| ABBOTT LABORATORIES ITEM 1A RISK FACTORS Abbott may acquire other businesses, license rights to technologies or products, form alliances, or dispose of or spin-off businesses, which could cause it to incur significant expenses and could negatively affect profitability |
| Abbott may pursue acquisitions of complementary businesses, technology licensing arrangements, and strategic alliances to expand its product offerings and geographic presence as part of its business strategy |
| Abbott may not complete these transactions in a timely manner, on a cost-effective basis, or at all, and may not realize the expected benefits of any acquisition, license arrangement, or strategic alliance |
| Other companies may compete with Abbott for these strategic opportunities |
| Further, even if Abbott is successful in making the acquisition, the products and technologies that are acquired may not be successful or may require significantly greater resources and investments than originally anticipated |
| Abbott may not be able to integrate acquisitions successfully into its existing business and could incur or assume significant debt and unknown or contingent liabilities |
| Abbott could also experience negative effects on its reported results of operations from acquisition-related charges, amortization of expenses related to intangibles and charges for impairment of long-term assets |
| These effects, individually or in combination, could cause a deterioration of Abbottapstas credit rating and result in increased borrowing costs and interest expense |
| Abbott could experience difficulties in integrating geographically separated organizations, systems and facilities, and personnel with diverse backgrounds |
| Integration of an acquired business also may require management resources that otherwise would be available for ongoing development of Abbottapstas existing business |
| Abbott may also dispose of or spin-off some of its businesses |
| Abbott may not complete these transactions in a timely manner, or at all, and may not realize their expected benefits |
| 9 _________________________________________________________________ The expiration of patent protection and licenses may affect Abbottapstas future revenues and operating income |
| Many of Abbottapstas businesses rely on patent and trademark and other intellectual property protection |
| Although most of the challenges to Abbottapstas intellectual property have come from other businesses, governments may also challenge intellectual property protections |
| To the extent Abbottapstas intellectual property is successfully challenged, invalidated, or circumvented or to the extent it does not allow Abbott to compete effectively, Abbottapstas business will suffer |
| To the extent that countries do not enforce Abbottapstas intellectual property rights or require compulsory licensing of its intellectual property, Abbottapstas future revenues and operating income will be reduced |
| Abbottapstas principal patents and trademarks are described in greater detail in the sections captioned, "e Patents, Trademarks, and Licenses "e and "e Financial Review, "e and litigation regarding these patents is described in the section captioned "e Legal Proceedings "e |
| Competitors &apos intellectual property may prevent Abbott from selling its products or have a material adverse effect on Abbottapstas future profitability and financial condition |
| Competitors may claim that an Abbott product infringes upon their intellectual property |
| A successful claim of patent or other intellectual property infringement against Abbott could adversely affect Abbottapstas profitability or financial condition, in some cases materially |
| Abbott cannot assure that it does not, in fact, infringe upon otherapstas intellectual property |
| Resolving an intellectual property infringement claim can be costly and time consuming and may require Abbott to enter into royalty or license agreements |
| If this should be necessary, Abbott cannot guarantee that it would be able to obtain royalty or license agreements on commercially reasonable terms |
| A successful claim of patent or other intellectual property infringement could subject Abbott to significant damages or an injunction preventing the manufacture, sale or use of affected Abbott products |
| Any of these events could have a material adverse effect on Abbottapstas profitability and financial condition |
| In the United States and other countries, access to and the cost of human health care products continues to be subject to downward pressure on prices |
| Cost-containment efforts by the government and private organizations are described in greater detail in the section captioned "e Regulation "e |
| In markets outside the United States, Abbottapstas businesses have experienced downward pressure on product pricing |
| Many countries, directly or indirectly, through limitations on reimbursement or availability, control the selling price of most health care products |
| To the extent these cost containment efforts are not offset by greater patient access to healthcare or other factors, Abbottapstas future revenues and operating income will be reduced |
| Abbott is subject to numerous governmental regulations and it can be costly to comply with these regulations and to develop compliant products and processes |
| Abbottapstas products are subject to rigorous regulation by the Federal Food and Drug Administration, and numerous other national, supranational, federal and state authorities |
| The process of obtaining regulatory approvals to market a drug or medical device, particularly from the FDA and certain governmental authorities outside the United States, can be costly and time-consuming, and approvals might not be granted for future products on a timely basis, if at all |
| Regulation is not static |
