| ALLERGAN INC Item 1A Risk Factors We operate in a rapidly changing environment that involves a number of risks |
| The following discussion highlights some of these risks and others are discussed elsewhere in this report |
| These and other risks could 16 _________________________________________________________________ [70]Table of Contents materially and adversely affect our business, financial condition, prospects, operating results or cash flows |
| The following risk factors are not an exhaustive list of the risks associated with our business |
| New factors may emerge or changes to these risks could occur that could materially affect our business |
| We operate in a highly competitive business |
| The pharmaceutical industry is highly competitive and requires an ongoing, extensive search for technological innovation |
| It also requires, among other things, the ability to effectively discover, develop, test and obtain regulatory approvals for products, as well as the ability to effectively commercialize, market and promote approved products, including communicating the effectiveness, safety and value of products to actual and prospective customers and medical professionals |
| Many of our competitors have greater resources than we have |
| This enables them, among other things, to make greater research and development investments and spread their research and development costs, as well as their marketing and promotion costs, over a broader revenue base |
| Our competitors may also have more experience and expertise in obtaining marketing approvals from the FDA and other regulatory authorities |
| In addition to product development, testing, approval and promotion, other competitive factors in the pharmaceutical industry include industry consolidation, product quality and price, product technology, reputation, customer service and access to technical information |
| It is possible that developments by our competitors could make our products or technologies less competitive or obsolete |
| Our future growth depends, in part, on our ability to develop products which are more effective |
| For instance, for our eye care products to be successful, we must be able to manufacture and effectively market those products and persuade a sufficient number of eye care professionals to use or continue to use our current products and the new products we may introduce |
| Glaucoma must be treated over an extended period and doctors may be reluctant to switch a patient to a new treatment if the patient’s current treatment for glaucoma remains effective |
| Sales of our existing products may decline rapidly if a new product is introduced by one of our competitors or if we announce a new product that, in either case, represents a substantial improvement over our existing products |
| Similarly, if we fail to make sufficient investments in research and development programs, our current and planned products could be surpassed by more effective or advanced products developed by our competitors |
| Until December 2000, Botox^® was the only neuromodulator approved by the FDA At that time, the FDA approved Myobloc^®, a neuromodulator formerly marketed by Elan Pharmaceuticals and now marketed by Solstice Neurosciences, Inc |
| is seeking FDA approval of its Dysport^® neuromodulator for certain therapeutic indications and approval of Dysport^®/Reloxin^® for cosmetic indications |
| While Beaufour Ipsen previously licensed Dysport^®/Reloxin^® to Inamed for the cosmetic indication in the United States, it will regain its licensed rights from Inamed in connection with our acquisition of Inamed |
| It is our belief that Beaufour Ipsen will likely relicense its rights to a partner in the United States, which license could include other geographic regions and indications |
| Beaufour Ipsen has marketed Dysport^® in Europe since 1991, prior to our European commercialization of Botox^® in 1992 |
| Also, Mentor Corporation is conducting clinical trials for a competing neuromodulator in the United States |
| In addition, we are aware of competing neuromodulators currently being developed and commercialized in Asia, Europe, South America and other markets |
| A Chinese entity received approval to market a botulinum toxin in China in 1997, and we believe that it has launched or is planning to launch its botulinum toxin product in other lightly regulated markets in Asia, South America and Central America |
| These lightly regulated markets may not require adherence to the FDA’s current Good Manufacturing Practice, or cGMP, regulations, or the regulatory requirements of the European Medical Evaluation Agency or other regulatory agencies in countries that are members of the Organization for Economic Cooperation and Development |
| Therefore, companies operating in these markets may be able to produce products at a lower cost than we can |
| In addition, Merz Pharmaceuticals received approval from German authorities for a botulinum toxin and launched its product in July 2005, and a Korean company is conducting Phase III clinical trials for a botulinum toxin in Korea |
| This product received exportation approval from Korean authorities in early 2005 |
| Our sales of Botox^® could be materially and negatively impacted by this competition or competition from other companies that might obtain FDA approval or approval from other regulatory authorities to market a neuromodulator |
