UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2019~~2020



☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-33500

JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)



Ireland	98-1032470
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Fifth Floor, Waterloo Exchange,

Waterloo Road, Dublin 4, Ireland D04 E5W7

011-353-1-634-7800

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary shares, nominal value $0.0001 per share	JAZZ	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 31, 2019, 56,572,721~~July 28, 2020, 55,458,631 ordinary shares of the registrant, nominal value $0.0001 per share, were outstanding.

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JAZZ PHARMACEUTICALS PLC

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED ~~SEPTEMBER~~JUNE 30, ~~2019~~2020

INDEX



		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets – ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019	3
	Condensed Consolidated Statements of Income (Loss) – Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	5
	Condensed Consolidated Statements of Shareholders’ Equity - Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	6
	Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	8
	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2728

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3942

Item 4.	Controls and Procedures	3942

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	4144

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8072

Item 5.	Other Information	8173

Item 6.	Exhibits	8174

SIGNATURES		8376

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

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PART I – FINANCIAL INFORMATION


Item 1.	Financial Statements

JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	795,175		$	309,622		$	786,082		$	637,344
Investments	275,000			515,000			910,000			440,000
Accounts receivable, net of allowances	267,031			263,838			351,920			355,987
Inventories	71,108			52,956			92,534			78,608
Prepaid expenses	30,841			25,017			49,109			39,434
Other current assets	81,401			67,572			112,701			78,895
Total current assets	1,520,556			1,234,005			2,302,346			1,630,268
Property, plant and equipment, net	129,472			200,358			128,259			131,506
Operating lease assets	141,878			—			133,179			139,385
Intangible assets, net	2,593,030			2,731,334			2,286,126			2,440,977
Goodwill	906,725			927,630			918,021			920,018
Deferred tax assets, net	183,944			57,879			243,395			221,403
Deferred financing costs	7,971			9,589			6,347			7,426
Other non-current assets	44,274			42,696			48,828			47,914
Total assets	$	5,527,850		$	5,203,491		$	6,066,501		$	5,538,897
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	70,104		$	40,602		$	50,043		$	45,732
Accrued liabilities	238,740			264,887			266,918			269,686
Current portion of long-term debt	33,387			33,387			33,387			33,387
Income taxes payable	43,488			1,197			55,979			10,965
Deferred revenue	4,720			5,414			3,633			4,720
Total current liabilities	390,439			345,487			409,960			364,490
Deferred revenue, non-current	6,041			9,581			3,588			4,861
Long-term debt, less current portion	1,570,781			1,563,025			2,069,669			1,573,870
Operating lease liabilities, less current portion	153,434			—			144,264			151,226
Deferred tax liabilities, net	250,167			309,097			162,376			224,095
Other non-current liabilities	102,583			218,879			134,839			109,374
Commitments and contingencies (Note 11)
Shareholders’ equity:
Ordinary shares	6			6			6			6
Non-voting euro deferred shares	55			55			55			55
Capital redemption reserve	472			472			472			472
Additional paid-in capital	2,209,156			2,113,630			2,499,135			2,266,026
Accumulated other comprehensive loss	(259,442		)	(197,791		)	(236,109		)	(223,393		)
Retained earnings	1,104,158			841,050			878,246			1,067,815
Total shareholders’ equity	3,054,405			2,757,422			3,141,805			3,110,981
Total liabilities and shareholders’ equity	$	5,527,850		$	5,203,491		$	6,066,501		$	5,538,897

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

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JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Revenues:
Product sales, net	$	532,321		$	465,197		$	1,559,075		$	1,402,139		$	558,203		$	523,423		$	1,088,408		$	1,026,754
Royalties and contract revenues	5,381			4,176			20,946			12,326			4,233			10,710			8,754			15,565
Total revenues	537,702			469,373			1,580,021			1,414,465			562,436			534,133			1,097,162			1,042,319
Operating expenses:
Cost of product sales (excluding amortization of intangible assets)	31,400			26,574			92,582			95,207
Cost of product sales (excluding amortization of acquired developed technologies)													28,008			27,676			56,665			61,182
Selling, general and administrative	178,706			155,873			522,667			521,665			191,406			176,014			399,806			343,961
Research and development	79,855			51,160			202,344			169,959			78,922			62,384			165,029			122,489
Intangible asset amortization	62,863			46,989			181,324			154,955			62,974			61,576			125,821			118,461
Impairment charges	—			—			—			42,896
Acquired in-process research and development	51,775			—			109,975			—			3,000			2,200			205,250			58,200
Impairment charge													—			—			136,139			—
Total operating expenses	404,599			280,596			1,108,892			984,682			364,310			329,850			1,088,710			704,293
Income from operations	133,103			188,777			471,129			429,783			198,126			204,283			8,452			338,026
Interest expense, net	(17,861		)	(18,920		)	(54,017		)	(59,171		)	(26,210		)	(18,234		)	(44,706		)	(36,156		)
Foreign exchange loss	(1,033		)	(756		)	(3,577		)	(5,181		)	(464		)	(1,933		)	(1,596		)	(2,544		)
Loss on extinguishment and modification of debt	—			—			—			(1,425		)
Income before income tax provision (benefit) and equity in loss of investees	114,209			169,101			413,535			364,006
Income (loss) before income tax provision (benefit) and equity in loss of investees													171,452			184,116			(37,850		)	299,326
Income tax provision (benefit)	10,903			19,348			(38,631		)	75,018			54,754			(78,650		)	3,467			(49,534		)
Equity in loss of investees	1,030			437			2,791			1,360			1,897			868			1,715			1,761
Net income	$	102,276		$	149,316		$	449,375		$	287,628
Net income (loss)													$	114,801		$	261,898		$	(43,032	)	$	347,099

Net income per ordinary share:
Net income (loss) per ordinary share:
Basic	$	1.80		$	2.47		$	7.90		$	4.78		$	2.07		$	4.62		$	(0.77	)	$	6.09
Diluted	$	1.78		$	2.41		$	7.80		$	4.68		$	2.06		$	4.56		$	(0.77	)	$	6.01
Weighted-average ordinary shares used in per share calculations - basic	56,674			60,476			56,860			60,196			55,413			56,707			55,684			56,955
Weighted-average ordinary shares used in per share calculations - diluted	57,438			61,857			57,647			61,493			55,864			57,427			55,684			57,753

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

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JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Net income $ 102,276
$ 149,316
$ 449,375
$ 287,628
Other comprehensive loss:
Foreign currency translation adjustments (48,448 ) (11,984 ) (56,271 ) (43,945 )
Unrealized gain (loss) on hedging activities, net of income tax (benefit) provision of ($80), $107, ($769) and $758, respectively (558 ) 746
(5,380 ) 5,304
Other comprehensive loss (49,006 ) (11,238 ) (61,651 ) (38,641 )
Total comprehensive income $ 53,270
$ 138,078
$ 387,724
$ 248,987



	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020			2019
Net income (loss)	$	114,801	$	261,898		$	(43,032	)	$	347,099
Other comprehensive income (loss):
Foreign currency translation adjustments	20,730		13,319			(9,260		)	(7,823		)
Unrealized gain (loss) on hedging activities, net of income tax provision (benefit) of $85, ($440), ($494) and ($689), respectively	597		(3,081		)	(3,456		)	(4,822		)
Other comprehensive income (loss)	21,327		10,238			(12,716		)	(12,645		)
Total comprehensive income (loss)	$	136,128	$	272,136		$	(55,748	)	$	334,454

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

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JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Ordinary Shares				Non-voting Euro Deferred			Capital Redemption Reserve				Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Retained Earnings				Total Equity			Ordinary Shares					Non-voting Euro Deferred				Capital Redemption Reserve		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Equity
	Shares		Amount		Shares	Amount					Shares					Accumulated Other Comprehensive Income (Loss)				Retained Earnings				Total Equity				Amount			Shares		Amount			Capital Redemption Reserve		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Equity
Balance at December 31, 2018	57,504		$	6	4,000	$	55	Capital Redemption Reserve	$	472		Additional Paid-in Capital		$	2,113,630			$	(197,791	)		$	841,050			$	2,757,422
Cumulative effect adjustment from adoption of new accounting standards	—		—		—	—		—				—				—				4,848				4,848
Balance at December 31, 2019																											56,140		$	6		4,000		$	55	$	472	$	2,266,026		$	(223,393	)	$	1,067,815		$	3,110,981
Issuance of ordinary shares in conjunction with exercise of share options	54		—		—	—		—				3,057				—				—				3,057			145		—			—		—		—		13,264			—			—			13,264
Issuance of ordinary shares in conjunction with vesting of restricted stock units	203		—		—	—		—				—				—				—				—			214		—			—		—		—		—			—			—			—
Shares withheld for payment of employee's withholding tax liability	—		—		—	—		—				(13,810		)		—				—				(13,810		)	—		—			—		—		—		(13,547		)	—			—			(13,547		)
Share-based compensation	—		—		—	—		—				27,861				—				—				27,861			—		—			—		—		—		28,731			—			—			28,731
Shares repurchased	(858	)	—		—	—		—				—				—				(111,249		)		(111,249		)	(1,131	)	—			—		—		—		—			—			(139,053		)	(139,053		)
Other comprehensive loss	—		—		—	—		—				—				(22,883		)		—				(22,883		)	—		—			—		—		—		—			(34,043		)	—			(34,043		)
Net income	—		—		—	—		—				—				—				85,201				85,201
Balance at March 31, 2019	56,903		$	6	4,000	$	55	$	472			$	2,130,738			$	(220,674	)		$	819,850			$	2,730,447
Net loss																											—		—			—		—		—		—			—			(157,833		)	(157,833		)
Balance at March 31, 2020																											55,368		$	6		4,000		$	55	$	472	$	2,294,474		$	(257,436	)	$	770,929		$	2,808,500
Issuance of Exchangeable Senior Notes, due 2026																											—		—			—		—		—		176,260			—			—			176,260
Partial repurchase of Exchangeable Senior Notes, due 2021																											—		—			—		—		—		(12,069		)	—			—			(12,069		)
Issuance of ordinary shares in conjunction with exercise of share options	98		—		—	—		—				7,033				—				—				7,033			74		—			—		—		—		4,440			—			—			4,440
Issuance of ordinary shares under employee stock purchase plan	57		—		—	—		—				6,032				—				—				6,032			65		—			—		—		—		6,547			—			—			6,547
Issuance of ordinary shares in conjunction with vesting of restricted stock units	15		—		—	—		—				—				—				—				—			19		—			—		—		—		—			—			—			—
Shares withheld for payment of employee's withholding tax liability	—		—		—	—		—				(1,003		)		—				—				(1,003		)	—		—			—		—		—		(1,116		)	—			—			(1,116		)
Share-based compensation	—		—		—	—		—				28,658				—				—				28,658			—		—			—		—		—		30,599			—			—			30,599
Shares repurchased	(447	)	—		—	—		—				—				—				(59,869		)		(59,869		)	(70	)	—			—		—		—		—			—			(7,484		)	(7,484		)
Other comprehensive income	—		—		—	—		—				—				10,238				—				10,238			—		—			—		—		—		—			21,327			—			21,327
Net income	—		—		—	—		—				—				—				261,898				261,898			—		—			—		—		—		—			—			114,801			114,801
Balance at June 30, 2019	56,626		$	6	4,000	$	55	$	472			$	2,171,458			$	(210,436	)		$	1,021,879			$	2,983,434
Issuance of ordinary shares in conjunction with exercise of share options	110		—		—	—		—				9,968				—				—				9,968
Issuance of ordinary shares in conjunction with vesting of restricted stock units	32		—		—	—		—				—				—				—				—
Shares withheld for payment of employee's withholding tax liability	—		—		—	—		—				(1,087		)		—				—				(1,087		)
Share-based compensation	—		—		—	—		—				28,817				—				—				28,817
Shares repurchased	(149	)	—		—	—		—				—				—				(19,997		)		(19,997		)
Other comprehensive loss	—		—		—	—		—				—				(49,006		)		—				(49,006		)
Net income	—		—		—	—		—				—				—				102,276				102,276
Balance at September 30, 2019	56,619		$	6	4,000	$	55	$	472			$	2,209,156			$	(259,442	)		$	1,104,158			$	3,054,405
Balance at June 30, 2020																											55,456		$	6		4,000		$	55	$	472	$	2,499,135		$	(236,109	)	$	878,246		$	3,141,805

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JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY—(Continued)

(In thousands)

(Unaudited)


	Ordinary Shares				Non-voting Euro Deferred			Capital Redemption Reserve				Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Retained Earnings				Total Equity			Ordinary Shares					Non-voting Euro Deferred				Capital Redemption Reserve		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Equity
	Shares		Amount		Shares	Amount					Shares					Accumulated Other Comprehensive Income (Loss)				Retained Earnings				Total Equity				Amount			Shares		Amount			Capital Redemption Reserve		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Equity
Balance at December 31, 2017	59,898		$	6	4,000	$	55	Capital Redemption Reserve	$	472		Additional Paid-in Capital		$	1,935,486			$	(140,878	)		$	917,956			$	2,713,097
Balance at December 31, 2018																											57,504		$	6		4,000		$	55	$	472	$	2,113,630		$	(197,791	)	$	841,050		$	2,757,422
Cumulative effect adjustment from adoption of new accounting standards	—		—		—	—		—				—				53				(351		)		(298		)	—		—			—		—		—		—			—			4,848			4,848
Issuance of ordinary shares in conjunction with exercise of share options	133		—		—	—		—				10,588				—				—				10,588
Issuance of ordinary shares in conjunction with vesting of restricted stock units	195		—		—	—		—				—				—				—				—
Shares withheld for payment of employee's withholding tax liability	—		—		—	—		—				(14,594		)		—				—				(14,594		)
Share-based compensation	—		—		—	—		—				24,276				—				—				24,276
Shares repurchased	(237	)	—		—	—		—				—				—				(34,546		)		(34,546		)
Other comprehensive income	—		—		—	—		—				—				42,057				—				42,057
Net income	—		—		—	—		—				—				—				45,991				45,991
Balance at March 31, 2018	59,989		$	6	4,000	$	55	$	472			$	1,955,756			$	(98,768	)		$	929,050			$	2,786,571
Issuance of ordinary shares in conjunction with exercise of share options	457		—		—	—		—				51,023				—				—				51,023
Issuance of ordinary shares under employee stock purchase plan	59		—		—	—		—				5,447				—				—				5,447
Issuance of ordinary shares in conjunction with vesting of restricted stock units	16		—		—	—		—				—				—				—				—
Shares withheld for payment of employee's withholding tax liability	—		—		—	—		—				(1,429		)		—				—				(1,429		)
Share-based compensation	—		—		—	—		—				26,294				—				—				26,294
Shares repurchased	(135	)	—		—	—		—				—				—				(21,015		)		(21,015		)
Other comprehensive loss	—		—		—	—		—				—				(69,460		)		—				(69,460		)
Net income	—		—		—	—		—				—				—				92,321				92,321
Balance at June 30, 2018	60,386		$	6	4,000	$	55	$	472			$	2,037,091			$	(168,228	)		$	1,000,356			$	2,869,752
Issuance of ordinary shares in conjunction with exercise of share options	133		—		—	—		—				16,998				—				—				16,998			54		—			—		—		—		3,057			—			—			3,057
Issuance of ordinary shares in conjunction with vesting of restricted stock units	30		—		—	—		—				—				—				—				—			203		—			—		—		—		—			—			—			—
Shares withheld for payment of employee's withholding tax liability	—		—		—	—		—				(1,169		)		—				—				(1,169		)	—		—			—		—		—		(13,810		)	—			—			(13,810		)
Share-based compensation	—		—		—	—		—				25,112				—				—				25,112			—		—			—		—		—		27,861			—			—			27,861
Shares repurchased	(128	)	—		—	—		—				—				—				(21,454		)		(21,454		)	(858	)	—			—		—		—		—			—			(111,249		)	(111,249		)
Other comprehensive loss	—		—		—	—		—				—				(11,238		)		—				(11,238		)	—		—			—		—		—		—			(22,883		)	—			(22,883		)
Net income	—		—		—	—		—				—				—				149,316				149,316			—		—			—		—		—		—			—			85,201			85,201
Balance at September 30, 2018	60,421		$	6	4,000	$	55	$	472			$	2,078,032			$	(179,466	)		$	1,128,218			$	3,027,317
Balance at March 31, 2019																											56,903		$	6		4,000		$	55	$	472	$	2,130,738		$	(220,674	)	$	819,850		$	2,730,447
Issuance of ordinary shares in conjunction with exercise of share options																											98		—			—		—		—		7,033			—			—			7,033
Issuance of ordinary shares under employee stock purchase plan																											57		—			—		—		—		6,032			—			—			6,032
Issuance of ordinary shares in conjunction with vesting of restricted stock units																											15		—			—		—		—		—			—			—			—
Shares withheld for payment of employee's withholding tax liability																											—		—			—		—		—		(1,003		)	—			—			(1,003		)
Share-based compensation																											—		—			—		—		—		28,658			—			—			28,658
Shares repurchased																											(447	)	—			—		—		—		—			—			(59,869		)	(59,869		)
Other comprehensive income																											—		—			—		—		—		—			10,238			—			10,238
Net income																											—		—			—		—		—		—			—			261,898			261,898
Balance at June 30, 2019																											56,626		$	6		4,000		$	55	$	472	$	2,171,458		$	(210,436	)	$	1,021,879		$	2,983,434

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

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JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Operating activities
Net income	$	449,375		$	287,628
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)							$	(43,032	)	$	347,099
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Intangible asset amortization	181,324			154,955			125,821			118,461
Share-based compensation	84,626			75,718			59,258			55,841
Impairment charges	—			42,896
Impairment charge							136,139			—
Depreciation	10,885			11,363			9,266			6,894
Acquired in-process research and development	109,975			—			205,250			58,200
Loss on disposal of assets	8			652
Deferred tax benefit	(167,935		)	(44,658		)	(82,768		)	(151,347		)
Provision for losses on accounts receivable and inventory	3,847			4,734			4,078			2,403
Loss on extinguishment and modification of debt	—			1,425
Loss on extinguishment of debt							4,475			—
Amortization of debt discount and deferred financing costs	34,415			32,669			24,793			22,584
Other non-cash transactions	(4,437		)	6,970			3,496			(779		)
Changes in assets and liabilities:
Accounts receivable	(4,307		)	(55,518		)	3,640			(47,574		)
Inventories	(23,028		)	(7,583		)	(18,826		)	(18,562		)
Prepaid expenses and other current assets	(22,858		)	6,989			(44,853		)	(15,929		)
Other non-current assets	2,251			(244		)	1,982			(1,067		)
Operating lease assets	10,919			—			6,422			7,399
Accounts payable	29,104			10,116			5,264			(14,096		)
Accrued liabilities	(37,369		)	65,074			(6,972		)	(59,031		)
Income taxes payable	42,813			(13,999		)	45,481			29,050
Deferred revenue	(4,234		)	(5,623		)	(2,360		)	(3,054		)
Other non-current liabilities	(3,634		)	7,244			25,912			14,177
Operating lease liabilities, less current portion	(3,137		)	—			(6,978		)	431
Net cash provided by operating activities	688,603			580,808			455,488			351,100
Investing activities
Proceeds from maturity of investments	820,000			565,000			565,000			630,000
Net proceeds from sale of assets	—			48,092
Purchases of property, plant and equipment	(32,998		)	(15,221		)	(7,520		)	(21,911		)
Asset acquisition, net of cash acquired	(55,074		)	—
Acquired in-process research and development	(61,700		)	—			(205,250		)	(58,200		)
Acquisition of intangible assets	(80,500		)	(111,100		)	(113,000		)	(25,500		)
Acquisition of investments	(585,975		)	(921,250		)	(1,040,475		)	(360,975		)
Net cash provided by (used in) investing activities	3,753			(434,479		)	(801,245		)	163,414
Financing activities
Net proceeds from issuance of Exchangeable Senior Notes, due 2026							981,381			—
Proceeds from revolving credit facility							500,000			—
Proceeds from employee equity incentive and purchase plans	26,090			84,056			24,251			16,122
Payment of employee withholding taxes related to share-based awards	(15,900		)	(17,192		)	(14,663		)	(14,813		)
Repayments of long-term debt	(25,040		)	(17,370		)	(16,693		)	(16,693		)
Share repurchases	(191,115		)	(77,015		)	(146,537		)	(171,118		)
Proceeds from tenant improvement allowance on build-to-suit lease	—			1,253
Payment of debt modification costs	—			(6,406		)
Net cash used in financing activities	(205,965		)	(32,674		)
Payments for partial repurchase of Exchangeable Senior Notes, due 2021							(332,888		)	—
Repayments under revolving credit facility							(500,000		)	—
Net cash provided by (used in) financing activities							494,851			(186,502		)
Effect of exchange rates on cash and cash equivalents	(838		)	(672		)	(356		)	105
Net increase in cash and cash equivalents	485,553			112,983			148,738			328,117
Cash and cash equivalents, at beginning of period	309,622			386,035			637,344			309,622
Cash and cash equivalents, at end of period	$	795,175		$	499,018		$	786,082		$	637,739

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

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JAZZ PHARMACEUTICALS PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. The Company and Summary of Significant Accounting Policies

Jazz Pharmaceuticals plc is a global biopharmaceutical company dedicated to developing and commercializing life-changing medicines ~~for people~~that transform the lives of patients with serious diseases – often with limited or no options. ~~As a leader in sleep medicine and with a growing hematology/oncology portfolio, we~~We have a diverse portfolio of ~~products~~marketed medicines and novel product candidates, from early- to late-stage development, in ~~development.~~key therapeutic areas. Our focus is in neuroscience, including sleep medicine and movement disorders, and in oncology, including hematologic malignancies and solid tumors. We actively explore new options for patients including novel compounds, small molecule advancements, biologics and innovative delivery technologies.

Our lead marketed products are:

•

~~Sunosi~~^® ~~(solriamfetol)~~, our newest lead marketed product launched in July 2019 and approved in the U.S. to improve wakefulness in adult patients with excessive daytime sleepiness, or EDS, associated with narcolepsy or obstructive sleep apnea. We are also seeking approval for Sunosi in Europe and submitted a marketing authorization application to the European Medicines Agency in the fourth quarter of 2018;


•	Xyrem^® (sodium oxybate) oral solution, the only product approved by the U.S. Food and Drug Administration, or FDA, and marketed in the U.S. for the treatment of both cataplexy and excessive daytime sleepiness, or EDS, in both adult and pediatric patients with narcolepsy;


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

•

Defitelio^®(defibrotide sodium), a product approved in the U.S. for the treatment of adult and pediatric patients with hepatic veno-occlusive disease, or VOD, also known as sinusoidal obstruction syndrome, with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Europe (where it is marketed as Defitelio^®(defibrotide)) for the treatment of severe VOD in adults and children undergoing HSCT therapy;


•	Erwinaze^® (asparaginase Erwinia chrysanthemi), a treatment approved in the U.S. and in certain markets in Europe (where it is marketed as Erwinase^®) for patients with acute lymphoblastic leukemia, or ALL, who have developed hypersensitivity to E. coli-derived asparaginase; ~~and~~


•	Vyxeos^®(daunorubicin and cytarabine) liposome for injection, a product approved in the U.S. and in Europe (where it is marketed as Vyxeos^® liposomal 44 mg/100 mg powder for concentrate for solution for infusion) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia, or AML, or AML with myelodysplasia-related ~~changes.~~changes; and


•	Zepzelca™ (lurbinectedin), a product approved by FDA in June 2020 and recently launched in the U.S. for the treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy.

~~In March 2019, we announced positive top-line results from our Phase 3 study evaluating~~On July 21, 2020, Xywav™ (formerly JZP-258) was approved in the ~~efficacy and safety of JZP-258, an oxybate product candidate that contains 92% less sodium than Xyrem,~~U.S. for the treatment of cataplexy ~~and~~or EDS in ~~adult~~narcolepsy patients ~~with narcolepsy~~seven years of age and ~~presented additional results from this study publicly at an international medical conference in September 2019. We~~older; we expect to ~~submit a new drug application, or NDA, for this~~launch Xywav in the fourth quarter of 2020. This approval follows multiple significant regulatory approvals and product launches over the last five years. In 2020, we also obtained our European approval of Sunosi, which was launched in ~~January~~Germany in May 2020, and ~~plan to redeem our priority review voucher~~the U.S. approval of Zepzelca, which was launched in ~~connection with this submission.~~July 2020.

Our strategy to create shareholder value is focused on:

Strong ~~financial~~ execution ~~through~~driving sales growth in ~~sales~~our core therapy areas through leveraging our leading market position and expertise in sleep and new high growth products in oncology that address significant unmet needs;

Expanding our pipeline with external patient-centric innovation to achieve a balanced portfolio of ~~our current lead marketed products;~~highly differentiated programs;

~~Building~~Continuing to build a ~~diversified product portfolio~~flexible, efficient, and productive development ~~pipeline through~~engine for targeted therapeutic conditions to identify and progress early- and mid-stage assets; and

Investing in a ~~combination of our internal research and development efforts and obtaining rights to clinically meaningful~~scalable operating model and differentiated ~~on- or near-market products and early-~~capabilities to ~~late-stage product candidates through acquisitions, collaborations, licensing arrangements,~~enable successful partnerships and ~~venture investments;~~unlock further value through indication expansion and

~~Maximizing the value of our products and product candidates by continuing to implement our comprehensive~~ global ~~development plans, including through generating additional clinical data and seeking regulatory approval for new indications.~~markets.

Throughout this report, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the registrant,” “we,” “us,” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries. Throughout this report, all references to “ordinary shares” refer to Jazz Pharmaceuticals plc’s ordinary shares.

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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

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annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of our financial position and operating results. The results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2019,~~2020, 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, 2018 with the exception of the accounting policy relating to operating leases and financing obligations which was updated as a result of adopting Accounting Standards Update No. 2016-02, “Leases”, or ASU No. 2016-02.2019.

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 1 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.

~~Leases~~

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease assets, other current liabilities, and operating lease liabilities on our condensed consolidated balance sheets. Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. In determining the net present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date. The operating lease asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For vehicle leases we account for the lease and non-lease components as a single lease component.

~~We have elected the short-term lease exemption and, therefore, do not recognize a right-of-use asset or corresponding liability for lease arrangements with an original term of 12 months or less.~~

Adoption of New Accounting Standards

In ~~February 2016,~~August 2018, the Financial Accounting Standards Board, or FASB, issued ASU No. ~~2016-02. Under~~2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” which aligns the ~~new guidance, lessees are required~~requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to ~~recognize~~develop or obtain internal-use software. We adopted this standard on January 1, 2020 and adoption did not have a ~~right-of-use asset,~~material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” which ~~represents~~simplifies the ~~lessee’s right~~accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test. Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to ~~use, or control~~ the ~~use~~carrying value of the goodwill. We adopted this standard on January 1, 2020 and adoption did not have a ~~specified asset~~material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” which requires that credit losses on financial assets measured at amortized cost be determined using an expected loss model, instead of the current incurred loss model, and requires that credit losses related to available-for-sale debt securities be recorded through an allowance for credit losses and limited to the ~~lease term,~~amount by which carrying value exceeds fair value. We adopted this standard on January 1, 2020 and adoption did not have a ~~corresponding lease liability,~~material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which ~~represents~~contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. ASC 848 allows for different elections to be made at different points in time, and the ~~lessee’s obligation~~timing of those elections will be documented as applicable. For the avoidance of doubt, we intend to ~~make lease payments under a lease, measured~~reassess the elections of optional expedients and exceptions included within ASC 848 related to our hedging activities and will document the election of these items on a ~~discounted~~quarterly basis. We adopted ASU No. 2016-02 on a modified retrospective basis applied to leases existing as of, or entered into after, January 1, 2019. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowedASC 848 is effective for us ~~to carry forward the historical lease classification of those leases in place~~ as of January 1, ~~2019.~~

~~The adoption of ASU No. 2016-02 resulted in the recognition of right-of-use assets~~2020 and lease liabilities of $149.4 million and $162.9 million, respectively, on the consolidated balance sheet as of January 1, 2019, and the de-recognition of the build-to-suit assets and related financing obligations on the consolidated balance sheet as ofwill no longer be available to apply after December 31, ~~2018 of $95.4 million and $109.8 million, respectively, with~~2022. In June 2020, we elected the balance impacting retained earnings, deferred rent and deferred tax liabilities. The right-of-use assets and lease liabilities primarily relate to real estate leases. Refer to Note 10 for lease-related disclosures.expedient in

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~~The cumulative effect~~ASC 848-50-25-2, which allows us to assume that our hedged interest payments are probable of ~~the changes made~~occurring regardless of any expected modification in their terms related to ~~our consolidated balance sheet as of January 1, 2019 for the adoption of the ASU No. 2016-02 was as follows (in thousands):~~

Balance at December 31,
2018 Transition Adjustments Balance at January 1,
2019
Assets:
Property, plant and equipment, net $ 200,358
$ (95,397 ) $ 104,961
Operating lease assets —
149,442
149,442
Liabilities:
Accrued liabilities 264,887
8,165
273,052
Operating lease liabilities, less current portion —
153,158
153,158
Deferred tax liabilities, net 309,097
1,489
310,586
Other non-current liabilities 218,879
(113,615 ) 105,264
Shareholders' Equity:
Retained earnings 841,050
4,848
845,898

reference rate reform.

Significant Risks and Uncertainties

With the global impact of the COVID-19 pandemic, we have developed a comprehensive response strategy, including establishing cross-functional response teams and implementing business continuity plans to manage the impact of the COVID-19 pandemic on our employees, patients and our business. Given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, we expect that our business, financial condition, results of operations and growth prospects will continue to be adversely affected in future quarters. With respect to our commercialization activities, the evolving effects of the COVID-19 pandemic are having a negative impact on demand, new patient starts and treatments for our products, primarily due to the inherent limitations of telemedicine and a reprioritization of healthcare resources toward COVID-19. The extent of the impact on our ability to generate sales of and revenues from our approved products, execute on new product launches, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our ordinary shares, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration and severity of the pandemic, governmental “stay-at-home” orders and travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Ireland and other countries, and the effectiveness of actions taken globally to contain and treat the disease.

Our financial results are significantly influenced by sales of Xyrem. Our ability to maintain or increase Xyrem product sales is subject to a number of risks and uncertainties including, without limitation, those related to the introduction of authorized generic and generic versions of sodium oxybate and/or new products ~~in the U.S. market that compete with, or otherwise disrupt the market~~ for ~~Xyrem in the~~ treatment of cataplexy and/or EDS in narcolepsy such as pitolisant, which was approved by FDA in August 2019 for the treatment of EDS in adult patients with narcolepsy, and our recently-launched product, Sunosi; the introduction of a generic version of Xyrem in the U.S. market, ~~before~~ the ~~entry dates specified~~current and potential impacts of the ongoing COVID-19 pandemic, including the current and expected future negative impact on demand for our products and the uncertainty with respect to our ability to meet commercial demand in ~~our settlements with~~ the ~~abbreviated new drug application, or ANDA, filers or on terms that are different from those contemplated by the settlement agreements;~~future, increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third party payors, including pressure to agree to new or additional discounts, rebates or restrictive pricing terms for Xyrem; changes in healthcare laws and policy, including changes in requirements for patient assistance programs, rebates, reimbursement and coverage by federal healthcare programs, and changes resulting from increased scrutiny on pharmaceutical pricing and risk evaluation and mitigation strategy, or REMS, programs by government entities; changes to or uncertainties around our Xyrem REMS, or any failure to comply with our REMS obligations to the satisfaction of the FDA; challenges to our intellectual property around Xyrem, including the possibility of new ANDA or NDA filers or new post-grant patent review proceedings; operational disruptions at the Xyrem central pharmacy; any supply or manufacturing problems, including any problems with our sole source Xyrem active pharmaceutical ingredient, or API, provider;and continued acceptance of Xyrem by physicians and patients, including as a result of negative publicity that surfaces from time to time; and changes to our label, including new safety warnings or changes to our boxed warning, that further restrict how we market and sell Xyrem.patients.

In addition to risks related specifically to Xyrem, we are subject to other challenges and risks related to successfully commercializing a portfolio of oncology products and other neuroscience products, including Sunosi, Defitelio, Erwinaze, Vyxeos, Zepzelca and Xywav, 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: obtaining regulatory approval of our late-stage product candidates; effectively commercializing our ~~other products, including effectively launching and commercializing new~~recently approved products such as ~~our recently-launched product Sunosi; competition;~~Sunosi, Zepzelca and Xywav; obtaining and maintaining adequate coverage and reimbursement for our products; increasing scrutiny of pharmaceutical product pricing and resulting changes in healthcare laws and policy; market acceptance; delays or problems in the supply of our products, loss of single source suppliers or failure to comply with manufacturing regulations; ~~regulatory approval and successful launch of our late-stage product candidates;~~ identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; ~~the regulatory approval process;~~ 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.

~~Table~~ In addition, to the extent the COVID-19 pandemic continues to adversely affect our business and results of ~~Contents~~

operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.

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~~June 30, ~~2019,~~2020, we had foreign exchange forward contracts with notional amounts totaling ~~$226.1~~$283.7 million. As of ~~September~~June 30, ~~2019,~~2020, the outstanding foreign exchange forward contracts had a net liability fair value of ~~$0.7~~$0.3 million. As of ~~September~~June 30, ~~2019,~~2020, we had interest rate swap contracts with notional amounts totaling $300.0 million. These outstanding interest rate swap contracts had a net liability fair value of ~~$2.1~~$5.5 million as of ~~September~~June 30, ~~2019.~~2020. The counterparties to these contracts are large multinational commercial banks, and we believe the risk of nonperformance is not significant.

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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 deteriorating 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~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, allowances on receivables were not material. As of ~~September~~June 30, ~~2019,~~2020, two customers accounted for ~~88%~~87% of gross accounts receivable, Express Scripts Specialty Distribution Services, Inc. and its affiliates, or ~~Express Scripts, the central pharmacy for Xyrem,~~ESSDS, which accounted for ~~83%~~73% of gross accounts receivable, and McKesson Corporation and affiliates, or McKesson, which accounted for 5%14% of gross accounts receivable. As of December 31, ~~2018,~~2019, two customers accounted for 89% of gross accounts receivable, ~~Express Scripts,~~ESSDS, which accounted for ~~74%~~77% of gross accounts receivable, and McKesson, which accounted for ~~15%~~12% of gross accounts receivable.

We depend on single source suppliers for most of our products, product candidates and their active pharmaceutical ingredients, or APIs. With respect to Xyrem, the API is manufactured for us by a single source supplier and the finished product is manufactured both by us in our facility in Athlone, Ireland and by our U.S.-based Xyrem supplier.

Recent Accounting Pronouncements

In ~~August 2018,~~December 2019, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for us beginning January 1, 2020 and early adoption is permitted. The new guidance is not expected to have a material impact on our results of operations and financial position.

~~In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other~~2019-12, "Income Taxes (Topic ~~350)~~740): Simplifying the ~~Test~~Accounting for ~~Goodwill Impairment”~~Income Taxes", which simplifies the accounting for ~~goodwill impairment~~income taxes by ~~eliminating Step 2 of the current goodwill impairment test. Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited~~removing certain exceptions to the ~~carrying value of~~general principles in the ~~goodwill.~~existing guidance for income taxes and making other minor improvements. The ~~standard is~~amendments are effective for usannual reporting periods beginning ~~January 1, 2020. Early~~after December 15, 2020 with early adoption ~~is permitted for any impairment tests performed after January 1, 2017. The~~permitted. We are currently evaluating the impact of adopting this new ~~guidance is not expected to have a material impact on our results of operations and financial position.~~accounting guidance.

2. ~~Collaboration and License Agreement and Asset Acquisition~~

~~Collaboration and~~ License Agreement

On ~~January 2,~~December 19, 2019, we entered into ~~a strategic collaboration~~an exclusive license agreement with ~~Codiak BioSciences, Inc.~~Pharma Mar, S.A., or ~~Codiak, focused on the research,~~PharmaMar, for development and U.S. commercialization of ~~exosome therapeutics~~Zepzelca. Zepzelca was granted orphan drug designation for relapsed SCLC by FDA in August 2018. In December 2019, PharmaMar submitted a new drug application, or NDA, to ~~treat cancer. Codiak granted us an exclusive, worldwide, royalty-bearing license to develop, manufacture~~FDA for accelerated approval of Zepzelca for relapsed SCLC based on data from a Phase 2 trial, and ~~commercialize therapeutic candidates directed at 5 targets to be developed using Codiak's engEx™ precision engineering platform~~in February 2020, FDA accepted the NDA for ~~exosome therapeutics.~~

~~Table~~filing with priority review. In June 2020, FDA approved the NDA for Zepzelca for the treatment of ~~Contents~~

adult patients with metastatic SCLC with disease progression on or after platinum-based chemotherapy.

Under the terms of ~~the~~this agreement, Codiak is responsible for the execution of preclinical and early clinical development of therapeutic candidates directed at all 5 targets through Phase 1/2 proof of concept studies. Following the conclusionwhich became effective in January 2020 upon expiration of the ~~applicable Phase 1/2 study, we will be responsible for future development, potential regulatory submissions and commercialization for each product. Codiak has~~waiting period under the ~~option to participate in co-commercialization and cost/profit-sharing in the U.S. and Canada on up to 2 products.~~

~~As part~~Hart-Scott-Rodino Antitrust Improvements Act of ~~the agreement,~~1976, as amended, we paid ~~Codiak~~PharmaMar an upfront payment of ~~$56.0~~$200.0 million, ~~in January 2019,~~ which was recorded as ~~acquired~~in-process research and development, or IPR&D expense in our condensed consolidated statements of income (loss) for the ~~nine~~six months ended ~~September~~June 30, ~~2019. Codiak~~2020. In June 2020, we made a milestone payment of $100.0 million to PharmaMar following FDA approval of Zepzelca, which was capitalized as an intangible asset on our condensed consolidated balance sheet.

PharmaMar is eligible to receive potential future regulatory milestone payments of up to $150.0 million upon the achievement of full regulatory approval of Zepzelca within certain timelines. PharmaMar is also eligible to receive up to ~~$20~~$550.0 million in ~~preclinical development~~potential commercial milestone payments, across all 5 programs. Codiak is also eligible to receive milestone payments totaling up to $200 million per target based on investigational new drug application acceptance, clinical and regulatory milestones, including approvals in the U.S., the European Union and Japan, and certain sales milestones. Codiak is also eligible to receiveas well as incremental tiered royalties on future net sales of ~~each approved product.~~

~~Asset Acquisition~~

~~On August 12, 2019, we announced~~Zepzelca ranging from the ~~acquisition of Cavion, Inc., or Cavion, a clinical-stage biotechnology company, for an upfront payment of $52.5 million with the potential for~~high teens up to 30 percent. PharmaMar may receive additional payments on approval of upother indications, with any such payments creditable against commercial milestone payment obligations. PharmaMar retains production rights for Zepzelca and will supply the product to $260.0 million upon the achievement of certain clinical, regulatory and commercial milestones, for a total potential consideration of $312.5 million. As a result of the acquisition, we added CX-8998, now named JZP-385, a modulator of T-type calcium channels, for the potential treatment of essential tremor, to our clinical pipeline. The acquisition of Cavion was accounted for as an asset acquisition because it did not meet the definition of a business.

~~The following table summarizes the total consideration for the acquisition and the value of assets acquired and liabilities assumed (in thousands):~~

Consideration
Upfront payment for acquisition of Cavion's outstanding shares $ 52,500
Cash acquired 397
Working capital adjustment (255 )
Transaction costs 2,829
Total consideration $ 55,471

Assets Acquired and Liabilities Assumed
Cash $ 397
In-process research and development 48,275
Deferred tax assets 7,995
Other assets and liabilities (1,196 )
Total net assets acquired $ 55,471

~~The value attributed to in-process research and development relates to JZP-385 and was expensed as it was determined to have no alternative future use.~~us.

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3. Cash and Available-for-Sale Securities

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


	September 30, 2019												June 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Investments		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Investments
Cash	$	297,243	$	—	$	—	$	297,243	$	297,243	$	—	$	470,560	$	—	$	—	$	470,560	$	470,560	$	—
Time deposits	530,000		—		—		530,000		255,000		275,000		1,100,000		—		—		1,100,000		190,000		910,000
Money market funds	242,932		—		—		242,932		242,932		—		125,522		—		—		125,522		125,522		—
Totals	$	1,070,175	$	—	$	—	$	1,070,175	$	795,175	$	275,000	$	1,696,082	$	—	$	—	$	1,696,082	$	786,082	$	910,000

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	December 31, 2018												December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Investments		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Investments
Cash	$	215,606	$	—	$	—	$	215,606	$	215,606	$	—	$	333,172	$	—	$	—	$	333,172	$	333,172	$	—
Time deposits	515,000		—		—		515,000		—		515,000		460,000		—		—		460,000		20,000		440,000
Money market funds	94,016		—		—		94,016		94,016		—		284,172		—		—		284,172		284,172		—
Totals	$	824,622	$	—	$	—	$	824,622	$	309,622	$	515,000	$	1,077,344	$	—	$	—	$	1,077,344	$	637,344	$	440,000

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.~~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 $3.1 million and $7.6 million in three and six months ended June 30, 2020, respectively, and $5.0 million and $9.8 million in the three and six months ended June 30, 2019, respectively.

4. Fair Value Measurement

The following table summarizes, by major security type, our available-for-sale securities and derivative contracts as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 that were measured at fair value on a recurring basis and were categorized using the fair value hierarchy (in thousands):


	September 30, 2019						December 31, 2018						June 30, 2020						December 31, 2019
	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		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:
Time deposits	$	—	$	530,000	$	530,000	$	—	$	515,000	$	515,000	$	—	$	1,100,000	$	1,100,000	$	—	$	460,000	$	460,000
Money market funds	242,932		—		242,932		94,016		—		94,016		125,522		—		125,522		284,172		—		284,172
Interest rate contracts	—		1		1		—		4,070		4,070
Foreign exchange forward contracts	—		1,008		1,008		—		1,194		1,194		—		1,454		1,454		—		2,508		2,508
Totals	$	242,932	$	531,009	$	773,941	$	94,016	$	520,264	$	614,280	$	125,522	$	1,101,454	$	1,226,976	$	284,172	$	462,508	$	746,680
Liabilities:
Interest rate contracts	$	—	$	2,082	$	2,082	$	—	$	—	$	—	$	—	$	5,479	$	5,479	$	—	$	1,515	$	1,515
Foreign exchange forward contracts	—		1,676		1,676		—		1,460		1,460		—		1,765		1,765		—		182		182
Totals	$	—	$	3,758	$	3,758	$	—	$	1,460	$	1,460	$	—	$	7,244	$	7,244	$	—	$	1,697	$	1,697

As of ~~September~~June 30, ~~2019,~~2020, our available-for-sale securities included time deposits and money market funds and their carrying values were approximately equal to their fair values. Time deposits were measured at fair value using Level 2 inputs and money market funds were measured using quoted prices in active markets, which represent Level 1 inputs. Level 2 inputs, obtained from various third party data providers, represent quoted prices for similar assets in active markets, or these inputs

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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, ~~and~~ 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 ~~2019~~2020 or ~~2018.~~2019.

As of ~~September~~June 30, ~~2019,~~2020, the carrying amount of investments measured using the measurement alternative for equity investments without a readily determinable fair value was $4.5 million. The carrying amount, which is recorded within other non-current assets, represents the purchase price paid in ~~December~~ 2018.

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As of ~~September~~June 30, ~~2019,~~2020, the estimated fair values of our 1.875% exchangeable senior notes due 2021, or the 2021 Notes, ~~and~~ our 1.50% exchangeable senior notes due 2024, or the 2024 Notes, and our 2.00% exchangeable senior notes due 2026, or the 2026 Notes, were approximately ~~$576~~$237 million, $528 million and ~~$554 million,~~$1 billion, respectively. The fair values of the 2021 Notes, the 2024 Notes and the ~~2024~~2026 Notes, which we refer to ~~together~~collectively as the Exchangeable Senior Notes, were estimated using quoted market prices obtained from brokers (Level 2). The estimated fair value of our borrowing under our term loan was approximately equal to its book value based on the borrowing rates currently available for variable rate loans (Level 2).

5. Derivative Instruments and Hedging Activities

We are exposed to certain risks arising from operating internationally, including fluctuations in interest rates on our outstanding term loan borrowings and fluctuations in foreign exchange rates primarily related to the translation of euro-denominated net monetary liabilities, including intercompany balances, held by subsidiaries with a U.S. dollar functional currency. We manage these exposures within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes.

To achieve a desired mix of floating and fixed interest rates on our variable rate debt, we entered into interest rate swap agreements in March 2017 which are effective until July 2021. These agreements hedge contractual term loan interest rates. As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the interest rate swap agreements had a notional amount of $300.0 million. As a result of these agreements, the interest rate on a portion of our term loan borrowings was fixed at 1.895%, plus the borrowing spread, until July 12, 2021.

The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The impact on accumulated other comprehensive loss and earnings from derivative instruments that qualified as cash flow hedges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 was as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,					Three Months Ended June 30,						Six Months Ended June 30,
Interest Rate Contracts:	2019			2018			2019			2018		2020			2019			2020			2019
Gain (loss) recognized in accumulated other comprehensive loss, net of tax	$	(322	)	$	876		$	(4,361	)	$	5,285
Loss recognized in accumulated other comprehensive loss, net of tax												$	(324	)	$	(2,698	)	$	(4,524	)	$	(4,039	)
Loss (gain) reclassified from accumulated other comprehensive loss to interest expense, net of tax	(236		)	(130		)	(1,019		)	19		921			(383		)	1,068			(783		)

Assuming no change in LIBOR-based interest rates from market rates as of ~~September~~June 30, ~~2019, $0.7~~2020, $4.6 million of losses, net of tax, recognized in accumulated other comprehensive loss will be reclassified to earnings over the next 12 months.

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~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019, the notional amount of foreign exchange contracts where hedge accounting is not applied was $~~226.1~~283.7 million and ~~$271.5~~$180.9 million, respectively.

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
Foreign Exchange Forward Contracts:	2019		2018		2019		2018		2020		2019		2020			2019
Loss recognized in foreign exchange loss	$	7,430	$	2,409	$	10,718	$	10,896
Gain (loss) recognized in foreign exchange loss									$	3,533	$	121	$	(2,606	)	$	(3,288	)

The cash flow effects of our derivative contracts for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 are included within net cash provided by operating activities in the condensed consolidated statements of cash flows.

