known as Doose syndrome (ongoing trial)

LGS, TSC and DS (ongoing trial in Japan)

Suvecaltamide (JZP385)

ET (ongoing trial)

Suvecaltamide (JZP385)

Parkinson's disease tremor (ongoing trial)

PTSD (ongoing trial)

JZP541 Irritability associated with autism spectrum disorder, or ASD (planned trial)

Additional cannabinoids ASD (ongoing trial)

JZP324 Oxybate extended-release formulation (planned trial)

JZP441* Potent, highly selective oral orexin-2 receptor agonist (ongoing trials in Japan and the U.S.)

Additional cannabinoids Neonatal hypoxic-ischemic encephalopathy (completed study)

Neuropsychiatry targets (ongoing trial)

Undisclosed targets Neuroscience

Regulatory Review

Rylaze ALL/LBL

FDA approval in June 2021;

approval for M/W/F IM dosing schedule in November 2022;

submitted an sBLA for IV administration in April 2022;

received complete response letter from FDA requesting additional data on IV administration in February 2023;

submitted MAA to EMA in May 2022

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

Confirmatory Study (PharmaMar study) (ongoing trial)

Zanidatamab HER2-positive gastroesophageal adenocarcinoma, or GEA (ongoing trial)

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

Pivotal Phase 2

Zanidatamab Previously treated, advanced HER2-expressing biliary tract cancer, or BTC (ongoing trial) (pivotal trial)

Zepzelca Basket trial including urothelial cancer, PD-NECs, and HRD cancers (ongoing trial)

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

Newly diagnosed untreated patients with high-risk AML (cooperative group study) (planned trial)

Vyxeos + venetoclax De novo or relapsed/refractory, or R/R, AML (MD Anderson collaboration study) (ongoing trial)

Zanidatamab HER2-expressing GEA, BTC or colorectal cancer in combination with standard first-line chemotherapy (ongoing trial)

Zanidatamab Previously treated HER2+HR+ breast cancer in combination with palbociclib

Zanidatamab First line breast cancer and GEA (BeiGene trial) (ongoing trial)

Zanidatamab HER2-expressing breast cancer in combination with ALX148 (ongoing trial)

Vyxeos + other approved therapies First-line, fit AML (ongoing trial)

Low intensity therapy for first-line, unfit AML (ongoing trial)

Vyxeos Low intensity dosing for higher risk MDS (MD Anderson collaboration study) (ongoing trial)

Vyxeos + other approved therapies R/R AML or hypomethylating agent failure MDS (MD Anderson collaboration study) (ongoing trial)

JZP815 Raf and Ras mutant tumors (acquired from Redx Pharma plc, or Redx) (ongoing trial)

Zanidatamab In previously treated metastatic HER2-expressing cancers in combination with select antineoplastic therapies (ongoing trial)

JZP341 (long-acting Erwinia asparaginase)

Solid tumors (licensed from Ligand Pharmaceuticals Incorporated, or Ligand) (ongoing trial)

Hematology/oncology exploratory activities

JZP898 Conditionally-activated IFNα INDUKINE™ molecule

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

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

Undisclosed targets Oncology

*Also known as DSP-0187

2022 Highlights and Recent Developments

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Oxybate Franchise

• In June 2021, FDA recognized seven years of Orphan Drug Exclusivity (ODE) for Xywav in narcolepsy through July 21, 2027.

• In August 2021, FDA approved our sNDA for Xywav for the treatment of IH in adults and in November 2021, we commenced the U.S.

commercial launch.

• In January 2022, FDA recognized seven years of ODE for Xywav in IH through August 12, 2028.

Epidiolex/Epidyolex

• In 2021, the U.K.

Medicines and Healthcare Products Regulatory Agency (MHRA), as well as the EU, approved a new indication for Epidyolex as an adjunctive treatment of seizures associated with TSC, for patients two years of age and older.

• In May 2021, Sunosi was approved in Canada for the treatment of EDS associated with narcolepsy or OSA in adult patients.

• In September 2021, Zepzelca received conditional approval in Canada for the treatment of adult patients with Stage III or metastatic SCLC who have progressed on or after platinum-containing therapy.

In November 2021, Zepzelca was made commercially available in Canada.

• In June 2021, Rylaze was approved by FDA under the Real-Time Oncology Review, or RTOR, program 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.

coli -derived asparaginase.

In July 2021, we launched Rylaze in the U.S.

• In January 2022, we submitted a sBLA for Rylaze with additional data in support of a Monday/Wednesday/Friday (M/W/F) IM dosing schedule, which has been granted review under the RTOR program.

• In March 2021, FDA approved a revised label for Vyxeos 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.

• In the first quarter of 2022, launched Epidyolex for LGS, DS and TSC in Ireland, for TSC in Scotland and Wales.

• In the third quarter of 2022, launched Epidyolex for TSC in Italy and Switzerland.

• In the fourth quarter of 2022, successfully completed the pricing and reimbursement process and commercial launch of Epidyolex in France.

Epidyolex is launched in all five key European markets:

United Kingdom, Germany, Italy, Spain and France.

• In January 2022, we submitted an sBLA for Rylaze with additional data in support of a M/W/F IM dosing schedule, and in November 2022, FDA approved the sBLA.

• In April 2022, we submitted an sBLA for IV administration.

In February 2023, we received a complete response letter from FDA requesting additional clinical data on the IV administration of Rylaze.

There is no impact on the approved product labelling for Rylaze IM administration.

• In May 2022, we completed a MAA submission to the EMA for M/W/F and every 48-hour dosing schedules and IV and IM dosing.

Research & Development

• In December 2021, we initiated a Phase 2 clinical trial for suvecaltamide (JZP385) for ET.

• In December 2021, we initiated a Phase 2 trial for JZP150 for PTSD.

• In December 2021, in collaboration with Roche, we have initiated a Phase 3 pivotal clinical trial in first-line extensive stage SCLC of Zepzelca in combination with Tecentriq ® (atezolizumab).

Other Significant Developments

• In May 2021, we acquired GW.

The total consideration paid by us for the entire issued share capital of GW was $7.2 billion.

The GW Acquisition, closed on May 5, 2021.

As a result, GW became an indirect wholly owned subsidiary of the Company.

• In connection with the financing of the transaction, in April 2021, we closed an offering of $1.5 billion in aggregate principal amount of 4.375% senior secured notes, due 2029, or the Secured Notes.

In May 2021, we entered into a credit agreement, or the Credit Agreement, that provides for (i) a seven-year $3.1 billion term loan B facility, or the Dollar Term Loan, (ii) a seven-year €625.0 million term loan B facility, or the Euro Term Loan and, together with the Dollar Term Loan, collectively known as the Term Loan and (iii) a five-year $500.0 million revolving credit facility, or the Revolving Credit Facility.

We financed the cash portion of the GW Acquisition consideration through a combination of cash on hand and borrowings under the Term Loan and the Secured Notes.

The Revolving Credit Facility is currently undrawn .

Acquisition of GW Pharmaceuticals Plc

In May 2021, we acquired GW with the objectives of broadening our neuroscience portfolio, further diversifying our revenue and driving sustainable, long-term value creation opportunities.

The total consideration paid by us for the entire issued share capital of GW was $7.2 billion.

GW's lead product, Epidiolex (cannabidiol) oral solution, is approved in patients one-year and older for the treatment of seizures associated with LGS, DS and TSC, all of which are rare diseases characterized by severe early-onset epilepsy.

Epidiolex was the first plant-derived cannabinoid medicine ever approved by FDA, and has also been approved in Europe under the trade name Epidyolex.

In addition to the approved indications for Epidiolex, we believe there are considerable opportunities to pursue other indications within the epilepsy field, including other treatment-resistant epilepsies where significant unmet needs of patients exist.

We plan to initiate a pivotal Phase 3 clinical trial of Epidiolex for the treatment of seizures associated with EMAS, known as Doose syndrome, in the first half of 2022.

EMAS represents the fourth target indication for Epidiolex.

We plan to continue to leverage the GW cannabinoid platform and significant expertise in discovering, developing, manufacturing and commercializing therapeutics to address a broad range of diseases.

This platform includes nabiximols, which is in Phase 3 clinical trials for the treatment of spasticity associated with multiple sclerosis with an additional planned Phase 3 clinical trial in spasticity associated with spinal cord injury, as well as earlier-stage cannabinoid product candidates.

We view the GW Acquisition as consistent with our overall business and capital allocation strategy to expand our neuroscience portfolio and drive substantial value for our shareholders.

• In January 2022, we initiated a Phase 2 basket trial for Zepzelca in solid tumors.

• In August 2022, we initiated a Phase 3 trial for Epidiolex in EMAS.

• In October 2022, we enrolled the first patient in a Phase 1 trial for JZP815 in patients with advanced or metastatic solid tumors with MAPK pathway alterations, and we enrolled the first patient in a Phase 3 trial of Epidyolex in LGS, DS and TSC in Japan.

• In November 2022, we initiated a Phase 2 trial of suvecaltamide in patients with Parkinson’s disease tremor, and we initiated a Phase 1 development program for JZP441 in sleep-deprived healthy volunteers.

• In December 2022, we initiated a trial for JZP341 in solid tumors.