| 17 _________________________________________________________________ [71]Table of Contents If our acquisition of Inamed is consummated, our principal competitor in the United States for breast implants will be Mentor Corporation |
| Mentor announced that it received an “approvable letter” from the FDA for its silicone breast implants in July 2005 |
| If Mentor receives approval to market and sell silicone breast implants in the United States before we do, their silicone breast implants would be the only approved silicone breast implants in the United States, giving Mentor a competitive advantage over us in the United States breast implant market, at least in the short term |
| In addition, Medicis Corporation began marketing Restylane^®, a dermal filler, in January 2004 |
| Through our purchase of Inamed, we will acquire Juvederm^®, a non-animal, hyaluronic acid-based dermal filler |
| Juvederm^® is not yet approved by the FDA for sale in the United States |
| Inamed began a clinical study of Juvederm^® in the United States during in the fourth quarter of 2004 and completed the filing of a premarket approval application with the FDA in December 2005 |
| We cannot assure you that Inamed will receive approval to market Juvederm^® in the United States, or if Juvederm^® is approved, that Juvederm^® will offer equivalent or greater facial aesthetic benefits to competitive dermal filler products, that it will be competitive in price or gain acceptance in the marketplace |
| We also face competition from generic drug manufacturers in the United States and internationally |
| For instance, Falcon Pharmaceuticals, Ltd, an affiliate of Alcon Laboratories, Inc, is currently attempting to obtain FDA approval for and to launch a brimonidine product to compete with our Alphagan^®P product |
| Changes in the consumer marketplace and economic conditions may adversely affect sales or product margins of Botox^® or Botox^® Cosmetic |
| Botox^® Cosmetic is a consumer product |
| If we fail to anticipate, identify or to react to competitive products or if consumer preferences in the cosmetic marketplace shift to other treatments for the temporary improvement in the appearance of moderate to severe glabellar lines, we may experience a decline in demand for Botox^® Cosmetic |
| In addition, the popular media has at times in the past produced, and may continue in the future to produce, negative reports and publicity regarding the efficacy, safety or side effects of Botox^® Cosmetic |
| Consumer perceptions of Botox^® Cosmetic may be negatively impacted by these reports and for other reasons, including the use of unapproved botulinum toxins that result in injury, which may cause demand to decline |
| Demand for Botox^® Cosmetic may also be materially adversely affected by changing economic conditions |
| Generally, the costs of cosmetic procedures are borne by individuals without reimbursement from their medical insurance providers or government programs |
| Individuals may be less willing to incur the costs of these procedures in weak or uncertain economic environments, and demand for Botox^® Cosmetic could be adversely affected |
| Changes in applicable tax laws may adversely affect sales or product margins of Botox^® or Botox^® Cosmetic |
| Because Botox^® and Botox^® Cosmetic are pharmaceutical products, we generally do not collect or pay state sales or other tax on sales of Botox^® or Botox^® Cosmetic |
| We could be required to collect and pay state sales or other tax associated with prior, current or future years on sales of Botox^® or Botox^® Cosmetic |
| In addition to any retroactive taxes and corresponding interest and penalties that could be assessed, if we were required to collect or pay state sales or other tax associated with current or future years on sales of Botox^® or Botox^® Cosmetic, our sales of, or our product margins on, Botox^® or Botox^® Cosmetic could be adversely affected due to the increased cost associated with those products |
| We could experience difficulties obtaining or creating the raw material needed to produce our products and interruptions in the supply of raw materials could disrupt our manufacturing and cause our sales and profitability to decline |
| The loss of a material supplier or the interruption of our manufacturing processes could adversely affect our ability to manufacture or sell many of our products |
| We obtain the specialty chemicals that are the active pharmaceutical ingredients in certain of our products from single sources, who must maintain compliance with the FDA’s cGMP regulations |
| If we experience difficulties acquiring sufficient quantities of these materials 18 _________________________________________________________________ [72]Table of Contents from our existing suppliers, or if our suppliers are found to be non-compliant with the cGMPs, obtaining the required regulatory approvals, including from the FDA, to use alternative suppliers may be a lengthy and uncertain process |
| A lengthy interruption of the supply of one or more of these materials could adversely affect our ability to manufacture and supply products, which could cause our sales and profitability to decline |
| In addition, the manufacturing process to create the raw material necessary to produce Botox^® is technically complex and requires significant lead-time |
