929987--2/22/2006--GUIDANT

related topics

{product, liability, claim}

{financial, litigation, operation}

{operation, international, foreign}

{property, intellectual, protect}

{regulation, government, change}

{product, candidate, development}

{product, market, service}

Since June of 2005, we have issued a number of product advisories to physicians concerning our defibrillator and pacemaker systems due to reported adverse events and malfunctions that have adversely impacted our sales and market share and could continue to have an adverse effect on our business, financial condition and results of operations. The FDA, the US Department of Justice, the Securities and Exchange Commission (SEC) and various state agencies are conducting, and other governmental entities may commence, investigations of Guidant in connection with our 2005 product communications which could have an adverse effect on our business, financial condition and results of operations. We are subject to extensive domestic and foreign medical device regulation which may impede or hinder the approval process for our products and, in some cases, may not ultimately result in approval or may result in the recall or seizure of previously approved products. We may not meet regulatory quality standards applicable to our manufacturing processes, which could have an adverse effect on our business, financial condition and results of operations. Pending and future patent litigation could be costly and disruptive to our business. We may not be able to effectively protect our intellectual property rights which could have an adverse effect on our business, financial condition and results of operations. Pending and future product liability claims and other litigation, including private securities litigation and shareholder derivative suits, may adversely impact our business, financial condition, results of operations, reputation and ability to attract and retain customers. We face intense competition and may not be able to keep pace with the rapid technological changes in the medical devices industry which could have an adverse effect on our business, financial condition and results of operations. Our future growth is dependent upon the development of new products, which requires significant research and development, clinical trials and regulatory approvals, all of which are very expensive and time-consuming and may not result in a commercially viable product. Healthcare cost containment pressures and legislative or administrative reforms resulting in restrictive reimbursement practices of third-party payers or preferences for alternate therapies could decrease the demand for our products, the prices that customers are willing to pay for those products and the number of procedures performed using our devices, which could have an adverse effect on our business, financial condition and results of operations. Consolidation in the healthcare industry could lead to demands for price concessions or to the exclusion of some suppliers from certain of our significant market segments which could have an adverse effect on our business, financial condition and results of operations. Because a portion of our future growth is expected to come from international operations, changes in international economic or regulatory conditions could have a material impact on our business, financial condition and results of operations.

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929987--2/22/2006--GUIDANT_CORP