| The suspension, revocation, or adverse amendment of the authority necessary for manufacture, marketing, or sale, and the imposition of additional or different regulatory requirements, such as those affecting labeling can also occur |
| Delays in the receipt of, or failure to obtain approvals for, future products could result in delayed realization of product revenues and in substantial additional costs |
| In addition, no assurance can be given that Abbott will remain in compliance with applicable FDA and other regulatory requirements once clearance or approval has been obtained for a product |
| These 10 _________________________________________________________________ requirements include, among other things, regulations regarding manufacturing practices, product labeling and advertising and postmarketing reporting, including adverse event reports and field alerts due to manufacturing quality concerns |
| Many of Abbottapstas facilities and procedures and those of Abbottapstas suppliers are subject to ongoing regulation, including periodic inspection by the FDA and other regulatory authorities |
| For example, developers and manufacturers of health care products, including pharmaceutical products, medical devices, and nutritional products must comply with detailed regulations governing current good manufacturing, laboratory and clinical practices, including requirements relating to quality control and quality assurance |
| Abbott must incur expense and spend time and effort to ensure compliance with these complex regulations |
| In the past, Abbottapstas business has received notices alleging violations of these regulations, and Abbott has modified practices in response to these notices |
| Abbottapstas manufacturing facilities and those of Abbottapstas suppliers could be subject to significant adverse regulatory actions in the future |
| These possible regulatory actions could include warning letters, fines, damages, injunctions, civil penalties, recalls, seizures of Abbottapstas products and criminal prosecution |
| These actions could result in, among other things, substantial modifications to Abbottapstas business practices and operations; refunds, recalls or seizures of Abbottapstas products; a total or partial shutdown of production in one or more of Abbottapstas facilities while Abbott remedies the alleged violation; the inability to obtain future pre-market clearances or approvals; and withdrawals or suspensions of current products from the market |
| Any of these events, in combination or alone, could disrupt Abbottapstas business and have a material adverse effect on Abbottapstas revenues, profitability and financial condition |
| Laws and regulations affecting government benefit programs could impose new obligations on Abbott, require Abbott to change its business practices, and restrict its operations in the future |
| Abbottapstas industry is also subject to various federal and state laws pertaining to government benefit program reimbursement, price reporting and regulation, and health care fraud and abuse, including anti-kickback and false claims laws, the Medicaid Rebate Statute, the Veterans Health Care Act and individual state laws relating to pricing |
| Violations of these laws may be punishable by criminal and/or civil sanctions, including, in some instances, substantial fines, imprisonment and exclusion from participation in federal and state health care programs, including Medicare, Medicaid, and Veterans Administration health programs |
| These laws and regulations are broad in scope and they are subject to evolving interpretations, which could require Abbott to incur substantial costs associated with compliance or to alter one or more of its sales or marketing practices |
| In addition, violations of these laws, or allegations of such violations, could disrupt Abbottapstas business and result in a material adverse effect on Abbottapstas revenues, profitability and financial condition |
| If Abbott does not introduce new products in a timely manner, Abbottapstas products may become obsolete over time, customers may not buy Abbottapstas products, and Abbottapstas revenue and profitability may decline |
| Demand for Abbottapstas products may change in ways Abbott does not anticipate |
| This could occur, for example, due to changing customer needs, the introduction by others of new products and technologies, or changing industry standards |
| Without the timely introduction of new products and enhancements, Abbottapstas products may become obsolete over time, causing Abbottapstas revenue and operating results to suffer |
| Even if Abbott succeeds in creating new product candidates, these candidates may not become commercially successful products |
| The success of Abbottapstas new products will depend on a variety of factors, including Abbottapstas ability to: • properly anticipate and satisfy customer needs; • innovate, develop, and manufacture new products in an economical and timely manner; • differentiate Abbottapstas offerings from competitors &apos offerings; • achieve positive clinical outcomes for new products; 11 _________________________________________________________________ • meet safety requirements and other regulatory requirements of government agencies; • avoid infringing the proprietary rights of third parties; and • establish and maintain its intellectual property rights |
| Even if Abbott successfully develops new products or enhancements or new generations of Abbottapstas existing products, these new products or enhancements or new generations of Abbottapstas existing products may be quickly rendered obsolete by changing customer preferences or the introduction by Abbottapstas competitors of products embodying new technologies or features |
| Finally, innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice, the need for regulatory clearance, and uncertainty over third-party reimbursement |
| The manufacture of many of Abbottapstas products is a highly exacting and complex process, and if Abbott or one of its suppliers encounters problems manufacturing products, Abbottapstas business could suffer |
