Grifols(GIKLY) - 2024 Q4 - Annual Report

Financial Exposure and Risks - As of December 31, 2024, the company had $3.2 billion and €6.0 billion of senior interest-bearing debt, with 29.0% of this debt bearing interest at variable rates[130] - In 2024, €4.8 billion, or 66.6%, of the company's net revenue of €7.2 billion was denominated in U.S. dollars, exposing it to foreign currency exchange rate fluctuations[131] - The company has approximately $3.2 billion of U.S. dollar denominated senior debt, increasing its exposure to currency risk[132] - Fluctuations in the exchange rate between the U.S. dollar and the euro may increase volatility and affect the value of ADSs and shares[234] Operational Risks - The company relies on third parties for the sale, distribution, and delivery of its products, which could materially affect its business if these parties fail to perform[140] - The company’s manufacturing capacity could be significantly impacted by accidents or force majeure events affecting its main facilities, which could lead to substantial revenue loss[133] - The company’s reliance on a limited number of suppliers for key components may impair its manufacturing ability if these suppliers fail to deliver on time[136] - The company may face delays in product commercialization due to the need for extensive preclinical tests and clinical trials, which are costly and time-consuming[142] - The company’s product development costs may increase significantly if it experiences delays in testing or approvals, impacting its ability to commercialize products[145] - The company’s insurance may be insufficient to cover losses from accidents or force majeure events, potentially leading to unrecoverable inventory value[135] Regulatory and Compliance Risks - The company is subject to evolving data privacy regulations, such as GDPR and CCPA, which could increase operational costs and require changes to business practices[152] - The California Privacy Rights Act (CPRA) was enacted in November 2020 and became effective on January 1, 2023, expanding consumer control over personal information and increasing compliance obligations for businesses[154] - Noncompliance with the GDPR can result in penalties of up to €20 million or 4% of global company revenues, highlighting the financial risks associated with data protection regulations[156] - The implementation of GDPR, CCPA, and other data protection requirements is expected to impose additional costs on the company, potentially affecting its business operations[157] - The company is subject to extensive government regulation and oversight, which includes compliance with the Federal Food, Drug and Cosmetic Act and the Federal False Claims Act, potentially leading to criminal and civil penalties[200] - Non-compliance with the 340B Program can result in civil monetary penalties of up to $5,000 for each instance of overcharging covered entities, adversely affecting revenues and profitability[202] - The company must report detailed pricing information to CMS, and inaccuracies could lead to fines and sanctions, impacting business operations[205] - Regulatory approvals are required for marketing products outside the U.S., and delays in obtaining these approvals could hinder commercialization efforts[206] - The company is required to report payments to healthcare providers under the Physician Payment Sunshine Act, which imposes additional compliance costs[207] - Heightened scrutiny and government efforts to increase transparency around pharmaceutical pricing could impact the company's ability to negotiate sales contracts[212] - Proposed state legislation regulating drug pricing may impose additional pricing pressures on the company's products[213] Intellectual Property Risks - The company relies on a combination of patents and trade secrets to protect its intellectual property, but there is a risk that these protections may not be sufficient against competitors[163] - Patent litigation and other intellectual property proceedings can incur substantial costs, potentially affecting the company's ability to compete effectively in the marketplace[175] - The company may face claims related to the inadvertent use of proprietary information from former employers of its employees, which could lead to costly litigation[176] - The company has in-licensed certain patent rights, and its ability to compete may depend on the performance of third-party licensors under these agreements[177] - Breaching obligations under in-license agreements could result in termination of licenses, adversely affecting the company's ability to develop and commercialize products[178] Strategic Developments - The company has acquired multiple plasma collection centers, including Canadian Plasma Resources Corporation in 2023 and Haema Plasma Kft. in 2024, as part of its plasma acquisition strategy[179] - A cost savings plan has been implemented to reduce headcount and improve efficiency in plasma procurement, which may lead to unexpected charges and expenses[179] Environmental and Health Risks - Climate change poses risks to the company's operations, including physical risks like water scarcity and flooding, which could increase costs and disrupt the supply chain[182] - New regulatory requirements related to climate change may increase operating costs and necessitate additional investments in technology[183] - The company faces risks associated with environmental, health, and safety regulations, which could lead to substantial liabilities and compliance costs[219] Market and Shareholder Risks - The Grifols Family and Scranton Enterprises B.V. own approximately 36% of Class A shares, exercising 100% voting control, which may lead to conflicts of interest with other shareholders[226] - Class B ADSs traded as high as $11.56 on October 1, 2024, and as low as $5.47 on March 13, 2024, closing at $6.52 on April 10, 2025[227] - Negative publicity from short sellers has previously created downward pressure on the market price of shares, potentially impacting revenues and customer confidence[230] - The company may face significant expenses defending against lawsuits resulting from negative publicity, which could adversely affect financial condition and results of operations[232] - Ineffective internal controls could harm the company's ability to provide reliable financial reports, affecting market confidence and trading prices[224] - The company has been subject to scrutiny and investigations by the SEC or CNMV due to negative publicity, which could divert management's attention from operations[230] - Subscription rights may be unavailable to U.S. holders of shares or ADSs, potentially leading to substantial dilution[236] - The market price of shares may be influenced by various factors, including market expectations, actual fluctuations in results, and short selling techniques[229] - The company intends to evaluate costs and potential liabilities associated with registration requirements for any future rights offerings[239] Healthcare Industry Risks - The ongoing changes and uncertainties surrounding the Affordable Care Act (ACA) could materially affect the company's operations in the United States[188] - Government pressures on pricing and reimbursement in the healthcare industry may adversely impact the company's financial performance[190] - The 340B Program requires the company to extend discounts, and changes to this program could negatively affect financial results[191] - The company anticipates increasing pricing and cost containment pressures in the healthcare industry through 2025 and beyond, which may impact reimbursement rates[192] - Off-label uses of drug products may be reimbursed by Medicare, but reductions in reimbursement could adversely affect the company's financial performance[214]