| Any failure by us to forecast demand for, or to maintain an adequate supply of, the raw material and finished product could result in an interruption in the supply of Botox^® and a resulting decrease in sales of the product |
| If we consummate the Inamed acquisition, we will rely on a single supplier for silicone raw materials used in some of our products |
| We will also depend on third party manufacturers for silicone molded components and facial aesthetics product lines, with the exclusion of the bovine and human-based collagen products |
| These third party manufacturers must maintain compliance with FDA’s Quality System Regulation, or QSR, which sets forth the current good manufacturing practice requirements for medical devices |
| Any material reduction in our raw material supply or a failure by our third party manufacturers to maintain compliance with the QSR could result in decreased sales of our products and a decease in our revenues |
| Our future success depends upon our ability to develop new products, and new indications for existing products, that achieve regulatory approval for commercialization |
| For our business model to be successful, we must continually develop, test and manufacture new products or achieve new indications for the use of our existing products |
| Prior to marketing, these new products and product indications must satisfy stringent regulatory standards and receive requisite approvals or clearances from regulatory authorities in the United States and abroad |
| The development, regulatory review and approval, and commercialization processes are time consuming, costly and subject to numerous factors that may delay or prevent the development, approval or clearance, and commercialization of new products, including legal actions brought by our competitors |
| To obtain approval or clearance of new indications or products in the United States, we must submit, among other information, the results of preclinical and clinical studies on the new indication or product candidate to the FDA The number of preclinical and clinical studies that will be required for FDA approval varies depending on the new indication or product candidate, the disease or condition for which the new indication or product candidate is in development and the regulations applicable to that new indication or product candidate |
| Even if we believe that the data collected from clinical trials of new indications for our existing products or for our product candidates are promising, the FDA may find such data to be insufficient to support approval of the new indication or product |
| The FDA can delay, limit or deny approval of a new indication or product candidate for many reasons, including: • a determination that the new indication or product candidate is not safe and effective; • the FDA may interpret our preclinical and clinical data in different ways than we do; • the FDA may not approve our manufacturing processes or facilities; • the FDA may require us to perform post-marketing clinical studies; or • the FDA may change its approval policies or adopt new regulations |
| Products that we are currently developing, other future product candidates or new indications for our existing products may or may not receive the regulatory approvals necessary for marketing or may receive such approvals only after delay or unanticipated costs |
| Delays or unanticipated costs in any part of the process or our inability to obtain timely regulatory approval for our products, including those attributable to, among other things, our failure to maintain manufacturing facilities in compliance with all applicable regulatory requirements, including cGMPs and QSR, could cause our operating results to suffer and our stock price to decrease |
| We are also required to pass pre-approval reviews and plant inspections of our and our suppliers’ facilities to demonstrate our compliance with cGMPs and QSR Further, even if we receive FDA and other regulatory approvals for a new indication or product, the product may later exhibit adverse effects that limit or prevent its widespread use or that force us to withdraw the product from the market or to revise our labeling to limit the indications for which the product may be prescribed |
| In addition, even if we receive the necessary regulatory approvals, we cannot assure you that new 19 _________________________________________________________________ [73]Table of Contents products or indications will achieve market acceptance |
| Our future performance will be affected by the market acceptance of products such as Lumigan^®, Alphagan^® P, Combigan^tm, Restasis^®, Acular LS^®, Zymar^®, Botox^® and, if we consummate our acquisition of Inamed and, if approved by the FDA, Juvederm^® and breast implant products, as well as FDA approval of new indications for Botox^®, and new products such as our Lumigan^®/timolol combination, Posurdex^® and memantine |
| We cannot assure you that these or any other compounds or products that we are developing for commercialization will be approved by the FDA for marketing or that we will be able to commercialize them on terms that will be profitable, or at all |
| If any of our products cannot be successfully or timely commercialized, our operating results could be materially adversely affected |
| Our product development efforts may not result in commercial products |
