Exhibit 99.1
RISK FACTORS
RISKS RELATING TO OUR BUSINESS
IF WE CANNOT SUCCESSFULLY DEVELOP OR OBTAIN FUTURE PRODUCTS, OUR GROWTH MAY BE
DELAYED
Our future growth will depend, in large part, upon our ability to develop
or obtain and commercialize new products and new formulations of or indications
for current products. We are engaged in an active research and development
program involving compounds owned by us or licensed from others which we may
commercially develop in the future. The process of successfully commercializing
product is time consuming, expensive and unpredictable. There can be no
assurance that we will be able to develop or acquire new products, obtain
regulatory approvals to use these products for proposed or new clinical
indications, manufacture our potential products in compliance with regulatory
requirements or in commercial volumes or gain market acceptance for such
products. It may be necessary for us to enter into other licensing arrangements,
similar to our arrangement with Schering-Plough and Roche, with other
pharmaceutical companies in order to market effectively any new products or new
indications for existing products. There can be no assurance that we will be
successful in entering into such licensing arrangements on terms favorable to us
or at all.
On November 6, 2003, we announced that we were commencing Phase 3 clinical
trials of Viramidine. There can be no assurance that our clinical trials for
Viramidine will be successful, that we will be granted approval to market
Viramidine for the indication we are seeking or that Viramidine will be a
commercially successful product. Additionally, there is the potential for
product liability claims from patients participating in the clinical trials in
the event a participant is harmed by the product.
POSSIBILITY OF GENERIC PRODUCT INTRODUCTION PUTS RIBAVIRIN ROYALTIES AT RISK AND
MAY IMPACT OUR ABILITY TO FINANCE RESEARCH AND DEVELOPMENT ACTIVITIES.
Royalty revenues earned by Ribapharm under our ribavirin license
agreements with Schering-Plough and Roche have represented an important source
of revenues to us. Schering-Plough markets ribavirin for use in combination with
its interferon product under the trade name "Rebetol" as a therapy for the
treatment of hepatitis C and Roche markets ribavirin for use in combination with
its interferon product under the name "Copegus."
Under the terms of their license agreements, Schering-Plough and Roche
each have sole discretion to determine the pricing of ribavirin and the amount
and timing of resources devoted to their respective marketing of ribavirin. In
February and March 2003, Schering-Plough entered into license agreements with
three generic pharmaceutical companies, which granted to each company a
non-exclusive, non-sublicensable license to Schering-Plough's U.S. ribavirin
patents. Competition from generic pharmaceutical companies could have a material
negative impact on our future royalty revenue. With respect to Schering-Plough,
royalties will be affected by the likelihood of reduced sales by Schering-Plough
as well as a reduction in the royalty rate per the license agreement. With
respect to Roche, under the license agreement, introduction of generics in any
market will eliminate the obligation of Roche to pay royalties for net sales in
that market. Our research and development activities are largely funded by the
royalties received from Schering and Roche.
Three generic pharmaceutical companies filed Abbreviated New Drug
Applications ("ANDAs") with the FDA to market generic forms of ribavarin for use
as part of a combination therapy for the treatment of
hepatitis C. We commenced litigation to prevent the marketing of a generic form
of ribavarin in the U.S. District Court for the Central District of California.
In July 2003, the court issued a memorandum of decision and order granting the
defendants their motion for summary judgment of non-infringement of the asserted
patents in the suit brought by us. This decision did not rule on the motion for
summary judgment that the patents are invalid. This ruling permits the FDA to
approve these generic companies' ANDAs, in their discretion.
Given the current status of filings with the FDA, including pending
generic drug applications and a related Citizen Petition submitted by Ribapharm
challenging those applications, generic competition in the United States may be
imminent. Although our financial planning has included an expectation of generic
competition for ribavirin in the United States as early as the fourth quarter of
2003, a significant decrease in royalties from expected levels for markets other
than the United States could require us to reduce research and development
expenditures and other activities.
