Jazz Pharmaceuticals plc 10-Q

Item 1. Financial Statements JAZZ PHARMACEUTICALS PLC CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) September 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 1,335,690 $ 881,482 Investments 250,000 — Accounts receivable, net of allowances 627,841 651,493 Inventories 611,827 714,061 Prepaid expenses 109,990 91,912 Other current assets 310,404 267,192 Total current assets 3,245,752 2,606,140 Property, plant and equipment, net 222,476 228,050 Operating lease assets 65,038 73,326 Intangible assets, net 5,417,860 5,794,437 Goodwill 1,705,320 1,692,662 Deferred tax assets, net 464,367 376,247 Deferred financing costs 7,172 9,254 Other non-current assets 76,080 55,139 Total assets $ 11,204,065 $ 10,835,255 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 109,850 $ 90,758 Accrued liabilities 769,942 803,255 Current portion of long-term debt 604,507 31,000 Income taxes payable 89,026 7,717 Deferred revenue 4 463 Total current liabilities 1,573,329 933,193 Long-term debt, less current portion 5,110,757 5,693,341 Operating lease liabilities, less current portion 61,892 71,838 Deferred tax liabilities, net 841,234 944,337 Other non-current liabilities 127,480 106,812 Commitments and contingencies (Note 9) Shareholders’ equity: Ordinary shares 6 6 Non-voting euro deferred shares 55 55 Capital redemption reserve 473 472 Additional paid-in capital 3,639,940 3,477,124 Accumulated other comprehensive loss ( 1,035,399 ) ( 1,125,509 ) Retained earnings 884,298 733,586 Total shareholders’ equity 3,489,373 3,085,734 Total liabilities and shareholders’ equity $ 11,204,065 $ 10,835,255 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents JAZZ PHARMACEUTICALS PLC CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, except per share amounts) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues: Product sales, net $ 938,398 $ 935,766 $ 2,769,604 $ 2,673,903 Royalties and contract revenues 33,742 4,886 52,665 13,348 Total revenues 972,140 940,652 2,822,269 2,687,251 Operating expenses: Cost of product sales (excluding amortization of acquired developed technologies) 102,153 133,661 328,334 373,153 Selling, general and administrative 308,310 358,478 947,071 1,033,764 Research and development 234,402 148,870 633,050 417,898 Intangible asset amortization 154,883 141,232 456,731 461,782 Acquired in-process research and development — — 1,000 69,148 Impairment charge — 133,648 — 133,648 Total operating expenses 799,748 915,889 2,366,186 2,489,393 Income from operations 172,392 24,763 456,083 197,858 Interest expense, net ( 71,497 ) ( 80,244 ) ( 219,114 ) ( 214,117 ) Foreign exchange loss ( 1,377 ) ( 4,649 ) ( 566 ) ( 16,532 ) Income (loss) before income tax benefit and equity in loss (gain) of investees 99,518 ( 60,130 ) 236,403 ( 32,791 ) Income tax benefit ( 47,176 ) ( 43,027 ) ( 86,823 ) ( 58,603 ) Equity in loss (gain) of investees ( 126 ) 2,545 2,548 9,148 Net income (loss) $ 146,820 $ ( 19,648 ) $ 320,678 $ 16,664 Net income (loss) per ordinary share: Basic $ 2.33 $ ( 0.31 ) $ 5.05 $ 0.27 Diluted $ 2.14 $ ( 0.31 ) $ 4.67 $ 0.26 Weighted-average ordinary shares used in per share calculations - basic 63,114 62,785 63,532 62,365 Weighted-average ordinary shares used in per share calculations - diluted 71,293 62,785 72,866 63,388 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents JAZZ PHARMACEUTICALS PLC CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income (loss) $ 146,820 $ ( 19,648 ) $ 320,678 $ 16,664 Other comprehensive income (loss): Foreign currency translation adjustments ( 170,826 ) ( 511,617 ) 82,952 ( 1,217,414 ) Loss on fair value hedging activities reclassified from accumulated other comprehensive income (loss) to foreign exchange gain (loss), net of income tax benefit of $ — , $ — , $ — and $ 43 , respectively — — — 128 Unrealized gain on cash flow hedging activities, net of income tax expense of $ 1,176 , $ — , $ 3,063 and $ — , respectively 3,539 — 9,218 — Gain on cash flow hedging activities reclassified from accumulated other comprehensive income (loss) to interest expense, net of income tax expense of $ 428 , $ — , $ 684 and $ — , respectively ( 1,289 ) — ( 2,060 ) — Other comprehensive income (loss) ( 168,576 ) ( 511,617 ) 90,110 ( 1,217,286 ) Total comprehensive income (loss) $ ( 21,756 ) $ ( 531,265 ) $ 410,788 $ ( 1,200,622 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents JAZZ PHARMACEUTICALS PLC CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) (Unaudited) Ordinary Shares Non-voting Euro Deferred Capital Redemption Reserve Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Equity Shares Amount Shares Amount Balance at December 31, 2022 63,214 $ 6 4,000 $ 55 $ 472 $ 3,477,124 $ ( 1,125,509 ) $ 733,586 $ 3,085,734 Issuance of ordinary shares in conjunction with exercise of share options 188 — — — — 21,228 — — 21,228 Issuance of ordinary shares in conjunction with vesting of restricted stock units 585 — — — — — — — — Shares withheld for payment of employee's withholding tax liability — — — — — ( 43,266 ) — — ( 43,266 ) Share-based compensation — — — — — 56,646 — — 56,646 Other comprehensive income — — — — — — 145,279 — 145,279 Net income — — — — — — — 69,420 69,420 Balance at March 31, 2023 63,987 $ 6 4,000 $ 55 $ 472 $ 3,511,732 $ ( 980,230 ) $ 803,006 $ 3,335,041 Issuance of ordinary shares in conjunction with exercise of share options 28 — — — — 2,003 — — 2,003 Issuance of ordinary shares under employee stock purchase plan 81 — — — — 8,863 — — 8,863 Issuance of ordinary shares in conjunction with vesting of restricted stock units 58 — — — — — — — — Shares withheld for payment of employee's withholding tax liability — — — — — ( 4,188 ) — — ( 4,188 ) Share-based compensation — — — — — 61,705 — — 61,705 Shares repurchased ( 756 ) — — — 1 — — ( 95,595 ) ( 95,594 ) Other comprehensive income — — — — — — 113,407 — 113,407 Net income — — — — — — — 104,438 104,438 Balance at June 30, 2023 63,398 $ 6 4,000 $ 55 $ 473 $ 3,580,115 $ ( 866,823 ) $ 811,849 $ 3,525,675 Issuance of ordinary shares in conjunction with exercise of share options 50 — — — — 5,512 — — 5,512 Issuance of ordinary shares in conjunction with vesting of restricted stock units 59 — — — — — — — — Shares withheld for payment of employee's withholding tax liability — — — — — ( 1,884 ) — — ( 1,884 ) Share-based compensation — — — — — 56,197 — — 56,197 Shares repurchased ( 562 ) — — — — — — ( 74,371 ) ( 74,371 ) Other comprehensive loss — — — — — — ( 168,576 ) — ( 168,576 ) Net income — — — — — — — 146,820 146,820 Balance at September 30, 2023 62,945 $ 6 4,000 $ 55 $ 473 $ 3,639,940 $ ( 1,035,399 ) $ 884,298 $ 3,489,373 6 Table of Contents JAZZ PHARMACEUTICALS PLC CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) (Unaudited) Ordinary Shares Non-voting Euro Deferred Capital Redemption Reserve Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Equity Shares Amount Shares Amount Balance at December 31, 2021 61,633 $ 6 4,000 $ 55 $ 472 $ 3,534,792 $ ( 400,360 ) $ 830,226 $ 3,965,191 Cumulative effect adjustment from adoption of ASU 2020-06 — — — — — ( 333,524 ) — 127,474 ( 206,050 ) Issuance of ordinary shares in conjunction with exercise of share options 207 — — — — 21,729 — — 21,729 Issuance of ordinary shares in conjunction with vesting of restricted stock units 404 — — — — — — — — Shares withheld for payment of employee's withholding tax liability — — — — — ( 33,776 ) — — ( 33,776 ) Share-based compensation — — — — — 50,106 — — 50,106 Other comprehensive loss — — — — — — ( 190,360 ) — ( 190,360 ) Net income — — — — — — — 1,647 1,647 Balance at March 31, 2022 62,244 $ 6 4,000 $ 55 $ 472 $ 3,239,327 $ ( 590,720 ) $ 959,347 $ 3,608,487 Issuance of ordinary shares in conjunction with exercise of share options 194 — — — — 16,640 — — 16,640 Issuance of ordinary shares under employee stock purchase plan 81 — — — — 8,234 — — 8,234 Issuance of ordinary shares in conjunction with vesting of restricted stock units 104 — — — — — — — — Shares withheld for payment of employee's withholding tax liability — — — — — ( 6,289 ) — — ( 6,289 ) Share-based compensation — — — — — 54,407 — — 54,407 Shares repurchased — — — — — — — ( 54 ) ( 54 ) Other comprehensive loss — — — — — — ( 515,309 ) — ( 515,309 ) Net income — — — — — — — 34,665 34,665 Balance at June 30, 2022 62,623 $ 6 4,000 $ 55 $ 472 $ 3,312,319 $ ( 1,106,029 ) $ 993,958 $ 3,200,781 Issuance of ordinary shares in conjunction with exercise of share options 207 — — — — 21,260 — — 21,260 Issuance of ordinary shares in conjunction with vesting of restricted stock units 60 — — — — — — — — Shares withheld for payment of employee's withholding tax liability — — — — — ( 2,567 ) — — ( 2,567 ) Share-based compensation — — — — — 56,985 — — 56,985 Other comprehensive loss — — — — — — ( 511,617 ) — ( 511,617 ) Net loss — — — — — — — ( 19,648 ) ( 19,648 ) Balance at September 30, 2022 62,890 $ 6 4,000 $ 55 $ 472 $ 3,387,997 $ ( 1,617,646 ) $ 974,310 $ 2,745,194 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents JAZZ PHARMACEUTICALS PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, 2023 2022 Operating activities Net income $ 320,678 $ 16,664 Adjustments to reconcile net income to net cash provided by operating activities: Intangible asset amortization 456,731 461,782 Share-based compensation 173,900 160,438 Acquisition accounting inventory fair value step-up adjustment 119,094 203,189 Other non-cash transactions 54,262 ( 26,352 ) Depreciation 22,764 22,958 Non-cash interest expense 16,255 32,002 Provision for losses on accounts receivable and inventory 7,732 13,066 Acquired in-process research and development 1,000 69,148 Impairment charge — 133,648 Loss on disposal of a business — 39,258 Deferred tax benefit ( 224,317 ) ( 146,874 ) Changes in assets and liabilities: Accounts receivable 23,581 ( 43,868 ) Inventories ( 12,016 ) ( 50,458 ) Prepaid expenses and other current assets ( 37,327 ) 23,801 Operating lease assets 14,423 10,672 Other non-current assets ( 20,881 ) ( 4,006 ) Accounts payable 17,705 4,188 Accrued liabilities ( 76,261 ) 17,864 Income taxes payable 61,159 ( 172 ) Deferred revenue ( 459 ) ( 1,570 ) Operating lease liabilities, less current portion ( 13,855 ) ( 12,139 ) Other non-current liabilities 20,500 6,767 Net cash provided by operating activities 924,668 930,006 Investing activities Proceeds from maturity of investments 20,000 — Acquired in-process research and development ( 1,000 ) ( 69,148 ) Purchases of property, plant and equipment ( 13,860 ) ( 19,668 ) Acquisition of investments ( 270,000 ) ( 61,036 ) Proceeds from sale of a business — 53,000 Acquisition of intangible assets — ( 25,000 ) Net cash used in investing activities ( 264,860 ) ( 121,852 ) Financing activities Proceeds from employee equity incentive and purchase plans 37,606 67,863 Repayments of long-term debt ( 23,250 ) ( 574,264 ) Payment of employee withholding taxes related to share-based awards ( 49,338 ) ( 42,632 ) Share repurchases ( 169,966 ) ( 54 ) Net cash used in financing activities ( 204,948 ) ( 549,087 ) Effect of exchange rates on cash and cash equivalents ( 652 ) ( 11,157 ) Net increase in cash and cash equivalents 454,208 247,910 Cash and cash equivalents, at beginning of period 