| We intend to continue an aggressive research and development program |
| Successful product development in the pharmaceutical industry is highly uncertain, and very few research and development projects produce a commercial product |
| Product candidates that appear promising in the early phases of development, such as in early human clinical trials, may fail to reach the market for a number of reasons, such as: • the product candidate did not demonstrate acceptable clinical trial results even though it demonstrated positive preclinical trial results; • the product candidate was not effective in treating a specified condition or illness; • the product candidate had harmful side effects in humans or animals; • the necessary regulatory bodies, such as the FDA, did not approve the product candidate for an intended use; • the product candidate was not economical for us to manufacture and commercialize; • other companies or people have or may have proprietary rights to the product candidate, such as patent rights, and will not let us sell it on reasonable terms, or at all; • the product candidate is not cost effective in light of existing therapeutics; and • certain of our licensors or partners may fail to effectively conduct clinical development or clinical manufacturing activities |
| Several of our product candidates have failed or been discontinued at various stages in the product development process, including, but not limited to, our oral formulation of tazarotene for the treatment of moderate to very severe psoriasis |
| Of course, there may be other factors that prevent us from marketing a product |
| We cannot guarantee we will be able to produce commercially successful products |
| Further, clinical trial results are frequently susceptible to varying interpretations by scientists, medical personnel, regulatory personnel, statisticians, and others, which may delay, limit, or prevent further clinical development or regulatory approvals of a product candidate |
| Also, the length of time that it takes for us to complete clinical trials and obtain regulatory approval for product marketing has in the past varied by product and by the intended use of a product |
| We expect that this will likely be the case with future product candidates and we cannot predict the length of time to complete necessary clinical trials and obtain regulatory approval |
| If we are unable to obtain and maintain adequate protection for our intellectual property rights associated with the technologies incorporated into our products, our business and results of operations could suffer |
| Our success depends in part on our ability to obtain patents or rights to patents, protect trade secrets and other proprietary technologies and processes, operate without infringing upon the proprietary rights of others, and prevent others from infringing on our patents, trademarks, service marks and other intellectual property rights |
| Upon the expiration or loss of patent protection for a product, we can lose a significant portion of sales of that product in a very short period of time as other companies manufacture generic forms of our previously protected product at lower cost, without having had to incur significant research and development costs in formulating the product |
| Therefore, our future financial success may depend in part on obtaining patent protection for technologies incorporated into our products |
| We cannot assure you that such patents will be issued, or that any existing or future patents will be of commercial benefit |
| In addition, it is impossible to anticipate the breadth or degree of protection that any such patents will afford, and we cannot assure you that 20 _________________________________________________________________ [74]Table of Contents any such patents will not be successfully challenged in the future |
| If we are unsuccessful in obtaining or preserving patent protection, or if any of our products rely on unpatented proprietary technology, we cannot assure you that others will not commercialize products substantially identical to those products |
| Generic drug manufacturers are currently challenging the patents covering certain of our products and we expect that they will continue to do so in the future |
| We believe that the protection of our trademarks and service marks is an important factor in product recognition and in our ability to maintain or increase market share |
| If we do not adequately protect our rights in our various trademarks and service marks from infringement, their value to us could be lost or diminished |
| If the marks we use are found to infringe upon the trademark or service mark of another company, we could be forced to stop using those marks and, as a result, we could lose the value of those marks and could be liable for damages caused by an infringement |
| In addition to intellectual property protections afforded to trademarks, service marks and proprietary know-how by the various countries in which our proprietary products are sold, we seek to protect our trademarks, service marks and proprietary know-how through confidentiality agreements with third parties, including our partners, customers, employees and consultants |
| It is possible that these agreements will be breached or that they will not be enforceable in every instance, and that we will not have adequate remedies for any such breach |
