Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the accompanying condensed consolidated financial statements and related notes beginning on page 5 in this Form 10-Q, and "Part II, Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited financial statements and notes thereto accompanying our Annual Report.

Executive Summary

Net income was $16.3 million or $0.10 per ordinary share-basic and $0.09 per ordinary share-diluted, for the three months ended September 30, 2026 and net loss was $49.7 million or $0.30 per ordinary share-basic and diluted, for the nine months ended September 30, 2026, compared to net income of $82.8 million and $192.3 million or $0.50 and $1.17 per ordinary share-basic and $0.49 and $1.14 per ordinary share-diluted, for the three and nine months ended September 30, 2025, respectively.

The decrease in net income of $66.5 million during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, was primarily due to increases in total operating expenses and interest expense of $139.0 million and $27.6 million, respectively. The increase in operating expenses was primarily related to the Avadel Acquisition and the increase in interest expense was related to interest incurred on the Facilities. In addition, our total revenues increased by $85.9 million during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, which was primarily due to the addition of LUMRYZ to our proprietary product portfolio.

The change in net loss of $242.0 million during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, was primarily due to increases in total operating expenses and interest expense of $467.5 million and $74.4 million, respectively. The increase in operating expenses was primarily related to the Avadel Acquisition and the increase in interest expense was related to interest incurred on the Facilities. In addition, our total revenues increased by $277.7 million during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, which was primarily due to the addition of LUMRYZ to our proprietary product portfolio, as previously noted.

These items are discussed in greater detail later in the "Results of Operations" section in this "Part I, Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q.

Products

Marketed Products

The key marketed products discussed below have generated, or are expected to generate, significant revenues for us. See the descriptions of the marketed products below and "Part I, Item 1A-Risk Factors" in our Annual Report for important factors that could adversely affect our marketed products. See the "Patents and Proprietary Rights" section in "Part I, Item 1-Business" in our Annual Report for information with respect to the IP protection for these marketed products.

The following provides summary information regarding our proprietary products that we commercialize:

Proprietary Products

The following provides summary information regarding certain key third-party products using our proprietary technologies under license and our key licensed product, that are commercialized by our licensees:

Key Third-Party Products Using Our Proprietary Technologies

Our Key Licensed Product

Proprietary Products

We have developed and now commercialize products designed to help address the unmet needs of people living with opioid dependence, alcohol dependence, schizophrenia, bipolar I disorder and narcolepsy. See the "Patents and Proprietary Rights" section in "Part I, Item 1-Business" in our Annual Report for information with respect to the IP protection for our proprietary products.

ARISTADA and ARISTADA INITIO

ARISTADA (aripiprazole lauroxil) is an extended-release intramuscular injectable suspension approved in the U.S. for the treatment of schizophrenia. ARISTADA utilizes our proprietary LINKERX technology. ARISTADA is a prodrug; once in the body, ARISTADA is likely converted by enzyme-mediated hydrolysis to N-hydroxymethyl aripiprazole, which is then hydrolyzed to aripiprazole. ARISTADA is available in four dose strengths with once-monthly dosing options (441 mg, 662 mg and 882 mg), a six-week dosing option (882 mg) and a two-month dosing option (1064 mg). ARISTADA is packaged in a ready-to-use, pre-filled syringe product format. We exclusively manufacture and commercialize ARISTADA in the U.S.

In September 2026, U.S. Patent No. 12,746,237 relating to ARISTADA was granted. The patent has claims to ARISTADA's commercial process and expires in 2035.

ARISTADA INITIO (aripiprazole lauroxil) leverages our proprietary LINKERX and NANOCRYSTAL technologies and provides an extended-release formulation of aripiprazole lauroxil in a smaller particle size compared to ARISTADA, thereby enabling faster dissolution and more rapid achievement of relevant levels of aripiprazole in the body. ARISTADA INITIO, combined with a single 30 mg dose of oral aripiprazole, is indicated for the initiation of ARISTADA when used for the treatment of schizophrenia in adults. The first ARISTADA dose may be administered on the same day as the ARISTADA INITIO regimen or up to 10 days thereafter. We exclusively manufacture and commercialize ARISTADA INITIO in the U.S.