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


	September 30, 2019						June 30, 2020
	Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Other current assets	$	1	Accrued liabilities	$	751	Other current assets	$	—	Accrued liabilities	$	5,299
				Other non-current liabilities	1,331					Other non-current liabilities	180
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	1,008		Accrued liabilities	1,676		Other current assets	1,454		Accrued liabilities	1,765
Total fair value of derivative instruments		$	1,009		$	3,758		$	1,454		$	7,244


	December 31, 2018						December 31, 2019
	Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Other current assets	$	1,929	Accrued liabilities	$	—	Other current assets	$	—	Accrued liabilities	$	855
	Other non-current assets	2,141								Other non-current liabilities	660
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	1,194		Accrued liabilities	1,460		Other current assets	2,508		Accrued liabilities	182
Total fair value of derivative instruments		$	5,264		$	1,460		$	2,508		$	1,697

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Although we do not offset derivative assets and liabilities within our condensed consolidated balance sheets, our International Swap and Derivatives Association agreements provide for net settlement of transactions that are due to or from the same counterparty upon early termination of the agreement due to an event of default or other termination event. The following tables summarize the potential effect on our condensed consolidated balance sheets of offsetting our interest rate contracts and foreign exchange forward contracts subject to such provisions (in thousands):


	September 30, 2019																June 30, 2020
	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								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	Gross Amounts of Recognized Assets/ Liabilities					Derivative Financial Instruments			Cash Collateral Received (Pledged)		Net Amount					Derivative Financial Instruments				Gross Amounts Offset in the Consolidated Balance Sheet		Cash Collateral Received (Pledged)			Net Amount
Derivative assets	$	1,009		Gross Amounts Offset in the Consolidated Balance Sheet	$	—			$	1,009	$	(772	)	$	—		Gross Amounts of Recognized Assets/ Liabilities		$	237	$	1,454			$	—	$	1,454	$	(1,269	)	$	—	$	185
Derivative liabilities	(3,758		)	—			(3,758	)	772		—			(2,986		)	(7,244	)		—			(7,244	)	1,269		—		(5,975		)


	December 31, 2018																December 31, 2019
	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								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	Gross Amounts of Recognized Assets/ Liabilities					Derivative Financial Instruments			Cash Collateral Received (Pledged)		Net Amount					Derivative Financial Instruments				Gross Amounts Offset in the Consolidated Balance Sheet		Cash Collateral Received (Pledged)			Net Amount
Derivative assets	$	5,264		Gross Amounts Offset in the Consolidated Balance Sheet	$	—			$	5,264	$	(935	)	$	—		Gross Amounts of Recognized Assets/ Liabilities		$	4,329	$	2,508			$	—	$	2,508	$	(596	)	$	—	$	1,912
Derivative liabilities	(1,460		)	—			(1,460	)	935		—			(525		)	(1,697	)		—			(1,697	)	596		—		(1,101		)

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6. Inventories

Inventories consisted of the following (in thousands):


	September 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Raw materials	$	11,653	$	10,895	$	15,856	$	13,595
Work in process	33,935		20,743		42,582		36,658
Finished goods	25,520		21,318		34,096		28,355
Total inventories	$	71,108	$	52,956	$	92,534	$	78,608

7. Goodwill and Intangible Assets

The gross carrying amount of goodwill was as follows (in thousands):

Balance at December 31, 2018 $ 927,630
Foreign exchange (20,905 )
Balance at September 30, 2019 $ 906,725



Balance at December 31, 2019	$	920,018
Foreign exchange	(1,997		)
Balance at June 30, 2020	$	918,021

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


	September 30, 2019								December 31, 2018							June 30, 2020								December 31, 2019
	Remaining Weighted- Average Useful Life (In years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value		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	13.5	$	3,136,957	$	(790,075	)	$	2,346,882	$	3,110,641	$	(632,413	)	$	2,478,228	12.9	$	3,275,569	$	(989,443	)	$	2,286,126	$	3,166,485	$	(864,834	)	$	2,301,651
Priority review voucher		111,101		—			111,101		111,101		—			111,101
Manufacturing contracts	—	11,656		(11,656		)	—		12,256		(12,256		)	—		—	11,987		(11,987		)	—		12,025		(12,025		)	—
Trademarks	—	2,881		(2,881		)	—		2,896		(2,896		)	—		—	2,889		(2,889		)	—		2,890		(2,890		)	—
Priority review voucher																—	—		—			—		111,101		(111,101		)	—
Total finite-lived intangible assets		3,262,595		(804,612		)	2,457,983		3,236,894		(647,565		)	2,589,329			3,290,445		(1,004,319		)	2,286,126		3,292,501		(990,850		)	2,301,651
Acquired IPR&D assets		135,047		—			135,047		142,005		—			142,005			—		—			—		139,326		—			139,326
Total intangible assets		$	3,397,642	$	(804,612	)	$	2,593,030	$	3,378,899	$	(647,565	)	$	2,731,334		$	3,290,445	$	(1,004,319	)	$	2,286,126	$	3,431,827	$	(990,850	)	$	2,440,977

The ~~increase~~decrease in the gross carrying amount of intangible assets as of ~~September~~June 30, ~~2019~~2020 compared to December 31, ~~2018~~2019 reflects the ~~capitalization~~impairment of ~~milestone payments triggered by FDA approval~~our acquired IPR&D asset of ~~Sunosi~~$136.1 million following the decision to stop enrollment in ~~March 2019~~our Phase 3 clinical study of defibrotide for the prevention of VOD due to a determination that the study is highly unlikely to reach one of its primary endpoints, the redemption of the priority review voucher in January 2020 and ~~subsequent U.S. Drug Enforcement Agency scheduling in June 2019, partially offset by~~ the negative impact of foreign currency translation adjustments due to the weakening of the euro against the U.S. ~~dollar.~~dollar, partially offset by the capitalization of milestone payments of $100.0 million and $13.0 million triggered by FDA approval of Zepzelca in June 2020 and European Marketing Authorization of Sunosi in January 2020, respectively.

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. We reduced the estimated remaining useful life of the Erwinaze intangible asset due to the receipt of a contract termination notice from Porton Biopharma Limited in February 2019. The reduction in the estimated remaining useful life increased intangible asset amortization expense by $15.0 million and $40.1 million, reduced net income by $10.2 million and $27.3 million, reduced basic net income per ordinary share by $0.18 and $0.48, and reduced diluted net income per ordinary share by $0.18 and $0.47 during the three and nine months ended September 30, 2019, respectively.

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Based on finite-lived intangible assets recorded as of ~~September~~June 30, ~~2019,~~2020, 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		Estimated Amortization Expense
2019 (remainder)	$	173,131
2020	246,957
2020 (remainder)			$	130,647
2021	201,390		215,415
2022	157,785		170,572
2023	157,785		170,572
2024			170,572
Thereafter	1,520,935		1,428,348
Total	$	2,457,983	$	2,286,126

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8. Certain Balance Sheet Items

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


	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
Leasehold improvements	$	49,614		$	33,273		$	53,348		$	52,294
Land and buildings	46,555			46,650			47,112			47,053
Manufacturing equipment and machinery							30,840			28,860
Computer software	28,529			19,062			22,758			25,680
Manufacturing equipment and machinery	27,321			25,837
Computer equipment	13,364			13,679			17,747			16,577
Furniture and fixtures	11,095			8,155			11,330			11,152
Construction-in-progress	5,849			51,243			3,393			5,147
Build-to-suit facility	—			52,067
Subtotal	182,327			249,966			186,528			186,763
Less accumulated depreciation and amortization	(52,855		)	(49,608		)	(58,269		)	(55,257		)
Property, plant and equipment, net	$	129,472		$	200,358		$	128,259		$	131,506

The decrease in the carrying amount of construction-in-progress and build-to-suit facility assets as of September 30, 2019 compared to December 31, 2018 reflects the de-recognition of assets related to build-to-suit facility leases on adoption of ASU No. 2016-02.

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Accrued liabilities consisted of the following (in thousands):


	September 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Rebates and other sales deductions	$	86,191	$	86,495	$	122,204	$	96,860
Employee compensation and benefits	64,595		58,543		51,289		80,531
Current portion of operating lease liabilities	11,713		—		12,763		12,728
Inventory-related accruals	10,433		8,753		12,364		7,816
Sales returns reserve					8,030		3,462
Derivative instrument liabilities					7,064		1,037
Consulting and professional services					6,221		7,665
Accrued interest					6,110		7,540
Royalties					6,031		6,931
Selling and marketing accruals					3,420		10,946
Accrued collaboration expenses					3,161		2,494
Clinical trial accruals	7,973		5,904		2,965		3,141
Selling and marketing accruals	6,705		6,780
Royalties	6,074		2,679
Professional fees	4,213		2,333
Accrued construction-in-progress	3,070		1,065		442		3,015
Sales returns reserve	2,872		2,510
Accrued interest	2,539		7,407
Derivative instrument liabilities	2,427		1,460
Accrued loss contingency	—		58,154
Other	29,935		22,804		24,854		25,520
Total accrued liabilities	$	238,740	$	264,887	$	266,918	$	269,686

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9. Debt

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


	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
2021 Notes	$	575,000		$	575,000		$	242,112		$	575,000
Unamortized discount and debt issuance costs on 2021 Notes	(44,566		)	(60,910		)	(11,560		)	(38,865		)
2021 Notes, net	530,434			514,090			230,552			536,135

2024 Notes	575,000			575,000			575,000			575,000
Unamortized discount and debt issuance costs on 2024 Notes	(123,310		)	(138,914		)	(106,840		)	(117,859		)
2024 Notes, net	451,690			436,086			468,160			457,141

2026 Notes							1,000,000			—
Unamortized discount and debt issuance costs on 2026 Notes							(193,498		)	—
2026 Notes, net							806,502			—

Term loan	622,044			646,236			597,842			613,981
Total debt	1,604,168			1,596,412			2,103,056			1,607,257
Less current portion	33,387			33,387			33,387			33,387
Total long-term debt	$	1,570,781		$	1,563,025		$	2,069,669		$	1,573,870

Exchangeable Senior Notes 2026

In the second quarter of 2020, Jazz Investments I Limited, our wholly owned subsidiary, completed a private placement of $1,000.0 million principal amount of the 2026 Notes. We used a portion of the net proceeds from this offering to repurchase for cash $332.9 million aggregate principal amount of the 2021 Notes through privately-negotiated transactions concurrently with the offering of the 2026 Notes. Interest on the 2026 Notes is payable semi-annually in cash in arrears on June 15 and December 15 of each year, beginning on December 15, 2020, at a rate of 2.00% per year. In certain circumstances, we may be required to pay additional amounts as a result of any applicable tax withholding or deductions required in respect of payments on the 2026 Notes. The 2026 Notes mature on June 15, 2026, unless earlier exchanged, repurchased or redeemed.

The holders of the 2026 Notes have the ability to require us to repurchase all or a portion of their 2026 Notes for cash in the event we undergo certain fundamental changes, such as specified change of control transactions, our liquidation or dissolution or the delisting of our ordinary shares from any of The New York Stock Exchange, The Nasdaq Global Market, The Nasdaq Global Select Market or The Nasdaq Capital Market (or any of their respective successors). Additionally, the terms and covenants in the indenture related to the 2026 Notes include certain events of default after which the 2026 Notes may be due and payable immediately. Prior to June 15, 2026, we may redeem the 2026 Notes, in whole but not in part, subject to compliance with certain conditions, if we have, or on the next interest payment date would, become obligated to pay to the holder of any 2026 Notes additional amounts as a result of certain tax-related events. We also may redeem the 2026 Notes on or after June 20, 2023 and prior to March 15, 2026, in whole or in part, if the last reported sale price per ordinary share has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide the notice of redemption.

The 2026 Notes are exchangeable at an initial exchange rate of 6.4182 ordinary shares per $1,000 principal amount of 2026 Notes, which is equivalent to an initial exchange price of approximately $155.81 per ordinary share. Upon exchange, the 2026 Notes may be settled in cash, ordinary shares or a combination of cash and ordinary shares, at our election. Our intent and policy is to settle the principal amount of the 2026 Notes in cash upon exchange. The exchange rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain make-whole fundamental changes occurring prior to the maturity date of the 2026 Notes or upon our issuance of a notice of redemption, we will in certain circumstances increase the exchange rate for holders of the 2026 Notes who elect to exchange their 2026 Notes in connection with that make-whole fundamental change or during the related redemption period. Prior to March 15, 2026, the 2026 Notes will be exchangeable only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

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In accounting for the issuance of the 2026 Notes, we separated the 2026 Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated exchange feature. The carrying amount of the equity component representing the exchange option was determined by deducting the fair value of the liability component from the face value of the 2026 Notes as a whole. The excess of the principal amount of the liability component over its carrying amount will be amortized to interest expense over the expected life of the 2026 Notes using the effective interest method with an effective interest rate of 5.98% per annum. We have determined the expected life of the 2026 Notes to be equal to the original 6-year term. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocated the total issuance costs incurred of $18.6 million to the liability and equity components based on their relative values. Issuance costs attributable to the liability component will be amortized to expense over the term of the 2026 Notes, and issuance costs attributable to the equity component were included with the equity component in our shareholders’ equity.

As part of the repurchase of $332.9 million aggregate principal amount of the 2021 Notes concurrently with the offering of the 2026 Notes, we settled a proportionate amount of outstanding interest related to the 2021 Notes of $2.0 million. We recorded a loss on extinguishment of debt of $4.5 million due to the write-off of unamortized debt issuance costs and debt discount related to the partial repurchase of the 2021 Notes. We accounted for the difference between the consideration transferred and the fair value of the liability component of the 2021 Notes that were repurchased, of $12.1 million, as a reduction to the equity component. As of June 30, 2020, the principal amount of the 2021 Notes remaining was $242.1 million.

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 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.

As of ~~September~~June 30, ~~2019,~~2020, the carrying values of the equity component of the 2021 Notes, 2024 Notes and the ~~2024~~2026 Notes, net of equity issuance costs, were ~~$126.9~~$114.8 million, $149.8 million and ~~$149.8~~$176.3 million, respectively.

Revolving Credit Facility

~~Table~~In April 2020, we drew down $500.0 million under the revolving credit facility provided for under the credit agreement that we entered into in June 2015 and subsequently amended, which we refer to as the amended credit agreement, to increase our cash position and preserve financial flexibility in light of ~~Contents~~

the uncertainties and disruption to the global financial markets resulting from the COVID-19 pandemic. We repaid this amount in full in June 2020 following the issuance of the 2026 Notes.

Maturities

Scheduled maturities with respect to our long-term debt principal balances outstanding as of ~~September~~June 30, ~~2019~~2020 were as follows (in thousands):


Year Ending December 31,	Scheduled Long-Term Debt Maturities		Scheduled Long-Term Debt Maturities
2019 (remainder)	$	8,347
2020	33,387
2020 (remainder)			$	16,693
2021	608,387		275,499
2022	33,387		33,387
2023	517,494		517,494
2024			575,000
Thereafter	575,000		1,000,000
Total	$	1,776,002	$	2,418,073

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10. Leases

The components of the lease expense for the three and ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 were as follows (in thousands):


							Three Months Ended June 30,						Six Months Ended June 30,
Lease Cost	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019			2020			2019			2020			2019
Operating lease cost	$	5,746		$	17,672		$	5,410		$	6,056		$	10,700		$	11,926
Short-term lease cost	396			1,616			890			619			1,760			1,220
Variable lease cost	—			4			—			1			1			4
Sublease income	(158		)	(478		)	(67		)	(158		)	(224		)	(320		)
Net lease cost	$	5,984		$	18,814		$	6,233		$	6,518		$	12,237		$	12,830

Supplemental balance sheet information related to operating leases was as follows (in thousands):


Leases	Classification	September 30, 2019		Classification	June 30, 2020		December 31, 2019
Assets
Operating lease assets	Operating lease assets	$	141,878	Operating lease assets	$	133,179	$	139,385

Liabilities
Current
Operating lease liabilities	Accrued liabilities	11,713		Accrued liabilities	12,763		12,728
Non-current
Operating lease liabilities	Operating lease liabilities, less current portion	153,434		Operating lease liabilities, less current portion	144,264		151,226
Total operating lease liabilities		$	165,147		$	157,027	$	163,954



~~Lease Term and Discount Rate~~	September 30, 2019
~~Weighted-average remaining lease term - operating leases (years)~~	~~10.0~~
~~Weighted-average discount rate - operating leases~~	~~5.3~~	%



Lease Term and Discount Rate	June 30, 2020		December 31, 2019
Weighted-average remaining lease term - operating leases (years)	9.3		9.7
Weighted-average discount rate - operating leases	5.3	%	5.3	%

~~Table of Contents~~

Supplemental cash flow information related to operating leases was as follows (in thousands):


			Six Months Ended June 30,
	Nine Months Ended September 30, 2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	11,758	$	11,404	$	8,240
Non-cash operating activities:
Right-of-use assets obtained in exchange for new operating lease liabilities (1)	$	153,048	$	533	$	152,142

_____________________________


(1)	~~Includes~~The June 30, 2019 disclosure includes the balances recognized on January 1, 2019 on adoption of ASU No. ~~2016-02.~~2016-02, Leases.

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Maturities of operating lease liabilities were as follows (in thousands):


Year Ending December 31,	Operating leases			Operating leases
2019 (remainder)	$	4,531
2020	20,954
2020 (remainder)				$	10,078
2021	20,843			21,203
2022	20,889			21,219
2023	21,260			21,489
2024				23,786
Thereafter	128,294			104,655
Total lease payments	$	216,771		$	202,430
Less imputed interest	(51,624		)	(45,403		)
Present value of lease liabilities	$	165,147		$	157,027

11. 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~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. 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.

~~Lease and~~ Other Commitments

~~Operating Leases.~~ We have noncancelable operating leases for our office buildings and we are obligated to make payments under noncancelable operating leases for automobiles used by our sales force. Refer to Note 10 for details of the maturity of our operating lease liabilities.

~~Other Commitments.~~As of ~~September~~June 30, ~~2019,~~2020, we had ~~$79.8~~$71.7 million of noncancelable purchase commitments due within one year, primarily related to agreements with third party manufacturers.

Legal Proceedings

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, 2 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 (hereinafter referred to as the Teamsters Lawsuit), 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

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~~Legal Proceedings~~Pharmaceuticals USA Inc., and Hikma Pharmaceuticals plc, or, collectively, the City of Providence Defendants (hereinafter referred to as the City of Providence Lawsuit).

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.

The plaintiffs in the BCBS Lawsuit, Teamsters Lawsuit, the GEHA Lawsuit, and the UFCW Lawsuit are seeking to represent a class of direct purchasers, and the plaintiffs in the City of Providence Lawsuit, the UFCW Lawsuit, and the AGL Plan Lawsuit are seeking to represent a class of indirect purchasers of Xyrem. The lawsuits generally allege 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 the BCBS Defendants, including the City of Providence Defendants. The suits seek 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.

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.

12. Shareholders’ Equity

Share Repurchase Program

In November 2016, our board of directors authorized a share repurchase program ~~pursuant to which we are~~and as of June 30, 2020 had authorized tothe repurchase ~~a number~~ of ordinary shares having an aggregate purchase price of up to ~~$300.0 million,~~$1.5 billion, exclusive of any brokerage commissions. In November and December 2018, our board of directors increased the existing share repurchase program authorization by $320.0 million and $400.0 million, respectively, thereby increasing the total amount authorized to $1.02 billion. 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 amended 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. In the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, we spent a total of ~~$191.1~~$146.5 million to purchase ~~1.5~~1.2 million of our ordinary shares under the share repurchase program at an average total purchase price, including commissions, of ~~$131.48~~$121.98 per share. All ordinary shares repurchased were canceled. As of ~~September~~June 30, ~~2019,~~2020, the remaining amount authorized under the share repurchase program was ~~$188.1~~$431.2 million. ~~In October 2019, our board~~

Table of ~~directors authorized the additional repurchase of shares having an aggregate purchase price of up to $500.0 million, exclusive of any brokerage commissions.~~Contents

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows (in thousands):


	Net Unrealized Gain (Loss) From Hedging Activities			Foreign Currency Translation Adjustments			Total Accumulated Other Comprehensive Loss			Net Unrealized Gain (Loss) From Hedging Activities			Foreign Currency Translation Adjustments			Total Accumulated Other Comprehensive Loss
Balance at December 31, 2018	$	3,557		$	(201,348	)	$	(197,791	)
Balance at December 31, 2019										$	(1,325	)	$	(222,068	)	$	(223,393	)
Other comprehensive loss before reclassifications	(4,361		)	(56,271		)	(60,632		)	(4,524		)	(9,260		)	(13,784		)
Amounts reclassified from accumulated other comprehensive loss	(1,019		)	—			(1,019		)	1,068			—			1,068
Other comprehensive loss, net	(5,380		)	(56,271		)	(61,651		)	(3,456		)	(9,260		)	(12,716		)
Balance at September 30, 2019	$	(1,823	)	$	(257,619	)	$	(259,442	)
Balance at June 30, 2020										$	(4,781	)	$	(231,328	)	$	(236,109	)

During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, other comprehensive loss reflects foreign currency translation adjustments, primarily due to the weakening of the euro against the U.S. dollar, and the net unrealized loss on derivatives that qualify as cash flow hedges.

~~Table of Contents~~

13. 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,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020			2019
Numerator:
Net income	$	102,276	$	149,316	$	449,375	$	287,628
Net income (loss)									$	114,801	$	261,898	$	(43,032	)	$	347,099
Denominator:
Weighted-average ordinary shares used in per share calculations - basic	56,674		60,476		56,860		60,196		55,413		56,707		55,684			56,955
Dilutive effect of employee equity incentive and purchase plans	764		1,381		787		1,297		451		720		—			798
Weighted-average ordinary shares used in per share calculations - diluted	57,438		61,857		57,647		61,493		55,864		57,427		55,684			57,753

Net income per ordinary share:
Net income (loss) per ordinary share:
Basic	$	1.80	$	2.47	$	7.90	$	4.78	$	2.07	$	4.62	$	(0.77	)	$	6.09
Diluted	$	1.78	$	2.41	$	7.80	$	4.68	$	2.06	$	4.56	$	(0.77	)	$	6.01

Potentially dilutive ordinary shares from our employee equity incentive and purchase plans and the Exchangeable Senior Notes 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, the assumed issuance of ordinary shares under our employee stock purchase plan, or ESPP, and the assumed issuance of ordinary shares upon exchange of the Exchangeable Senior Notes. The potential issue of ordinary shares issuable upon exchange of the Exchangeable Senior Notes had no effect on diluted net income (loss) per ordinary share because the average price of our ordinary shares for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 did not exceed the effective exchange prices per ordinary share of the Exchangeable Senior Notes.

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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,		Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018	2020	2019	2020	2019
Exchangeable Senior Notes	5,504	5,504	5,504	5,504	6,474	5,504	5,989	5,504
Options, RSUs and ESPP	5,062	2,244	5,084	2,975	6,178	5,202	5,895	5,095

~~Table of Contents~~

14. Revenues

The following table presents a summary of total revenues (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Xyrem	$	425,644	$	357,251	$	1,207,173	$	1,030,036	$	446,808	$	413,212	$	854,683	$	781,529
Defitelio/defibrotide									42,714		46,055		90,146		87,555
Erwinaze/Erwinase	34,024		41,134		122,545		150,474		32,683		27,622		70,415		88,521
Defitelio/defibrotide	37,604		36,177		125,159		111,736
Vyxeos	29,581		21,038		89,886		75,217		26,568		31,362		59,288		60,305
Sunosi	987		—		987		—		8,578		—		10,502		—
Other	4,481		9,597		13,325		34,676		852		5,172		3,374		8,844
Product sales, net	532,321		465,197		1,559,075		1,402,139		558,203		523,423		1,088,408		1,026,754
Royalties and contract revenues	5,381		4,176		20,946		12,326		4,233		10,710		8,754		15,565
Total revenues	$	537,702	$	469,373	$	1,580,021	$	1,414,465	$	562,436	$	534,133	$	1,097,162	$	1,042,319

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,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
United States	$	492,366	$	429,729	$	1,436,160	$	1,290,775	$	516,097	$	480,932	$	994,580	$	943,794
Europe	35,037		30,816		106,956		94,165		37,895		36,518		79,451		71,919
All other	10,299		8,828		36,905		29,525		8,444		16,683		23,131		26,606
Total revenues	$	537,702	$	469,373	$	1,580,021	$	1,414,465	$	562,436	$	534,133	$	1,097,162	$	1,042,319

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,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Express Scripts	79	%	76	%	76	%	73	%
ESSDS									79	%	77	%	78	%	75	%
McKesson	12	%	15	%	14	%	18	%	10	%	12	%	11	%	15	%

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 45 days.

Contract Liabilities - Deferred Revenue

The deferred revenue balance as of ~~September~~June 30, ~~2019~~2020 primarily related to deferred upfront fees received from Nippon Shinyaku Co., Ltd., or Nippon Shinyaku, in connection with 2 license, development and commercialization agreements granting Nippon Shinyaku exclusive rights to develop and commercialize each of Defitelio and Vyxeos in Japan. We recognized contract revenues of $1.2 million and ~~$4.2~~$2.4 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, relating to these upfront payments. The deferred revenue balances are being recognized over an average of four

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years representing the period over which we expect to perform our research and developments obligations under each agreement.

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The following table presents a reconciliation of our beginning and ending balances in contract liabilities from contracts with customers for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 (in thousands):

Contract Liabilities
Balance as of December 31, 2018 $ 14,995
Amount recognized within royalties and contract revenues (4,234 )
Balance as of September 30, 2019 $ 10,761



	Contract Liabilities
Balance as of December 31, 2019	$	9,581
Amount recognized within royalties and contract revenues	(2,360		)
Balance as of June 30, 2020	$	7,221

15. Share-Based Compensation

Share-based compensation expense related to share options, RSUs and grants under our ESPP was as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Selling, general and administrative	$	20,302		$	18,978		$	61,357		$	57,012		$	21,020		$	20,685		$	41,616		$	41,055
Research and development	6,498			4,600			17,917			13,684			7,663			5,896			14,048			11,419
Cost of product sales	1,985			1,525			5,352			5,022			1,921			1,708			3,594			3,367
Total share-based compensation expense, pre-tax	28,785			25,103			84,626			75,718			30,604			28,289			59,258			55,841
Income tax benefit from share-based compensation expense	(4,106		)	(3,552		)	(12,246		)	(12,066		)	(2,924		)	(4,473		)	(6,670		)	(8,140		)
Total share-based compensation expense, net of tax	$	24,679		$	21,551		$	72,380		$	63,652		$	27,680		$	23,816		$	52,588		$	47,701

Share Options

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Shares underlying options granted (in thousands)	198			117			1,597			1,349			79			102			644			1,399
Grant date fair value	$	40.62		$	53.93		$	42.32		$	46.95		$	33.29		$	38.95		$	33.61		$	42.56
Black-Scholes option pricing model assumption information:
Volatility	33		%	32		%	32		%	35		%	36		%	31		%	32		%	32		%
Expected term (years)	4.5			4.5			4.5			4.5			4.6			4.5			4.6			4.5
Range of risk-free rates	1.5-1.7%			2.7-2.8%			1.5-2.5%			2.2-2.8%			0.3-0.4%			1.8-2.3%			0.3-1.6%			1.8-2.5%
Expected dividend yield	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%

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,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
RSUs granted (in thousands)	80		71		642		564		129		42		1,088		561
Grant date fair value	$	135.90	$	174.73	$	138.50	$	145.59	$	108.20	$	132.73	$	113.48	$	138.87

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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.

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As of ~~September~~June 30, ~~2019~~2020, compensation cost not yet recognized related to unvested share options and RSUs was $~~92.2~~74.5 million and ~~$116.1~~$159.4 million, respectively, which is expected to be recognized over a weighted-average period of ~~2.7~~2.6 ~~years.~~years and 3.0 years, respectively.

16. Income Taxes

Our income tax provision was ~~$10.9~~$54.8 million and $3.5 million in the three and six months ended ~~September~~June 30, ~~2019 and our income tax benefit was $38.6 million in the nine months ended September 30, 2019,~~2020, respectively, compared to an income tax ~~provision~~benefit of ~~$19.3~~$78.7 million and ~~$75.0~~$49.5 million for the same periods in ~~2018.~~2019. The effective tax rates were ~~9.5%~~31.9% and ~~(9.3)~~(9.2)% in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, compared to ~~11.4%~~(42.7)% and ~~20.6%~~(16.5)% for the same periods in 2018. The decrease in the effective tax rate for the three months ended September 30, 2019 compared to the same period in 2018 was primarily due to the release of reserves related to unrecognized tax benefits upon expiration of a statute of limitations.2019. The income tax benefit for the ~~nine~~three and six months ended ~~September~~June 30, 2019 ~~includes~~included a discrete tax benefit of $112.3 million resulting from an intra-entity intellectual property asset transfer. The tax benefit, which represents a deferred future benefit, was recorded as a deferred tax asset. The ~~decrease~~increase in the effective tax ~~rate~~rates for the ~~nine~~three and six months ended ~~September~~June 30, ~~2019~~2020 compared to the same ~~period~~periods in ~~2018~~2019 was primarily due to the impact of the intra-entity intellectual property asset transfer. Excluding this effect, the increase in the effective tax rate for the three months ended June 30, 2020 compared to the same period in 2019 was primarily due to the impact of the disallowance of certain interest deductions and provision for a proposed settlement reached with the French tax authorities in respect of an ongoing tax audit discussed in more detail below. The decrease in the effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 was primarily due to the impact of the defibrotide acquired IPR&D asset impairment charge ~~recognized on the Prialt assets held for sale~~ and the impact of the ~~loss contingency~~acquired IPR&D expense ~~in 2018.~~related to the PharmaMar transaction, partially offset by the impact of the disallowance of certain interest deductions and provision for the proposed settlement reached with the French tax authorities. The effective tax rate for the three months ended ~~September~~June 30, ~~2019~~2020 was higher than the Irish statutory rate of 12.5% primarily due to the impact of the disallowance of certain interest deductions and provision for the proposed settlement reached with the French tax authorities. The effective tax rate for the six months ended June 30, 2020 was lower than the Irish statutory rate of 12.5% primarily due to the impact of the release of reserves related to unrecognized tax benefits upon expiration of a statute of limitations. The effective tax rate for the nine months ended September 30, 2019 was lower than the Irish statutory rate of 12.5% primarily due todefibrotide acquired IPR&D asset impairment charge and the impact of the ~~intra-entity intellectual property asset transfer.~~acquired IPR&D expense related to the PharmaMar transaction, partially offset by the impact of certain interest disallowance provision and provision for the proposed settlement reached with the French tax authorities. 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 primarily arose due to the acquisition of Celator Pharmaceuticals, Inc. The balance~~asset is ~~net of deferred tax assets which are~~ comprised primarily of U.S. federal and state tax credits, U.S. federal and state and foreign net operating loss carryforwards and other temporary ~~differences.~~differences, and is net of deferred tax liabilities related to acquired intangible assets. We maintain a valuation allowance against certain foreign and U.S. ~~federal and state~~ 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. Our most significant tax jurisdictions are Ireland and the U.S. (both at the federal level and in various state jurisdictions). InFor Ireland we are no longer subject to income tax audits by taxing authorities for the years prior to ~~2014.~~2015. The U.S. jurisdictions generally have ~~statutes~~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), carryforward tax attributes that were generated in 2015 and earlier may still be adjusted upon examination by the tax authorities. Certain of our subsidiaries are currently under examination by the French tax authorities for the years ended December 31, 2012, 2013, 2015, 2016 and ~~2017 and by the Italian tax authorities for the year ended December 31,~~ 2017. ~~These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes.~~ In December 2015, we received proposed tax assessment notices, and, in October 2018 and December 2019, we received revised tax assessment notices from the French tax authorities for 2012 and 2013 and in December 2018 and September 2019, we received a proposed tax ~~assessments notices from the French tax authorities~~assessment notice for 2015, 2016 and 2017, relating to certain transfer pricing adjustments. The notices ~~provide for~~propose additional French tax of approximately ~~$41~~$41.9 million for 2012 and 2013 and approximately ~~$12~~$12.0 million for 2015, 2016 and 2017 including interest and penalties through the respective dates of the proposed assessments, translated at the foreign exchange rate ~~at September~~as of June 30, ~~2019. We disagree~~2020. Due to the subjective nature of the transfer pricing issues involved, in May 2020, the Company reached an agreement in principle to settle the audits for all open years with the ~~assessments~~French tax authorities. The settlement would require the Company to pay incremental taxes, interest and penalties of $17.7 million, translated at the foreign exchange rate as of June 30, 2020. The settlement, which is subject to formal finalization and documentation with the French tax authorities, was accrued as of June 30, 2020 and the income tax expense for the three and six months ended June 30, 2020 includes the impact of the settlement. Certain of our Italian subsidiaries are ~~contesting them vigorously.~~currently under examination by the Italian tax authorities for the year ended December 31, 2017.

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~~17. Subsequent Event~~

In October 2019, we notified the FDA of our intention to redeem our priority review voucher for the planned NDA submission for JZP-258 in January 2020. As a result of this notification, we expect to amortize the cost of the priority review voucher intangible asset, of $111.1 million, in full in the fourth quarter of 2019.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes to condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the “Cautionary Note Regarding Forward-Looking Statements” that appears at the end of this discussion. These statements, like all statements in this report, speak only as of the date of this Quarterly Report on Form 10-Q (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments.

Overview

Our lead marketed products are:

•

~~Sunosi~~^® ~~(solriamfetol)~~, our newest lead marketed product launched in July 2019 and approved in the U.S. to improve wakefulness in adult patients with excessive daytime sleepiness, or EDS, associated with narcolepsy or obstructive sleep apnea, or OSA. We are also seeking approval for Sunosi in Europe and submitted a marketing authorization application, or MAA, to the European Medicines Agency, or EMA, in the fourth quarter of 2018;


•	Xyrem^® (sodium oxybate) oral solution, the only product approved by the U.S. Food and Drug Administration, or FDA, and marketed in the U.S. for the treatment of both cataplexy and excessive daytime sleepiness, or EDS, in both adult and pediatric patients with narcolepsy;


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

•


•	Erwinaze^® (asparaginase Erwinia chrysanthemi), a treatment approved in the U.S. and in certain markets in Europe (where it is marketed as Erwinase^®) for patients with acute lymphoblastic leukemia, or ALL, who have developed hypersensitivity to E. coli-derived asparaginase; ~~and~~


•	Vyxeos^®(daunorubicin and cytarabine) liposome for injection, a product approved in the U.S. and in Europe (where it is marketed as Vyxeos^® liposomal 44 mg/100 mg powder for concentrate for solution for infusion) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia, or AML, or AML with myelodysplasia-related ~~changes.~~changes; and


•	Zepzelca™ (lurbinectedin), a product approved by FDA in June 2020 and recently launched in the U.S. for the treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy.

~~Our strategy~~On July 21, 2020, Xywav™ (formerly JZP-258) was approved in the U.S. for the treatment of cataplexy or EDS in narcolepsy patients seven years of age and older; we expect to ~~create shareholder value is focused on:~~

~~Strong financial execution through growth~~launch Xywav in ~~sales~~the fourth quarter of ~~our current lead marketed products;~~

Building a diversified product portfolio and development pipeline through a combination of our internal research and development efforts and obtaining rights to clinically meaningful and differentiated on- or near-market products and early- to late-stage product candidates through acquisitions, collaborations, licensing arrangements, partnerships and venture investments; and

~~Maximizing the value of our products~~2020. This approval follows multiple significant regulatory approvals and product ~~candidates~~launches over the last five years. In 2020, we also obtained our European approval of Sunosi, which was launched in Germany in May 2020, and the U.S. approval of Zepzelca, which was launched in July 2020.

In December 2019, we enrolled our first patient in our pivotal Phase 2/3 clinical study (conducted in collaboration with the Children’s Oncology Group) for JZP-458, a recombinant Erwinia asparaginase product candidate, for the treatment of pediatric and adult patients with ALL or lymphoblastic lymphoma, or LBL, who are hypersensitive to E. coli-derived asparaginase products. The study continues to enroll, and we expect to submit our biologics license application, or BLA, to FDA for JZP-458 as early as the end of 2020, with an objective of launching in the U.S. in mid-2021. JZP-458 was granted Fast Track designation by ~~continuing to implement our comprehensive global development plans, including through generating additional clinical data and seeking regulatory approval~~FDA in October 2019 for ~~new indications.~~the treatment of this patient population.

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In addition, we are conducting a Phase 3 clinical trial of Xywav (JZP-258) for the ~~three~~treatment of idiopathic hypersomnia, a chronic neurological disorder that is primarily characterized by EDS that currently has no approved therapies in the U.S. We completed enrollment in this trial in the first quarter of 2020 and ~~nine months ended September 30, 2019, our total net product~~expect top-line data in the fourth quarter of 2020 and submission of a supplemental new drug application, or NDA, as early as the first quarter of 2021, with potential approval and launch as early as late 2021.

Our strategy to create shareholder value is focused on:

Strong execution driving sales increased by 14% and 11%, respectively, compared to the same periods in 2018, primarily due to an increase in Xyrem net product sales. We expect total net product sales to increase in 2019 over 2018, primarily due to expected growth in ~~sales~~our core therapy areas through leveraging our leading market position and expertise in sleep and new high growth products in oncology that address significant unmet needs;

Expanding our pipeline with external patient-centric innovation to achieve a balanced portfolio of ~~Xyrem, Vyxeos~~highly differentiated programs;

Continuing to build a flexible, efficient, and ~~Defitelio. Our ability~~productive development engine for targeted therapeutic conditions to ~~increase net product sales is subject~~identify and progress early- and mid-stage assets; and

Investing in a scalable operating model and differentiated capabilities to ~~a number of risks~~enable successful partnerships and ~~uncertainties as set forth below~~unlock further value through indication expansion and ~~under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. For additional information regarding our net product sales, see “—Results of Operations.”~~global markets.

Significant Developments During the Quarter Affecting Our Business ~~During~~

In June 2020, Jazz Investments I Limited, our wholly owned subsidiary, completed a private offering of an aggregate $1.0 billion principal amount of 2.00% exchangeable senior notes due 2026, or the ~~Quarter~~2026 Notes. We used a portion of the net proceeds from the issuance of the 2026 Notes to repurchase for cash $332.9 million aggregate principal amount of existing 1.875% exchangeable senior notes due 2021, or the 2021 Notes, through individual privately-negotiated transactions concurrently with the offering. The remaining net proceeds will be used for general corporate purposes, including additional repurchases of 2021 Notes by us from time to time.

In June 2020, Zepzelca received accelerated FDA approval for the treatment of adult patients with metastatic SCLC with disease progression on or after platinum-based chemotherapy, a product for which we have exclusive U.S. commercialization rights. In July 2020, we launched Zepzelca in the U.S. and the National Comprehensive Cancer Network added Zepzelca to the clinical practice guidelines in oncology for SCLC as a preferred treatment in patients who relapse in six months or less after prior systemic therapy and as a recommended regimen in patients who relapse more than six months after prior systemic therapy. At launch, all contracts with distributors and group purchasing organizations were executed for Zepzelca.

In July ~~2019, we acquired from Redx Pharma plc, or Redx, a pan-RAF inhibitor program~~2020, FDA approved our NDA for Xywav (formerly JZP-258), an oxybate product that contains 92% less sodium than Xyrem, for the ~~potential~~ treatment of ~~RAF~~cataplexy or EDS in narcolepsy patients seven years of age and ~~RAS mutant tumors. Under~~older. The 92% reduction of sodium translates into a reduction of approximately 1,000 to 1,500 milligrams per day for a patient prescribed an oxybate product, depending on the ~~terms of our agreement~~dose. Multiple Xywav dosing options are available for adult and pediatric patients. When patients start Xywav after sodium oxybate, Xywav treatment is initiated at the same dose and regimen as sodium oxybate (gram for gram) and titrated as needed based on efficacy and tolerability. The label for Xywav, unlike Xyrem, does not include a warning to prescribers to monitor patients sensitive to sodium intake, including patients with ~~Redx, we paid Redx $3.5 million at closing~~heart failure, hypertension or renal impairment. There is a well-accepted relationship between dietary sodium and ~~Redx is eligible to receive up to $203 million in development, regulatory and commercial milestone payments from us,~~blood pressure as well as ~~incremental tiered royalties~~published hypertension guidelines underscoring that excessive consumption of sodium is independently associated with an increased risk of stroke, cardiovascular disease and other adverse outcomes. We developed Xywav to provide a clinically meaningful benefit to patients who are prescribed an oxybate product to treat the chronic condition of narcolepsy. In approving Xywav, FDA approved a risk evaluation and mitigation strategy, or REMS, for Xywav and Xyrem. We plan to launch Xywav in ~~mid-single digit percentage based on any future net sales.~~the fourth quarter of 2020, following implementation of the REMS.

In ~~August 2019, we announced~~July 2020, Defitelio was approved by the acquisition of Cavion, Inc., a clinical-stage biotechnology company, or Cavion, for an upfront payment of $52.5 million with the potential for additional payments of up to $260.0 million upon the achievement of certain clinical, regulatory and commercial milestones, for a total potential consideration of $312.5 million. As a result of the acquisition, we added CX-8998, now named JZP-385, a modulator of T-type calcium channels,Australian Therapeutic Goods Administration for the ~~potential~~ treatment of ~~essential tremor, to our clinical pipeline. The acquisition of Cavion was accounted for as an asset acquisition because it did not meet the definition of a business.~~

In the third quarter of 2019, we began executing agreements with payor organizations, including pharmacy benefit managers, or PBMs, to ensure patient access for our products, including Sunosi and Xyrem, and to support the long-term success of our sleep franchise. These agreements include terms related to the payment of rebates and/or administrative fees on these products. VOD.

Continued Emphasis on Research and Development

During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, consistent with our strategy, we continued our focus on research and development activities within our neuroscience and oncology therapeutic areas, such as our recent expansion into movement disorders and solid tumors, and exploring and investing in adjacent therapeutic areas that could further diversify our portfolio.

Our development activities encompass all stages of development and currently include clinical testing of new product candidates and activities related to clinical improvements of, or additional indications or new clinical data for, our existing marketed products. We have also expanded into preclinical exploration of novel therapies, including precision medicines in hematology and oncology. We conduct a significant number of these activities by leveraging our growing internal research and development function, but we have also entered into collaborations with third parties for the research and development of innovative early-stage product candidates and have supported third party work seeking to perform additional clinical studies of

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our products. We also seek out investment opportunities in support of development of early- and mid-stage technologies in our ~~sleep~~therapeutic areas and ~~hematology/oncology therapeutic areas.~~

~~Our recent~~adjacencies. Through third parties, we have a number of licensing and collaboration agreements related to preclinical and clinical research and development activities ~~included the following developments:~~

~~In July 2019, we announced that we are pursuing development activities for Sunosi for the potential treatment of EDS~~ in ~~patients with major depressive disorder;~~

•

~~In August 2019, we announced that, based on the results of a Phase 1 clinical trial, we plan to commence a single-arm, pivotal Phase 2/3 clinical trial of JZP-458, a recombinant~~ ~~Erwinia~~ ~~asparaginase product candidate, for the potential treatment of ALL~~hematology and ~~lymphoblastic lymphoma, or LBL, by the end of 2019. In October 2019, the FDA granted Fast Track designation to JZP-458 for the treatment of ALL/LBL; and~~

~~In October 2019, we announced enrollment of the first patient~~ in ~~an exploratory Phase 2 clinical trial evaluating the ability of defibrotide to prevent neurotoxicity~~precision oncology, as well as in ~~patients with relapsed or refractory diffuse large B-cell lymphoma receiving chimeric antigen receptor T-cell, or CAR T-cell, therapy.~~neuroscience.

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

~~Sleep/~~Neuroscience



Product Candidates	Description
~~Submitted for Regulatory Approval~~
~~Sunosi in the European Union, or EU~~	~~EDS in OSA and EDS in narcolepsy~~
Phase 3
~~JZP-258 (oxybate; 92% sodium reduction)~~	~~Cataplexy and EDS in narcolepsy~~
~~JZP-258~~Xywav (JZP-258) (oxybate; 92% sodium reduction)	Idiopathic hypersomnia
Phase 2b
JZP-385 ~~(CX-8998)~~	Essential tremor (planned study)
~~Preclinical~~Phase 1
JZP-324	Oxybate ~~once-nightly~~extended-release formulation	~~Narcolepsy~~

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~~Hematology/~~Oncology



Product Candidates	Description
Phase 3
~~Defitelio~~	~~Prevention of VOD in high-risk patients following HSCT~~
	Vyxeos	AML or high-risk ~~myelodysplastic syndrome,~~Myelodysplastic Syndrome, or MDS ~~(AML19~~(AML18 and ~~AML 18)~~AML19) (cooperative group ~~study)~~studies)
	~~Vyxeos~~	Newly diagnosed adults with standard- and high-risk AML ~~(cooperative~~(AML Study Group cooperative group study)
~~Vyxeos~~	Newly diagnosed pediatric patients ~~(planned Children’s~~with AML (Children’s Oncology Group cooperative group study)
Zepzelca (lurbinectedin)	Relapsed SCLC (ATLANTIS) (exclusive U.S. license)
Phase 2/3
JZP-458 (recombinant Erwinia asparaginase)	ALL/LBL
Phase 2
Defitelio	Prevention of acute Graft versus Host Disease ~~following allogeneic HSCT~~
Defitelio	~~Defitelio~~	Prevention of CAR T-cell therapy-associated neurotoxicity
~~Vyxeos + venetoclax~~	~~De novo or relapsed/refractory, or R/R, AML (MD Anderson Cancer Center, or MD Anderson, collaboration study)~~
Vyxeos	High-risk MDS (European Myelodysplastic Syndromes Cooperative Group cooperative group study)
Vyxeos	~~Vyxeos~~	~~R/R AML (Children’s Oncology Group cooperative group study)~~
~~Vyxeos~~	Newly diagnosed older adults with high-risk AML (planned cooperative group study)
Vyxeos + venetoclax	~~High-risk~~De novo or relapsed/refractory, or R/R, AML ~~(planned cooperative group~~(MD Anderson collaboration study)
Phase 1
~~Vyxeos + gemtuzumab~~	~~R/R AML or hypomethylating agent failure MDS (MD Anderson collaboration study)~~
~~Vyxeos + venetoclax~~	~~Low intensity therapy for first-line, unfit AML (Phase 1b study)~~
~~Vyxeos + various targeted agents~~	~~First-line, fit AML (planned Phase 1b study)~~
Vyxeos	Low intensity dosing for higher risk MDS (MD Anderson collaboration study)
Vyxeos + other approved therapies	R/R AML or hypomethylating agent failure MDS (MD Anderson collaboration study)
	First-line, fit AML (Phase 1b study)
	Low intensity therapy for first-line, unfit AML (Phase 1b study)
IMGN632	R/R CD123+ hematological malignancies (Jazz opt-in opportunity with ImmunoGen, Inc.), or ImmunoGen)
IMGN632	~~IMGN632 +/~~+/- venetoclax/azacitidine	in CD123+ AML (Jazz opt-in opportunity with ~~ImmunoGen, Inc.;~~ImmunoGen; Phase 1b/2 study)
Preclinical
CombiPlex	~~Solid tumors candidate~~
~~CombiPlex~~	Hematology/oncology exploratory activities

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Product Candidates	Description
JZP-341 (long-acting Erwinia asparaginase)	ALL and other hematological malignancies (collaboration with Pfenex, Inc., or Pfenex)
Recombinant pegaspargase	Hematological malignancies (Jazz opt-in opportunity with Pfenex)
~~Defitelio~~	~~Exploratory activities~~
~~Exosome NRAS candidate~~	~~Hematological malignancies (collaboration with Codiak Biosciences, Inc., or Codiak)~~
~~Exosome STAT3 candidate~~	~~Hematological malignancies (collaboration with Codiak)~~
~~Exosome-based candidates~~	~~Solid tumors/hematological malignancies (collaboration with Codiak)~~
Pan-RAF inhibitor program	RAF and RAS mutant tumors (acquired from Redx Pharma, which is continuing development)
Exosome targets (NRAS, STAT3 and 3 other candidates)	Hematological malignancies/solid tumors (collaboration with Codiak BioSciences, Inc., or Codiak)
Defitelio	Exploratory activities

~~For~~In April 2020, we announced our decision to stop enrollment in our Phase 3 clinical study of defibrotide for the ~~remainder~~prevention of ~~2019~~VOD due to a determination that the study is highly unlikely to reach one of its primary endpoints. This does not impact the approved indication or other ongoing defibrotide development activities. In 2020 and beyond, we expect that our research and development expenses will continue to increase from ~~historical~~previous levels, particularly as we prepare for anticipated regulatory submissions and ~~trial~~ data read-outs from clinical trials, initiate and undertake additional clinical trials and related development work and potentially acquire rights to additional product candidates.

Operational Excellence

In addition, we remain focused on continuing to build excellence in areas that will give us a competitive advantage, including building an increasingly agile and adaptable commercialization engine and strengthening our customer-focused market expertise across patients, providers and payors. We are refining our approach to engaging our customers by strengthening alignment and integration across functions and across regions. To that end, in 2020, we have set out to make several important organizational shifts to accelerate our progress, including a more integrated approach to brand planning, a new North American regional business structure, and a new global medical affairs organization. These initiatives mark a significant operational evolution that is directly linked to our corporate strategy and are designed to better enable our teams to work collaboratively on an aligned and shared agenda. We are leveraging our differentiated operational capabilities this year in achieving three product approvals and executing our ongoing launches of Sunosi in Europe and Zepzelca in the U.S. and our planned launch of Xywav in the U.S.