Operational Excellence

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We are refining our approach to engaging our customers by strengthening alignment and integration across functions and across regions.

This includes a more integrated approach to brand planning, a heightened focus on launch and operational excellence and multichannel customer engagement.

We have fully adapted to virtual scientific congresses designed to ensure we can continue to provide promotional and non-promotional interactions and have supported our field-based teams with virtual customer interaction tools, training and content.

This includes maintaining a virtual presence at scientific congresses, when appropriate, designed to ensure we can continue to provide promotional and non-promotional interactions and supporting our field-based teams with virtual customer interaction tools, training and content.

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.

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.

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.

Impact to Business Due to COVID-19

The prolonged nature of the pandemic continues to impact the healthcare system and 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.

Workforce trends starting during the pandemic results in staffing shortages in health care organizations and offices, which may impact the ability of patients to seek 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.

However we have begun to observe, and expect to continue to observe, a gradual normalization in patient and healthcare provider practices, as providers and patients have adapted their behaviors and procedures to the evolving circumstances and as COVID-19 vaccines continue to be administered.

Workplace and Employees

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.

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 developed plans regarding the opening of our sites to enable our employees to return to work in our global offices, the field and our manufacturing facilities, 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.

Commercialization

There continues to be some negative impact on demand, new patient starts and treatments for our products arising from the pandemic, primarily due to the inherent limitations of telemedicine and a reprioritization of healthcare resources toward COVID-19.

As healthcare systems have adapted to cope with the ongoing situation, we have seen improvements.

We are utilizing technology to continue to engage healthcare professionals and other customers virtually to support patient care.

As more clinics and institutions begin to allow in-person interactions pursuant to local health authority and government guidelines, our field teams continue to resume in-person interactions with healthcare professionals and clinics combined with virtual engagement.

The level of renewed in-person engagement varies by account, region and country and may be adversely impacted in the future as a result of the continuing impact of the COVID-19 pandemic.

As healthcare systems have adapted to cope with the ongoing situation, we have seen improvements, although in many countries the healthcare system continues to operate under significant strain.

We are utilizing technology to continue to engage healthcare professionals and other customers virtually in cases where this is the preferred method of engagement.

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 products for 2022.

Research and Development

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.

Corporate Response

The COVID-19 pandemic has caused a significant burden on health systems globally and has highlighted the need for companies to evaluate existing therapies to assess if they can be utilized beyond their current indications to treat COVID-19 as well as consider developing new therapies.

To this end, we have granted requests for several ISTs to evaluate the use of defibrotide in COVID-19 patients experiencing respiratory distress.

In addition, we are supporting our local communities and patient-focused organizations in COVID-19 relief efforts including through corporate donations to charitable organizations providing food and medical relief to communities in which we operate, and other localities where the needs related to the impact of COVID-19 are greatest.

We are engaging with patient advocacy organizations to better understand the impact of COVID-19 and working to enable patients living with sleep disorders, epilepsies and oncology conditions with access to treatments and that their other needs are addressed given the impact of COVID-19 on the healthcare system.

We are committed to enabling our employees to give back, including allowing licensed healthcare practitioners employed by us to support local response efforts.

Other Challenges, Risks and Trends Related to Our Business

Our business has been substantially dependent on Xyrem.

Our future plans assume that our newly launched oxybate product 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, current Xyrem patients, and patients who previously were not prescribed Xyrem, including those patients for whom sodium content is a concern.

Historically, our business has been substantially dependent on Xyrem and our financial results have been significantly influenced by sales of Xyrem .

Our operating plan assumes that Xywav, with 92% lower sodium compared to Xyrem, depending on the dose, absence of a sodium warning and dosing titration option, will remain the treatment of choice for patients who can benefit from oxybate treatment.

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.

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

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.

other third party payors, or that we will be able to ensure patient access and acceptance on institutional formularies.

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.

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

Moreover, we have increasingly experienced pressure from third party payors to agree to discounts, rebates or restrictive pricing terms, and we cannot guarantee we will be able to agree to commercially reasonable terms with PBMs, or similar organizations and other third party payors, or that we will be able to ensure patient access and acceptance on institutional formularies.

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

In addition, beginning in January 2023 our oxybate products face competition from an authorized generic version of sodium oxybate pursuant to a settlement agreement we entered into with an abbreviated new drug application, or ANDA, filer, and, in the future, we expect our oxybate products to face competition from additional authorized generic versions of sodium oxybate and from generic versions of sodium oxybate pursuant to settlement agreements we entered into with multiple 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.

Xywav and Xyrem may also face increased competition from new branded products for treatment of cataplexy and/or EDS in narcolepsy in the U.S.

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.

While we have established our Epidiolex commercial team and have hired our U.S.

and European sales forces, we will need to continue to maintain and further develop the teams to continue to successfully coordinate the commercialization of Epidiolex.

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.

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

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/Epidyolex depends on the extent to which patients and physicians accept and adopt Epidiolex/Epidyolex 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/Epidyolex if coverage is not provided or reimbursement is inadequate to cover a significant portion of the cost.

Additionally, any negative development for Epidiolex/Epidyolex 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/Epidyolex.

Moreover, we expect that Epidiolex will face competition from generic products in the future.

For example, in November and December 2022, we received notices from ten ANDA filers that they have each filed with FDA an ANDA for a generic version of Epidiolex.

In addition, there are non-FDA approved cannabidiol preparations being made available from companies through the state-enabled medical marijuana industry, which might attempt to compete with Epidiolex.

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

In addition to our neuroscience products and product candidates, we are commercializing a portfolio of oncology products, including Defitelio, Vyxeos, Rylaze and Zepzelca.

An inability to effectively commercialize Defitelio, Vyxeos, Rylaze and Zepzelca and to maximize their potential where possible through successful research and development activities could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

A key aspect of our growth strategy is our continued investment in our evolving and expanding research and development activities.

A key aspect of our growth strategy is our continued investment in our evolving and expanding R&D activities.

If we are not successful in the clinical development of these or other product candidates, if we are unable to obtain regulatory approval for our product candidates in a timely manner, or at all, or if sales of an approved product do not reach the levels we expect, our anticipated revenue from our product candidates would be negatively affected, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

In addition to continued investment in our research and development pipeline, we intend to continue to grow our business by acquiring or in-licensing, and developing, including with collaboration partners, additional products and product candidates that we believe are highly differentiated and have significant commercial potential.

In addition to continued investment in our R&D pipeline, we intend to continue to grow our business by acquiring or in-licensing, and developing, including with collaboration partners, additional products and product candidates that we believe are highly differentiated and have significant commercial potential.

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 historical 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.

For example, in the third quarter of 2022, we recorded a $133.6 million asset impairment charge as a result of the decision to discontinue the nabiximols program.

As a result, the anticipated benefits of the GW Acquisition may not be realized at the expected level, 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.

and internationally.

If healthcare policies or reforms intended to curb healthcare costs are adopted or if we experience negative publicity with respect to pricing of our products or the pricing of pharmaceutical drugs generally, the prices that we charge for our products may be affected, our commercial opportunity may be limited and/or our revenues from sales of our products may be negatively impacted.

If new healthcare policies or reforms intended to curb healthcare costs are adopted or if we experience negative publicity with respect to pricing of our products or the pricing of pharmaceutical drugs generally, the prices that we charge for our products may be affected, our commercial opportunity may be limited and/or our revenues from sales of our products may be negatively impacted.

For example, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law, which, among other things, requires the U.S.

Department of Health and Human Services Secretary to negotiate, with respect to Medicare units and subject to a specified cap, the price of a set number of certain high Medicare spend drugs and biologicals per year starting in 2026, penalizes manufacturers of certain Medicare Parts B and D drugs for price increases above inflation, and makes several changes to the Medicare Part D benefit, including a limit on annual out-of-pocket costs, and a change in manufacturer liability under the program, that could negatively affect our business and financial condition.

In addition, under the Medicaid Drug Rebate Program, rebates owed by manufacturers are currently capped at 100 percent of average manufacturer price, but, effective January 1, 2024, this cap will be lifted, which could adversely affect our rebate liability.

We are also subject to increasing pricing pressure and restrictions on reimbursement imposed by payors.

If we fail to obtain and maintain adequate formulary positions and

institutional access for our products and future approved products, we will not be able to achieve a return on our investment and our business, financial condition, results of operations and growth prospects would be materially adversely affected.

If we fail to obtain and maintain adequate formulary positions and institutional access for our current

products and future approved products, we will not be able to achieve a return on our investment and our business, financial condition, results of operations and growth prospects would be materially adversely affected.

While certain preparations of cannabis remain Schedule I controlled substances, if such products are approved by FDA for medical use in the U.S.

they are rescheduled to Schedules II-V, since approval by FDA satisfies the “accepted medical use” requirement;

or may be removed from control under the Controlled Substances Act entirely.

If any of our product candidates receive FDA approval, the U.S.

or such products may be removed from control under the Controlled Substances Act entirely.

If any of our product candidates receive FDA approval, the Department of Health and Human Services, or HHS, and the U.S.

Drug Enforcement Administration, or DEA, will make a scheduling determination.