LUMRYZ

LUMRYZ (sodium oxybate) is an extended-release oral suspension product approved by the FDA in May 2023 and October 2024 as the first and only once-at-bedtime treatment for cataplexy or excessive daytime sleepiness ("EDS") in adults with narcolepsy and in pediatric patients seven years of age and older with narcolepsy, respectively. The FDA has granted seven years of orphan drug exclusivity to LUMRYZ for the adult and pediatric narcolepsy patient populations through May 1, 2030 and October 16, 2031, respectively. We exclusively commercialize LUMRYZ in the U.S. Pursuant to the settlement and license agreement entered into between Jazz Pharmaceuticals entities ("Jazz") and Avadel entities in October 2025 (the "Avadel Settlement Agreement"), from October 1, 2025, Jazz receives a royalty of 3.85% (subject to certain adjustments set forth in the Avadel Settlement Agreement) on net sales of LUMRYZ sold for narcolepsy and additional royalties on net sales of LUMRYZ sold for any other non-narcolepsy indications. For more information about the Avadel Settlement Agreement and underlying royalty obligations, see "Patents and Proprietary Rights - LUMRYZ" in "Item 1-Business" in our Annual Report.

LUMRYZ employs a version of our MICROPUMP technology. LUMRYZ is manufactured by third parties. The FDA has required implementation of a risk evaluation and mitigation strategy ("REMS") for LUMRYZ to help ensure the benefits of the drug outweigh any risks of serious adverse outcomes that may result from inappropriate prescribing, misuse, abuse or diversion of the product. Under the LUMRYZ REMS, healthcare providers who prescribe the drug must be specially certified, pharmacies that dispense the drug must be specially certified, and the drug must be dispensed only to patients who have enrolled in the LUMRYZ REMS and completed all REMS requirements, including documentation of safe use conditions.

In September 2026 and October 2026, respectively, U.S. Patent Nos. 12,728,110 and 12,766,122 relating to LUMRYZ were granted. U.S. Patent No. 12,728,110 has claims to a powder formulation and expires in 2037. U.S. Patent No. 12,766,122 has claims to a method of titration and expires in 2037.

For a discussion of legal proceedings related to LUMRYZ, see Note 18, Commitments and Contingent Liabilities in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q, and for information about risks relating to such legal proceedings, see "Part I, Item 1A-Risk Factors" in our Annual Report and specifically the section entitled "Uncertainty over IP in the biopharmaceutical industry has been the source of litigation and other legal proceedings, and we and our licensees have previously and may in the future face claims against IP rights covering our products and competition from generic drug manufacturers."

LYBALVI

LYBALVI (olanzapine and samidorphan) is a once-daily, oral atypical antipsychotic drug approved in the U.S. for the treatment of adults with schizophrenia and for the treatment of adults with bipolar I disorder, as a maintenance monotherapy or for the acute treatment of manic or mixed episodes, as monotherapy or an adjunct to lithium or valproate. LYBALVI is a combination of olanzapine, an atypical antipsychotic, and samidorphan, an opioid antagonist, in a single bilayer tablet. LYBALVI is available in fixed dosage strengths composed of 10 mg of samidorphan and 5 mg, 10 mg, 15 mg or 20 mg of olanzapine. We exclusively manufacture and commercialize LYBALVI in the U.S.

For a discussion of legal proceedings related to LYBALVI, see Note 18, Commitments and Contingent Liabilities in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q, and for information about risks relating to such legal proceedings, see "Part I, Item 1A-Risk Factors" in our Annual Report and specifically the section entitled "Uncertainty over IP in the biopharmaceutical industry has been the source of litigation and other legal proceedings, and we and our licensees have previously and may in the future face claims against IP rights covering our products and competition from generic drug manufacturers."

