Grifols(GIKLY) - 2022 Q4 - Annual Report

Financial Position and Revenue - As of December 31, 2022, the company had $2.3 billion and €1.3 billion of senior interest-bearing debt, with 37% of this debt bearing interest at variable rates [118]. - In 2022, €4,416.9 million, or 73%, of the company's net revenue of €6,064.0 million was denominated in U.S. dollars, exposing it to foreign currency exchange rate fluctuations [119]. - The company had approximately $2,313.9 million of U.S. dollar-denominated senior debt as of December 31, 2022 [120]. Operational Risks - A significant portion of the company's revenue is derived from plasma fractionation, and any disruption to its main facilities could materially affect revenue [121]. - The company relies on third parties for the sale, distribution, and delivery of its products, making it vulnerable to breaches or failures in these contracts [128]. - The company may face significant delays in obtaining regulatory approval for its product candidates, which could increase product development costs [133]. - The company’s operations are highly dependent on information technology systems, which are vulnerable to cybersecurity incidents that could disrupt business [139]. - The company’s clinical trials may be delayed due to unforeseen events, impacting the ability to obtain marketing approval for product candidates [137]. - The company’s product development costs may increase if there are delays in testing or approvals, potentially shortening the patent protection period [134]. Strategic Developments - The company acquired plasma collection centers from GC Pharma, BPL, and Kedrion, and entered into a plasma supply agreement with Haema AG in Hungary, as well as acquiring Biotest AG in 2022 [164]. - The company has implemented a cost savings plan for 2023 aimed at reducing headcount and improving efficiency in plasma procurement [164]. Regulatory and Compliance Challenges - The company faces potential penalties of up to €20 million or 4% of global revenues for noncompliance with GDPR regulations [145]. - The company is subject to evolving data privacy and security regulations, which could impose increased operational costs and require changes to business practices [141]. - The implementation of the Affordable Care Act (ACA) has led to significant changes in the U.S. healthcare industry, including a shift towards managed or value-based care, which could adversely impact financial performance [172]. - The 340B Program, which extends discounts to eligible entities, has been expanded under the ACA, increasing the number of qualified entities and potentially affecting financial performance due to pricing pressures [173]. - Regulatory pressures and government constraints on pricing and reimbursement are expected to continue, potentially leading to negative impacts on business operations [175]. - Non-compliance with laws governing sales and marketing could result in significant penalties, including fines and exclusion from federal programs, adversely affecting business operations [183]. - The company faces challenges in obtaining timely regulatory approvals for product commercialization outside the United States, which may hinder market expansion [189]. - The company is subject to various cost-containment measures that could adversely affect pricing and reimbursement for its products, impacting financial results [193]. Intellectual Property and Litigation Risks - The company’s success is heavily reliant on obtaining and maintaining intellectual property protection, particularly for its purification processes [147]. - The company may face substantial costs and operational disruptions due to potential patent litigation and other intellectual property disputes [159]. - The company’s patents may not provide sufficient protection against competitors, as many patents relate to processes rather than products [148]. - The company may need to seek licenses from third parties to avoid patent infringement claims, which could impose additional costs [158]. - The company has taken steps to protect proprietary information through confidentiality agreements, but risks of unauthorized use remain [154]. Market and Shareholder Considerations - The Grifols Family and Scranton Enterprises B.V. control approximately 36% of Class A shares, allowing them significant influence over corporate decisions [209]. - The market price of Class B ADSs has experienced volatility, trading between $5.95 and $19.78 since December 31, 2020, influenced by various market factors [212]. - Fluctuations in the exchange rate between the U.S. dollar and the euro may increase the risk and volatility of the company's ADSs and shares [215]. - Existing shareholders generally entitled to subscription rights under Spanish law for future capital increases, unless waived [216]. - Holders of Class B shares typically do not have voting rights on capital increase resolutions [216]. - U.S. holders of ADSs may face dilution if preemptive rights are not exercised due to registration issues [217]. - The company will evaluate costs and liabilities associated with registration requirements during any rights offering [218]. - No assurance that the company will comply with registration requirements for subscription rights [219]. - If rights are not exercised or sold, they may lapse without value for ADS holders [219]. - ADS holders may face limitations on the transfer of their ADSs due to depositary policies [221].