If any foreign regulatory authority determines that Epidyolex may have potential for abuse, or if DEA makes a similar determination for nabiximols, it may require us to generate more clinical or other data than we currently anticipate to establish whether or to what extent the substance has an abuse potential, which could increase the cost, delay the approval and/or delay the launch of that product.

If we are unable to compete successfully, our commercial opportunities will be reduced and our business, results of operations and financial conditions may be materially harmed.

or foreign regulatory agencies may request additional information regarding the abuse potential of our products which may require us to generate more clinical or other data than we currently anticipate to establish whether or to what extent the substance has an abuse potential, which could increase the cost, delay the approval and/or delay the launch of that product.

Finally, business practices by pharmaceutical companies, including product formulation improvements, patent litigation settlements, and risk evaluation and mitigation strategy, or REMS, programs, have increasingly drawn public scrutiny from legislators and regulatory agencies, with allegations that such programs are used as a means of improperly blocking or delaying competition.

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 October 2021, 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 14, Commitments and Contingencies-Legal Proceedings of the Notes to Consolidated Financial Statements, included in Part IV of this Annual Report on Form 10‑K.

Government investigations 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, could cause use to incur significant monetary charges to resolve these matters and could distract us from the operation of our business and execution of our strategy.

For example, in July 2022, we received a subpoena from the U.S.

Attorney’s Office for the District of Massachusetts requesting documents related to Xyrem and U.S.

8,772,306 (“Method of Administration of Gamma Hydroxybutyrate with Monocarboxylate Transporters”), product labeling changes for Xyrem, communications with FDA and the U.S.

Patent and Trademark Office, pricing of Xyrem, and other related documents.

For more information, see the risk factor under the heading “ We are subject to significant ongoing regulatory obligations and oversight, which may subject us to civil or criminal proceedings, investigations, or penalties and may result in significant additional expense and limit our ability to commercialize our products ” in Part I, Item 1A.

We may also become subject to similar investigations by other state or federal governmental agencies.

The investigation by the U.S.

Attorney’s Office and any additional investigations or litigation related to the subject matter of this investigation may result in damages, fines, penalties, financial charges to resolve the matter or administrative sanctions against us, negative publicity or other negative actions that could harm our reputation, reduce demand for Xyrem and/or reduce coverage of Xyrem, including by federal health care programs and state health care programs.

In addition, 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 and other legal matters, see Note 14, Commitments and Contingencies-Legal Proceedings of the Notes to Consolidated Financial Statements, included in Part IV of this Annual Report on Form 10‑K.

It is possible that additional lawsuits will be filed against us making similar or related allegations.

We cannot predict the outcome of these or potential additional lawsuits or government action;

however, if the plaintiffs were to be successful in their claims, they may be entitled to injunctive relief or we may be required to pay significant monetary damages.

We cannot predict the outcome of these or potential additional lawsuits;

however, if the plaintiffs were to be successful in their claims against us, they may be entitled to injunctive relief or we may be required to pay significant monetary damages.

Moreover, we are, and expect to continue to be, the subject of various claims, legal proceedings, and government investigations apart from those set forth above that have arisen in the ordinary course of business that have not yet been fully resolved and that could adversely affect our business and the execution of our strategy.

Any of the foregoing risks and uncertainties could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

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 this Annual Report on Form 10‑K.

Results of Operations

The following table presents revenues and expenses for the years ended December 31, 2022, 2021 and 2020 (in thousands except percentages):

2021(1) Change 2020 Change 2019

2022 Change 2021 (1)

Product sales, net $ 3,641,429 18 % $ 3,079,001 31 % $ 2,346,660

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Foreign exchange loss 19,014 337 % 4,350 33 % 3,271

Income tax expense (benefit) 216,116 545 % 33,517 N/A(2) (73,154)

Equity in loss of investees 714 (76) % 2,962 (28) % 4,089

Income tax expense (benefit) (158,645) (173 %) 216,116 545 % 33,517

Equity in loss of investees 9,921 N/A(2) 714 (76) % 2,962

_________________________

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The following table presents product sales, royalties and contract revenues, and total revenues for the years ended December 31, 2022, 2021 and 2020 (in thousands except percentages):

2021 Change 2020 Change 2019

2022 Change 2021 (1)

Xyrem $ 1,020,453 (19) % $ 1,265,830 (27) % $ 1,741,758

Xywav 535,297 N/A(1) 15,264 N/A(1) —

Xywav 958,425 79 % 535,297 N/A(3) 15,264

Total Oxybate 1,978,878 10 % 1,801,127 3 % 1,757,022

Epidiolex/Epidyolex 463,645 N/A(2) — N/A(2) —

Sunosi 57,914 104 % 28,333 N/A(1) 3,714

Sativex 12,707 N/A(2) — N/A(2) —

Epidiolex/Epidyolex 736,398 59 % 463,645 N/A(3) —

Sativex 16,825 32 % 12,707 N/A(3) —

28,844 (50) % 57,914 104 % 28,333

Total Neuroscience 2,760,945 18 % 2,335,393 31 % 1,785,355

Zepzelca 246,808 173 % 90,380 N/A(1) —

Rylaze 85,629 N/A(1) — N/A(1) —

Zepzelca 269,912 9 % 246,808 173 % 90,380

Rylaze 281,659 229 % 85,629 N/A(3) —

Vyxeos 127,980 (5) % 134,060 11 % 121,105

Defitelio/defibrotide 194,290 (2) % 197,931 1 % 195,842

Erwinaze/Erwinase 69,382 (53) % 147,136 (17) % 177,465

Erwinaze/Erwinase — N/A(3) 69,382 (53) % 147,136

Total Oncology 873,841 19 % 733,810 32 % 554,463

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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 of Sunosi U.S.

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

(3) Comparison to prior period is not meaningful.

(2) The results of operations of the GW business have been included from the closing of the GW Acquisition on May 5, 2021 and comparison to prior period is not meaningful.

Product Sales, Net

Total oxybate product sales increased in 2021 compared to 2020 primarily due to a higher average selling price, partially offset by higher gross to net deductions driven by higher Tricare rebates and additional commercial payor contracts, and to a lesser extent a decrease in commercial sales volumes.

Total oxybate revenue bottle volume decreased by 1% in 2021 compared to 2020 reflecting our continued investment in patient access programs during the launch of Xywav.

Total oxybate product sales increased by $177.8 million in 2022 compared to 2021.

Total oxybate revenue bottle volume increased by 6% in 2022 compared to 2021.

Average active oxybate patients on therapy were approximately 18,000 in the fourth quarter of 2022, an increase of approximately 11% compared to the same period in 2021.

Xyrem product sales decreased in 2021 compared to 2020 primarily due to a decrease in sales volume, due to the strong adoption of Xywav by existing Xyrem patients, partially offset by a higher average net selling price.

Xywav product sales increased in 2022 compared to 2021 primarily due to higher sales volume, with bottle volume increasing 76%.

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.

Xyrem product sales decreased in 2022 compared to 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 selling price.

Price increases were instituted in January 2021 and January 2022.

Total oxybate product sales increased by $44.1 million in 2021 compared to 2020 primarily due to a higher average net selling price, partially offset by a decrease in sales volume.

Total oxybate revenue bottle volume decreased by 1% in 2021 compared to 2020 reflecting our continued investment in patient access programs during the launch of Xywav.

Average active oxybate patients on therapy were approximately 16,200 in the fourth quarter of 2021, an increase of approximately 6% compared to the same period in 2020.

Xywav product sales were $535.3 million in 2021 compared to $15.3 million in 2020, following its U.S.

launch in November 2020.

Total oxybate product sales increased in 2020 compared to 2019 primarily due to a higher average selling price and, to a lesser extent, an increase in commercial sales volume, partially offset by higher gross to net deductions.

Total oxybate revenue bottle volume increased by 4% in 2020 compared to 2019 primarily driven by persistence and compliance among existing Xyrem patients.

Xyrem product sales increased in 2020 compared to 2019 primarily due to a higher average selling price and, to a lesser extent, an increase in sales volume, partially offset by higher gross to net deductions driven by managed care plans and commercial payor contracts.

Price increases were instituted in January 2020, and in January and July 2019.

Xyrem product sales decreased in 2021 compared to 2020 primarily due to a decrease in sales volume driven by the strong adoption of Xywav by existing Xyrem patients, partially offset by a higher average selling price.

Price increases were instituted in January 2020 and January 2021.

In 2020 new patient diagnoses and enrollments were negatively impacted by COVID-19.

Epidiolex/Epidyolex product sales increased by 59% in 2022 compared to 2021, which included product sales from the closing of the GW Acquisition on May 5, 2021 to December 31, 2021.

On a pro forma basis, Epidiolex/Epidyolex product sales increased by 12% in 2022 compared to 2021, primarily due to an increase in sales volume of 16% and, to a lesser extent, a higher average net selling price, partially offset by higher gross to net deductions.

Price increases were instituted in January 2021 and January 2022.

Epidiolex/Epidyolex product sales in 2021, from the closing of the GW Acquisition on May 5, 2021 to December 31, 2021 were $463.6 million.

On a pro forma basis, Epidiolex/Epidyolex product sales increased by 29% in 2021 compared to 2020, primarily due to an increase in commercial sales volumes.