COVID-19 Business Update

With the global impact of the COVID-19 pandemic, we have developed a comprehensive response strategy including establishing cross-functional response teams and implementing business continuity plans to manage the impact of the COVID-19 pandemic on our ~~current portfolio~~employees, patients and our business. In the second quarter of 2020, we experienced financial and other impacts of the pandemic, and given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, we expect that our business, financial condition, results of operations and growth prospects will continue to be adversely affected in future quarters.

We support broad public health strategies designed to prevent the spread of COVID-19 and are focused on the health and welfare of our employees. In accordance with guidance issued by the Centers for Disease Control and Prevention, the World Health Organization and local authorities, in March 2020, our global workforce, including field-based teams, transitioned to working remotely. Our global organization has mobilized to enable our employees to accomplish our most critical goals in new ways, leveraging positivity, innovation and prioritization of resources to overcome new obstacles. In addition to rolling out new technologies and collaboration tools, we have implemented processes and resources to support our employees in the event an employee receives a positive COVID-19 diagnosis. We have developed and are implementing plans to reopen our sites and enable our employees to return to work in our global offices, the field and our manufacturing facilities, which plans take into account applicable public health authority and local government guidelines and which are designed to ensure community and employee safety. However, the effects of the COVID-19 pandemic continue to rapidly evolve and even if our employees more broadly return to work in our global offices, the field and our manufacturing facilities, we may have to resume a more restrictive remote work model, whether as a result of spikes or surges in COVID-19 infection or hospitalization rates or otherwise.

Commercialization

With respect to our commercialization activities, the evolving effects of the COVID-19 pandemic are having a negative impact on demand, new patient starts and treatments for our products, ~~including recent~~primarily due to the inherent limitations of telemedicine and a reprioritization of healthcare resources toward COVID-19. Due to the nature of the pandemic, we are not able to accurately predict the duration or extent of these impacts on demand for our products. In March 2020, we transitioned our

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~~acquisitions~~field-based sales, market access, reimbursement and ~~potentially acquire rights to additional product candidates. Our ability~~medical employees out of the field and suspended work-related travel and in-person customer interactions. We utilized technology to continue to ~~undertake~~engage healthcare professionals and other customers virtually to support patient care. In late June 2020, as clinics and institutions began to allow in-person interactions pursuant to local health authority and government guidelines, our ~~planned development activities,~~field teams resumed in-person interactions with healthcare professionals and clinics. The level of renewed engagement varies by account, region and country and may be adversely impacted in the future as a result of the continuing impact of the COVID-19 pandemic.

For Xyrem, the closure of sleep labs across the U.S. has resulted in reduced access to sleep testing. Toward the end of the first quarter of 2020, we saw a decline in prescribers’ ability to diagnose new narcolepsy patients and a related decline in new patients starting on therapy. Although new Xyrem patient enrollments trended upward in the latter half of the second quarter of 2020, we continue to expect that delays in obtaining a narcolepsy diagnosis will have a negative impact on new Xyrem patient enrollments in future quarters. Given the long-term impact of the COVID-19 pandemic, we may also potentially see a negative impact on patients’ ability to pay for Xyrem prescriptions. For Sunosi, the impact on demand is primarily related to the reduced ability of our field-based teams to interact with prescribers and patients’ inability to meet with their healthcare providers during this time. As a result, we have seen slower than expected growth of Sunosi prescribers and new patient starts in the U.S. We also anticipate that pricing and reimbursement reviews by certain European regulatory authorities may take longer in certain countries due to the pandemic, which could delay our rolling Sunosi launch in those European Union, or EU, member states.

In the second quarter of 2020, demand for Defitelio was impacted by a reduction in the number of hematopoietic stem cell transplants performed due to COVID-19 related impacts, including the reprioritization of healthcare resources and related delays, postponements or suspensions of certain medical procedures such as stem cell transplants. Demand for Vyxeos in the second quarter of 2020 was also impacted by a shift toward oral or less intensive outpatient AML treatments due to COVID-19, which is directly negatively impacting, or delaying, the use of Vyxeos, which prescribers are still primarily utilizing in inpatient settings. While we observed a recovery in demand for Defitelio and Vyxeos toward the end of the second quarter, we continue to expect that the ongoing impacts of the COVID-19 pandemic will have a negative impact on utilization of Defitelio and Vyxeos. Since the launch of Zepzelca in July 2020, we are experiencing strong initial physician reception and uptake of Zepzelca across academic and community accounts, and our sales force is actively engaging with target prescribers through live and virtual interactions.

We have also seen an upward trend in demand for patient financial assistance programs since the end of the first quarter of 2020. Depending on the ultimate duration and severity of the COVID-19 pandemic and the extent of a global economic slowdown, widespread unemployment and resulting loss of employer-sponsored insurance coverage, we may experience an increasing shift from commercial payor coverage to government payor coverage or increasing demand for patient assistance and/or free drug programs, which could adversely affect net revenue.

Supply Chain

We currently expect to have adequate global supply of Xyrem, Sunosi, Defitelio, Vyxeos and Zepzelca for the remainder of 2020, as well as adequate commercial product availability for Xywav to support the ~~success~~planned U.S. launch in the fourth quarter of 2020. However, the manufacturer of Erwinaze continues to have supply disruptions unrelated to the impact of the COVID-19 pandemic, and we are experiencing supply disruptions of Erwinaze globally and expect to continue to experience supply disruptions globally for the remainder of 2020.

Our manufacturing facility in Athlone, Ireland, which produces Xyrem and Xywav, continues to be operational with only office-based staff working remotely. In March 2020, we temporarily ceased operations at our Villa Guardia, Italy manufacturing facility, which produces defibrotide, to ensure the safety of our employees and communities in northern Italy. We reopened the facility in the second quarter of 2020 taking into account applicable public health authority and local government guidelines as well as employee safety, and the facility has now resumed operations with only office-based staff working remotely. If the impacts of the COVID-19 pandemic become more severe and begin to impact supply of manufacturing materials or essential distribution systems such as general delivery services, or require us or our suppliers to again cease or restrict operations at our respective manufacturing facilities, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our products, which would adversely impact our ability to generate sales of and revenues from our approved products.

Research and Development

With respect to our clinical trial activities, we have taken measures to implement remote and virtual approaches, including remote data monitoring where possible, to maintain patient safety and trial continuity and to preserve study integrity. We have seen limited COVID-19-related impact to our mid- and late-stage clinical trial activity, despite delays in initiating trial sites. We temporarily suspended two of our healthy volunteer clinical development programs, JZP-385 and JZP-324, in the interest of volunteer safety, and expect to restart these clinical trials in August 2020. While it has not been the case thus far, we could still see an impact on the ability to supply study drug, report trial results, or interact with regulators, ethics committees or

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other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the continuing impact of the COVID-19 pandemic. If these effects become more severe, we could experience significant disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

Corporate Development and Other Financial Impacts

With our strong cash balance and positive cash flow and our recent issuance of $1.0 billion principal amount of 2026 Notes, we anticipate having sufficient liquidity to make planned investments in our business in support of our long-term growth strategy. However, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments. The effects of the pandemic could also impact our ability to do in-person due diligence, negotiations, and other interactions to identify new opportunities.

While we expect the COVID-19 pandemic to adversely affect our business operations and financial results, the extent of the impact on our ability to generate sales of and revenues from our approved products, execute on new product launches, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our ordinary shares, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration and severity of the pandemic, governmental “stay-at-home” orders and travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Ireland and other countries, and the effectiveness of actions taken globally to contain and treat the disease. For example, the inability of our workforce to return to office and field-based work and the ongoing stress and reprioritization within the healthcare systems in our key markets may require us to reassess the timing and scope of key business activities for the year, including with respect to our ability to successfully launch Zepzelca and Xywav.

Corporate Response

The COVID-19 pandemic has caused a significant burden on health systems globally and has highlighted the need for companies to evaluate existing therapies to assess if they can be utilized beyond their current indications to treat COVID-19 as well as consider developing new therapies. We have accelerated our efforts to study, build expertise and generate data around defibrotide in the treatment of acute respiratory distress syndrome, a severe and relatively common symptom of COVID-19. We have received and granted requests for investigator-sponsored trials, or ISTs, to evaluate the use of defibrotide in COVID-19 patients experiencing respiratory distress. Currently, two Phase 2 programs are ~~subject~~in progress to evaluate the potential use of defibrotide in COVID-19 patients: an IST in Spain for the prevention and treatment of respiratory distress and cytokine release syndrome and a ~~number~~trial in Italy to evaluate the reduction in the rate of ~~risks~~respiratory failure in patients with COVID-19 pneumonia.

In addition, we are supporting our local communities and ~~uncertainties,~~patient-focused organizations in COVID-19 relief efforts including through corporate donations to charitable organizations providing food and medical relief to our communities in which we operate in Italy, Philadelphia and the ~~risk factors under~~San Francisco Bay Area, and other localities where the ~~headings “Risks Related~~needs related to ~~Our Business”~~the impact of COVID-19 are greatest. We are engaging with patient advocacy organizations to better understand the impact of COVID-19 and ~~“Risks Related~~working to ~~Our Industry” in Part II, Item 1A~~ensure that patients living with sleep disorders and hematology and oncology conditions continue to have access to treatments and that their other needs are addressed given the impact of ~~this Quarterly Report~~COVID-19 on ~~Form 10-Q.~~the healthcare system. We are committed to enabling our employees to give back, including allowing licensed healthcare practitioners employed by us to support local response efforts.

Other Challenges, Risks and Trends Related to Our Business

Our business is substantially dependent on Xyrem. Xyrem is our largest selling product, and our financial results are significantly influenced by sales of Xyrem, which were 80% and 77% of our net product sales for the three and nine months ended September 30, 2019, respectively, and 75% of our net product sales for the year ended December 31, 2018. Our future plans assume that sales of Xyrem will increase, but thereThere is no guarantee that we can maintain sales of Xyrem at or near current levels, or that Xyrem sales will continue to grow. We have periodically increased the price of Xyrem, most recently in ~~July 2019,~~January 2020, and there is no guarantee that we will ~~be able to~~ make similar price adjustments in the future or that price adjustments we have taken or may take in the future will not negatively affect Xyrem sales volumes and ~~revenues from Xyrem.~~

Although Xyrem is protected by patents covering its manufacture, formulation, distribution system and method of use, nine companies have sent us notices that they had filed abbreviated new drug applications, or ANDAs, seeking approval to market a generic version of Xyrem, and we have filed and settled patent lawsuits with all nine companies. To date, the FDA has approved or tentatively approved three of these ANDAs, and we believe that it is likely that the FDA will approve or tentatively approve additional ANDAs. In connection with the ANDA settlement agreements, we granted four of the ANDA filers the right to sell an authorized generic version of Xyrem, or an AG Product, and we granted each of the nine ANDA filers a license to launch its own generic sodium oxybate product. The actual timing of the launch of an AG Product or generic sodium oxybate product is uncertain because the launch dates of the AG Products and generic sodium oxybate products under our settlement agreements are subject to acceleration under certain circumstances.revenues. In the absence of any circumstances triggering acceleration, the earliest launch of an AG Product would be January 1, 2023. For a further description of the settlement agreements, including a more complete description of potential dates of market entry for an AG Product(s) and generic sodium oxybate product(s) and circumstances that might trigger acceleration of such dates, see the risk factor under the heading “~~The introduction of new products in the U.S. market that compete with, or otherwise disrupt the market for,~~future, we expect Xyrem ~~would adversely affect sales of Xyrem”~~ ~~in Part II, Item 1A of this Quarterly Report on Form 10-Q.~~

~~In addition~~ to face competition from generic and authorized generic versions of sodium oxybate pursuant to the settlement agreements we have entered into with multiple abbreviated new drug application filers. Generic competition can decrease the prices at which Xyrem weis sold and ~~others have launched and~~the number of prescriptions written for Xyrem. Xyrem may ~~in the future launch products as treatment options in cataplexy and/or EDS in patients with narcolepsy, including~~also face increased competition from other branded sodium oxybate products and other new and existing branded market entrants. ~~For example, Avadel Pharmaceuticals plc is conducting a Phase 3 clinical trial~~

As for other products and product candidates in our neuroscience therapeutic area, we obtained approval of Sunosi in the U.S. and EU, and most recently, Xywav in the U.S. Our future plans assume that Xywav, with its reduction in sodium from

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Xyrem, absence of a ~~once-nightly formulation of~~ sodium ~~oxybate which uses its proprietary technology for~~warning and multiple dosing options, will become the treatment of ~~EDS~~choice for physicians who have patients who can benefit from oxybate treatment, including current Xyrem patients and ~~cataplexy in~~ patients ~~with narcolepsy, and has indicated that it intends~~who previously were not prescribed Xyrem, including those patients for whom sodium content is a concern. If we are unable to ~~seek approval of its product candidate in the U.S. under a Section 505(b)(2) new drug application,~~successfully commercialize Sunosi or ~~NDA, approval pathway. Other companies may also develop a sodium oxybate~~Xywav, or ~~similar product using, for example, an alternative formulation or a different delivery technology and pursue a similar regulatory approval strategy in the future.~~

~~Non-oxybate products intended for the treatment of EDS or cataplexy in narcolepsy, including new market entrants, even~~ if ~~not directly competitive with Xyrem, could have the effect of changing treatment regimens and payor coverage of Xyrem, and indirectly materially and adversely affect~~ sales of ~~Xyrem. Prescribers often prescribe stimulants or wake-promoting agents for treatment of EDS,~~Sunosi and ~~anti-depressants for cataplexy, before or instead of prescribing Xyrem, and payors often require patients to try such medications before they~~Xywav do not reach the levels we expect, our anticipated revenue from our neuroscience therapeutic area will ~~cover Xyrem. It is possible that additional branded or generic products that treat symptoms of narcolepsy will also~~ be prescribed before or instead of Xyrem, or that payors will require patients to try such products before they will cover Xyrem, or that payors will exclude Xyrem from formulary coverage in favor of a newly-launched product. Our product Sunosi,negatively affected, which we launched in July 2019, is an example of a new market entrant recently approved by the FDA to improve wakefulness in adult patients with EDS associated with narcolepsy or OSA. In addition, Harmony Biosciences LLC recently announced that its product, pitolisant, was approved by the FDA in August 2019 for the treatment of EDS in adult patients with narcolepsy and is expected to be commercially available in the U.S. in the fourth quarter of 2019. Pitolisant has also been approved and marketed in Europe to treat adult patients with narcolepsy with or without cataplexy.

The receipt of marketing approval and commercialization of an alternative product approved in the U.S. for the treatment of narcolepsy patients could negatively impact our ability to maintain and grow sales of Xyrem, including due to payor actions taken in response to the disruption of the narcolepsy market. This could have the additional impact of potentially triggering acceleration of market entry of the AG Products or other generic sodium oxybate products under our ANDA litigation settlement agreements. We expect that the approval and launch of any other sodium oxybate or alternative product that treats narcolepsy, or the launch of an AG Product or other generic version of Xyrem, couldwould have a material adverse effect ~~on our sales of and revenues from Xyrem and~~ on our business, financial condition, results of operations and growth prospects.

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~~Future Xyrem sales may also be impacted by changes to, or uncertainties around, regulatory restrictions, including changes~~In addition to our ~~current Xyrem risk evaluation~~neuroscience products and ~~mitigation strategy, or REMS, which requires, among other things, that Xyrem be distributed~~product candidates, we are commercializing a portfolio of oncology products, including Defitelio, Erwinaze, Vyxeos and Zepzelca. An inability to effectively commercialize Defitelio, Vyxeos and Zepzelca and to maximize their potential where possible through successful research and development activities could have a ~~single pharmacy. We cannot predict whether the FDA will request, seek to require or ultimately require modifications to, or impose additional requirements~~material adverse effect on ~~the Xyrem REMS, including in connection with the submission~~our business, financial condition, results of applications for new oxybate products, new oxybate indications or the introduction of authorized generics, or whether the FDA will approve modifications to the Xyrem REMS that we consider warranted in connection with the submission of applications for new oxybate products. We may face pressure to further modify the Xyrem REMS or to license or share intellectual property pertinent to the Xyrem REMS, including proprietary data required for the safe distribution of sodium oxybate, in connection with the FDA’s approval of the generic sodium oxybate REMS or otherwise. Any such modifications to the Xyrem REMS approved, required or rejected by the FDA could make it more difficult or expensive for us to distribute Xyrem, make distribution easier for sodium oxybate competitors, disrupt continuity of care for Xyrem patients and/or negatively affect sales of Xyrem. We also cannot predict the impact of future implementation of a generic sodium oxybate REMS on the Xyrem REMS.operations and growth prospects.

~~Erwinaze/Erwinase.~~ Sales of Erwinaze/Erwinase (which we refer to in this report as Erwinaze unless otherwise indicated or the context otherwise requires), were 6% and 8% of our net product sales for the three and nine months ended September 30, 2019, respectively, and 9% for the year ended December 31, 2018. Erwinaze is licensed from and manufactured by a single source, Porton Biopharma Limited, or PBL, a company that is wholly owned by the UK Department of Health and Social Care. Our license and supply agreement with Porton Biopharma Limited, a limited liability company wholly owned by the UK Secretary of State for Health, or PBL, which includes ~~our~~an exclusive right to market, sell or distribute Erwinaze, an exclusive license to Erwinaze trademarks, and a non-exclusive license to PBL’s manufacturing know-how, ~~expires~~will expire on December 31, 2020. ~~We and~~In April 2020, PBL announced that it had ~~been engaged in discussions related to entry~~entered into ~~a replacement~~an agreement ~~to extend the term of our commercial relationship past 2020, but we did not reach agreement. Unless we and PBL enter into~~with a new partner to commercialize and distribute Erwinaze after our license and supply agreement expires. As a result, our ability to generate revenue through Erwinaze sales in the future will be adversely impacted. Under our agreement with PBL, we ~~will lose our rights to Erwinaze effective December 31, 2020, other than our~~have the right to sell certain Erwinaze inventory for a post-termination sales period of 12 ~~months.~~months and retain ownership of certain data, know-how and other property interests, including the BLA for Erwinaze in the U.S. and marketing authorizations for Erwinase in several other countries. We intend to work with PBL to address business transition post-termination to ensure continuity of patient care. However, we cannot compel PBL to work with us on ensuring an orderly transition, or to recognize our continuing rights. In ~~such event,~~the past, we have had disagreements with PBL over product quality and supply, the costs of remediation, and other rights and obligations under the existing contract. Our ability to supply the market and generate future sales of product including product we are entitled to receive post-termination during 2021, will depend on PBL’s ability to address Erwinaze manufacturing and quality issues and on the level of product supply PBL provides us before and after the termination date. We may not receive Erwinaze product that we expect from PBL to be able to supply the market through 2020 or in the post-termination sales period and may incur costs, including time and distraction of relevant employees, associated with resolution of any disputes with PBL. If PBL is unable to remediate the quality and manufacturing issues that have required oversight by us in order to get product to patients in the U.S., Erwinaze shortages may continue to increase, and we could suffer reputational harm based on our historical and current association with the product. If we are unable to replace the future product sales we ~~would~~will lose from Erwinaze, ~~which in 2018 totaled $174.7 million, and~~ our business, financial condition, results of operations and growth prospects would be materially adversely affected. ~~In addition,~~

A key aspect of our growth strategy is our continued investment in our evolving and expanding research and development activities. If we ~~cannot predict whether and~~are not successful in the clinical development of these or other product candidates, if we are unable to ~~what extent uncertainty related to~~obtain regulatory approval for our ~~rights to, and availability of, Erwinaze after 2020 will negatively impact~~product candidates in a timely manner, or at all, or if sales of ~~and revenues from this product.~~

~~A continuing and significant challenge to maintaining sales of Erwinaze and a barrier to increasing sales is PBL’s inability to consistently supply~~an approved product adequate to meet market demand. All Erwinaze that PBL has been able to supply is currently completely absorbed by demand for the product. In addition, PBL is subject to a January 2017 warning letter issued by the FDA citing significant violations of the FDA’s current Good Manufacturing Practices, or cGMP. PBL’s product quality and manufacturing issues have resulted, and continue to result, in disruptions in our ability to supply markets from time to time and have caused, and may in the future cause, us to implement batch-specific, modified product use instructions. We have been experiencing, and continue to experience, supply disruptions globally and expect further supply disruptions for the remainder of 2019 and in 2020. These supply disruptions will continue to adversely impact our ability to generate sales of and revenues from Erwinaze and our business, financial condition, results of operations and growth prospects could be materially adversely affected.

~~Defitelio/defibrotide.~~ Sales of Defitelio/defibrotide were 7% and 8% of our net product sales for the three and nine months ended September 30, 2019, respectively, and 8% for the year ended December 31, 2018. Our ability to maintain and grow sales and to realize the anticipated benefits from our investment in Defitelio is subject to a number of risks and uncertainties, including continued acceptance by hospital pharmacy and therapeutics committees in the U.S., the continued availability of favorable pricing and adequate coverage and reimbursement, the limited experience of, and need to educate, physicians in recognizing, diagnosing and treating VOD, and the limited size of the population of VOD patients who are indicated for treatment with Defitelio (particularly if changes in HSCT treatment protocols reduce the incidence of VOD diagnosis and demand for Defitelio). If sales of Defitelio do not reach the levels we expect, our anticipated revenue from ~~the~~our product ~~will be negatively affected and our business, financial condition, results of operations and growth prospects could be materially adversely affected.~~

~~Vyxeos~~. Sales of Vyxeos were 6% of our net product sales for the three and nine months ended September 30, 2019 and 5% of our net product sales for the year ended December 31, 2018. We began selling Vyxeos in the U.S. in August 2017 following NDA approval. In August 2018, the European Commission, or EC, granted marketing authorization for Vyxeos. We are continuing our rolling launch of Vyxeos in the EU and are continuing to make pricing and reimbursement submissions in EU member states.

Our ability to realize the anticipated benefits from our investment in Vyxeos is subject to a number of risks and uncertainties, including acceptance by hospital pharmacy and therapeutics committees in the U.S., the EU and other countries, the availability of adequate coverage, pricing and reimbursement approvals, competition from new and existing products and potential competition from products in development, and delays or problems in the supply or manufacture of Vyxeos. If sales

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~~of Vyxeos do not reach the levels we expect, our anticipated revenue from the product will~~candidates would be negatively affected, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~Sunosi/solriamfetol.~~ ~~The FDA approved Sunosi inMarch 2019, and we launched Sunosi in July 2019.~~ In ~~the fourth quarter of 2018, we submitted an MAA~~addition to ~~the EMA for Sunosi. We cannot predict whether our Sunosi MAA will be approved in a timely manner, or at all. Our ability to realize the anticipated benefits from our~~continued investment in ~~Sunosi is subject to a number of risks and uncertainties, including, among other things, market acceptance of Sunosi, including~~ our ability, in a competitive retail pharmacy market, to differentiate Sunosi from other branded and generic products that treat EDS in patients with narcolepsy with which physicians are more familiar; the availability of adequate formulary positions and pricing and adequate coverage and reimbursement by government programs and other third party payors, including the impact of any delays in coverage decisions by payors; restrictions on permitted promotional activities based on any additional limitations on the labeling for the product that may be required by the FDA in the future and any such limitations that may be required by the EC or other regulatory authority on any approved labeling; delays or problems in the supply or manufacture of Sunosi; and our ability to satisfy the FDA’s post-marketing requirements and other post-marketing requirements or commitments, if any, imposed by the EC in connection with its potential marketing authorization. If we are unable to successfully launch and commercialize Sunosi in the U.S., if we are unable to obtain approval of our Sunosi MAA in a timely manner, or at all, if the EC requires product labeling that negatively impacts patient, physician or payor acceptance of the product, or if sales of Sunosi in the U.S. and in the EU (if approved) do not reach the levels we expect, our anticipated revenue from the product will be negatively affected, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~JZP-258.~~ In March 2019, we announced positive top-line results from our Phase 3 study evaluating the efficacy and safety of JZP-258 for the treatment of cataplexy and EDS in adult patients with narcolepsy and presented additional data from this study publicly at an international medical conference in September 2019. We expect to submit an NDA for this product in January 2020 and plan to redeem our priority review voucher in connection with this submission. We cannot predict whether we will be able to submit our planned NDA in a timely manner or at all. Any failure or delay in successfully completing necessary clinical trials and conducting other activities, including chemistry, manufacturing and controls activities, that are required to complete our planned NDA submission and obtain regulatory approval, could materially and adversely affect our growth prospects. If we submit an NDA to the FDA for approval and the FDA determines that our safety or efficacy data do not warrant marketing approval, we may be required to conduct additional clinical trials, which could be costly and time-consuming, or we may not be able to commercialize JZP-258, in which event we would not receive any return on our investment.

~~Other Challenges and Risks~~. We anticipate that we will continue to face a number of other challenges and risks to our business and our ability to execute our strategy for the remainder of 2019 and beyond. Some of these challenges and risks are specific to our business, and others are common to companies in the pharmaceutical industry with development and commercial operations. In this regard, a key aspect of our growth strategy is our continued and growing investment in research and development ~~activities. Our ability~~pipeline, we intend to ~~successfully develop~~grow our business by acquiring or in-licensing, and developing, including with collaboration partners, additional products and product candidates ~~for one or more indications as well as our ability to identify new indications for existing products~~that we believe are ~~subject to a number of risks~~highly differentiated and uncertainties, such as the difficulty and uncertainty of pharmaceutical product development and the uncertainty of clinical success, including the risk that results from preclinical studies and/or early clinical trials may not be predictive of results obtained in later and larger clinical trials. In addition, obtaining regulatory approval for product candidates is subject to the inherent uncertainty associated with the regulatory approval process, especially as we continue to increase investment in our product pipeline development projects and undertake planned regulatory submissions for our product candidates.

~~We also seek to expand our business through corporate development activities. Our ability~~have significant commercial potential. Failure to identify and acquire, in-license or develop additional products or product candidates, ~~to grow our business are subject to a number of risks and uncertainties, including~~successfully manage the risks associated with ~~business combination~~integrating any products or product ~~or product candidate acquisition transactions, such as the challenges inherent in the integration of acquired businesses with~~candidates into our ~~historical business, the increase in geographic dispersion among our centers of operation and~~portfolio or the risks ~~that we may acquire~~arising from anticipated and unanticipated ~~liabilities along~~problems in connection with ~~acquired businesses~~an acquisition or otherwise fail to realize the anticipated benefits (commercial or otherwise) from such transactions. In addition, we may not realize the anticipated benefits of our collaborations with third parties for the acquisition and development of product candidates, including asin-licensing, could have a ~~result of the inability of a collaboration partner to obtain and maintain adequate funding to pursue development activities or our inability to agree with our collaboration partners~~material adverse effect on our ~~respective contractual rights.~~business, results of operations and financial condition.

We are increasingly experiencing pressure from third party payors to agree to discounts, rebates or restrictive pricing terms for Xyrem. We ~~also~~ need to ~~obtain adequate formulary positions~~maintain payor coverage of Sunosi and ~~reimbursement~~intend to obtain coverage for ~~newly-launched products such as Sunosi.~~Xywav. Entering into agreements with ~~payors~~pharmacy benefit managers, or PBMs, and payors to ensure patient access ~~may~~has and will likely continue to result in higher gross to net deductions for future periods for these products. We cannot guarantee we will be able to agree to commercially reasonable terms with PBMs and other third party payors, or that we will be able to ensure patient access to ~~Xyrem, Sunosi or~~ our ~~other sleep franchise products.~~

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our products on institutional formularies. We also need to obtain adequate formulary positions and institutional access for newly-launched oncology products such as Zepzelca and future products, if approved, such as JZP-458. In addition to increasing pricing pressure ~~from,~~ and restrictions on reimbursement imposed by ~~governmental and private third party~~ payors, ~~due to the attention being paid globally to~~ healthcare cost containment has received global attention, and drug pricing by pharmaceutical companies is currently, and is expected to continue to be, ~~under~~subject to close scrutiny by both federal and state ~~governments, including with respect to companies that have increased the price of products after acquiring those products from other companies.~~governments. If healthcare policies or reforms intended to curb healthcare costs are adopted or if we experience negative publicity with respect to pricing of our products or the pricing of pharmaceutical drugs generally, the prices that we charge for our products ~~including Xyrem,~~ may be affected, our commercial opportunity may be limited and/or our revenues from sales of our products may be negatively impacted.

~~In addition,~~Finally, business practices by pharmaceutical companies, including product formulation improvements, patent litigation settlements, and REMS programs, have increasingly drawn public scrutiny from ~~the U.S. Congress, the Federal Trade Commission~~legislators and ~~the FDA,~~regulatory agencies, with

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allegations that such programs are used as a means of improperly blocking or delaying competition. If we become the subject of any future government investigation with respect to ~~drug pricing or other~~our business practices, including as they relate to the Xyrem REMS, the launch of Xywav, our Xyrem patent litigation settlement agreements or otherwise, we could incur significant expense and could be distracted from operation of our business and execution of our strategy.

Any of these risks and uncertainties could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, to the extent the COVID-19 pandemic continues to adversely affect our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described above. All of these risks and uncertainties are discussed in greater detail, along with other risks and uncertainties, in “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form ~~10-Q.~~10‑Q.

Results of Operations

The following table presents our revenues and expenses (in thousands, except percentages):


	Three Months Ended September 30,				Increase/		Nine Months Ended September 30,					Increase/		Three Months Ended June 30,					Increase/		Six Months Ended June 30,					Increase/
	2019		2018		(Decrease)		2019			2018		(Decrease)		2020		2019			(Decrease)		2020		2019			(Decrease)
Product sales, net	$	532,321	$	465,197	14	%	$	1,559,075		$	1,402,139	11	%	$	558,203	$	523,423		7	%	$	1,088,408	$	1,026,754		6	%
Royalties and contract revenues	5,381		4,176		29	%	20,946			12,326		70	%	4,233		10,710			(60	)%	8,754		15,565			(44	)%
Cost of product sales (excluding amortization of intangible assets)	31,400		26,574		18	%	92,582			95,207		(3	)%
Cost of product sales (excluding amortization of acquired developed technologies)														28,008		27,676			1	%	56,665		61,182			(7	)%
Selling, general and administrative	178,706		155,873		15	%	522,667			521,665		—	%	191,406		176,014			9	%	399,806		343,961			16	%
Research and development	79,855		51,160		56	%	202,344			169,959		19	%	78,922		62,384			27	%	165,029		122,489			35	%
Intangible asset amortization	62,863		46,989		34	%	181,324			154,955		17	%	62,974		61,576			2	%	125,821		118,461			6	%
Impairment charges	—		—		N/A(1)		—			42,896		N/A(1)
Impairment charge														—		—			N/A(1)		136,139		—			N/A(1)
Acquired in-process research and development	51,775		—		N/A(1)		109,975			—		N/A(1)		3,000		2,200			36	%	205,250		58,200			253	%
Interest expense, net	17,861		18,920		(6	)%	54,017			59,171		(9	)%	26,210		18,234			44	%	44,706		36,156			24	%
Foreign exchange loss	1,033		756		37	%	3,577			5,181		(31	)%	464		1,933			(76	)%	1,596		2,544			(37	)%
Loss on extinguishment and modification of debt	—		—		N/A(1)		—			1,425		N/A(1)
Income tax provision (benefit)	10,903		19,348		N/A(1)		(38,631		)	75,018		N/A(1)		54,754		(78,650		)	N/A(1)		3,467		(49,534		)	N/A(1)
Equity in loss of investees	1,030		437		136	%	2,791			1,360		105	%	1,897		868			119	%	1,715		1,761			(3	)%

_____________________________


(1)	Comparison to prior period not meaningful.

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Revenues

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


	Three Months Ended September 30,				Increase/		Nine Months Ended September 30,				Increase/		Three Months Ended June 30,				Increase/		Six Months Ended June 30,				Increase/
	2019		2018		(Decrease)		2019		2018		(Decrease)		2020		2019		(Decrease)		2020		2019		(Decrease)
Xyrem	$	425,644	$	357,251	19	%	$	1,207,173	$	1,030,036	17	%	446,808		413,212		8	%	854,683		781,529		9	%
Defitelio/defibrotide													42,714		46,055		(7	)%	90,146		87,555		3	%
Erwinaze/Erwinase	34,024		41,134		(17	)%	122,545		150,474		(19	)%	32,683		27,622		18	%	70,415		88,521		(20	)%
Defitelio/defibrotide	37,604		36,177		4	%	125,159		111,736		12	%
Vyxeos	29,581		21,038		41	%	89,886		75,217		20	%	26,568		31,362		(15	)%	59,288		60,305		(2	)%
Sunosi	987		—		N/A(1)		987		—		N/A(1)		8,578		—		N/A(1)		10,502		—		N/A(1)
Other	4,481		9,597		(53	)%	13,325		34,676		(62	)%	852		5,172		(84	)%	3,374		8,844		(62	)%
Product sales, net	532,321		465,197		14	%	1,559,075		1,402,139		11	%	558,203		523,423		7	%	1,088,408		1,026,754		6	%
Royalties and contract revenues	5,381		4,176		29	%	20,946		12,326		70	%	4,233		10,710		(60	)%	8,754		15,565		(44	)%
Total revenues	$	537,702	$	469,373	15	%	$	1,580,021	$	1,414,465	12	%	$	562,436	$	534,133	5	%	$	1,097,162	$	1,042,319	5	%

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(1)	Comparison to prior period not meaningful.

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Product Sales, Net

Xyrem product sales increased in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same periods in ~~2018~~2019 primarily due to a higher average net selling price and, to a lesser extent, an increase in sales ~~volume.~~volume, partially offset by higher gross to net deductions. Price increases were instituted in July 2019 and January ~~2019.~~2020. Xyrem product sales volume increased by 6%5% in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020, compared to the same periods in ~~2018~~2019 primarily driven by an increase in the average number of patients on Xyrem. Defitelio/defibrotide product sales decreased in the three months ended June 30, 2020 compared to the same period in 2019 primarily due to lower sales volumes which were negatively impacted by the reduction in the number of hematopoietic stem cell transplants performed due to the COVID-19 pandemic as hospitals managed critical resources including intensive care beds. Defitelio/defibrotide product sales increased in the six months ended June 30, 2020 compared to the same period in 2019 primarily due to higher sales volumes. Erwinaze/Erwinase product sales increased in the three months ended June 30, 2020 compared to the same period in 2019 primarily due to the timing of availability of supply. Erwinaze/Erwinase product sales decreased in the six months ended June 30, 2020 compared to the same period in 2019 primarily due to limited availability of inventory from the manufacturer. Ongoing supply challenges continue to negatively impact the timing of and our ability to supply Erwinaze to the market. We are experiencing supply disruptions of Erwinaze globally and expect to continue to experience supply disruptions globally through the rest of the year. Vyxeos product sales decreased in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same periods in ~~2018~~2019 primarily ~~due to~~driven by a decrease in ~~product availability. Ongoing supply challenges at PBL continue~~sales volumes in the U.S. which were negatively impacted by recommendations from oncology organizations to ~~negatively impact our ability~~treat patients with oral oncolytics when possible to ~~supply the market. We have been experiencing,~~avoid hospitalizations for high risk cancer patients and ~~continue to experience, supply disruptions globally and expect further supply disruptions during 2019 and 2020. Defitelio/defibrotide~~preserve intensive care beds for patients with COVID-19. Sunosi product sales ~~increased~~were $8.6 million and $10.5 million in the three and ~~nine~~six months ended ~~September~~June 30, 2019 compared to the same periods in 2018 primarily due to higher sales volumes as a result of increased use by transplant centers that treat adult and pediatric patients. Vyxeos product sales increased2020, respectively. Sunosi launched in the three and nine months ended September 30, 2019 compared to the same periods in 2018 following the commercial launch in the EU in September 2018. Sunosi product sales in the three and nine months ended September 30, 2019 were $1.0 million following its U.S. ~~launch~~ in July ~~2019. Other product sales decreased~~2019 and the European rolling launch commenced in ~~the three and nine months ended September 30, 2019 compared to the same periods~~Germany in ~~2018 primarily due to the sale of our rights to Prialt to TerSera Therapeutics LLC, or TerSera, in September 2018.~~May 2020. We expect total product sales for 2020 will ~~increase in~~be higher than 2019 ~~over 2018,~~ primarily due to ~~expected~~ growth in sales of Xyrem ~~Vyxeos~~ and ~~Defitelio.~~Sunosi, as well as product sales of Zepzelca.

Royalties and Contract Revenues

Royalties and contract revenues ~~increased~~decreased in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same periods in ~~2018~~2019 primarily due to ~~higher contract~~lower milestone revenues from out-licensing agreements. We expect royalties and contract revenues to ~~increase~~decrease in ~~2019~~2020 compared to ~~2018,~~2019 primarily due to ~~higher contract~~lower milestone revenues from out-licensing arrangements.

Cost of Product Sales

Cost of product sales increased in the three months ended ~~September~~June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 primarily due to changes in product mix. Cost of product sales decreased in the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 primarily due to changes in product mix. Gross margin as a percentage of net product sales was ~~94.1%~~95.0% and 94.8% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020, respectively, compared to ~~94.3%~~94.7% and ~~93.2%, respectively,~~94.0% for the same periods in ~~2018.~~2019. We ~~do not~~ expect that our gross margin as a percentage of net product sales towill not change materially in ~~2019~~2020 compared to ~~2018.~~

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2019.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased in the three and six months ended ~~September~~June 30, ~~2019~~2020 compared to the same ~~period~~periods in ~~2018~~2019 primarily due to ~~higher expenses~~increased investment in sales, marketing and launch activities related to ~~the launch of Sunosi in the U.S., an increase in compensation-related expenses driven by higher headcount,~~our priority products and product candidates, as well as an increase in other expenses related to the expansion ~~and support~~ of our business. Selling, general and administrative expenses in the nine months ended September 30, 2019 were in line with the same period in 2018 as higher expenses related to the launch of Sunosi in the U.S., an increase in compensation-related expenses driven by higher headcount, and an increase in other expenses related to the expansion and support of our business, were offset by a loss contingency of $57.0 million recorded in the 2018 period. In April 2019, we finalized a settlement agreement with the U.S. Department of Justice and the Office of Inspector General. For a further description of this matter, see the risk factors under the heading “Other Risks Related to Our Business and Industry” in Part II, Item 1A of this report. We expect selling, general and administrative expenses in ~~2019~~2020 to increase compared to ~~2018,~~2019, primarily due to ~~an increase in compensation-related expenses driven by higher headcount and other expenses related to the expansion and support of our business including~~ an increase in expenses related to the continuation of the commercial launch of Sunosi in the U.S.~~, the continuation of~~ and in Europe, the commercial launch of ~~Vyxeos~~Zepzelca in the EUU.S., and ~~the preparation for~~ the planned commercial launch of ~~Sunosi~~Xywav in the ~~EU.~~U.S.

Research and Development Expenses

Research and development expenses consist primarily of costs related to clinical studies and outside services, personnel expenses ~~milestone payments~~ and other research and development costs. Clinical ~~studies~~study and outside services costs relate primarily to services performed by clinical research organizations, materials and supplies, and other third party fees. Personnel expenses relate primarily to salaries, benefits and share-based compensation. Other research and development expenses primarily include overhead allocations consisting of various support and facilities-related costs. We do not track fully-burdened research and development expenses on a project-by-project basis. We manage our research and development expenses by identifying the research and development activities that we anticipate will be performed during a given period and then prioritizing efforts based on our assessment of which development activities are important to our business and have a reasonable probability of success, and by dynamically allocating resources accordingly. We also continually review our development pipeline projects

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and the status of their development and, as necessary, reallocate resources among our development pipeline projects that we believe will best support the future growth of our business.

The following table provides a breakout of our research and development expenses by major categories of expense (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Clinical studies and outside services $ 33,753
$ 26,501
$ 97,018
$ 86,889
Personnel expenses 24,506
17,340
66,671
52,588
Milestone expense 11,000
—
11,000
11,000
Other 10,596
7,319
27,655
19,482
Total $ 79,855
$ 51,160
$ 202,344
$ 169,959



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Clinical studies and outside services	$	40,145	$	33,034	$	87,894	$	63,265
Personnel expenses	31,146		20,855		57,048		42,165
Other	7,631		8,495		20,087		17,059
Total	$	78,922	$	62,384	$	165,029	$	122,489

Research and development expenses increased by ~~$28.7~~$16.5 million and ~~$32.4~~$42.5 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, compared to the same periods in ~~2018.~~2019. Clinical studies and outside services costs increased by ~~$7.3~~$7.1 million and ~~$10.1~~$24.6 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, compared to the same periods in ~~2018~~2019 primarily due to higher clinical trial costs primarily associated with JZP-458, and an increase in expenses related to our ongoing ~~pre-clinical~~preclinical and clinical development programs and ~~regulatory activities.~~support of partner programs. Personnel expenses increased by ~~$7.2~~$10.3 million and ~~$14.1~~$14.9 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, compared to the same periods in ~~2018,~~2019 primarily due to increased headcount in support of our development programs. Milestone expense of $11.0 million in the three and nine months ended September 30, 2019 related to a milestone payable under the license and option agreement with Pfenex, which we entered into in July 2016 and amended in December 2017, for worldwide rights to develop and commercialize multiple early-stage hematology product candidates. Milestone expense of $11.0 million in the nine months ended September 30, 2018 related to milestone payments following FDA acceptance of our NDA for Sunosi in March 2018.

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~~For the remainder of 2019~~In 2020 and beyond, we expect that our research and development expenses will continue to increase from ~~historical~~previous levels, particularly as we prepare for anticipated regulatory submissions and data read-outs from clinical trials, initiate and undertake additional clinical trials and related development work ~~on our current portfolio of products including recent acquisitions~~ and potentially acquire rights to additional product candidates. A discussion of the risks and uncertainties with respect to our research and development activities, including completing the development of and regulatory submissions for our product candidates, and the consequences to our business, financial position and growth prospects can be found in “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10‑Q.

Intangible Asset Amortization

Intangible asset amortization ~~increased by $15.9 million~~ in the three months ended ~~September~~June 30, ~~2019~~2020 was in line with the same period in 2019. Intangible asset amortization increased by $7.4 million in the six months ended June 30, 2020 compared to the same period in ~~2018,~~2019 primarily due to the reduction in the estimated remaining useful life of the Erwinaze intangible asset resulting from the contract termination notice we received from PBL in February 2019. Intangible asset amortization increased by $26.4 million in the nine months ended September 30, 2019 compared to the same period in 2018, primarily due to the reduction in the estimated remaining useful life of the Erwinaze intangible asset, partially offset by the cessation of amortization of the Prialt intangible asset following our entry into an Asset Purchase Agreement, or APA, with TerSera in 2018. Intangible asset amortization is expected to ~~increase~~decrease in ~~2019~~2020 compared to ~~2018~~2019 as a result of the amortization in full of our priority review voucher intangible asset in the fourth quarter of ~~2019 and the reduction in the estimated remaining useful life of the Erwinaze intangible asset.~~2019.

Impairment ~~Charges~~Charge

In ~~2018,~~the six months ended June 30, 2020, we ~~entered into~~recorded an APA with TerSera, pursuant to which TerSera purchased substantially all of the assets held by us related to Prialt. In connection with the entry into the APA, we reclassified the Prialt assets to be transferred to TerSera as assets held for saleacquired in-process research and ~~recorded these assets at fair value, less estimated sales costs, resulting in the recognition of an~~development, or IPR&D, asset impairment charge of ~~$42.9~~$136.1 million following the decision to stop enrollment in our Phase 3 clinical study of defibrotide for the ~~nine months ended September 30, 2018.~~prevention of VOD due to a determination that the study is highly unlikely to reach one of its primary endpoints.

Acquired In-Process Research and Development

Acquired IPR&D expense in the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 primarily related to ~~the value attributed~~an upfront payment of $200.0 million to ~~JZP-385~~Pharma Mar, S.A. in ~~the acquisition of Cavion.~~connection with our license agreement for Zepzelca. Acquired IPR&D expense in the ~~nine~~six months ended ~~September~~June 30, 2019 primarily related to an upfront payment of $56.0 million to Codiak in connection with ~~our~~a strategic collaboration ~~agreement and the value attributed to JZP-385 in the acquisition of Cavion.~~agreement.

Interest Expense, Net

Interest expense, net ~~decreased~~increased by ~~$1.1~~$8.0 million and ~~$5.2~~$8.6 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, respectively,~~2020 compared to the same periods in ~~2018,~~2019, primarily due to ~~higher~~a loss on extinguishment of debt of $4.5 million related to the repurchase of $332.9 million principal amount of the 2021 Notes due to the write-off of unamortized debt issuance costs and debt discount and, to a lesser extent, lower interest income. We expect interest expense, net will ~~be lower~~increase in ~~2019~~2020 compared to ~~2018,~~2019, primarily due to ~~higher interest income.~~the increase in our average debt balance following the issuance of the 2026 Notes in June 2020.

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Foreign Exchange Loss

The foreign exchange loss is primarily related to the translation of euro-denominated net monetary liabilities, primarily intercompany balances, held by subsidiaries with a U.S. dollar functional currency and related foreign exchange forward contracts not designated as hedging instruments.

~~Loss on Extinguishment and Modification of Debt~~

In the nine months ended September 30, 2018, we recorded a loss of $1.4 million in connection with the amendment of our 2015 credit agreement in June 2018, related to unamortized debt issuance costs and original issue discount associated with extinguished debt and new third party fees associated with modified debt.

Income Tax Provision (Benefit)

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property asset transfer. The tax benefit, which represents a deferred future benefit, was recorded as a deferred tax asset. The ~~decrease~~increase in the effective tax ~~rate~~rates for the ~~nine~~three and six months ended ~~September~~June 30, ~~2019~~2020 compared to the same ~~period~~periods in ~~2018~~2019 was primarily due to the impact of the intra-entity intellectual property asset transfer. Excluding this effect, the increase in the effective tax rate for the three months ended June 30, 2020 compared to the same period in 2019 was primarily due to the impact of the disallowance of certain interest deductions, and provision for a proposed settlement reached with the French tax authorities in respect of an ongoing tax audit, and the decrease in the effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 was primarily due to the impact of the defibrotide acquired IPR&D asset impairment charge ~~recognized on the Prialt assets held for sale~~ and the impact of the ~~loss contingency~~acquired IPR&D expense ~~in 2018.~~related to the PharmaMar transaction, partially offset by the impact of the disallowance of certain interest deductions and provision for the proposed settlement reached with the French tax authorities. The effective tax rate for the three months ended ~~September~~June 30, ~~2019~~2020 was higher than the Irish statutory rate of 12.5% primarily due to the impact of the disallowance of certain interest deductions and provision for the proposed settlement reached with the French tax authorities. The effective tax rate for the six months ended June 30, 2020 was lower than the Irish statutory rate of 12.5% primarily due to the impact of the release of reserves related to unrecognized tax benefits upon expiration of a statute of limitations. The effective tax rate for the nine months ended September 30, 2019 was lower than the Irish statutory rate of 12.5% primarily due todefibrotide acquired IPR&D asset impairment charge and the impact of the ~~intra-entity intellectual property asset transfer.~~acquired IPR&D expense related to the PharmaMar transaction, partially offset by the impact of the disallowance of certain interest deductions and provision for the proposed settlement reached with the French tax authorities. 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.

Equity in ~~Loss~~Earnings of Investees

Equity in ~~loss~~earnings of investees relates to our share in the net loss (gain) of companies in which we have made investments accounted for under the equity method of accounting.

