1444570--12/17/2010--Axcan_Intermediate_Holdings

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{property, intellectual, protect}

{product, liability, claim}

{regulation, change, law}

{operation, international, foreign}

{acquisition, growth, future}

{investment, property, distribution}

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The launch of a product that competes with our ursodiol product line in France could have a material adverse impact on our financial position, cash flows or overall trends in results of operations. Some of our key products face competition from generic or unbranded products. Future sales of our marketed products might be less than expected. The concentration of our product sales to only a few wholesale distributors increases the risk that we will not be able to effectively distribute our products if we need to replace any of these distributors, which would cause our sales to decline. Wholesaler buying patterns may change, and this could have a detrimental effect on our future revenue and financial condition. We use third parties to manufacture and test most of our products and product candidates. This may increase the risk of not having sufficient quantity of our products or product candidates, quantity at an acceptable cost or product with acceptable quality or in compliance with standards and specifications. This could adversely affect sales of our products or result in the clinical development or commercialization of our products or product candidates being delayed, prevented or impaired. We rely on our third-party manufacturers for compliance with applicable regulatory requirements. This may increase the risk of sanctions being imposed on us or on a manufacturer of our products or product candidates, which could result in our inability to obtain sufficient quantities of these products or product candidates. We rely on third parties to conduct, supervise and monitor our clinical trials, and those third parties may perform in an unsatisfactory manner, such as by failing to meet established deadlines for the completion of such trials. Our business could suffer as a result of adverse drug reactions to the products we market. The publication of negative results of studies or clinical trials may adversely impact our sales revenue. We may not be able to acquire or successfully integrate new products or businesses. Acquisitions that we may undertake will involve a number of inherent risks, any of which could cause us not to realize the anticipated benefits. There is no assurance that we will continue to be successful in our licensing and marketing operations. The success of our strategic investments, partnerships or development alliances depends upon the performance of the companies in which we invest, or with which we partner or co-develop products. Our operations could be disrupted if our information systems fail or if we are unsuccessful in implementing necessary upgrades. Our quarterly results may fluctuate. Our business depends on key scientific, sales and managerial personnel for continued success. RISKS RELATED TO OUR PANCREATIC ENZYME PRODUCTS (PEPs) Our ULTRASE MT and VIOKASE PEPs may never be approved in the U.S. If ULTRASE MT and VIOKASE are approved and relaunched, competition in the PEP market could be more intense than expected. If ULTRASE MT and VIOKASE are approved and relaunched, our future revenues and profitability will be adversely affected if governmental, private third-party payors and other third-party payors, including Medicare and Medicaid, do not sufficiently defray the cost of ULTRASE MT and VIOKASE to the consumer. RISKS RELATED TO REGULATORY MATTERS If our products fail in clinical studies or if we fail, or encounter difficulties, in obtaining regulatory approval for our new products or new indications of existing products or relaunching our PEPs, we will have expended significant resources for no return. We may find it difficult to achieve market acceptance of our PEPS or products in our product pipeline. Our business is subject to limitations imposed by government regulations. Regulatory approval for our currently marketed products is limited by the regulatory authorities to those specific indications and conditions for which clinical safety and efficacy have been demonstrated. Our approved products and pipeline products remain subject to ongoing regulatory requirements. If we fail to comply with these requirements, we could lose these approvals, and the sales of any such approved commercial products could be suspended. Our approved products and pipeline products remain subject to ongoing regulatory requirements. RISKS RELATED TO OUR INDUSTRY The pharmaceutical industry is highly competitive and is subject to rapid and significant change, which could render our products obsolete or uncompetitive. Pricing pressures from, and other measures taken by, third-party payors, including managed care organizations, government sponsored health-care systems and regulations relating to Medicare and Medicaid, Health Care and Education Reconciliation Act of 2010, pharmaceutical reimbursements and pricing in general could decrease our revenue The Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010, known together as the Affordable Care Act, enacted in the U.S in March 2010 contain several provisions that could impact our business. Uncertainties regarding the Affordable Care Act and third-party reimbursement may impair our ability to continue to sell our products or form collaborations. Our relationships with customers and payors are subject to applicable fraud and abuse and other health-care laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, and diminished profits and future earnings. The FDAAA may make it more difficult and costly for us to obtain regulatory approval of our product candidates and to produce, market and distribute our existing products. Changes in laws and regulations could affect our results of operations, financial position or cash flows. We may be subject to investigations or other inquiries concerning our compliance with reporting obligations under federal health-care program pharmaceutical pricing requirements. Future litigation and the outcome of current litigation may harm our business. Exposure relating to product liability claims may harm our business. RISKS RELATED TO INTELLECTUAL PROPERTY We rely on the intellectual property of others, and we may not be able to protect our own intellectual property. Litigation or third-party claims of intellectual property infringement could require substantial time and money to resolve. Unfavorable outcomes to these proceedings could limit our intellectual property rights and our activities. Our intellectual property rights might not afford us with meaningful protection. RISKS RELATED TO GENERAL ECONOMIC AND FINANCIAL CONDITIONS We are exposed to political, economic and other risks that arise from operating a multinational business. Currency exchange rate fluctuations may have a negative effect on our financial condition. We might be impacted by unfavorable decisions in proceedings related to future tax assessments. RISKS RELATED TO OUR INDEBTEDNESS We may need additional capital. Our substantial level of indebtedness could materially adversely affect our ability to generate sufficient cash to fulfill our obligations under our existing indebtedness, our ability to react to changes in our business and our ability to incur additional indebtedness to fund future needs. ($ in millions of dollars) We, including our subsidiaries, have the ability to incur substantially more indebtedness, including senior secured indebtedness. Restrictions imposed by the indentures governing the notes, our senior secured credit facilities and our other outstanding indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. Our note holders right to receive payments on the senior notes is effectively junior to the right of lenders who have a security interest in our assets to the extent of the value of those assets. Our ability to repay our debt is affected by the cash flow generated by our subsidiaries. Claims of note holders will be structurally subordinated to claims of creditors of certain of our subsidiaries that will not guarantee the notes. The lenders under our senior secured credit facilities have the discretion to release any guarantors under these facilities in a variety of circumstances, which will cause those guarantors to be released from their guarantees of the notes. If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the notes. We may not be able to repurchase the notes upon a change of control. Insolvency and fraudulent transfer laws and other limitations may preclude the recovery of payment under the notes and the guarantees. Enforcing our note holders rights under the guarantees entered into by certain of our foreign subsidiaries across multiple jurisdictions may be difficult. We are indirectly owned and controlled by the Sponsor, and the Sponsor s interests as equity holders may conflict with the interests of our note holders. Holders of secured notes may not be able to fully realize the value of their liens.

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1444570--12/17/2010--Axcan_Intermediate_Holdings_Inc.