Various parties are opposing Ribapharm's ribavirin patents in actions
before the European Patent Office, and Ribapharm is responding to these
oppositions. While data exclusivity for the combination therapies marketed by
Schering-Plough and Roche is scheduled to continue in the major markets of the
European Union until 2009 for Schering-Plough and 2012 for Roche, regulatory
approvals and schemes may change and/or studies regarding ribavirin in
combination with interferon may be replicated, allowing earlier introduction of
generics into such markets.
IF OUR FOCUS ON THE DEVELOPMENT OF VIRAMIDINE DOES NOT RESULT IN AN APPROVED AND
COMMERCIALLY SUCCESSFUL PRODUCT, OUR BUSINESS COULD BE ADVERSELY AFFECTED.
We focus our research and development activities on areas in which we have
particular strengths, particularly antivirals. However, the outcome of any
development program is highly uncertain. Although Viramidine appears promising
and has advanced to Phase 3 clinical trials, it may yet fail to yield a
commercial product. Success in preclinical and early stage clinical trials may
not necessarily translate into success in large-scale clinical trials, for
reasons that are sometimes not fully understood. Further, to be successful in
clinical trials, increased investment will be necessary, which may adversely
affect short-term profitability.
In addition, we will need to obtain and maintain regulatory approval in
order to market Viramidine. Even if Viramidine appears promising in large-scale
Phase 3 clinical trials, regulatory approval may not be achieved. The results of
clinical trials are susceptible to varying interpretations that may delay, limit
or prevent approval or result in the need for post-marketing studies. In
addition, changes in regulatory policy for product approval during the period of
product development and FDA review of a new application may cause delays or
rejection. Even if we receive regulatory approval, this approval may include
limitations on the indicated uses for which we can market the product. There is
no guarantee that we will be able to satisfy the needed regulatory requirements,
and we may suffer a significant variation from planned revenue as a result.
THIRD PARTIES MAY BE ABLE TO SELL GENERIC FORMS OF OUR PRODUCTS OR BLOCK OUR
SALES OF OUR PRODUCTS IF OUR INTELLECTUAL PROPERTY RIGHTS OR DATA EXCLUSIVITY
RIGHTS DO NOT SUFFICIENTLY PROTECT US.
Our success depends in part on our ability to obtain and maintain
meaningful exclusivity protection for our products and product candidates
throughout the world via patent protection and/or data exclusivity protection.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and factual
questions. We will be able to protect our products from generic substitution by
third parties only to the extent that our technologies are covered by valid and
enforceable patents effectively maintained as trade secrets or are protected by
data exclusivity. However, our currently pending or future patent applications
may not issue as patents. Any patent issued may be challenged, invalidated, held
unenforceable or circumvented. Furthermore, our patents may not be sufficiently
broad to prevent third parties from producing generic substitutes for our
products. Lastly, data exclusivity schemes vary from country to country and may
be limited or eliminated as governments seek to reduce pharmaceutical costs by
increasing the speed and ease of approval of generic products.
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In order to protect or enforce patent and/or data exclusivity rights, we
may initiate patent litigation against third parties, and we may be similarly
sued by others. We may also become subject to interference proceedings conducted
in the patent and trademark offices of various countries to determine the
priority of inventions. The defense and prosecution, if necessary, of
intellectual property and data exclusivity actions are costly and divert
technical and management personnel from their normal responsibilities. We may
not prevail in any of these suits. An adverse determination of any litigation or
defense proceedings, resulting in a finding of non-infringement or invalidity of
our patents, or a lack of protection via data exclusivity, may allow entry of
generic substitutes for our products.
Furthermore, because of the substantial amount of discovery required in
connection with such litigation, there is a risk that some of our confidential
information could be compromised by disclosure during such litigation. In
addition, during the course of this kind of litigation, there could be public
announcements of the results of hearings, motions or other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
these results to be negative, it could have a substantial negative effect on the
trading price of our securities.