Sunosi product sales increased in 2021, compared to 2020 primarily due to an increase in sales volume, partially offset by higher gross to net deductions.

Sunosi product sales increased in 2020 compared to 2019 following launch in the U.S.

in July 2019 and the European rolling launch commenced in May 2020.

Zepzelca product sales increased in 2021 compared to 2020 primarily due to higher sales volumes following launch in the U.S in July 2020.

Rylaze product sales were $85.6 million in 2021, following its U.S.

launch in July 2021.

Vyxeos product sales increased in 2021 compared to 2020 primarily due to lower gross to net deductions driven by a reduction in the returns provision due to lower than estimated actual returns.

Vyxeos product sales in 2020 were in line with 2019.

Defitelio/defibrotide product sales increased in 2021 compared to 2020, primarily due to the positive impact of foreign exchange rates, partially offset by lower average net selling price due to regional mix.

Defitelio/defibrotide product sales increased in 2020

compared to 2019, primarily due to higher sales volumes, partially offset by lower average net selling price due to regional mix.

On a pro forma basis, Epidiolex/Epidyolex product sales increased by 29% in 2021 compared to 2020, primarily due to an increase in sales volume.

Sunosi product sales decreased in 2022 as compared to 2021 as we completed the U.S.

divestment of Sunosi in May 2022.

Sunosi product sales increased in 2021 compared to 2020 primarily due to higher sales volume partially offset by higher gross to net deductions.

Zepzelca product sales increased by 9% in 2022 compared to 2021 primarily due to a higher average net selling price and higher sales volume.

Price increases were instituted in July 2021, January 2022 and July 2022.

Zepzelca product sales increased in 2021 compared to 2020 primarily due to higher sales volume following launch in the U.S.

in July 2020.

Rylaze product sales increased in 2022 compared to 2021 primarily due to higher sales volume following its launch in the U.S.

in July 2021.

The increase in volumes reflects the significant unmet patient need for a high-quality, reliable supply of Erwinia asparaginase for patients with ALL.

Vyxeos product sales decreased by 5% in 2022 compared to 2021 primarily due to higher gross to net deductions, driven by a reduction in the returns provision in 2021 due to lower than estimated actual returns, and the negative impact of foreign exchange rates, partially offset by higher sales volume.

Vyxeos product sales increased by 11% in 2021 compared to 2020 primarily due to lower gross to net deductions driven by a reduction in the returns provision.

Defitelio/defibrotide product sales in 2022 decreased by 2% compared to 2021 as the impact of a higher average net selling price and increased sales volume were offset by the negative impact of foreign exchange rates.

Defitelio/defibrotide product sales increased by 1% in 2021 compared to 2020, primarily due to the positive impact of foreign exchange rates, partially offset by lower average net selling price due to regional mix.

Price increases were instituted in July 2021, January 2022 and July 2022.

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

Erwinaze/Erwinase product sales decreased in 2020 compared to 2019 primarily due to limited availability of supply of inventory from the manufacturer.

We expect product sales, net will increase in 2022 over 2021, primarily due to an increase in sales of Xywav partially offset by a decrease in sales of 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 sales of Zepzelca.

We expect product sales, net will increase in 2023 over 2022, primarily due to an increase in sales of Xywav due to continuing growth in IH and as patients continue to transition to Xywav from Xyrem, expected growth in Epidiolex and our oncology products, primarily Rylaze, offset by a decrease in sales of Xyrem as patients transition to Xywav and the impact of the entry of the authorized generic versions of Xyrem.

Royalties and Contract Revenues

Royalties and contract revenues increased in 2022 compared to 2021 primarily due to higher royalty revenues.

Royalties and contract revenues decreased in 2021 compared to 2020 primarily due to lower contract revenues from out-licensing agreements.

Royalties and contract revenues decreased in 2020 compared to 2019 primarily due to lower milestone revenues from out-licensing agreements.

We expect royalties and contract revenues to increase in 2022 compared to 2021 primarily due to increased royalty revenue.

We expect royalties and contract revenues to increase in 2023 compared to 2022 primarily due to increased royalty revenues arising from the launch of an authorized generic version of Xyrem.

Cost of Product Sales

Cost of product sales increased in 2021 compared to 2020, primarily due to the cost of product sales acquired in the GW Acquisition, including the acquisition accounting inventory fair value step-up expense, or fair value step-up expense.

Cost of product sales increased in 2020 compared to 2019, primarily due to a change in product mix and an increase in net product sales.

Gross margin as a percentage of net product sales was 85.7%, 93.7% and 94.0% in 2021, 2020 and 2019, respectively.

The decrease in our gross margin percentage in 2021 compared to 2020 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.

Cost of product sales increased in 2022 compared to 2021, primarily due to an increase in the acquisition accounting inventory fair value step-up expense, or fair value step-up expense, of $50.3 million, driven by the inclusion of a full year expense in 2022 and an expense for past royalties payable under a settlement agreement reached with Otsuka Pharmaceutical Co., Ltd, or Otsuka.

Cost of product sales increased in 2021 compared to 2020, primarily due to the cost of product sales acquired in the acquisition of GW, including fair value step-up expense.

Gross margin as a percentage of net product sales was

85.2%, 85.7% and 93.7% in 2022, 2021 and 2020, respectively.

The decrease in our gross margin percentage in 2022 compared to 2021 was primarily due to an increase in the fair value step-up expense and the Otsuka royalty expense and the decrease in our gross margin percentage in 2021 compared to 2020 was primarily due to the impact of the fair value step-up expense.

We expect our cost of product sales to decrease in 2023 compared to 2022 primarily driven by a reduction in the fair value step-up expense.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased in 2022 compared to 2021 primarily due to lower GW related integration expenses of $207.9 million and lower Sunosi related costs, partially offset by restructuring costs of $22.1 million and costs related to program terminations of $42.6 million, the loss on disposal of Sunosi of $40.8 million, an increase in compensation related expenses driven by the inclusion of GW related headcount costs for the full period in 2022, and increased investment in sales and marketing spend relating to Xywav and Epidiolex.

Selling, general and administrative expenses increased in 2021 compared to 2020 primarily due to transaction and integration-related expenses of $229.0 million in 2021, an increase in compensation-related expenses driven by higher headcount as a result of the GW Acquisition and increased investment in sales and marketing spend primarily related to Sunosi, Epidiolex and Xywav.

Selling, general and administrative expenses increased in 2020 compared to 2019 primarily due to increased investment in sales, marketing and launch activities related to the launches of Zepzelca and Xywav in the U.S., and the continuation of the launch of Sunosi in the U.S., as well as an increase in other expenses related to the expansion of our business.

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, together with synergies expected to be realized connected to the GW Acquisition, partially offset by the inclusion of full year expense related to the GW Acquisition.

We expect selling, general and administrative expenses in 2023 to decrease compared to 2022, primarily due to the removal of costs relating to the Sunosi business following its disposal, together with synergies realized following the GW Acquisition, continued disciplined approach in our capital allocation and our focus on operational efficiencies.

Research and Development Expenses

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Personnel expenses 223,603 193,716 127,794

Restructuring expenses 10,284 — —

Milestone expense 6,250 15,000 1,000

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Research and development expenses increased by $84.7 million in 2022 compared to 2021.

Clinical studies and outside services costs increased in 2021 compared to 2020 primarily due to the addition of costs related to clinical programs for

nabiximols, Epidiolex and cannabinoids and an increase in costs related to suvecaltamide (JZP385) and JZP150.

Personnel expenses increased by $65.9 million in 2021 compared to 2020, primarily due to increased headcount primarily driven by the GW Acquisition.

Milestone expense of $15.0 million in 2021 primarily related to milestones expense of $13.0 million made under our asset purchase and collaboration agreements with Redx Pharma, or Redx.

Clinical studies and outside services costs increased in 2022 compared to 2021 primarily due to the addition of costs related to clinical programs for zanidatamab, JZP898 and JZP441, and increased costs for JZP150, offset by a reduction in costs related to JZP458 (Rylaze).

Personnel expenses increased by $29.9 million in 2022 compared to 2021, primarily due to increased compensation related expenses driven by the inclusion of GW related headcount costs for the full period in 2022.

We incurred restructuring costs of $10.3 million in 2022.

Milestone expenses of $6.3 million in 2022 primarily related to a milestone expense of $5.0 million made under our asset purchase and collaboration agreements with Redx.

Research and development expenses increased by $170.4 million in 2021 compared to 2020.

Clinical studies and outside services costs increased in 2020 compared to 2019 primarily due to the progress made on our clinical programs, including JZP458 and JZP385.

Personnel expenses increased by $27.7 million in 2020 compared to 2019, primarily due to increased headcount in support of our development programs.

Milestone expense of $26.0 million in 2019 related to milestone payments made under our license and option agreement with Ligand Pharmaceuticals Incorporated, or Ligand.

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.

Clinical studies and outside services costs increased in 2021 compared to 2020 primarily due to the addition of costs related to clinical programs for nabiximols, Epidiolex and cannabinoids and an increase in costs related to suvecaltamide (JZP385) and JZP150.

Personnel expenses increased by $65.9 million in 2021 compared to 2020, primarily due to increased headcount primarily driven by the GW Acquisition.

