Quest Diagnostics 2013 Annual Report Download - page 35

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Adverse results in material litigation could have an adverse financial impact and an adverse impact on our client base
and reputation.
We are involved in various legal proceedings arising in the ordinary course of business including, among other things,
disputes as to intellectual property, professional liability and employee-related matters, as well as inquiries from governmental
agencies and Medicare or Medicaid carriers. Some of the proceedings against us involve claims that are substantial in amount
and could divert management's attention from operations. The proceedings also may result in substantial monetary damages, as
well as damage to our reputation, and decrease the demand for our services and products, all of which could have a material
adverse effect on our business. We do not have insurance or are substantially self-insured for a significant portion of any
liabilities with respect to some of these claims. The ultimate outcome of the various proceedings or claims could have a
material adverse effect on our financial condition, results of operations or cash flows in the period in which the impact of such
matters is determined or paid.
Our operations may be adversely impacted by the effect of trends in utilization of the U.S. healthcare system.
Our operations may be adversely impacted by the effects of trends in the utilization of the healthcare system in the
United States. Trends in the utilization of the U.S. healthcare system can be influenced by such factors as unemployment,
under-employed workers, decisions to delay medical care and increased patient financial responsibility for medical care.
Declining utilization of the U.S. healthcare system may result in a decline in the number of patients who seek clinical testing
services. These matters could have a material adverse effect on our business and our consolidated financial condition, results of
operations and cash flows.
The failure to successfully commercialize our development state drug assets may have a material adverse effect on our
business and results of operations.
As a result of our 2011 acquisition of Celera, we have an interest in non-commercial, development state drug assets,
including through a license agreement with Merck & Co. Inc. and small molecule drug discovery and development programs
sold by Celera to Pharmacyclics Inc. in 2006. We are entitled to receive milestone payments based on development progress
for each potential product and royalty payments from the sale of products, if any, resulting from these programs. However, we
have no direct control over the amount or timing of resources devoted to developing or commercializing potential products.
Developing and commercializing new products includes inherent risks and uncertainties. New product candidates that appear
promising in development may fail to reach the market or may have only limited commercial success because of efficacy or
safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory approvals, limited scope
of approved uses, difficulty or excessive costs to manufacture, the failure to establish or maintain intellectual property rights, or
the infringement of the patents or intellectual property of others. As a result, we cannot state with certainty when or whether
any products under development will be launched or whether any products will be commercially successful. In addition, even
if some milestones are met, there is no assurance that any programs will result in any product sales that would generate royalty
payments to us.
If we fail to comply with the requirements of our Corporate Integrity Agreement, we could be subject to suspension or
termination from participation in federal healthcare programs and substantial monetary penalties.
As part of a settlement with the U.S. Department of Justice and other federal government agencies, in April 2009 we
entered into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of
Inspector General. If we fail to comply with our obligations under the Corporate Integrity Agreement, which expires in April
2014, we could be suspended or terminated from participating in certain federal healthcare programs and subject to substantial
monetary penalties.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
Some statements and disclosures in this document are forward-looking statements. Forward-looking statements
include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as
“may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan” or “continue.” These forward-looking statements
are based on our current plans and expectations and are subject to a number of risks and uncertainties that could cause our plans
and expectations, including actual results, to differ materially from the forward-looking statements. Investors are cautioned not
to unduly rely on such forward-looking statements when evaluating the information presented in this document. The following
important factors could cause our actual financial results to differ materially from those projected, forecasted or estimated by us
in forward-looking statements: