Jazz Pharmaceuticals(JAZZ) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's discussion, market risk, and controls Defined Terms and Products This section provides a comprehensive glossary of defined terms and product names used throughout the Form 10-Q, covering financial, regulatory, disease-state, and company-specific terminology, as well as brand names of the company's products and product candidates Defined Terms This subsection clarifies various financial, legal, regulatory, and medical terms essential for understanding the Form 10-Q - The report defines various financial instruments (e.g., 2024 Notes, 2026 Notes, 2030 Notes), legal proceedings (e.g., AFL Plan Lawsuit, BCBS Lawsuit, Chimerix Shareholder Litigation), regulatory bodies (e.g., FDA, SEC, EC), and medical terms (e.g., ALL, AML, EDS, IH, SCLC, TSC) to ensure clarity and consistency[9][10][11][12] Products This subsection lists key product brand names and their generic names, providing a quick reference for the company's portfolio - Key product brand names and their associated generic names include CombiPlex, Defitelio (defibrotide sodium), dordaviprone (ONC201), Epidiolex (cannabidiol), Rylaze (asparaginase erwinia chrysanthemi (recombinant)-rywn), Sativex (nabiximols), Suvecaltamide (JZP385), Vyxeos (daunorubicin and cytarabine), Xyrem (sodium oxybate), Xywav (calcium, magnesium, potassium, and sodium oxybates), Zepzelca (lurbinectedin), and Ziihera (zanidatamab-hrii)[13][14][15] Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Jazz Pharmaceuticals plc, including the balance sheets, statements of income (loss), comprehensive income (loss), shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, recent acquisitions, debt, and legal proceedings Condensed Consolidated Balance Sheets This subsection provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $1,189,880 | $2,412,864 | | Investments | $480,000 | $580,000 | | Total current assets | $3,350,433 | $4,629,028 | | Total assets | $10,944,141 | $12,012,257 | | LIABILITIES & EQUITY | | | | Current portion of long-term debt | $1,028,478 | $31,000 | | Long-term debt, less current portion | $4,335,616 | $6,077,640 | | Total current liabilities | $2,071,205 | $1,038,573 | | Total shareholders' equity | $3,706,359 | $4,093,756 | | Total liabilities and shareholders' equity | $10,944,141 | $12,012,257 | - Total assets decreased by approximately $1.07 billion from December 31, 2024, to June 30, 2025, primarily driven by a significant reduction in cash and cash equivalents[17] - Current portion of long-term debt increased substantially from $31.0 million to $1.03 billion, indicating a significant amount of debt becoming due within the next year[17] Condensed Consolidated Statements of Income (Loss) This subsection outlines the company's financial performance, reporting revenues, expenses, and net income or loss Condensed Consolidated Statements of Income (Loss) (Three and Six Months Ended June 30, 2025 vs. 2024) | Metric (in thousands, except per share) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenues | $1,045,712 | $1,023,825 | $1,943,553 | $1,925,808 | | Total operating expenses | $1,732,104 | $824,382 | $2,685,837 | $1,660,158 | | Income (loss) from operations | $(686,392) | $199,443 | $(742,284) | $265,650 | | Net income (loss) | $(718,470) | $168,568 | $(811,011) | $153,950 | | Basic EPS | $(11.74) | $2.68 | $(13.28) | $2.45 | | Diluted EPS | $(11.74) | $2.49 | $(13.28) | $2.35 | - The company reported a significant net loss of $718.47 million for the three months ended June 30, 2025, and $811.01 million for the six months ended June 30, 2025, a substantial decline from net income in the prior year periods. This was primarily driven by a large increase in 'Acquired in-process research and development' expense of $905.36 million in 2025[20] Condensed Consolidated Statements of Comprehensive Income (Loss) This subsection presents total comprehensive income or loss, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (Loss) (Three and Six Months Ended June 30, 2025 vs. 2024) | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $(718,470) | $168,568 | $(811,011) | $153,950 | | Other comprehensive income (loss) | $299,842 | $(5,833) | $461,899 | $(46,080) | | Total comprehensive income (loss) | $(418,628) | $162,735 | $(349,112) | $107,870 | - Total comprehensive loss for the six months ended June 30, 2025, was $349.11 million, a significant decrease from a comprehensive income of $107.87 million in the prior year, primarily due to the net loss, partially offset by positive foreign currency translation adjustments[22] Condensed Consolidated Statements of Shareholders' Equity This subsection details changes in the company's equity, including net income, share repurchases, and other comprehensive income Condensed Consolidated Statements of Shareholders' Equity (June 30, 2025 vs. December 31, 2024) | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Total Shareholders' Equity | $4,093,756 | $3,706,359 | | Net Loss | N/A | $(718,470) | | Shares Repurchased | N/A | $(125,023) | | Other Comprehensive Income | N/A | $299,842 | - Total shareholders' equity decreased from $4.09 billion at December 31, 2024, to $3.71 billion at June 30, 2025, primarily due to the net loss incurred and share repurchases, partially offset by other comprehensive income[24][25] Condensed Consolidated Statements of Cash Flows This subsection reports cash generated and used by the company across operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, 2025 vs. 2024) | Metric (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $518,639 | $598,581 | | Net cash used in investing activities | $(809,951) | $(528,995) | | Net cash used in financing activities | $(937,991) | $(217,637) | | Net decrease in cash and cash equivalents | $(1,222,984) | $(150,508) | | Cash and cash equivalents, at end of period | $1,189,880 | $1,355,802 | - Net cash provided by operating activities decreased by $79.9 million, primarily due to Xyrem antitrust litigation settlements of $172.0 million in 2025[28][231] - Net cash used in investing activities increased by $281.0 million, largely due to the $858.1 million cash outflow for the Chimerix Acquisition and a $25.0 million milestone payment to Zymeworks[28][232][235] - Net cash used in financing activities increased by $720.4 million, driven by a $750.0 million voluntary repayment on the Tranche B-2 Dollar Term Loan and increased employee withholding taxes related to share-based awards[28][232][235] Notes to Condensed Consolidated Financial Statements This subsection provides detailed explanations and supplementary information for financial statements, covering policies, debt, and contingencies 1. The Company and Summary of Significant Accounting Policies This note describes Jazz Pharmaceuticals' business, focus areas, key products, and significant accounting principles - Jazz Pharmaceuticals is a global biopharmaceutical company focused on developing life-changing medicines for serious diseases, with a diverse portfolio in sleep disorders, epilepsy, and cancer treatments[30] - Key marketed products include Xywav (narcolepsy, IH), Epidiolex/Epidyolex (epilepsy), Rylaze/Enrylaze (ALL/LBL), Zepzelca (SCLC), and Ziihera (HER2-positive BTC)[36] - The company operates in one business segment: identification, development, and commercialization of pharmaceutical products addressing unmet medical needs[40] - Significant risks include dependence on oxybate revenues, competition from generic oxybate products (Lumryz, AG versions), challenges in commercializing Epidiolex/Epidyolex, and risks associated with R&D, regulatory approvals, and product pricing scrutiny[43][44][46] 2. Asset Acquisition This note details the Chimerix acquisition, including consideration paid and allocation of acquired assets and liabilities - On April 21, 2025, Jazz Pharmaceuticals acquired Chimerix for a total cash consideration of $944.2 million, funded by cash and cash equivalents. The acquisition was accounted for as an asset acquisition[53] Chimerix Acquisition Consideration and Net Assets Acquired (in thousands) | Item | Amount | | :------------------------------------ | :------- | | Cash consideration for common stock | $802,023 | | Cash consideration for equity awards | $142,131 | | Total cash consideration paid | $944,154 | | Transaction costs | $13,237 | | Total consideration | $957,391 | | Cash acquired | $99,338 | | In-process research and development | $905,362 | | Accrued liabilities | $(53,066) | | Other assets and liabilities | $5,757 | | Total net assets acquired | $957,391 | - The value attributed to in-process research and development (dordaviprone) was expensed as it had no alternative future use[54] 3. Cash and Available-for-Sale Securities This note provides a breakdown of cash, cash equivalents, and investment holdings, along with related interest income Cash, Cash Equivalents and Investments (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Cash | $672,211 | $948,894 | | Time deposits | $480,000 | $790,000 | | Money market funds | $517,669 | $1,253,970 | | Totals | $1,669,880 | $2,992,864 | | Cash and cash equivalents | $1,189,880 | $2,412,864 | | Investments | $480,000 | $580,000 | - Total cash, cash equivalents, and investments decreased by approximately $1.32 billion from December 31, 2024, to June 30, 2025[55][56] Interest Income from Available-for-Sale Securities (in millions) | Period | 2025 (3 Months) | 2024 (3 Months) | 2025 (6 Months) | 2024 (6 Months) | | :-------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Interest income | $19.1 | $25.4 | $46.8 | $48.6 | 4. Fair Value Measurement This note details the fair value of available-for-sale securities, derivative contracts, and certain debt instruments Fair Value of Available-for-Sale Securities and Derivative Contracts (in thousands) | Category (Assets) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------------------ | :------------------------- | :----------------------------- | | Money market funds | $517,669 | $1,253,970 | | Time deposits | $480,000 | $790,000 | | Foreign exchange forward contracts | $9,137 | $2,250 | | Interest rate contracts | $6 | $991 | | Total Assets | $1,006,812 | $2,047,211 | | | | | | Category (Liabilities) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------------------ | :------------------------- | :----------------------------- | | Foreign exchange forward contracts | $2,801 | $10,198 | | Interest rate contracts | $48 | $0 | | Total Liabilities | $2,849 | $10,198 | - The estimated fair values of the 2026 Notes, 2030 Notes, and Secured Notes as of June 30, 2025, were $1.0 billion, $1.1 billion, and $1.4 billion, respectively. The Tranche B-2 Dollar Term Loans had an estimated fair value of $1.9 billion[60] 5. Derivative Instruments and Hedging Activities This note explains the company's use of foreign exchange forward contracts and interest rate swaps to manage market risks - The company uses foreign exchange forward contracts to manage foreign currency transaction risk and interest rate swap agreements to manage interest rate risk on variable rate debt, with all derivatives used for risk management, not speculation[61][62] Foreign Exchange Forward Contracts Gain (Loss) (in thousands) | Period | 2025 (3 Months) | 2024 (3 Months) | 2025 (6 Months) | 2024 (6 Months) | | :-------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Gain (loss) recognized | $12,393 | $(825) | $21,000 | $(4,911) | - As of June 30, 2025, interest rate swap agreements had a notional amount of $500.0 million, fixing a portion of term loan interest at 3.9086% plus borrowing spread until April 2026[63] 6. Inventories This note provides a breakdown of inventory components and the impact of acquisition-related fair value adjustments Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Raw materials | $39,566 | $20,161 | | Work in process | $300,459 | $311,752 | | Finished goods | $164,964 | $148,532 | | Total inventories | $504,989 | $480,445 | - Total inventories increased by $24.5 million from December 31, 2024, to June 30, 2025. Inventories included $138.0 million and $191.2 million related to the GW acquisition's fair value step-up as of June 30, 2025, and December 31, 2024, respectively[66] 7. Goodwill and Intangible Assets This note details the company's goodwill and finite-lived intangible assets, including foreign exchange changes and estimated amortization Goodwill (in thousands) | Metric | Amount | | :-------------------- | :------------ | | Balance at Dec 31, 2024 | $1,716,323 | | Foreign exchange | $127,651 | | Balance at Jun 30, 2025 | $1,843,974 | Intangible Assets, Net (in thousands) | Category (Net Book Value) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Acquired developed technologies | $4,768,987 | $4,755,695 | | Manufacturing contracts | $0 | $0 | | Trademarks | $0 | $0 | | Total finite-lived intangible assets | $4,768,987 | $4,755,695 | - The increase in goodwill and intangible assets is primarily due to positive foreign currency translation adjustments, reflecting the strengthening of sterling against the U.S. dollar[67] Estimated Future Amortization Expense (in thousands) | Year Ending December 31, | Estimated Amortization Expense | | :----------------------- | :----------------------------- | | 2025 (remainder) | $340,354 | | 2026 | $678,197 | | 2027 | $669,802 | | 2028 | $646,640 | | 2029 | $644,906 | | Thereafter | $1,789,088 | | Total | $4,768,987 | 8. Certain Balance Sheet Items This note provides detailed breakdowns of property, plant, equipment, and accrued liabilities Property, Plant and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Manufacturing equipment and machinery | $96,286 | $87,451 | | Land and buildings | $73,772 | $71,902 | | Computer software | $58,399 | $42,635 | | Leasehold improvements | $56,119 | $70,201 | | Construction-in-progress | $36,334 | $34,493 | | Computer equipment | $21,487 | $20,137 | | Furniture and fixtures | $8,902 | $8,551 | | Subtotal | $351,299 | $335,370 | | Less accumulated depreciation and amortization | $(166,324) | $(161,957) | | Property, plant and equipment, net | $184,975 | $173,413 | Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Rebates and other sales deductions | $429,142 | $342,717 | | Employee compensation and benefits | $103,074 | $153,133 | | Clinical trial accruals | $44,557 | $49,962 | | Inventory-related accruals | $41,670 | $25,509 | | Accrued interest | $40,703 | $41,626 | | Accrued royalties | $31,627 | $36,802 | | Sales return reserve | $29,816 | $26,428 | | Consulting and professional services | $24,425 | $26,221 | | Selling and marketing accruals | $23,265 | $26,981 | | Accrued development expenses | $20,613 | $23,099 | | Current portion of lease liabilities | $13,883 | $14,779 | | Accrued construction-in-progress | $7,705 | $10,061 | | Derivative instrument liabilities | $2,849 | $10,198 | | Accrued collaboration expenses | $2,339 | $18,005 | | Accrued milestones | $0 | $27,500 | | Other | $59,143 | $77,926 | | Total accrued liabilities | $874,811 | $910,947 | - Accrued liabilities decreased by $36.1 million, primarily due to decreases in employee compensation and benefits, accrued collaboration expenses, and accrued milestones, partially offset by an increase in rebates and other sales deductions[70] 9. Debt This note details the company's debt instruments, including principal balances, maturities, and recent repayments Indebtedness (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | 2026 Notes, net | $997,478 | $996,253 | | 2030 Notes, net | $982,265 | $980,865 | | Secured Notes | $1,485,338 | $1,483,841 | | Term Loan | $1,899,013 | $2,647,681 | | Total debt | $5,364,094 | $6,108,640 | | Less current portion | $1,028,478 | $31,000 | | Total long-term debt | $4,335,616 | $6,077,640 | - Total debt decreased by $744.5 million, primarily due to a voluntary repayment of $750.0 million on the Tranche B-2 Dollar Term Loan in January 2025[71][232] - The 2026 Notes are included in the current portion of long-term debt as they mature in June 2026, significantly increasing current liabilities[72] Scheduled Long-Term Debt Maturities (in thousands) | Year Ending December 31, | Scheduled Long-Term Debt Maturities | | :----------------------- | :---------------------------------- | | 2025 (remainder) | $15,500 | | 2026 | $1,031,000 | | 2027 | $31,000 | | 2028 | $1,848,500 | | 2029 | $1,500,000 | | Thereafter | $1,000,000 | | Total | $5,426,000 | 10. Commitments and Contingencies This note outlines the company's legal proceedings, including antitrust, patent infringement, and acquisition-related litigation - The company is involved in various legal proceedings, including Xyrem antitrust litigation, patent infringement suits (Avadel, Xywav, Zepzelca, Defitelio), FDA litigation, a qui tam matter, and Chimerix acquisition litigation[81] - Jazz Pharmaceuticals Ireland Limited entered into a class settlement agreement for $145 million to resolve claims from indirect Xyrem purchasers in the antitrust litigation, which received preliminary court approval[96][97][98] - In the Avadel patent infringement litigation, a jury found Jazz's asserted patents valid and awarded damages