| It is also possible that our trade secrets will become known or independently developed by our competitors |
| Third parties may challenge, invalidate, or circumvent our patents and patent applications relating to our products, product candidates and technologies |
| Challenges may result in potentially significant harm to our business |
| The cost of responding to these challenges and the inherent costs to defend the validity of our patents, including the prosecution of infringements and the related litigation, could be substantial and can preclude or delay commercialization of products |
| Such litigation also could require a substantial commitment of our management’s time |
| For certain of our product candidates, third parties may have patents or pending patents that they claim prevent us from commercializing certain product candidates in certain territories |
| Our success depends in part on our ability to obtain and defend patent rights and other intellectual property rights that are important to the commercialization of our products and product candidates |
| For additional information on our material patents see “Patents, Trademarks and Licenses” in Item 1 of Part I of this report, “Business |
| ” Importation of products from Canada and other countries into the United States may lower the prices we receive for our products |
| In the United States, some of our products are subject to competition from lower priced versions of our products and competing products from Canada, Mexico and other countries where government price controls or other market dynamics result in lower prices |
| Our products that require a prescription in the United States are often available to consumers in these markets without a prescription, which may cause consumers to further seek out our products in these lower priced markets |
| The ability of patients and other customers to obtain these lower priced imports has grown significantly as a result of the Internet, an expansion of pharmacies in Canada and elsewhere targeted to American purchasers, the increase in US-based businesses affiliated with Canadian pharmacies marketing to American purchasers, and other factors |
| These foreign imports are illegal under current US law, with the sole exception of limited quantities of prescription drugs imported for personal use |
| However, the volume of imports continues to rise due to the limited enforcement resources of the FDA and the US Customs Service, and there is increased political pressure to permit the imports as a mechanism for expanding access to lower priced medicines |
| In December 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 |
| This law contains provisions that may change US import laws and expand consumers’ ability to import lower priced versions of our products and competing products from Canada, where there are government price controls |
| These changes to US import laws will not take effect unless and until the Secretary of Health and Human Services certifies that the changes will lead to substantial savings for consumers and will not create a public health safety issue |
| The former Secretary of Health and Human Services did not make such a certification |
| However, it is possible that the current Secretary or a subsequent Secretary could make the certification in the future |
| As directed by Congress, a task force on drug importation 21 _________________________________________________________________ [75]Table of Contents recently conducted a comprehensive study regarding the circumstances under which drug importation could be safely conducted and the consequences of importation on the health, medical costs and development of new medicines for US consumers |
| The task force issued its report in December 2004, finding that there are significant safety and economic issues that must be addressed before importation of prescription drugs is permitted, and the current Secretary has not yet announced any plans to make the required certification |
| In addition, federal legislative proposals have been made to implement the changes to the US import laws without any certification, and to broaden permissible imports in other ways |
| Even if the changes to the US import laws do not take effect, and other changes are not enacted, imports from Canada and elsewhere may continue to increase due to market and political forces, and the limited enforcement resources of the FDA, the US Customs Service and other government agencies |
| For example, state and local governments have suggested that they may import drugs from Canada for employees covered by state health plans or others, and some already have implemented such plans |
| The importation of foreign products adversely affects our profitability in the United States |
| This impact could become more significant in the future, and the impact could be even greater if there is a further change in the law or if state or local governments take further steps to import products from abroad |
| Our business will continue to expose us to risks of environmental liabilities |
| Our product development programs and manufacturing processes involve the controlled use of hazardous materials, chemicals and toxic compounds |