Liquidity and Capital Resources

As of ~~September~~June 30, ~~2019,~~2020, we had cash, cash equivalents and investments of ~~$1.1~~$1.7 billion, borrowing availability under our revolving credit facility of $1.6 billion and long-term debt principal balance of ~~$1.8~~$2.4 billion. Our long-term debt included ~~$626.0~~$601.0 million aggregate principal amount term loan, ~~$575.0~~$242.1 million principal amount of ~~our 1.875% exchangeable senior notes due~~the 2021 ~~and~~Notes, $575.0 million principal amount of our 1.50% exchangeable senior notes due ~~2024.~~2024 and $1.0 billion principal amount of the 2026 Notes. We generated cash flows from operations of ~~$688.6~~$455.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, and we expect to continue to generate positive cash flows from operations during 2020.

In April 2020, in an abundance of caution and as a proactive measure, we drew down $500.0 million under the revolving credit facility provided for under the ~~remainder~~credit agreement that we entered into in June 2015 and subsequently amended, which we refer to as the amended credit agreement to increase our cash position and preserve financial flexibility in light of ~~2019.~~the uncertainties and disruption to the global financial markets resulting from the COVID-19 pandemic. We repaid this amount in full in June 2020 following the issuance of the 2026 Notes.

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

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To continue to grow our business over the longer term, we plan to commit substantial resources to product acquisition and in-licensing, product development, clinical trials of product candidates and expansion of our commercial, development, manufacturing and other operations. In this regard, we have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our strategy to acquire or in-license and develop additional products and product candidates. Acquisition opportunities that we pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue new operations or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital ~~to license or acquire additional products, product candidates or companies~~for corporate development transactions, to expand our operations or for general corporate purposes. Raising additional capital could be accomplished through one or more public or private debt or equity financings, collaborations or partnering arrangements. ~~Any~~However, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital or an impact on liquidity, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments. In addition, any equity financing would be dilutive to our shareholders, and the consent of the lenders under the amended credit agreement could be required for certain financings.

In November 2016, our board of directors authorized a ~~new~~ share repurchase program ~~pursuant to which we were~~and as of June 30, 2020 had authorized tothe repurchase ~~a number~~ of ordinary shares having an aggregate purchase price of up to ~~$300 million,~~$1.5 billion, exclusive of any brokerage commissions. In November and December 2018, our board of directors increased the existing share repurchase program authorization by $320.0 million and $400.0 million, respectively, thereby increasing the total amount authorized to $1.02 billion. 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 ~~our~~the amended 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. In the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, we spent a total of ~~$191.1~~$146.5 million to purchase ~~1.5~~1.2 million of our ordinary shares under the share repurchase program at an average total purchase price, including commissions, of ~~$131.48~~$121.98 per share. All ordinary shares repurchased were canceled. As of ~~September~~June 30, ~~2019,~~2020, the remaining amount authorized under the

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share repurchase program was ~~$188.1~~$431.2 million. ~~In October 2019, our board of directors authorized the additional repurchase of shares having an aggregate purchase price of up to $500.0 million, exclusive of any brokerage commissions.~~

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


	Nine Months Ended September 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Net cash provided by operating activities	$	688,603		$	580,808		$	455,488		$	351,100
Net cash provided by (used in) investing activities	3,753			(434,479		)	(801,245		)	163,414
Net cash used in financing activities	(205,965		)	(32,674		)
Net cash provided by (used in) financing activities							494,851			(186,502		)
Effect of exchange rates on cash and cash equivalents	(838		)	(672		)	(356		)	105
Net increase in cash and cash equivalents	$	485,553		$	112,983		$	148,738		$	328,117

Operatingactivities

Net cash provided by operating activities ~~of $688.6~~increased by $104.4 million ~~for~~in the ~~nine~~six months ended ~~September~~June 30, 2020 compared to the same period in 2019, ~~related to net income of $449.4 million, adjusted for acquired IPR&D expense of $110.0 million and non-cash items of $142.7 million~~ primarily ~~related to intangible asset amortization, share-based compensation expense and deferred income taxes, offset by a~~due to:

An increase in net cash ~~outflow of $13.5 million~~inflow related to changes in operating assets and ~~liabilities. Net cash provided~~liabilities primarily driven by ~~operating activities~~the impact of ~~$580.8~~a $58.6 million ~~for~~payment related to a civil settlement agreement with the ~~nine~~U.S. Department of Justice and the Office of the Inspector General of the U.S. Department of Health and Human Services in the six months ended ~~September~~June 30, ~~2018 related to net income~~2019 and the timing of $287.6 million, adjusted for non-cash items of $286.7 million primarily related to intangible asset amortization, share-based compensation expense, impairment charges and a net cash inflow of $6.5 million related to changes in operating assets and liabilities.receipts from customers.

Investingactivities

Net cash provided by (used in) investing activities ~~for~~decreased by $964.7 million in the ~~nine~~six months ended ~~September~~June 30, ~~2019 related~~2020 compared to the same period in 2019, primarily due to the following:

$744.5 million net ~~proceeds on maturity~~increase in the acquisition of investments, ~~of $234.0~~primarily time deposits;

$147.1 million ~~partially offset by milestone payments of $80.5 million triggered by FDA approval of Sunosi~~increase in ~~March 2019 and subsequent U.S. Drug Enforcement Agency scheduling in June 2019,~~ upfront payments for acquired IPR&D primarily driven by the $200.0 million payment under our license agreement with PharmaMar in the six months ended June 30, 2020, compared to the same period in 2019 which included a payment of ~~$61.7~~$56.0 million ~~primarily related to~~under our strategic collaboration agreement with ~~Codiak, consideration, net of cash acquired of $55.1 million related to our~~Codiak; and

An increase in acquisition of ~~Cavion and purchases of property, plant and equipment of $33.0 million. Net cash used in investing activities for the nine months ended September 30, 2018~~intangible assets primarily related to the ~~net acquisition~~$100.0 million milestone payment to PharmaMar on FDA approval of ~~investments~~Zepzelca.

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Financing activities

Net cash provided by (used in) financing activities increased by $681.4 million ~~acquisition of intangible assets of $111.1 million related~~in the six months ended June 30, 2020 compared to the ~~purchase~~same period in 2019, primarily due to:

An increase of ~~a priority review voucher and purchases~~$981.4 million in net proceeds from issuance of ~~property, plant and equipment of $15.2 million,~~2026 Notes, partially offset by ~~net proceeds~~$332.9 million of ~~$48.1 million from the sale of our rights to Prialt to TerSera.~~

~~Net cash used in financing activities~~payments for ~~the nine months ended September 30, 2019 related to~~partial repurchase of ~~ordinary shares under our~~2021 Notes;

A decrease of $24.6 million in share ~~repurchase program~~repurchases; and

An increase of ~~$191.1~~$8.1 million ~~repayment of our term loan principal of $25.0 million and payment of employee withholding taxes of $15.9 million related to share-based awards, partially offset by~~in proceeds from employee equity incentive and purchase plans of $26.1 million. Net cash used in financing activities for the nine months ended September 30, 2018 related to repurchase of ordinary shares under our share repurchase program of $77.0 million, repayment of our term loan principal of $17.4 million, payment of employee withholding taxes of $17.2 million related to share-based awards and payment of debt modification costs of $6.4 million, partially offset by proceeds from employee equity incentive and purchase plans of $84.1 million and proceeds from tenant improvement allowance on a build-to-suit lease of $1.3 million.

plans.

Debt

The summary of our outstanding indebtedness under our financing arrangements is included in Note 9, Debt, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. ~~As of September 30, 2019, no amounts were outstanding under our revolving credit facility.~~ During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, there were no material changes to ~~our~~the amended credit agreement, ~~and the Exchangeable Senior Notes,~~ as set forth in Note 11, Debt, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

In June 2020, Jazz Investments I Limited, our wholly owned subsidiary, completed a private offering of an aggregate $1.0 billion principal amount of the 2026 Notes. We used a portion of the net proceeds from the issuance of the 2026 Notes to repurchase for cash $332.9 million aggregate principal amount of the 2021 Notes through individual privately-negotiated transactions concurrently with the offering. The terms of the 2026 Notes are described in Note 9, Debt, of the Notes to Condensed Consolidated Financial Statements included in this report.

In April 2020, in an abundance of caution and as a proactive measure, we drew down $500.0 million under the revolving credit facility provided for under the amended credit agreement to increase our cash position and preserve financial flexibility in light of the uncertainties and disruption to the global financial markets resulting from the COVID-19 pandemic. We repaid this amount in full in June 2020 following the issuance of the 2026 Notes. As of June 30, 2020, no amounts were outstanding under our revolving credit facility.

Contractual Obligations

~~During the three and nine months ended September 30, 2019, there were no material changes to~~The table below presents a summary of our contractual obligations as ~~set forth~~of June 30, 2020 (in thousands):



	Payments Due by Period
Contractual Obligations (1)	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 years
Term loan - principal	$	600,961	$	33,387	$	567,574	$	—	$	—
Term loan - interest (2)	31,093		14,490		16,603		—		—
Exchangeable Senior Notes - principal	1,817,112		—		242,112		575,000		1,000,000
Exchangeable Senior Notes - interest (3)	164,382		31,924		59,520		52,938		20,000
Revolving credit facility - commitment fee (4)	11,900		4,056		7,844		—		—
Commitment to equity method investees	9,600		7,000		2,600		—		—
Purchase and other obligations (5)	100,786		71,733		23,320		5,656		77
Operating lease obligations (6)	202,430		21,391		42,483		42,990		95,566
Total	$	2,938,264	$	183,981	$	962,056	$	676,584	$	1,115,643

__________________________

(1)

This table does not include potential future milestone payments or royalty obligations to third parties under asset purchase, product development, license and other agreements as the timing and likelihood of such milestone payments are not known, and, in the case of royalty obligations, as the amount of such obligations are not estimable. In December 2019, we entered into an exclusive license agreement with PharmaMar, for development and U.S. commercialization of Zepzelca. The agreement became effective in January 2020 and we made an upfront payment of $200.0 million. In June 2020, we made a milestone payment of $100.0 million to PharmaMar following FDA approval of Zepzelca. PharmaMar is also eligible to receive milestone payments totaling up to $700.0 million based on regulatory and commercial milestones. PharmaMar is also eligible to receive incremental tiered royalties on future net sales of Zepzelca ranging from the high teens up to 30 percent. In January 2019, we entered into a strategic collaboration agreement with Codiak for an exclusive, worldwide, royalty-bearing license to develop, manufacture and commercialize potential therapeutic candidates directed at five targets to be developed using Codiak’s engEx™

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precision engineering platform for exosome therapeutics. Codiak is eligible to receive up to $20 million in ~~Part II, Item 7 “Management’s Discussion~~preclinical development milestone payments. Codiak is also eligible to receive milestone payments totaling up to $200 million per target based on investigational NDA acceptance, clinical and ~~Analysis~~regulatory milestones, including approvals in the U.S., the EU and Japan, and certain sales milestones. Codiak is also eligible to receive tiered royalties on net sales of ~~Financial Condition~~each approved product. In August 2019, we announced the acquisition of Cavion, for an upfront payment of $52.5 million with the potential for additional payments of up to $260.0 million upon the achievement of certain clinical, regulatory and ~~Results~~commercial milestones, for a total potential consideration of ~~Operations”~~$312.5 million. In July 2019, we acquired a pan-RAF inhibitor program for the potential treatment of RAF and RAS mutant tumors from Redx. Redx is eligible to receive up to $203 million in development, regulatory and commercial milestone payments from us, as well as incremental tiered royalties in mid-single digit percentage based on any future net sales. In 2014, we acquired worldwide development, manufacturing and commercial rights to Sunosi from Aerial (other than in certain jurisdictions in Asia where SK Biopharmaceuticals Co., Ltd, or SK, retains rights). In January 2020, we received approval of Sunosi by the EC, triggering regulatory milestones of $10.0 million and $3.0 million to Aerial and SK, respectively. Aerial and SK are currently eligible to receive milestone payments up to an aggregate of $165 million based on sales milestones and tiered royalties from high single digits to mid-teens based on potential future sales of Sunosi. In July 2016, we entered into an agreement with Pfenex, which was subsequently amended in December 2017, that granted us worldwide rights to develop and commercialize multiple early-stage hematology product candidates and an option for us to negotiate a license for a recombinant pegaspargase product candidate with Pfenex. Under the amended agreement, Pfenex is eligible to receive future payments of up to $163 million based on the achievement of development, regulatory and sales milestones. Potential future milestone payments to other third parties under other agreements could be up to an aggregate of $290 million. These would become due and payable to other third parties upon the achievement of certain developmental, clinical, regulatory and/or commercial milestones, the timing and likelihood of which are not known. We are also obligated under these agreements to pay royalties on net sales of certain products at specified rates, which royalties are dependent on future product sales and are not provided for in the table above as they are not estimable.


(2)	Estimated interest for variable rate debt was calculated based on the interest rates in effect as of June 30, 2020. The interest rate for our term loan borrowing was 1.55% as of June 30, 2020. Interest that is fixed, associated with our interest rate swaps, is calculated based on the fixed interest swap rate as of June 30, 2020.


(3)	We used the fixed interest rates of 1.875% on the 2021 Notes, 1.50% on the 2024 Notes and 2.00% on the 2026 Notes to estimate interest owed as of June 30, 2020 until the respective final maturity dates of these notes.


(4)	Our revolving credit facility has a commitment fee payable on the undrawn amount ranging from 0.25% to 0.35% per annum based upon our secured leverage ratio. In the table above, we used a rate of 0.25% and assumed undrawn amounts of $1.6 billion as of June 30, 2020 to estimate commitment fees owed.


(5)	Consists primarily of noncancelable commitments to our third party manufacturers and to ImmunoGen under our amended collaboration and option agreement.


(6)	Consists primarily of the minimum lease payments for our office buildings and automobile lease payments for our sales force. Operating expenses associated with our leased office buildings are not included in table above.

We do not provide for Irish income taxes on undistributed earnings of our foreign operations that are intended to be indefinitely reinvested in our ~~Annual Report on Form 10-K~~foreign subsidiaries. In addition, our liability for unrecognized tax benefits has been excluded from the ~~year ended December 31, 2018.~~above contractual obligations table as the nature and timing of future payments, if any, cannot be reasonably estimated. We do not anticipate that the amount of our existing liability for unrecognized tax benefits will significantly change in the next twelve months.

Critical Accounting Estimates

To understand our financial statements, it is important to understand our critical accounting estimates. The preparation of our financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and

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assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in determining the amounts to be deducted from gross revenues, in particular estimates of government rebates, which include Medicaid and TRICARE rebates, commercial contracting and estimated product returns. Significant estimates and assumptions are also required to determine whether to capitalize intangible assets, the amortization periods for identifiable intangible assets, the potential impairment of goodwill and other intangible assets, income taxes and share-based compensation. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. For any given individual estimate or assumption we make, there may also be other estimates or assumptions that are reasonable. Although we believe our estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made.

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Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, ~~2018. Except for the operating leases and financing obligations policy that was updated as a result of adopting Accounting Standards Update No. 2016-02, “Leases”, our~~2019. Our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s current plans, objectives, estimates, expectations and intentions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “propose,” “intend,” “continue,” “potential,” “possible,” “foreseeable,” “likely,” “unforeseen” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other risk factors in greater detail under Part II, Item 1A of this Quarterly Report on Form 10-Q. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our plans, objectives, estimates, expectations and intentions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results and the timing of events may be materially different from what we expect. We hereby qualify our forward-looking statements by our cautionary statements. Except as required by law, we undertake no obligation to update or supplement any forward-looking statements publicly, or to update or supplement the reasons that actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

~~During~~Except as set forth below, during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

Exchangeable Senior Notes 2026

In the second quarter of 2020, Jazz Investments I Limited, our wholly owned subsidiary, completed a private placement of $1.0 billion aggregate principal amount of the 2026 Notes. The 2026 Notes have a fixed annual interest rate of 2.00% and we, therefore, do not have economic interest rate exposure on the 2026 Notes. However, the fair value of the 2026 Notes is exposed to interest rate risk. Generally, the fair value of the 2026 Notes will increase as interest rates fall and decrease as interest rates rise. The fair value of the 2026 Notes is also affected by volatility in our ordinary share price. As of June 30, 2020, the fair value of the 2026 Notes was estimated to be $1 billion.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We have carried out an evaluation under the supervision and with the participation of management, including our ~~chief executive officer, who is both our~~ principal executive officer and ~~interim~~ principal financial officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on ~~his~~their evaluation, ~~our chief executive officer, who is both~~ our principal executive officer and ~~interim~~ principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2019.~~2020.

Limitations on the Effectiveness of Controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization

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have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our ~~chief executive officer, who is both our~~ principal executive officer and ~~interim~~ principal financial officer ~~has~~have concluded, based on ~~his~~their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.

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Changes in Internal Control over Financial Reporting. During the quarter ended ~~September~~June 30, ~~2019,~~2020, there have been no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information required to be set forth under this Item 1 is incorporated by reference to Note 11, Commitments and Contingencies—Legal Proceedings of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.


Item 1A.	Risk Factors

We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations. Our business could be harmed by any of these risks. The trading price of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in this Quarterly Report on Form 10‑Q, including our condensed consolidated financial statements and accompanying notes.

Risks Related to ~~Xyrem~~Our Lead Products and ~~Our Other Marketed Products~~Product Candidates

~~Xyrem is our largest selling product, and our~~Our inability to maintain or increase sales ~~of Xyrem~~from our neuroscience therapeutic area would have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our current business is substantially dependent on Xyrem^® (sodium oxybate) oral solution, is the only product approved by the U.S. Food and Drug Administration, or FDA, and marketed in the U.S. for the treatment of both cataplexy and excessive daytime sleepiness, or EDS, in both adult and pediatric patients with narcolepsy. Xyrem is our largest selling product, and our financial results are significantly influenced by sales of Xyrem, which accounted for 80% and 77% of our net product sales for the three and nine months ended September 30, 2019, respectively, and 75% of our net product sales for the year ended December 31, 2018. Our future plans assume thatXyrem. A significant decline in sales of Xyrem will increase, but there is no guarantee that we can maintain sales of Xyrem at or near current levels, or that Xyrem sales will continue to grow. We have periodically increased the price of Xyrem, most recently in July 2019, and there is no guarantee that we will be able to make similar price adjustments in the future or that price adjustments we have taken or may take in the future will not negatively affect Xyrem sales volumes and revenues from Xyrem.

~~Our ability to maintain or increase Xyrem product sales is subject to a number of risks and uncertainties. The most important of these risks and uncertainties, any of which~~ could ~~have a material adverse effect on our sales of and revenue from Xyrem, are discussed in more detail in this Part II, Item 1A and include those related to:~~


•	the introduction of new products in the U.S. market that compete with, or otherwise disrupt the market for, Xyrem in the treatment of cataplexy and/or EDS in narcolepsy, such as pitolisant, which was approved by FDA in August 2019 for the treatment of EDS in adult patients with narcolepsy, and our recently-launched product, Sunosi^® ~~(solriamfetol);~~

the introduction of a generic version of Xyrem in the U.S. market before the entry dates specified in our settlements with the abbreviated new drug application, or ANDA, filers or on terms that are different from those contemplated by the settlement agreements;

increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third party payors, including pressure to agree to new or additional discounts, rebates or restrictive pricing terms for Xyrem;

changes in healthcare laws and policy, including changes in requirements for patient assistance programs, rebates, reimbursement and coverage by federal healthcare programs, and changes resulting from increased scrutiny on pharmaceutical pricing and risk evaluation and mitigation strategy, or REMS, programs by government entities;

~~changes to or uncertainties around our Xyrem REMS, or any failure to comply with our REMS obligations to the satisfaction of the FDA;~~

~~challenges to our intellectual property around Xyrem, including the possibility of new ANDA or new drug application, or NDA, filers or new post-grant patent review proceedings;~~

~~operational disruptions at the Xyrem central pharmacy;~~

~~any supply or manufacturing problems, including any problems with our sole source Xyrem active pharmaceutical ingredient, or API, provider;~~

~~continued acceptance of Xyrem by physicians and patients, including as a result of negative publicity that surfaces from time to time; and~~

~~changes to our label, including new safety warnings or changes to our boxed warning, that further restrict how we market and sell Xyrem.~~

~~If sales of Xyrem were to decline significantly, we might need~~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. There is no guarantee that we can maintain sales of Xyrem at or near current levels, or that Xyrem sales will continue to grow. Our ability to maintain or increase Xyrem product sales is subject to a number of risks and uncertainties as discussed in greater detail below, including those related to the introduction of authorized generic and generic versions of sodium oxybate and/or new products for treatment of cataplexy and/or excessive daytime sleepiness, or EDS, in narcolepsy in the U.S. market, the current and potential impacts of the COVID-19 pandemic, including the current and expected future negative impact on demand for our products and the uncertainty with respect to our ability to meet commercial demand in the future, increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third party payors, challenges to our intellectual property around Xyrem, and continued acceptance of Xyrem by physicians and patients.

In July 2020, FDA approved our NDA for Xywav™, an oxybate product that contains 92%, or approximately 1,000 to 1,500 milligrams per day, less sodium than Xyrem, for the treatment of cataplexy or EDS in narcolepsy patients seven years of age and older. Our ability to realize the anticipated benefits from our investment in Xywav is subject to a number of risks and uncertainties including obtaining and maintaining adequate coverage and reimbursement for Xywav; the introduction of new products in the U.S. market that compete with Xywav in the treatment of cataplexy and/or EDS in narcolepsy, including generic or authorized generic versions of sodium oxybate or new sodium oxybate products; and acceptance of Xywav by payors, physicians and patients.

As for other products and product candidates in our neuroscience therapeutic area, we obtained approval of Sunosi^® (solriamfetol) in 2019 in the U.S. and in January 2020 in the European Union, or EU, for the treatment of EDS associated with narcolepsy or obstructive sleep apnea, or OSA. Our ability to realize the anticipated benefits from our investment in Sunosi is subject to a number of risks and uncertainties, including the potential impacts of the continuing COVID-19 pandemic on the successful commercialization in the U.S. and the rolling launch in Europe, which are at an early stage; market acceptance of Sunosi; our ability, in a competitive retail pharmacy market, to differentiate Sunosi from other products that are prescribed to treat excessive sleepiness in patients with OSA or EDS in patients with narcolepsy; adequate coverage and reimbursement by government programs and other third party payors, including the impact of future coverage decisions by payors; restrictions on permitted promotional activities based on any additional limitations on the labeling for the product that may be required by the U.S. Food and Drug Administration, or FDA or the European Commission, or the EC, or other regulatory authority in the future;and our ability to satisfy FDA’s post-marketing requirements.

If we are unable to successfully commercialize Xywav and/or Sunosi, or if sales of Xywav and Sunosi do not reach the levels we expect, our anticipated revenue from our neuroscience therapeutic area will be negatively affected, which would have a material adverse effect on our business, financial condition, results of operations and growth prospects.

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The introduction of new products in the U.S. market that compete with, or otherwise disrupt the market for, ~~Xyrem~~our oxybate products and product candidates would adversely affect sales of ~~Xyrem.~~our oxybate products and product candidates.

While Xyrem isand Xywav are currently the only ~~product~~products approved by ~~the~~ FDA and marketed in the U.S. for the treatment of both cataplexy and EDS in both adult and pediatric patients with narcolepsy, ~~we and others~~new treatment options for EDS in narcolepsy have launched, and ~~may~~ in the future, ~~launch~~other products ~~as treatment~~

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~~options in cataplexy and/or EDS in narcolepsy, including other branded sodium oxybate products and other new and existing branded market entrants,~~may be launched that are competitive with ~~Xyrem. In addition,~~or disrupt the market for our oxybate products.

For example, in the future, we expect Xyrem ~~will~~and Xywav to face competition from ~~generics and authorized generics. We expect that the approval and launch of any other sodium oxybate or alternative product that treats narcolepsy, or the launch of an~~ authorized generic ~~product, or AG Product, or other~~and generic ~~version~~versions of ~~Xyrem, could~~sodium oxybate. Nine companies have ~~a material adverse effect on our sales of and revenues from Xyrem and on our business, financial condition, results of operations and growth prospects.~~

~~With respect to generic and authorized generic competition, nine companies~~ sent us notices that they had filed abbreviated new drug applications, or ANDAs, ~~with the FDA~~ seeking approval to market a generic version of Xyrem, and we have filed and settled patent lawsuits ~~against each of them, asserting that such generic products would violate our patents covering Xyrem. We have settled the patent litigation~~ with all nine companies. To date, FDA has approved or tentatively approved four of these ANDAs, and we believe that it is likely that FDA will approve or tentatively approve some or all of the others. In our patent litigation settlement with the first filer, West-Ward Pharmaceuticals Corp. (a wholly owned subsidiary of Hikma Pharmaceuticals ~~PLC)~~PLC and now known as Hikma in the U.S.), or ~~West-Ward,~~Hikma, we granted ~~West-Ward~~Hikma the right to sell an authorized generic product, or AG Product, with royalties back to us, in the U.S. beginning on January 1, 2023, or earlier under certain circumstances. These include circumstances related to the licensing or market entry of another generic sodium oxybate product, a final decision that all unexpired claims of the Xyrem patents are invalid and/or unenforceable, or a substantial reduction in Xyrem net sales over specified periods of time. West-WardHikma has a right to elect to continue to sell the ~~West-Ward~~Hikma AG Product for a total of up to five years. We also granted ~~West-Ward~~Hikma a license to launch its own generic sodium oxybate product as early as six months after it has the right to sell the ~~West-Ward~~Hikma AG Product, but if it elects to ~~begin selling~~launch its own generic product, ~~it cannot continue~~Hikma will no longer have the right to sell the ~~West-Ward~~Hikma AG Product. In our settlements with Amneal Pharmaceuticals LLC, or Amneal, Lupin Inc., or Lupin, and Par Pharmaceutical, Inc., or Par, we granted each party the right to sell a limited volume of an AG Product in the U.S. beginning on July 1, 2023, or earlier under certain circumstances, ~~including events related~~and ending on December 31, 2025, with royalties back to us. AG Products will be distributed through the ~~acceleration of West-Ward’s AG Product launch date, the earlier launch of another party’s AG Product, the launch of another generic sodium oxybate product~~same risk evaluation and mitigation strategy, or ~~a final decision that all unexpired claims of the~~REMS, as Xyrem ~~patents are invalid and/or unenforceable.~~and Xywav. We also granted each of Amneal, Lupin and Par a license to launch its own generic sodium oxybate product under its ANDA on or after December 31, 2025, or earlier under certain circumstances, including ~~events related~~the circumstance where Hikma elects to ~~the~~ launch of another generic sodium oxybate product or a final decision that all unexpired claims of the Xyrem patents are not infringed, or are invalid and/or unenforceable. If an acceleration event occurs, then each of Amneal, Par and Lupin will have the option to elect to market its AG Product until December 31, 2025, but will not be entitled to market its AG Product and its own generic ~~sodium oxybate~~product. If Amneal, Lupin or Par elects to launch its own generic product ~~simultaneously. Under~~under such circumstance, it will no longer have the ~~terms of our settlement agreements, we are entitled~~right to ~~receive royalty and other revenue based on sales of~~sell an AG ~~Products.~~Product. In our settlements with each of the other five ANDA filers, we granted each a license to launch its own generic sodium oxybate product under its ANDA on or after December 31, 2025, or earlier under certain circumstances, including ~~the launch of another~~circumstances where Hikma launches its own generic sodium oxybate product.

~~In order to~~ The actual timing of the launch aof an AG Product or generic sodium oxybate product ~~an ANDA filer must obtain~~is uncertain because the launch dates of the AG Products and ~~maintain FDA approval of its ANDA. In January 2017, the FDA approved West-Ward’s ANDA and tentatively approved two additional ANDAs for~~ generic sodium oxybate products ~~and we believe that it is likely that the FDA will approve or tentatively approve the additional ANDAs that have been filed.~~under our settlement agreements are subject to acceleration under certain circumstances.

Any ANDA holder launching an AG Product or another generic sodium oxybate product will independently establish the price of the AG Product and/or its own generic sodium oxybate product. Generic competition often results in decreases in the prices at which branded products can be sold. After any introduction of a generic product, whether or not it is an AG Product, a significant percentage of the prescriptions written for Xyrem ~~may~~will likely be filled with the generic product. Certain U.S. state laws allow for, and in some instances in the absence of specific instructions from the prescribing physician mandate, the dispensing of generic products rather than branded products when a generic version is available. This would result in reduction in sales of, and revenue from, Xyrem, although we would continue to receive ~~royalty~~royalties and other revenue based on sales of an AG Product in accordance with the terms of our settlement agreements. ~~For more information on the impact of generic competition, see the risk factors under the heading “Adequate coverage and reimbursement from third party payors may not be available for our products, which could diminish our sales or affect our ability to sell our products profitably” and “~~The pricing of pharmaceutical products has come under increasing scrutiny as part of a global trend toward healthcare cost containment and resulting changes in healthcare law and policy may impact our business in ways that we cannot currently predict, which could have a material adverse effect on our business and financial condition” ~~in this Part II, Item 1A.~~

It is possible that additional companies may file ANDAs seeking to market a generic version of Xyrem which could lead to additional patent litigation or challenges with respect to Xyrem. Such patent litigation or challenges could potentially trigger acceleration of the launch dates in our settlement ~~agreements. For~~agreements if, for example, ~~the launch dates in~~ our ~~settlement agreements would be accelerated if a new ANDA filer~~patents covering Xyrem were ~~to obtain a final decision prior to January 1, 2023 that~~ all ~~unexpired claims of the Xyrem patents are invalid and/or unenforceable.~~invalidated. Alternatively, the launch dates in our settlement agreements could be accelerated if a new ANDA filer were to obtain FDA approval for its sodium oxybate product, and launch its generic product through a generic sodium oxybate REMS before the entry dates specified in our settlement ~~agreements, if, for example, we are unable to obtain an injunction or because that party launches “at risk” of being held liable for damages for patent infringement.~~agreements. It is also possible that we could enter into a settlement agreement with a future ANDA filer that would permit such filer to enter the market on or prior to the launch date(s) in our settlement agreements. If a company launches a generic or authorized

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generic sodium oxybate product in any of these scenarios, except in limited circumstances related to an “at risk” launch, the launch date for ~~West-Ward’s~~Hikma’s AG Product would be accelerated to a date on or prior to the date of such entry, which could lead to acceleration of the other settling ANDA filers’ AG Product and generic sodium oxybate product launch dates as described above. ~~For further discussion of Xyrem-related patent matters, see the risk factors under the heading “Risks Related to Our Intellectual Property” in this Part II, Item 1A.~~

Another circumstance that could trigger acceleration of ~~West-Ward’s~~Hikma’s launch date for an AG Product, which would also accelerate Amneal, Lupin and Par’s launch dates for their AG Products and ultimately could lead to acceleration of the other settling ANDA filers’ launch dates for their generic sodium oxybate products, is a substantial reduction in Xyrem net sales. Such a reduction could occur under various circumstances, including if we introduce, or a third party introduces, a product to treat EDS or cataplexy in narcolepsy that leads to a substantial decline in Xyrem net sales prior to January 1, 2023. For example, we are developing JZP-258, an oxybate product candidate that contains 92% less sodium than Xyrem, for the treatment of cataplexy and EDS in adult patients with narcolepsy. In March 2019, we announced positive top-line results from a Phase 3 study of JZP-258. We expect to submit an NDA for this product in January 2020 and plan to redeem our priority review voucher in connection with this submission. Given the well-accepted relationship between dietary sodium and blood pressure as well as published hypertension guidelines underscoring that excessive consumption of sodium is independently associated with an increased risk of stroke, cardiovascular disease and other adverse outcomes, we believe that significantly lowering sodium intake would be beneficial for patients. Other companies may ~~similarly~~ develop a sodium oxybate product for treatment of narcolepsy, using an alternative formulation or a different delivery technology, and seek approval in the U.S. using an NDA approval pathway under Section 505(b)(2) and referencing the safety and efficacy data for ~~Xyrem, which could lead to additional patent litigation or challenges. We are aware that~~Xyrem. In April 2020, Avadel Pharmaceuticals plc, or Avadel, ~~is conducting a~~announced positive topline

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results from its Phase 3 clinical trial of ~~a once-nightly~~an extended-release formulation of sodium oxybate which uses its proprietary technology for the treatment of EDS and cataplexy in patients with narcolepsy and expects to announce top-line results in the second quarter of 2020. Xyrem may also face increased competition from new branded entrants to treat EDS in narcolepsy such as pitolisant. Other companies have announced that they have product candidates in various phases of development to treat the symptoms of narcolepsy, such as Axsome Therapeutics, Inc.’s reboxetine.

We expect that Xywav will face competition similar to that described above for Xyrem, including from generic or authorized generic sodium oxybate products or new branded entrants in narcolepsy. For example, Avadel has ~~indicated~~announced that it ~~intends~~has obtained an orphan drug designation from FDA for its extended-release sodium oxybate formulation. To obtain approval with orphan drug exclusivity, Avadel will have to ~~seek approval using~~show clinical superiority to Xyrem and Xywav. We cannot predict the ~~Section 505(b)(2) approval pathway. Approval and successful commercialization~~timing or approvability of ~~JZP-258 or~~ Avadel’s sodium oxybate ~~formulation,~~product candidate or how FDA will evaluate any ~~other new non-generic sodium oxybate~~clinical superiority arguments that either we or ~~other~~Avadel may make, but in any event, we expect to face competition from Avadel, if its product ~~for treatment of narcolepsy patients could negatively impact our ability to maintain and grow sales of Xyrem.~~candidate is approved.

~~Although, as noted above, Xyrem is currently the only product approved by the FDA and marketed in the U.S.~~Moreover, non-oxybate products intended for the treatment of EDS or cataplexy ~~associated~~in narcolepsy, including new market entrants, even if not directly competitive with ~~narcolepsy, we are aware that prescribers often prescribe branded~~Xyrem or ~~generic medications for cataplexy before prescribing~~Xywav, could have the effect of changing treatment regimens and payor or ~~instead~~formulary coverage of ~~prescribing~~Xyrem or Xywav in favor of other products, and indirectly materially and adversely affect sales of Xyrem and Xywav. Examples of such new market entrants include our product, Sunosi, and pitolisant, a drug that payors often require patients to try such medications before they will cover Xyrem, even if they are not approved for this use. For example, prescribers often treat mild cataplexy with drugs that have not beenwas approved by ~~the~~ FDA for this indication, including tricyclic antidepressants and selective serotonin reuptake inhibitors or selective norepinephrine reuptake inhibitors. We are also aware that branded or generic stimulants may be prescribed off label for treatment of EDS in ~~narcolepsy. Wake-promoting agents Provigil~~^® ~~(modafinil) and Nuvigil~~^® ~~(armodafinil), and their generic equivalents are approved~~2019 for the treatment of EDS in adult patients with narcolepsy and ~~other conditions,~~that is expected to be submitted to FDA in the third quarter of 2020 pursuant to a complete response resubmission for approval of an adult cataplexy indication in the U.S. Pitolisant has also been approved and ~~may be used~~marketed in ~~conjunction~~Europe to treat adult patients with narcolepsy with or ~~instead~~without cataplexy, and a marketing authorization application is pending with the European Medicines Agency, or EMA, for approval of ~~Xyrem. Prescribers~~pitolisant in the treatment of EDS in OSA. In addition, prescribers often prescribe ~~these medications~~stimulants or wake-promoting agents for treatment of EDS, and anti-depressants for cataplexy, before ~~prescribing~~ or instead of prescribing Xyrem, and payors often require patients to try such medications before they will cover Xyrem. ~~Payors could also choose to exclude Xyrem from formulary coverage~~Examples of such products are described in ~~favor~~“Business—Competition” in Part I, Item 1 of ~~a newly-launched product~~our Annual Report on Form 10-K for the ~~treatment~~year ended December 31, 2019.

We expect that the approval and launch of ~~symptoms~~an AG Product or other generic version of Xyrem could have a material adverse effect on our sales of and revenues from Xyrem and Xywav and on our business, financial condition, results of operations and growth prospects. We also expect that the approval and launch of any other sodium oxybate (including Xywav or Avadel’s extended-release sodium oxybate formulation) or alternative product that treats narcolepsy could have a material adverse effect on our sales of and revenues from Xyrem, which could have the additional impact ~~access to Xyrem, particularly for newly-diagnosed narcolepsy patients.~~of potentially triggering acceleration of market entry of AG Products or other generic sodium oxybate products under our patent litigation settlement agreements.

The distribution and sale of ~~Xyrem~~our oxybate products are subject to significant regulatory restrictions, including the requirements of a REMS, and these regulatory requirements subject us to risks and uncertainties, any of which could negatively impact sales of ~~Xyrem.~~Xyrem and Xywav.

The active pharmaceutical ingredient, or API, of Xyrem ~~sodium oxybate,~~and Xywav, is ~~the sodium salt~~a form of gamma-hydroxybutyric acid, or GHB, a central nervous system depressant known to be associated with facilitated sexual assault as well as with respiratory depression and other serious side effects. As a result, ~~the~~ FDA requires that we maintain a REMS with elements to assure safe use, or ETASU, for Xyrem and Xywav to help ensure that the benefits of the drug in the treatment of cataplexy and EDS in narcolepsy outweigh the serious risks of the drug. The REMS imposes extensive controls and restrictions on the sales and marketing of Xyrem and Xywav that we are responsible for implementing. For example, under the Xyrem REMS, all of the Xyrem sold in the U.S. must be dispensed and shipped directly to patients or caregivers through a central pharmacy, and may not be stocked in retail pharmacies. Physicians and patients must complete an enrollment process prior to fulfillment of Xyrem prescriptions, and each physician and patient must receive materials concerning the serious risks associated with Xyrem before the physician can prescribe, or a patient can receive, the product. The central certified pharmacy must monitor and report instances of patient or prescriber behavior giving rise to a reasonable suspicion of abuse, misuse or diversion of Xyrem, and maintains enrollment and prescription monitoring information in a central database. Any failure to ~~comply~~demonstrate our substantial compliance with our REMS obligations, including as a result of business or other interruptions resulting from the evolving effects of the COVID-19 pandemic, or a determination by ~~the~~ FDA that the ~~Xyrem~~ REMS is not meeting its goals, could result in enforcement action by ~~the~~ FDA, lead to changes in our ~~Xyrem~~ REMS obligations, negatively affect sales of Xyrem or Xywav, result in additional costs and expenses for us and/or require us to invest a significant amount of resources, any of which could materially and adversely affect our business, financial condition, results of operations and growth prospects.

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While we believe that the Xyrem REMS has met its goal of mitigating the risks of serious adverse outcomes resulting from inappropriate prescribing, misuse, abuse and diversion of Xyrem, we cannot guarantee that the FDA will agree or that the Xyrem REMS will continue to do so in the future. We are required to prepare and submit regular assessments of the Xyrem REMS, and the FDA has stated that it will evaluate the Xyrem REMS on an ongoing basis and will require modifications as may be appropriate. In July 2020, in connection with the approval of Xywav, FDA approved the Xywav and Xyrem REMS. We cannot predict whether ~~the~~ FDA will request, seek to require or ultimately require modifications to, or impose additional requirements on, the Xywav and Xyrem REMS, including in connection with the submission of ~~applications for~~ new oxybate products ~~new oxybate~~or indications, or the introduction of authorized generics, or to accommodate generics, or whether ~~the~~ FDA will approve modifications to the Xywav and Xyrem REMS that we consider ~~warranted in connection with the submission of applications for new oxybate products.~~warranted. Any modifications approved, required or rejected by ~~the~~ FDA could change the safety profile of Xywav or Xyrem, and have a significant negative impact in terms of product liability, public acceptance of Xywav or Xyrem as a treatment for cataplexy and EDS in narcolepsy, and prescribers’ willingness to prescribe, and patients’ willingness to take, Xywav or Xyrem, any of which could have a material adverse effect on our ~~Xyrem~~oxybate business. Modifications approved, required or rejected by ~~the~~ FDA could also make it more difficult or expensive for us to distribute Xywav or Xyrem, make

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distribution easier for ~~sodium~~ oxybate competitors, disrupt continuity of care for Xywav or Xyrem patients and/or negatively affect sales of Xywav or Xyrem.

In October 2018, the FDA approved a modification to the Xyrem REMS in connection with our submission of our pediatric supplemental NDA to include information for pediatric patients and their caregivers and, in March 2019, we completed the implementation of the approved REMS modification. We have also submitted and expect to continue to submit ongoing assessments as required by the FDA. However, we cannot guarantee that the ongoing assessments will be completed on our expected timing or be satisfactory to the FDA, or that the operation of the Xyrem REMS will satisfy the FDA’s expectations in its evaluation of the Xyrem REMS on an ongoing basis.

We depend on outside vendors, including ~~the central certified pharmacy, to implement the requirements of the Xyrem REMS. We have an exclusive agreement with~~ Express Scripts Specialty Distribution Services, Inc., or ESSDS, the central certified pharmacy, to distribute Xyrem in the U.S., provide patient support services and implement the requirements of the Xywav and Xyrem REMS. In July 2020, upon expiration of the existing exclusive agreement, we entered into a new agreement with ESSDS for ~~Xyrem, which expires on July 1, 2020. The agreement may be terminated by either party at any time without cause on 180 days’ prior written notice to the other party.~~a two-year term. If the central pharmacy fails to meet the requirements of the Xywav and Xyrem REMS applicable to the central pharmacy or otherwise does not fulfill its contractual obligations to us, ~~provides timely notice that it wants~~moves to terminate our agreement, refuses or fails to adequately serve patients, or fails to promptly and adequately address operational challenges or challenges in implementing REMS modifications, whether due to business or other interruptions resulting from the evolving effects of the COVID-19 pandemic or otherwise, the fulfillment of Xywav or Xyrem prescriptions and our sales would be adversely affected. If we change to a new central pharmacy, new contracts might be required with government payors and other insurers who pay for Xywav or Xyrem, and the terms of any new contracts could be less favorable to us than current agreements. In addition, any new central pharmacy would need to be registered with the U.S. Drug Enforcement Administration, or DEA, and certified and would also need to implement the particular processes, procedures and activities necessary to distribute ~~Xyrem~~ under the Xywav and Xyrem REMS. Transitioning to a new pharmacy could result in product shortages, which would negatively affect sales of Xywav and Xyrem, result in additional costs and expenses for us and/or take a significant amount of time, any of which could materially and adversely affect our business, financial condition, results of operations and growth prospects.

~~A generic version~~In its approval of Hikma’s ANDA, FDA waived the requirement of a ~~drug subject to a~~single shared REMS ~~with ETASU is required to have the same REMS as~~between the brand drug and generics and brands are mandated to use a single shared system REMS. However, the FDA may waive this requirement for a single shared system and approve an ANDA with a separate REMS with differing but comparable aspects of ETASU under certain circumstances. In its approval of West-Ward’s ANDA, the FDA waived the shared REMS requirement,generic versions, approving ~~West-Ward’s~~Hikma’s ANDA with a generic sodium oxybate REMS onseparate from the ~~condition~~Xyrem REMS, except for the requirement that the generic sodium oxybate REMS program pharmacies contact the Xyrem REMS by phone to verify and report certain information. The generic sodium oxybate REMS was approved with the condition that it be open to all future sponsors of ANDAs or NDAs for sodium oxybate products. In connection with the waiver, FDA issued a statement that it considers the generic sodium oxybate REMS to have the same ETASU as the Xyrem REMS and operationalizes those elements in a comparable manner to achieve the same level of safety as the Xyrem REMS. However, the generic sodium oxybate REMS, unlike the Xyrem REMS, permits multiple certified pharmacies and multiple databases that are connected via an electronic “switch” system. The generic sodium oxybate REMS also requires the certified pharmacies in its system to contact the Xyrem REMS program to verify that the patient has no other active prescriptions for Xyrem that overlap with the generic prescription to be filled and to identify any patient and prescriber disenrollments from the Xyrem system for suspected abuse, misuse and diversion.

~~We were not involved in development of the generic sodium oxybate REMS and were not consulted regarding any features of this REMS.~~ A sodium oxybate distribution system that is less restrictive than the Xywav and Xyrem REMS, such as the generic sodium oxybate REMS, which provides that generic sodium oxybate products and potentially new sodium oxybate products approved under a Section 505(b)(2) NDA approval pathway could be distributed through multiple pharmacies, could increase the risks associated with ~~sodium~~ oxybate distribution. Because patients, consumers and others may not differentiate generic sodium oxybate from Xyrem or differentiate between the different REMS programs, any negative outcomes, including risks to the public, caused by or otherwise related to a separate sodium oxybate REMS, could have a significant negative impact in terms of product liability, our reputation and good will, public acceptance of Xywav or Xyrem as a treatment for cataplexy and EDS in

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narcolepsy, and prescribers’ willingness to prescribe, and patients’ willingness to take, Xywav or Xyrem, any of which could have a material adverse effect on our ~~Xyrem~~oxybate business.

We may face pressure to further modify the Xyrem or Xywav REMS or to license or share intellectual property pertinent to ~~the Xyrem~~that REMS, including proprietary data required for the safe distribution of sodium oxybate, in connection with ~~the~~ FDA’s approval of the generic sodium oxybate REMS or ~~otherwise.~~another oxybate REMS that may be submitted or approved in the future. Our settlement agreements with ANDA filers do not directly impact ~~the~~ FDA’s waiver of the single shared system REMS requirement, any other ANDA or NDA filer’s ability to develop and implement the generic sodium oxybate REMS for its ~~generic~~ sodium oxybate product, or our ability to take any action with respect to the safety of the generic sodium oxybate REMS. We cannot predict the outcome or impact on our business of any future action that we may take with respect to ~~the~~ FDA’s waiver of the single shared system REMS requirement, its approval and tentative approval of generic versions of ~~Xyrem~~sodium oxybate or the consequences of distribution of sodium oxybate through the generic sodium oxybate REMS approved by ~~the~~ FDA or another separate REMS.

REMS programs have increasingly drawn public scrutiny from the U.S. Congress, the Federal Trade Commission, or FTC, and ~~the~~ FDA, with allegations that such programs are used as a means of improperly blocking or delaying competition. ~~The~~In December 2019, as part of the Further Consolidated Appropriations Act of 2020, the U.S. Congress ~~for example, has introduced proposed~~passed legislation ~~aimed at preventing~~known as the Creating and Restoring Equal Access To Equivalent Samples Act, or CREATES. CREATES is intended to prevent companies from using REMS and other restricted distribution programs as a means to deny potential competitors access to product samples ~~needed for bioequivalence testing. The~~that are reasonably necessary to conduct testing in support of an application that references a listed drug or biologic, and provides such potential competitors a potential private right of action if the innovator fails to timely provide samples upon request. CREATES also grants FDA has stated that it will seek to coordinate with the FTC in identifying and publicizing practices the FTC finds to be anticompetitive and has further stated that the FDA has concerns related to the role of REMS programs in delayingadditional authority regarding approval of generic ~~products. For example, in May 2018, FDA published a list of companies that it said had potentially been blocking access to the samples of their branded~~ products ~~including one of our subsidiaries that sells FazaClo~~^® ~~(clozapine, USP) through a REMS program.~~ with REMS.