for infringement for Avadel's past sales of Lumryz. An injunction was granted, preventing Avadel from marketing Lumryz for new indications and imposing an ongoing royalty for narcolepsy sales[114] - The Chimerix acquisition litigation, alleging omitted material information and misrepresentations in tender offer documents, was dismissed after supplemental disclosures were filed[138][139] 11. Shareholders' Equity This note details changes in shareholders' equity, including share repurchase programs and accumulated other comprehensive loss - A new share repurchase program was authorized in July 2024 for $500.0 million. As of June 30, 2025, $225.0 million remained authorized[140] Share Repurchases (in millions) | Period | 2025 (3 Months) | 2024 (3 Months) | 2025 (6 Months) | 2024 (6 Months) | | :-------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Amount spent | $125.0 | $161.4 | $125.0 | $161.4 | | Shares repurchased (millions) | 1.1 | 1.5 | 1.1 | 1.5 | | Average price per share | $109.52 | $110.75 | $109.52 | $110.75 | Accumulated Other Comprehensive Loss (in thousands) | Category | December 31, 2024 | June 30, 2025 | | :------------------------ | :---------------- | :------------ | | Net Unrealized Gain (Loss) From Hedging Activities | $740 | $(47) | | Foreign Currency Translation Adjustments | $(948,407) | $(485,721) | | Total Accumulated Other Comprehensive Loss | $(947,667) | $(485,768) | - Accumulated other comprehensive loss decreased from $(947.7) million to $(485.8) million, primarily due to positive foreign currency translation adjustments from the strengthening of the sterling and euro against the U.S. dollar[141][142] 12. Net Income (Loss) per Ordinary Share This note presents basic and diluted net income or loss per ordinary share, along with weighted-average share counts Net Income (Loss) per Ordinary Share (in thousands, except per share amounts) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $(718,470) | $168,568 | $(811,011) | $153,950 | | Basic EPS | $(11.74) | $2.68 | $(13.28) | $2.45 | | Diluted EPS | $(11.74) | $2.49 | $(13.28) | $2.35 | | Weighted-average ordinary shares (basic) | 61,194 | 62,882 | 61,087 | 62,710 | | Weighted-average ordinary shares (diluted) | 61,194 | 69,625 | 61,087 | 69,684 | - The company reported a basic and diluted net loss per ordinary share of $(11.74) and $(13.28) for the three and six months ended June 30, 2025, respectively, a significant decline from positive EPS in the prior year periods[143] - The potential issue of ordinary shares from the 2026 Notes was anti-dilutive for the three and six months ended June 30, 2025, due to the company's election to fix the settlement method to a combination of cash and ordinary shares[144] 13. Revenues This note provides a detailed breakdown of total revenues by product and geographic source, highlighting growth drivers and declines Total Revenues by Product (in thousands) | Product/Category | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | YoY Change (%) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | YoY Change (%) | | :------------------------ | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Xywav | $415,321 | $368,472 | 13% | $760,125 | $683,772 | 11% | | Xyrem | $35,349 | $62,180 | (43)% | $72,590 | $126,412 | (43)% | | Epidiolex/Epidyolex | $251,730 | $247,102 | 2% | $469,467 | $445,818 | 5% | | Total Neuroscience | $707,015 | $684,137 | 3% | $1,312,204 | $1,265,120 | 4% | | Rylaze/Enrylaze | $100,659 | $107,829 | (7)% | $194,892 | $210,579 | (7)% | | Zepzelca | $74,541 | $81,047 | (8)% | $137,574 | $156,147 | (12)% | | Defitelio/defibrotide | $48,106 | $45,421 | 6% | $88,768 | $93,097 | (5)% | | Vyxeos | $44,851 | $43,012 | 4% | $74,395 | $75,035 | (1)% | | Ziihera | $5,991 | $0 | N/A | $7,966 | $0 | N/A | | Total Oncology | $274,148 | $277,309 | (1)% | $503,595 | $534,858 | (6)% | | Product sales, net | $985,571 | $964,144 | 2% | $1,824,989 | $1,806,246 | 1% | | High-sodium oxybate AG royalty revenue | $54,138 | $54,164 | 0% | $103,084 | $104,111 | (1)% | | Other royalty and contract revenues | $6,003 | $5,517 | 9% | $15,480 | $15,451 | 0% | | Total revenues | $1,045,712 | $1,023,825 | 2% | $1,943,553 | $1,925,808 | 1% | - Total revenues increased by 2% and 1% for the three and six months ended June 30, 2025, respectively, driven by Xywav and Epidiolex/Epidyolex sales growth, partially offset by declines in Xyrem, Rylaze/Enrylaze, and Zepzelca[147][208] - Xywav sales increased due to higher sales volumes (14% in Q2, 14% in H1) and a higher selling price, with patient adoption in narcolepsy and IH. Xyrem sales decreased significantly (35% in Q2, 38% in H1) due to high-sodium oxybate competition and Xywav adoption[208] Total Revenues by Geographic Source (in thousands) | Geographic Source | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $936,283 | $924,592 | $1,734,797 | $1,732,806 | | Europe | $82,763 | $82,159 | $165,801 | $153,514 | | All other | $26,666 | $17,074 | $42,955 | $39,488 | | Total revenues | $1,045,712 | $1,023,825 | $1,943,553 | $1,925,808 | 14. Share-Based Compensation This note details the company's share-based compensation expense across various functional categories Share-Based Compensation Expense (in thousands) | Category | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Selling, general and administrative | $40,999 | $35,137 | $82,673 | $75,350 | | Research and development | $20,651 | $17,272 | $41,581 | $36,103 | | Cost of product sales | $2,851 | $4,245 | $7,900 | $6,642 | | Total share-based compensation expense, pre-tax | $64,501 | $56,654 | $132,154 | $118,095 | | Income tax benefit from share-based compensation expense | $(12,259) | $(9,629) | $(21,793) | $(13,028) | | Total share-based compensation