Ribapharm's patents in the United States are the subject of litigation,
and the most recent ruling by the court in the ribavirin-related litigation with
generic drug companies was not in our favor. See "Possibility of Generic Product
Introduction Puts Ribavirin Royalties at Risk and May Impact Ability to Finance
Research and Development Activities", above.
Ribapharm has limited patent rights in selected countries of the European
Union, Switzerland and Japan relating to the antiviral use of ribavirin. These
patents are currently scheduled to expire by 2005, although Ribapharm is seeking
to extend these patents until 2010. Ribapharm may not be able to have these
patents extended.
The existence of a patent will not necessarily protect us from
competition. Competitors may successfully challenge our patents, produce similar
drugs that do not infringe our patents or produce drugs in countries that do not
respect our patents.
No patent can protect its holder from a claim of infringement of another
patent. Therefore, our patent position cannot and does not provide an assurance
that the manufacture, sale or use of products patented by us could not infringe
a patent right of another.
While we know of no actual or threatened claim of infringement that would
be material to us, there can be no assurance that such a claim will not be
asserted. If such a claim is asserted, there can be no assurance that the
resolution of the claim would permit us to continue producing the relevant
product on commercially reasonably terms.
OBTAINING NECESSARY GOVERNMENT APPROVALS IS TIME CONSUMING AND NOT ASSURED.
FDA approval must be obtained in the United States and approval must be
obtained from comparable agencies in other countries prior to marketing or
manufacturing new pharmaceutical products for use by humans. Obtaining FDA
approval for new products and manufacturing processes can take a number of years
and involves the expenditure of substantial resources. Numerous requirements
must be satisfied, including preliminary testing programs on animals and
subsequent clinical testing programs on humans, to establish product safety and
efficacy. No assurance can be given that we will obtain approval in the United
States, or any other country, of any application we may submit for the
commercial sale of a new or existing drug or compound. Nor can any assurance be
given that if such approval is secured, the approved labeling will not have
significant labeling limitations that could affect profitability, or that those
drugs or compounds will be commercially successful.
The FDA and other regulatory agencies in other countries also periodically
inspect manufacturing facilities both in the United States and abroad. Failure
to comply with applicable regulatory requirements can result in, among other
things, warning letters, sanctions, fines, delays or suspensions of approvals,
seizures or recalls of products, operating restrictions, manufacturing
interruptions, costly corrective actions, injunctions, adverse publicity against
us and our products, refusal to renew marketing applications, and criminal
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prosecutions. Furthermore, changes in existing regulations or adoption of new
regulations could prevent or delay us from obtaining future regulatory approvals
or jeopardize existing approvals.
DIFFICULTIES WITH ACQUISITIONS COULD MATERIALLY IMPACT OUR FUTURE GROWTH.
We intend to pursue a strategy of targeted expansion through the
acquisition of compatible businesses and product lines and the formation of
strategic alliances, joint ventures and other business combinations. There can
be no assurance that we will successfully complete or finance any future
acquisition or investment or that any acquisitions that we do complete will be
completed at prices or on terms that prove to be advantageous to us. The success
or failure in integrating the operations of companies that we have acquired or
may acquire in the future may have a material impact on our future growth and
success.
IF COMPETITORS DEVELOP VACCINES OR MORE EFFECTIVE OR LESS COSTLY DRUGS FOR OUR
TARGET INDICATIONS, OUR BUSINESS COULD BE SERIOUSLY HARMED.
The biotechnology and pharmaceutical industries are intensely competitive
and subject to rapid and significant technological change. Ribavirin and many of
the drugs that we are attempting to discover will be competing with new and
existing therapies. Many companies in the United States and abroad are pursuing
the development of pharmaceuticals that target the same diseases and conditions
that we are targeting. For example, in December 2002, Roche received approval to
sell Copegus, its version of ribavirin. In addition, Human Genome Sciences, Inc.
submitted an investigational new drug application with the FDA in October 2000
to initiate phase I human clinical trials of Albuferon for treatment of
hepatitis C. If Albuferon or other therapies that do not incorporate the use of
our products prove to be a more effective treatment for hepatitis C than the
combination therapy involving ribavirin, then our royalty revenues from
ribavirin could significantly decrease. In addition, there are institutions
doing research on the development of a vaccine to prevent hepatitis C. The
availability of such a vaccine would have a material adverse effect on our
ribavirin royalty revenues.