It is possible that the FTC, ~~the~~ FDA or other governmental authorities ~~or other third parties~~ could claim that, or launch an investigation into whether, we are using our REMS programs in an anticompetitive manner or have engaged in other anticompetitive practices. The Federal Food, Drug and Cosmetic Act further states that a REMS ETASU shall not be used by an NDA holder to block or delay generic drugs or drugs covered by an application under Section 505(b)(2) from entering the market. In its 2015 letter approving the Xyrem REMS, ~~the~~ FDA expressed concern that we were aware that the Xyrem REMS could have the effect of blocking or delaying generic competition. We cannot predict whether we would face a government investigation ~~or a complaint by a third party~~ premised on a claim that the Xyrem REMS is blocking competition, or the outcome or impact of any such claim. In June and July 2020, we were served with a number of class action complaints that included allegations that we had used the Xyrem REMS to delay

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approval of generic sodium oxybate. For additional information on these class action complaints, see Note 11, Commitments and Contingencies-Legal Proceedings of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. It is possible that additional lawsuits will be filed against us making similar or related allegations. We cannot predict the outcome of these or potential additional lawsuits; however, if the plaintiffs were to be successful in their claims, they may be entitled to injunctive relief or we may be required to pay significant monetary damages, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Pharmaceutical companies, including their agents and employees, are required to monitor adverse events occurring during the use of their products and report them to ~~the~~ FDA. The patient counseling and monitoring requirements of the Xyrem REMS provide more extensive information about adverse events experienced by patients taking Xyrem, including deaths, than is generally available for other products that are not subject to similar REMS requirements. As required by ~~the~~ FDA and other regulatory agencies, the adverse event information that we collect for Xyrem is regularly reported to ~~the~~ FDA and could result in ~~the~~ FDA requiring changes to Xyrem labeling, including additional warnings or additional boxed warnings, or requiring us to take other actions that could have an adverse effect on patient and prescriber acceptance of Xyrem. As required by ~~the~~ FDA, Xyrem’s current labeling includes a boxed warning regarding the risk of central nervous system depression and misuse and abuse.

Any failure to demonstrate our substantial compliance with the REMS or any other applicable regulatory requirements to the satisfaction of ~~the~~ FDA or another regulatory authority could result in such regulatory authorities taking actions in the future which could have a material adverse effect on Xyrem sales and therefore on our business, financial condition, results of operations and growth prospects. ~~For more information, see the risk factor under the heading “~~In addition to those specifically described in other risk factors, we are subject to significant ongoing regulatory obligations and oversight, which may result in significant additional expense and limit our ability to commercialize our products~~” in this Part II, Item 1A.~~

While we expect our oxybate products, Xyrem ~~remains~~and our newly approved Xywav, to remain the largest ~~product,~~part of our business, our success also depends on our ability to effectively commercialize products in our ~~other products.~~oncology therapeutic area.

In addition to Xyrem, Xywav and our other neuroscience products and product candidates, we are commercializing a portfolio of products, including our other lead marketed products, Defitelio, Erwinaze, ~~Defitelio,~~ Vyxeos and Sunosi. We are in the early stages of launching and commercializing Sunosi, which received FDA approval in March 2019 and was launched in the U.S. in July 2019. We are making significant investments in maximizing the value and therapeutic reach of Defitelio, Vyxeos and Sunosi by conducting additional research and development activities, which include generating additional supportive clinical data and seeking regulatory approval for new indications, as appropriate. OurZepzelca. An inability to effectively commercialize Defitelio, Vyxeos and ~~Sunosi~~Zepzelca and to maximize their potential where possible through successful research and development activities, whether due to the evolving effects of the COVID-19 pandemic or otherwise, and ~~our~~an inability to ~~retain rights to~~replace the future product sales we will lose from Erwinaze, ~~after 2020~~ could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~Erwinaze~~Defitelio

~~Erwinaze~~^® ~~(asparaginase~~ ~~Erwinia chrysanthemi) is a treatment approved in the U.S. and in certain markets in Europe (where it is marketed as Erwinase~~^®~~) for patients with acute lymphoblastic leukemia, or ALL, who have developed hypersensitivity to~~ ~~E. coli-derived asparaginase. Erwinaze is licensed from, and manufactured by, a single source, Porton~~

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Biopharma Limited, or PBL, a company that is wholly owned by the UK Department of Health and Social Care. In February 2019, we received a contract termination notice from PBL. As a result of our receipt of the contract termination notice, our license and supply agreement with PBL, which includes our license to Erwinaze trademarks and manufacturing know-how, will expire on December 31, 2020. We and PBL had been engaged in discussions related to entry into a replacement agreement to extend the term of our commercial relationship past 2020, but we did not reach agreement. Unless we and PBL enter into a new agreement, we will lose our rights to Erwinaze effective December 31, 2020, other than our right to sell certain Erwinaze inventory for a post-termination sales period of 12 months. In such event, we may not be able to replace the product sales we would lose from Erwinaze, which in 2018 totaled $174.7 million, and our business, financial condition, results of operations and growth prospects would be materially adversely affected. In addition, we cannot predict whether and to what extent uncertainty related to our rights to, and availability of, Erwinaze after 2020 will negatively impact sales of and revenues from this product.

A continuing and significant challenge to our ability to maintain sales of Erwinaze and a barrier to increasing sales is PBL’s inability to consistently supply product adequate to meet market demand. PBL’s product quality and manufacturing issues have resulted, and continue to result, in supply disruptions, and our need for PBL to minimize or avoid additional supply disruptions due to capacity constraints, production delays, quality or regulatory challenges and other manufacturing difficulties. In addition, we have incurred and continue to incur significant internal and external costs and expenses as a result of these issues, including due to managing the increased need for regulatory and customer interaction. See the discussion regarding Erwinaze supply issues in the risk factor under the heading “Delays or problems in the supply of our products for sale or our for use in clinical trials, loss of our single source suppliers or failure to comply with manufacturing regulations could materially and adversely affect our business, financial condition, results of operations and growth prospects~~” in this Part II, Item 1A.~~

Our ability to maintain and grow sales ~~of Erwinaze is also subject~~and to ~~a number of additional challenges, including~~realize the ~~following as well as other risks and uncertainties described elsewhere~~anticipated benefits from our investment in ~~this Part II, Item 1A:~~


•	~~the limited population of patients with ALL, and the incidence of hypersensitivity reactions to~~ ~~E. coli-derived asparaginase within that population;~~

the development and/or approval of new asparaginase treatments or treatment protocols for ALL that may not include asparaginase-containing regimens and prescribers’ use of alternate methods to address hypersensitivity reactions;

the failure to obtain regulatory approval from the FDA or UK Medicines and Healthcare Products Regulatory Agency, or MHRA, to release batches of Erwinaze requiring batch-specific approval due to quality and manufacturing issues;

~~difficulties with obtaining and maintaining favorable pricing and reimbursement arrangements;~~

~~potential competition from future biosimilar products;~~

~~PBL’s ability to meet the manufacturing post-marketing commitments imposed by the FDA in connection with its approval of our biologics license application, or BLA; and~~

~~any failure to comply with obligations under our agreement with PBL resulting in PBL claiming an uncured material breach.~~

~~If we fail to maintain revenue from sales of Erwinaze, our business, financial condition, results of operations and growth prospects could be materially adversely affected.~~

To expand our asparaginase franchise beyond Erwinaze, we are pursuing activities related to the development of improved asparaginase products for patients with ALL or other hematological malignancies. Several of our external research and development collaborations are focused on these efforts, including our agreement with Pfenex, Inc., or Pfenex, which includes worldwide rights to develop and commercialize multiple early-stage hematology product candidates and an option to negotiate a license for a recombinant pegaspargase product candidate, and our agreement with XL-protein GmbH, or XLp, for rights to use XLp’s PASylation® technology to extend the plasma half-life of selected asparaginase product candidates. Among the product candidates in collaboration with Pfenex is JZP-458, a recombinant ~~Erwinia~~ asparaginase product candidate, for the potential treatment of ALL and lymphoblastic lymphoma for which we plan to commence a single-arm, pivotal Phase 2/3 clinical trial by the end of 2019. If these activities are unsuccessful, our growth prospects could be materially adversely affected.

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~~Defitelio~~

Defitelio^®(defibrotide sodium) is a product approved in the U.S. in 2016 for the treatment of adult and pediatric patients with hepatic veno-occlusive disease, or VOD, also known as sinusoidal obstruction syndrome, with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Europe in 2013 (where it is marketed as Defitelio^®~~(defibrotide)) for the treatment of severe VOD in adults and children undergoing HSCT therapy.~~

~~Our ability to maintain and successfully and sustainably grow sales of Defitelio~~ is subject to a number of risks and uncertainties, including ~~the following as well as other risks and uncertainties described elsewhere in this Part II, Item 1A:~~

~~the~~ continued acceptance ~~of Defitelio in the U.S., the EU and other countries~~ by hospital pharmacy and therapeutics committees in the U.S., the EUand other countries; the continued availability of favorable pricing and adequate coverage and reimbursement ~~by government programs and third party payors;~~

;the limited experience of, and need to educate, physicians in recognizing, diagnosing and treating hepatic veno-occlusive disease, or VOD, particularly in adults;

the possibility that physicians recognizing VOD symptoms may not initiate or may delay initiation of treatment while waiting for those symptoms to improve, or may terminate treatment before the end of the recommended dosing schedule;

~~our ability to successfully maintain or grow sales of Defitelio in Europe~~ and ~~other non-U.S. countries, including our ability to obtain marketing approval in new countries;~~

~~delays or problems in the supply or manufacture of the product;~~

the limited size of the population of VOD patients who are indicated for treatment with Defitelio (particularly if changes in ~~HSCT~~ hematopoietic stem cell transplantation treatment protocols reduce the incidence of VOD diagnosis and demand for Defitelio);

our ability to meet the post-marketing commitments and requirements imposed by the FDA in connection with its approval of our NDA and by the European Commission, or EC, in connection with its marketing authorization granted “under exceptional circumstances”; and

~~our ability to maintain favorable pricing and reimbursement approvals across Europe, particularly in countries that represent significant markets.~~.

~~To expand the potential of Defitelio, our clinical development strategy generally focuses on the prevention and treatment of serious diseases associated with endothelial cell damage, including an ongoing~~We recently announced that we stopped enrollment in our Phase 3 ~~clinical~~ trial evaluating defibrotide in the prevention of VOD due to a determination that the study is highly unlikely to reach one of its primary endpoints. Although we do not expect this outcome to impact clinicians’ use of Defitelio in ~~high-risk~~the treatment of VOD, it may result in delays in the initiation of treatment for some patients ~~following HSCT, ongoing Phase 2 trials in prevention~~as clinicians wait for definitive signs and symptoms of ~~acute Graft versus Host Disease following allogeneic HSCT, and an ongoing Phase 2 trial in prevention of chimeric antigen receptor T-cell, or CAR T-cell, therapy-associated neurotoxicity.~~ VOD. In addition, due to ~~clinical trials~~the evolving effects of the COVID-19 pandemic, the reprioritization of healthcare resources and related delays, postponements or suspensions of certain medical procedures such as stem cell transplants is resulting in a decrease in demand for Defitelio. If sales of Defitelio do not reach the levels we ~~are sponsoring, there are more than 20 investigator-sponsored trials ongoing in~~expect, our anticipated revenue from the ~~U.S.~~product would be negatively affected and ~~EU to evaluate defibrotide in multiple conditions. If these development activities are unsuccessful,~~ our business, financial condition, results of operations and growth prospects ~~could~~would be materially adversely affected.

~~Because~~In addition, because VOD is an ultra-rare disease, we have experienced inter-quarter variability in our Defitelio sales, which makes Defitelio sales difficult to predict from period to period. As a result, Defitelio sales results or trends in any period may not necessarily be indicative of future performance. If

Erwinaze

Erwinaze^® (asparaginase Erwinia chrysanthemi), which is approved to treat a limited population of patients with acute lymphoblastic leukemia, or ALL, who have developed hypersensitivity to E. coli-derived asparaginase, is licensed from, and manufactured by, a single source, Porton Biopharma Limited, or PBL, a company that is wholly owned by the UK Department of Health and Social Care. Our license and supply agreement with PBL, which includes an exclusive right to market, sell or distribute Erwinaze, an exclusive license to Erwinaze trademarks, and a non-exclusive license to PBL’s manufacturing know-how, will expire on December 31, 2020. In April 2020, PBL announced that it had entered into an agreement with a new

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partner to commercialize and distribute Erwinaze after our license and supply agreement expires. As a result, our ability to generate revenue through Erwinaze sales in the future will be adversely impacted. Under our agreement with PBL, we have the right to sell certain Erwinaze inventory for a post-termination sales period of 12 months and retain ownership of certain data, know-how and other property interests, including the biologics license application, or BLA, for Erwinaze in the U.S. and marketing authorizations for Erwinase in several other countries. We intend to work with PBL to address business transition post-termination to ensure continuity of patient care. However, we cannot compel PBL to work with us on ensuring an orderly transition, or to recognize our continuing rights. In the past, we have had disagreements with PBL over product quality and supply, the costs of remediation, and other rights and obligations under the existing contract. Our ability to supply the market and generate future sales of ~~Defitelio do~~product including product we are entitled to receive post-termination during 2021, will depend on PBL’s ability to address Erwinaze manufacturing and quality issues and on the level of product supply PBL provides us before and after the termination date. We may not ~~reach the levels~~receive Erwinaze product that we expect from PBL to be able to supply the market through 2020 or in the post-termination sales period and may incur costs, including time and distraction of relevant employees, associated with resolution of any disputes with PBL. If PBL is unable to remediate the quality and manufacturing issues that have required oversight by us in order to get product to patients in the U.S., Erwinaze shortages may continue to increase, and we could suffer reputational harm based on our ~~anticipated revenue~~historical and current association with the product. If we are unable to replace the future product sales we will lose from ~~the product would be negatively affected, which could have a material adverse effect on~~Erwinaze, our business, financial condition, results of operations and growth ~~prospects.~~prospects would be materially adversely affected.

In addition, a continuing and significant challenge to maintaining sales of Erwinaze and a barrier to increasing sales is PBL’s inability to consistently supply product that meets specifications in quantities that are adequate to meet market demand. Other challenges facing Erwinaze include the limited population of patients with ALL, and the incidence of hypersensitivity reactions to E. coli-derived asparaginase within that population; the development and/or approval of new asparaginase treatments or treatment protocols for ALL that may not include asparaginase-containing regimens and prescribers’ use of alternate methods to address hypersensitivity reactions; difficulties with obtaining and maintaining favorable pricing and reimbursement arrangements; and potential competition from future biosimilar products.

Vyxeos

Our ability to realize the anticipated benefits from our investment in Vyxeos^® (daunorubicin and cytarabine) liposome for injection is a product approved in the U.S. in 2017 and in Europe in August 2018 (where it is marketed as Vyxeos® liposomal 44 mg/100 mg powder for concentrate for solution for infusion) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia, or t-AML, or acute myeloid leukemia, or AML, with myelodysplasia-related changes, or AML-MRC. Our ability to realize the anticipated benefits from our investment in Vyxeos by successfully and sustainably growing sales is subject to a number of risks and uncertainties, including ~~the following as well as other risks and uncertainties described elsewhere in this Part II, Item 1A:~~

our ability to differentiate Vyxeos from other liposomal chemotherapies and generically available chemotherapy combinations with which physicians and treatment centers are more familiar;

~~the~~ acceptance ~~of Vyxeos~~by hospital pharmacy and therapeutics committees in the U.S., the EU and other ~~countries by hospital pharmacy and therapeutics committees and the availability of favorable pricing and adequate coverage and reimbursement by government programs and third party payors;~~

delays or problems in the supply or manufacture of the product, including the ability of the third parties upon which we rely to manufacture Vyxeos and its APIs to manufacture sufficient quantities in accordance with applicable specifications;

countries; the increasing complexity of the acute myeloid leukemia, or AML, landscape requiring changes in patient identification and treatment selection, including diagnostic tests and monitoring that clinicians may find challenging to incorporate;

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the use of new and novel compounds in AML that are either used off-label or are only approved for use in combination with other agents and that have not been tested in combination with Vyxeos;

the increasing use of venetoclax, bolstered by the recent announcement of Phase 3 clinical data supporting the use of venetoclax in AML treatment; the limited size of the population of high-risk AML patients who may potentially be indicated for treatment with Vyxeos, particularly ~~given~~as a result of the ~~ongoing clinical trials by other companies with~~shift of healthcare resources toward less intensive outpatient AML treatments in the ~~same patient population; and~~

~~our ability to meet~~U.S. in light of the ~~post-marketing commitments and requirements imposed by~~COVID-19 pandemic which is directly negatively impacting, or delaying, the ~~FDA in connection with its approval of our NDA and by the EC in connection with its marketing authorization.~~

~~The lack of prescriber usage data from U.S. commercialization~~use of Vyxeos, ~~makes Vyxeos sales difficult~~as well as the suspension of in-person interactions with healthcare professionals due to ~~predict from period to period, and sales results or trends in any period may not necessarily be indicative~~the COVID-19 pandemic; the availability of ~~future performance. Following receipt of marketing authorization from the EC in late 2018, as part of our rolling launch of Vyxeos in the EU, we are continuing to make~~adequate coverage, pricing and reimbursement ~~submissions. If we experience~~approvals, competition from new and existing products and potential competition from products in development; and delays or ~~unforeseen difficulties in obtaining favorable pricing and reimbursement, planned launches~~problems in the ~~affected EU member states would be delayed, which could negatively impact anticipated revenue.~~

~~To expand the potential~~supply or manufacture of Vyxeos, our clinical development strategy is designed to target potential new patient segments across the AML landscape, to pursue indications related to myelodysplastic syndrome and to generate clinical data on Vyxeos when used in combination with other therapeutic agents. We are pursuing this strategy by sponsoring clinical trials, working with cooperative groups who are conducting clinical trials and partnering with The University of Texas MD Anderson Cancer Center to evaluate potential treatment options for hematologic malignancies, with a near-term focus on Vyxeos. In addition, there are multiple investigator-sponsored trials ongoing. Because combination regimens and the continual generation of new data have become particularly important in AML, if we are unable to initiate multiple combination studies, safely combine Vyxeos with novel agents, or if efficacy results do not meet clinicians’ expectations, our growth prospects could be materially adversely affected.

If sales of Vyxeos do not reach the levels we expect, our anticipated revenue from the product ~~will~~would be negatively affected, which ~~could~~would have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~Sunosi~~Zepzelca

~~Sunosi~~^® (solriamfetol) is a product approved in the U.S. to improve wakefulness in adult patients with EDS associated with narcolepsy or obstructive sleep apnea, or OSA. Sunosi was launched in the U.S. in July 2019, and our launch of this product is at an early stage. Sunosi faces competition from existing branded and generic products that treat EDS or improve wakefulness in adult patients with narcolepsy or OSA in a competitive retail pharmacy market. For further discussion of the competition that Sunosi faces, see the risk factor under the heading “~~We face substantial competition from other companies, including companies with larger sales organizations and more experience working with large and diverse product portfolios” in this Part II, Item 1A.~~

We submitted a marketing authorization application, or MAA, for Sunosi for the potential treatment of EDS in adult patients with narcolepsy or OSA to the European Medicines Agency, or EMA, in the fourth quarter of 2018. We cannot predict whether our Sunosi MAA will be approved in a timely manner, or at all. If we fail to obtain approval for Sunosi in the EU, or if the EC requires product labeling that negatively impacts patient, physician or payor acceptance of the product, our growth prospects could be materially adversely affected.

~~In addition to challenges and uncertainties related to Sunosi competition and obtaining regulatory approval of Sunosi in the EU, our~~Our ability to realize the anticipated benefits from our investment in ~~Sunosi~~ Zepzelca^® (lurbinectedin) is subject to a number of risks and uncertainties, including ~~the following as well as other risks and uncertainties described elsewhere in this Part II, Item 1A:~~

our ability to successfully launch and ~~grow sales of Sunosi~~commercialize Zepzelca in the U.S. ~~and, if approved, in the EU;~~

~~our ability to obtain marketing approval, successfully launch and grow sales of Sunosi in other non-U.S. countries;~~

~~the~~ ; availability of ~~adequate formulary positions and~~favorable pricing and adequate coverage and reimbursement ~~by third party payors, including government programs, including~~; the limited experience of, and need to educate, physicians in the use of Zepzelca for the treatment of metastatic small cell lung cancer, or SCLC; the potential for negative trial data read-outs in ongoing or future Zepzelca clinical trials; and the impact of ~~any delays in coverage decisions by payors;~~

~~restrictions on permitted promotional activities based on any additional limitations~~the evolving effects of the COVID-19 pandemic on the ~~labeling for the product that may be required by the FDA~~ability of our field teams to access clinicians and prescribers to increase awareness of Zepzelca in the ~~future and any such limitations that may be required by the EC or other regulatory authority on any approved labeling;~~

~~market acceptance~~treatment of ~~Sunosi;~~

~~delays or problems~~relapsed SCLC in the ~~supply or manufacture of Sunosi; and~~

~~our ability to satisfy the FDA’s post-marketing requirements and other post-marketing requirements or commitments, if any, imposed by the EC in connection with its potential marketing authorization.~~

~~To expand the potential of Sunosi, our clinical development strategy is designed to~~ target potential new indications for Sunosi for the potential treatment of EDS in other sleep or central nervous system disorders, including pursuing development activities for Sunosi for the potential treatment of EDS in patients with major depressive disorder, or MDD. If these development activities are unsuccessful, our growth prospects could be materially adversely affected.

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~~If we are unable to successfully launch and commercialize Sunosi in the~~ U.S., if we are unable to obtain approval of our Sunosi MAA in a timely manner, or at all, if the EC requires product labeling that negatively impacts patient, physician or payor acceptance of the product, or if sales of Sunosi in the U.S. and EU (if approved) do not reach the levels we expect, our anticipated revenue from Sunosi will be negatively affected, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

For a discussion of the risks inherent in implementing our research and clinical development strategy with respect to Defitelio, Vyxeos, and Sunosi, see the discussion in the risk factor under the heading “Conducting clinical trials is costly and time-consuming, and the outcomes are uncertain. A failure to prove that our product candidates are safe and effective in clinical trials, or to generate data in clinical trials to support expansion of the therapeutic uses for our existing products, could materially and adversely affect our business, financial condition, results of operations and growth prospects~~” in this Part II, Item 1A.~~

We face substantial competition from other companies, including companies with larger sales organizations and more experience working with large and diverse product portfolios.

Our products compete, and our product candidates may in the future compete, with currently existing therapies, including generic drugs, product candidates currently under development by us and others and/or future product candidates, including new chemical entities that may be safer or more effective or more convenient than our products. Any products that we develop

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may be commercialized in competitive markets, and our competitors, which include large global pharmaceutical companies and small research-based companies and institutions, may succeed in developing products that render our products obsolete or noncompetitive.

We Many of our competitors, particularly large pharmaceutical and life sciences companies, have substantially greater financial, operational and human resources than we do. Smaller or earlier stage companies may also ~~face competition,~~prove to be significant competitors, particularly through focused development programs and collaborative arrangements with large, established companies. In addition, many of our competitors deploy more personnel to market and sell their products than we do, and we compete with other companies to recruit, hire, train and retain pharmaceutical sales and marketing personnel. If our sales force and sales support organization are not appropriately resourced and sized to adequately promote our products, the commercial potential of our current and any future products may inbe diminished. In any event, the future face additional competition, from manufacturers of generic drugs. Certain U.S. state laws allow for, and in some instances in the absence of specific instructions from the prescribing physician mandate, the dispensing of generic products rather than branded products when a generic version is available. Generic competition often results in decreases in the net revenue for branded products.

~~The~~ commercial potential of our current products and any future products may be reduced or eliminated if our competitors develop or acquire and commercialize generic or branded products that are safer or more effective, are more convenient or are less expensive than our products.

For a description of the competition that our lead marketed products and most advanced product candidates face or may face, see the discussion in “Business—Competition” in Part I, Item 1 of ~~specific risks relating to competition from new products that treat cataplexy and/or EDS in narcolepsy, including generic versions of Xyrem or other sodium oxybate products, see~~our Annual Report on Form 10-K for the year ended December 31, 2019 and the risk factor under the heading “The introduction of new products in the U.S. market that compete with, or otherwise disrupt the market for, ~~Xyrem~~our oxybate products and product candidates would adversely affect sales of ~~Xyrem~~our oxybate products and product candidates” ” in this Part II, Item 1A. We expect that the approval and launch of any other sodium oxybate or alternative product that treats narcolepsy, or the launch of an AG Product or other generic version of Xyrem, could have a material adverse effect on our sales of and revenues from Xyrem and on our business, financial condition, results of operations and growth prospects.

~~While there is currently no direct competition to Erwinaze to treat ALL patients with hypersensitivity to~~ ~~E. coli~~-derived asparaginase, other companies have developed or are developing new treatments for ALL. Some new asparaginase treatments could reduce the rate of hypersensitivity in patients with ALL, and new treatment protocols are being developed and approved for ALL that may not include asparaginase-containing regimens, including some for the treatment of relapsed or refractory ALL patients. We have experienced frequent intermittent shortages of the product that have impacted prescribing habits for Erwinaze, including prescribers’ use of alternate methods to address hypersensitivity reactions. The development of these new treatments could negatively impact our ability to maintain, and potentially in the future grow, sales of Erwinaze in patient populations where the benefit of an asparaginase-containing regimen is not well established. As a biologic product, Erwinaze also faces potential competition from biosimilar products.

While there is currently no direct competition to Defitelio to treat severe VOD, changes in the types of conditioning regimens used as part of HSCT may affect the incidence of VOD diagnosis and demand for Defitelio.

With respect to Vyxeos, there are a number of alternative established therapies in AML. A key consideration in the treatment of AML patients is the patient’s suitability for chemotherapy. The AML patient population studied in the Vyxeos Phase 3 clinical trial supporting our NDA included fit patients, or those deemed able to tolerate intensive induction chemotherapy. The existing options for the treatment of newly-diagnosed t-AML and AML-MRC in fit patients include cytarabine in combination with an anthracycline (i.e., daunorubicin), known as 7+3. In addition, we are aware of several other products that have been recently approved by the FDA or are in development as treatment options for newly diagnosed AML patients eligible for intensive chemotherapy, such as targeted agents (e.g. midostaurin, enasidenib and ivosidenib), immunotherapies (e.g., gemtuzumab ozogamicin and CAR-T‑cell therapy), and agents disrupting leukemia cell survival (e.g., glasdegib). We are also aware of the increasing use of venetoclax, an AML treatment recently approved by the FDA. Some of the patient populations being studied for, or treated by, these products overlap with the patient population studied in the Vyxeos Phase 3 clinical trial supporting our NDA. The existence of established treatment options and the development of competing

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~~products for the treatment of newly-diagnosed t-AML or AML-MRC could negatively impact our ability to successfully commercialize Vyxeos and achieve the level of sales we expect.~~

Sunosi faces competition from existing branded and generic products that treat EDS or improve wakefulness in adult patients with narcolepsy or OSA in a competitive retail pharmacy market. To successfully launch and commercialize Sunosi, we need to differentiate Sunosi from other branded and generic products that treat EDS in patients with narcolepsy with which physicians are more familiar, including stimulants, wake-promoting agents, such as Provigil and Nuvigil, and generic versions of stimulants and wake-promoting agents. We are also aware that stimulants are prescribed for patients to treat excessive sleepiness in OSA. Sunosi will likely face competition from this genericized market and may face competition from new branded entrants such as pitolisant, a drug that was approved by the FDA in August 2019 for the treatment of EDS in adult patients with narcolepsy and is expected to be commercially available in the U.S. in the fourth quarter of 2019, and that has also been approved and marketed in Europe to treat adult patients with narcolepsy with or without cataplexy, or from other products in development as potential treatments for EDS in patients with narcolepsy or OSA, including, for example, orexin agonists, mazindol, modafinil combinations and Avadel’s once-nightly sodium oxybate formulation.

Many of our competitors, particularly large pharmaceutical and life sciences companies, have substantially greater financial, operational and human resources than we do. They can spend more on, and have more expertise in, research and development, regulatory, manufacturing, distribution and sales and marketing activities. As a result, our competitors may obtain FDA or other regulatory approvals for their product candidates more rapidly than we can and may market their products more effectively than we do. Smaller or earlier stage companies may also prove to be significant competitors, particularly through focused development programs and collaborative arrangements with large, established companies.

We have a relatively small number of sales representatives compared with most other pharmaceutical companies with marketed products. Each of our sales representatives is responsible for a territory of significant size. Many of our competitors deploy more personnel to market and sell their products than we do. In particular, we compete with companies with extensive sales, marketing and promotional experience in hematology/oncology markets, and our failure to compete effectively in this area could negatively affect sales of our hematology/oncology products. If our sales force and sales support organization are not appropriately resourced and sized to adequately promote our products, the commercial potential of our current and any future products may be diminished.

The growth of our current products and the launch of any future products may require expansion of our sales force and sales support organization, and we may need to commit significant additional funds, management and other resources to such growth. We may not be able to expand in a timely or cost-effective manner, or we may not have the financial resources to achieve the necessary growth. We also compete with other companies to recruit, hire, train and retain pharmaceutical sales and marketing personnel, and excessive turnover in such personnel could negatively affect sales of our products.

Adequate coverage and reimbursement from third party payors may not be available for our products, which could diminish our sales or affect our ability to sell our products profitably.

In both U.S. and non-U.S. markets, our ability to successfully commercialize and achieve market acceptance of our products depends in significant part on adequate financial coverage and reimbursement from third party ~~payors. Third party~~ payors, ~~include~~including governmental payors (such as the Medicare and Medicaid programs in the U.S.), managed care organizations and private health insurers. Without third party payor ~~support,~~reimbursement, patients may not be able to obtain or afford prescribed ~~medications~~medications. In addition, reimbursement guidelines and incentives provided to prescribing physicians by third party payors may have a significant impact on the prescribing physicians’ willingness and ability to prescribe our products. The demand for, and the profitability of, our products could be materially harmed if the Medicaid program, Medicare program, other healthcare programs in the U.S. or elsewhere, or third party commercial payors in the U.S. or elsewhere deny reimbursement for our products, limit the indications for which our products will be reimbursed, or provide reimbursement only on unfavorable terms. In particular, we cannot predict to what extent the evolving effects of the COVID-19 pandemic may disrupt global healthcare systems and access to our products or result in a widespread loss of individual health insurance coverage due to ~~barriers~~unemployment, a shift from commercial payor coverage to ~~access, including the inability to afford the medication.~~government payor coverage, or an increase in demand for patient assistance and/or free drug programs, any of which could adversely affect net revenue.

~~Third party payors’ reimbursement practices are complex, vary widely from payor to payor and can impose time-consuming burdens for patients and prescribing physicians.~~ As part of the overall trend toward cost containment, third party payors often require prior authorization for, and require reauthorization for continuation of, prescription products or impose step edits, which require prior use of another medication, usually a generic or preferred brand, prior to approving coverage for a new or more expensive product. Such restrictive conditions for reimbursement and an increase in reimbursement-related activities can extend the time required to fill prescriptions and may discourage patients from seeking treatment. For example, we are experiencing increasingly restrictive conditions for reimbursement required by some third party payors for Xyrem, which have extended the time required to fill some prescriptions and could continue to do so in the future and which may have a material effect on the overall level of reimbursement coverage for Xyrem. Moreover, other companies with products that compete with ours may seek to disadvantage our products’ reimbursement coverage or formulary position with third party payors, leading to reduced access for our patients. We cannot predict actions that third party payors may take, or whether they will limit the access and level of reimbursement for our products or refuse to provide any approvals or coverage. From time to time, third party payors have refused to provide reimbursement for our products, and others may do so in the future.

Reimbursement guidelines and incentives provided to prescribing physicians by third party payors may have a significant impact on the prescribing physicians’ willingness to prescribe our products. For example, the U.S. federal government follows a Medicare severity diagnosis-related group, or MS-DRG, payment system for certain inpatient hospital services provided under Medicare, which some states also use for Medicaid. The MS-DRG system entitles a hospital to a fixed reimbursement

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based on discharge diagnoses rather than actual costs incurred in providing inpatient treatment, thereby increasing the incentive for the facility to limit or control expenditures for many healthcare products. For our hematology/oncology products, all of which are used primarily or exclusively in the inpatient hospital setting, there may not be sufficient reimbursement under the relevant MS-DRG to fully cover the cost of our products. This risk was in part mitigated by a New Technology Add-on Payment, or NTAP, which is in addition to the MS-DRG-based reimbursement that hospitals receive. In 2017, Centers for Medicare and Medicaid Services, or CMS, approved an NTAP for Defitelio, which was renewed by CMS for 2018 and 2019. NTAP designations are reviewed by CMS on a yearly basis and may only be renewed for two years. Because Defitelio has already been renewed twice, the product will not be eligible for renewal after 2019. For 2019, CMS approved an NTAP for Vyxeos and renewed that NTAP for 2020, but we cannot guarantee that CMS will renew our NTAP after 2020.

In addition, a significant portion of our revenue from our hematology/oncology products, particularly Erwinaze and Vyxeos, is obtained through government payors, including Medicare, Medicaid and similar types of payors in other countries, and any failure to qualify for or receive adequate reimbursement under those programs, including as a result of legislative changes to these programs, would have a material adverse effect on revenues from such products. Significant attention has been paid to legislation proposing federal rebates on Medicare Part D and Medicare Advantage utilization for drugs issued to certain groups of lower income beneficiaries and the desire to change the provisions that treat these dual-eligible patients differently from traditional Medicare patients. Any such changes could have a negative impact on revenues from sales of our affected products. Any failure to cover our products appropriately, in addition to legislative and regulatory changes and others that may occur in the future, could impact our ability to maximize revenues in the federal marketplace.

Medicaid and other governmental programs are described under the heading “Business—Pharmaceutical Pricing, Reimbursement by Government and Private Payors and Patient Access” in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2018. For a discussion of specific risks relating to our reporting and payment obligations to government payors, see the risk factor under the heading “If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects” in this Part II, Item 1A. Third party payors outside the federal government are also increasingly considering new metrics as the basis for reimbursement rates, including those used by federal government payors such as average net sales price, average manufacturer price and actual acquisition cost. It is not possible to predict the impact of these evolving reimbursement mechanics on the willingness of payors to cover our products.

Third party payors increasingly examine the ~~cost effectiveness~~cost-effectiveness of pharmaceutical products, in addition to their safety and efficacy, when making coverage and reimbursement decisions. We may need to conduct expensive pharmacoeconomic and/or clinical studies in order to demonstrate the cost-effectiveness of our products. Even with such studies, our products may be considered less safe, less effective or less cost-effective than other products, and third party payors may not provide and maintain coverage and reimbursement for our products. If our competitors offer their products at prices that provide purportedly lower treatment costs than our products, or otherwise suggest that their products are safer, more effective or more cost-effective than our products, this may result in a greater level of access for their products relative to our products, which would reduce our sales and harm our results of operations. In some cases, for example, third party payors try to encourage the use of less expensive generic products through their prescription ~~benefits~~benefit coverage and reimbursement and co-pay policies. Because some of our products compete in a market with both branded and generic products, obtaining and maintaining access and reimbursement coverage for our products may be more challenging than for products that are new chemical entities for which no therapeutic alternatives exist.

~~A small number of third~~Third party pharmacy benefit managers, or PBMs, and payors ~~have market power and negotiating leverage to~~can limit coverage to specific products on an approved list, or formulary, which might not include all of the approved products for a particular indication, and to exclude drugs from their formularies in favor of competitor drugs or alternative treatments, or place drugs on formulary tiers with higher patient co-pay obligations, and/or to mandate stricter utilization criteria. Formulary exclusion effectively encourages patients and providers to seek alternative treatments, make a complex and time-intensive request for medical exemptions, or pay 100% of the cost of a drug. In addition, in many instances, certain PBMs and third party payors ~~and PBMs~~ may exert negotiating leverage by requiring incremental rebates, discounts or other concessions from manufacturers in order to maintain formulary positions, which could

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result in higher gross to net deductions for affected products.

We cannot predict market acceptance of, and our ability to obtain or maintain adequate formulary positions, access to and reimbursement coverage for our products, including Sunosi, which was recently launched in the U.S. in July 2019. We In this regard, we have ~~started to enter~~entered into agreements with PBMs and payor accounts ~~regarding~~to provide rebates to those entities related to formulary coverage for Xyrem and Sunosi, but we cannot guarantee that we will be able to agree to coverage terms with other PBMs and other third party payors.

Payors could decide to exclude ~~Sunosi~~Xywav from formulary coverage lists, impose step edits that require patients to try alternative, including generic, treatments before authorizing payment for ~~Sunosi,~~Xywav, limit the types of diagnoses for which coverage will be provided or impose a moratorium on coverage for products while the payor makes a coverage decision. An inability to obtain or maintain adequate formulary positions could increase patient cost-sharing for ~~Sunosi~~Xywav and cause some patients to determine not to use ~~Sunosi.~~Xywav. Any

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delays or unforeseen difficulties in obtaining access or reimbursement approvals could limit patient access, depress therapy adherence rates, and adversely impact our ability to successfully ~~launch Sunosi.~~commercialize Xywav. If we are unsuccessful in obtaining broad coverage for ~~Sunosi,~~Xywav, our anticipated revenue from and growth prospects for ~~Sunosi~~Xywav could be negatively affected.

In many countries outside the U.S., procedures to obtain price approvals, coverage and reimbursement can take considerable time after the receipt of marketing authorization. Many European countries periodically review their reimbursement of medicinal products, which could have an adverse impact on reimbursement status. In addition, we expect that legislators, policymakers and healthcare insurance funds in the EU member states will continue to propose and implement cost-containing measures, such as lower maximum prices, lower or lack of reimbursement coverage and incentives to use cheaper, usually generic, products as an alternative to branded products, and/or branded products available through parallel import to keep healthcare costs down. Moreover, in order to obtain reimbursement for our products in some European countries, including some EU member states, we may be required to compile additional data comparing the cost-effectiveness of our products to other available therapies. If we are unable to maintain favorable pricing and reimbursement status in EU member states that represent significant markets, our anticipated revenue from and growth prospects for our products in the EU could be negatively affected. For ~~more information on~~example, the EC granted marketing authorization for Vyxeos in August 2018 and for Sunosi ~~see the risk factor under the heading “While Xyrem remains our largest product, our success also depends on our ability to effectively commercialize our other products.~~” in ~~this Part II, Item 1A.~~

~~The demand for,~~January 2020, and, ~~the profitability~~as part of our ~~products could be materially harmed if~~rolling launches of Vyxeos and Sunosi in Europe, we are making pricing and reimbursement submissions in European countries. Due to the ~~Medicaid program, Medicare program~~evolving effects of the COVID-19 pandemic, we currently anticipate delays by certain European regulatory authorities in their pricing and reimbursement reviews. If we experience setbacks or ~~other third party payors~~unforeseen difficulties in obtaining favorable pricing and reimbursement decisions, including as a result of regulatory review delays due to the COVID-19 pandemic, planned launches in the ~~U.S.~~ affected EU member states would be delayed, which could negatively impact anticipated revenue from and growth prospects for Vyxeos and/or elsewhere deny reimbursement for our products, limit the indications for which our products will be reimbursed, or provide reimbursement only on unfavorable terms. We are unable to predict what additional legislation, regulations or policies, if any, relating to third party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business.Sunosi.

The pricing of pharmaceutical products has come under increasing scrutiny as part of a global trend toward healthcare cost containment and resulting changes in healthcare law and policy may impact our business in ways that we cannot currently predict, which could have a material adverse effect on our business and financial condition.

Political, economic and regulatory influences are subjecting the healthcare industry in the U.S. to fundamental changes, particularly given the current atmosphere of mounting criticism of prescription drug costs in the U.S. We expect there will continue to be legislative and regulatory proposals to change the healthcare system in ways that could impact our ability to sell our products profitably.

Policies to address healthcare costs and drug pricing have garnered increasing bipartisan support and activity within the U.S. Congress, and continuing support by the current presidential administration, for drug pricing-related policies. Specific legislation that may be enacted or implemented remain uncertain, both as to their final substance and timing, and may affect a broad range of public policy considerations, the Medicare and Medicaid programs and the FDA regulatory regime. We For example, we anticipate that the U.S. Congress, state legislatures, and regulators ~~will continue to consider and~~ may adopt or accelerate adoption of new healthcare policies and reforms intended to curb healthcare ~~costs. These cost containment measures may include~~costs, such as federal and state controls on government-funded reimbursement for drugs (including Medicare, Medicaid) and commercial health plans, new or increased requirements to pay prescription drug rebates and penalties to government health care programs, and additional pharmaceutical cost transparency bills that aim to require drug companies to justify their prices through required disclosures. Additionally, proposals made part of proposed legislation and executive rule-making, including multiple U.S. executive orders released on July 24, 2020, seek to utilize an “international pricing index” as a benchmark to determine the costs and potentially limit the reimbursement of drugs under Medicare Part B to more closely align with international drug prices. If the U.S. were to move to such a pricing system that were to apply to any of our products, our revenues from U.S. sales of such products could decrease.

~~Other legislative~~Legislative and regulatory proposals that have recently been considered include the potential authorization of prescription drug importation from other countries, ~~the approval of generic drugs and changes to REMS provisions related to generic products,~~ legislative proposals to limit the terms of patent litigation settlements with generic sponsors, ~~redefine~~and proposals to define certain conduct around patenting and new product development as unfair ~~competition, create a private right of action related to access to samples of innovator products and ease the approval of REMS for generic applicants.~~competition. All such considerations may adversely affect our business and industry in ways that we cannot accurately predict.

There is also ongoing activity related to the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act of 2010, together, the Healthcare Reform Act. The Healthcare Reform Act has substantially changed the way healthcare is financed by both governmental and private insurers. These changes have impacted previously existing government healthcare programs and have resulted in the development of new programs, including Medicare payment-for-performance initiatives. ~~Some of the~~Certain provisions of the Healthcare Reform Act have ~~yet to be fully implemented, and certain provisions have~~ been subject to judicial ~~and Congressional~~ challenges, as well as efforts ~~by the current presidential administration~~ to repeal or replace ~~certain aspects of the Healthcare Reform Act and~~them or to alter the implementation of the Healthcare Reform Act and related laws. Additional legislative and regulatory changes and judicial challenges related to the Healthcare Reform Act remain possible. For example, while “repeal and replace” efforts have failed, aspects of the Healthcare Reform Act have been changed legislatively, such as the repeal of the requirement that certain individuals who fail to maintain qualifying health coverage for alltheir interpretation or part of a year make a tax-based shared responsibility payment commonly referred to as the “individual mandate.” In addition, there have been delays in the implementation of key provisions of the Healthcare Reform Act, including the excise tax on generous employer-based health plans. There is ongoing judicial scrutiny of the Healthcare Reform Act including recent court rulings that have invalidated the Healthcare Reform Act based upon the repeal of the tax penalty associated with the individual mandate.implementation. We expect that the Healthcare Reform Act and its implementation, efforts to repeal or replace, or invalidate, the Healthcare Reform Act or portions thereof and other

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healthcare reform measures that may be adopted in the future could have a material adverse effect on our industry generally and on our ability to maintain or increase sales of our products.

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If healthcare policies or reforms intended to curb healthcare costs are adopted or if we experience negative publicity with respect to pricing of our products or the pricing of pharmaceutical drugs generally, the prices that we charge for our products, including Xyrem, may be affected, our commercial opportunity may be limited and/or our revenues from sales of our products may be negatively impacted. We have periodically increased the price of Xyrem, most recently in ~~July 2019,~~January 2020, and ~~may do so again~~there is no guarantee that we will make similar price adjustments in the ~~future.~~future or that price adjustments we have taken or may take in the future will not negatively affect Xyrem sales volumes and revenues. We also have made and may in the future make ~~similar~~ price ~~increases~~adjustments on our other products. There is no guarantee that such price adjustments will not negatively affect our reputation and our ability to secure and maintain reimbursement coverage for our products, which could limit the prices that we charge for our products, including Xyrem, limit the commercial opportunities for our products and/or negatively impact revenues from sales of our products.

If we become the subject of any future government investigation or U.S. Congressional hearing with respect to drug pricing or other business practices, we could incur significant expense and could be distracted from operation of our business and execution of our strategy. Any such investigation or hearing could also result in reduced market acceptance and demand for our products, could harm our reputation and our ability to market our products in the future, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. ~~For more information, see the risk factor under the heading “~~In addition to those specifically described in other risk factors, we are subject to significant ongoing regulatory obligations and oversight, which may result in significant additional expense and limit our ability to commercialize our products~~” in this Part II, Item 1A.~~

In many countries outside the U.S., procedures to obtain price approvals, coverage and reimbursement can take considerable time after the receipt of marketing approval. The process of maintaining pricing and reimbursement approvals is complex and varies from country to country. Many European countries periodically review their reimbursement of medicinal products, which could have an adverse impact on reimbursement status. We cannot predict the outcome of any periodic reviews required to maintain pricing and reimbursement approvals across Europe. In addition, orphan products that have a significant impact on patient survival, such as Defitelio, may be budgeted on a local rather than national level. The balance of all of these factors will determine our ability to maintain favorable pricing and reimbursement approvals across Europe. Furthermore, after initial pricing and reimbursement approvals, reductions in prices and changes in reimbursement levels can be triggered by multiple factors, including reference pricing systems and publication of discounts by third party payors or authorities in other countries. In the EU, prices can be reduced further by parallel distribution and parallel trade, or external reference pricing, which consists of arbitrage between low-priced and high-priced countries. Changes in the pricing of our medicinal products in one of the EU member states could, therefore, affect the price of our medicinal products in other EU member states. If we are unable to maintain favorable pricing and reimbursement approvals in EU member states that represent significant markets, especially where an EU member state’s reimbursed price influences other EU member states, our anticipated revenue from and growth prospects for our products in the EU could be negatively affected.

In August 2018, the EC granted marketing authorization for Vyxeos, and, as part of our rolling launch of Vyxeos in the EU, we are continuing to make pricing and reimbursement submissions in EU member states. If we experience delays or unforeseen difficulties in obtaining favorable pricing and reimbursement approvals, planned launches in the affected EU member states would be delayed, which could negatively impact anticipated revenue from Vyxeos. If we are unable to obtain favorable pricing and reimbursement approvals in the EU member states that represent significant potential markets, our anticipated revenue from and growth prospects for Vyxeos in the EU could be negatively affected.

In various EU member states we expect to be subject to continuous cost-cutting measures, such as lower maximum prices, lower or lack of reimbursement coverage and incentives to use cheaper, usually generic, products as an alternative. Health Technology Assessment, or HTA, of medicinal products is becoming an increasingly common part of the pricing and reimbursement procedures in some EU member states, including those representing the larger markets. The HTA process, which is currently governed by the national laws of these countries, is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU member states. The extent to which pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product currently varies between EU member states, although a recently proposed EU regulation governing HTA procedures may lead to harmonization.

In the EU, our products are marketed through various channels and within different legal frameworks. In certain EU member states, reimbursement for unauthorized products may be provided through national named patient programs. Such reimbursement may no longer be available if authorization for named patient programs expire or are terminated or when marketing authorization is granted. In other EU member states, authorization and reimbursement policies may also delay commercialization of our products, or may adversely affect our ability to sell our products on a profitable basis.

We expect that legislators, policymakers and healthcare insurance funds in ~~the EU member states~~Europe will continue to propose and implement cost-containing measures to keep healthcare costs down. ~~Such~~These measures could include limitations on the prices we will be able to charge for our products or the ~~amounts~~level of reimbursement available for these products from governmental

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authorities or third party ~~payors, may increase the tax obligations on pharmaceutical companies, or may facilitate the introduction of generic competition with respect to our products.~~payors. Further, an increasing number of ~~EU member states~~European and other foreign countries use prices for medicinal products established in other countries as “reference prices” to help determine the price of the product in their own territory. Consequently, a downward trend in prices of ~~medicinal~~pharmaceutical products in some countries could contribute to similar downward trends elsewhere. Moreover, in order to obtain reimbursement for our products in some European countries, including some EU member states, we may be required to compile additional data comparing the cost-effectiveness of our products to other available therapies. There can be no assurance that our products will obtain favorable reimbursement status in any country in Europe. Any cost containment measures, including those listed above, or other healthcare system reforms that are adopted, could negatively affect our growth prospects in Europe.

In addition to access, coverage and reimbursement, the commercial success of our products depends upon their market acceptance by physicians, patients, third party payors and the medical community.