VIVITROL

VIVITROL (naltrexone for extended-release injectable suspension) is a once-monthly, non-narcotic, injectable medication approved in the U.S. for the treatment of alcohol dependence in patients able to abstain from alcohol in an outpatient setting prior to initiation of treatment with VIVITROL and for the prevention of relapse to opioid dependence, following opioid detoxification. VIVITROL uses our polymer-based microsphere injectable extended-release technology to deliver and maintain therapeutic medication levels in the body through one intramuscular injection every four weeks. We exclusively manufacture and commercialize VIVITROL in the U.S.

For a discussion of legal proceedings related to VIVITROL, see Note 18, Commitments and Contingent Liabilities in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q, and for information about risks relating to such legal proceedings, see "Part I, Item 1A-Risk Factors" in our Annual Report and specifically the sections entitled "Uncertainty over IP in the biopharmaceutical industry has been the source of litigation and other legal proceedings, and we and our licensees have previously and may in the future face claims against IP rights covering our products and competition from generic drug manufacturers" and "Litigation or arbitration filed against Alkermes, including securities litigation, or actions (such as citizens petitions) filed against regulatory agencies in respect of our products, may result in financial losses, harm our reputation, divert management resources, negatively impact the approval of our products, or otherwise negatively impact our business."

Products Using Our Proprietary Technologies and Licensed Product

We have licensed products to third parties for commercialization and have licensed our proprietary technologies to third parties to enable them to develop, commercialize and/or manufacture products. See the "Proprietary Technology Platforms" and "Patents and Proprietary Rights" sections in "Part I, Item 1-Business" in our Annual Report for information with respect to our proprietary technologies and the IP protection for these products. We receive royalties and/or manufacturing and other revenues from the commercialization of these products under our collaborative arrangements with these third parties. Such arrangements, among others, include the following:

Products Using Our Proprietary Technologies

INVEGA SUSTENNA/XEPLION, INVEGA TRINZA/TREVICTA and INVEGA HAFYERA/BYANNLI

The long-acting INVEGA products are long-acting atypical antipsychotics owned and commercialized worldwide by Janssen. We believe that these products incorporate our technologies.

INVEGA SUSTENNA is approved in the U.S. for the treatment of schizophrenia and for the treatment of schizoaffective disorder as either a monotherapy or adjunctive therapy. Paliperidone palmitate extended-release injectable suspension is approved in the European Union ("EU") and other countries outside of the U.S. for the treatment of schizophrenia and is marketed and sold under the trade name XEPLION. INVEGA SUSTENNA/XEPLION is manufactured by Janssen.

INVEGA TRINZA is approved in the U.S. for the treatment of schizophrenia in patients who have been adequately treated with INVEGA SUSTENNA for at least four months. TREVICTA is approved in the EU for the maintenance treatment of schizophrenia in adult patients who are clinically stable on XEPLION. INVEGA TRINZA/TREVICTA is manufactured by Janssen.

INVEGA HAFYERA is approved in the U.S. for the treatment of schizophrenia in patients who have been adequately treated with INVEGA SUSTENNA for at least four months or INVEGA TRINZA for at least three months. BYANNLI is approved in the EU for the maintenance treatment of schizophrenia in adult patients who are clinically stable on XEPLION or TREVICTA. INVEGA HAFYERA/BYANNLI is manufactured by Janssen.

Licensed Product

VUMERITY

VUMERITY (diroximel fumarate) is a novel, oral fumarate with a distinct chemical structure that is approved in the U.S., the EU and several other countries for the treatment of relapsing forms of multiple sclerosis in adults, including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease.

Under our license and collaboration agreement with Biogen, Biogen holds the exclusive, worldwide license to develop and commercialize VUMERITY. For more information about the license and collaboration agreement with Biogen, see the "Collaborative Arrangements-Biogen" section in "Part I, Item 1-Business" in our Annual Report.

Key Development Programs

Our R&D is focused on the development of innovative medicines in the field of neuroscience that are designed to address unmet patient needs. As part of our ongoing R&D efforts, we have devoted, and will continue to devote, significant resources to conducting preclinical work and clinical studies to advance the development of new pharmaceutical products. The discussion below highlights our current key development programs. Drug development involves a high degree of risk and investment, and the status, timing and scope of our development programs are subject to change. Important factors that could adversely affect our drug development efforts are discussed in "Part I, Item 1A-Risk Factors" in our Annual Report. See the "Patents and Proprietary Rights" section in "Part I, Item 1-Business" in our Annual Report for information with respect to the IP protection for our key development programs.

Alixorexton

Alixorexton is a novel, investigational, oral, selective orexin 2 receptor ("OX2R") agonist in development for the treatment of narcolepsy type 1 ("NT1"), narcolepsy type 2 ("NT2") and IH. Orexin, a neuropeptide produced in the lateral hypothalamus, is considered to be the master regulator of wakefulness due to its activation of multiple, downstream wake-promoting pathways that project widely throughout the brain. Targeting the orexin system may address EDS across hypersomnolence disorders, whether or not orexin deficiency is the underlying cause of disease. Alixorexton is currently being evaluated in the phase 3 Brilliance Studies in adults with NT1 and NT2, and in the phase 2 Vibrance-3 study in adults with IH.

LUMRYZ (sodium oxybate)

In May 2026, the Company announced positive topline results from REVITALYZ, a double-blind, placebo-controlled, randomized withdrawal, multicenter phase 3 study evaluating the investigational use of LUMRYZ (sodium oxybate) extended-release oral suspension compared to placebo in adults with IH.

ALKS 7290

ALKS 7290 is a novel, investigational, oral OX2R agonist in development for the treatment of ADHD and as an adjunctive therapy to antidepressants in MDD. On September 21, 2026, the Company announced positive topline results from the phase 1 proof-of-concept study of ALKS 7290 in adults with ADHD. ALKS 7290 is currently being evaluated in phase 2 studies in adults with ADHD and adults with MDD.

Results of Operations

Product Sales, Net

Our product sales, net, consist of sales of ARISTADA and ARISTADA INITIO, LYBALVI, VIVITROL, and, following the completion of the Avadel Acquisition on February 12, 2026, LUMRYZ, primarily to wholesalers, specialty distributors and specialty pharmacies. The following table presents the adjustments deducted from product sales, gross, to arrive at product sales, net, for sales of ARISTADA and ARISTADA INITIO, LUMRYZ, LYBALVI and VIVITROL during the three and nine months ended September 30, 2026 and 2025:

The increases in product sales, gross, during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to the addition of LUMRYZ, a 9% and 7% increase, respectively, in the number of units sold for ARISTADA/ARISTADA INITIO and a 16% and 20% increase, respectively, in the number of units sold for LYBALVI. During the nine months ended September 30, 2026, there was also an increase of 2% in the number of units sold for VIVITROL. In addition, there was a 6% price increase that went into effect on January 1, 2026 for each of ARISTADA/ARISTADA INITIO, LYBALVI and VIVITROL.

The decreases in Medicaid rebates as a percentage of sales during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to gross-to-net favorability, as actual Medicaid rebates were lower than original estimates by approximately $8.3 million and $17.2 million, respectively, for VIVITROL and $3.1 million and $11.2 million, respectively, for ARISTADA/ARISTADA INITIO. In addition, LUMRYZ does not participate in the Medicaid drug rebate program. The increases in Medicare Part D during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to increases of $13.5 million and $19.2 million, respectively, in adjustments related to expanded rebate eligibility for units of LYBALVI sold during those periods. The increases in Chargebacks and Other adjustments during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily related to the addition of certain gross-to-net deductions related to LUMRYZ.