881,482 591,448 Cash and cash equivalents, at end of period $ 1,335,690 $ 839,358 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Table of Contents JAZZ PHARMACEUTICALS PLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The Company and Summary of Significant Accounting Policies Jazz Pharmaceuticals plc is a global biopharmaceutical company whose purpose is to innovate to transform the lives of patients and their families. We are dedicated to developing life-changing medicines for people with serious diseases - often with limited or no therapeutic options. We have a diverse portfolio of marketed medicines and novel product candidates, from early- to late-stage development, in neuroscience and oncology. Within these therapeutic areas, we strive to identify new options for patients by actively exploring small molecules and biologics, and through innovative delivery technologies and cannabinoid science. Our lead marketed products are: Neuroscience • Xywav® (calcium, magnesium, potassium, and sodium oxybates) oral solution , a product approved by the U.S. Food and Drug Administration, or FDA, in July 2020 and launched in the U.S. in November 2020 for the treatment of cataplexy or excessive daytime sleepiness, or EDS, in patients with narcolepsy 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 cataplexy or EDS in patients with narcolepsy seven years of age and older; Jazz also markets Xyrem in Canada for the treatment of cataplexy in patients with narcolepsy. Xyrem is also approved and distributed in the European Union, or EU (EU market authorizations include Northern Ireland), Great Britain and other markets through a licensing agreement; and • Epidiolex® (cannabidiol) oral solution , a product approved by FDA and launched in the U.S. in 2018 by GW Pharmaceuticals plc, or GW, and currently indicated for the treatment of seizures associated with Lennox-Gastaut syndrome, or LGS, Dravet syndrome, or DS, or tuberous sclerosis complex, or TSC, in patients one year of age or older; in the EU and Great Britain (where it is marketed as Epidyolex®) and other markets, it is approved for adjunctive treatment of seizures associated with LGS or DS, in conjunction with clobazam (EU and Great Britain only), in patients 2 years of age and older and for adjunctive treatment of seizures associated with TSC in patients 2 years of age and older (select markets). Oncology • Rylaze® (asparaginase erwinia chrysanthemi (recombinant)-rywn) , 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 lymphoblastic lymphoma in adults and pediatric patients aged one month or older who have developed hypersensitivity to E. coli -derived asparaginase. In September 2023, the European Commission, or EC, granted marketing authorization for this therapy under the trade name Enrylaze; • Zepzelca® (lurbinectedin) , a product approved by FDA in June 2020 under FDA's accelerated approval pathway and launched in the U.S. in July 2020 for the treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy; in Canada, Zepzelca received conditional approval in September 2021 for the treatment of adults with Stage III or metastatic SCLC, who have progressed on or after platinum-containing therapy; • Defitelio® (defibrotide sodium) , a product approved in the U.S. 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 VOD). It is currently approved in the EU, Great Britain and other markets for the treatment of severe hepatic VOD, also known as sinusoidal obstructive syndrome in HSCT therapy. It is indicated in adults and pediatric patients over 1 month of age; and • Vyxeos® (daunorubicin and cytarabine) liposome for injection , a product approved in the U.S., Canada, EU, Great Britain and other markets (marketed as Vyxeos® liposomal in the EU, Great Britain and other markets) for the treatment of adults with newly diagnosed therapy-related acute myeloid leukemia, or t-AML, or AML with myelodysplasia-related changes, or 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. 9 Table of Contents Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the registrant,” "the Company", “we,” “us,” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries. Throughout this Quarterly Report on Form 10-Q, all references to “ordinary shares” refer to Jazz Pharmaceuticals plc’s ordinary shares. Basis of Presentation These unaudited condensed consolidated financial statements have been prepared following the requirements of the U.S. Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by U.S. generally accepted accounting principles, or U.S. GAAP, can be condensed or omitted. The information included in this Quarterly Report on Form 10‑Q should be read in conjunction with our annual audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10‑K for the year ended December 31, 2022. In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of our financial position and operating results. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, for any other interim period or for any future period. Our significant accounting policies have not changed substantially from those previously described in our Annual Report on Form 10‑K for the year ended December 31, 2022, other than as described below. These condensed consolidated financial statements include the accounts of Jazz Pharmaceuticals plc and our subsidiaries, and intercompany transactions and balances have been eliminated. Our operating segment is reported in a manner consistent with the internal reporting provided to the chief operating decision maker, or CODM. Our CODM has been identified as our chief executive officer. We have determined that we operate in one business segment, which is the identification, development and commercialization of meaningful pharmaceutical products that address unmet medical needs. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates. Adoption of New Accounting Standards In October 2021, the Financial Accounting Standards Board issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, or ASU 2021-08, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. ASU 2021-08 was effective for the Company from January 1, 2023 and we will apply to future business combinations, if any. Significant Risks and Uncertainties Historically, our business has been substantially dependent on Xyrem and while we expect that our business will continue to meaningfully depend on oxybate revenues from both Xywav and Xyrem, there is no guarantee that we can maintain oxybate revenues at or near historical levels, or that oxybate revenues will grow. In this regard, our ability to maintain or increase oxybate revenues and realize the anticipated benefits from our investment in Xywav are subject to a number of risks and uncertainties including, without limitation, those related to the launch of Xywav for the treatment of IH in adults and adoption in that indication; competition from the recent introduction of two authorized generic, or AG, versions of high-sodium oxybate and new products, such as Avadel’s Lumryz, for treatment of cataplexy and/or EDS in narcolepsy in the U.S. market, as well as potential future competition from additional AG versions of high-sodium oxybate and from generic versions of high-sodium oxybate and from other competitors; increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third party payors, including our ability to maintain adequate coverage and reimbursement for Xywav and Xyrem; increased rebates required to maintain access to our products; challenges to our intellectual property around Xywav and/or 10 Table of Contents Xyrem, including from pending antitrust and intellectual property litigation; and continued acceptance of Xywav and Xyrem by physicians and patients . A significant decline in oxybate revenues could cause us to reduce our operating expenses or seek to raise additional funds, which would have a material adverse effect on our business, financial condition, results of operations and growth prospects, including on our ability to acquire, in-license or develop new products to grow our business. In addition to risks related specifically to Xywav and Xyrem, we are subject to other challenges and risks related to successfully commercializing a portfolio of oncology products and other neuroscience products, and other risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: ongoing clinical research activity and related outcomes, obtaining regulatory approval of our late-stage product candidates; effectively commercializing our approved or acquired products such as Epidiolex, Rylaze and Zepzelca; obtaining and maintaining adequate coverage and reimbursement for our products; contracting and rebates to pharmacy benefit managers and similar organizations that reduce our net revenue; increasing scrutiny of pharmaceutical product pricing and resulting changes in healthcare laws and policy; market acceptance; regulatory concerns with controlled substances generally and the potential for abuse; future legislation, action by the U.S. Federal Government authorizing the sale, distribution, use, and insurance reimbursement of non-FDA approved cannabinoid products; delays or problems in the supply of our products, loss of single source suppliers or failure to comply with manufacturing regulations; delays or problems with third parties that are part of our manufacturing and supply chain; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements; and possible restrictions on our ability and flexibility to pursue certain future opportunities as a result of our substantial outstanding debt obligations. In addition, the success of the acquisition of GW, or the GW Acquisition, will depend, in part, on our ability to realize the anticipated benefits from the combination of our and GW's historical businesses. The anticipated benefits to us of the GW Acquisition may not be realized at the expected levels, within the expected timeframe or at all or may take longer to realize or cost more than expected, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. Concentrations of Risk Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, investments and derivative contracts. Our investment policy permits investments in U.S. federal government and federal agency securities, corporate bonds or commercial paper issued by U.S. corporations, money market instruments, certain qualifying money market mutual funds, certain repurchase agreements, and tax-exempt obligations of U.S. states, agencies and municipalities and places restrictions on credit ratings, maturities, and concentration by type and issuer. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and investments to the extent recorded on the balance sheet. We manage our foreign currency transaction risk and interest rate risk within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes. As of September 30, 2023, we had foreign exchange forward contracts with notional amounts totaling $ 509.9 million. As of September 30, 2023, the outstanding foreign exchange forward contracts had a net liability fair value of $ 14.6 million. As of September 30, 2023, we had interest rate swap contracts with notional amounts totaling $ 500 million. These outstanding interest rate swap contracts had an asset fair value of $ 9.6 million as of September 30, 2023. The counterparties to these contracts are large multinational commercial banks, and we believe the risk of nonperformance is not significant. We are also subject to credit risk from our accounts receivable related to our product sales. We monitor our exposure within accounts receivable and record a reserve against uncollectible accounts receivable as necessary. We extend credit to pharmaceutical wholesale distributors and specialty pharmaceutical distribution companies, primarily in the U.S., and to other international distributors and hospitals. Customer creditworthiness is monitored and collateral is not required. We monitor economic conditions in certain European countries which may result in variability of the timing of cash receipts and an increase in the average length of time that it takes to collect accounts receivable outstanding. Historically, we have not experienced significant credit losses on our accounts receivable and as of September 30, 2023 and December 31, 2022, allowances on receivables were not material. As of September 30, 2023, five customers accounted for 84 % of gross accounts receivable, including Express Scripts Specialty Distribution Services, Inc. and its affiliates, or ESSDS, which accounted for 45 % of gross accounts receivable, McKesson Corporation and affiliates, or McKesson, which accounted for 12 % of gross accounts receivable and ASD Specialty Healthcare LLC, which accounted for 12 % of gross accounts receivable. As of December 31, 2022, five customers accounted for 87 % of gross accounts receivable, including ESSDS, which accounted for 55 % of gross accounts receivable, Cardinal Health Inc, which accounted for 10 % of gross accounts receivable and McKesson, which accounted for 9 % of gross accounts receivable. 11 Table of Contents We depend on single source suppliers for most of our products, product candidates and their active pharmaceutical ingredients, or APIs. With respect to our oxybate products, the API is manufactured for us by a single source supplier and the finished products are manufactured both by us in our facility in Athlone, Ireland and by our U.S.-based supplier. 2. Cash and Available-for-Sale Securities Cash, cash equivalents and investments consisted of the following (in thousands): September 30, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cash and Cash Equivalents Investments Cash $ 366,100 $ — $ — $ 366,100 $ 366,100 $ — Time deposits 560,000 — — 560,000 310,000 250,000 Money market funds 659,590 — — 659,590 659,590 — Totals $ 1,585,690 $ — $ — $ 1,585,690 $ 1,335,690 $ 250,000 December 31, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cash and Cash Equivalents Investments Cash $ 334,018 $ — $ — $ 334,018 $ 334,018 $ — Time deposits 30,000 — — 30,000 30,000 — Money market funds 517,464 — — 517,464 517,464 — Totals $ 881,482 $ — $ — $ 881,482 $ 881,482 $ — Cash equivalents and investments are considered available-for-sale securities. We use the specific-identification method for calculating realized gains and losses on securities sold and include them in interest expense, net in the condensed consolidated statements of income (loss). Our investment balances represent time deposits with original maturities of greater than three months and less than one year. Interest income from available-for-sale securities was $ 19.2 million and $ 44.4 million in the three and nine months ended September 30, 2023, respectively, and $ 3.5 million and $ 4.4 million in the three and nine months ended September 30, 2022, respectively. 3. Fair Value Measurement The following table summarizes, by major security type, our available-for-sale securities and derivative contracts as of September 30, 2023 and December 31, 2022 that were measured at fair value on a recurring basis and were categorized using the fair value hierarchy (in thousands): September 30, 2023 December 31, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total Estimated Fair Value Assets: Available-for-sale securities: Money market funds $ 659,590 $ — $ 659,590 $ 517,464 $ — $ 517,464 Time deposits — 560,000 560,000 — 30,000 30,000 Interest rate contracts — 9,577 9,577 — — — Foreign exchange forward contracts — 1,331 1,331 — 17,356 17,356 Totals $ 659,590 $ 570,908 $ 1,230,498 $ 517,464 $ 47,356 $ 564,820 Liabilities: Foreign exchange forward contracts $ — $ 15,964 $ 15,964 $ — $ — $ — Totals $ — $ 15,964 $ 15,964 $ — $ — $ — As of September 30, 2023, our available-for-sale securities included money market funds and time deposits and their carrying values were approximately equal to their fair values. Money market funds were measured using quoted prices in 12 Table of Contents active markets, which represent Level 1 inputs and time deposits were measured at fair value using Level 2 inputs. Level 2 inputs are obtained from various third party data providers and represent quoted prices for similar assets in active markets, or these inputs were derived from observable market data, or if not directly observable, were derived from or corroborated by other observable market data. Our derivative assets and liabilities include interest rate and foreign exchange derivatives that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk as well as an evaluation of our counterparties’ credit risks. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the fair value hierarchy. There were no transfers between the different levels of the fair value hierarchy in 2023 or 2022. As of September 30, 2023 and December 31, 2022, the carrying amount of investments measured using the measurement alternative for equity investments without a readily determinable fair value was $ 5.5 million. The carrying amount, which is recorded within other non-current assets, is based on the latest observable transaction price. As of September 30, 2023, the estimated fair values of the 1.50 % exchangeable senior notes due 2024, or 2024 Notes, the 2.00 % exchangeable senior notes due 2026, or 2026 Notes, which we refer to collectively as the Exchangeable Senior Notes, the 4.375 % senior secured notes, due 2029, or the Secured Notes, and the seven-year $ 3.1 billion term loan B facility were approximately $ 555 million, $ 1.0 billion, $ 1.3 billion and $ 2.7 billion respectively. The fair values of each of these debt facilities was estimated using quoted market prices obtained from brokers (Level 2). 4. Derivative Instruments and Hedging Activities We are exposed to certain risks arising from operating internationally, including fluctuations in foreign exchange rates primarily related to the translation of sterling and euro-denominated net monetary liabilities, including intercompany balances, held by subsidiaries with a U.S. dollar functional currency and fluctuations in interest rates on our outstanding term loan borrowings. We manage these exposures within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes. We enter into foreign exchange forward contracts, with durations of up to 12 months, designed to limit the exposure to fluctuations in foreign exchange rates related to the translation of certain non-U.S. dollar denominated liabilities, including intercompany balances. Hedge accounting is not applied to these derivative instruments as gains and losses on these hedge transactions are designed to offset gains and losses on underlying balance sheet exposures. As of September 30, 2023 and December 31, 2022, the notional amount of foreign exchange contracts where hedge accounting is not applied was $ 509.9 million and $ 505.0 million, respectively. The foreign exchange gain (loss) in our condensed consolidated statements of income (loss) included the following losses associated with foreign exchange contracts not designated as hedging instruments (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Foreign Exchange Forward Contracts: 2023 2022 2023 2022 Loss recognized in foreign exchange gain (loss) $ ( 13,549 ) $ ( 40,331 ) $ ( 8,921 ) $ ( 95,536 ) To achieve a desired mix of floating and fixed interest rates on our variable rate debt, we entered into interest rate swap agreements in April 2023 which are effective until April 2026. These agreements hedge contractual term loan interest rates. As of September 30, 2023 , the interest rate swap agreements had a notional amount of $ 500.0 million. As a result of these agreements, the interest rate on a portion of our term loan borrowings is fixed at 3.9086 %, plus the borrowing spread, until April 30, 2026. The impact on accumulated other comprehensive income (loss) and earnings from derivative instruments that qualified as cash flow hedges for the three and nine months ended September 30, 2023 was as follows (in thousands): Interest Rate Contracts: Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Gain recognized in accumulated other comprehensive income (loss), net of tax $ 3,539 $ 9,218 Gain reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax ( 1,289 ) ( 2,060 ) 13 Table of Contents Assuming no change in USD Secured Overnight Financing Rate based interest rates from market rates as of September 30, 2023 , $ 5.1 million of gains, net of tax, recognized in accumulated other comprehensive income (loss) will be reclassified to earnings over the next 12 months. In order to hedge our exposure to foreign currency exchange risk associated with our seven-year € 625.0 million term loan B facility, or the Euro Term Loan, we entered into a cross-currency interest rate swap contract in May 2021, which matured in March 2022, and was de-designated as a fair value hedge. The terms of this contract converted the principal repayments and interest payments on the Euro Term Loan into U.S. dollars. The carrying amount of the Euro Term Loan and the fair value of the cross-currency interest rate swap contract were remeasured on a monthly basis, with changes in the euro to U.S. dollar foreign exchange rates recognized within foreign exchange gain (loss) in the condensed consolidated statements of income (loss). The impact on accumulated other comprehensive income (loss) and earnings from the cross-currency interest rate swap contract was as follows (in thousands): Cross-Currency Interest Rate Contract: Nine Months Ended September 30, 2022 Loss reclassified from accumulated other comprehensive income (loss) to foreign exchange loss, net of tax $ 128 Loss recognized in foreign exchange loss 2,646 The cash flow effects of our derivative contracts for the nine months ended September 30, 2023 and 2022 are included within net cash provided by operating activities in the condensed consolidated statements of cash flows, except for the settlement of notional amounts of the cross-currency swap, which were included in net cash used in financing activities. The following tables summarize the fair value of outstanding derivatives (in thousands): Classification September 30, 2023 December 31, 2022 Assets Derivatives designated as hedging instruments: Interest rate contracts Other current assets $ 6,896 $ — Other non-current assets 2,681 — Derivatives not designated as hedging instruments: Foreign exchange forward contracts Other current assets 1,331 17,356 Total fair value of derivative asset instruments $ 10,908 $ 17,356 Liabilities