Milestone expense of $15.0 million in 2021 primarily related to milestones expense of $13.0 million made under our asset purchase and collaboration agreements with Redx.

For 2023, we expect that our research and development expenses will continue to increase from previous levels as we prepare for anticipated data read-outs from clinical trials, initiate and undertake additional clinical trials and related development work primarily relating to zanidatamab and JZP441 and additional spend on new product candidates acquired.

Intangible Asset Amortization

Intangible asset amortization increased by $266.2 million in 2021 compared to 2020 primarily due to the commencement of amortization on the intangible assets arising from the GW Acquisition in May 2021, primarily related to Epidiolex.

Intangible asset amortization decreased in 2020 compared to 2019 primarily due to the amortization of the cost of the priority review voucher, or PRV, of $111.1 million in full in 2019 following the notification to FDA of our intention to redeem it in the NDA submission for Xywav, partially offset by the commencement of amortization of the Zepzelca intangible asset upon FDA approval in June 2020.

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 GW Acquisition.

Intangible asset amortization increased by $73.4 million in 2022 compared to 2021 primarily due to the inclusion of the amortization for the full period in 2022, 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 increased in 2021 compared to 2020 primarily due to the commencement of amortization on the intangible assets arising from the GW Acquisition in May 2021, primarily related to Epidiolex.

Impairment Charges

In 2020, we recorded an acquired in-process research and development, or IPR&D, asset impairment charge of $136.1 million following the decision to stop enrollment in our Phase 3 clinical study of defibrotide for the prevention of VOD due to a determination that the study was highly unlikely to reach one of its primary endpoints.

In 2022, we recorded an acquired in-process research and development, or IPR&D, asset impairment charge of $133.6 million as a result of the decision to discontinue our nabiximols program.

In 2020, we recorded an acquired IPR&D asset impairment charge of $136.1 million following the decision to stop enrollment in our Phase 3 clinical study of defibrotide for the prevention of VOD due to a determination that the study was highly unlikely to reach one of its primary endpoints.

Acquired In-Process Research and Development

Acquired IPR&D expense in 2020 primarily related to an upfront payment of $200.0 million to PharmaMar in connection with our license agreement for Zepzelca.

In 2019, acquired IPR&D expense primarily related to an upfront payment of $56.0 million to Codiak in connection with our strategic collaboration agreement and the value attributed to suvecaltamide (JZP385) in the acquisition of Cavion, Inc., or Cavion.

Acquired IPR&D expense in 2022 primarily related to the upfront payments made in connection with our licensing and collaboration agreements with Zymeworks and Werewolf of $375.0 million and $15.0 million, respectively, and our licensing agreement with Sumitomo of $50.0 million.

In 2020, acquired IPR&D expense primarily related to an upfront payment of $200.0 million to PharmaMar in connection with our license agreement for Zepzelca.

Interest Expense, Net

Interest expense, net increased by $179.1 million in 2021 compared to 2020, primarily due to increased interest expense incurred on the Term Loan and the Secured Notes which were used, in part, to finance the cash portion of the GW Acquisition and higher non-cash interest expense following the issuance of our 2.00% exchangeable senior notes due 2026, or the 2026 Notes, in June 2020.

Interest expense, net increased by $27.4 million in 2020 compared to 2019, primarily due to higher non-cash interest expense following the issuance of the 2026 Notes, lower interest income and a loss on extinguishment of debt related to the partial repurchases of our 1.875% exchangeable senior notes due 2021, or the 2021 Notes .

We adopted ASU No.

Interest expense, net increased by $9.5 million in 2022 compared to 2021, primarily due to the inclusion of interest expense for the full period in 2022, on the $1.5 billion in aggregate principal amount of 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, which were used, in part, to finance the cash portion of the GW Acquisition, and higher interest rates on the Dollar Term Loan in 2022, offset by a decrease in non-cash interest expense relating to the 1.50% exchangeable senior notes due 2024, or the 2024 Notes, and our 2.00% exchangeable senior notes due 2026, or the 2026 Notes, collectively known as the Exchangeable Senior Notes, following the adoption of ASU No.

2020-06, “Debt—Debt with Conversion and Other Options(Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, or ASU 2020-06, on January 1, 2022, and as a result we expect interest expense, net to decrease in 2022 compared to 2021 due to decreased non-cash interest expense on our 1.50% exchangeable senior notes due 2024, or the 2024 Notes and the 2026 Notes, as we will no longer recognize non-cash interest expense on the debt discount, partially offset by an increase in interest expense primarily related to a full year of interest expense on the Term Loan and Secured Notes.

For more information relating to ASU 2020-06 see Note 2, Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements, included in Part IV of this Annual Report on Form 10‑K.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, or ASU 2020-06, on January 1, 2022.

Interest expense, net increased by $179.1 million in 2021 compared to 2020, primarily due to increased interest expense incurred on the Dollar Term Loan, the seven-year $625.0 million term loan B facility, or the Euro Term Loan and the Secured Notes and higher non-cash interest expense following the issuance of our 2.00% exchangeable senior notes due 2026, or the 2026 Notes, in June 2020.

We expect interest expense, net to increase in 2023 compared to 2022 primarily due to the cash interest expense on the Dollar Term Loan as the interest rate is expected to rise in line with anticipated increases in the US Federal Reserve base rate.

Foreign Exchange Loss

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Income Tax Expense (Benefit)

Our income tax expense was $216.1 million and $33.5 million in 2021 and 2020, respectively, and our income tax benefit was $73.2 million in 2019.

Our income tax expense in 2021 included an expense of $259.9 million arising on the

remeasurement of our U.K.

Our income tax benefit was $158.6 million in 2022 and our income tax expense was $216.1 million and $33.5 million in 2021 and 2020, respectively, relating to tax arising on income or losses in Ireland, the U.K., the U.S.

and certain other foreign jurisdictions, offset by deductions on subsidiary equity, originating tax credits, and, in 2022 and 2021, foreign derived intangible income, or FDII, benefits.

Our income tax benefit in 2022 increased primarily due to payments for acquired IPR&D made in the year and the impact of the impairment of our acquired IPR&D asset as a result of the decision to discontinue our nabiximols program.

Our income tax expense in 2021 included an expense of $259.9 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 tax rate in the U.K.

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Finance Act 2021.

Excluding this impact, the increase in benefit for income taxes in 2021 compared to 2020 resulted primarily from the mix of pre-tax income and losses incurred across tax jurisdictions, deductions on subsidiary equity and the impacts recognized in 2020 of the disallowance of certain interest deductions and a provision for a proposed settlement reached with the French taxing authorities.

Our income tax benefit in 2019 included a discrete tax benefit of $112.3 million resulting from an intra-entity intellectual property asset transfer.

Excluding this effect, the increase in the effective tax rate for 2020 compared to 2019 was primarily due to the benefit recognized in 2019 from the application of the Italian patent box incentive regime 2015 through 2019 and the impacts recognized in 2020 of the disallowance of certain interest deductions and a provision for a proposed settlement reached with the French taxing authorities.

Our income tax expense in 2020 included the impact of the disallowance of certain interest deductions and a provision for a proposed settlement reached with the French taxing authorities.

Equity in Loss of Investees

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As of December 31, 2022, we had cash and cash equivalents of $881.5 million, borrowing availability under our revolving credit facility of $500.0 million and a long-term debt principal balance of $5.8 billion.

Our long-term debt included $3.3 billion aggregate principal amount Term Loan, $1.5 billion principal amount of the Secured Notes, $575.0 million principal amount of the 2024 Notes, and $1.0 billion principal amount of the 2026 Notes.

Our long-term debt included $2.8 billion aggregate principal amount Dollar Term Loan, $1.5 billion principal amount of the Secured Notes, $575.0 million principal amount of the 2024 Notes, and $1.0 billion principal amount of the 2026 Notes.

During 2022, 2021 and 2020, we generated cash flows from operations of $1,272.0 million, $778.5 million and $899.6 million, respectively, and we expect to continue to generate positive cash flow from operations which will enable us to operate our business and de-lever our balance sheet over time.

In April 2021, we issued $1.5 billion in aggregate principal amount of the Secured Notes and in May 2021 we entered into the Credit Agreement that provides for $3.8 billion in aggregate principal amount of the Term Loan, and a five-year $500.0 million Revolving Credit Facility, which is currently undrawn.

We used the proceeds from the Term Loan (i) to repay in full $575.9 million that was outstanding under our credit agreement, dated as of June 18, 2015, or the Existing Credit Agreement, (ii) to fund, in part, the cash consideration payable in connection with the GW Acquisition and (iii) to pay related fees and expenses.

We expect to use future loans under the Revolving Credit Facility, if any, for general corporate purposes, including potential business development activities.

In September and December 2021, we made voluntary prepayments totaling €416.7 million or $502.0 million on the Euro Term Loan and in August 2021 we repurchased the remaining $218.8 million aggregate principal amount of our 1.875% exchangeable senior notes due 2021, or the 2021 Notes .

In 2022, we made voluntary repayments of $300.0 million of the Dollar Term Loan principal outstanding and €208.3 million , or $251.0 million , of the Euro Term Loan, which represented the remaining principal amount.