The following table compares product sales, net earned during the three and nine months ended September 30, 2026 and 2025:

Manufacturing and Royalty Revenues

The following table compares manufacturing and royalty revenues earned during the three and nine months ended September 30, 2026 and 2025:

The decreases in royalty revenues related to the long-acting INVEGA products during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to the expiry of our royalty on net sales of XEPLION in certain territories. The decrease in VUMERITY revenue during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, was due to decreases in manufacturing revenue of $3.5 million and decreases in royalty revenue of $2.6 million. The decrease in VUMERITY revenue during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, was due to a decrease in manufacturing revenue of $16.9 million, partially offset by an increase in royalty revenue of $1.4 million. The decreases in VUMERITY manufacturing revenue were related to the conclusion of our VUMERITY manufacturing subcontracting obligations for Biogen in August 2025. The variability in VUMERITY royalty revenue during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, was primarily due to differences in end-market net sales of the product.

Costs and Expenses

Cost of Goods Manufactured and Sold

In connection with the Avadel Acquisition, we acquired LUMRYZ inventory at its estimated fair value, resulting in a step-up of approximately $121.6 million above its cost. The inventory step-up is recognized in cost of goods manufactured and sold as the underlying inventory is sold. See Note 7, Inventory in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q for additional information related to purchase accounting adjustments. The increases in the cost of goods manufactured and sold during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily related to the addition of LUMRYZ and the amortization of such inventory step-up of approximately $28.7 million and $72.4 million, respectively. In addition, the cost of goods sold for ARISTADA/ARISTADA INITIO and VIVITROL increased due to increases in costs related to out-of-specification batches and investigation costs. These increases were partially offset by decreases of $5.2 million and $19.2 million, respectively, in the cost of goods manufactured for certain legacy products following the completion of our subcontracting arrangements for the manufacture of such products by the end of 2025.

Research and Development Expenses

For each of our R&D programs, we incur both external and internal expenses. External R&D expenses include fees for clinical and preclinical activities performed by contract research organizations, consulting fees, and costs related to laboratory services, the purchase of drug product materials and third-party manufacturing development activities. Internal R&D expenses include employee-related expenses, occupancy costs, depreciation and general overhead. We track external R&D expenses for each of our development programs; however, internal R&D expenses are not tracked by individual program as they can benefit multiple development programs or our products or technologies in general.

The following table sets forth our external R&D expenses for the three and nine months ended September 30, 2026 and 2025 relating to our then-current development programs and our internal R&D expenses, listed by the nature of such expenses:

These amounts are not necessarily predictive of future R&D expenses. In an effort to allocate our spending most effectively, we continually evaluate our products under development based on the performance of such products in preclinical and/or clinical trials, our expectations regarding the likelihood of their regulatory approval and our view of their future potential commercial viability, among other factors.

The increases in expenses related to alixorexton during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to increased spend related to the advancement of the development program, including initiation of our phase 3 Brilliance Studies in narcolepsy and costs related to our long-term extension study. The increases in expenses related to LUMRYZ during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were due to the addition, in connection with the Avadel Acquisition, of the REVITALYZ phase 3 development program. The increases in other orexin programs and other external R&D expenses during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to activities associated with our preclinical and clinical development programs.

The increases in employee-related expenses during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to increases in share-based compensation expense of $0.5 million and $10.5 million, respectively, and increases in labor and benefits expense related to a 16% increase in R&D-related headcount, primarily in connection with the Avadel Acquisition. The increase in share-based compensation expense during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, was primarily due to expense of $6.7 million related to Avadel Shares that were accelerated and settled by us in connection with the Avadel Acquisition. See Note 3, Business Combination in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q for additional information related to purchase accounting adjustments.