Derivatives not designated as hedging instruments: Foreign exchange forward contracts Accrued liabilities $ 15,964 $ — Although we do not offset derivative assets and liabilities within our consolidated balance sheets, our International Swap and Derivatives Association agreements provide for net settlement of transactions that are due to or from the same counterparty upon early termination of the agreement due to an event of default or other termination event. These provisions were not applicable as of December 31, 2022 since all derivatives were in an asset position. The following table summarizes the potential effect on our condensed consolidated balance sheets of offsetting our interest rate and foreign exchange forward contracts subject to such provisions as of September 30, 2023 (in thousands): September 30, 2023 Gross Amounts of Recognized Assets/ Liabilities Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet Gross Amounts Not Offset in the Consolidated Balance Sheet Description Derivative Financial Instruments Cash Collateral Received (Pledged) Net Amount Derivative assets $ 10,908 $ — $ 10,908 $ ( 7,702 ) $ — $ 3,206 Derivative liabilities ( 15,964 ) — ( 15,964 ) 7,702 — ( 8,262 ) 14 Table of Contents 5. Inventories Inventories consisted of the following (in thousands): September 30, 2023 December 31, 2022 Raw materials $ 25,028 $ 20,786 Work in process 457,877 517,670 Finished goods 128,922 175,605 Total inventories $ 611,827 $ 714,061 As of September 30, 2023 and December 31, 2022 inventories included $ 348.1 million and $ 457.6 million, respectively, related to the purchase accounting inventory fair value step-up on inventory acquired in the GW Acquisition. 6. Goodwill and Intangible Assets The gross carrying amount of goodwill was as follows (in thousands): Balance at December 31, 2022 $ 1,692,662 Foreign exchange 12,658 Balance at September 30, 2023 $ 1,705,320 The gross carrying amounts and net book values of our intangible assets were as follows (in thousands): September 30, 2023 December 31, 2022 Remaining Weighted- Average Useful Life (In years) Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value Acquired developed technologies 9.7 $ 7,577,534 $ ( 2,159,674 ) $ 5,417,860 $ 7,491,994 $ ( 1,697,557 ) $ 5,794,437 Manufacturing contracts — 11,340 ( 11,340 ) — 11,417 ( 11,417 ) — Trademarks — 2,874 ( 2,874 ) — 2,876 ( 2,876 ) — Total finite-lived intangible assets $ 7,591,748 $ ( 2,173,888 ) $ 5,417,860 $ 7,506,287 $ ( 1,711,850 ) $ 5,794,437 The increase in the gross carrying amount of intangible assets as of September 30, 2023 compared to December 31, 2022 primarily relates to the positive impact of foreign currency translation adjustments due to the strengthening of sterling against the U.S. dollar. The assumptions and estimates used to determine future cash flows and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by various factors, including external factors, such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for specific product lines. 15 Table of Contents Based on finite-lived intangible assets recorded as of September 30, 2023, and assuming the underlying assets will not be impaired and that we will not change the expected lives of the assets, future amortization expenses were estimated as follows (in thousands): Year Ending December 31, Estimated Amortization Expense 2023 (remainder) $ 150,595 2024 602,379 2025 602,379 2026 602,379 2027 602,379 Thereafter 2,857,749 Total $ 5,417,860 7. Certain Balance Sheet Items Property, plant and equipment consisted of the following (in thousands): September 30, 2023 December 31, 2022 Manufacturing equipment and machinery $ 77,865 $ 73,580 Construction-in-progress 73,286 67,385 Land and buildings 69,355 68,935 Leasehold improvements 65,994 64,776 Computer software 36,543 34,116 Computer equipment 14,967 16,424 Furniture and fixtures 9,285 10,481 Subtotal 347,295 335,697 Less accumulated depreciation and amortization ( 124,819 ) ( 107,647 ) Property, plant and equipment, net $ 222,476 $ 228,050 Other current assets consisted of the following (in thousands): September 30, 2023 December 31, 2022 Deferred charge for income taxes on intercompany profit $ 209,009 $ 176,057 Other 101,395 91,135 Total other current assets $ 310,404 $ 267,192 16 Table of Contents Accrued liabilities consisted of the following (in thousands): September 30, 2023 December 31, 2022 Rebates and other sales deductions $ 323,000 $ 313,176 Employee compensation and benefits 107,890 143,243 Accrued facilities expenses 52,006 25,864 Clinical trial accruals 45,115 31,338 Accrued royalties 28,336 57,347 Accrued collaboration expenses 23,530 33,205 Accrued interest 22,200 35,614 Sales return reserve 20,150 26,164 Consulting and professional services 18,507 22,278 Current portion of lease liabilities 16,722 15,938 Derivative instrument liabilities 15,964 — Selling and marketing accruals 14,573 18,553 Inventory-related accruals 10,746 8,565 Accrued construction-in-progress 5,167 3,298 Other 66,036 68,672 Total accrued liabilities $ 769,942 $ 803,255 8. Debt The following table summarizes the carrying amount of our indebtedness (in thousands): September 30, 2023 December 31, 2022 2024 Notes $ 575,000 $ 575,000 Unamortized - debt issuance costs ( 1,493 ) ( 2,738 ) 2024 Notes, net 573,507 572,262 2026 Notes 1,000,000 1,000,000 Unamortized - debt issuance costs ( 7,094 ) ( 8,932 ) 2026 Notes, net 992,906 991,068 Secured Notes 1,479,238 1,476,938 Term Loan 2,669,613 2,684,073 Total debt 5,715,264 5,724,341 Less current portion (1) 604,507 31,000 Total long-term debt $ 5,110,757 $ 5,693,341 ______________________________ (1) Balance as of September 30, 2023 includes the 2024 Notes since they mature in August 2024. Exchangeable Senior Notes The Exchangeable Senior Notes were issued by Jazz Investments I Limited, or the Issuer, a 100 %-owned finance subsidiary of Jazz Pharmaceuticals plc. The Exchangeable Senior Notes are senior unsecured obligations of the Issuer and are fully and unconditionally guaranteed on a senior unsecured basis by Jazz Pharmaceuticals plc. No subsidiary of Jazz Pharmaceuticals plc guaranteed the Exchangeable Senior Notes. Subject to certain local law restrictions on payment of dividends, among other things, and potential negative tax consequences, we are not aware of any significant restrictions on the ability of Jazz Pharmaceuticals plc to obtain funds from the Issuer or Jazz Pharmaceuticals plc’s other subsidiaries by dividend or loan, or any legal or economic restrictions on the ability of the Issuer or Jazz Pharmaceuticals plc’s other subsidiaries to 17 Table of Contents transfer funds to Jazz Pharmaceuticals plc in the form of cash dividends, loans or advances. There is no assurance that in the future such restrictions will not be adopted. The total liability of the 2026 Notes is reflected net of issuance costs of $ 15.3 million which will be amortized over the term of the 2026 Notes. The effective interest rate of the 2026 Notes is 2.26 %. During the three months ended September 30, 2023 and 2022, we recognized interest expense of $ 5.7 million, of which $ 5.0 million related to the contractual coupon rate and $ 0.7 million related to the amortization of debt issuance costs, respectively. During the nine months ended September 30, 2023 and 2022, we recognized interest expense of $ 16.8 million, of which $ 15.0 million related to the contractual coupon rate and $ 1.8 million related to the amortization of debt issuance costs, respectively. The total liability of the 2024 Notes is reflected net of issuance costs of $ 11.4 million which will be amortized over the term of the 2024 Notes. The effective interest rate of the 2024 Notes is 1.79 %. During the three months ended September 30, 2023 and 2022, we recognized interest expense of $ 2.5 million, of which $ 2.1 million related to the contractual coupon rate and $ 0.4 million related to the amortization of debt issuance costs, respectively. During the nine months ended September 30, 2023 and 2022, we recognized interest expense of $ 7.6 million, of which $ 6.4 million related to the contractual coupon rate and $ 1.2 million related to the amortization of debt issuance costs, respectively. Maturities Scheduled maturities with respect to our long-term debt principal balances outstanding as of September 30, 2023 were as follows (in thousands): Year Ending December 31, Scheduled Long-Term Debt Maturities 2023 (remainder) $ 7,750 2024 606,000 2025 31,000 2026 1,031,000 2027 31,000 Thereafter 4,098,500 Total $ 5,805,250 9. Commitments and Contingencies Indemnification In the normal course of business, we enter into agreements that contain a variety of representations and warranties and provide for general indemnification, including indemnification associated with product liability or infringement of intellectual property rights. Our exposure under these agreements is unknown because it involves future claims that may be made but have not yet been made against us. To date, we have not paid any claims or been required to defend any action related to these indemnification obligations. We have agreed to indemnify our executive officers, directors and certain other employees for losses and costs incurred in connection with certain events or occurrences, including advancing money to cover certain costs, subject to certain limitations. The maximum potential amount of future payments we could be required to make under the indemnification obligations is unlimited; however, we maintain insurance policies that may limit our exposure and may enable us to recover a portion of any future amounts paid. Assuming the applicability of coverage, the willingness of the insurer to assume coverage, and subject to certain retention, loss limits and other policy provisions, we believe the fair value of these indemnification obligations is not significant. Accordingly, we did not recognize any liabilities relating to these obligations as of September 30, 2023 and December 31, 2022. No assurances can be given that the covering insurers will not attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these insurers, in which case we may incur substantial liabilities as a result of these indemnification obligations. 