If physicians do not prescribe our products, we cannot generate the revenues we anticipate from product sales. Market acceptance of each of our products by physicians, patients, third party payors and the medical community depends on:

the clinical indications for which a product is approved and any restrictions placed upon the product in connection with its approval, such as a REMS, patient registry requirements or labeling restrictions;

the prevalence of the disease or condition for which the product is approved and its diagnosis;

the severity of side ~~effects;~~effects and other risks in relation to the benefits of our products;

acceptance by physicians and patients of each product as a safe and effective treatment;

availability of sufficient product inventory to meet demand, particularly with respect to Erwinaze;

physicians’ decisions relating to treatment practices based on availability of product, particularly with respect to Erwinaze;

perceived clinical superiority and advantages over alternative treatments;

relative convenience and ease of administration;

with respect to Xyrem and Xywav, physician and patient assessment of the burdens associated with obtaining or maintaining the certifications required under the Xyrem and Xywav REMS;

the cost of treatment in relation to alternative treatments, including generic products; and

the availability of financial or other assistance for patients who are uninsured or underinsured.

Because of our dependence upon market acceptance of our products, any adverse publicity associated with harm to patients or other adverse events resulting from the use or misuse of any of our products or any similar products distributed by other companies, including generic versions of our products, could materially and adversely affect our business, financial condition, results of operations and growth prospects. For example, from time to time, there is negative publicity about illicit GHB and its effects, including with respect to illegal use, overdoses, serious injury and death. Because sodium oxybate, the API in Xyrem, is a derivative of GHB, Xyrem sometimes also receives negative mention in publicity relating to GHB. Xywav includes the same API as Xyrem, but uses a different mixture of salts. Patients, physicians and regulators may therefore view Xyrem or Xywav as the same as or similar to illicit GHB. In addition, there are regulators and some law enforcement agencies that oppose the prescription and use of Xyrem, and potentially other oxybate products generally because of ~~its~~their connection to GHB. ~~Xyrem’s label includes~~The labels for Xyrem and Xywav include information about adverse events from GHB.

~~For additional discussion about payor acceptance, see the risk factor under the heading “~~Table of Contents~~Adequate coverage and reimbursement from third party payors may not be available for our products, which could diminish our sales or affect our ability to sell our products profitably” in this Part II, Item 1A.~~

Delays or problems in the supply of our products for sale or for use in clinical trials, loss of our single source suppliers or failure to comply with manufacturing regulations could materially and adversely affect our business, financial condition, results of operations and growth prospects.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of process controls required to consistently produce the API and the finished product in sufficient quantities while meeting detailed product specifications on a repeated basis. We and our suppliers may encounter difficulties in production, including difficulties with procurement of manufacturing materials, production costs and yields, process controls, quality control and quality assurance, including testing of stability, impurities and impurity levels and other product specifications by validated test methods, and compliance with strictly enforced U.S., state and non-U.S. regulations. In addition, we and our suppliers are subject to ~~the~~ FDA’s current Good Manufacturing Practices, or cGMP, requirements, DEA regulations and equivalent rules and regulations prescribed by non-U.S. regulatory authorities. We have cGMP responsibilities for the products we manufacture in our facilities and also have oversight responsibilities for the manufacturing conducted by our third party suppliers operating under contract. If we or any of our suppliers encounter manufacturing, quality or compliance difficulties with respect to any of our products, whether due to the evolving effects of the COVID-19 pandemic (including as a result of disruptions of global shipping and the transport of products) or otherwise, we may be unable to obtain or maintain regulatory approval or meet commercial demand for such products, which could adversely affect our business, financial condition, results of operations and growth prospects. In addition, ~~the~~we could be subject to enforcement action by regulatory authorities for our failure ~~of any of our suppliers~~ to comply with cGMP ~~or other rules~~with respect to the products we manufacture in our facilities as well as for our failure to adequately oversee compliance with cGMP by any of our third party suppliers operating under contract. Moreover, failure to comply with applicable legal and ~~regulations while manufacturing products on~~regulatory requirements subjects us and our ~~behalf could result in~~suppliers to possible regulatory action,

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~~directed at~~ including restrictions on supply or shutdown, which may adversely affect our or a supplier’s ability to supply the ~~adequacy of our oversight of our contract suppliers, which could result in enforcement actions against us by the FDA and other regulatory entities.~~ ingredients or finished products we need.

We have a manufacturing and development facility in Athlone, Ireland where we manufacture Xyrem and ~~development-stage oxybate products, including JZP-258,~~Xywav, and a manufacturing plant in Italy where we produce the defibrotide drug substance. We currently do not have our own commercial manufacturing or packaging capability for our other products, product candidates or their APIs. As a result, our ability to develop and supply products in a timely and competitive manner depends primarily on third party suppliers being able to meet our ongoing commercial and clinical trial needs for API, other raw materials, packaging materials and finished products. ~~For details~~Our manufacturing facility in Athlone, Ireland currently continues to be operational with only office-based staff working remotely. In March 2020, we temporarily ceased operations at our Villa Guardia, Italy manufacturing facility, which produces defibrotide, to ensure the safety of our ~~arrangements~~employees and communities in northern Italy. We reopened the facility in the second quarter of 2020 taking into account applicable public health authority and local government guidelines as well as employee safety, and the facility has now resumed operations with only office-based staff working remotely. However, the effects of the COVID-19 pandemic continue to rapidly evolve and even if our ~~suppliers, see “Business—Manufacturing”~~employees more broadly return to work in ~~Part I, Item 1~~our global offices, the field and our manufacturing facilities, we may have to resume a more restrictive remote work model, whether as a result of ~~our Annual Report on Form 10-K for the year ended December 31, 2018.~~spikes or surges in COVID-19 infection or hospitalization rates or otherwise.

In part due to the limited market size for our products and product candidates, we have a single source of supply for most of our marketed products, product candidates and their APIs. We are the sole supplier of the defibrotide compound. We have single source suppliers for sodium oxybate, the API for Xyrem, for Erwinaze, for the finished vial form of Defitelio, for Vyxeos and the API and finished form of Sunosi. Single sourcing puts us at risk of interruption in supply in the event of manufacturing, quality or compliance difficulties. ~~There is no guarantee that our suppliers can or will continue to supply on a timely basis, or at all, the quantities of API or finished product that we need.~~ If one of our suppliers fails or refuses to supply us for any reason, it would take a significant amount of time and expense to implement and execute the necessary technology transfer to, and to qualify, a new supplier. ~~The~~ FDA and similar international or national regulatory bodies must approve manufacturers of the active and inactive pharmaceutical ingredients and certain packaging materials used in our products. The loss of one of our suppliers could require us to obtain regulatory clearance in the form of a “prior approval supplement” and to incur validation and other costs associated with the transfer of the API or product manufacturing process. We believe that it could take up to two years, or longer in certain cases, to qualify a new supplier, and we may not be able to obtain APIs or finished products from new suppliers on acceptable terms and at reasonable prices, or at all. If there are delays in qualifying new suppliers or facilities or a new supplier is unable to meet FDA’s or similar international regulatory body’s requirements for approval, there could be a shortage of the affected products for the marketplace or for use in clinical studies, or both, which could negatively impact our anticipated revenues and could potentially cause us to breach contractual obligations with customers or to violate local laws requiring us to deliver the product to those in need. In addition, to conduct our ongoing and any future clinical trials of, complete marketing authorization submissions for, and potentially launch our other product candidates, we need to have sufficient quantities of product manufactured.

Erwinaze is licensed from, and manufactured for us by, a single source, PBL. ~~The Erwinaze BLA includes a number of post-marketing commitments related to the manufacture of Erwinaze by PBL.~~

In January 2017, the FDA issued a warning letter to PBL indicating that it was not satisfied with PBL’s response to the FDA Form 483 issued to PBL in March 2016 and citing significant violations of cGMP for finished pharmaceuticalsA continuing and significant ~~deviations from cGMP for APIs. In March 2017, PBL filed a response~~challenge to the warning letter with the FDA. In August 2018, the FDA conducted an inspection of the PBL manufacturing facility and issued an FDA Form 483 to PBL citing observations related to items referenced in the warning letter as well as other manufacturing practices, including data and records management. PBL continues to address the issues identified by the FDA in the warning letter and has submitted its response to the August 2018 Form 483.

In the United Kingdom, or UK, where PBL’s manufacturing facilities are located, PBL is subject to similar inspections conducted by the MHRA. Inability to comply with regulatory requirements of the FDA, the MHRA or other competent authorities in the EU member states in which Erwinaze is subject to marketing authorizations, including any failure by PBL to correct the violations and deviations referenced above to the satisfaction of the FDA, could further adversely affect Erwinaze supply, particularly in light of the ongoing limited supplymaintaining sales of Erwinaze and ~~could result~~a barrier to increasing sales is PBL’s inability to consistently supply product that meets specifications in enforcement actions by the FDA, MHRA or other EU member states’ competent authorities (including the issuance of the local equivalents of FDA Form 483s or warning letters), the approval of the FDA or other competent authorities being suspended, varied, or revoked, product release being delayed or suspended, including potentially the FDA refusing admission of Erwinaze in the U.S., or product being seized or recalled. Any of these actions could have a material adverse effect on our sales of, and revenues from, Erwinaze and further limit our future maintenance and potential growth of the market for this product. We have incurred and continue to incur significant internal and external costs and expenses as a result of these issues, including due to managing the increased need for regulatory and customer interaction. In addition, if the FDA or any non-U.S. regulatory authority mandates any changes to the specifications for Erwinaze, we may face challenges having product producedquantities that are adequate to meet such specifications, and PBL may increase its price to supply Erwinaze meeting such specifications, which may result in additional costs to us or a delay in supply and may decrease any profit we would otherwise achieve with Erwinaze.

market demand. All Erwinaze that PBL has been able to supply is currently completely absorbed by demand for the ~~product.~~product, and erratic supply patterns have prevented us from meeting patient demand in some markets or from being able to expand to new markets or indications. As a consequence, there is no product inventory that can be used to absorb supply disruptions resulting from quality, manufacturing, regulatory or other issues. PBL has experienced and continues to experience product quality and manufacturing issues that have resulted, and continue to result, in disruptions in our ability to supply markets from time to time and have caused, and may

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in the future cause, us to implement batch-specific, modified product use instructions. We ~~have been~~are experiencing supply disruptions of Erwinaze globally and expect to continue to experience supply disruptions globally ~~and expect further supply disruptions for the remainder of 2019 and~~ in 2020. In addition, FDA has issued a warning letter and FDA Forms 483 to PBL citing, among other things, significant violations of cGMP for finished pharmaceuticals and significant deviations from cGMP for APIs. We cannot predict whether the required remediation activities by PBL in connection with its ~~January 2017 FDA~~prior warning letter ~~or the August 2018~~and FDA ~~Form~~Forms 483 will further strain PBL’s manufacturing capacity or otherwise further adversely affect

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Erwinaze supply. We also cannot predict whether a delay in the ability of FDA to conduct inspections as a result of COVID-19 impacts could result in a delay in obtaining regulatory discretion required for release of Erwinaze supply in the U.S.

As capacity constraints and supply disruptions continue, whether as a result of continued quality or manufacturing challenges at PBL, the evolving effects of the COVID-19 pandemic, regulatory issues or ~~otherwise,~~an inability to enforce our contractual rights, we will be unable to build product inventory, our ability to supply the market will continue to be compromised and physicians’ decisions to use Erwinaze will continue to be negatively impacted.

~~If PBL’s quality, manufacturing~~ In addition, any inability to comply with regulatory requirements of FDA, the Medicines and Healthcare Products Regulatory Agency, or MHRA, or other competent authorities in the EU member states or other countries in which Erwinaze is subject to marketing authorizations, including any failure by PBL to correct the violations and deviations referenced above to the satisfaction of FDA, or failure to meet regulatory ~~issues persist and~~specifications for the product, could further adversely affect Erwinaze supply, ~~disruptions continue, our agreement with PBL, which will expire on December 31, 2020, only gives us the right to engage a backup supplier for Erwinaze~~particularly in ~~very limited circumstances, such as following termination~~light of the ~~agreement by us due to uncured material breach or~~historical limitations on the cessation of manufacturing by PBL. Moreover, if our right to engage a backup supplier for Erwinaze arises during the term of our agreement with PBL, there would not be sufficient time for us to engage a backup or alternative supplier before our agreement with PBL expires at the end of 2020. If we continue to fail to obtain a sufficient supply of Erwinaze, ~~from PBL,~~and could result in enforcement actions by FDA, the MHRA or other EU member states’ competent authorities (including the issuance of the local equivalents of FDA Form 483s or warning letters), the approval of FDA or other competent authorities being suspended, varied, or revoked, product release being delayed or suspended, including potentially FDA refusing admission of Erwinaze in the U.S., or product being seized or recalled. Any of these actions could have a material adverse effect on our sales of, and revenues from, Erwinaze, our future maintenance and potential growth of the market for this product, our reputation and our business, financial condition, results of operations and growth prospects could continue to be materially adversely affected.

The API in Defitelio is derived from porcine DNA. If our porcine DNA supplier experiences safety or other issues that impact its ability to supply porcine materials to us as needed, we may not be able to find alternative suppliers in a timely fashion, which could negatively impact our supply of Defitelio.Erwinaze.

Vyxeos is manufactured by Baxter Oncology GmbH, or Baxter, which is a sole source supplier from a single site location. ~~Given that our Vyxeos launch is still at a relatively early stage, there is limited experience with the complex manufacturing process relating to Vyxeos.~~ Baxter ~~manufactured batches that were used in the Phase 3 clinical trial for Vyxeos; there have since been~~has experienced batch failures due to mechanical, component and other issues in the production of Vyxeos, and batches have been produced that have otherwise not been in compliance with applicable specifications. We are continuing to work with Baxter to address manufacturing ~~complexities.~~complexities related to Vyxeos. Moreover, the proprietary technology that supports the manufacture of Vyxeos is not easily transferable. Consequently, engaging an alternate manufacturer may be difficult, costly and time-consuming. If we fail to obtain a sufficient supply of Vyxeos in accordance with applicable specifications on a timely basis, ~~for any reason or due to manufacturing or regulatory challenges,~~ our sales of and revenues from Vyxeos, our future maintenance and potential growth of the market for this product, our ability to conduct ongoing and future clinical trials of Vyxeos, and our business, financial condition, results of operations and growth prospects could be materially adversely affected.

In addition, while the APIs in Vyxeos, daunorubicin and cytarabine, are available from a number of suppliers, certain suppliers have received warning letters from ~~the~~ FDA. As a result, we have qualified other suppliers for each API, and we provided the qualification data to ~~the~~ FDA. If ~~the~~ FDA restricts importation of API from either supplier, and we are unable to qualify API from additional suppliers in a timely manner, or at all, our ability to successfully commercialize Vyxeos and generate sales of this product at the level we expect and to conduct ongoing and future clinical trials of Vyxeos could be materially and adversely affected.

Siegfried USA, LLC, through its European affiliates, or Siegfried, is our sole supplier of both the API and finished product for Sunosi for both commercial sale as well as development activities. If Siegfried does not or is not able to supply us with Sunosi for any reason, it may take time and resources to implement and execute the necessary technology transfer to another provider, and such delay could negatively impact our sales of and revenues from Sunosi, our future maintenance and potential growth of the market for this product, and our abilityIn addition, in order to conduct our ongoing and any future clinical trials of, ~~Sunosi, any of which could materially~~complete marketing authorization submissions for, and ~~adversely affect~~potentially launch our ~~business, financial condition, results of operations and growth prospects.~~

~~We or our suppliers may not be able to produce sufficient supplies of our~~other product candidates, ~~in a timely manner or in accordance with applicable specifications. If any~~we also need to have sufficient quantities of ~~our suppliers fail or refuse to comply with their obligations to us under our supply and manufacturing arrangements, we may not have adequate remedies for any breach. In addition,~~product manufactured. Moreover, to obtain approval from ~~the~~ FDA or a similar international or national regulatory body of any product candidate, we or our ~~supplier or~~ suppliers for that product must obtain approval by the applicable regulatory body to manufacture and supply product, in some cases based on qualification data provided to the applicable body as part of our regulatory submission. Any delay in generating, or failure to generate, data required in connection with submission of the chemistry, manufacturing and controls ~~or CMC,~~ portions of any regulatory submission could negatively impact our ability to meet our anticipated submission dates, and therefore our anticipated timing for obtaining FDA or similar international or national regulatory body approval, or our ability to obtain regulatory approval at all. In addition, any failure of us or a supplier to obtain approval by the applicable regulatory body to manufacture and supply product or any delay in receiving, or failure to receive, adequate supplies of a product on a timely basis or in accordance with applicable specifications could negatively impact our ability to successfully launch and commercialize products and generate sales of products at the levels we expect.

~~Table~~If the effects of ~~Contents~~

~~Our~~the COVID-19 pandemic become more severe and begin to impact supply of manufacturing facilities and manufacturing facilities of our suppliers have been and are subject to periodic unannounced inspection by the FDA, the EMA, the DEA, the Italian Health Authority and other regulatory authorities, including state authorities and similar authorities in other jurisdictions, to confirm compliance with cGMP and other requirements. We and our third party suppliers must continually expend time, money and effort in production, recordkeeping and quality assurance and control to ensure that our products and product candidates meet applicable specifications and other requirements for product safety, efficacy and quality. Failure to comply with applicable legal and regulatory requirements subjectsmaterials or essential distribution systems such as general delivery services, or require us ~~and~~or our suppliers to ~~possible legal~~again cease or ~~regulatory action, including restrictions on~~restrict operations at our respective manufacturing facilities, we could experience disruptions to our supply ~~or shutdown, which may adversely affect our or a supplier’s ability to supply~~chain and operations, and associated delays in the ingredients or finished products we need. Moreover, our or our third party suppliers’ facilities could be damaged by fire, flood, earthquake, power loss, telecommunication and information system failure, terrorism or similar events. Any of these events could cause a delay or interruption in manufacturing and ~~potentially a~~ supply ~~shortage~~ of our products, which ~~could negatively~~would adversely impact our ~~anticipated revenues.~~ability to generate sales of and revenues from our approved products and our business, financial condition, results of operations and growth prospects would be materially adversely affected.

Risks Related to Growth of Our Product Portfolio and Research and Development

Our future success depends on our ability to successfully develop and obtain and maintain regulatory approval in the U.S. and Europe for our late-stage product candidates and, if approved, to successfully launch and commercialize those product candidates.

~~In furtherance~~The testing, manufacturing and marketing of our ~~growth strategy,~~products require regulatory approvals, including approval from FDA and similar bodies in Europe and other countries. If FDA, the EC or the competent authorities of the EU member states determine that our quality, safety or efficacy data do not warrant marketing approval for a product candidate, we ~~have made~~could be required to

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conduct additional clinical trials as a condition to receiving approval, which could be costly and ~~are making significant investments in a number~~time-consuming and could delay or preclude the approval of ~~product candidates, including Sunosi and JZP-258.~~our application. Our inability to obtain and maintain regulatory approval for our product candidates in the U.S. and Europe and ~~if approved,~~ to successfully commercialize new products that are approved would prevent us from receiving a return on our investments and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~Sunosi~~

~~We submitted an MAA for Sunosi~~Due to the ~~EMA~~evolving effects of the COVID-19 pandemic, it is possible that we could experience delays in the ~~fourth quarter~~timing of ~~2018. If we are unable~~marketing application review and/or our interactions with regulatory authorities due to ~~obtain~~limited staffing or working hours of governmental employees, governmental “stay-at-home” orders and travel restrictions with respect to physical inspections if required for regulatory approval, or the diversion of regulatory authority efforts and attention to approval of other therapeutics or other activities related to COVID-19, which could delay anticipated approval decisions and otherwise delay or limit our ~~Sunosi MAA~~ability to make planned regulatory submissions or obtain new product approvals. It is possible that we could experience delays in regulatory interactions and review of submissions due to COVID-19 impacts described above, such as with respect to our planned BLA submission of JZP-458.

Even if we receive approval of a ~~timely manner,~~product, regulatory authorities may impose significant labeling restrictions or ~~at all, if~~requirements, including limitations on the ~~EC requires product labeling that negatively impacts patient, physician or payor acceptance~~dosing of the product, requirements around the naming or ~~if sales~~strength of ~~Sunosi~~a product, restrictions on indicated uses for which we may market the product, the imposition of a boxed warning or other warnings and precautions, and/or the requirement for a REMS to ensure that the benefits of the drug outweigh the risks. FDA requires a REMS and a boxed warning for Xyrem and Xywav, and similar restrictions could be imposed on other products in the ~~EU (if approved) do not reach the levels we expect, our anticipated revenue from Sunosi will be negatively affected, which~~future. Our receipt of approval for narrower indications than sought, restrictions on marketing through a REMS, or significant labeling restrictions or requirements in an approved label such as a boxed warning, could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, we are targeting potential new indications for Sunosi for the potential treatment of EDS in other sleep or central nervous system disorders, including pursuing development activities for Sunosi for the potential treatment of EDS in patients with MDD. If these development activities are unsuccessful, our growth prospects could be materially adversely affected. For more information, see the risk factor under the heading “~~While Xyrem remains our largest product, our success also depends~~negative impact on our ability to ~~effectively~~recoup our research and development costs and to successfully commercialize ~~our other products” in this Part II, Item 1A.~~

~~JZP-258~~

~~JZP-258 is an oxybate~~that product, candidate that contains 92% less sodium than Xyrem. Given the well-accepted relationship between dietary sodium and blood pressure as well as published hypertension guidelines, we believe that significantly lowering sodium intake would be beneficial for patients. On March 26, 2019, we announced positive top-line results from our Phase 3 study evaluating the efficacy and safetyany of JZP-258 for the treatment of cataplexy and EDS in adult patients with narcolepsy and presented additional data from this study publicly at an international medical conference in September 2019. We expect to submit an NDA for this product in January 2020 and plan to redeem our priority review voucher in connection with this submission. Although we received positive results from that Phase 3 study, we cannot guarantee the timing or acceptance of our planned NDA by the FDA. We are also conducting a Phase 3 clinical trial for use of JZP-258 for the treatment of idiopathic hypersomnia, a chronic neurological disorder that is primarily characterized by EDS. Any failure or delay in successfully completing necessary clinical trials and conducting other activities, including CMC activities, that are required to complete our planned NDA submission and obtain regulatory approval, could materially and adversely affect our growth prospects. If we submit an NDA to the FDA for approval and the FDA determines that our safety or efficacy data do not warrant marketing approval, we may be required to conduct additional clinical trials, which ~~could be costly and time-consuming, or we may not be able to commercialize JZP-258, in which event we would not receive any return on our investment.~~

Avadel has announced that it has obtained an orphan drug designation from the FDA for its once-nightly sodium oxybate formulation for the treatment of EDS and cataplexy in patients with narcolepsy. To obtain orphan drug exclusivity upon approval, Avadel will have to show clinical superiority to Xyrem, or, if applicable, clinical superiority to JZP-258. However, if the FDA approves Avadel’s product and grants it orphan drug exclusivity before we obtain approval for JZP-258, there is a risk that JZP-258 will not be approvable for seven years unless it can establish clinical superiority to Avadel’s product. We cannot predict the timing of the two submissions or how FDA will evaluate any clinical superiority arguments that either company may make, but a delay in our ability to obtain approval for JZP-258, if at all, could be detrimental to our business.

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~~For a discussion of the risks inherent in product development and regulatory approval, see the discussions in the risk factors under the headings “~~Conducting clinical trials is costly and time-consuming, and the outcomes are uncertain. A failure to prove that our product candidates are safe and effective in clinical trials, or to generate data in clinical trials to support expansion of the therapeutic uses for our existing products, could materially and adversely affect our business, financial condition, results of operations and growth ~~prospects~~”prospects.

Regulatory authorities may also impose post-marketing obligations as part of their approval, which may lead to additional costs and “~~The regulatory approval process is expensive, time-consuming and uncertain~~burdens associated with commercialization of the drug, and may ~~prevent us~~pose a risk to maintaining approval of the drug. We are subject to certain post-marketing requirements and commitments in connection with the approval of certain of our products, including Defitelio, Erwinaze, Vyxeos, Sunosi and Zepzelca. These post-marketing requirements and commitments include satisfactorily conducting multiple post-marketing clinical trials and safety studies. In the event that we are unable to comply with our post-marketing obligations imposed as part of the marketing approvals in the U.S. or EU, our ~~partners~~approval may be varied, suspended or revoked, product supply may be delayed and our sales of and revenues from ~~obtaining~~our products could be materially adversely affected.

We are pursuing activities related to the development of additional asparaginase products for patients with ALL or other hematological malignancies. Several of our external research and ~~maintaining approvals~~development collaborations are focused on these efforts, including our agreement with Pfenex, Inc., or Pfenex. Among the product candidates being developed under our Pfenex agreement is JZP-458, a recombinant Erwinia asparaginase product candidate, for the ~~commercialization~~potential treatment of ~~some~~ALL and lymphoblastic lymphoma who have hypersensitivity to E. coli-derived asparaginase. We also have clinical development efforts focused on expanding the potential of Defitelio, Vyxeos, Sunosi and Xywav, as well as clinical development efforts focused on JZP-385 for the treatment of essential tremor. Because combination regimens and the continual generation of new data have become particularly important in AML, if we are unable to initiate multiple combination studies, safely combine Vyxeos with novel agents, or ~~all of~~if efficacy results do not meet clinicians’ expectations, our ~~product candidates”~~growth prospects could be materially adversely affected. ~~in this Part II, Item 1A.~~ If we are not successful in the clinical development of our product candidates, if we are unable to obtain regulatory approval for our product candidates in a timely manner, or at all, or if sales of an approved product do not reach the levels we expect, our anticipated revenue from our product candidates would be negatively affected, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We may not be able to successfully identify and acquire or in-license additional products or product candidates to grow our business, and, even if we are able to do so, we may otherwise fail to realize the anticipated benefits of these ~~acquisitions.~~transactions.

In addition to continued investment in our research and development pipeline, we intend to grow our business by acquiring or in-licensing, and developing, including with collaboration partners, additional products and product candidates that we believe are highly differentiated and have significant commercial potential. ~~Future growth through~~However, we may be unable to identify or consummate suitable acquisition or in-licensing ~~will depend upon the availability~~opportunities, and this inability could impair our ability to grow our business. Other companies, many of ~~suitable products~~which may have substantially greater financial, sales and ~~product candidates~~marketing resources, compete with us for ~~acquisition or in-licensing on acceptable prices, terms and conditions.~~

these opportunities. Even if appropriate opportunities are available, we may not be able to successfully identify them, or we may not have the financial resources necessary to pursue them. Other companies, many of which may have substantially greater financial, sales and marketing resources, compete with us for these opportunities. In order to compete successfully to acquire attractive products or product candidates in the current business climate, we may have to pay higher prices for assets than may have been paid historically, which may make it more difficult for us to realize an adequate return on any acquisition.

Even if we are able to successfully identify and acquire, in-license or develop additional products or product candidates, we may not be able to successfully manage the risks associated with integrating any products or product candidates into our portfolio or the risks arising from anticipated and unanticipated problems in connection with an acquisition or in-licensing. We

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Further, while we seek to mitigate risks and liabilities of potential acquisitions and in-licensing transactions through, among other things, due diligence, there may be risks and liabilities that such due diligence efforts fail to discover, that are not ~~be able~~disclosed to ~~realize the anticipated benefits for a variety of reasons, including if:~~

~~we or a collaboration partner are unable to obtain and maintain adequate funding to complete the development of, obtain regulatory approval for and commercialize an acquired product candidate;~~

~~we and our collaboration partners are unable to agree on our respective contractual rights or other disputes arise between us and our collaboration partners;~~

~~our collaborations with third parties are terminated or allowed to expire;~~

~~a product candidate proves not to be safe or effective in later clinical trials or its development is otherwise discontinued by~~ us, or ~~a collaboration partner;~~

~~a product fails to reach its forecasted commercial potential as a result of pricing pressures or for any other reason;~~

that we ~~experience negative publicity regarding actual or potential future price increases for that product or otherwise; or~~

~~the integration of a product or product candidate gives rise to unforeseen difficulties and expenditures.~~

inadequately assess. Any failure ~~to identify~~in identifying and ~~manage~~managing these risks, liabilities and uncertainties effectively, could have a material adverse effect on our ~~business.~~

business, results of operations and financial condition. In addition, product and product candidate acquisitions, ~~create other uncertainties and risks,~~ particularly when the acquisition takes the form of a merger or other business ~~consolidation. Our business acquisitions~~consolidation, have required, and any similar future transactions will also require, significant efforts and expenditures, including with respect to transition ~~activities~~ and ~~integrating the acquired business with our historical business.~~integration activities. We may encounter unexpected difficulties, or incur ~~unexpected~~substantial costs, in connection with potential acquisitions and similar transactions, which include:

~~high acquisition costs;~~

the need to incur substantial debt and/or engage in dilutive issuances of equity securities to pay for acquisitions;

the potential disruption of our historical core business;

the strain on, and need to continue to expand, our existing operational, technical, financial and administrative infrastructure;

the difficulties in integrating acquired products and product candidates into our portfolio;

the difficulties in assimilating employees and corporate cultures;

the failure to retain key managers and other personnel;

~~the challenges in controlling additional costs and expenses in connection with and as a result of any acquisition;~~

the need to write down assets or recognize impairment charges;

the diversion of our management’s attention to integration of operations and corporate and administrative infrastructures; and

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any unanticipated liabilities for activities of or related to the acquired business or its operations, products or product candidates.

~~If any~~Moreover, if the effects of the COVID-19 pandemic become more severe, we could experience an inability to access additional capital, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments.

As a result of these or other factors, ~~impair our ability~~products or product candidates we acquire, or obtain licenses to, ~~integrate~~may not produce the revenues, earnings or ~~otherwise manage an~~business synergies that we anticipated, acquired ~~business efficiently~~or in-licensed product candidates may not result in regulatory approvals, and ~~successfully, we~~acquired or licensed products may be required to spend time or money on integration activities that otherwise would be spent on the development and expansion of our business. Resulting operating inefficiencies could increase costs and expenses more than we planned, could negatively impact the market price of our ordinary shares and could otherwise distract us from the execution of our strategy.not perform as expected. Failure to ~~maintain effective~~manage effectively our growth through acquisitions or in-licensing transactions could adversely affect our growth prospects, business, results of operations and financial ~~controls and reporting systems and procedures during and after integration of an acquired business could also impact our ability to produce timely and accurate financial statements.~~condition.

Conducting clinical trials is costly and time-consuming, and the outcomes are uncertain. A failure to prove that our product candidates are safe and effective in clinical trials, or to generate data in clinical trials to support expansion of the therapeutic uses for our existing products, could materially and adversely affect our business, financial condition, results of operations and growth prospects.

As a condition to regulatory approval, each product candidate must undergo extensive and expensive preclinical studies and clinical trials to demonstrate to a statistically significant degree that the product candidate is safe and effective. The results at any stage of the development process may lack the desired safety, efficacy or pharmacokinetic characteristics. ~~Results of limited preclinical studies, including studies~~If FDA determines that the safety or efficacy data to be submitted to FDA in ~~animal models,~~the planned BLA for JZP-458, do not warrant marketing approval, we may ~~not predict the results of human clinical trials. Similarly, results from early~~be required to conduct additional clinical trials, ~~may not~~which could be ~~predictive of results obtained in later~~costly and ~~larger clinical trials, and later clinical trials may fail to show the desired safety and efficacy of our product candidates despite successful initial clinical testing.~~time-consuming. Even if we believe we have successfully completed testing, ~~the~~ FDA or any equivalent non-U.S. regulatory agency may determine our data is not sufficiently compelling to warrant marketing approval for the indications sought, if at all, and may require us to engage in additional clinical trials or provide further analysis which may be costly and time-consuming. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in clinical trials, even in advanced clinical trials after showing positive results in preclinical studies or earlier clinical trials. If a product candidate fails at any stage of development or the data is otherwise not sufficient for regulatory approval, we will not be able to commercialize it and receive any return on our investment in that product candidate.

If the FDA determines that the safety or efficacy data we submit in our planned NDA for JZP-258 do not warrant marketing approval, we may be required to conduct additional clinical trials, which could be costly and time-consuming, or we may not be able to commercialize JZP-258, in which event we would not receive any return on our investment in this product candidate. The FDA may also require product labeling that negatively impacts patient, physician or payor acceptance of the product. For more information, see the risk factor under the heading “Our future success depends on our ability to successfully develop and obtain and maintain regulatory approval in the U.S. and Europe for our late-stage product candidates and, if approved, to successfully launch and commercialize those product candidates” ~~in this Part II, Item 1A.~~

Any adverse events or other data generated during the course of clinical trials of our product candidates and/or clinical trials related to additional indications for our commercialized products could result in action by ~~the~~ FDA or a non-U.S. regulatory agency, which may restrict our ability to sell, or adversely affect sales of, currently marketed products, or such events or other data could otherwise have a material adverse effect on a related commercial product, including with respect to its safety profile. Any failure or delay in completing such clinical trials could materially and adversely affect the maintenance and growth of the markets for the related marketed products, which could adversely affect our business, financial condition, results of operations and overall growth prospects.

In addition to issues relating to the results generated in clinical trials, clinical trials can be delayed or halted for a variety of reasons, including:

direct and indirect impacts of the evolving effects of the COVID-19 pandemic on various aspects and stages of the clinical development process, including the inherent limitations of remote and virtual approaches;

difficulty identifying, recruiting or enrolling eligible patients, often based on the number of clinical trials, particularly in ~~hematology and~~ oncology, with enrollment criteria targeting the same patient population;

significant reprioritization and diversion of healthcare resources away from the conduct of clinical trials as a result of the COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

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difficulty identifying a clinical development pathway, including viable indications and appropriate clinical trial protocol design, particularly where there is no applicable regulatory precedent;

delays or failures in obtaining regulatory authorization to commence a trial because of safety concerns of regulators relating to our product candidates or similar product candidates of our competitors or failure to follow regulatory guidelines;

interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the COVID-19 pandemic;

delays or failures in obtaining clinical materials and manufacturing sufficient quantities of the product candidate for use in trials;

delays or failures in reaching agreement on acceptable terms with prospective study sites;

delays or failures in obtaining approval of our clinical trial protocol from an institutional review board, known as an ethics committee in Europe, to conduct a clinical trial at a prospective study site;

~~delays or failures in recruiting patients to participate in a clinical trial;~~

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failure of our clinical trials and clinical investigators, including contract research organizations or other third parties assisting us with clinical trials, to ~~be in compliance~~satisfactorily perform their contractual duties, meet expected deadlines and comply with ~~the~~ FDA and other regulatory agencies’ requirements, ~~commonly referred to as~~including good clinical practices;

unforeseen safety issues;

inability to monitor patients adequately during or after treatment;

difficulty monitoring multiple study sites;

~~failure of our third party clinical trial managers to satisfactorily perform their contractual duties, comply with regulations or meet expected deadlines;~~ or

insufficient funds to complete the trials.

In light of the evolving effects of the COVID-19 pandemic, we have taken measures to implement remote and virtual approaches, including remote data monitoring where possible, to maintain patient safety and trial continuity and to preserve study integrity. We have seen limited COVID-19-related impact to our mid- and late-stage clinical trial activity, despite delays in initiating trial sites. We temporarily suspended two of our healthy volunteer clinical development programs, JZP-385 and JZP-324, in the interest of volunteer safety, and expect to restart these clinical trials in August 2020. While it has not been the case thus far, we could still see an impact on the ability to supply study drug, report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations ~~and~~or other third parties ~~such as cooperative groups,~~ to assist ~~us in designing, coordinating, managing, monitoring and otherwise conducting clinical trials with our product candidates. If we, contract research organizations assisting~~ us with clinical trials, ~~other third parties conducting clinical trials with our product candidates, or our trial sites fail~~and we cannot guarantee that they will continue to ~~comply with applicable good clinical practices, the clinical data generated in these clinical trials may be deemed unreliable, and the FDA and/or other global regulatory agencies may require us to~~ perform additional clinical trials before approving our marketing applications. In addition, clinical trials must be conducted with product candidates produced under the FDA’s cGMP regulations and similar regulations outside of the U.S. Our failure, or the failure of our product suppliers, to comply with these regulations may require us to repeat or redesign clinical trials, which would delay the completion of clinical trials and the regulatory approval process.

~~If third parties do not successfully carry out~~ their contractual duties ~~under their agreements with us, if the quality or accuracy~~in a timely and satisfactory manner as a result of the ~~data they obtain is compromised due to failure to adhere~~evolving effects of the COVID-19 pandemic. If these effects become more severe, we could experience significant disruptions to our clinical protocols, including dosing requirements, or regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties need to be replaced, our clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates or generate additional clinical data in support of these products.

The regulatory approval process is expensive, time-consuming and uncertain and may prevent us or our partners from obtaining and maintaining approvals for the commercialization of some or all of our product candidates.

We are not permitted to market a pharmaceutical product in the U.S. or in the EU member states until we receive approval from the FDA or a marketing authorization from the EC or the competent authorities of the EU member states, as applicable. Submission of an application for marketing authorization does not assure approval for marketing in any jurisdiction, and we may encounter significant difficulties or costs in our efforts to obtain approval to market products. If the FDA, the EC or the competent authorities of the EU member states determine that our quality, safety or efficacy data do not warrant marketing approval for a product candidate, we could be required to conduct additional clinical trials as a condition to receiving approval,development timelines, which could be costly and time-consuming and could delay or preclude the approval of our application. If we are unable to obtain regulatory approval of our product candidates, we will not be able to commercialize them and recoup our research and development costs.

In the U.S., the Prescription Drug User Fee Act, or PDUFA, provides a ten-month deadline for the FDA to review an NDA that has been accepted by filing by the FDA, or a six-month deadline for priority review. However, there is no guarantee that the FDA will meet the applicable deadline, and the FDA can extend a PDUFA action date under certain circumstances. If the FDA fails to meet PDUFA targeted action dates established for any of our product candidates, the commercialization of the affected product candidate could be delayed or impaired.

In addition, in May 2018, we purchased a rare pediatric disease priority review voucher for $110.0 million. We plan to redeem our priority review voucher in connection with the submission of our NDA for JZP-258 in January 2020. However, the redemption of a rare pediatric disease priority review voucher may not result in faster review or approval compared to products considered for approval under conventional FDA procedures and, in any event, does not assure ultimate approval by FDA. Accordingly, we could fail to realize the anticipated benefits of our purchase of the priority review voucher.

Any delay or failure in obtaining approval of a product candidate, or receipt of approval for narrower indications than sought, can have a negative impact on our ability to recoup or research and development costs and to successfully commercialize that product, any of which could materially andwould adversely affect our business, financial condition, results of operations and growth prospects.

~~Even if we receive approval, an approved product~~ In addition, some patients may not be subject to significant labeling restrictions, including limitations on the dosing of the product, indicated uses for which we may market the product, the imposition of a boxed warning or other warnings and precautions, and/or the requirement for a REMS to ensure that the benefits of the drug outweigh the risks. A boxed warning is the strongest type of warning that the FDA can require for a drug product and warns prescribers that the drug carries a significant risk of serious or even life-threatening adverse effects. The FDA requires a REMS and a boxed warning for

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~~Xyrem, and similar restrictions could be imposed on other products in the future. For example, we expect that the FDA would require a REMS for an approved JZP-258 product.~~

Regulatory authorities may also impose post-marketing obligations as part of their approval. Post-marketing obligations may lead to additional costs and burdens associated with commercialization of the drug, and may pose a risk to maintaining approval of the drug. We are subject to certain post-marketing requirements and commitments in connection with the approval of certain of our products, including Erwinaze, Defitelio, Vyxeos and Sunosi. For example, for Defitelio, in the U.S. the FDA imposed several post-marketing commitments and requirements in connection with its approval, including the requirement that we conduct a clinical trial to analyze the safety of defibrotide versus best supportive care in the prevention of VOD in adult and pediatric patients, and in the EU marketing authorization was granted under exceptional circumstances and requires usable to comply with a number of post-marketing obligations, including the conduct of a Phase 3, randomized adaptive study of Defitelio as compared to the best supportive care in the prevention of VOD in adult and pediatric patients undergoing HSCT. Similarly, the FDA imposed post-marketing requirements in connection with its approval of our NDA for Vyxeos, including the requirement that we conduct a safety study to characterize infusion-related reactions in patients treated with Vyxeos and a clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our ability to ~~determine dosing to minimize toxicity in~~recruit and retain patients ~~with moderate~~ and ~~severe renal impairment,~~principal investigators and the marketing authorization in the EU also requires us to comply with certain manufacturing-related post-approval commitments. The FDA also required us to conduct additional post-marketing safety studies related to pregnancy and lactation for Sunosi. In the event that we are unable to comply with our post-marketing obligations imposedsite staff who, as part of the marketing approvals in the U.S. or EU, our approval may be varied, suspended or revoked, product supply may be delayed and our sales of and revenues from our products could be materially adversely affected.

A significant proportion of the regulatory framework in the UK is derived from EU laws. For that reason, the results of the formal procedure of withdrawal from the EU, initiated by the UK in March 2017, could materially change the regulatory regime applicable to our operations, including with respect to the approval of our product candidates, as there is significant uncertainty concerning the future relationship between the UK and the EU. For a further discussion, see the risks under the heading “~~The UK’s planned withdrawal from the EU, commonly referred to as Brexit,~~healthcare providers, may have ~~a negative effect on global economic conditions, financial markets~~heightened exposure to COVID-19 and adversely impact our ~~business” in this Part II, Item 1A.~~clinical trial operations.

Risks Related to Our Intellectual Property

It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.

Our commercial success depends in part on obtaining, maintaining and defending intellectual property protection for our products and product candidates, including protection of their use and methods of manufacturing and distribution. Our ability to protect our products and product candidates from unauthorized making, using, selling, offering to sell or importation by third parties depends on the extent to which we have rights under valid and enforceable patents or have adequately protected trade secrets that cover these activities.

~~The patent position of pharmaceutical companies can be highly uncertain and involve complex and often changing legal, regulatory and factual questions.~~ The degree of protection to be afforded by our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

our patent applications, or those of our licensors or partners, may not result in issued patents;

others may independently develop similar or therapeutically equivalent products without infringing our patents, or those of our licensors, such as products that are not covered by the claims of our patents, or for which we do not have adequate exclusive rights under our license agreements;

our issued patents, or those of our licensors or partners, may be held invalid or unenforceable as a result of legal challenges by third parties or may be vulnerable to legal challenges as a result of changes in applicable law;

we or our licensors or partners might not have been the first to invent or file, as appropriate, subject matters covered by our issued patents or pending patent applications or those of our licensors or partners;

competitors may manufacture products in countries where we have not applied for patent protection or that have a different scope of patent protection or that do not respect our patents; or

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others may be issued patents that prevent the sale of our products or require licensing and the payment of significant fees or royalties.

~~We have patents covering many~~Patent enforcement generally must be sought on a country-by-country basis, and issues of ~~our products~~patent validity and infringement may be judged differently in ~~Europe and other parts of the world where patent laws operate differently and provide a~~ different ~~scope of protection than in the U.S.~~countries. For example, in the EU, approval of a generic pharmaceutical product can occur independently of whether the reference brand product is covered by patents, and enforcement of such patents generally must await approval and an indication that the generic product is being offered for sale. ~~Patent enforcement generally must be sought on a country-by-country basis, and issues of patent validity and infringement may be judged differently in different countries.~~

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We own a portfolio of U.S. and non-U.S. patents and patent applications and have licensed rights to a number of issued patents and patent applications that cover or relate to our products and product candidates, including Xyrem, Defitelio, Vyxeos and Sunosi. Changes in either the patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the value of our intellectual ~~property.~~property portfolio. Even if we are able to obtain patents covering our products and product candidates, any patent may be challenged, and potentially invalidated or held unenforceable, including through patent litigation or through patent office procedures that permit challenges to patent validity. Patents can also be circumvented, potentially including by FDA approval of an ANDA or Section 505(b)(2) application that avoids infringement of our intellectual property.

~~Xyrem is covered by patents covering its manufacture, formulation, distribution system and method of use, and we have U.S. patents that extend to 2033.~~ We have settled patent litigation with nine companies seeking to introduce generic versions of Xyrem in the U.S. by granting those companies licenses to launch their generic products (and in certain cases, an ~~AG Product)~~authorized generic version of Xyrem) in advance of the expiration of the last of our patents. Notwithstanding our Xyrem patents and settlement agreements, additional third parties may also attempt to introduce generic versions of Xyrem or other sodium oxybate products for treatment of cataplexy and/or EDS in narcolepsy that design around our patents or assert that our patents are invalid or otherwise unenforceable. ~~If these efforts are successful, then that~~Such third ~~party~~parties could launch a generic or 505(b)(2) product referencing Xyrem before the dates provided in our patents or settlement agreements.

For example, we have several method of use patents listed in ~~the~~ FDA’s publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” or the Orange Book, that expire in 2033 that cover treatment methods included in the Xyrem label related to a drug-drug interaction, or DDI, with divalproex sodium. Although ~~the~~ FDA has stated, in granting a Citizen Petition we submitted in 2016, that it would not approve any sodium oxybate ANDA referencing Xyrem that does not include the portions of the currently approved Xyrem label related to the DDI patents, we cannot predict whether a future ANDA filer, or a company that files a Section 505(b)(2) application for a drug referencing Xyrem, may pursue regulatory strategies to avoid infringing our DDI patents notwithstanding ~~the~~ FDA’s response to the Citizen Petition, or whether any such strategy would be successful. Likewise, we cannot predict whether we will be able to maintain the validity of these patents or will otherwise obtain a judicial determination that a generic or other sodium oxybate product, its package insert or the generic sodium oxybate REMS or another separate REMS will infringe any of our patents or, if we prevail in proving infringement, whether a court will grant an injunction that prevents a future ANDA filer or other company introducing a different sodium oxybate product from marketing its product, or instead require that party to pay damages in the form of lost profits or a reasonable royalty.

Since Xyrem’s regulatory exclusivity has expired in the EU, we are aware that generic or hybrid generic applications have been approved by various EU regulatory authorities, and additional generic or hybrid generic applications may be submitted and approved. We cannot predict whether our licensee in the EU will be able to enforce our existing European patents against generic or hybrid generic filers in the EU.