Selling, General and Administrative Expense

The increases in selling and marketing expense during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to increases in employee-related expenses of $17.4 million and $63.1 million, respectively, and marketing expense of $15.1 million and $34.5 million, respectively. The increases in employee-related expenses were primarily due to an 18% increase in sales and marketing-related headcount due to the addition of the LUMRYZ commercial organization. Also, during the nine months ended September 30, 2026, we recorded share-based compensation expense of $13.9 million related to Avadel Shares that were accelerated and settled by us in connection with the Avadel Acquisition. See Note 3, Business Combination in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q for additional information related to purchase accounting adjustments. The increases in marketing expense during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025, were primarily due to the addition of marketing costs for LUMRYZ of $12.9 million and $37.1 million, respectively, partially offset by decreases of $3.2 million and $11.5 million, respectively, in direct marketing spend for ARISTADA/ARISTADA INITIO, LYBALVI and VIVITROL.

The increase in general and administrative expense during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, was primarily due to increases of $4.7 million and $5.4 million in professional service fees and employee-related expenses, respectively. The increase in professional service fees was primarily due to increases in legal fees and consulting fees. The increase in employee-related expenses was primarily due to an increase in labor and benefits expense due to a 9% increase in general and administrative-related headcount. These increases were partially offset by a decrease in our estimated branded prescription drug fee.

The increase in general and administrative expense during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, was primarily due to increases of $33.1 million, $31.7 million and $13.8 million in expenses related to the Avadel Acquisition, employee-related expenses and professional service fees, respectively. Expenses related to the Avadel Acquisition included stamp duty and transaction-related advisory fees. The increase in employee-related expenses was primarily due to increases of $19.9 million and $9.9 million in labor and benefits expense and share-based compensation expense, respectively. The increase in labor and benefits expense was primarily due to an increase in severance expense of $5.5 million related to the Avadel Acquisition, and the 9% increase in general and administrative-related headcount noted above. The increase in share-based compensation expense was primarily due to the recognition of incremental share-based compensation expense following the modification of certain equity awards and due to Avadel Shares that were accelerated and settled by us in connection with the Avadel Acquisition. The increase in professional service fees was primarily due to an increase in legal fees and expenses incurred in connection with the Avadel Acquisition.

Amortization of Acquired Intangible Assets

We amortize our amortizable intangible assets using the economic-use method, which reflects the pattern that the economic benefits of the intangible assets are consumed as revenue is generated from the underlying patent or contract. Based on our most recent analysis, amortization of intangible assets included within our consolidated balance sheet at September 30, 2026 is expected to be approximately $74.7 million, $83.7 million, $112.7 million, $122.3 million and $128.6 million in the years ending December 31, 2026 through 2030, respectively.

Contingent Consideration

The changes in fair value of contingent consideration during the nine months ended September 30, 2026 related to an increase in probability of success of achieving the CVR Milestone following receipt of positive topline results from the REVITALYZ phase 3 clinical study of LUMRYZ in IH announced in May 2026. See Note 6, Fair Value, in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q for additional information regarding the valuation approach used to determine the fair value of the contingent consideration.

Other (Expense) Income, Net

Interest income consists of interest earned on our cash and available-for-sale investments. The increase in interest expense in both periods is due to financing costs related to the Bridge Credit Agreement through the Closing Date of the Avadel Acquisition, interest incurred on the Facilities and costs incurred in connection with the Credit Agreement Amendment. See Note 12, Long-Term Debt in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q for additional information regarding the Bridge Credit Agreement and the Facilities.

Income Tax Provision (Benefit)

The income tax benefit in the three months ended September 30, 2026 primarily related to employee equity activity. The income tax provision during the nine months ended September 30, 2026 was primarily attributable to taxes on income earned in the U.S. The income tax provisions during the three and nine months ended September 30, 2025 were primarily attributable to taxes on income earned in Ireland.