| The manufacture of many of Abbottapstas products is a highly exacting and complex process, due in part to strict regulatory requirements, which govern their manufacture |
| Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, natural disasters and environmental factors |
| If problems arise during the production of a batch of product, that batch of product may have to be discarded |
| This could, among other things, lead to increased costs, lost revenue, damage to customer relations, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products |
| If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred |
| To the extent Abbott or one of its suppliers experiences significant manufacturing problems, this could have a material adverse effect on Abbottapstas revenues and profitability |
| The international nature of Abbottapstas business subjects it to additional business risks that may cause its revenue and profitability to decline |
| Abbottapstas business is subject to risks associated with doing business internationally |
| Sales outside of the United States make up more than 40prca of Abbottapstas net sales |
| The risks associated with Abbottapstas operations outside the United States include: • changes in foreign medical reimbursement policies and programs; • multiple foreign regulatory requirements that are subject to change and that could restrict Abbottapstas ability to manufacture and sell its products; • differing local product preferences and product requirements; • fluctuations in foreign currency exchange rates and in interest rates; • trade protection measures and import or export licensing requirements; • difficulty in establishing, staffing, and managing foreign operations; • differing labor regulations; • potentially negative consequences from changes in or interpretations of tax laws; • political and economic instability; • inflation, recession, interest rate fluctuations, and actual or anticipated military or political conflicts; and • diminished protection of intellectual property in some countries |
| 12 _________________________________________________________________ These risks may, individually or in the aggregate, have a material adverse effect on Abbottapstas revenues and profitability |
| Significant safety issues could arise for Abbottapstas products, which could have a material adverse effect on Abbottapstas revenues and financial condition |
| All health care products, including pharmaceutical products, medical products, and nutritionals, receive regulatory approval based on data obtained in controlled clinical trials of limited duration |
| Following regulatory approval, these products will be used over longer periods of time in many patients |
| Investigators may also conduct additional, and perhaps more extensive, studies or studies for different indications |
| If new safety issues are reported, Abbott may be required to amend the conditions of use for a product |
| For example, Abbott may be required to provide additional warnings on a productapstas label or narrow its approved indication, either of which could reduce the productapstas market acceptance |
| If serious safety issues with an Abbott product arise, sales of the product could be halted by Abbott or by regulatory authorities |
| In addition, in the ordinary course of business, Abbott is the subject of product liability claims and lawsuits alleging that its products have resulted or could result in an unsafe condition or injury to patients |
| Product liability claims and lawsuits and safety alerts or product recalls, regardless of their ultimate outcome, may have a material adverse effect on Abbottapstas business and reputation and on Abbottapstas ability to attract and retain customers |
| Product liability claims could have a material adverse effect on Abbottapstas profitability and financial condition |
| Abbott faces significant competition and may not be able to compete effectively |
| Abbott competes with many companies ranging from other multinational companies to small start-up companies |
| Competition takes many forms, including responding to pricing pressures from managed care groups and government agencies, the development of new products by competitors having lower prices or superior performance or that are otherwise competitive with Abbottapstas current products, generic competition when Abbottapstas products lose their patent or regulatory protection, technological advances, patents and registrations obtained by competitors, and business combinations among Abbottapstas competitors or major customers |
| Abbottapstas present or future products could be rendered obsolete or uneconomical as the result of this competition |
| Abbottapstas failure to compete effectively could cause it to lose market share to its competitors and/or have a material adverse effect on its revenues and profitability |
| External economic forces, over which Abbott has no control, can have a material adverse effect on Abbottapstas future profitability and financial condition |
| Many external economic forces can affect Abbottapstas profitability and its financial condition |
| For example, to calculate its cost for pension and post-employment benefits, Abbott must use the long-term assumptions it has developed with the assistance of its actuaries |
| These include assumptions regarding the health care cost trend rate, discount (interest) rate, and the expected return on plan assets |
| Similarly, to determine its stock-based compensation costs, Abbott must develop assumptions regarding the volatility of Abbottapstas common shares, option life, the associated tax benefit, and discount (interest) rate |
| These assumptions are based on an analysis of external economic factors over which Abbott has no control |