18 Table of Contents Legal Proceedings We are involved in legal proceedings, including the following matters: Xyrem Antitrust Litigation 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 generic drug manufacturers who had filed Abbreviated New Drug Applications, or ANDA, violate state and federal antitrust and consumer protection laws, as follows: On June 17, 2020, a class action lawsuit was filed in the United States District Court for the Northern District of Illinois by Blue Cross and Blue Shield Association, or BCBS, against Jazz Pharmaceuticals plc, Jazz Pharmaceuticals, Inc., and Jazz Pharmaceuticals Ireland Limited, or, collectively, the Company Defendants (hereinafter referred to as the BCBS Lawsuit). The BCBS Lawsuit also names Roxane Laboratories, Inc., Hikma Pharmaceuticals USA Inc., Eurohealth (USA), Inc., Hikma Pharmaceuticals plc, Amneal Pharmaceuticals LLC, Par Pharmaceuticals, Inc., Lupin Ltd., Lupin Pharmaceuticals Inc., and Lupin Inc., or, collectively, the BCBS Defendants. On June 18 and June 23, 2020, respectively, two additional class action lawsuits were filed against the Company Defendants and the BCBS Defendants: one by the New York State Teamsters Council Health and Hospital Fund in the United States District Court for the Northern District of California, and another by the Government Employees Health Association Inc. in the United States District Court for the Northern District of Illinois (hereinafter referred to as the GEHA Lawsuit). On June 18, 2020, a class action lawsuit was filed in the United States District Court for the Northern District of California by the City of Providence, Rhode Island, on behalf of itself and all others similarly situated, against Jazz Pharmaceuticals plc, and Roxane Laboratories, Inc., West-Ward Pharmaceuticals Corp., Hikma Labs Inc., Hikma Pharmaceuticals USA Inc., and Hikma Pharmaceuticals plc, or, collectively, the City of Providence Defendants. On June 30, 2020, a class action lawsuit was filed in the United States District Court for the Northern District of Illinois by UFCW Local 1500 Welfare Fund on behalf of itself and all others similarly situated, against Jazz Pharmaceuticals Ireland Ltd., Jazz Pharmaceuticals, Inc., Roxane Laboratories, Inc., Hikma Pharmaceuticals plc, Eurohealth (USA), Inc. and West-Ward Pharmaceuticals Corp., or collectively the UFCW Defendants (hereinafter referred to as the UFCW Lawsuit). On July 13, 2020, the plaintiffs in the BCBS Lawsuit and the GEHA Lawsuit dismissed their complaints in the United States District Court for the Northern District of Illinois and refiled their respective lawsuits in the United States District Court for the Northern District of California. On July 14, 2020, the plaintiffs in the UFCW Lawsuit dismissed their complaint in the United States District Court for the Northern District of Illinois and on July 15, 2020, refiled their lawsuit in the United States District Court for the Northern District of California. On July 31, 2020, a class action lawsuit was filed in the United States District Court for the Southern District of New York by the A.F. of L.-A.G.C. Building Trades Welfare Plan on behalf of itself and all others similarly situated, against Jazz Pharmaceuticals plc (hereinafter referred to as the AFL Plan Lawsuit). The AFL Plan Lawsuit also names Roxane Laboratories Inc., West-Ward Pharmaceuticals Corp., Hikma Labs Inc., Hikma Pharmaceuticals plc, Amneal Pharmaceuticals LLC, Par Pharmaceuticals Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc. On August 14, 2020, an additional class action lawsuit was filed in the United States District Court for the Southern District of New York by the Self-Insured Schools of California on behalf of itself and all others similarly situated, against the Company Defendants, as well as Hikma Pharmaceuticals plc, Eurohealth (USA) Inc., Hikma Pharmaceuticals USA, Inc., West-Ward Pharmaceuticals Corp., Roxane Laboratories, Inc., Amneal Pharmaceuticals LLC, Endo International, plc, Endo Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals Inc., Lupin Inc., Sun Pharmaceutical Industries Ltd., Sun Pharmaceutical Holdings USA, Inc., Sun Pharmaceutical Industries, Inc., Ranbaxy Laboratories Ltd., Teva Pharmaceutical Industries Ltd., Watson Laboratories, Inc., Wockhardt Ltd., Morton Grove Pharmaceuticals, Inc., Wockhardt USA LLC, Mallinckrodt plc, and Mallinckrodt LLC (hereinafter referred to as the Self-Insured Schools Lawsuit). On September 16, 2020, an additional class action lawsuit was filed in the United States District Court for the Northern District of California, by Ruth Hollman on behalf of herself and all others similarly situated, against the same defendants named in the Self-Insured Schools Lawsuit. In December 2020, the above cases were centralized and transferred to the United States District Court for the Northern District of California, where the multidistrict litigation will proceed for the purpose of discovery and pre-trial proceedings. On March 18, 2021, United Healthcare Services, Inc. filed a lawsuit in the United States District Court for the District of Minnesota against the Company Defendants, Hikma Pharmaceuticals plc, Roxane Laboratories, Inc., Hikma Pharmaceuticals USA Inc., Eurohealth (USA) Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical Inc., Lupin Ltd., and Lupin Pharmaceuticals, Inc., raising similar allegations, or the UHS Lawsuit. On March 24, 2021, the U.S. Judicial Panel on 19 Table of Contents Multidistrict Litigation conditionally transferred the UHS Lawsuit to the United States District Court for the Northern District of California, where it was consolidated for discovery and pre-trial proceedings with the other cases. On August 13, 2021, the United States District Court for the Northern District of California granted in part and denied in part the Company Defendants' motion to dismiss the complaints in the cases referenced above. On October 8, 2021, Humana Inc. filed a lawsuit in the United States District Court for the Northern District of California against the Company Defendants, Hikma Pharmaceuticals plc, Hikma Pharmaceuticals USA Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations. On October 8, 2021, Molina Healthcare Inc. filed a lawsuit in the United States District Court for the Northern District of California against the Company Defendants, Hikma Pharmaceuticals plc, Hikma Pharmaceuticals USA Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations. On February 17, 2022, Health Care Service Corporation filed a lawsuit in the United States District Court for the Northern District of California against the Company Defendants, Hikma Pharmaceuticals plc, Hikma Pharmaceuticals USA Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations. On April 19, 2023, the Court held a hearing on class certification in the consolidated multi-district litigation referenced above. On May 12, 2023, the Court granted the plaintiffs’ motion and preliminarily certified classes of Xyrem purchasers seeking monetary and injunctive relief. The Court excluded Xywav purchasers from the classes. Trial in this matter is scheduled for October 28, 2024. On January 13, 2023, Amneal Pharmaceuticals LLC, Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, notified the Court that they had reached a settlement-in-principle with the class action plaintiffs. On April 19, 2023, the Court held a hearing on a motion for preliminary approval of this proposed settlement. On May 12, 2023, the Court granted the motion for preliminary approval of the proposed settlement. On May 9, 2022, Aetna Inc., or Aetna, filed a lawsuit in the Superior Court of California for the County of Alameda against the Company Defendants, Hikma Pharmaceuticals plc, Hikma Pharmaceuticals USA Inc., Hikma Labs, Inc., Eurohealth (USA), Inc., Amneal Pharmaceuticals LLC, Par Pharmaceutical, Inc., Lupin Ltd., Lupin Pharmaceuticals, Inc., and Lupin Inc, raising similar allegations. On December 27, 2022, the Court granted in part and denied in part our motion to dismiss Aetna’s complaint. As a result of that ruling, the generic defendants have been dismissed from the case, and certain of Aetna’s claims against Jazz have been dismissed. On January 27, 2023, Aetna filed an amended complaint against Jazz. On March 22, 2023, we filed motions to dismiss and to strike portions of the amended complaint. On June 26, 2023, the Court granted our motions, and granted Aetna leave to further amend its complaint. On August 7, 2023, Aetna filed a motion seeking leave of the Court to file a second amended complaint. That motion was granted on November 3, 2023. The plaintiffs in certain of these lawsuits are seeking to represent a class of direct purchasers of Xyrem, and the plaintiffs in the remaining lawsuits are seeking to represent a class of indirect purchasers of Xyrem. Each of the lawsuits generally alleges violations of U.S. federal and state antitrust, consumer protection, and unfair competition laws in connection with the Company Defendants’ conduct related to Xyrem, including actions leading up to, and entering into, patent litigation settlement agreements with each of the other named defendants. Each of the lawsuits seeks monetary damages, exemplary damages, equitable relief against the alleged unlawful conduct, including disgorgement of profits and restitution, and injunctive relief. It is possible that additional lawsuits will be filed against the Company Defendants making similar or related allegations. 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, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. GW Acquisition Litigation On March 15, 2021, GW filed a definitive proxy statement, or Proxy Statement, with the Securities and Exchange Commission in connection with the GW Acquisition. Since the filing of the Proxy Statement, Jazz Pharmaceuticals plc has been named in two lawsuits filed in state and federal courts in New York on March 17, 2021 by purported GW shareholders in connection with the GW Acquisition. The first was filed in the United States District Court for the Southern District of New York by James Farrell (hereinafter referred to as the Farrell Lawsuit) and an additional suit was filed in New York state court by Brian Levy (hereinafter referred to as the Levy Lawsuit). In addition to Jazz Pharmaceuticals plc, Jazz Pharmaceuticals U.K. Holdings Ltd., GW Pharmaceuticals plc, and the GW board of directors are named as defendants in the Farrell Lawsuit. In the Levy Lawsuit, GW Pharmaceuticals plc, the GW board of directors, Centerview Partners LLC, and Goldman Sachs & Co. LLC are named as defendants. In addition to 20 Table of Contents the Farrell Lawsuit and the Levy Lawsuit, ten additional suits have been filed in New York, California, and Pennsylvania federal courts by purported GW shareholders against GW Pharmaceuticals plc and its board of directors, but which do not name any Jazz Pharmaceuticals parties (hereinafter referred to as the GW Litigation, and collectively with the Farrell Lawsuit and the Levy Lawsuit, as the Transaction Litigation). In the Transaction Litigation, the plaintiffs allege that the Proxy Statement omitted material information and contained misrepresentations, and that the individual members of the GW board of directors breached their fiduciary duties, in violation of state and federal laws, including the Securities Exchange Act of 1934. The plaintiffs in the Transaction Litigation sought various remedies, including injunctive relief to prevent the consummation of the GW Acquisition unless certain allegedly material information was disclosed, or in the alternative, rescission or damages. On April 14, 2021, GW filed a Form 8-K containing supplemental disclosures related to the GW Acquisition. Pursuant to a memorandum of understanding between the parties, the Levy Lawsuit was dismissed on April 14, 2021. On May 27, 2021, a class action lawsuit was filed in the United States District Court for the Southern District of California by plaintiff Kurt Ziegler against GW and its former Directors asserting claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, referred to as the Ziegler Lawsuit. The allegations in the Ziegler Lawsuit are similar