Many of our competitors, particularly large pharmaceutical companies, have
substantially greater financial, technical and human resources than we do. We
believe that many of our competitors spend significantly more on research and
development related activities than us. Others may succeed in developing
products that are more effective than those currently marketed or proposed for
development by us. Progress by other researchers in areas similar to those being
explored by us may result in further competitive challenges. In addition,
academic institutions, government agencies, and other public and private
organizations conducting research may seek patent protection with respect to
potentially competitive products. They may also establish exclusive
collaborative or licensing relationships with our competitors.
Competing therapies in development may include:
- - Infergen being developed by Amgen, Inc. and Intermune;
- - Omega interferon being developed by DioMedicines;
- - Thymosin alfa being developed by Sciclone;
- - Albuferon being developed by Human Genome Sciences, Inc.; and
- - protease inhibitors being developed by Boehringer Ingelheim, Eli Lilly and
Company, Vertex Pharmaceuticals Incorporated, Viropharma Incorporated, Wyeth
and Gilead Sciences, Inc.
Other companies that engage in research activities similar to our and
Ribapharm's research activities including Abbott Laboratories, Pfizer, Inc.,
GlaxoSmithKline plc, Merck & Co., Inc. and Novartis AG.
IF OUR PRODUCTS ARE ALLEGED TO BE HARMFUL, WE MAY NOT BE ABLE TO SELL THEM AND
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS NOT COVERED BY INSURANCE.
The nature of our business exposes us to potential liability risks
inherent in the testing, manufacturing and marketing of pharmaceutical products.
Using our drug candidates in clinical trials may expose us to
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product liability claims. These risks will expand with respect to drugs, if any,
that receive regulatory approval for commercial sale. Even if a drug were
approved for commercial use by an appropriate governmental agency, there can be
no assurance that users will not claim that effects other than those intended
may result from our products. While to date no material adverse claim for
personal injury resulting from allegedly defective products, including
ribavirin, has been successfully maintained against us, a substantial claim, if
successful, could have a material negative impact on us.
In the event that anyone alleges that any of our products are harmful, we
may experience reduced consumer demand for our products or our products may be
recalled from the market. In addition, we may be forced to defend lawsuits and,
if unsuccessful, to pay a substantial amount in damages. We do not currently
have insurance against product liability risks. Insurance is expensive and, if
we seek insurance in the future, it may not be available on acceptable terms.
Even if obtained, insurance may not fully protect us against potential product
liability claims.
WE ARE INVOLVED IN VARIOUS LEGAL PROCEEDINGS THAT COULD ADVERSELY AFFECT US.
We are involved in several legal proceedings, including the following
matters.
Securities Class Actions
Since July 25, 2002, multiple class actions have been filed in the United
States District Courts for the Eastern District of New York, the District of New
Jersey and the Central District of California against us and certain of our
current and former executive officers. The lawsuits allege that the defendants
violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5
promulgated thereunder, by issuing false and misleading financial results to the
market during different class periods ranging from May 3, 2001 to July 10, 2002,
thereby artificially inflating the price of our stock. The lawsuits generally
claim that the defendants improperly inflated our sales volume and revenues
through excess shipment of products to our distributors and improper recognition
of revenue from certain royalty payments. The plaintiffs generally seek to
recover compensatory damages, including interest. While we intend to defend this
matter vigorously, an adverse result could have a material adverse effect on us.