expense, net of tax | $52,242 | $47,025 | $110,361 | $105,067 | - Total pre-tax share-based compensation expense increased by $7.8 million (14%) for the three months and $14.1 million (12%) for the six months ended June 30, 2025, compared to the same periods in 2024[149] 15. Income Taxes This note explains the company's income tax benefit and the impact of recent tax law changes, including Pillar Two rules Income Tax Benefit (in millions) | Period | 2025 (3 Months) | 2024 (3 Months) | 2025 (6 Months) | 2024 (6 Months) | | :-------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Income tax benefit | $17.2 | $30.7 | $35.0 | $19.0 | - The income tax benefit for the six months ended June 30, 2025, was $35.0 million, an increase from $19.0 million in the prior year, primarily due to the tax impact of certain Xyrem antitrust litigation settlements[150][222] - Ireland's Pillar Two global minimum tax rules, effective January 1, 2024, require a top-up tax for differences between the Pillar Two effective tax rate and the 15% minimum rate, impacting the company's current tax[153] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Jazz Pharmaceuticals' business, strategic growth drivers, and a detailed analysis of its financial performance for the three and six months ended June 30, 2025, compared to 2024. It covers revenue trends by product, operating expenses, and the company's liquidity and capital resources, highlighting key challenges and risks Overview This subsection introduces Jazz Pharmaceuticals' core business, strategic growth initiatives, and key marketed products - Jazz Pharmaceuticals is a global biopharmaceutical company focused on neuroscience and oncology, aiming to transform patient lives through innovative medicines for serious diseases with unmet needs[156] - The company's growth strategy centers on strong commercial execution, expanding and advancing its R&D pipeline, strategic corporate development (acquisitions/in-licensing), and unlocking value through indication expansion and global market entry[157][158] - Key marketed products include Xywav (narcolepsy, IH), Epidiolex (LGS, DS, TSC), Rylaze (ALL, LBL), Zepzelca (SCLC), and Ziihera (HER2-positive BTC)[160] Neuroscience This subsection highlights the company's leadership in oxybate therapy for sleep disorders and commercial performance of Xywav and Epidiolex - Jazz is a global leader in oxybate therapy for sleep disorders, with Xywav approved for narcolepsy (July 2020) and idiopathic hypersomnia (IH) in adults (August 2021). Xywav has 92% less sodium than Xyrem and is the only approved oxybate without a high sodium warning[161][163][164] - Xywav has Orphan Drug Exclusivity (ODE) for narcolepsy through January 2028 and for IH through August 2028[163][164] - As of Q2 2025, approximately 15,225 patients were taking Xywav (10,600 for narcolepsy, 4,625 for IH), showing strong adoption, particularly a 40% increase in IH patients year-over-year[166][208] - Epidiolex (cannabidiol) was acquired in May 2021 and is approved for seizures associated with LGS, DS, and TSC in patients one year or older in the U.S. and other markets[167] Oncology This subsection details the company's oncology product portfolio, including Rylaze, Zepzelca, Ziihera, Defitelio, and Vyxeos - Rylaze (asparaginase) was approved in June 2021 for ALL/LBL patients hypersensitive to E. coli-derived asparaginase, with an expanded dosing schedule approved in November 2022 and EC marketing authorization in September 2023[169] - Zepzelca (lurbinectedin) is approved for metastatic SCLC. Positive top-line Phase 3 results for Zepzelca in combination with Tecentriq as first-line maintenance therapy were announced in October 2024, with FDA granting Priority Review for the sNDA in June 2025 (PDUFA date: October 7, 2025)[170][177] - Ziihera (zanidatamab-hrii) received accelerated FDA approval in November 2024 for previously treated, unresectable or metastatic HER2-positive BTC, and conditional EC marketing authorization in June 2025[172] - Defitelio is the only approved treatment for veno-occlusive disease (VOD) following HSCT. Vyxeos treats newly-diagnosed t-AML or AML-MRC in adults and pediatric patients[173][174] Research and Development Progress This subsection outlines the company's pipeline advancements in oncology and neuroscience, including clinical trials and acquisitions - Jazz is advancing its R&D pipeline in oncology and neuroscience, including clinical testing of new candidates and expanding indications for existing products, leveraging internal R&D and third-party collaborations[175] - In oncology, zanidatamab (Ziihera) is in multiple Phase 3 trials for HER2-expressing cancers (GEA, BTC, breast cancer). Zepzelca is in a Phase 3 trial for first-line SCLC maintenance therapy[176][177] - The acquisition of Chimerix in April 2025 brought dordaviprone, a novel treatment for H3 K27M-mutant diffuse glioma, with an NDA under FDA Priority Review (PDUFA date: August 18, 2025)[181] - Neuroscience R&D includes a Phase 3 trial of Epidyolex in Japan (did not meet primary endpoint but showed numeric improvements), and early-stage development of JZP324 (extended-release low sodium oxybate) and JZP441 (orexin-2 receptor agonist for sleep disorders)[183][184][185] Challenges, Risks and Trends Related to Our Business This subsection discusses significant risks including competition, pricing pressures, regulatory scrutiny, and global trade issues - Oxybate revenues face significant risks from competition (Avadel's Lumryz, AG versions of high-sodium oxybate) and pricing pressure from third-party payors, potentially impacting Xywav and Xyrem sales[188][190][191][192][193] - Commercial success of Epidiolex/Epidyolex is dependent on market