to those in the previously dismissed Transaction Litigation. On June 3, 2022, we filed a motion to dismiss the Ziegler Lawsuit. While the motion to dismiss was pending, in December 2022, the parties participated in a mediation and reached a tentative settlement, which remains subject to court approval. On March 20, 2023, the plaintiffs in the Ziegler Lawsuit filed a motion for preliminary approval of the settlement. On July 28, 2023, the Court granted the motion for preliminary approval, which conditionally certified a class for settlement purposes. A hearing on whether final approval should be granted is scheduled for December 11, 2023. Patent Infringement Litigation Avadel Litigation On May 13, 2021, we filed a patent infringement suit against Avadel Pharmaceuticals plc, or Avadel, and several of its corporate affiliates in the United States District Court for the District of Delaware. The suit alleges that Avadel’s Lumryz will infringe five of our patents related to controlled release formulations of oxybate and the safe and effective distribution of oxybate. The suit seeks an injunction to prevent Avadel from launching a product that would infringe these patents, and an award of monetary damages if Avadel does launch an infringing product. Avadel filed an answer to the complaint and counterclaims asserting that the patents are invalid or not enforceable, and that its product will not infringe our patents. Avadel filed a motion for partial judgment on the pleadings on its counterclaim that one of our patents should be delisted from the Orange Book. On November 18, 2022, the Court issued an order that we delist the patent from the Orange Book. On November 22, 2022, we filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. The Federal Circuit temporarily stayed the District Court’s delisting order. On February 24, 2023, the Federal Circuit affirmed the District Court’s delisting order, lifted the temporary stay, and gave Jazz 14 days to request that FDA delist the patent from the Orange Book. Jazz complied with the Federal Circuit’s order and requested delisting on February 28, 2023. On March 3, 2023, we and Avadel stipulated to the dismissal without prejudice of the claims and counterclaims related to infringement and validity of the delisted patent in both this suit and a later-filed suit described below related to the same patent. On August 4, 2021, we filed an additional patent infringement suit against Avadel in the United States District Court for the District of Delaware. The second suit alleges that Avadel’s Lumryz will infringe a newly-issued patent related to sustained-release formulations of oxybate. The suit seeks an injunction to prevent Avadel from launching a product that would infringe this patent, and an award of monetary damages if Avadel does launch an infringing product. Avadel filed an answer to the complaint and counterclaims asserting that the patents are invalid or not enforceable, and that its product will not infringe our patents. On November 10, 2021, we filed an additional patent infringement suit against Avadel in the United States District Court for the District of Delaware. The third suit alleges that Avadel’s Lumryz will infringe a newly-issued patent related to sustained-release formulations of oxybate. The suit seeks an injunction to prevent Avadel from launching a product that would infringe this patent, and an award of monetary damages if Avadel does launch an infringing product. Avadel filed an answer to the complaint and counterclaims asserting that the patents are invalid or not enforceable, and that its product will not infringe our patents. On April 14, 2022, Avadel sued us in the United States District Court for the District of Delaware. Avadel’s new suit alleges that we misappropriated trade secrets related to Avadel’s once-nightly sodium oxybate development program and breached certain contracts between the parties. Avadel seeks monetary damages, an injunction preventing us from using Avadel’s confidential information, and an order directing the United States Patent and Trademark Office to modify the inventorship of one of our oxybate patents. On July 8, 2022, we filed a motion for judgment on the pleadings, which the Court denied on July 18, 2023. The denial is not a ruling that Jazz misappropriated Avadel‘s trade secrets or breached any contract. The case will go forward in discovery and the Court instructed the parties to submit a proposed scheduling order. 21 Table of Contents On June 7, 2022, we received notice from Avadel that it had filed a "paragraph IV certification" regarding one patent listed in the Orange Book for Xyrem. A paragraph IV certification is a certification by a generic applicant that alleges that patents covering the branded product are invalid, unenforceable, and/or will not be infringed by the manufacture, use or sale of the generic product. On July 15, 2022, we filed an additional lawsuit against Avadel asserting infringement of that patent. The suit alleges that the filing of Avadel’s application for approval of FT218 is an act of infringement, and that Avadel’s product would infringe the patent if launched. The suit seeks an injunction to prevent Avadel from launching a product that would infringe the patent, and an award of damages if Avadel does launch an infringing product. Avadel filed an answer to the complaint and counterclaims asserting that the patent is invalid, that its product would not infringe, and that by listing the patent in the Orange Book, we engaged in unlawful monopolization in violation of the Sherman Act. On December 9, 2022, we filed a motion to dismiss Avadel’s counterclaims. On June 29, 2023, we filed a motion seeking leave to supplement our motion to dismiss, as well as a motion to stay discovery pending resolution of the motion to dismiss. The Court has not yet ruled on these motions. As noted above, on March 3, 2023, we and Avadel stipulated to the dismissal without prejudice of the claims and counterclaims related to infringement and validity of the delisted patent. On November 1, 2023, the Court held a claim construction hearing relating to disputed terms in the asserted patents. The Court has not yet issued a ruling. The Court scheduled a trial regarding our patent infringement claims against Avadel for February 26, 2024. No trial date has been set for Avadel’s trade secret misappropriation claims or Avadel’s counterclaims related to unlawful monopolization. On July 21, 2022, Avadel filed a lawsuit against FDA in the United States District Court for the District of Columbia, challenging FDA’s determination that Avadel was required to file a paragraph IV certification regarding one of our Orange Book listed patents. Avadel filed a motion for preliminary injunction, or in the alternative, summary judgment, seeking relief including a declaration that FDA’s decision requiring patent certification was unlawful, an order setting aside that decision, an injunction prohibiting FDA from requiring such certification as a precondition to approval of its application for FT218, and an order requiring FDA to take final action on Avadel’s application for approval of FT218 within 14 days of the Court’s ruling. On July 27, 2022, we filed a motion to intervene in that case, which the Court granted. The Court held a hearing on the parties’ respective motions for summary judgment on October 7, 2022. On November 3, 2022, the Court granted our and FDA’s motions for summary judgment and denied Avadel’s motion. Xywav Patent Litigation In June 2021, we received notice from Lupin Inc., or Lupin, that it has filed with FDA an ANDA, for a generic version of Xywav. The notice from Lupin included a paragraph IV certification with respect to ten of our patents listed in FDA’s Orange Book for Xywav on the date of our receipt of the notice. The asserted patents relate generally to the composition and method of use of Xywav, and methods of treatment when Xywav is administered concomitantly with certain other medications. In July 2021, we filed a patent infringement suit against Lupin in the United States District Court for the District of New Jersey. The complaint alleges that by filing its ANDA, Lupin has infringed ten of our Orange Book listed patents. We are seeking a permanent injunction to prevent Lupin from introducing a generic version of Xywav that would infringe our patents. As a result of this lawsuit, we expect that a stay of approval of up to 30 months will be imposed by FDA on Lupin's ANDA. In June 2021, FDA recognized seven years of Orphan Drug Exclusivity for Xywav through July 21, 2027. On October 4, 2021, Lupin filed an answer to the complaint and counterclaims asserting that the patents are invalid or not enforceable, and that its product, if approved, will not infringe our patents. In April 2022, we received notice from Lupin that it had filed a paragraph IV certification regarding a newly-issued patent listed in the Orange Book for Xywav. On May 11, 2022, we filed an additional lawsuit against Lupin in the United States District Court for the District of New Jersey alleging that by filing its ANDA, Lupin infringed the newly-issued patent related to a method of treatment when Xywav is administered concomitantly with certain other medications. The suit seeks a permanent injunction to prevent Lupin from introducing a generic version of Xywav that would infringe our patent. On June 22, 2022, the Court consolidated the two lawsuits we filed against Lupin. In November 2022, we received notice from Lupin that it had filed a paragraph IV certification regarding a newly-issued patent listed in the Orange Book for Xywav. On January 19, 2023, we filed an additional lawsuit against Lupin in the United States District Court for the District of New Jersey alleging that by filing its ANDA, Lupin infringed the newly-issued patent referenced in its November 2022 paragraph IV certification, as well as another patent that issued in January 2023. The suit seeks a permanent injunction to prevent Lupin from introducing a generic version of Xywav that would infringe the two patents in suit. On February 15, 2023, the Court consolidated the new lawsuit with the two suits we previously filed against Lupin. No trial date has been set in the consolidated case against Lupin. In February 2023, we received notice from Teva Pharmaceuticals, Inc., or Teva, that it had filed with FDA an ANDA for a generic version of Xywav. The notice from Teva included a paragraph IV certification with respect to thirteen of our patents listed in FDA’s Orange Book for Xywav on the date of the receipt of the notice. The asserted patents relate generally to the 22 Table of Contents composition and method of use of Xywav, and methods of treatment when Xywav is administered concomitantly with certain other medications. In March 2023, we filed a patent infringement suit against Teva in the United States District Court for the District of New Jersey. The complaint alleges that by filing its ANDA, Teva has infringed thirteen of our Orange Book listed patents. We are seeking a permanent injunction to prevent Teva from introducing a generic version of Xywav that would infringe our patents. As a result of this lawsuit, we expect