| To the extent these factors change over time or actual results differ from these assumptions, Abbott may incur increased costs, some of which may be material |
| not limited to those identified under “Item 1A Risk Factors” of this Form 10-K and those listed below, may cause actual results to differ materially from current expectations, estimates, projections, forecasts and from past results |
| • Competitive factors, including: (i) pricing pressures, both in the United States and abroad, primarily from managed care groups and government agencies, (ii) the development of new products by competitors having lower prices or superior performance or that are otherwise competitive with Abbott’s current products, (iii) generic competition when Abbott’s products lose their patent or regulatory protection, (iv) technological advances, patents and registrations obtained by competitors, and (v) business combinations among Abbott’s competitors or major customers |
| • Difficulties and delays inherent in the development, manufacturing, marketing, or sale of products, including: (i) uncertainties in the United States Food and Drug Administration and foreign regulatory approval processes, (ii) delays in the receipt of or the inability to obtain required approvals, (iii) efficacy or safety concerns, (iv) the suspension, revocation, or adverse amendment of the authority necessary for manufacture, marketing, or sale, (v) the imposition of additional or different regulatory requirements, such as those affecting labeling, (vi) seizure or recall of products, (vii) the failure to obtain, the imposition of limitations on the use of, or the loss of patent and other intellectual property rights, (viii) loss of regulatory exclusivity, (ix) manufacturing or distribution problems, (x) restrictions on imports or exports, (xi) problems with licensors, suppliers, distributors, and business partners, and (xii) labor disputes, strikes, slow-downs or other forms of labor or union activity |
| • Governmental action including: (i) new laws, regulations and judicial and administrative decisions related to health care availability, method of delivery, or the method or amount of payment or reimbursement for health care products and services, (ii) changes in the United States Food and Drug Administration and foreign regulatory approval processes that may delay or prevent the approval of new products and result in lost market opportunity, (iii) new laws, regulations, and judicial and administrative decisions affecting pricing or marketing, and costs, and (iv) changes in the tax laws, regulations, and interpretations relating to Abbott’s operations, including laws related to the remittance of foreign earnings |
| • Changes in economic conditions over which Abbott has no control, including changes in the rate of inflation, business conditions, interest rates, foreign currency exchange rates, market value of Abbott’s equity investments, and the performance of investments held by Abbott’s employee benefit trusts |
| ______________________________________________________________________ • Changes in business and political conditions, including (i) war, political instability, terrorist attacks in the US and other parts of the world, the threat of future terrorist activity in the US and other parts of the world and related military action, (ii) natural disasters, and (iii) the cost and availability of insurance due to any of the foregoing events |
| • Changes in Abbott’s business units and investments and changes in the relative and absolute contribution of each to earnings and cash flow resulting from evolving business strategies and opportunities existing now or in the future, such as acquisitions, restructurings, dispositions, spin-offs or split-ups, including the spin-off of Hospira, Inc |
| • Changes in costs or expenses, including variations resulting from: (i) changes in product mix and changes in tax rates both in the United States and abroad, and (ii) the spin-off of Hospira, Inc |
| • Changes in the buying patterns of a major distributor, retailer, or wholesale customer resulting from buyer purchasing decisions, pricing, seasonality, or other factors |
| • Legal difficulties, any of which could preclude commercialization of products or adversely affect profitability, including: (i) claims asserting antitrust violations, (ii) claims asserting securities law violations, (iii) claims asserting violations of the Federal False Claims Act, Anti-Kickback Statute, or other violations in connection with Medicare and/or Medicaid reimbursement, (iv) claims asserting violations of the Prescription Drug Marketing Act, (v) derivative actions, (vi) product liability claims, (vii) disputes over intellectual property rights (including patents), (viii) environmental matters, (ix) adverse litigation decisions, (x) issues regarding compliance with any governmental consent decree, including the consent decree between Abbott and the United States Food and Drug Administration described in Abbott’s 2005 Form 10-K under the caption “Regulation,” and Abbott’s ability to successfully return diagnostic products affected by this consent decree to market, and (xi) issues regarding compliance with any corporate integrity agreements which generally impose certain training, auditing, and reporting obligations on a company |
| • Changes in accounting standards and interpretations thereof promulgated by the Financial Accounting Standards Board, the Securities and Exchange Commission or the American Institute of Certified Public Accountants |
| No assurance can be made that any expectation, estimate or projection contained in a forward-looking statement will be achieved or will not be affected by the factors cited above or other future events |
| Readers are cautioned not to place undue reliance on such statements, which speak only as of the date made |
| Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as the result of subsequent events or developments |
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