On May 9, 2003, a bondholder filed a class action lawsuit against us and
some of our current and former directors. The lawsuit alleges that the
defendants violated Sections 11 and 15 of the Securities Act by making false and
misleading statements in connection with an offering of Convertible Subordinated
Notes. We intend to file a motion to dismiss the complaint in this action. While
we intend to defend this matter vigorously, an adverse result could have a
material adverse effect on us.
Settlement with the Commission
We are subject to the provisions of a settlement agreement with the
Commission, which arose from a civil complaint brought against us by the
Commission in 1999. We reached a settlement of the matter which was embodied in
court orders entered in 2002. The material terms of the settlement with the
Commission are as follows: Valeant, without admitting or denying liability,
consented to the entry of a consent judgment permanently enjoining us from
violating Section 10(b) of the Exchange Act, and Rule 10b-5, promulgated
thereunder. We paid a civil penalty in the amount of $1,000,000. We also
consented to various corporate governance undertakings regarding FDA-related
press releases. Because the settlement documents explicitly acknowledged that a
"change of control" of Valeant occurred as of May 29, 2002, we can make an
application for termination of the undertakings (upon a showing of "good cause")
18 months after entry of the judgment, that is, 2004. As a result of the
settlement, we cannot take advantage of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995
and, therefore, may be hindered in the defense of future allegations.
Export Control Matters
In April 2003, we submitted a voluntary disclosure regarding potential
violations of Cuban Asset Control Regulations to the Department of Treasury's
Office of Foreign Assets Controls ("OFAC"). The
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subject transactions involved shipments to Cuba over the last five years of
foreign-origin pharmaceutical products, specifically vitamins, antibiotics, and
other medicines, by our Mexican and Panamanian subsidiaries. We believe the sale
of these pharmaceutical products would have been licensed had we and our
non-U.S. subsidiaries recognized the need for and sought such licenses. We and
our non-U.S. subsidiaries were granted a license by OFAC to engage in these
transactions for the next one-year period (through mid-October 2004).
In the course of our ongoing investigation into this matter, we discovered
additional business activity with Cuba by our Mexican and Panamanian
subsidiaries, including the purchase of Cuban-origin medical products from a
Cuban company and certain financial transactions. Consequently, we updated our
voluntary disclosure with OFAC on August 4, 2003. As of this writing, the
voluntary disclosure is in the Civil Penalties Division of OFAC, which has a
substantial backlog of similar cases.
OUR FLEXIBILITY IN MAXIMIZING COMMERCIALIZATION OPPORTUNITIES FOR OUR COMPOUNDS
MAY BE LIMITED BY OUR OBLIGATIONS TO SCHERING-PLOUGH.
In November 2000, we entered into an agreement that provides
Schering-Plough with an option to acquire the rights to up to three of our
products that they designate at an early stage of product development and a
right for first/last refusal to license various compounds we may develop and
elect to license to others. Viramidine is no longer subject to the option of
Schering-Plough, but it would be subject to their right of first/last refusal if
we elected to license it to a third party. The interest of potential
collaborators in obtaining rights to our compounds or the terms of any
agreements we ultimately enter into for these rights may be impacted by our
agreement with Schering-Plough. A commercialization partner other than
Schering-Plough might have otherwise been preferable due to that potential
partner's strength in a given disease area or geographic region or for other
reasons.
WE ARE SUBJECT TO UNCERTAINTY RELATED TO HEALTH CARE REFORM MEASURES AND
REIMBURSEMENT POLICIES.
The levels at which government authorities, private health insurers, HMOs
and other organizations reimburse the costs of drugs and treatments related to
those drugs will have an effect on the successful commercialization of our drug
candidates. We cannot be sure that reimbursement in the United States or
elsewhere will be available for any drugs we may develop or, if already
available, will not be decreased in the future. Also, we cannot be sure that
reimbursement amounts will not reduce the demand for, or the price of, our
drugs. If reimbursement is not available or is available only to limited levels,
we may not be able to obtain a satisfactory financial return on the manufacture
and commercialization of any future drugs. In addition, as a result of the trend
towards managed health care in the United States, as well as legislative
proposals to reduce government insurance programs, third party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement of new drug products. Consequently, significant
uncertainty exists as to the reimbursement status of newly approved health care
products. Third-party payors may not establish and maintain price levels
sufficient for us to realize an appropriate return on our investment in product
development.
