Grifols(GIKLY) - 2020 Q4 - Annual Report

Financial Risks - As of December 31, 2020, the company had $2.5 billion and €1.3 billion of senior interest-bearing debt, with 53.9% of this debt bearing interest at variable rates [110]. - In 2020, €4.1 billion, or 76%, of the company's net revenue of €5.3 billion was denominated in U.S. dollars, exposing the company to foreign currency exchange rate fluctuations [111]. - The company has approximately $2.5 billion of U.S. dollar denominated senior debt as of December 31, 2020 [112]. - The market price of Class B ADSs may be volatile due to various factors, including market expectations and actual or anticipated fluctuations in financial performance [191][197]. - Fluctuations in the exchange rate between the U.S. dollar and the euro may impact the value of ADSs and shares, increasing volatility [192][194]. Regulatory and Compliance Challenges - The company is subject to complex and evolving data privacy regulations, which could impose increased operational costs and require changes to business practices [131]. - Noncompliance with data privacy laws such as GDPR could result in penalties of up to €20 million or 4% of global revenues [133]. - The company may experience significant delays in obtaining regulatory approvals for its product candidates, impacting its ability to commercialize products [123]. - The company is subject to government regulations that mandate pricing controls and reimbursement pressures, which could negatively impact financial performance [154]. - The implementation of the ACA has led to significant changes in the healthcare industry, including a shift towards managed care, which may adversely affect the company’s operations [155]. - The company must comply with the 340B Program, which requires extending discounts and could impact reimbursement rates for its products [156]. - The regulatory approval process for biosimilars in the U.S. remains lengthy and costly, with a new abbreviated pathway introduced under the ACA to expedite approvals [161]. - The FDA mandates that no biosimilar application can be accepted for review until four years after the reference product's first licensing, and approval cannot be effective until 12 years post-licensing [162]. - The ACA's Patient-Centered Outcomes Research Institute could influence reimbursement levels for therapies deemed less cost-effective, potentially impacting financial results [163]. - Companies face significant penalties for non-compliance with the 340B Program, with fines up to $5,000 for each instance of overcharging covered entities [168]. - The ACA's Physician Payment Sunshine Act requires detailed reporting of financial relationships with healthcare providers, imposing additional compliance costs [173]. - The company has implemented extensive compliance programs to adhere to healthcare laws, but there is no guarantee against investigations or penalties by regulatory agencies [180]. Operational Risks - A significant portion of the company's revenue is derived from plasma fractionation or products manufactured at key facilities, which could be adversely affected by accidents or force majeure events [113]. - The company relies on third parties for the sale, distribution, and delivery of its products, which could impair its business if these parties fail to perform [118]. - The company may face significant delays and increased costs in product development due to the need for extensive preclinical tests and clinical trials [121]. - The company is highly dependent on third-party suppliers for key components and materials, which could disrupt production if these suppliers fail to deliver [115]. - The company may incur substantial costs from patent litigation or proceedings, which could adversely affect its competitive position in the marketplace [147]. - The company is exposed to risks from potential conflicts of interest between principal shareholders and other shareholders [189]. - The company maintains workers' compensation insurance, but it may not provide adequate coverage against potential liabilities from hazardous materials [184]. - Future changes in federal, state, local, or foreign laws may require operational updates and incur unforeseen costs [185]. - The company may face additional costs and liabilities due to changing regulatory requirements, which could materially affect operations [181]. Intellectual Property Risks - The company relies heavily on intellectual property protection for its technology and products, particularly in purification processes, which may be challenged or invalidated, impacting competitive advantage [135]. - The company’s patents may not provide sufficient protection against competitors, and the uncertainty in biotechnology patenting could limit its ability to enforce rights [137]. Governance and Control Risks - The Grifols Family and Scranton Enterprises B.V. own approximately 36% of Class A shares, which exercise 100% voting control, potentially influencing corporate decisions [189]. - There is a risk of material weaknesses in internal control over financial reporting, which could adversely affect the reliability of financial information and market confidence [186][188]. - The company may not comply with registration requirements for subscription rights, potentially leading to dilution for ADS holders [196][199].