acceptance, adequate reimbursement, and future generic competition, with patent litigation settled for generic versions to launch in the late 2030s[194] - The company's growth strategy relies on successful R&D and strategic acquisitions/in-licensing, with failures in these areas potentially having a material adverse effect[197][198] - Healthcare cost containment, drug pricing scrutiny (e.g., Inflation Reduction Act of 2022, 'most favored nation' pricing proposals), and government investigations into business practices (e.g., Xyrem antitrust litigation) pose significant financial and reputational risks[199][201] - Global trade issues, including tariffs and export regulations, could increase costs, disrupt supply chains (especially for products manufactured in Ireland, UK, Italy, and APIs from China), and reduce product competitiveness[203] Results of Operations This subsection provides a detailed analysis of the company's financial performance, covering revenue, cost of sales, and operating expenses Key Financial Metrics (in thousands, except percentages) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | YoY Change (%) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | YoY Change (%) | | :---------------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Product sales, net | $985,571 | $964,144 | 2% | $1,824,989 | $1,806,246 | 1% | | Royalties and contract revenues | $60,141 | $59,681 | 1% | $118,564 | $119,562 | (1)% | | Cost of product sales | $116,268 | $109,902 | 6% | $220,888 | $205,389 | 8% | | Selling, general and administrative | $358,399 | $338,523 | 6% | $872,412 | $690,235 | 26% | | Research and development | $189,972 | $220,734 | (14)% | $370,624 | $443,581 | (16)% | | Intangible asset amortization | $162,103 | $155,223 | 4% | $316,551 | $310,953 | 2% | | Acquired in-process research and development | $905,362 | $0 | N/A | $905,362 | $10,000 | N/A | | Interest expense, net | $47,363 | $62,023 | (24)% | $101,069 | $128,139 | (21)% | | Income tax benefit | $(17,170) | $(30,653) | (44)% | $(34,982) | $(18,984) | 84% | Total Revenues This subsection analyzes the company's revenue performance, detailing contributions from key products and overall growth trends - Total revenues increased by 2% to $1.05 billion for Q2 2025 and 1% to $1.94 billion for H1 2025, primarily driven by Xywav and Epidiolex/Epidyolex sales growth[207][208] - Xywav sales increased 13% (Q2) and 11% (H1) due to higher sales volumes and selling price, while Xyrem sales decreased 43% (Q2 and H1) due to competition and Xywav adoption[207][208] - Oncology product sales decreased by 1% (Q2) and 6% (H1), with Rylaze/Enrylaze down 7% and Zepzelca down 8% (Q2) and 12% (H1) due to competition and treatment protocol changes. Ziihera contributed $5.99 million (Q2) and $7.97 million (H1) in its initial launch period[207][209] Cost of Product Sales This subsection examines the cost of goods sold, including the impact of product mix and fair value step-up expenses - Cost of product sales increased by 6% (Q2) and 8% (H1) due to changes in product mix and higher fair value step-up expense ($3.9 million in Q2, $4.8 million in H1)[205][213] - Gross margin as a percentage of net product sales was 88.2% (Q2) and 87.9% (H1) in 2025, compared to 88.6% in 2024[213] Selling, General and Administrative Expenses This subsection analyzes trends in SG&A expenses, highlighting the impact of litigation settlements and commercial investments - SG&A expenses increased by 6% (Q2) and 26% (H1). The H1 increase was primarily due to $172.0 million in Xyrem antitrust litigation settlements[205][214] - The company expects SG&A expenses to increase in 2025 due to litigation settlements, Chimerix acquisition costs, investment in the commercial portfolio (including Ziihera launch), and increased compensation[215] Research and Development Expenses This subsection details R&D expenditures, explaining changes due to clinical studies, personnel costs, and acquisition-related expenses - R&D expenses decreased by 14% (Q2) and 16% (H1), driven by reduced clinical studies and outside services costs related to zanidatamab and JZP385 (discontinued), partially offset by dordaviprone costs from the Chimerix acquisition[205][217] Research and Development Expenses by Category (in thousands) | Category | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Clinical studies and outside services | $93,099 | $134,118 | $180,442 | $265,584 | | Personnel expenses | $75,439 | $68,305 | $149,798 | $141,301 | | Other | $21,434 | $18,311 | $40,384 | $36,696 | | Total | $189,972 | $220,734 | $370,624 | $443,581 | Intangible Asset Amortization This subsection discusses the amortization expense related to the company's intangible assets - Intangible asset amortization remained broadly consistent in the three and six months ended June 30, 2025, compared to the same periods in 2024[205][219] Acquired In-Process Research and Development This subsection explains the expense recognized for in-process research and development acquired through business combinations - Acquired IPR&D expense of $905.36 million in Q2 and H1 2025 represents the value allocated to dordaviprone from the Chimerix Acquisition[205][220] Interest Expense, Net This subsection analyzes the company's net interest expense, detailing the impact of debt repayments and new debt instruments - Net interest expense decreased by 24% (Q2) and 21% (H1), primarily due to lower interest expense on the Tranche B-2 Dollar Term Loans, partially offset by the inclusion of interest expense on the 2030 Notes[205][221] Income Tax Benefit This subsection discusses the income tax benefit recognized, including the impact of litigation settlements - Income tax benefit was $17.2 million (Q2) and $35.0 million (H1) in 2025, compared to $30.7 million (Q2) and $19.0 million (H1) in 2024. The H1 2025 benefit was primarily due to the tax impact of Xyrem antitrust litigation settlements[205][222] Liquidity and Capital Resources This subsection assesses the company's financial flexibility, including cash position, debt levels, and ability to fund growth - As of June 30, 2025, the company had $1.7 billion in cash, cash equivalents, and investments, $885.0 million available under its revolving credit facility, and a long-term debt principal balance of $5.4 billion[223] - The company generated $518.6 million in cash flow from operations during the first six months of 2025 and expects to continue generating positive cash flows to fund operations and de-lever the balance sheet[223] - Voluntary repayments of $750.0 million were made on the Tranche B-2 Dollar Term Loans in January 2025, and the $575.0 million 2024 Notes were repaid in August 2024[224] - The company's substantial debt could impair flexibility and access to capital. Future growth plans may require additional capital through debt or equity financings, which could be impacted by economic conditions[225][228] - A new $500.0 million share repurchase program was authorized in July 2024, with $225.0 million remaining as of June 30, 2025. $125.0 million was spent on repurchases in H1 2025[229] Critical Accounting Estimates This subsection highlights significant judgments and assumptions made in financial statements, which could materially impact reported results - The preparation of financial statements requires significant estimates and assumptions, particularly for revenue deductions, acquisition and valuation of intangibles, and income taxes. These estimates are subjective and complex, and actual results may differ[236] - Critical accounting policies and significant estimates have not substantially changed from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[237] Cautionary Note Regarding Forward-Looking Statements This subsection advises readers that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from projections[238] - Key risks include inability to maintain oxybate revenues, competition from new products, regulatory restrictions on oxybate products, challenges in commercializing Epidiolex/Epidyolex, and difficulties in obtaining regulatory approvals for pipeline candidates[238][243] - Other risks include competition, inadequate payor coverage/reimbursement, drug pricing scrutiny, supply chain disruptions, global trade issues, and challenges in integrating acquisitions like Chimerix[238][239][243] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there were no material changes to the company's market risk disclosures during the six months ended June 30, 2025, compared to those reported in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to market risk disclosures were reported for the six months ended June 30, 2025[242] Item 4. Controls and Procedures This section confirms that the company's disclosure controls and procedures were effective as of June 30, 2025, and that there were no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[244] - No changes to internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended June 30, 2025[246] PART II – OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, and a list of exhibits Item 1. Legal Proceedings This section incorporates by reference the detailed information on legal proceedings from Note 10, Commitments and Contingencies—Legal Proceedings, found in Part I, Item 1 of this Quarterly Report on Form 10-Q - Legal proceedings information is incorporated by reference from Note 10, Commitments and Contingencies—Legal Proceedings[247] Item 1A. Risk Factors This section supplements previously disclosed risk factors, detailing new or updated risks related to healthcare cost containment, global trade issues, the Chimerix acquisition, general acquisition and in-licensing activities, intellectual property protection, FDA disruptions, and changes in tax laws Healthcare Cost Containment and Drug Pricing Scrutiny This subsection details risks from legislative and regulatory efforts to control drug costs, including the IRA and new U.S. legislation - The U.S. healthcare industry faces fundamental changes due to increasing scrutiny of prescription drug costs, with legislative and regulatory proposals (e.g., IRA, state-level pricing controls) potentially impacting product profitability and reimbursement[249] - The Inflation Reduction Act of 2022 (IRA) introduces drug price negotiation for Medicare, penalties for price increases above inflation, and changes to Medicare Part D, which could negatively affect business and financial condition[249] - New legislation signed by President Trump on July 4, 2025, includes significant reforms to Medicaid, Medicare, and ACA tax credits, anticipated to decrease Medicaid spending and potentially reduce access and reimbursement for products[250] - European and international markets also impose cost-containing measures, including price limitations, reimbursement caps, and increased transparency on R&D costs, which could lead to downward price trends[255] Global Trade Issues and Tariffs This subsection discusses potential adverse impacts of global trade restrictions, tariffs, and supply chain disruptions - Global trade restrictions, changes in trade policies, and export regulations, including tariffs, could increase costs, reduce product competitiveness, and adversely affect business operations[256][257] - A Section 232 investigation initiated by the U.S. Secretary of Commerce is expected to result in new tariffs on pharmaceutical products, increasing manufacturing costs and supply chain complexity[259] - Relocating manufacturing