IF OUR NUCLEOSIDE ANALOG LIBRARY IS DESTROYED BECAUSE OF AN EARTHQUAKE OR OTHER
DISASTER, OUR RESEARCH AND DEVELOPMENT PROGRAM MAY BE SERIOUSLY HARMED.
The laboratory books and the compounds that comprise our nucleoside analog
library are all located at our headquarters in Costa Mesa, California, near
areas where earthquakes have occurred in the past.
There are no duplicate copies off-premises and there are no backup copies
of the product candidates we are currently developing. No duplicate copies of
our nucleoside analog library exist because making copies would be prohibitively
expensive and the library has not been moved off-site because our scientific
staff is currently in the process of screening it. Our ability to develop
potential product candidates from our nucleoside analog library would be
significantly impaired if these records were destroyed in an earthquake or other
disaster. Any insurance we maintain may not be adequate to cover our losses.
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OUR INDEBTEDNESS MAY RESTRICT OUR CORPORATE ACTIVITIES, INCLUDING OUR ABILITY TO
OBTAIN FINANCING IN THE FUTURE.
As of September 30, 2003, we and our subsidiaries had approximately $480
million of consolidated indebtedness. Subject to restrictions in our existing
indebtedness, we may incur additional indebtedness from time to time to finance
working capital needs, acquisitions, capital expenditures or for other purposes.
There can be no assurance that financing will continue to be available on terms
acceptable to us or at all. In the absence of such financing, our ability to
respond to changing business and economic conditions, to fund scheduled
investments and capital expenditures, to make future acquisitions and to absorb
negative operating results may be adversely affected.
In connection with potential future indebtedness, we may enter into debt
instruments that contain significant covenants that might, among other things,
restrict our ability to dispose of assets, incur additional indebtedness, repay
other indebtedness, amend other debt instruments, pay dividends, create liens on
assets, make investments or acquisitions, engage in mergers or consolidations,
make capital expenditures or engage in certain transactions with subsidiaries
and affiliates, and otherwise restrict certain corporate activities. To the
extent such future indebtedness is not repaid or the instruments governing that
indebtedness modified, we might be prevented from taking actions that we
otherwise would.
In addition, if we do enter into restrictive debt instruments in the
future, our ability to comply with the covenants contained in such debt
instruments might be affected by events beyond our control, including prevailing
economic, financial and industry conditions. The breach of any of these
covenants or restrictions could result in a default under the debt instruments,
which could permit the lenders to declare all borrowed amounts due and payable,
together with accrued and unpaid interest. Also, any commitments of other
lenders to make further extensions of credit could be terminated.
DEPENDENCE ON KEY PERSONNEL LEAVES US VULNERABLE TO A NEGATIVE IMPACT IF THEY
LEAVE.
We believe that our continued success will depend to a significant extent
upon the efforts and abilities of the key members of management. The loss of
their services could have a negative impact on us.
In addition, Ribapharm depends upon the principal members of its
scientific staff. Ribapharm's success depends upon its ability to attract,
train, motivate and retain qualified scientific personnel. Qualified personnel
are in great demand throughout the biotechnology and pharmaceutical industries.
We may not be able to attract additional personnel or retain existing employees.
OUR THIRD PARTY MANUFACTURERS' FAILURE TO COMPLY WITH FDA REGULATIONS COULD
CAUSE INTERRUPTION OF THE MANUFACTURE OF OUR PRODUCTS.
Our manufacturers are required to adhere to regulations enforced by the
FDA and similar regulatory agencies in other countries. Our dependence upon
others to manufacture our products may adversely affect our profit margins and
our ability to develop and commercialize products on a timely and competitive
basis. Delays or difficulties with contract manufacturers in producing,
packaging or distributing our products could adversely affect the sales of our
current products or introduction of other products.