Our effective tax rates during the nine months ended September 30, 2026 and 2025 were (1.3)% and 16.8%, respectively. The negative effective tax rate during the nine months ended September 30, 2026 was due to taxes on income (including non-deductible expenses) earned in the U.S., and an overall loss before income taxes. The effective tax rate during the nine months ended September 30, 2025 exceeded the Irish statutory tax rate of 12.5%, primarily due to non-deductible expenses and income that was taxable at rates higher than the Irish statutory tax rate.

Liquidity and Financial Condition

Our financial condition is summarized as follows:

At September 30, 2026 our investments consisted of the following:

Sources and Uses of Cash

We generated $72.9 million and $350.6 million of cash from operating activities during the nine months ended September 30, 2026 and 2025, respectively. We expect that our existing cash, cash equivalents and investments will be sufficient to finance our anticipated working capital and other cash requirements, including debt service and capital expenditures, for at least the twelve months following the date from which our financial statements were issued. Subject to market conditions, interest rates and other factors, we may pursue opportunities to obtain financing in the future, including debt and equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets or other financing methods or structures.

Our investment objectives are, first, to preserve liquidity and conserve capital and, second, to generate investment income. We mitigate credit risk in our cash reserves by maintaining a well-diversified portfolio that limits the amount of investment exposure as to institution, maturity and investment type. Our available-for-sale investments consist primarily of short and long-term U.S. government and agency debt securities and corporate debt securities. Our held-to-maturity investments consist of investments that are held as collateral under certain letters of credit related to certain of our lease agreements.

We classify available-for-sale investments in an unrealized loss position that do not mature within 12 months as long-term investments. We have the intent and ability to hold these investments until recovery, which may be at maturity, and it is more-likely-than-not that we would not be required to sell these securities before recovery of their amortized cost.

We have no off-balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources in the next 12 months.

Information about our cash flows, by category, is presented in the accompanying condensed consolidated statements of cash flows. The following table summarizes our cash flows for the nine months ended September 30, 2026 and 2025:

Operating Activities

Cash flows provided by operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income for non-cash operating items such as depreciation, amortization and share-based compensation and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations.

Cash flows provided by operating activities for the nine months ended September 30, 2026 were $72.9 million and primarily consisted of net loss of $49.7 million, adjusted for non-cash items, including share-based compensation of $94.2 million, depreciation and amortization of $76.9 million, amortization of inventory step-up of $72.4 million, change in fair value of contingent consideration of $27.0 million and a loss on debt extinguishment incurred in connection with the Credit Agreement Amendment of $0.5 million, partially offset by changes in working capital of $156.8 million.

Cash flows provided by operating activities for the nine months ended September 30, 2025 primarily consisted of $192.3 million of net income, adjusted for non-cash items, including $72.4 million of share-based compensation, $30.5 million in deferred income taxes, $23.3 million of depreciation and amortization and $27.7 million of changes in working capital.

Investing Activities

Cash flows used in investing activities for the nine months ended September 30, 2026 were primarily used to complete the Avadel Acquisition and purchase $15.6 million of property, plant and equipment, partially offset by $41.3 million in net sales of investments. Total cash consideration paid on the Closing Date was $2,199.2 million, which was accounted for as a business combination, and we recognized $2,085.1 million of assets acquired, net of liabilities assumed and cash transferred as an investing activity during the nine months ended September 30, 2026.

Cash flows used in investing activities for the nine months ended September 30, 2025 were primarily due to the purchase of $40.4 million of property, plant and equipment, partially offset by $11.8 million in net sales of investments.