We have made voluntary repayments of €625.0 million, or $753.0 million, relating to Euro Term Loan and voluntary and mandatory repayments of $300.0 million and $46.5 million, respectively, relating to the Dollar Term Loan since the closing of the acquisition of GW in May 2021.

We have a significant amount of debt outstanding on a consolidated basis.

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In this regard, we have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our strategy to acquire or in-license and develop additional products and product candidates.

Acquisition opportunities that we pursue could materially affect our liquidity and capital resources and may require us to incur

additional indebtedness, seek equity capital or both.

Acquisition opportunities that we pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both.

We regularly evaluate the performance of our products and product candidates to ensure fit within our portfolio and support efficient allocation of capital.

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

However, the COVID-19 pandemic continues to rapidly evolve and has resulted in significant volatility in the global financial markets.

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 pre-emption 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, our ability to raise additional capital may be adversely impacted by worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the U.S.

and worldwide resulting from the effects of inflationary pressures or otherwise.

Accordingly, 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, and we currently have such authorization.

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 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 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 share repurchase program may be modified, suspended or discontinued at any time without prior notice.

In 2022, we spent a total of $0.1 million to purchase 338 of our ordinary shares at a total purchase price, including brokerage commissions, of $160.70 per share.

In 2021, we did not repurchase any of our ordinary shares under the share repurchase program.

In 2020, we spent a total of $146.5 million to repurchase 1.2 million of our ordinary shares at an average total purchase price, including brokerage commissions, of $121.98 per share.

All ordinary shares repurchased were canceled.

As of December 31, 2022, the remaining amount authorized under the share repurchase program was $431.2 million.

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Net cash used in investing activities (446,230) (5,212,143) (1,007,670)

Net cash provided by (used in) financing activities 3,970,522 528,073 (293,745)

Net cash (used in) provided by financing activities (529,491) 3,970,522 528,073

Effect of exchange rates on cash and cash equivalents (6,222) (3,207) 374

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Operating activities

Net cash provided by operating activities increased by $493.5 million in 2022 compared to 2021, primarily due to cash received from increased sales of our products and decreased transaction and integration-related costs associated with the GW Acquisition.

Net cash provided by operating activities decreased by $121.1 million in 2021 compared to 2020, primarily due to the payment of transaction and integration-related costs related to the GW Acquisition.

Net cash provided by operating activities increased by $123.2 million in 2020 compared to 2019, primarily due to a decrease in net outflow related to changes in operating assets and liabilities including the impact of the $58.6 million payment related to a civil settlement agreement with the DOJ and the OIG in 2019 together with an increase in accounts receivable of $38.6 million due to higher product sales together with the timing of receipts from customers and other working capital movements.

Investing activities

Net cash used in investing activities decreased by $4,765.9 million in 2022 compared to 2021, primarily due to the following:

• $6,234.8 million outflow in 2021 related to the net cash paid for the GW Acquisition;

• $53.0 million upfront payment from Axsome in 2022 relating to the Sunosi U.S.

• $1,069.2 million decrease in net proceeds from maturity of investments, primarily time deposits;

• $444.1 million in upfront payments in 2022 for acquired IPR&D primarily driven by the $375.0 million, $50.0 million and $15.0 million payments to Zymeworks, Sumitomo and Werewolf, respectively.

Net cash used in investing activities increased by $4,204.5 million in 2021 compared to 2020, primarily due to the following:

• $6,234.8 million outflow related to the net cash paid for the GW Acquisition;

• $6,234.8 million outflow in 2021 related to the net cash paid for the GW Acquisition;

partially offset by

• $1,710.9 million increase in net proceeds from maturity of investments, primarily time deposits;

• $251.3 million decrease in upfront payments for acquired IPR&D primarily driven by the $200.0 million payment under our license agreement with PharmaMar and the $35.0 million payment under our asset purchase and exclusive license agreement with SpringWorks in 2020;

• $95.1 million decrease in acquisition of intangible assets primarily related to our $100.0 million milestone payment to PharmaMar on FDA approval of Zepzelca in 2020.

Net cash used in investing activities increased by $852.4 million in 2020 compared to 2019, primarily due to the following:

• $710.6 million net increase in the acquisition of investments, primarily time deposits;

• $189.6 million increase in upfront payments for acquired IPR&D primarily driven by our $200.0 million payment to PharmaMar and the $35.0 million to SpringWorks in 2020, compared to 2019 which included a payment of $56.0 million under our strategic collaboration agreement with Codiak;

partially offset by

• The impact of consideration, net of cash acquired of $55.1 million related to our acquisition of Cavion in 2019.

• $251.3 million in upfront payments in 2020 for acquired IPR&D primarily driven by the $200.0 million and $35.0 million payments to PharmaMar and SpringWorks Therapeutics, Inc., or SpringWorks, respectively;

• $95.1 million decrease in acquisition of intan gible assets primarily related to our $100.0 million milestone payment to PharmaMar on FDA approval of Zepzelca in 2020.

Financing activities

Net cash (used in) provided by financing activities decreased by $4,500.0 million in 2022 compared to 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 2021 that were used to fund, in part, the cash consideration payable in connection with the GW Acquisition ;

• Repayments of long-term debt of $582.0 million in 2022, compared to $1,320.6 million in 2021.

Net cash provided by financing activities increased by $3,442.4 million in 2021 compared to 2020, primarily due to:

• An increase of $3,279.1 million in debt financing 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, partially offset by $1,101.8 million in repayment of long-term debt and payments for repurchase of the 2021 Notes of $218.8 million in the year ended December 31, 2021;

• Net proceeds from issuance of borrowings under the Credit Agreement of $3,719.9 million and the Secured Notes of $1,471.5 million, partially offset by $1,101.8 million in repayment of long-term debt and payments for repurchase of our 1.875% exchangeable senior notes due 2021, or the 2021 Notes, of $218.8 million in the year ended December 31, 2021;

• Net proceeds from issuance of the 2026 Notes of $981.4 million, partially offset by payments for partial repurchase of the 2021 Notes of $356.2 million and repayment of long-term debt of $33.4 million in the year ended December 31, 2020;

• The impact of share repurchases of $146.5 million in the year ended December 31, 2020.

• An increase of $35.6 million in proceeds from employee equity incentive and purchase plans in the year ended December 31, 2021.

Net cash provided by (used in) financing activities increased by $821.8 million in 2020 compared to 2019, primarily due to:

• The receipt of $981.4 million in net proceeds from the issuance of the 2026 Notes, partially offset by $356.2 million of payments for partial repurchases of the 2021 Notes;

• A decrease of $154.9 million in share repurchases;

• An increase of $41.9 million in proceeds from employee equity incentive and purchase plans.

Credit Agreement

On May 5, 2021, the Company, Jazz Financing Lux S.à.r.l., or Jazz Lux, and certain of our other subsidiaries, as borrowers, (collectively with the Company and Jazz Lux, the “Borrowers”), entered into the Credit Agreement, that provides for (i) the Dollar Term Loan which was drawn by Jazz Lux on the Closing Date in U.S.

dollars (ii) the Euro Term Loan which was drawn by Jazz Lux on the Closing Date in Euros and (iii) the Revolving Credit Facility, which is available to be drawn by any Borrower in U.S.

We used the proceeds from the Term Loan (i) to repay in full $575.9 million under the Existing Credit Agreement, (ii) to fund, in part, the cash consideration payable in connection with the GW Acquisition and (iii) to pay related fees and expenses.

dollars (ii) the Euro Term Loan which was drawn by Jazz Lux on the Closing Date in Euros, and, together with the Dollar Term Loan, collectively known as the Term Loan and (iii) the Revolving Credit Facility, which is available to be drawn by any Borrower in U.S.

We used the proceeds from the Term Loan (i) to repay in full $575.9 million under that certain credit agreement, dated as of June 18, 2015 (as amended) among the Company, and certain of our other subsidiaries as borrowers, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent, or the Existing Credit Agreement, (ii) to fund, in part, the cash consideration payable in connection with the GW Acquisition and (iii) to pay related fees and expenses.

Upon the repayment in full of loans under the Existing Credit Agreement, it was terminated and all guarantees and liens thereunder were released.

Loans under the Term Loan and Revolving Credit Facility bear interest at a rate equal to (A) in the case of the Dollar Term Loan and the Revolving Credit Facility, at the applicable Borrower’s option, either (a) London Inter-Bank Offered Rate, or LIBOR or (b) the prime lending rate and (B) in the case of the Euro Term Loan, Euro Inter-Bank Offered Rate, or EURIBOR, in each case, plus an applicable margin.

The applicable margin for the Term Loan is 3.50% (in the case of LIBOR or EURIBOR borrowings) and 2.50% (in the case of borrowings at the prime lending rate).

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.

The Euro Term Loan bore interest at the Euro Inter-Bank Offered Rate, or EURIBOR, plus an applicable margin.

The applicable margin for the Euro Term Loan was 3.50%.

During the term of the Euro Term Loan, the interest rate and effective interest rate were 4.43% and 4.93%, respectively.

Loans under the Dollar Term Loan and Revolving Credit Facility bear interest at a rate equal to, at the applicable Borrower’s option, either (a) London Inter-Bank Offered Rate, or LIBOR or (b) the prime lending rate.