that a stay of approval of up to 30 months will be imposed by FDA on Teva’s ANDA. On May 23, 2023, Teva filed an answer to the complaint and counterclaims asserting that the patents are invalid or not enforceable, and that its product, if approved, will not infringe our patents. No trial date has been set in the case against Teva. Alkem Patent Litigation In April 2023, we received notice from Alkem Laboratories Ltd., or Alkem, that it has filed with FDA an ANDA, for a generic version of Xyrem. The notice from Alkem included a paragraph IV certification with respect to six of our patents listed in FDA’s Orange Book for Xyrem on the date of our receipt of the notice. The asserted patents relate generally to methods of treatment when Xyrem is administered concomitantly with certain other medications. In June 2023, we filed a patent infringement suit against Alkem in the United States District Court for the District of New Jersey. The complaint alleges that by filing its ANDA, Alkem has infringed six of our Orange Book listed patents. We are seeking a permanent injunction to prevent Alkem from introducing a generic version of Xyrem that would infringe our patents. As a result of this lawsuit, we expect that a stay of approval of up to 30 months will be imposed by FDA on Alkem’s ANDA. On October 4, 2023, we entered into a settlement agreement with Alkem that resolves our patent litigation. Under the settlement agreement, we granted Alkem a license to manufacture, market, and sell its generic version of Xyrem on or after December 31, 2025, or earlier under certain circumstances, including circumstances where Hikma launches its own generic sodium oxybate product. Epidiolex Patent Litigation In November and December 2022, we received notices from Teva Pharmaceuticals, Inc.; Padagis US LLC; Apotex Inc.; API Pharma Tech LLC and InvaGen Pharmaceuticals, Inc.; Lupin Limited; Taro Pharmaceutical Industries Ltd.; Zenara Pharma Private Limited and Biophore Pharma, Inc.; MSN Laboratories Pvt. Ltd. and MSN Pharmaceuticals, Inc.; Alkem Laboratories Ltd.; and Ascent Pharmaceuticals, Inc. (hereinafter referred to as the “Epidiolex ANDA Filers”), that they have each filed with FDA an ANDA for a generic version of Epidiolex (cannabidiol) oral solution. As of the date of this filing, we are not aware of other ANDA filers. The notices from the Epidiolex ANDA Filers each included a “paragraph IV certification” with respect to certain of our patents listed in FDA’s Orange Book for Epidiolex on the date of the receipt of the notice. The listed patents relate generally to the composition and method of use of Epidiolex, and methods of treatment using Epidiolex. A paragraph IV certification is a certification by a generic applicant that alleges that patents covering the branded product are invalid, unenforceable, and/or will not be infringed by the manufacture, use or sale of the generic product. On January 3, 2023, we filed a patent infringement suit against the Epidiolex ANDA Filers in the United States District Court for the District of New Jersey. The complaint alleges that by filing their ANDAs, the Epidiolex ANDA Filers have infringed certain of our Orange Book listed patents, and seeks an order that the effective date of FDA approval of the ANDAs shall be a date no earlier than the expiration of the last to expire of the asserted patents. As a result of this lawsuit, we expect that a stay of approval of up to 30 months will be imposed by FDA on the Epidiolex ANDA Filers’ ANDAs. From March 2023 through May 2023, we received the Epidiolex ANDA Filers’ answers to the complaint. The answers include defenses and counterclaims asserting that the Epidiolex ANDA Filers’ products, if launched would not infringe our patents, that our patents are invalid, and in one instance, counterclaims related to allegations of inequitable conduct and improper listing of patents in the Orange Book. On May 25, 2023, we filed a motion to dismiss certain of the counterclaims, which remains pending. The Court in the Epidiolex Patent Litigation scheduled trial for September 2025. In June and July 2023, we received notice from certain of the Epidiolex ANDA Filers that they had each filed a paragraph IV certification regarding a newly-issued patent listed in the Orange Book for Epidiolex. On July 21, 2023, we filed an additional lawsuit against all of the Epidiolex ANDA Filers in the United States District Court for the District of New Jersey alleging that, by filing its ANDA, each Epidiolex ANDA Filer infringed the newly-issued patent related to a method of treatment using Epidiolex. The suit seeks an order that the effective date of FDA approval of each Epidiolex ANDA Filer’s application shall be a date no earlier than the expiration of the newly-issued patent. On October 24, 2023, we entered into a settlement agreement with Padagis US LLC, or Padagis, that resolved our patent litigation with Padagis related to Epidiolex. Under the settlement agreement, we granted Padagis a license to manufacture, 23 Table of Contents market, and sell its generic version of Epidiolex on a date that depends on the occurrence of certain other events. The specific terms of the Padagis settlement agreement are confidential. The settlement with Padagis does not resolve the litigation against the other nine Epidiolex ANDA Filers, which is ongoing. We cannot predict the specific timing or outcome of events in these matters with respect to the remaining defendants or the impact of developments involving any specific parties or patents on other ongoing proceedings with any specific Epidiolex ANDA Filer. Epidiolex also has ODE for the treatment of seizures associated with LGS or DS in patients 2 years of age and older through September 28, 2025, and for the treatment of seizures associated with LGS or DS in patients between 1 and 2 years of age and for the treatment of seizures associated with TSC through July 31, 2027. The Company vigorously enforces its intellectual property rights, but cannot predict the outcome of these matters. MSP Litigation On April 3, 2023, MSP Recovery Claims, Series LLC, or MSP, filed a class action lawsuit on behalf itself and others similarly situated against Jazz Pharmaceuticals plc, Jazz Pharmaceuticals, Inc., and Jazz Pharmaceuticals Ireland Limited, (collectively, the Company Defendants), Express Scripts, Inc., Express Scripts Holding Company, Express Scripts Specialty Distribution Services, Inc., Curascript, Inc. d/b/a Curascript, S.D., Priority Healthcare Distribution, Inc. d/b/a Curascript SD and Curascript Specialty Distribution SD, Caring Voice Coalition, and Adira Foundation (collectively with the Company Defendants, referred to as the Defendants) in the United States District Court for the Northern District of California. The MSP complaint alleges that the Defendants conspired to increase the price and quantity dispensed of Xyrem and Prialt, in violation of the Racketeer Influenced and Corrupt Organizations Act and several state laws. The allegations relate generally to the conduct at issue in the investigation conducted by the United States Department of Justice from 2016-2019, involving the Company’s contributions to certain charitable foundations. MSP seeks monetary damages, restitution, disgorgement, and a declaration that the conduct alleged is unlawful. On July 25, 2023, we and certain other defendants filed motions to dismiss MSP's complaint, which remain pending. No trial date has been set for this matter. FDA Litigation On June 22, 2023, we filed a complaint in the United States District Court for the District of Columbia seeking a declaration that FDA’s approval on May 1, 2023 of the New Drug Application, or NDA, for Avadel's Lumryz was unlawful. In the complaint, we allege that FDA acted outside its authority under the Orphan Drug Act, when, despite the orphan drug exclusivity, or ODE, protecting Jazz’s low-sodium oxybate product Xywav, FDA approved the Lumryz NDA and granted Lumryz ODE based on FDA’s finding that Lumryz makes a major contribution to patient care and is therefore clinically superior to Xywav and Xyrem. Jazz further alleges that in doing so, FDA failed to follow its own regulations, failed to follow established agency policy without providing a reasoned explanation for the departure, reversed prior decisions by its own staff and experts without a reasoned explanation, and disregarded the relevant scientific literature and data. The complaint, filed pursuant to the Administrative Procedure Act, seeks to have the Court vacate and set aside FDA’s approval of the Lumryz NDA and seeks a declaration that FDA’s approval of the Lumryz NDA was arbitrary, capricious, an abuse of discretion and otherwise not in accordance with law; and that approval of the Lumryz NDA was in excess of FDA’s statutory authority and was made without observance of procedure required by law. On September 15, 2023, we filed a motion for summary judgment. On October 20, 2023, Avadel and FDA filed cross motions for summary judgment. These motions remain pending and the Court has not set a hearing date. From time to time we are involved in legal proceedings arising in the ordinary course of business. We believe there is no other litigation pending that could have, individually or in the aggregate, a material adverse effect on our results of operations or financial condition. 24 Table of Contents 10. Shareholders’ Equity Share Repurchase Program In November 2016, our board of directors authorized a share repurchase program and as of September 30, 2023 had authorized the repurchase of ordinary shares having an aggregate purchase price of up to $ 1.5 billion, exclusive of any brokerage commissions. Under this program, which has no expiration date, we may repurchase ordinary shares from time to time on the open market. The timing and amount of repurchases will depend on a variety of factors, including the price of our ordinary shares, alternative investment opportunities, restrictions under the May 2021 credit agreement, corporate and regulatory requirements and market conditions. The share repurchase program may be modified, suspended or discontinued at any time without prior notice. During the nine months ended September 30, 2023, we spent a total of $ 170.0 million to purchase 1.3 million of our ordinary shares under the share repurchase program at an average total purchase price, including commissions, of $ 128.89 per share. All ordinary shares repurchased were canceled. As of September 30, 2023, the remaining amount authorized under the share repurchase program was $ 261.2 million, exclusive of any brokerage commissions. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss as of September 30, 2023 and December 31, 2022 were as follows (in thousands): Net Unrealized Gain From Hedging Activities Foreign Currency Translation Adjustments Total Accumulated Other Comprehensive Loss Balance at December 31, 2022 $ — $ ( 1,125,509 ) $ ( 1,125,509 ) Other comprehensive income before reclassifications 9,218 82,952 92,170 Amounts reclassified from accumulated other comprehensive income (loss) ( 2,060 ) — ( 2,060 ) Other comprehensive income, net 7,158 82,952 90,110 Balance at September 30, 2023 $ 7,158 $ ( 1,042,557 ) $ ( 1,035,399 ) During the nine months ended September 30, 2023, other comprehensive income primarily reflects foreign currency translation adjustments, primarily due to the strengthening of the sterling against the U.S. dollar. 