Financing Activities

Cash flows provided by financing activities for the nine months ended September 30, 2026 primarily consisted of $1,511.6 million in net proceeds from the original borrowings under the Facilities in connection with the Avadel Acquisition and $55.6 million received upon exercises of employee stock options. These inflows were partially offset by $13.3 million in contractual principal payments under the Facilities, $27.7 million (exclusive of any fees, commissions or other related expenses) used to repurchase ordinary shares under our Repurchase Program and $25.2 million of employee taxes paid related to the net share settlement of equity awards. In connection with the Credit Agreement Amendment, financing activities also included $45.5 million in additional proceeds from borrowings under the Facilities and $45.5 million in repayments to exiting lenders, whose debt was accounted for as extinguished under ASC 470-50 based on our lender-by-lender assessment. For additional details regarding the Facilities and the Credit Agreement Amendment, see Note 12, Long-Term Debt in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q.

Cash flows provided by financing activities for the nine months ended September 30, 2025 were due to $32.2 million of cash that we received upon exercises of employee stock options, offset by $30.8 million of employee taxes paid related to the net share settlement of equity awards.

Debt

On the Closing Date, we entered into the Credit Agreement, and on August 12, 2026, we entered into the Credit Agreement Amendment. The Credit Agreement, as amended, provides for (i) a TLA Facility in an outstanding principal amount of up to $745.3 million and (ii) a TLB Facility in an outstanding principal amount of up to $773.1 million. The TLA Facility matures on February 12, 2031, and the TLB Facility matures on August 12, 2031.

For additional details regarding our outstanding indebtedness, see Note 12, Long-Term Debt in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different conditions or using different assumptions.

See the "Critical Accounting Estimates" section in "Part II, Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report for a discussion of our critical accounting estimates. See below for a discussion of additions to our critical accounting estimates since December 31, 2025.

Contingent Consideration

We record contingent consideration we may owe related to a business combination at fair value on the acquisition date. We estimate the fair value of contingent consideration through valuation models that incorporate a DCF model related to the achievement of a certain specified milestone. We revalue our contingent consideration each reporting period, with changes in the fair value of contingent consideration recognized within the consolidated statements of operations and comprehensive (loss) income. Changes in the fair value of contingent consideration can result from changes to one or multiple assumptions, including adjustments to the discount rates, changes in the assumed achievement and timing of any such specified milestone and changes in the assumed probability associated with regulatory approval.

The period over which we discount contingent consideration is based on the current development stage of the product candidate, the specific development plan for such product candidate adjusted for the probability of completing the development step, and the date on which contingent payments may be triggered. In estimating the probability of success, we utilize data regarding similar milestone events from several sources, including industry studies and our own experience. These fair value measurements are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions at the acquisition date and for each subsequent reporting period. Accordingly, changes in assumptions described above could have a material impact on the increase or decrease in the fair value of contingent consideration recorded in any given period.

At September 30, 2026, our contingent consideration related to the CVR Milestone issued in connection with the Avadel Acquisition. The fair value of the contingent consideration was determined as follows:

In accordance with the accounting standard for fair value measurements, the fair value of the contingent consideration has been classified as a Level 3 liability as its fair value is based on significant inputs not observable in the market.

Valuation of Intangible Assets

Our intangible assets consist primarily of IP related to the existing commercial product and IPR&D product candidate that we acquired as part of the Avadel Acquisition. When significant identifiable intangible assets are acquired, we engage an independent third-party valuation firm to assist in determining the fair values of these assets as of the acquisition date. Discounted cash flow models are typically used in these valuations, which require the use of significant estimates and assumptions, including but not limited to:

We believe the fair values assigned to the intangible assets acquired are based upon reasonable estimates and assumptions given available facts and circumstances as of the acquisition date. If these projects are not successfully developed, the sales and profitability of the Company may be adversely affected in future periods. Additionally, the value of the acquired intangible assets may become impaired. We believe that the foregoing assumptions used in the IPR&D analysis were reasonable as of the acquisition date. No assurance can be given, however, that the underlying assumptions used to estimate expected product sales, development costs or profitability, or the events associated with such products, will transpire as estimated.

New Accounting Standards

See the "New Accounting Pronouncements" section in Note 2, Summary of Significant Accounting Policies in the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q for discussion of certain recent accounting standards applicable to us.