The applicable margin for the Dollar Term Loan is 3.50% (in the case of LIBOR) and 2.50% (in the case of borrowings at the prime lending rate).

The applicable margin for the Revolving Credit Facility ranges from 3.25% to 2.75% (in the case of LIBOR borrowings) and 2.25% to 1.75% (in the case of borrowings at the prime lending rate), depending on our first lien secured net leverage ratio level.

The Dollar Term Loan is subject to a LIBOR floor of 0.50%, the Euro Term Loan and loans under the Revolving Credit Facility are not subject to a EURIBOR or LIBOR (as applicable) floor.

The Dollar Term Loan is subject to a LIBOR floor of 0.50% and loans under the Revolving Credit Facility are not subject to a EURIBOR or LIBOR (as applicable) floor.

The Revolving Credit Facility has a commitment fee payable on the undrawn amount ranging from 0.50% to 0.40% per annum based upon our first lien secured net leverage ratio.

As of December 31, 2022, the interest rate and effective interest rate on the Dollar Term Loan were 7.88% and 4.56%, respectively.

The interest rate and effective interest rate on the Euro Term Loan were 4.43% and 4.93%, respectively.

As of December 31, 2022, we had an undrawn Revolving Credit Facility totaling $500.0 million.

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Principal repayments of the Dollar Term Loan, which are due quarterly, began in September 2021 and are equal to 1.0% per annum of the original principal amount of $3.1 billion with any remaining balance payable on the maturity date.

The Euro Term Loan does not have any mandatory principal repayments during its term, however in September and December 2021, we made voluntary prepayments totaling €416.7 million or $502.0 million.

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

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its restricted subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of junior indebtedness and dividends and other distributions.

The Credit Agreement contains financial covenants that require the Company and its restricted subsidiaries to (a) not exceed a maximum first lien secured net leverage ratio and (b) not fall below a minimum interest coverage ratio, provided that such covenants apply only to the Revolving Credit Facility and are applicable only if amounts are drawn (or non-cash collateralized letters of credit in excess of $50 million are outstanding) under the Revolving Credit Facility.

The Credit Agreement contains financial covenants that require the Company and its restricted subsidiaries to (a) not exceed a maximum

first lien secured net leverage ratio and (b) not fall below a minimum interest coverage ratio, provided that such covenants apply only to the Revolving Credit Facility and are applicable only if amounts are drawn (or non-cash collateralized letters of credit in excess of $50 million are outstanding) under the Revolving Credit Facility.

The Credit Agreement also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations.

2029 Senior Secured Notes

On April 29, 2021, Jazz Securities Designated Activity Company, or Jazz Securities, a direct wholly owned subsidiary of the Company, closed the offering of the Secured Notes in a private placement.

On April 29, 2021, Jazz Securities Designated Activity Company, or Jazz Securities, our direct wholly owned subsidiary, closed the offering of the Secured Notes in a private placement.

We used the proceeds from the Secured Notes to fund, in part, the cash consideration payable in connection with the GW Acquisition.

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The Secured Notes mature on January 15, 2029.

The Secured Notes are jointly and severally guaranteed by the Company and each of its restricted subsidiaries, other than Jazz Securities, that is a borrower, or a guarantor, under the Credit Agreement.

The Secured Notes are jointly and severally guaranteed by us and each of our restricted subsidiaries, other than Jazz Securities, that is a borrower, or a guarantor, under the Credit Agreement.

The Secured Notes and related guarantees are secured by a first priority lien (subject to permitted liens and certain other exceptions), equally and ratably with the Credit Agreement, on the collateral securing the Credit Agreement.

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In addition, during each of the three consecutive twelve-month periods commencing on the issue date of the Secured Notes, Jazz Securities may redeem up to 10% of the original aggregate initial principal amount of the Secured Notes at a redemption price of 103% of the principal amount of such Secured Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

If Jazz undergoes a change of control, Jazz Securities will be required to make an offer to purchase all of the Secured Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase, subject to certain exceptions.

The indenture governing the Secured Notes contains customary affirmative covenants and negative covenants applicable to the Company and its restricted subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of junior indebtedness and dividends and other distributions.

If Jazz Securities or the Company’s restricted subsidiaries engage in certain asset sales, Jazz Securities will be required under certain circumstances to make an offer to purchase the Secured Notes at 100% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

If we undergo a change of control, Jazz Securities will be required to make an offer to purchase all of the Secured Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase, subject to certain exceptions.

The indenture governing the Secured Notes contains customary affirmative covenants and negative covenants applicable to us and our restricted subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of junior indebtedness and dividends and other distributions.

If Jazz Securities or our restricted subsidiaries engage in certain asset sales, Jazz Securities will be required under certain circumstances to make an offer to purchase the Secured Notes at 100% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

As of December 31, 2022, the interest rate and effective interest rate on the Secured Notes were 4.375% and 4.64%, respectively.

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In the second quarter of 2020, Jazz Investments I Limited, our wholly owned subsidiary, completed a private placement of $1.0 billion principal amount of the 2026 Notes.

We used a portion of the net proceeds from this offering to repurchase for cash $332.9 million aggregate principal amount of the 2021 Notes through privately-negotiated transactions concurrently with the offering of the 2026 Notes.

We used a portion of the net proceeds from this offering to repurchase for cash $332.9 million aggregate principal amount of the 1.875% exchangeable senior notes due 2021, or the 2021 Notes, through privately-negotiated transactions concurrently with the offering of the 2026 Notes.

Interest on the 2026 Notes is payable semi-annually in cash in arrears on June 15 and December 15 of each year, beginning on December 15, 2020, at a rate of 2.00% per year.

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Additionally, the terms and covenants in the indenture related to the 2026 Notes include certain events of default after which the 2026 Notes may be due and payable immediately.

Prior to June 15, 2026, we may redeem the 2026 Notes, in whole but not in part, subject to compliance with certain conditions, if we have, or on the next interest payment date would, become obligated to pay to the holder of any 2026 Notes additional amounts as a result of certain tax-related events.

holder of any 2026 Notes additional amounts as a result of certain tax-related events.

We also may redeem the 2026 Notes on or after June 20, 2023 and prior to March 15, 2026, in whole or in part, if the last reported sale price per ordinary share has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide the notice of redemption.

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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.

In the third quarter of 2017, our wholly owned subsidiary Jazz Investments I Limited, completed a private placement of $575.0 million principal amount of 2024 Notes.

In 2017, our wholly owned subsidiary Jazz Investments I Limited, completed a private placement of $575.0 million principal amount of 2024 Notes.

We used the net proceeds from this offering to repay $500.0 million in outstanding loans under the revolving credit facility under the amended credit agreement and to pay related fees and expenses.

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Prior to May 15, 2024, the 2024 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.

In 2014, we completed a private placement of the 2021 Notes with a maturity date of August 15, 2021.

Interest on the 2021 Notes was payable semi-annually in cash in arrears on February 15 and August 15 of each year, beginning on February 15, 2015, at a rate of 1.875% per year.

The exchange rate was 5.0057 ordinary shares per $1,000 principal amount of 2021 Notes, which was equivalent to an exchange price of approximately $199.77 per ordinary share.

In 2020 we repurchased $356.2 million aggregate principal amount of the 2021 Notes and we repurchased the remaining $218.8 million on maturity in August 2021.

Contractual Obligations

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For information relating to our scheduled maturities with respect to our long-term debt and our lease liabilities see Note 12 Debt and Note 13 Leases, respectively, and for information relating to our noncancelable purchase commitments due within one year see Note 14 Commitments and Contingencies, included in the Notes to Consolidated Financial Statements, included in Part IV of this Annual Report on Form 10‑K.

Our long-term noncancelable purchase commitments were $36.1 million at December 31, 2022, primarily related to agreements with third party manufactures.

We also have potential future milestone payments or royalty obligations to third parties under asset purchase, product development, license and other agreements as the timing and likelihood of such milestone payments are not known, and, in the case of royalty obligations, as the amount of such obligations are not estimable.

Our contingent obligations to third parties, in the form of development, regulatory and sales-based milestone payments, as of December 31, 2021 included $1,025.0 million across five targets under our strategic collaboration agreement with Codiak, $706.0 million under our amended license agreement with PharmaMar, $610.0 million under asset purchase and collaboration agreements with Redx, $375.0 million under the asset purchase and exclusive license agreement with SpringWorks, $260.0 million in connection with our acquisition of Cavion, $165.0 million to Aerial BioPharma LLC and SK Biopharmaceuticals Co.

Ltd in connection with our acquisition of the rights to Sunosi, $155.5 million under our license agreement with Ligand and $391.2 million related to other agreements.

Our contingent obligations to third parties, in the form of development, regulatory and sales-based milestone payments, as of December 31, 2022 included $1,387.5 million under our license and collaboration agreement with Zymeworks, $1,260.0 million under our global license and collaboration agreement with Werewolf, $1,090.0 million under our license agreement with Sumitomo, $1,025.0 million with our strategic collaboration agreement with Codiak, $681.0 million under our amended license agreement with PharmaMar, $595.0 million under asset purchase and collaboration agreements with Redx, $375.0 million under the asset purchase and exclusive license agreement with SpringWorks, $260.0 million in connection with our acquisition of Cavion, $155.5 million under our license agreement with Ligand and $345.4 million related to other agreements.