For a discussion regarding the risks associated with our ANDA litigation settlement agreements, the potential launch of AG Products or other generic versions of Xyrem, and the approval and launch of other sodium oxybate or other current and potential future products that compete with Xyrem, as well as other risks and challenges we face with respect to Xyrem, see the risk factors under the headings “Risks Related to Xyrem and the Our Other Marketed Products” and “We have incurred and may in the future incur substantial costs as a result of litigation or other proceedings relating to patents, other intellectual property rights and related matters, and we may be unable to protect our rights to, or commercialize, our products” ~~in this Part II, Item 1A.~~

We also currently rely on trade ~~secrets~~secret protection for several of our products, including Erwinaze and ~~other unpatented proprietary~~Defitelio. Trade secret protection does not protect information or inventions if another party develops that information or invention independently, and establishing that a competitor developed a product through trade secret misappropriation rather than through legitimate means may be difficult to prove. Trade secret protection also requires that information be secret and subject to reasonable efforts to maintain secrecy, and this requirement may come into conflict with requirements to provide information to ~~protect our products~~employees, consultants, business partners, and ~~their commercial position, particularly with respect to our products with limited or no patent protection, such as Erwinaze, which has no patent protection.~~regulatory bodies. We seek to protect our trade secrets and other unpatented proprietary information in part through confidentiality and invention agreements with our employees, consultants, advisors and partners. Nevertheless, our employees, consultants, advisors and partners may unintentionally or willfully disclose our proprietary information to competitors, and we may not have adequate remedies for such disclosures. Enforcing a claim that a third party illegally obtained or is using any of our inventions or trade secrets would be expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside of the U.S. are sometimes less willing to protect trade secrets. Moreover, ~~our competitors may independently develop equivalent knowledge, methods and know-how.~~

In some instances, we also rely on regulatory exclusivity to protect our commercial position. In addition to relying on trade secret protection, Erwinaze was granted orphan drug exclusivity by the FDA for the treatment of ALL in the U.S. for a seven-year period from its FDA approval, which had precluded approval of another product with the same principal molecular structure for the same indication until November 2018. As a biologic product approved under a BLA, Erwinaze is also subject to the U.S. Biologics Price Competition and Innovation Act, or BPCIA. We believe that Erwinaze is protected by exclusivity that prevents approval of a biosimilar in the U.S. through late 2023 under the BPCIA. However, interpretation of regulatory exclusivity under the BPCIA may evolve over time based on FDA issuance of guidance documents, proposed regulations or decisions made by the FDA in the course of considering specific applications. In addition, the BPCIA exclusivity period does

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not prevent another company from independently developing a product that is highly similar to Erwinaze, generating all the data necessary for a full BLA and seeking approval. BPCIA exclusivity only assures that another company cannot rely on the FDA’s prior approvals of Erwinaze to support the biosimilar product’s approval. As a result, it is possible that a potential competing drug product might obtain FDA approval before the expected BPCIA exclusivity period has expired, which would adversely affect sales of Erwinaze. In the EU, the regulatory data protection that provides an exclusivity period for Erwinase has lapsed. Any new marketing authorizations for Erwinase in other EU member states will not receive any regulatory data protection. If a biosimilar product to Erwinaze is approved as interchangeable to Erwinaze in the U.S. or in other countries where Erwinaze is sold, a significant percentage of the prescriptions that would have been written for Erwinaze may be filled with the biosimilar version, resulting in a loss in sales of Erwinaze, and there may be a decrease in the price at which Erwinaze can be sold. Competition from a biosimilar product to Erwinaze could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our research and development collaborators may have rights to publish data and other information to which we have rights. In addition, we sometimes engage individuals or entities to conduct research that may be relevant to our business. While the ability of these individuals or entities to publish or otherwise publicly disclose data and other information generated during the course of their research is subject to contractual limitations, these contractual provisions may be insufficient or inadequate to protect our trade secrets and may impair our patent rights. If we do not apply for patent protection prior to such publication, or if we cannot otherwise maintain the confidentiality of our innovations and other confidential information, then our ability to obtain patent protection or protect our proprietary information may be jeopardized. Moreover, a dispute ~~may arise~~arises with our employees, consultants, advisors or partners over the ownership of rights to inventions, including jointly developed intellectual ~~property. Such disputes, if not successfully resolved,~~property, we could ~~lead to a loss~~lose patent protection or the confidentiality of ~~rights~~our proprietary information, and possibly ~~prevent us from pursuing~~also lose the ability to pursue the development of certain new products or product candidates.

We have incurred and may in the future incur substantial costs as a result of litigation or other proceedings relating to patents, other intellectual property rights and related matters, and we may be unable to protect our rights to, or commercialize, our products.

Our ability, and that of our partners, to commercialize any approved products will depend, in part, on our ability to obtain patents, enforce those patents and operate without infringing the proprietary rights of third parties. If we choose to go to court to stop a third party from infringing our patents, our licensed patents or our partners’ patents, that third party has the right to ask the court or an administrative agency to rule that these patents are invalid and/or should not be enforced. These lawsuits and administrative proceedings are expensive and consume time and other resources, and we may not be successful in these proceedings or in stopping infringement. In addition, the inter partes review process, or IPR, ~~process~~ under the Leahy-Smith America

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Invents Act permits any person, whether they are accused of infringing the patent at issue or not, to challenge the validity of certain ~~patents. As a result, many types of entities, including ANDA filers, have challenged valuable pharmaceutical~~ patents through ~~the IPR process, and six of our Orange Book-listed patents for Xyrem were invalidated through this process and have since been delisted from the Orange Book.~~

~~There is~~ a ~~risk that a court or~~proceeding before the Patent Trial and Appeal Board, or PTAB, of the U.S. Patent and Trademark ~~Office~~Office.

There is a risk that a court or the PTAB could decide that our patents or certain claims in our patents are not valid or infringed, and that we do not have the right to stop a third party from using the inventions covered by those claims, as happened with ~~the decision of the PTAB that certain~~six of our ~~patent claims~~patents covering the Xyrem REMS, ~~are invalid.~~which were invalidated through the IPR process and delisted from the Orange Book. In addition, even if we prevail in establishing that another product infringes a valid claim of one of our patents, a court may determine that we can be compensated for the infringement in damages, and refuse to issue an injunction. As a result, we may not be entitled to stop another party from infringing our patents for their full term. ~~For more information, see the risk factors under the headings “Risks Related to Xyrem and Our Other Marketed Products” and “It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection”~~ in this Part II, Item 1A. Lawsuits or proceedings we may file in the future, or our defense against any lawsuits or other proceedings that may be brought against us, may not costly and time-consuming and may not be successful in stopping the infringement of our patents.

Litigation involving patent matters is frequently settled between the parties, rather than continuing to a court ruling, and we have settled patent litigation with all nine Xyrem ANDA filers. The FTC has publicly stated that, in its view, certain types of agreements between branded and generic pharmaceutical companies related to the settlement of patent litigation or the manufacture, marketing and sale of generic versions of branded drugs violate the antitrust laws and has commenced investigations and brought actions against some companies that have entered into such agreements. In particular, the FTC has expressed its intention to take aggressive action to challenge settlements that include an alleged transfer of value from the brand company to the generic company (so-called “pay for delay” patent litigation settlements) ~~and to call on legislators to pass stronger laws prohibiting such settlements.~~. The U.S. Congress and state legislatures have also identified pharmaceutical patent litigation settlements as potential impediments to generic competition and have ~~suggested that they may introduce~~introduced, and in states like California passed, legislation to regulate them. Third party payors have also challenged such settlements on the grounds that they increase drug prices. Because there is currently no precise legal standard with respect to the lawfulness of such settlements, ~~there could be~~many pharmaceutical companies have faced extensive litigation over whether ~~any settlement that we~~patent litigation settlements they have entered into ~~or might enter into in the future constitutes a~~

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are reasonable and ~~lawful~~lawful. In June and July 2020, a number of class action lawsuits were filed on behalf of purported direct and indirect Xyrem purchasers, alleging that the patent ~~settlement.~~ litigation settlement agreements we entered with Hikma and other ANDA filers violate state and federal antitrust and consumer protection laws. For additional information on these class action complaints, see Note 11, Commitments and Contingencies-Legal Proceedings of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. It is possible that additional lawsuits will be filed against us making similar or related allegations. We cannot predict the outcome of these or potential additional lawsuits; however, if the plaintiffs were to be successful in their claims, they may be entitled to injunctive relief or we may be required to pay significant monetary damages, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Parties to such settlement agreements in the U.S. are required by law to file the agreements with the FTC and the U.S. Department of Justice, or DOJ, for review. Accordingly, we have submitted our ~~ANDA~~patent litigation settlement agreements to the FTC and the DOJ for review. We may receive formal or informal requests from the FTC regarding our ANDA litigation settlements, and there is a risk that the FTC may commence a formal investigation or action against us, ~~or a third party may initiate civil litigation regarding such settlements,~~ which could divert the attention of management and cause us to incur significant costs, regardless of the outcome. Any claim or finding that we or our business partners have failed to comply with applicable laws and regulations could be costly to us and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

A third party may claim that we or our manufacturing or commercialization partners are using inventions covered by the third party’s patent rights, or that we or such partners are infringing, misappropriating or otherwise violating other intellectual property rights, and may go to court to stop us from engaging in our normal operations and activities, including making or selling our products. Such lawsuits are costly and could affect our results of operations and divert the attention of management and development personnel. There is a risk that a court could decide that we or our partners are infringing, misappropriating or otherwise violating third party patent or other intellectual property rights, which could be very costly to us and have a material adverse effect on our business.

In the pharmaceutical and life sciences industry, like other industries, it is not always clear to industry participants, including us, which patents cover various types of products or methods. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid or unenforceable, which we may not be able to do.

Because some patent applications in the U.S. may be maintained in secrecy until the patents are issued, because patent applications in the U.S. and many non-U.S. jurisdictions are typically not published until 18 months after their priority date, and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for inventions covered by our or our licensors’ issued patents or pending applications, or that we or our licensors were the first inventors.

Some of our competitors may be able to sustain the costs of complex patent and other intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations. For further discussion of our Xyrem-related patent matters, see the risk factors under the headings “Risks Related to Xyrem and Our Other Marketed Products” and “Risks Related to Our Intellectual Property.”

Other Risks Related to Our Business and Industry

Our business is currently adversely affected and could be materially and adversely affected in the future by the evolving effects of the COVID‑19 pandemic and related global economic slowdown as a result of the current and potential future impacts on our commercialization efforts, clinical trial activity, research and development activities, supply chain and corporate development activities and other business operations, in addition to the impact of a global economic slowdown.

The COVID-19 pandemic is having significant impact on the global healthcare delivery system. Many healthcare systems have had to restructure operations to prioritize caring for COVID-19 patients and limit or cease other activities. The severe burden on healthcare systems caused by this pandemic has impaired the ability to diagnose and treat patients with non-COVID-19 related conditions and impaired the ability of many clinical research sites to start new studies, enroll new patients

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and monitor patients in clinical trials. The evolving effects of the COVID-19 pandemic and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as significant reductions in business related activities have occurred, supply chains have been disrupted, and manufacturing and clinical development activities have been curtailed or suspended.

Continued remote work policies, quarantines, shelter-in-place and similar government orders, shutdowns or other restrictions on the conduct of business operations related to the effects of the COVID-19 pandemic may materially and adversely affect our business, our ability to generate sales of and revenues from our approved products, our supply chain, regulatory, clinical development and corporate development activities. With respect to our commercialization activities, the evolving effects of the COVID-19 pandemic are having a negative impact on demand, new patient starts and treatments for our products, primarily due to the inherent limitations of telemedicine and a reprioritization of healthcare resources toward COVID-19. Beginning in March 2020, we transitioned our field-based sales, market access, reimbursement and medical employees out of the field and suspended work-related travel and in-person customer interactions. We utilized technology to continue to engage healthcare professionals and other customers virtually to support patient care. In late June 2020, as clinics and institutions began to allow in-person interactions pursuant to local health authority and government guidelines, our field teams resumed in-person interactions with healthcare professionals and clinics. The level of renewed engagement varies by account, region and country and may be adversely impacted in the future as a result of the continuing impact of the COVID-19 pandemic.

In the second quarter of 2020, demand for Defitelio was impacted by a reduction in the number of hematopoietic stem cell transplants performed due to COVID-19 related impacts, including the reprioritization of healthcare resources and related delays, postponements or suspensions of certain medical procedures such as stem cell transplants. Demand for Vyxeos in the second quarter of 2020 was also impacted by a shift toward less intensive outpatient AML treatments due to COVID-19, which is directly negatively impacting, or delaying, the use of Vyxeos, which prescribers are still primarily utilizing in inpatient settings. While we observed a recovery in demand for Defitelio and Vyxeos toward the end of the second quarter, we continue to expect that the ongoing impacts of the COVID-19 pandemic will have a negative impact on utilization of Defitelio and Vyxeos. In the first month of Zepzelca’s launch, we experienced relatively strong initial physician reception and uptake of Zepzelca, in spite of the reduced ability of our field-based teams to interact with healthcare providers due to COVID-19.

In addition, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital or an impact on liquidity, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments. In addition, a recession or market correction resulting from the impact of the evolving effects of the COVID-19 could materially affect our business and the value of our ordinary shares. While we expect these effects to adversely affect our business operations and financial results, the extent of the impact on our ability to generate sales of and revenues from our approved products, execute on new product launches, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our ordinary shares, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration and severity of the pandemic, governmental “stay-at-home” orders and travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Ireland and other countries, and the effectiveness of actions taken globally to contain and treat the disease. For example, the inability of our workforce to return to office and field-based work and the ongoing stress and reprioritization within the healthcare systems in our key markets may require us to reassess the timing and scope of key business activities for the year, including with respect to our ability to successfully launch Zepzelca

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and Xywav. These effects could materially and adversely affect our business, financial condition, results of operations and growth prospects, as further described in the risks and uncertainties described elsewhere in this ‘‘Risk Factors’’ section.

We have substantially expanded our international footprint and operations, and we may expand further in the future, which subjects us to a variety of risks and complexities which, if not effectively managed, could negatively affect our business.

We are headquartered in Dublin, Ireland and have multiple offices in the U.S., Canada, the UK, Italy and other countries in Europe. Our headcount has grown to approximately 1,580 as of November 2019. This includes employees in 18 countries in North America and Europe, a European commercial presence, a complex distribution network for products in Europe and additional territories, and manufacturing facilities in Italy and Ireland. We may further expand our international operations into other countries in the future, either organically or by acquisition. ~~While we have management and other personnel with substantial international experience, conducting~~Conducting our business in multiple countries subjects us to a variety of risks and complexities that may materially and adversely affect our business, results of operations, financial condition and growth ~~prospects. These risks and complexities include:~~prospects, including:

the diverse regulatory, financial and legal requirements in the countries where we are located or do business, including those related to data security and the use of, or access to, commercial and personal information, taxation, trade laws, including tariffs, export quotas, custom duties or other trade restrictions, and any changes to those requirements;

challenges inherent in efficiently managing employees in diverse geographies, including the need to adapt systems, policies, benefits and compliance programs to differing labor and employment law and other regulations, as well as maintaining positive interactions with our unionized employees;

costs of, and liabilities for, our international operations, products or product candidates; and

~~fluctuations in currency rates.~~public health risks, such as the COVID-19 pandemic and potential related effects on supply chain, travel and employee health and availability.

In addition, as a result of our international expansion, our business and corporate structure has become substantially more complex. Significant management time and effort is required to effectively manage the increased complexity of our company, and there can be no guarantee that we will effectively manage the ~~increased~~increasing, global complexity of our business without experiencing operating

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inefficiencies or control deficiencies. Our failure to do so could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

The UK’s ~~planned~~ withdrawal from the EU, commonly referred to as Brexit, ~~may have a negative effect on global economic conditions, financial markets~~could increase our cost of doing business, reduce our gross margins or otherwise negatively impact our business and our ~~business.~~financial results.

Brexit ~~has created~~will continue to create significant uncertainty concerning the future relationship between the UK and the EU, particularly if the recent UK ~~withdraws~~withdrawal from the EU ~~without~~in January 2020 is followed by a ~~ratified withdrawal agreement in place. From~~failure to agree to a ~~regulatory perspective, there is uncertainty about which laws~~future trading relationship between the EU and ~~regulations will apply in~~ the ~~UK in the future. A~~UK. Since a significant portion of the regulatory framework in the UK is derived from EU ~~laws. However, it is unclear which, if any, existing EU~~ laws, ~~the UK will decide to replace or replicate following its withdrawal from the EU. In particular,~~Brexit could materially impact the regulatory regime ~~applicable to our operations, including~~ with respect to the ~~marketing authorization~~development, manufacture, importation, approval and commercialization of our product candidates may change, potentially significantly, and become inconsistent with the regime applicable in the EU. This may impact the process for obtaining or maintaining marketing authorization in the EU for pharmaceutical products manufactured or sold in the UK.

A basic requirement related to the grant of a marketing authorization for a medicinal product in the EU is the requirement that the applicant be established in the EU. Following withdrawal of the UK from the EU, marketing authorizations previously granted to applicants established in the UK ~~through~~or the ~~centralized, mutual recognition or decentralized procedures may no longer be valid. Moreover, depending upon the exact terms of the UK's withdrawal,~~EU. For example, there is a risk that the scope of a marketing authorization for a medicinal product granted by the EC ~~pursuant to the centralized procedure,~~ or by the competent authorities of EU member states ~~through the decentralized or mutual recognition procedures, would~~will not encompass the UK. In these circumstances, a separate marketing authorization granted by the UK competent authorities ~~would~~will be required to place medicinal products on the UK market.

In addition, the laws and regulations that will apply after the UK withdraws from the EU may have implications for manufacturing sites that hold certifications issued by the UK competent authorities. Our capabilityour ability to rely on ~~these~~UK manufacturing sites for products intended for the EU market will depend on the terms of the ~~UK's withdrawal~~trade agreements concluded between the EU and the UK in the coming months and, potentially, on the ability to obtain relevant exemptions under EU law to supply the EU market with products manufactured at UK-certified sites. There is also the risk that if batch release and quality control testing sites for our products are located only in the UK, manufacturers will need to use sites in other EU member states to manufacture products for supply to the EU market. All of these changes, if they occur, could increase our costs and otherwise adversely affect our business.

Brexit has also given rise to calls for the governments of other EU member states to consider withdrawal from the EU. These developments, or the perception that they could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, including by significantly reducing global market liquidity or restricting the ability of key market participants to operate in certain financial markets. In addition, currency exchange rates for the British Pound and the euro with respect to each other and to the U.S. dollar have already been, and may continue to be, negatively affected by ~~Brexit. Should this foreign exchange volatility continue or be exacerbated by the UK’s withdrawal from the EU, it~~Brexit, which could cause volatility in our quarterly financial results.

We have an office in Oxford, England, which is focused on commercialization of our products outside of the U.S. We do not know to what extent, or when, the UK’s recent withdrawal from ~~the EU or any other future changes to membership in~~ the EU will impact our business, particularly our ability to conduct international business from a base of operations in the UK. The UK could lose the benefits of global trade agreements negotiated by the EU on behalf of its ~~members,~~member states, possibly resulting in increased trade barriers, which could make doing business in Europe more difficult and/or costly. Moreover, in the U.S., tariffs on certain U.S. imports have recently been imposed, and the EU and other countries have responded with retaliatory tariffs on certain U.S. exports. We cannot predict what effects these and potential additional tariffs will have on our business, including in the context of escalating global trade and political tensions. However, these tariffs and other trade restrictions, whether resulting from the UK’s withdrawal from the EU or otherwise, could increase our cost of doing business, reduce our gross margins or otherwise negatively impact our business and our financial results.

If we fail to attract, retain and motivate key personnel or to retain the members of our executive management team, our operations and our future growth may be adversely affected.

Our success and our ability to grow depend in part on our continued ability to attract, retain and motivate highly qualified ~~personnel. We are highly dependent upon~~personnel, including our executive management ~~team and other critical personnel, all of whom work on many complex matters that are essential to our success.~~team. We do not carry “key person” insurance. The loss of services and institutional knowledge of one or more additional members of our executive management team or other key personnel could delay or prevent the successful completion of some of our vital ~~activities. Any employee may terminate his or her employment at any time without notice or with only short notice~~activities and ~~without cause or good reason. The resulting loss of institutional knowledge~~ may negatively impact our operations and future growth. IfIn addition, changes in our organization as a result of executive management transition may have a disruptive impact on our ability to implement our strategy. Until we integrate new personnel, and unless they are able to succeed in their

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positions, we may be unable to successfully manage and grow our business. In any event, if we are unable to attract, retain and motivate quality individuals, or if there are delays, ~~in the selection of new members of management,~~ or if we do not successfully manage ~~these~~personnel and executive management transitions, our business, financial condition, results of operations and growth prospects could be adversely affected.

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In addition, to grow our company we will need additional personnel. Competition for qualified personnel in the pharmaceutical industry is intense. If we are unable to attract, retain and motivate quality individuals, including in our research and development operations, which are continuing to expand, our business, financial condition, results of operations and growth prospects could be adversely affected.

We also depend on the unique abilities, industry experience and institutional knowledge of the members of our board of directors to efficiently set company strategy and effectively guide our executive management team. We cannot be certain that future board turnover will not negatively affect our business.

Significant disruptions of information technology systems or data security breaches could adversely affect our business.

~~We are increasingly dependent on information technology systems and infrastructure to operate our business.~~ In the ordinary course of our business, we collect, store, process and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal ~~information. It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such~~ information. We have also outsourced some of our operations (including parts of our information technology infrastructure) to a number of third party vendors who may have, or could gain, access to our confidential information. In addition, many of those third parties, in turn, subcontract or outsource some of their responsibilities to third parties.

Our information technology systems, and those of our vendors, are large and complex and store large amounts of confidential information. The size and complexity of these systems make them potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third party vendors and/or business partners, or from cyber-attacks by malicious third parties. Attacks of this nature are increasing in frequency, persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states and others. In addition to the extraction of important information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of our information. Although the aggregate impact on our operations and financial condition has not been material to date, we and our vendors have been the target of events of this nature and expect them to continue.

Significant disruptions of our, our third party vendors’ and/or business partners’ information technology systems or security breaches, including in our remote work environment as a result of the COVID-19 pandemic, could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information and personal information), and could result in financial, legal, business and reputational harm to us. Any such event that leads to unauthorized access, use or disclosure of personal information, including personal information regarding our patients or employees, could harm our reputation, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could disrupt our business, result in increased costs or loss of revenue, and/or result in significant legal and financial exposure. In addition, security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may further harm us. Moreover, the prevalent use of mobile devices to access confidential information increases the risk of security breaches. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business. In addition, failure to maintain effective internal accounting controls related to security breaches and cybersecurity in general could impact our ability to produce timely and accurate financial statements and subject us to regulatory scrutiny.

~~In addition to those specifically described in other risk factors, we~~We are subject to significant ongoing regulatory obligations and oversight, which may result in significant additional expense and limit our ability to commercialize our products.

FDA and Equivalent Non-U.S. Regulatory Authorities

Our activities are subject to extensive regulation encompassing the entire life cycle of our products, from research and development activities to marketing approval (including specific post-marketing obligations), manufacturing, labeling, packaging, adverse event and safety reporting, storage, advertising, promotion, sale, pricing and reimbursement, recordkeeping, distribution, importing and exporting. ~~These requirements apply both to us and to third parties we contract with to perform services and supply us with products.~~ The failure by us or any of our third party partners, including our corporate development and collaboration partners, clinical trial sites, suppliers, distributors and our central pharmacy for Xyrem and Xywav, to comply with applicable requirements could subject us to administrative or judicial sanctions or other negative consequences, such as delays in approval or refusal to approve a product candidate, restrictions on our products, our suppliers, our other partners or us, the withdrawal, suspension or variation of product approval or manufacturing authorizations, untitled letters, warning letters, fines and other monetary penalties, unanticipated expenditures, product recall, withdrawal or seizure, total or partial suspension of

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production or distribution, interruption of manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, civil penalties and/or criminal prosecution, any of which could result in a significant drop in our revenues from the affected products and harm to our reputation and could have a significant impact on our sales, business and financial condition.

We monitor adverse events resulting from the use of our products, as do the regulatory authorities, and we file periodic reports with the authorities concerning adverse events. The authorities review these events and reports, and if they determine

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that any events and/or reports indicate a trend or signal, they can require a change in a product label, restrict sales and marketing and/or require conduct or ~~conduct~~ other actions, potentially including variation, withdrawal or suspension of the marketing authorization, any of which could result in reduced market acceptance and demand for our products, could harm our reputation and our ability to market our products in the future, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. ~~The~~ FDA and the competent authorities of the EU member states on behalf of the EMA, also periodically inspect our records related to safety reporting. ~~Following such inspections, the FDA may issue notices on FDA Form 483 and warning letters that could cause us to modify certain activities.~~ The EMA’s Pharmacovigilance Risk Assessment Committee may propose to the Committee for Medicinal Products for Human Use that the marketing authorization holder be required to take specific steps or advise that the existing marketing authorization be varied, suspended or revoked. Failure to adequately and promptly correct the observation(s) can result in further regulatory enforcement action, which could include the variation, suspension or withdrawal of marketing authorization or imposition of financial penalties or other enforcement measures. The failure to adequately address and promptly correct any matters identified by the FDA or other foreign regulatory authorities could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Erwinaze, defibrotide and Vyxeos are available on a named patient basis or through a compassionate use process in many countries where they are not commercially available. If any such country’s regulatory authorities determine that we are promoting such products without proper authorization, we could be found to be in violation of pharmaceutical advertising laws or the regulations permitting sales under named patient programs. In that case, we may be subject to financial or other penalties. ~~Moreover, any~~Any failure to maintain revenues from sales of Erwinaze, defibrotide and/or Vyxeos on a named patient basis and/or to generate revenues from commercial sales of these products exceeding historical sales on a named patient basis could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~The~~ FDA, the competent authorities of the EU member states and other governmental authorities require advertising and promotional materials to be truthful and not misleading, and products to be marketed only for their approved indications and in accordance with the provisions of the approved label. Regulatory authorities actively investigate allegations of off-label promotion in order to enforce regulations prohibiting these types of activities. IfA determination that we ~~are found to~~ have promoted an approved product for off-label uses ~~we may be~~could subject us to significant liability, including civil and administrative financial penalties and other remedies as well as criminal financial penalties, other sanctions and imprisonment. Even if we are not determined to have engaged in off-label promotion, an allegation that we have engaged in such activities could have a significant impact on our sales, business and financial condition. The U.S. government has also required companies to enter into complex corporate integrity agreements and/or non-prosecution agreements that impose significant reporting and other burdens on the affected companies. Failure to maintain a comprehensive and effective compliance program, and to integrate the operations of acquired businesses into a combined comprehensive and effective compliance program on a timely basis, could subject us to a range of regulatory actions and/or civil or criminal penalties that could affect our ability to commercialize our products and could harm or prevent sales of the affected products, or could substantially increase the costs and expenses of commercializing and marketing our products.

In the EU, the advertising and promotion of our products are also subject to EU member states’ laws and industry codes of practice governing promotion of medicinal products, including limitations on our promotional activities with health care professionals, prohibition of the advertising and promotion of our products to the general public, misleading and comparative advertising and unfair commercial practices. Violations of the rules governing the promotion of medicinal products in the EU could be penalized by administrative measures, limitations on promotional activities, fines and imprisonment. These laws may also impose limitations on our promotional activities with health care professionals.

Other Regulatory Authorities

We are also subject to regulation by other regional, national, state and local agencies, including the DEA, the DOJ, the FTC, the United States Department of Commerce, the Office of Inspector General ~~or OIG,~~ of the ~~HHS~~U.S. Department of Health and Human Services, or OIG, and other regulatory bodies, as well as similar governmental authorities in those non-U.S. countries in which we commercialize our products.

We are subject to numerous ~~anti-fraud~~fraud and abuse laws and regulations globally and our sales, marketing, patient support and medical activities may be subject to scrutiny under these laws and regulations. ~~For example,~~These laws are described in “Business—Government Regulation” in Part I, Item 1 of our Annual Report on Form 10-K for the U.S. federal anti-kickback statute is broad and activities that involve providing anything of value to those who prescribe, purchase, or recommend pharmaceutical products that are directly or indirectly reimbursed by federal health care programs like Medicare or Medicaid may be subject to scrutiny. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common manufacturer business arrangements and activities, the exemptions and safe harbors are drawn narrowly, and practices

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~~or arrangements that involve remuneration may be subject to scrutiny if they do not clearly qualify for an exemption or safe harbor.~~year ended December 31, 2019. While we maintain a comprehensive compliance program to try to ensure that our practices and the activities of our third-party contractors and employees fall within the scope of ~~such~~available statutory exceptions and regulatory safe harbors whenever possible, and otherwise comply with applicable laws, regulations or guidance, regulators and enforcement agencies may disagree with our assessment or find fault with the conduct of our employees or contractors. In addition, existing regulations are subject to regulatory revision or changes in interpretation by the DOJ or OIG. ~~Violations of the federal anti-kickback statute may be punished by civil and criminal fines, imprisonment, and/or exclusion from participation in federal healthcare programs.~~

The U.S. federal False Claims Act, or False Claims Act, prohibits, among other things, making a fraudulent claim for payment of federal funds, causing such a fraudulent claim to be made, or making a false statement to get a false claim paid. The government may assert that a claim resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim under the False Claims Act. Many companies have faced government investigations or lawsuits by whistleblowers who bring a qui tam action under the False Claims Act on behalf of themselves and the government for a variety of alleged improper marketing activities, including providing free product to customers expecting that the customers would bill federal programs for the product, providing consulting fees, grants, free travel and other benefits to physicians to induce them to prescribe the company’s products, and inflating prices reported to private price publication services, which are used to set drug reimbursement rates under government healthcare programs. In addition, the government and private whistleblowers have pursued False Claims Act cases against pharmaceutical companies for causing false claims to be submitted as a result of the marketing of their products for unapproved ~~uses. Pharmaceutical and other healthcare companies also are subject to other~~uses or violations of the federal ~~false claim laws, including federal criminal healthcare fraud and false statement statutes that extend to non-government health benefit programs.~~anti-kickback statute. If we become the subject of a government False Claims Act or other investigation or whistleblower suit, we could incur substantial legal costs (including settlement costs) and business disruption responding to such investigation or suit, regardless of the outcome. ~~Violations~~

Table of ~~the False Claims Act may result in significant financial penalties (on a per claim or statement basis), treble damages and exclusion from participation in federal health care programs.~~Contents

~~The majority of individual states also have statutes or regulations similar to~~

Public reporting under the federal anti-kickback law and the False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Certain states and cities require identification or licensing of our sales representatives. Other states restrict our ability to offer co-pay support to patients for certain prescription drugs. We must comply with these state laws to avoid being subject to civil or criminal penalties.

~~The~~ Physician Payment Sunshine Act, or Sunshine provisions, ~~requires us to track~~ and ~~report to~~other similar state laws, the ~~federal government payments and transfers~~requirements of ~~value that we make to physicians and teaching hospitals (and to certain additional covered recipients beginning~~which are discussed in ~~2022) and ownership interests held by physicians and their families, and provides~~“Business—Government Regulation” in Part I, Item 1 of our Annual Report on Form 10-K for ~~public disclosures of these data. Public reporting under~~ the ~~Sunshine provisions~~year ended December 31, 2019, has resulted in increased scrutiny of the financial relationships between industry, teaching hospitals, physicians and ~~physicians.~~other healthcare providers. Such scrutiny may negatively impact our ability to engage with physicians on matters of importance to us. In addition, government agencies and private entities may inquire about our marketing practices or pursue other enforcement activities based on the disclosures in those public reports. Moreover, certain states require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and gifts and payments to individual physicians, and/or restrict when and to what extent pharmaceutical companies may provide meals to prescribers or engage in other marketing related activities. If the data reflected in our reports are found to be in violation of any of the Sunshine provisions or any other U.S. federal, state or local laws or regulations that may apply, or if we otherwise fail to comply with the Sunshine provisions or similar requirements of state or local regulators, we may be subject to significant civil, ~~criminal~~ and administrative penalties, damages or fines.

Outside the U.S., interactions between pharmaceutical companies and physicians are also governed by strict laws, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct. The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products, which is prohibited in the EU, is governed by the national anti-bribery laws of the EU member states, as described below and by industry codes of practice. Violation of these laws could result in substantial fines and imprisonment. The national laws of certain EU member states and industry codes of practice require that payments made to physicians be publicly disclosed. Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer, his/her competent professional organization, and/or the competent authorities of the individual EU member states. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

Xyrem and Sunosi are controlled substances under the Controlled Substances Act. Our suppliers, distributors, clinical sites and prescribers, as well as retail pharmacies for Sunosi and the central pharmacy for Xyrem, are subject to DEA and state regulations relating to manufacturing, storage, distribution and physician prescription procedures, including limitations on prescription refills, and are required to maintain DEA registration and state licenses, when handling these drugs and their APIs. The DEA periodically inspects facilities for compliance with its rules and regulations. Failure to comply with current and

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future regulations of the DEA, relevant state authorities or any comparable international requirements could lead to a variety of sanctions, including revocation or denial of renewal of DEA registrations, fines, injunctions, or civil or criminal penalties, could result in, among other things, additional operating costs to us or delays in shipments outside or into the U.S. and could have an adverse effect on our business and financial condition. DEA quotas are required for any U.S. supplier to manufacture sodium oxybate or Xyrem. New oxybate market entrants, including generic products, may impact the amount of quota available in the U.S., and if, our suppliers cannot obtain the quotas that are needed on a timely basis, or at all, our business, financial condition, results of operations and growth prospects could be materially and adversely affected.

We have various programs to help patients access our products, including patient assistance programs, which include co-pay coupons for certain of our products, assistance to help patients determine their insurance coverage for our products, and a free product program. Co-pay coupon programs for commercially insured patients, including our program for Xyrem, have received negative publicity related to allegations regarding their use to promote branded pharmaceutical products over other less costly alternatives. In the past, payors brought class action lawsuits challenging the legality of manufacturer co-pay programs under a variety of federal and state laws and insurers have taken actions through their network pharmacies and PBMs to restrict manufacturer co-pay programs. In September 2014, the OIG issued a Special Advisory Bulletin warning manufacturers that they may be subject to sanctions under the federal ~~anti-kickback statute~~Anti-Kickback Statute and other laws if they do not take appropriate steps to exclude Medicare Part D beneficiaries from using co-pay coupons. It is possible that changes in insurer policies regarding co-pay coupons and/or the introduction and enactment of new legislation or regulatory action could restrict or otherwise negatively affect these patient support programs, which could result in fewer patients using affected products, including Xyrem, and therefore could have a material adverse effect on our sales, business and financial condition.

We have established programs to consider grant applications submitted by independent charitable organizations, including organizations that provide co-pay support to patients who suffer from the diseases treated by our drugs. The OIG has ~~established guidelines that suggest that it is lawful~~issued guidance for how pharmaceutical manufacturers tocan lawfully make donations to charitable organizations who provide co-pay assistance to Medicare patients, provided that such organizations, among other things, are bona fide charities, are entirely independent of and not controlled by the manufacturer, provide aid to applicants on a first-come basis according to consistent financial criteria, and do not link aid to use of a donor’s product. IfIn April 2019, we finalized our civil settlement agreement with the DOJ and OIG and entered into a corporate integrity agreement requiring us to maintain our ongoing corporate compliance program and obligating us to implement or continue, as applicable, a set of defined corporate integrity activities for a period of five years from the effective date of the corporate integrity agreement. Although we have structured our programs to follow available guidance and the requirements of our corporate integrity agreement, if we or our vendors or donation recipients are deemed to fail to comply with relevant laws, regulations or evolving government guidance in the operation of these programs, such facts could be used as the basis for an enforcement action against us by the federal government or other enforcement agencies or private ~~litigants.~~

In 2016 and 2017, we received subpoenas from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to our support of charitable organizations that provide financial assistance to Medicare patients. On April 4, 2019, we finalized our civil settlement agreement with the DOJ and OIG in the amount of $57.0 million plus interest. In connection with the settlement agreement, we entered into a corporate integrity agreement requiring us to maintain our ongoing corporate compliance program and obligating us to implementlitigants, or continue, as applicable, a set of defined corporate integrity activities for a period of five years from the effective date of the corporate integrity agreement. In the event of a breach of the corporate integrity agreement, we could become liable for payment of certain stipulated penalties or could be excluded from participation in federal health care programs, which would have a material adverse effect on our sales, business and financial condition.

We may also become subject to similar investigations by other state or federal governmental agencies or ~~offices. Any additional investigations~~offices of our patient assistance programs or other business practices, ~~may~~which could result in damages, fines, penalties, exclusion from participation in federal health care programs or other criminal, civil or administrative sanctions or enforcement ~~actions. Such investigations may also result in~~actions, as well as negative publicity, ~~or other negative actions that could harm our reputation, impact our business practices, reduce~~reduction in demand for, or patient access to, our products and/or reduce coverage of our products, including by federal and state health care programs. If any or all of these events occur, our business, financial condition, results of operations and stock price could be materially and adversely affected.

Our business activities outside of the U.S. are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate, including the UK Bribery Act of 2010, or the UK Bribery Act. ~~Our heavily regulated business involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in~~In certain countries, the health care providers who prescribe pharmaceuticals are employed by their government and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers may be subject to regulation under the FCPA and the UK Bribery Act. Recently the U.S. Securities and Exchange Commission ~~or SEC,~~ and the DOJ have increased their FCPA enforcement activities with respect to pharmaceutical companies. In addition, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, private individuals who report original information to the SEC that leads to successful enforcement actions may be eligible for a monetary award. There is no certainty that all employees and third party business partners (includingViolation of these laws by us or our ~~distributors, wholesalers, agents, contractors, and other partners) will comply with anti-bribery laws. In particular, we do not control the actions of~~ suppliers and other third party agents ~~although~~for which we may be liable ~~for their actions. Violation of these laws~~ may result

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in civil or criminal sanctions, which could include monetary fines, criminal penalties, and disgorgement of past profits, which could have a material adverse impact on our business and financial condition.

Outside the U.S., interactions between pharmaceutical companies and physicians are also governed by strict laws, such as national anti-bribery laws of European countries, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

Xyrem, Sunosi and Xywav are controlled substances under the Controlled Substances Act. Our suppliers, distributors, clinical sites and prescribers, as well as retail pharmacies for Sunosi and the central pharmacy for Xyrem and Xywav, are subject to DEA and state regulations relating to manufacturing, storage, distribution and physician prescription procedures,

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including limitations on prescription refills, and are required to maintain DEA registration and state licenses, when handling these drugs and their APIs. The DEA periodically inspects facilities for compliance with its rules and regulations. Failure to comply with current and future regulations of the DEA, relevant state authorities or any comparable international requirements could lead to a variety of sanctions, including revocation or denial of renewal of DEA registrations, fines, injunctions, or civil or criminal penalties, could result in, among other things, additional operating costs to us or delays in shipments outside or into the U.S. and could have an adverse effect on our business and financial condition.

We are also subject to data protection and privacy laws and regulations governing the processing of personal data. ~~The legislative and regulatory landscape for privacy~~Because of the remote work policies we implemented due to the COVID-19 pandemic, information that is normally protected, including company confidential information, may be less secure. Cybersecurity and data security ~~continues~~threats continue to evolve and ~~there has been~~raise the risk of an ~~increasing focus on privacy and data security issues which may~~incident that could affect our ~~business. Failure~~operations or compromise our business information or sensitive personal information, including health data. We may also need to comply with current and future laws and regulations, such as the EU General Data Protection Regulation that became effective in May 2018 and the California Consumer Privacy Act of 2018 that will become effective beginning January 2020, could result in government enforcement actions (including the imposition of significant penalties), criminal and civil liability for us andcollect more extensive health-related information from our ~~officers and directors, private litigation and/or adverse publicity that negatively affects~~employees to manage our ~~business.~~workforce. If we or our ~~vendors~~third party partners fail to comply or are alleged to have failed to comply with applicable data protection and privacy laws ~~or if the legal mechanisms we or our vendors rely upon for the transfer of personal data are ever deemed inadequate,~~and regulations, or if we ~~or our vendors~~were to experience a data breach ~~resulting in exposure of~~involving personal ~~data subject to the applicable laws,~~information, we could be subject to government enforcement actions ~~and significant penalties against us, and~~or private lawsuits. In addition, our business could be adversely impacted if our ability to transfer personal data outside of the European Economic Area or Switzerland is restricted, which could adversely impact our operating results. For example, in July 2020, the Court of Justice of the European Union, or the Court of Justice, declared the Privacy Shield Decision (Decision 2018/1250) invalid, which could adversely impact our ability to transfer personal data from the EU to the U.S. The Court of Justice further ruled that in order to transfer data outside of the EU, under the existing mechanism known as the Standard Contractual Clauses, the importing country’s level of protection must be adequate. If the level of protection in the U.S. or any other importing country is called into question under the Standard Contractual Clauses, this could further impact our ability to transfer data outside of the EU.

In addition, although we are not directly subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HIPAA, other than with respect to providing certain employee benefits, we potentially could be subject to criminal penalties if we, our affiliates or our agents knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

Under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, agreements between branded pharmaceutical companies and potential generic competitors settling patent litigation must be submitted to the FTC and the DOJ for review. The FTC has publicly stated that, in its view, certain brand-generic settlement agreements violate the antitrust laws and has brought actions against some companies that have entered into such agreements. In particular, the FTC has expressed its intention to take aggressive action to challenge settlements that include an alleged transfer of value from the brand company to the generic company (so-called “pay for delay” patent litigation settlements) and to call on legislators to pass stronger laws prohibiting such settlements. Because there is currently no precise legal standard with respect to the lawfulness of such settlements, there could be extensive litigation over whether any settlement that we have entered into or might enter into in the future constitutes a reasonable and lawful patent settlement. We may receive formal or informal requests from the FTC regarding our Xyrem patent settlements, and there is a risk that the FTC may commence a formal investigation or action against us, or a third party may initiate civil litigation regarding such settlements, which could divert the attention of management and cause us to incur significant costs, regardless of the outcome. We cannot predict the outcome of any potential government investigation of any antitrust claims, including those described above, or the impact of any such claims.

In addition to those described in this and other risk factors, numerous federal, state and non-U.S. statutes and regulations govern the research, development, manufacturing and commercial activities relating to prescription pharmaceutical products, including preclinical testing, approval, production, labeling, sale, distribution, import, export, post-market surveillance, advertising, dissemination of information, promotion, marketing, and pricing to government purchasers and government healthcare programs. Such laws and regulations are subject to change as activities relating to prescription pharmaceutical products have become the subject of active legislative activity. Any claim or finding that we or our business partners have failed to comply with applicable laws and regulations could be costly to us and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~Our reporting and payment obligations under~~We participate in the Medicaid Drug Rebate program, the 340B program, the U.S. Department of Veterans Affairs, Federal Supply Schedule, or FSS, pricing program, the Tricare Retail Pharmacy program, and ~~other governmental~~have obligations to report the average sales price for certain of our drugs to the Medicare program. All of these programs are described in more detail under the heading “Business—Pharmaceutical Pricing, Reimbursement by Government and Private Payors and Patient Access” in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, ~~2018. Our failure to comply with these obligations could negatively impact our financial results.~~

CMS issued a final regulation, which became effective on April 1, 2016, to implement the changes to the Medicaid Drug Rebate program under the Healthcare Reform Act. The issuance of the final regulation, as well as any other regulations and coverage expansion by various governmental agencies relating to the Medicaid Drug Rebate program, has increased and will continue to increase our costs and the complexity of compliance, has been and will continue to be time-consuming to implement, and could have a material adverse effect on our results of operations, particularly if CMS challenges the approach we take in our implementation of the final regulation.

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We also participate in the 340B program, which is described in more detail under the heading “Business—Pharmaceutical Pricing, Reimbursement by Government and Private Payors and Patient Access” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018. The Health Resources and Services Administration, or HRSA, issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities, which became effective on January 1, 2019. It is currently unclear how HRSA will apply its enforcement authority under the new regulation. Implementation of this regulation could affect our obligations and potential liability under the 340B program in ways we cannot anticipate. Any charge by HRSA that we have violated the requirements of the program or the regulation could negatively impact our financial results. We are also required to report the 340B ceiling prices for our covered outpatient drugs to HRSA, which then publishes them to 340B covered entities. There is no guarantee that our submissions will not be found by HRSA to be incomplete or incorrect. Further, any additional future changes to the definition of average manufacturer price and the Medicaid rebate amount under the Healthcare Reform Act or otherwise could affect our 340B ceiling price calculations and negatively impact our results of operations. In addition, legislation may be introduced that, if passed, would further expand the 340B program to additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting.

We have obligations to report the average sales price for certain of our drugs to the Medicare program. Statutory or regulatory changes or CMS guidance could affect the average sales price calculations for our products and the resulting Medicare payment rate, and could negatively impact our results of operations.

Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by us, governmental or regulatory agencies and the ~~courts.~~courts, which can change and evolve over time. In the case of our Medicaid pricing data, if we become aware that our reporting for a prior quarter was incorrect, or has changed as a result of recalculation of the pricing data, we are obligated to resubmit the corrected data for up to three years after those data originally were due. Such restatements and recalculations increase our costs for complying with the laws and regulations governing the Medicaid Drug Rebate program and could result in an overage or underage in our rebate liability for past quarters. Price recalculations also may affect the ceiling price at which we are required to offer our products under the 340B program.

Civil monetary penalties can be applied if we are found to have knowingly submitted any false price or product information to the government, if we are found to have made a misrepresentation in the reporting of our average sales price, or if we fail to submit the required price data on a timely basis, or if we are found to have charged 340B covered entities more than the statutorily mandated ceiling price. ~~Such conduct~~Centers for Medicare and Medicaid Services, or CMS, could also ~~could be grounds for CMS~~decide to terminate our Medicaid drug rebate agreement, in which case federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs. ~~There is no guarantee that~~

Our failure to comply with our ~~submissions~~reporting and payment obligations under the Medicaid Drug Rebate program and other governmental programs could negatively impact our financial results. CMS issued a final regulation, which became effective on April 1, 2016, to implement the changes to the Medicaid Drug Rebate program under the Healthcare Reform Act. The issuance of the final regulation, as well as any other regulations and coverage expansion by various governmental agencies relating to the Medicaid Drug Rebate program, has increased and will ~~not be found by CMS~~continue to increase our costs and the complexity of compliance, has been and will continue to be ~~incomplete~~time-consuming to implement, and could have a material adverse effect on our results of operations, particularly if CMS challenges the approach we take in our implementation of the final regulation.

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The Health Resources and Services Administration, or ~~incorrect.~~HRSA, issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities, which became effective on January 1, 2019. Implementation of this regulation could affect our obligations and potential liability under the 340B program in ways we cannot anticipate. We are also required to report the 340B ceiling prices for our covered outpatient drugs to HRSA, which then publishes them to 340B covered entities. Any charge by HRSA that we have violated the requirements of the program or the regulation could negatively impact our financial results. Further, any additional future changes to the definition of average manufacturer price and the Medicaid rebate amount under the Healthcare Reform Act or otherwise could affect our 340B ceiling price calculations and negatively impact our results of operations.

We ~~participate in~~have obligations to report the ~~U.S. Department~~average sales price for certain of ~~Veterans Affairs, Federal Supply Schedule,~~our drugs to the Medicare program. Statutory or ~~FSS, pricing program~~regulatory changes or CMS guidance could affect the average sales price calculations for our products and the ~~Tricare Retail Pharmacy program, as described in more detail under the heading “Business—Pharmaceutical Pricing, Reimbursement by Government~~resulting Medicare payment rate, and ~~Private Payors and Patient Access” in Part I, Item 1A~~could negatively impact our results of ~~our Annual Report on Form 10-K for the year ended December 31, 2018.~~ operations.

Pursuant to applicable law, knowing provision of false information in connection with price reporting under ~~these~~the U.S. Department of Veterans Affairs, FSS or Tricare Retail Pharmacy, or Tricare, programs can subject a manufacturer to civil monetary penalties. These program obligations also contain extensive disclosure and certification requirements.

If we overcharge the government in connection with our arrangements with FSS or Tricare, we are required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our business and operations could be negatively affected if we become subject to shareholder activism or hostile bids, which could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price.

Shareholder activism, which takes many forms and arises in a variety of situations, has been increasingly prevalent. Recent stock price declines due to the evolving effects of the COVID-19 may also increase our vulnerability to unsolicited approaches. If we become the subject of certain forms of shareholder activism, such as proxy contests or hostile bids, the attention of our management and our board of directors may be diverted from execution of our strategy. Such shareholder activism could give rise to perceived uncertainties as to our future strategy, adversely affect our relationships with business partners and make it more difficult to attract and retain qualified personnel. Also, we may incur substantial costs, including significant legal fees and other expenses, related to activist shareholder matters. Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism.

Product liability and product recalls could harm our business.

The development, manufacture, testing, marketing and sale of pharmaceutical products are associated with significant risks of product liability claims or recalls. Side effects or adverse events known or reported to be associated with, or

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manufacturing defects in, the products sold by us could exacerbate a patient’s condition, or could result in serious injury or impairment or even death. This could result in product liability claims against us and/or recalls of one or more of our products. In many countries, including in EU member states, national laws provide for strict (no-fault) liability which applies even where damages are caused both by a defect in a product and by the act or omission of a third party.

Product liability insurance coverage is expensive, can be difficult to obtain and may not be available in the future on acceptable terms, or at all. Our product liability insurance may not cover all of the future liabilities we might incur in connection with the development, manufacture or sale of our products. In addition, we may not continue to be able to obtain insurance on satisfactory terms or in adequate amounts. A successful claim or claims brought against us in excess of available insurance coverage could subject us to significant liabilities and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Such claims could also harm our reputation and the reputation of our products, adversely affecting our ability to market our products successfully. In addition, defending a product liability lawsuit is expensive and can divert the attention of key employees from operating our business.