| These programs and processes expose us to risks that an accidental contamination could lead to noncompliance with environmental laws, regulatory enforcement actions and claims for personal injury and property damage |
| If an accident occurs, or if we discover contamination caused by prior operations, including by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages and fines |
| The substantial unexpected costs we may incur could have a significant and adverse effect on our business and results of operations |
| We may experience losses due to product liability claims, product recalls or corrections |
| The design, development, manufacture and sale of our products involve an inherent risk of product liability or other claims by consumers and other third parties |
| We have in the past been, and continue to be, subject to various product liability claims and lawsuits |
| In addition, we have in the past and may in the future recall or issue field corrections related to our products due to manufacturing deficiencies, labeling errors or other safety or regulatory reasons |
| We cannot assure you that we will not in the future experience material losses due to product liability claims, lawsuits, product recalls or corrections |
| If we consummate our acquisition of Inamed, we will assume Inamed’s product liability risks |
| Inamed has in the past and continues to be a manufacturer of breast implant products |
| The manufacture and sale of breast implant products entails risk of product liability claims |
| Historically, other breast implant manufacturers that suffered such claims in the 1990’s were forced to cease operations or even to declare bankruptcy |
| Additionally, Inamed is seeking to reintroduce silicone breast implants in the United States |
| If it obtains FDA approval to market silicone breast implants for breast augmentation, such approval may come with significant restrictions and requirements, including the need for a patient registry, follow up MRI’s, and substantial Phase IV clinical trial commitments |
| We also face a substantial risk of product liability claims from our current eye care, neuromodulator and skin care products and, upon our acquisition of Inamed, may face similar risks associated with Inamed’s obesity intervention and facial aesthetics products |
| Additionally, our pharmaceutical and aesthetic products may cause, or may appear to cause, serious adverse side effects or potentially dangerous drug interactions if misused or improperly prescribed |
| We are subject to adverse event reporting regulations that require us to report to the FDA or similar bodies in other countries if our products are associated with a death or serious injury |
| These adverse events, among others, could result in additional regulatory controls, such as the performance of costly post-approval clinical studies or revisions to our approved labeling, which could limit the indications or patient population for our products or could even lead to the withdrawal of a product from the market |
| Furthermore, any adverse publicity associated with such an event could cause consumers to seek alternatives to our products, which may cause 22 _________________________________________________________________ [76]Table of Contents our sales to decline, even if our products are ultimately determined not to have been the primary cause of the event |
| Negative publicity concerning the safety of our products may harm our sales and we may be forced to withdraw products |
| Physicians and potential and existing patients may have a number of concerns about the safety of our products, including Botox^®, eye care pharmaceuticals, skin care products, and, if we consummate our acquisition of Inamed, breast implants, obesity intervention products and facial dermal fillers, whether or not such concerns have a basis in generally accepted science or peer-reviewed scientific research |
| Negative publicity — whether accurate or inaccurate — about our products, based on, for example, news about Botox^®, breast implant litigation or regulatory activities and developments, whether involving us or a competitor, or new government regulation, could materially reduce market acceptance of our products and could result in product withdrawals |
| In addition, significant negative publicity could result in an increased number of product liability claims, whether or not these claims have a basis in scientific fact |
| Furthermore, any adverse publicity associated with such an event could cause consumers to seek alternatives to our products, which may cause our sales to decline, even if our products are ultimately determined not to have been the primary cause of the event |
| Health care initiatives and other cost-containment pressures could cause us to sell our products at lower prices, resulting in decreased revenues |
| Some of our products are purchased or reimbursed by state and federal government authorities, private health insurers and other organizations, such as health maintenance organizations, or HMOs, and managed care organizations, or MCOs |
| Third party payors increasingly challenge pharmaceutical product pricing |
| The trend toward managed healthcare in the United States, the growth of organizations such as HMOs and MCOs, and various legislative proposals and enactments to reform healthcare and government insurance programs, including the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, could significantly influence the manner in which pharmaceutical products are prescribed and purchased, which could result in lower prices and/or a reduction in demand for our products |