Critical Accounting Policies and Significant Estimates

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Product sales revenue is recognized when control has transferred to the customer, which occurs at a point in time, which is typically on delivery to the customer or, in the case of products that are subject to consignment agreements, when the customer removes product from our consigned inventory location for shipment directly to a patient.

A significant portion of our net product revenues is derived from sales of Xywav and Xyrem.

We sell Xywav and Xyrem in the U.S.

to a single central pharmacy, Express Scripts Specialty Distribution Services, Inc., or ESSDS.

In 2021, sales of Xywav and Xyrem to Express Scripts accounted for 58% of our net product sales.

We recognize revenues from sales of Xywav and Xyrem within the U.S.

when control has transferred to the customer, which occurs when ESSDS removes product from our consigned inventory location at its facility for shipment directly to a patient.

We do not accept returns of Xywav or Xyrem from ESSDS.

Items Deducted from Gross Product Sales .

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We review the adequacy of our provisions for sales deductions on a quarterly basis.

Amounts accrued for sales deductions are adjusted when trends or significant events indicate that adjustment is appropriate and to reflect actual experience.

Because we derive a significant portion of our revenues from sales of Xywav and Xyrem in the U.S.

to one specialty pharmacy customer, ESSDS, we have a much higher level of knowledge about each prescription than if we sold the product through the normal pharmaceutical wholesaler channel as we do with most of our other products.

Amounts accrued for sales deductions are adjusted when trends or significant events indicate that adjustment is appropriate and to reflect actual experien ce.

The most significant items deducted from gross product sales where we exercise judgment are rebates, sales returns and chargebacks.

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Balance at December 31, 2020 110,885 18,368 5,293 16,793 151,339

GW Acquisition 53,872 5 1,322 3,260 58,459

Provision, net 440,776 (1,765) 91,425 125,859 656,295

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Balance at December 31, 2021 195,715 15,814 11,389 21,808 244,726

GW Acquisition 53,872 5 1,322 3,260 58,459

Provision, net 630,295 13,222 135,854 186,609 965,980

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Included in these amounts are immaterial adjustments related to prior-year sales due to changes in estimates.

Such amounts represented less than 1% of net product sales for each of the years ended December 31, 2021, 2020 and 2019.

Such amounts represented approximately 1% of net product sales for each of the years ended December 31, 2022, 2021 and 2020.

We are subject to rebates on sales made under governmental and managed-care pricing programs and commercial payor contracts in the U.S.

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Rebates were $630.3 million, $440.8 million and $288.1 million, or 13.7%, 11.8% and 10.4% as a percentage of gross product sales, in 2022, 2021 and 2020, respectively.

Rebates as a percentage of gross product sales increased in 2022 compared to 2021 primarily due to the entry into additional contracts with commercial payors and a full year of Epidiolex in our product portfolio.

Rebates as a percentage of gross product sales increased in 2021 compared to 2020 primarily due to the entry into additional contracts with commercial payors and the addition of Epidiolex to our product portfolio.

Rebates as a percentage of gross product sales increased in 2020 compared to 2019 primarily due to the entry into additional contracts with commercial payors.

Rebates as a percentage of gross product sales are expected to increase in 2022 compared to 2021, primarily due to rebate rate increases and additional commercial rebates.

Rebates as a percentage of gross product sales are expected to increase in 2023 compared to 2022, primarily due to rebate rate increases and new government rebates.

Sales returns

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Sales returns were $13.2 million, $(1.8) million and $18.4 million, or 0.3%, (0.1)% and 0.7% as a percentage of gross product sales in 2022, 2021 and 2020, respectively.

Sales returns as a percentage of gross product sales decreased in 2021 compared to 2020 driven by a reduction in the returns provision due to lower than estimated actual returns.

The increase in sales returns in 2020 compared to 2019 was due to the commencement of a product return policy for certain products in 2020.

Sales returns as a percentage of gross product sales did not change materially in 2020 compared to 2019.

Sales returns as a percentage of gross product sales increased in 2022 compared to 2021 driven by a 2021 reduction in the returns provision due to lower than estimated actual returns.

The decrease in sales returns in 2021 compared to 2020 was due to this reduction in the returns provision.

Sales returns as a percentage of gross product sales are not expected to change materially in 2023 compared to 2022.

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Chargebacks were $135.9 million, $91.4 million and $45.6 million, or 2.9%, 2.4% and 1.6% as a percentage of gross product sales in 2022, 2021 and 2020, respectively.

Chargebacks as a percentage of gross product sales increased in 2021 compared to 2020 primarily due to the addition of Epidiolex to Jazz’s portfolio.

Chargebacks as a percentage of gross product sales did not change materially in 2020 compared to 2019.

We expect that chargebacks will continue to significantly impact our reported net product sales.

Chargebacks as a percentage of gross product sales increased in 2022 compared to 2021 primarily due to higher chargeback utilization and a full year of Epidiolex in our product portfolio.

Chargebacks as a percentage of gross product sales increased in 2021 compared to 2020 primarily due to the addition of Epidiolex to our product portfolio.

Chargebacks as a percentage of gross product sales are not expected to change materially in 2023 compared to 2022.

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Discounts and distributor fees were $186.6 million, $125.9 million and $69.3 million, or 4.1%, 3.4% and 2.5% as a percentage of gross product sales in 2022, 2021 and 2020, respectively.

Discounts and distributor fees as a percentage of gross product sales increased in 2021 compared to 2020 primarily due to the addition of Epidiolex to Jazz’s portfolio.

Discounts and distributor fees as a percentage of gross product sales did not change materially in 2020 compared to 2019.

We expect that discounts and distributor fees as a whole will continue to significantly impact our reported net product sales.

Discounts and distributor fees as a percentage of gross product sales increased in 2022 compared to 2021, primarily due to a full year of Epidiolex in our product portfolio.

Discounts and distributor fees as a percentage of gross product sales increased in 2021 compared to 2020 primarily due to the addition of Epidiolex to our product portfolio.

Discounts and distributor fees as a percentage of gross product sales are not expected to change materially in 2023 compared to 2022.

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Impairment of Intangible Assets

Finite-lived intangible assets consist primarily of purchased developed technology and are amortized on a straight-line basis over their estimated useful lives, which range from two to 20 years.

Finite-lived intangible assets consist primarily of purchased developed technology and are amortized on a straight-line basis over their estimated useful lives, which range from five to eighteen years.

The estimated useful lives associated with intangible assets are consistent with the estimated lives of the products and may be modified when circumstances warrant.

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If our assumptions are not correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense.

IPR&D is not amortized but is tested for impairment annually or when events or circumstances indicate that the fair value may be below the carrying value of the asset.

In-process research and development, or IPR&D, is not amortized but is tested for impairment annually or when events or circumstances indicate that the fair value may be below the carrying value of the asset.

If the carrying value of the assets is not expected to be recovered, the assets are written down to their estimated fair values.

As of December 31, 2021, we had $7.0 billion of finite-lived intangible assets, which included $4.9 billion associated with the Epidiolex intangible asset which we acquired in the GW Acquisition.

We did not recognize an impairment charge related to our intangible assets in 2021 or 2019.

In 2020, we recorded an acquired in-process research and development, or IPR&D, asset impairment charge of $136.1 million following the decision to stop enrollment in our Phase 3 clinical study of defibrotide for the prevention of VOD due to a determination that the study is highly unlikely to reach one of its primary endpoints.

As of December 31, 2022, we had $5.8 billion of finite-lived intangible assets, of which $3.9 billion related to the Epidiolex intangible asset which we acquired in the GW Acquisition and $1.3 billion related to the Vyxeos intangible asset which we acquired in the Celator Acquisition.

As part of our annual impairment assessment, we reviewed these intangible assets as of December 31, 2022 and determined the carrying value is recoverable.

Cash flow models used in our assessment are based on our commercial experience to date and require the use of significant estimates, which include, but are not limited to, patient-related assumptions, including patient population and segmentation, patient growth and treatment rates, and long-range pricing expectations.

In 2022, we recorded an acquired IPR&D asset impairment charge of $133.6 million as a result of the decision to discontinue our nabiximols program.

We did not recognize an impairment charge related to our intangible assets in 2021.

In 2020, we recorded an acquired IPR&D asset impairment charge of $136.1 million following the decision to stop enrollment in our Phase 3 clinical study of defibrotide for the prevention of VOD due to a determination that the study is highly unlikely to reach one of its primary endpoints.

Please refer to Note 10, Goodwill and Intangible Assets, of the Notes to Consolidated Financial Statements included in Part IV of this Annual Report on Form 10‑K, for further information about our intangible assets and the remaining useful lives of our finite-lived intangible assets as of December 31, 2022.

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Our most significant tax jurisdictions are Ireland, the U.K.

Significant estimates are required in determining our expense for income taxes.

Certain estimates are required in determining our expense for income taxes.

Some of these estimates are based on management’s interpretations of jurisdiction-specific tax laws or regulations and the likelihood of settlement related to tax audit issues.

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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-K

Item 7. Management’s Discussion and Analysis