Product recalls may be issued at our discretion or at the discretion of our suppliers, government agencies and other entities that have regulatory authority for pharmaceutical sales. Any recall of our products could materially adversely affect our business by rendering us unable to sell that product for some time and by adversely affecting our reputation. A recall could also result in product liability claims by individuals and third party payors. In addition, product liability claims could result in an investigation of the safety or efficacy of our products, our manufacturing processes and facilities, or our marketing programs conducted by ~~the~~ FDA, the EMA or the competent authorities of the EU member states. Such investigations could also potentially lead to a recall of our products or more serious enforcement actions, limitations on the therapeutic indications for which they may be used, or suspension, variation, or withdrawal of approval. Any such regulatory action by ~~the~~ FDA, the EC or the competent authorities of the EU member states could lead to product liability lawsuits as well.

Product liability insurance coverage is expensive, can be difficult to obtain and may not be available in the future on acceptable terms, or at all. Our product liability insurance may not cover all of the future liabilities we might incur in connection with the development, manufacture or sale of our products. A successful claim or claims brought against us in excess of available insurance coverage could subject us to significant liabilities and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Such claims could also harm our reputation and the reputation of our products, adversely affecting our ability to market our products successfully.

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We use hazardous materials in our manufacturing facilities, and any claims relating to the improper handling, storage, release or disposal of these materials could be time-consuming and expensive.

Our operations are subject to complex and increasingly stringent environmental, health and safety laws and regulations in the countries where we operate and, in particular, in Italy and Ireland where we have manufacturing facilities. Environmental and health and safety authorities in Italy and Ireland administer laws governing, among other matters, the emission of pollutants into the air (including the workplace), the discharge of pollutants into bodies of water, the storage, use, handling and disposal of hazardous substances, the exposure of persons to hazardous substances, and the general health, safety and welfare of employees and members of the public. Our manufacturing facilities are involved in the controlled storage, use and disposal of chemicals and solvents. Even if our safety procedures for handling and disposing of these hazardous materials comply with the standards prescribed by EU laws, we cannot completely eliminate the risk of contamination or injury from hazardous materials. If an accident or contamination involving pollutants or hazardous substances occurs, an injured party could seek to hold us liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance. We may not be able to maintain insurance with sufficient coverage on acceptable terms, or at all. In certain cases, laws may impose strict liability for pollution of the environment and contamination resulting from spills, disposals or other releases of hazardous substances or waste or any migration of such hazardous substances or waste. Costs, damages and/or fines may result from the presence, investigation and remediation of such contamination at properties currently or formerly owned, leased or operated by us or at off-site locations, including where we have arranged for the disposal of hazardous substances or waste. In addition, we may be subject to third party claims, including for natural resource damages, personal injury and property damage, in connection with such contamination.

~~We may incur significant costs to comply with current or future EU environmental laws.~~

Risks Related to Our Financial Condition and Results

We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial ~~position.~~position, and our business would be adversely affected if we are unable to service our debt obligations.

As of ~~September~~June 30, ~~2019,~~2020, we had total indebtedness of approximately ~~$1.8 billion, which included $626.0 million in outstanding term loan~~$2.4 billion. Our substantial indebtedness under a secured credit agreement that we entered into in June 2015 and subsequently amended in July 2016 and in June 2018, which we refer to as the amended credit agreement, $575.0 million of outstanding indebtedness under our 1.875% exchangeable senior notes due 2021, or the 2021 Notes, which were issued in August 2014, and $575.0 million of outstanding indebtedness under our 1.50% exchangeable senior notes due 2024, or the 2024 Notes, which were issued in August 2017 and which we refer to, together with the 2021 Notes, as the Exchangeable Senior Notes.

~~Our debt~~ may:

limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

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limit our ability to use our cash flow or obtain additional financing for working capital, capital expenditures, acquisitions, investments or other general business purposes;

require us to use a substantial portion of our cash flow from operations to make debt service payments;

limit our flexibility to plan for, or react to, changes in our business and ~~industry;~~industry, or our ability to take specified actions to take advantage of certain business opportunities that may be presented to us;

result in dilution to our existing shareholders in the event exchanges of ~~the Exchangeable Senior Notes~~our exchangeable senior notes are settled in our ordinary shares;

place us at a competitive disadvantage compared to our less leveraged competitors; and

increase our vulnerability to the impact of adverse economic and industry conditions.

Our ability to meet our debt service obligations will depend on our future performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control. If we do not have sufficient funds to meet our debt service obligations, we may be required to refinance or restructure all or part of our existing debt, sell assets, borrow more money or sell securities, none of which we can assure you that we would be able to do in a timely manner, or at all.

Covenants in our amended credit agreement restrict our business and operations in many ways and if we do not effectively manage our covenants, our financial conditions and results of operations could be adversely affected.

The amended credit agreement provides for a $667.7 million principal amount term loan due in June 2023 and a $1.6 billion revolving credit facility, with any loans under such revolving credit facility due in June 2023, subject to early mandatory repayments under certain circumstances. The amended credit agreement contains various covenants that, among other things, limit our ability and/or our restricted subsidiaries’ ability to:

~~incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;~~

~~issue redeemable preferred stock;~~

~~pay dividends or distributions or redeem or repurchase capital stock;~~

~~prepay, redeem or repurchase certain debt;~~

~~make loans, investments, acquisitions (including acquisitions of exclusive licenses) and capital expenditures;~~

~~enter into agreements that restrict distributions from our subsidiaries;~~

~~sell assets and capital stock of our subsidiaries;~~

~~enter into certain transactions with affiliates; and~~

~~consolidate or merge with or into, or sell substantially all of our assets to, another person.~~

The amended credit agreement also includes financial covenants that require us to maintain a maximum secured leverage ratio and a minimum interest coverage ratio. Our ability to comply with these financial covenants may be affected by events beyond our control. In addition, the covenants under the amended credit agreement could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us. Our failure to comply with any of the covenants could result in a default under the amended credit agreement, which could permit the lenders to declare all or part of any outstanding borrowings to be immediately due and payable, or to refuse to permit additional borrowings under the revolving credit facility. A default under the amended credit agreement could also lead to a default under other debt agreements or obligations, including the indentures governing the Exchangeable Senior Notes.

In addition, the holders of the Exchangeable Senior Notes have the ability to require us to repurchase their notes for cash if we undergo certain fundamental changes, such as specified change of control transactions, our liquidation or dissolution, or the delisting of our ordinary shares from The Nasdaq Global Select Market. Moreover, upon exchange of the Exchangeable Senior Notes, unless we elect to deliver only our ordinary shares to settle such exchange, we will be required to make cash payments in respect of the Exchangeable Senior Notes. It is our intent and policy to settle the principal amount of the Exchangeable Senior Notes in cash upon exchange. However, we may not have enough available cash or be able to obtain financing at the time we are required to make any required repurchases of surrendered Exchangeable Senior Notes or to pay cash upon exchanges of the Exchangeable Senior Notes. Our failure to repurchase the Exchangeable Senior Notes at a time when the repurchase is required by the indentures governing the Exchangeable Senior Notes or to pay any cash payable on future exchanges of the Exchangeable Senior Notes as required by the indentures governing the Exchangeable Senior Notes would constitute a default under that indenture. A default under those indentures could also lead to a default under other debt agreements or obligations, including the amended credit agreement. If the repayment of the related indebtedness were to be accelerated, we may not have sufficient funds to repay the related indebtedness, which could have a material adverse effect on our financial condition and our business. In this regard, if we are unable to repay amounts under the amended credit agreement, the lenders under the amended credit agreement could proceed against the collateral granted to them to secure that debt, which would seriously harm our business.

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~~We may not be able to generate sufficient cash to service our debt obligations.~~

Our ability to make payments on and to refinance our debt will depend on our future financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may be unable to maintain a level of positive cash flows from operating activities sufficient to permit us to pay the principal and interest on our debt.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, seek additional capital or restructure or refinance our debt. These alternative measures may not be successful and may not permit us to meet our ~~scheduled~~ debt service obligations. In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. ~~The~~In addition, if we are unable to repay amounts under our secured credit agreement that we entered into in June 2015 and subsequently amended, which we refer to as the amended credit agreement, ~~restricts our ability to dispose of assets, use~~ the proceeds from any disposition of assets and refinance our indebtedness. We may not be able to consummate or obtain proceeds from such dispositions, and any such proceeds may not be adequate to meet any debt service obligations then due.

~~In addition, our borrowings~~lenders under the amended credit agreement ~~are,~~could proceed against the collateral granted to them to secure that debt, which would seriously harm our business.

Covenants in our amended credit agreement restrict our business and ~~are expected~~operations in many ways and if we do not effectively manage our covenants, our financial conditions and results of operations could be adversely affected.

The amended credit agreement contains various covenants that, among other things, limit our ability and/or our restricted subsidiaries’ ability to:

incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;

pay dividends or distributions or redeem or repurchase capital stock;

prepay, redeem or repurchase certain debt;

make loans, investments, acquisitions (including acquisitions of exclusive licenses) and capital expenditures;

enter into agreements that restrict distributions from our subsidiaries;

sell assets and capital stock of our subsidiaries; and

consolidate or merge with or into, or sell substantially all of our assets to, ~~continue~~another person.

The amended credit agreement also includes certain financial covenants that require us to maintain a maximum secured leverage ratio and a minimum interest coverage ratio. Our failure to comply with any of the covenants could result in a default under the amended credit agreement, which could permit the lenders to declare all or part of any outstanding borrowings to be immediately due and payable, or to refuse to permit additional borrowings under the revolving credit facility. Moreover, our failure to repurchase our exchangeable senior notes at ~~variable rates~~a time when the repurchase is required by the indentures governing our exchangeable senior notes or to pay any cash payable on future exchanges of ~~interest and expose us~~our exchangeable senior notes as required by those indentures would constitute a default under those indentures. A default under those indentures could also lead to ~~interest rate risk. If interest rates increase,~~a default under other debt agreements or obligations, including the amended credit agreement. Likewise, a default under the amended

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credit agreement could also lead to a default under other debt agreements or obligations, including the indentures governing our ~~debt service obligations on the variable rate indebtedness would increase even if the amount borrowed remained the same, and our net income would decrease.~~exchangeable senior notes.

To continue to grow our business, we will need to commit substantial resources, which could result in future losses or otherwise limit our opportunities or affect our ability to operate and grow our business.

The scope of our business and operations has grown substantially since 2012, including through a series of ~~transactions, including the~~ business ~~combination between Jazz Pharmaceuticals, Inc.~~combinations and ~~Azur Pharma Public Limited Company, which we refer to as the Azur Merger, and our acquisitions of EUSA Pharma Inc., Gentium S.r.l., Celator Pharmaceuticals, Inc. and Cavion, Inc., or Cavion.~~acquisitions. To continue to grow our business over the longer term, we ~~will need~~plan to commit substantial ~~additional~~ resources to ~~our business~~product acquisition and ~~execution~~in-licensing, product development, clinical trials of ~~our strategy. Our ongoing capital requirements will depend on many factors, including:~~

~~the revenues from our commercial products, which may be affected by many factors, including the extent of competition for Xyrem or our other products;~~

~~the cost of acquiring and/or in-licensing any new products~~product candidates and ~~product candidates;~~

~~the costs~~expansion of our commercial, ~~operations, including the costs related to the launch and commercialization of new products;~~

~~the scope, rate of progress, results and costs of our~~ development, ~~and clinical activities;~~

~~the cost and timing of obtaining regulatory approvals and of compliance with laws and regulations;~~

~~the cost of preparing, filing, prosecuting, defending and enforcing patent claims~~manufacturing and other ~~intellectual property rights;~~

~~the cost of investigations, litigation and/or settlements related to regulatory oversight and third party claims;~~

~~the costs of integration activities related to any future strategic transactions we may engage in; and~~

~~the costs arising from changes in laws and regulations, including, for example, healthcare reform legislation.~~

~~Our strategy includes the expansion of our business through acquiring or in-licensing, and developing, additional products and product candidates~~operations. Acquisition opportunities that we ~~believe are highly differentiated~~pursue could materially affect our liquidity and ~~have significant commercial potential. See the risk factor under the heading “~~capital resources and may require us to incur additional indebtedness, seek equity capital or both. ~~We may not be able~~Our ability to ~~successfully identify and acquire or in-license~~raise additional ~~products or product candidates to grow our business, and, even if we are able to do so, we may otherwise fail to realize the anticipated benefits of these acquisitions” in this Part II, Item 1A. We~~capital may be ~~unable~~adversely impacted by potential worsening global economic conditions and the recent disruptions to, ~~expand our business if we do not have sufficient capital or cannot~~and volatility in, the credit and financial markets in the U.S. and worldwide resulting from the effects of the COVID-19 pandemic. An inability to borrow or raise additional capital on attractive ~~terms. Our substantial indebtedness may limit~~terms, or at all, could prevent us from expanding our ~~ability to borrow additional funds for acquisitions or to use~~business and otherwise could have a material adverse effect on our ~~cash flow or obtain additional financing for future acquisitions.~~business and growth prospects. In addition, if we use a substantial amount of our funds to acquire or in-license products or product candidates, we may not have sufficient additional funds to conduct all of our operations in the manner we would otherwise choose.

We ~~may not be able to access the capital and credit markets on terms that are favorable to us, or at all.~~

During the past several years, domestic and international financial markets have experienced extreme disruption from time to time, including, among other things, high volatility and significant variability in stock prices, which has caused uncertainty with regard to credit availability for many borrowers. We expect to opportunistically seek access to the capital and credit markets to supplement our existing cash balances, cash we expect to generate from operations and funds available under our revolving credit facility to satisfy our needs for working capital, capital expenditures and debt service requirements or to continue to grow our business over the longer term through product acquisition and in-licensing, product development and clinical trials of product candidates, and expansion of our commercial operations. In the event of adverse capital and credit market conditions, including as a result of the UK’s withdrawal from the EU or as a result of tariffs and other trade restrictions potentially contributing to instability in the global financial markets, we may not be able to obtain capital market financing or credit on favorable terms, or at all, which could have a material adverse effect on our business and growth prospects. Changes

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~~in our credit ratings issued by nationally recognized credit rating agencies could also adversely affect our cost of financing and have an adverse effect on the market price of our securities.~~

We have significant intangible assets and goodwill. Consequently, the future impairment of our intangible assets and goodwill may significantly impact our profitability.

Our intangible assets and goodwill are ~~significant. As of September 30, 2019, we had recorded $3.5 billion of intangible assets~~significant and ~~goodwill related to our past acquisitions. Intangible assets and goodwill~~ are subject to an impairment analysis whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. ~~For example, in connection with entry into an asset purchase agreement in June 2018 to sell substantially all of the assets held by us related to Prialt~~^® (ziconotide) intrathecal infusion, we recognized an impairment charge of $42.9 million in our consolidated statements of income in 2018, primarily related to the carrying balances of intangible assets. Additionally, goodwill and indefinite-lived assets are subject to an impairment test at least annually.

Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be predicted. Our results of operations and financial position in future periods could be negatively impacted should future impairments of intangible assets or goodwill occur. For example, in the first quarter of 2020, we recorded a $136.1 million asset impairment charge following the decision to stop enrollment in our Phase 3 clinical study of defibrotide for the prevention of VOD due to a determination that the study is highly unlikely to reach one of its primary endpoints.

Our financial results have been and may continue to be adversely affected by foreign currency exchange rate fluctuations.

We have significant operations in Europe as well as in the U.S., but we report revenues, costs and earnings in U.S. dollars. Our primary currency translation exposure relates to our subsidiaries that have functional currencies denominated in the euro. Exchange rates between the U.S. dollar and the euro have fluctuated and are likely to continue to fluctuate from period to period. Because our financial results are reported in U.S. dollars, we are exposed to foreign currency exchange risk as the functional currency financial statements of non-U.S. subsidiaries are translated to U.S. dollars for reporting purposes. To the extent that revenue and expense transactions are not denominated in the functional currency, we are also subject to the risk of transaction losses. For example, because our Sunosi, Defitelio, Erwinase and Vyxeos product sales outside of the U.S. are primarily denominated in the euro, our sales of those products have been and may continue to be adversely affected by fluctuations in foreign currency exchange rates. In this regard, when the U.S. dollar strengthens against a foreign currency, the relative value of sales made in the foreign currency decreases. Conversely, when the U.S. dollar weakens against a foreign currency, the relative value of such sales increases. Accordingly, increases in the value of the U.S. dollar relative to foreign currencies, primarily the euro, could adversely affect our foreign revenues, perhaps significantly. In addition, as we continue to expand our international operations, we will conduct more transactions in currencies other than the U.S. dollar, which could increase our foreign currency exchange risk. Given the volatility of exchange rates, as well as our expanding operations, there is no guarantee that we will be able to effectively manage currency transaction and/or translation ~~risks. We use~~risks, which could adversely affect our operating results. Although we utilize foreign exchange forward contracts to manage currency risk primarily related to certain intercompany balances denominated in non-functional ~~currencies. These foreign exchange forward contracts are not designated as hedges. Gains and losses on these derivative instruments are designed~~currencies, our efforts to ~~offset gains and losses on the underlying balance sheet exposures. Fluctuations in foreign~~manage currency ~~exchange rates could have a material adverse effect on our results of operations and financial condition.~~

Werisk may not be ~~able to successfully maintain~~successful.

Changes in our effective tax rates ~~which~~ could adversely affect our business and financial condition, results of operations and growth prospects.

We are incorporated in Ireland and maintain subsidiaries in North America and a number of other foreign jurisdictions. As a result, our effective tax rate is derived from a combination of applicable tax rates in the various jurisdictions where we operate. Our effective tax rate may fluctuate depending on a number of factors, including, but not limited to, the distribution of our profits or losses between the jurisdictions where we operate and changes to or differences in interpretation of tax laws. ~~In addition, the tax laws of any jurisdiction in which we operate may change in the future, which could impact our effective tax rate.~~ We are subject to reviews and audits by the U.S. Internal Revenue Services, or IRS, and other taxing authorities from time to time, and the IRS or other taxing authority may challenge our structure, transfer pricing arrangements and tax positions through an audit or lawsuit. Responding to or defending against challenges from taxing authorities could be expensive and consume time and other resources. If we are unsuccessful, we may be required to pay taxes for prior periods, interest, fines or penalties, and may be obligated to pay increased taxes in the future, any of which could require us to reduce our operating expenses, decrease efforts in support of our products or seek to raise additional funds. Any of these actions could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

In December 2015, we received proposed tax assessment notices, and, in October 2018, we received revised tax assessment notices from the French tax authorities for 2012 and 2013 and in December 2018 and September 2019, we received proposed tax assessment notices for 2015, 2016 and 2017, relating to certain transfer pricing adjustments. The notices provide for additional French tax of approximately $41 million for 2012 and 2013 and approximately $12 million for 2015, 2016 and 2017 including interest and penalties through the respective dates of the proposed assessments, translated at the foreign exchange rate at September 30, 2019. We disagree with the assessments and are contesting them vigorously.

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On December 22, 2017, the U.S. Tax Act was signed into law. The U.S. Tax Act made broad and complex changes to the U.S. tax code. The U.S. Department of Treasury has issued limited regulations and other interpretive guidance under the U.S. Tax Act, and is expected to issue additional guidance, the impact of which is uncertain but could change the financial impacts that were previously recorded or are expected to be recorded in future periods. Furthermore, the impact of this tax reform on certain holders of our ordinary shares could be adverse. Among other things, changes to the rules for determining a foreign corporation’s status as a controlled foreign corporation could have an adverse effect on U.S. persons who are treated as owning (directly or indirectly) at least 10% of the value or voting power of our ordinary shares. Investors should consult their own advisers regarding the potential application of these rules to their investments.

The IRS may not agree with the conclusion that we should be treated as a foreign corporation for U.S. federal tax purposes.

Although we are incorporated in Ireland, the IRS may assert that we should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal tax purposes pursuant to Section 7874 of the U.S. Internal Revenue Code, or the Code. For U.S. federal tax purposes, a corporation generally is considered a tax resident in the jurisdiction of its organization

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or incorporation. Because we are an Irish incorporated entity, we would be classified as a foreign corporation (and, therefore, a non-U.S. tax resident) under these rules. Section 7874 of the Code provides an exception under which a foreign incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal tax purposes. Because we indirectly acquired all of Jazz Pharmaceuticals, Inc.’s assets through the acquisition of the shares of Jazz Pharmaceuticals, Inc. common stock when the businesses of Jazz Pharmaceuticals, Inc. and Azur Pharma Public Limited Company were combined in a merger transaction in January 2012, or the Azur Merger, the IRS could assert that we should be treated as a U.S. corporation for U.S. federal tax purposes under Section 7874. The IRS continues to scrutinize transactions that are potentially subject to Section 7874, and has issued several sets of final and temporary regulations under Section 7874 since 2012. We do not expect these regulations to affect the U.S. tax consequences of the Azur Merger. Nevertheless, new statutory and/or regulatory provisions under Section 7874 of the Code or otherwise could be enacted that adversely affect our status as a foreign corporation for U.S. federal tax purposes, and any such provisions could have prospective or retroactive application to us, our shareholders, Jazz Pharmaceuticals, Inc. and/or the Azur Merger.

Our U.S. affiliates’ ability to use their net operating losses to offset potential taxable income and related income taxes that would otherwise be due is limited under Section 7874 of the Code and could be subject to further limitations if we do not generate taxable income in a timely manner or if the “ownership change” provisions of Sections 382 and 383 of the Code result in further annual limitations.

Following certain acquisitions of a U.S. corporation by a foreign corporation, Section 7874 of the Code can limit the ability of the acquired U.S. corporation and its U.S. affiliates to utilize U.S. tax attributes such as net operating losses, or NOLs, to offset U.S. taxable income resulting from certain transactions. ~~Based on the limited guidance available, this limitation applies to us.~~ Our U.S. affiliates have a significant amount of NOLs. As a result of Section 7874 of the Code, after the Azur Merger, our U.S. affiliates have not been able and will continue to be unable, for a period of time, to utilize their U.S. tax attributes to offset their U.S. taxable income, if any, resulting from certain taxable transactions. While we expect to be able to fully utilize our U.S. affiliates’ U.S. NOLs prior to their expiration, as a result of this limitation, it may take our U.S. affiliates longer to use their NOLs.

Our ability to use these NOLs to offset potential future taxable income and related income taxes that would otherwise be due is also dependent upon our generation of future taxable income before the expiration dates of the NOLs, and we cannot predict with certainty when, or whether, our U.S. affiliates will generate sufficient taxable income to use all of the NOLs. In addition, the use of NOLs to offset potential future taxable income and related income taxes that would otherwise be due is subject to annual limitations under the “ownership change” provisions of Sections 382 and 383 of the Code and similar state provisions, which may result in the expiration of additional NOLs before future utilization.

~~Future changes~~Changes to ~~the tax laws under which we expect to be treated as a foreign corporation for U.S. federal tax purposes or to other~~ tax laws relating to multinational corporations could adversely affect us.

The U.S. Congress, the EU, the Organization for Economic Co-operation and Development, or OECD, and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. One example is the OECD’s initiative in the area of “base erosion and profit shifting,” where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. Some countries are beginning to implement legislation and other guidance to align their international tax rules with the OECD’s recommendation. As a result of the focus on the taxation of multinational corporations, the tax laws in Ireland, the U.S. and other countries in which we and our affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect us.

~~Table~~On December 22, 2017, the U.S. Tax Cuts and Jobs Act, or U.S. Tax Act, was signed into law. The U.S. Tax Act made broad and complex changes to the U.S. tax code. The U.S. Department of ~~Contents~~

Treasury has issued regulations and other interpretive guidance under the U.S. Tax Act, and is expected to issue additional guidance, the impact of which is uncertain but could change the financial impacts that were previously recorded or are expected to be recorded in future periods. Furthermore, the impact of this tax reform on certain holders of our ordinary shares could be adverse. Among other things, changes to the rules for determining a foreign corporation’s status as a controlled foreign corporation could have an adverse effect on U.S. persons who are treated as owning (directly or indirectly) at least 10% of the value or voting power of our ordinary shares. Investors should consult their own advisers regarding the potential application of these rules to their investments.

A substantial portion of our indebtedness bears interest at variable interest rates based on USD LIBOR and certain of our financial contracts are also indexed to USD LIBOR. Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates on our current or future indebtedness and may otherwise adversely affect our financial condition and results of operations.

In July 2017, the Financial Conduct Authority, the authority that regulates the London Inter-bank Offered Rate, or LIBOR, announced that it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee, or ARRC, in the U.S. has proposed that the Secured Overnight Financing Rate, or SOFR, is the rate that represents best practice as the alternative to the U.S. dollar, or USD, LIBOR for use in derivatives and other financial contracts that are currently indexed to USD LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD LIBOR and organizations are currently working on industry-wide and company-specific transition plans as relating to derivatives and cash markets exposed to USD LIBOR. We have certain financial contracts, including the amended credit agreement and our interest rate swaps, that are indexed to USD LIBOR. Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may

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adversely affect interest rates on our current or future indebtedness. Any transition process may involve, among other things, increased volatility or illiquidity in markets for instruments that rely on LIBOR, reductions in the value of certain instruments or the effectiveness of related transactions such as hedges, increased borrowing costs, uncertainty under applicable documentation, or difficult and costly consent processes. ~~We are monitoring this activity and evaluating the related risks, and any such effects of the~~The transition away from LIBOR may result in increased expenses, may impair our ability to refinance our indebtedness or hedge our exposure to floating rate instruments, or may result in difficulties, complications or delays in connection with future financing efforts, any of which could adversely affect our financial condition and results of operations.

Risks Related to Our Ordinary Shares

The market price of our ordinary shares has been volatile and ~~may~~is likely to continue to be volatile in the future, and the value of your investment could decline significantly.

The market price for our ordinary shares has fluctuated significantly from time to time, for example, varying between a high of $169.82 on October 1, 2018 and a low of $113.52 on December 24, 2018 during the period from September 30, 2018 through September 30, 2019. The market price of our ordinary shares is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market, industry and other factors, including the risk factors described above. The stock market in general, including the market for life sciences companies, has experienced extreme price and trading volume fluctuations that have often been unrelated or disproportionate to the operating performance of those ~~companies. In particular, negative publicity regarding pricing and price increases by pharmaceutical~~ companies, including recently in connection with the evolving effects of the COVID-19 pandemic, which has ~~negatively impacted, and may continue to negatively impact,~~resulted in decreased market prices, notwithstanding the ~~market for life sciences companies. These broad market and industry factors have harmed, and~~lack of a fundamental change in the ~~future~~underlying business models of those companies. Worsening economic conditions and other adverse effects or developments relating to the evolving effects of the COVID-19 pandemic may ~~seriously harm,~~negatively affect the market price of our ordinary shares, regardless of our actual operating performance. The market price for our ordinary shares is likely to continue to be volatile, particularly due to the evolving effects of the COVID-19 pandemic, and subject to significant price and volume fluctuations in response to market, industry and other factors, including the risk factors described in this “Risk Factors” section.

Our share price may be dependent upon the valuations and recommendations of the analysts who cover our business. If our results do not meet these analysts’ forecasts, the expectations of our investors or the financial guidance we provide to investors in any period, the market price of our ordinary shares could decline. Our ability to meet analysts’ forecasts, investors’ expectations and our financial guidance is substantially dependent on our ability to maintain or increase sales of our marketed products. The risks and uncertainties associated with our ability to maintain or increase sales of our products include those discussed elsewhere in these risk factors. In the past, following periods of volatility in the market or significant price decline, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.

In addition, the market price of our ordinary shares may decline if the effects of our strategic transactions ~~including our acquisition of Cavion and/or potential future acquisitions,~~ on our financial or operating results are not consistent with the expectations of financial analysts or investors. The market price of our ordinary shares could also be affected by possible sales of our ordinary shares by holders of ~~the Exchangeable Senior Notes~~our exchangeable senior notes who may view ~~the Exchangeable Senior Notes~~our exchangeable senior notes as a more attractive means of equity participation in our company and by hedging or arbitrage trading activity involving our ordinary shares by the holders of ~~the Exchangeable Senior Notes.~~our exchangeable senior notes.

We are subject to Irish law, which differs from the laws in effect in the U.S. and may afford less protection to holders of our securities.

It may not be possible to enforce court judgments obtained in the U.S. against us in Ireland based on the civil liability provisions of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liability

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provisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. We have been advised that the U.S. currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically be enforceable in Ireland.

As an Irish company, we are governed by the Irish Companies Act 2014, which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions, mergers, amalgamations and acquisitions, takeovers and shareholder lawsuits. ~~Likewise, the~~The duties of directors and officers of an Irish company are generally owed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly, holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a U.S. jurisdiction.

Our articles of association, Irish law and the indentures governing ~~the Exchangeable Senior Notes~~our exchangeable senior notes contain provisions that could delay or prevent a takeover of us by a third party.

Our articles of association could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our ordinary shares. ~~For example, our articles of association:~~

~~impose advance notice requirements for shareholder proposals and nominations of directors to be considered at shareholder meetings;~~

~~stagger the terms of our board of directors into three classes;~~

~~require the approval of a supermajority of the voting power of the shares of our share capital entitled to vote generally at a meeting of shareholders to amend our articles of association; and~~

~~permit our board of directors to issue one or more series of preferred shares with rights and preferences, as our shareholders may determine by ordinary resolution.~~

In addition to our articles of association, several mandatory provisions of Irish law could prevent or delay an acquisition of us. For example, Irish law does not permit shareholders of an Irish public limited company to take action by written consent with less than unanimous consent, and the shareholder approval requirements for certain types of transactions differ from those in the U.S., and in some cases are greater, under Irish law. We are also subject to various provisions of Irish law relating to mandatory bids, voluntary bids, requirements to make a cash offer and minimum price requirements, as well as substantial acquisition rules and rules requiring the disclosure of interests in our shares in certain circumstances. Furthermore,

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the indentures governing ~~the Exchangeable Senior Notes~~our exchangeable senior notes require us to repurchase ~~the Exchangeable Senior Notes~~our exchangeable senior notes for cash if we undergo certain fundamental changes and, in certain circumstances, to increase the exchange rate for a holder of ~~2021 Notes or 2024 Notes.~~our exchangeable senior notes. A takeover of us may trigger the requirement that we purchase ~~the Exchangeable Senior Notes~~our exchangeable senior notes and/or increase the exchange rate, which could make it more costly for a potential acquiror to engage in a business combination transaction with us.

These provisions, whether alone or together, may discourage potential takeover attempts, discourage bids for our ordinary shares at a premium over the market price or adversely affect the market price of, and the voting and other rights of the holders of, our ordinary shares. These provisions, whether alone or together, could also discourage proxy contests and make it more difficult for our shareholders to elect directors other than the candidates nominated by our board.

Future sales and issuances of our ordinary shares, securities convertible into our ordinary shares or rights to purchase ordinary shares or convertible securities could result in additional dilution of the percentage ownership of our shareholders and could cause our share price to decline.

We expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations or for general corporate purposes. To the extent we raise additional capital by issuing equity securities or securities convertible into or exchangeable for ordinary shares, our shareholders may experience substantial dilution. We may sell ordinary shares, and we may sell convertible or exchangeable securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell such ordinary shares, convertible or exchangeable securities or other equity securities in subsequent transactions, existing shareholders may be materially diluted.

We have never declared or paid dividends on our capital stock and we do not anticipate paying dividends in the foreseeable future.

Other than funds we have allocated for the purposes of supporting our share repurchase program, we anticipate that we will retain all earnings, if any, to support our operations and our proprietary drug development programs, acquire or in-license additional products and product candidates, and pursue other opportunities. If we propose to pay dividends in the future, we mustWe do ~~so in accordance with Irish law, which provides that distributions including dividend payments, share repurchases and redemptions be funded from “distributable reserves.” In addition, our ability~~not currently plan to pay cash dividends ~~on or repurchase our ordinary shares is restricted under~~in the ~~terms of the amended credit agreement.~~foreseeable future. Any future determination as to the payment of dividends will, subject to Irish legal requirements, be at the sole discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, compliance with the terms of the amended credit agreement and other factors our board of directors deems relevant. Accordingly, holders of our ordinary shares must rely on increases in the trading price of their shares for returns on their investment in the foreseeable future. In addition, in the event that we pay a dividend on our ordinary shares, in certain circumstances, as an Irish tax resident company, some shareholders may be subject to withholding tax, which could adversely affect the price of our ordinary shares.

~~Table of Contents~~

~~A transfer of our ordinary shares may be subject to Irish stamp duty.~~

In certain circumstances, the transfer of shares in an Irish incorporated company will be subject to Irish stamp duty, which is a legal obligation of the buyer. This duty is currently charged at the rate of 1.0% of the price paid or the market value of the shares acquired, if higher. Because our ordinary shares are traded on a recognized stock exchange in the U.S., an exemption from this stamp duty is available in respect of transfers by shareholders who hold our ordinary shares beneficially through brokers which in turn hold those shares through the Depository Trust Company, or DTC, to holders who also hold through DTC. However, a transfer by or to a record holder who holds our ordinary shares directly in his, her or its own name could be subject to this stamp duty. We, in our absolute discretion and insofar as the Irish Companies Act 2014 or any other applicable law permits, may, or may provide that a subsidiary of ours will, pay Irish stamp duty arising on a transfer of our ordinary shares on behalf of the transferee of such ordinary shares. If stamp duty resulting from the transfer of our ordinary shares which would otherwise be payable by the transferee is paid by us or any of our subsidiaries on behalf of the transferee, then in those circumstances, we will, on our behalf or on behalf of our subsidiary (as the case may be), be entitled to (i) seek reimbursement of the stamp duty from the transferee, (ii) set-off the stamp duty against any dividends payable to the transferee of those ordinary shares and (iii) claim a first and permanent lien on the ordinary shares on which stamp duty has been paid by us or our subsidiary for the amount of stamp duty paid. Our lien shall extend to all dividends paid on those ordinary shares.

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Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table summarizes purchases of our ordinary shares made by or on behalf of us or any of our “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during each fiscal month during the three-month period ended ~~September~~June 30, ~~2019:~~2020:

Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (4)
July 1 - July 31, 2019 46,900
$ 138.13
46,900
$ 201,567,632
August 1 - August 31, 2019 53,500
$ 134.94
53,500
$ 194,349,529
September 1 - September 30, 2019 48,670
$ 129.43
48,670
$ 188,051,191
Total 149,070
$ 134.14
149,070



	Total Number of Shares Purchased (1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (4)
April 1 - April 30, 2020	52,500	$	105.66	52,500	$	433,156,902
May 1 - May 31, 2020	17,500	$	110.72	17,500	$	431,219,240
June 1 - June 30, 2020	—	$	—	—	$	431,219,240
Total	70,000	$	—	70,000

_________________________


(1)	This ~~column includes ordinary shares that we reacquired in satisfaction of the exercise price of employee stock options upon exercise, but~~table does not include ordinary shares that we withheld in order to satisfy minimum tax withholding requirements in connection with the vesting and release of restricted stock units.


(2)	Average price paid per ordinary share includes brokerage commissions.

(3)

The ordinary shares reported in this column above were purchased pursuant to our publicly announced share repurchase program. In November 2016, we announced that our board of directors authorized the use of up to $300 million to repurchase our ordinary shares. In November ~~and~~2018, December 2018, and October 2019, our board of directors increased the existing share repurchase program authorization by $320.0 million, $400.0 million, and ~~$400.0~~$500.0 million respectively thereby increasing the total amount authorized for repurchase to ~~$1.02~~$1.5 billion. In October 2019, our board of directors authorized the additional repurchase of shares having an aggregate purchase price of up to $500.0 million, exclusive of any brokerage commissions. This authorization has no expiration date.

(4)

The dollar amount shown represents, as of the end of each fiscal month, the approximate dollar value of ordinary shares that may yet be purchased under our publicly announced share repurchase program, exclusive of any brokerage commissions. 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 our credit agreement, corporate and regulatory requirements and market conditions, and may be modified, suspended or otherwise discontinued at any time without prior notice.

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Item 5.	Other Information

~~Departure~~Results of ~~Directors or Certain Officers; Election~~Matters Presented at the 2020 Annual General Meeting of ~~Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers~~Shareholders

On ~~October~~July 30, ~~2019, 2019, Michael P. Miller,~~2020, we held our ~~Executive Vice President, U.S. Commercial, notified us~~2020 annual general meeting of ~~his decision to retire from his role as Executive Vice President, U.S. Commercial, effective March 31, 2020, or such other date as may be mutually agreed,~~shareholders, or the ~~Effective Date.~~

~~On November 2, 2019, Mr. Miller~~annual meeting, at our corporate headquarters in Dublin, Ireland. At the annual meeting, our shareholders voted on three proposals, each of which is described in more detail in our definitive proxy statement on Schedule 14A as filed with the U.S. Securities and Jazz Pharmaceuticals, Inc. entered into a transition and termination agreement, or the Termination Agreement, in connection with Mr. Miller’s retirement from his role as Executive Vice President, U.S. Commercial with us. Pursuant to the Termination Agreement, Mr. Miller will continue in his position as Executive Vice President, U.S. Commercial through the Effective Date, and then immediately thereafter, move into a project-based role untilExchange Commission on June ~~30,~~12, 2020, or the Termination Date, as a non-executive, full-time employee with the title of Executive Vice President, Special Projects, with full-time base salary and benefits, including the continued vesting of existing equity awards. In addition, subject to full compliance with the termsProxy Statement. The results of the ~~Termination Agreement, Mr. Miller will receive: (i)~~matters presented at the annual meeting, based on the presence in person or by proxy of holders of 48,172,091 of the 55,346,861 ordinary shares entitled to vote, are described below.

Proposal 1

Proposal 1 was to elect by separate resolutions each of the four nominees for director named below to hold office until our 2023 annual general meeting of shareholders. Each of the four nominees for director was elected as follows:



Director Nominees	For	Against	Abstain	Broker Non-Votes
Bruce C. Cozadd	41,147,508	4,233,454	343,787	2,447,342
Heather Ann McSharry	43,716,632	1,988,273	19,844	2,447,342
Anne O’Riordan	45,123,421	582,111	19,217	2,447,342
Rick E Winningham	43,477,704	2,221,356	25,689	2,447,342

Proposal 2

Proposal 2 was to ratify, on a ~~cash payment equal~~non-binding advisory basis, the appointment of KPMG, Dublin as the independent auditors of the company for the fiscal year ending December 31, 2020 and to ~~six months’ of his base salary to be paid~~authorize, in a ~~lump sum shortly following~~binding vote, the ~~Termination Date; (ii) full payment~~board of ~~his monthly COBRA premiums for a period~~directors, acting through the audit committee, to determine the auditors’ remuneration. This proposal was approved as follows:

Proposal 3

Proposal 3 was to approve, on an advisory basis, the compensation of ~~six months, including for his enrolled dependents;~~our named executive officers as disclosed in the Proxy Statement. This proposal was approved as follows:

Proposal 4

Proposal 4 was to approve an amendment and ~~(iii) a cash payment equal to his at target bonus,~~restatement of our Amended and Restated 2007 Non-Employee Directors Stock Award Plan, as ~~prorated for~~disclosed in the ~~period of time that Mr. Miller serves~~Proxy Statement. This proposal was approved as Executive Vice President, U.S. Commercial during fiscal year 2020, to be paid in a lump sum shortly following the Termination Date. Mr. Miller’s outstanding equity awards will be treated in accordance with their existing terms. The Termination Agreement contains customary terms including a release of claims by Mr. Miller.follows:

~~The foregoing description~~Proposal 5

Proposal 5 was to approve a capital reduction and creation of distributable reserves under Irish Law, as disclosed in the ~~terms of the Termination Agreement does not purport to be complete and is qualified in its entirety by reference to the Termination Agreement, which is filed~~Proxy Statement. This proposal was approved as ~~an exhibit to this Quarterly Report on Form 10-Q.~~follows:

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Item 6.	Exhibits



Exhibit Number	Description of Document
2.1	Agreement and Plan of Merger and Reorganization, dated as of September 19, 2011, by and among Azur Pharma Limited (now Jazz Pharmaceuticals plc), Jaguar Merger Sub Inc., Jazz Pharmaceuticals, Inc. and Seamus Mulligan, solely in his capacity as the Indemnitors’ Representative (incorporated herein by reference to Exhibit 2.1 in Jazz Pharmaceuticals, Inc.’s Current Report on Form 8-K (File No. 001-33500) filed with the SEC on September 19, 2011).
2.2	Letter Agreement, dated as of January 17, 2012, by and among Jazz Pharmaceuticals plc, Jaguar Merger Sub Inc., Jazz Pharmaceuticals, Inc. and Seamus Mulligan, solely in his capacity as the Indemnitors’ Representative (incorporated by reference to Exhibit 2.2 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on January 18, 2012).
2.3	Agreement and Plan of Merger, dated as of April 26, 2012, by and among Jazz Pharmaceuticals plc, Jewel Merger Sub Inc., EUSA Pharma Inc., and Essex Woodlands Health Ventures, Inc., Mayflower L.P., and Bryan Morton, in their capacity as the representatives of the equity holders of EUSA Pharma Inc. (incorporated herein by reference to Exhibit 2.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on April 27, 2012).
2.4	Assignment, dated as of June 11, 2012, by and among Jazz Pharmaceuticals plc and Jazz Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 2.1B in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on June 12, 2012).
2.5	Tender Offer Agreement, dated December 19, 2013, by and among Jazz Pharmaceuticals Public Limited Company, Jazz Pharmaceuticals Italy S.r.l. and Gentium S.p.A. (incorporated herein by reference to Exhibit 2.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K/A (File No. 001-33500), as filed with the SEC on December 20, 2013).
2.6†	Asset Purchase Agreement, dated January 13, 2014, by and among Jazz Pharmaceuticals International III Limited, Aerial BioPharma, LLC and Jazz Pharmaceuticals plc (incorporated herein by reference to Exhibit 2.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on January 13, 2014).
2.7†	Assignment Agreement, dated July 1, 2014, by and among Jazz Pharmaceuticals International II Limited, Sigma-Tau Pharmaceuticals, Inc., Jazz Pharmaceuticals plc and Gentium S.p.A. (incorporated herein by reference to Exhibit 2.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on August 5, 2014).

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2.8	Amended and Restated Agreement for the Acquisition of the Topaz Portfolio Business of Jazz Pharmaceuticals plc, dated March 20, 2015, between Jazz Pharmaceuticals plc and Essex Bidco Limited (incorporated herein by reference to Exhibit 2.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on March 23, 2015).
2.9	Agreement and Plan of Merger, dated as of May 27, 2016, by and among Jazz Pharmaceuticals plc, Plex Merger Sub, Inc., and Celator Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 2.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on May 31, 2016).
3.1	Amended and Restated Memorandum and Articles of Association of Jazz Pharmaceuticals plc, as amended on August 4, 2016 (incorporated herein by reference to Exhibit 3.1 in Jazz Pharmaceuticals plc’s Quarterly Report on Form 10-Q (File No. 001-33500) for the period ended June 30, 2016, as filed with the SEC on August 9, 2016).
4.1	Reference is made to Exhibit 3.1.
4.2A	Indenture, dated as of August 13, 2014, by and among Jazz Pharmaceuticals plc, Jazz Investments I Limited and U.S. Bank National Association (incorporated herein by reference to Exhibit 4.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on August 13, 2014).
4.2B	Form of 1.875% Exchangeable Senior Note due 2021 (incorporated herein by reference to Exhibit 4.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-33500), as filed with the SEC on August 13, 2014).
4.3A	Indenture, dated as of August 23, 2017, among Jazz Pharmaceuticals Public Limited Company, Jazz Investments I Limited and U.S. Bank National Association (incorporated herein by reference to Exhibit 4.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-033500), as filed with the SEC on August 23, 2017).
4.3B	Form of 1.50% Exchangeable Senior Note due 2024 (incorporated herein by reference to Exhibit 4.2 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-033500), as filed with the SEC on August 23, 2017).

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~~10.1+~~

4.4A	~~Employment Agreement,~~Indenture, dated as of ~~May 16, 2012 by and between Patricia Carr and~~June 11, 2020 among Jazz Pharmaceuticals ~~plc.~~Public Limited Company, Jazz Investments I Limited and U.S. Bank National Association (incorporated herein by reference to Exhibit 4.1 in Jazz Pharmaceuticals plc’s Current Report on Form 8-K (File No. 001-033500), as filed with the SEC on June 11, 2020).
~~10.2+~~4.4B	~~Change~~Form of 2.000% Exchangeable Senior Note due 2026 (incorporated herein by reference to Exhibit 4.2 in ~~Control Severance Terms, dated as of May 15, 2016, by and between~~ Jazz Pharmaceuticals ~~Ireland Ltd. and Patricia Carr.~~plc’s Current Report on Form 8-K (File No. 001-033500), as filed with the SEC on June 11, 2020).
~~10.3+~~	~~Change in Control Stock Award Acceleration Agreement, dated as of May 15, 2016 by and between Jazz Pharmaceuticals plc and Patricia Carr.~~
~~10.4+~~10.1+	Offer Letter, dated as of ~~July 5, 2019~~May 2, 2020, by and between Jazz Pharmaceuticals, Inc. and ~~Neena M. Patil.~~Kim Sablich.
~~10.5+~~10.2†	~~Amended and Restated Executive Change in Control and Severance Benefit Plan,~~Pharmacy Master Services Agreement, dated as of July ~~31, 2019.~~
~~10.6+~~	~~Transition and Termination Agreement, dated as of November 2, 2019,~~1, 2020, by and between Jazz Pharmaceuticals, Inc. and ~~Mike Miller.~~Express Scripts Specialty Distribution Services, Inc.
10.3+	Amended and Restated 2007 Non-Employee Directors Stock Award Plan (approved July 30, 2020).
31.1	Certification of ~~Principal~~Chief Executive Officer pursuant to Rules 13a-14(a) and ~~Interim Principal~~15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1*	~~Certification~~Certifications of ~~Principal~~Chief Executive Officer and ~~Interim Principal~~Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

__________________


+	Indicates management contract or compensatory plan.


†	Confidential treatment has been granted for portions of this exhibit. Omitted portions have been filed separately with the SEC.


*	The certification attached as Exhibit 32.1 accompanies this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~November 5, 2019~~August 4, 2020

JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY

(Registrant)

/s/ Bruce C. Cozadd

Bruce C. Cozadd

Chairman and Chief Executive Officer and Director

(~~Duly Authorized Officer,~~ Principal Executive ~~Officer~~Officer)

/s/ Renée Galá

Renée Galá

Executive Vice President and ~~Interim~~ Chief Financial Officer

(Principal Financial Officer)

/s/ Patricia Carr

Patricia Carr

Vice President, Finance

(Principal Accounting Officer)

8376



	Balance at December 31, 2018		Transition Adjustments			Balance at January 1, 2019
Assets:
Property, plant and equipment, net	$	200,358	$	(95,397	)	$	104,961
Operating lease assets	—		149,442			149,442
Liabilities:
Accrued liabilities	264,887		8,165			273,052
Operating lease liabilities, less current portion	—		153,158			153,158
Deferred tax liabilities, net	309,097		1,489			310,586
Other non-current liabilities	218,879		(113,615		)	105,264
Shareholders' Equity:
Retained earnings	841,050		4,848			845,898



Consideration
Upfront payment for acquisition of Cavion's outstanding shares	$	52,500
Cash acquired	397
Working capital adjustment	(255		)
Transaction costs	2,829
Total consideration	$	55,471

Assets Acquired and Liabilities Assumed
Cash	$	397
In-process research and development	48,275
Deferred tax assets	7,995
Other assets and liabilities	(1,196		)
Total net assets acquired	$	55,471



	Contract Liabilities
Balance as of December 31, 2018	$	14,995
Amount recognized within royalties and contract revenues	(4,234		)
Balance as of September 30, 2019	$	10,761

Broker Non-Votes