| For example, effective January 1, 2006, the MMA established a new Medicare outpatient prescription drug benefit under Part D The MMA also established a competitive acquisition program, or CAP, in which physicians who administer drugs in their offices will be offered an option to acquire drugs covered under the Medicare Part B benefit from vendors who are selected in a competitive bidding process |
| Winning vendors have been selected based on criteria that include their bid price |
| Such cost containment measures and healthcare reforms could adversely affect our ability to sell our products |
| Under a new rule, implementation of the CAP will begin in July 2006 |
| Furthermore, individual states have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, importation from other countries and bulk purchasing |
| Legally mandated price controls on payment amounts by third party payors or other restrictions could negatively and materially impact our revenues and financial condition |
| We encounter similar regulatory and legislative issues in most countries outside the United States |
| We expect there will continue to be federal and state laws and/or regulations, proposed and implemented, that could limit the amounts that international, federal and state governments will pay for health care products and services |
| The extent to which future legislation or regulations, if any, relating to the health care industry or third-party coverage and reimbursement may be enacted or what effect such legislation or regulation would have on our business remains uncertain |
| Such measures or other health care system reforms that are adopted could have a material adverse effect on our ability to commercialize successfully our products or could limit or eliminate our spending on development projects and affect our ultimate profitability |
| In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their 23 _________________________________________________________________ [77]Table of Contents prescription drug and other healthcare programs |
| This can reduce demand for our products or put pressure on our product pricing, which could negatively affect our revenues and profitability |
| We are subject to risks arising from currency exchange rates, which could increase our costs and may cause our profitability to decline |
| We collect and pay a substantial portion of our sales and expenditures in currencies other than the US dollar |
| Therefore, fluctuations in foreign currency exchange rates affect our operating results |
| We cannot assure you that future exchange rate movements, inflation or other related factors will not have a material adverse effect on our sales, gross profit or operating expenses |
| We are subject to risks associated with doing business internationally |
| Our business is subject to certain risks inherent in international business, many of which are beyond our control |
| These risks include, among other things: • adverse changes in tariff and trade protection measures; • unexpected changes in foreign regulatory requirements, including quality standards and other certification requirements; • potentially negative consequences from changes in or interpretations of tax laws; • differing labor regulations; • changing economic conditions in countries where our products are sold or manufactured or in other countries; • differing local product preferences and product requirements; • exchange rate risks; • restrictions on the repatriation of funds; • political unrest and hostilities; • differing degrees of protection for intellectual property; and • difficulties in coordinating and managing foreign operations |
| Any of these factors, or any other international factors, could have a material adverse effect on our business, financial condition and results of operations |
| We cannot assure you that we can successfully manage these risks or avoid their effects |
| We may be subject to intellectual property litigation and infringement claims, which could cause us to incur significant expenses and losses or prevent us from selling our products |
| We cannot assure you that our products will not infringe patents or other intellectual property rights held by third parties |
| In the event we discover that we may be infringing third party patents or other intellectual property rights, we may not be able to obtain licenses from those third parties on commercially attractive terms or at all |
| We may have to defend, and have recently defended, against charges that we violated patents or the proprietary rights of third parties |
| Litigation is costly and time-consuming, and diverts the attention of our management and technical personnel |
| In addition, if we infringe the intellectual property rights of others, we could lose our right to develop, manufacture or sell products or could be required to pay monetary damages or royalties to license proprietary rights from third parties |
| An adverse determination in a judicial or administrative proceeding or a failure to obtain necessary licenses could prevent us from manufacturing or selling our products, which could harm our business, financial condition, prospects, results of |