in response to tariffs is complex, costly, and time-consuming, making it difficult to react quickly to a changing environment and potentially leading to product shortages[260] Chimerix Acquisition Risks This subsection outlines risks associated with the Chimerix acquisition, including regulatory approval, product success, and integration challenges - The success of the Chimerix acquisition depends on the ability to realize anticipated benefits from combining operations, which may not occur within the expected timeframe or cost[262] - Risks include dordaviprone's NDA not being approved by FDA in a timely manner, the product not being successful, or requiring greater resources than anticipated, and the assumption of unknown liabilities[262] Acquisition and In-licensing Risks This subsection addresses challenges in identifying and integrating new acquisitions or in-licensed products - The company may be unable to identify or consummate suitable acquisition or in-licensing opportunities, impairing business growth, especially given competition from companies with greater resources[263] - Integrating acquired products or candidates poses risks, including unexpected difficulties, substantial costs, failure to retain key personnel, and diversion of management attention[264][266] - Acquired products may not produce anticipated revenues, earnings, or regulatory approvals, as seen with the $133.6 million asset impairment charge from the discontinued nabiximols program acquired in the GW acquisition[265] Intellectual Property Protection Risks This subsection details challenges in obtaining, maintaining, and defending intellectual property, including patent litigation and generic competition - Commercial success depends on obtaining, maintaining, and defending intellectual property, but legal means offer limited protection, and patents can be challenged, invalidated, or designed around by competitors[267][268][269] - Lupin and Teva have filed ANDAs for generic Xywav, and Zepzelca ANDA filers have also submitted applications, leading to patent infringement lawsuits and potential generic competition[270][278] - Avadel's Lumryz was found to infringe Jazz's oxybate patents, resulting in damages and an injunction, but Avadel has filed its own patent infringement suits against Jazz's Xywav sales[277][118] - Reliance on trade secret protection for products like Defitelio carries risks, as trade secrets can be independently developed or unintentionally/willfully disclosed by employees or partners[279] FDA Disruptions This subsection highlights risks from potential disruptions at the FDA, which could delay regulatory approvals and impact product launches - Disruptions at the FDA, including workforce reductions or inadequate funding, could delay product reviews, approvals, and other regulatory actions, negatively impacting the business[280] - Delays in obtaining regulatory approval for dordaviprone, which has a PDUFA action date of August 18, 2025, could increase costs and adversely affect the anticipated benefits of the Chimerix acquisition[281] Changes to Tax Laws This subsection discusses the potential impact of evolving tax laws, including global minimum tax rules and U.S. legislation - Changes in tax laws related to multinational corporations, such as the OECD's Pillar Two global minimum tax (15% effective January 1, 2024) and new provisions in the U.S. Inflation Reduction Act (15% corporate alternative minimum tax, 1% excise tax on share repurchases), could adversely affect the company's effective tax rate, tax liabilities, and cash taxes[282][283][284] - Recent U.S. legislation (July 4, 2025) extended certain 2017 Tax Cuts and Jobs Act provisions and amended foreign-derived intangible income rules, increasing the effective tax rate for such income and excluding certain R&D and interest expenses from deductions[285] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities under its publicly announced programs, including the number of shares purchased, average price paid, and the remaining authorized amount Issuer Purchases of Equity Securities This subsection provides a table and details on the company's share repurchase activities during the reporting period Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :---------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------------------------- | | April 1 - April 30, 2025 | 0 | $0 | 0 | $349,999,951 | | May 1 - May 31, 2025 | 1,141,570 | $109.52 | 1,141,570 | $224,999,972 | | June 1 - June 30, 2025 | 0 | $0 | 0 | $224,999,972 | | Total | 1,141,570 | $109.52 | 1,141,570 | | - During the three months ended June 30, 2025, the company repurchased 1.14 million ordinary shares for a total of $125.0 million under the New Repurchase Program, at an average price of $109.52 per share[286] - As of June 30, 2025, $225.0 million remained authorized for repurchases under the New Repurchase Program, which has no expiration date[286] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including transaction agreements, organizational documents, license agreements, and certifications - Exhibits include the Transaction Agreement for the GW Pharmaceuticals acquisition, the Agreement and Plan of Merger for the Chimerix acquisition, Amended and Restated Memorandum and Articles of Association, License and Option Agreements, and certifications from the CEO and CFO[287] SIGNATURES This section contains the signatures of the principal executive officer, principal financial officer, and principal accounting officer, certifying the filing of the Quarterly Report on Form 10-Q - The report is signed by Bruce C. Cozadd (Chairman and CEO), Philip L. Johnson (EVP and CFO), and Patricia Carr (SVP, Chief Accounting Officer) on August 6, 2025[292]