Schering-Plough manufactures and sells ribavirin under license from us. In
February 2001, Schering-Plough announced that the FDA has been conducting
inspections of Schering-Plough's manufacturing facility in Las Piedras, Puerto
Rico that manufactures ribavirin, and has issued reports citing deficiencies
concerning compliance with current Good Manufacturing Practices, primarily
relating to production processes, controls and procedures. In June 2001,
Schering-Plough announced that FDA inspections at this and one other
Schering-Plough facility in May and June 2001 cited continuing and additional
deficiencies in manufacturing practices. In May 2002, Schering-Plough signed a
consent decree of permanent injunction with the FDA, agreeing to measures to
assure that the drug products manufactured at the firm's New Jersey and Puerto
Rico plants are made in compliance with FDA's current good manufacturing
practice regulations. While Schering-Plough has advised us that the deficiencies
were not specifically applicable to the production of ribavirin, the Consent
Decree covers the facility producing ribavirin. Schering-Plough's ability to
manufacture and ship
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ribavirin could be affected by temporary interruption of some production lines
to install system upgrades and further enhance compliance, and other technical
production and equipment qualification issues.
If the FDA is not satisfied with Schering-Plough's compliance under the
Consent Decree, the FDA could take further regulatory actions against
Schering-Plough, including the seizure of products, an injunction against
further manufacture, a product recall or other actions that could interrupt
production of ribavirin. Interruption of ribavirin production for a sustained
period of time could materially reduce our royalty receipts.
DUE TO THE LARGE PORTION OF OUR BUSINESS CONDUCTED OUTSIDE THE U.S., WE HAVE
SIGNIFICANT FOREIGN CURRENCY RISK.
We sell products in many countries that are susceptible to significant
foreign currency risk. In some of these markets we sell products in these
countries for United States dollars. While this eliminates our direct currency
risk in such markets, it increases our credit risk because if a local currency
is devalued significantly it becomes more expensive for customers in that market
to purchase our products in United States dollars. We currently do not enter
into third party hedges to protect against foreign currency exposure.
OUR RESEARCH AND DEVELOPMENT ACTIVITIES INVOLVE THE CONTROLLED USE OF
POTENTIALLY HARMFUL BIOLOGICAL MATERIALS AS WELL AS HAZARDOUS MATERIALS,
CHEMICALS AND VARIOUS RADIOACTIVE COMPOUNDS.
We cannot completely eliminate the risk of accidental contamination or
injury from the use, storage, handling or disposal of these materials. In the
event of contamination or injury, we could be held liable for damages that
result. Any liability could exceed our resources. We are subject to federal,
state and local laws and regulations governing the use, storage, handling and
disposal of these materials and specified waste products. The cost of compliance
with, or any potential violation of, these laws and regulations could be
significant. Any insurance we maintain may not be adequate to cover our losses.
WE ARE SUBJECT TO PRICE CONTROL RESTRICTIONS ON OUR PHARMACEUTICAL PRODUCTS IN
THE MAJORITY OF COUNTRIES IN WHICH WE OPERATE.
There is a risk that other jurisdictions may enact price control
restrictions, and that the restrictions that currently exist may be increased.
Our future sales and gross profit could be materially affected if we are unable
to obtain appropriate price increases.
OUR STOCKHOLDER RIGHTS PLAN AND ANTI-TAKEOVER PROVISIONS OF OUR CHARTER
DOCUMENTS COULD PROVIDE OUR BOARD OF DIRECTORS WITH THE ABILITY TO DELAY OR
PREVENT A CHANGE IN CONTROL OF US.
Our stockholder rights plan, provisions of our certificate of
incorporation and provisions of the Delaware General Corporation Law could
provide our board of directors with the ability to deter hostile takeovers or
delay, deter or prevent a change in control of us, including transactions in
which stockholders might otherwise receive a premium for their shares over then
current market prices.
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