25 Table of Contents 11. Net Income (Loss) per Ordinary Share Basic net income (loss) per ordinary share is based on the weighted-average number of ordinary shares outstanding. Diluted net income (loss) per ordinary share is based on the weighted-average number of ordinary shares outstanding and potentially dilutive ordinary shares outstanding. Basic and diluted net income (loss) per ordinary share were computed as follows (in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Numerator: Net income (loss) $ 146,820 $ ( 19,648 ) $ 320,678 $ 16,664 Effect of interest on assumed conversions of Exchangeable Senior Notes, net of tax 5,912 — 19,951 — Net income (loss) for dilutive net income per ordinary share $ 152,732 $ ( 19,648 ) $ 340,629 $ 16,664 Denominator: Weighted-average ordinary shares used in per share calculations - basic 63,114 62,785 63,532 62,365 Dilutive effect of Exchangeable Senior Notes 7,560 — 8,549 — Dilutive effect of employee equity incentive and purchase plans 619 — 785 1,023 Weighted-average ordinary shares used in per share calculations - diluted 71,293 62,785 72,866 63,388 Net income (loss) per ordinary share: Basic $ 2.33 $ ( 0.31 ) $ 5.05 $ 0.27 Diluted $ 2.14 $ ( 0.31 ) $ 4.67 $ 0.26 Potentially dilutive ordinary shares from our employee equity incentive and purchase plans are determined by applying the treasury stock method to the assumed exercise of share options, the assumed vesting of outstanding restricted stock units, or RSUs, and performance-based restricted stock units, or PRSUs, and the assumed issuance of ordinary shares under our employee stock purchase plan, or ESPP. Potentially dilutive ordinary shares from the Exchangeable Senior Notes are determined by applying the if-converted method to the assumed issuance of ordinary shares upon exchange of the Exchangeable Senior Notes. In August 2023, we made an irrevocable election to fix the settlement method for exchanges of the 2024 Notes to a combination of cash and ordinary shares of the Company with a specified cash amount per $1,000 principal amount of the 2024 Notes of $1,000. As a result, the assumed issuance of ordinary shares upon exchange of the 2024 Notes has only been included in the calculation of diluted net income per ordinary share in the three and nine months ended September 30, 2023 up to the date the irrevocable election was made. The potential issue of ordinary shares upon exchange of the Exchangeable Senior Notes was anti-dilutive and had no impact on diluted net income per ordinary share for the three and nine months ended September 30, 2022. The following table represents the weighted-average ordinary shares that were excluded from the calculation of diluted net income (loss) per ordinary share for the periods presented because including them would have an anti-dilutive effect (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Employee equity incentive and purchase plans 2,501 2,194 3,091 1,904 Exchangeable Senior Notes — 9,044 — 9,044 26 Table of Contents 12. Revenues The following table presents a summary of total revenues (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Xywav $ 331,633 $ 255,936 $ 935,958 $ 677,041 Xyrem 125,110 256,039 463,009 772,957 Epidiolex/Epidyolex 213,711 196,218 604,846 529,400 Sativex 4,627 3,220 14,531 12,104 Sunosi 1 — — — 28,844 Total Neuroscience 675,081 711,413 2,018,344 2,020,346 Rylaze 104,859 73,513 292,479 200,687 Zepzelca 77,994 70,320 215,523 197,943 Defitelio/defibrotide 47,730 49,452 132,917 153,637 Vyxeos 29,827 30,067 100,583 97,714 Total Oncology 260,410 223,352 741,502 649,981 Other 2,907 1,001 9,758 3,576 Product sales, net 938,398 935,766 2,769,604 2,673,903 High-sodium oxybate AG royalty revenue 28,921 — 36,531 — Other royalty and contract revenues 4,821 4,886 16,134 13,348 Total revenues $ 972,140 $ 940,652 $ 2,822,269 $ 2,687,251 _____________________________ (1) Divestiture of Sunosi U.S. was completed in May 2022. The following table presents a summary of total revenues attributed to geographic sources (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 United States $ 884,579 $ 867,835 $ 2,579,401 $ 2,466,758 Europe 68,971 60,024 194,198 181,831 All other 18,590 12,793 48,670 38,662 Total revenues $ 972,140 $ 940,652 $ 2,822,269 $ 2,687,251 The following table presents a summary of the percentage of total revenues from customers that represented more than 10% of our total revenues: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 ESSDS 47 % 57 % 49 % 56 % McKesson 12 % 10 % 11 % 11 % Financing and payment Our payment terms vary by the type and location of our customer but payment is generally required in a term ranging from 30 to 65 days. 27 Table of Contents 13. Share-Based Compensation Share-based compensation expense related to share options, RSUs, PRSUs and grants under our ESPP was as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Selling, general and administrative $ 35,268 $ 37,435 $ 113,155 $ 108,453 Research and development 16,635 16,000 49,346 43,338 Cost of product sales 4,212 3,246 11,399 8,647 Total share-based compensation expense, pre-tax 56,115 56,681 173,900 160,438 Income tax benefit from share-based compensation expense ( 9,792 ) ( 10,715 ) ( 29,533 ) ( 30,632 ) Total share-based compensation expense, net of tax $ 46,323 $ 45,966 $ 144,367 $ 129,806 Restricted Stock Units The table below shows the number of RSUs granted covering an equal number of our ordinary shares and the weighted-average grant date fair value of RSUs granted: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 RSUs granted (in thousands) 91 64 1,728 2,014 Grant date fair value $ 134.33 $ 153.75 $ 145.05 $ 152.45 The fair value of RSUs is determined on the date of grant based on the market price of our ordinary shares on that date. The fair value of RSUs is expensed ratably over the vesting period, generally over four years . Performance-Based Restricted Stock Units The Compensation & Management Development Committee of our board of directors, and in the case of our Chief Executive Officer, the independent members of our board of directors, approved awards of PRSUs to certain employees of the Company, subject to vesting on the achievement of certain commercial and pipeline performance criteria to be assessed over a performance period from the date of the grant to December 31, 2023, December 31, 2024, and December 31, 2025, respectively. Following the determination of the Company’s achievement with respect to the performance criteria, the amount of shares awarded will be subject to adjustment based on the application of a relative total shareholder return, or TSR, modifier. The number of shares that may be earned ranges between 0 % and 200 % of the target number of PRSUs granted based on the degree of achievement of the applicable performance metric and the application of the relative TSR modifier. The table below shows the number of PRSUs granted covering an equal number of our ordinary shares and the weighted-average grant date fair value of PRSUs granted: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 PRSUs granted (in thousands) 13 2 270 287 Grant date fair value $ 142.65 $ 176.58 $ 157.01 $ 179.10 As the PRSUs granted in each year are subject to a market condition, the grant date fair value for such PRSUs was based on a Monte Carlo simulation model. The Company evaluated the performance targets in the context of its current long-range financial plan and its product candidate development pipeline and recognized expense based on the probable number of awards that will ultimately vest. As of September 30, 2023, compensation cost not yet recognized related to unvested RSUs, PRSUs, ESPP and share options was $ 351.8 million, $ 44.1 million, $ 6.0 million and $ 3.3 million, respectively, which is expected to be recognized over a weighted-average period of 2.6 years, 1.4 years, 1.1 years and 0.7 years, respectively. 28 Table of Contents 14. Income Taxes Our income tax benefit was $ 47.2 million and $ 86.8 million for the three and nine months ended September 30, 2023, compared to an income tax benefit of $ 43.0 million and $ 58.6 million for the same periods in 2022, 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, Foreign Derived Intangible Income and patent box benefits. Our effective tax rate was ( 47.4 )% and ( 36.7 )% for the three and nine months ended September 30, 2023 compared to effective tax rates of 71.6 % and 178.7 % for the same periods of 2022. The increase in the income tax benefit for the three and nine months ended September 30, 2023, resulted primarily from the mix of pre-tax income and losses across tax jurisdictions partially offset by the impairment of our acquired in-process research and development asset in 2022. We do not provide for Irish income taxes on undistributed earnings of our foreign operations that are intended to be indefinitely reinvested in our foreign subsidiaries. Our net deferred tax liability is primarily related to acquired intangible assets, and is net of deferred tax assets related to U.S. federal and state tax credits, U.S. federal and state and foreign net operating loss carryforwards and other temporary differences. We maintain a valuation allowance against certain deferred tax assets. Each reporting period, we evaluate the need for a valuation allowance on our deferred tax assets by jurisdiction and adjust our estimates as more information becomes available. We are required to recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. As a result, we have recorded an unrecognized tax benefit for certain tax benefits which we judge may not be sustained upon examination. We file income tax returns in multiple tax jurisdictions, the most significant of which are Ireland, the U.K. and the U.S. (both at the federal level and in various state jurisdictions). For Ireland, we are no longer subject to income tax examinations by taxing authorities for the years prior to 2018. For the U.K., we are no longer subject to income tax examinations by taxing authorities for the years prior to 2016. The U.S. jurisdictions generally have statute of limitations three to four years from the later of the return due date or the date when the return was filed. However, in the U.S. (at the federal level and in most states), carryforwards that were generated in 2018 and earlier may still be adjusted upon examination by the taxing authorities. Certain of our Luxembourg subsidiaries are currently under examination by the Luxembourg taxing authorities for the years ended December 31, 2017, 2018 and 2019. In October 2022 and in January 2023, we received tax assessment notices from the Luxembourg taxing authorities for all years under examination relating to certain transfer pricing and other adjustments. The notices propose additional Luxembourg income tax of approximately $ 23.7 million, translated at the foreign exchange rate as September 30, 2023. We disagree with the proposed assessments and are contesting them vigorously. 29 Table of Contents