AbbVie 2013 Annual Report Download - page 25

AbbVie is dependent on wholesale distributors for distribution of its products in the United States and,
accordingly, its results of operations could be adversely affected if they encounter financial difficulties.
In 2013, three wholesale distributors—AmerisourceBergen Corporation, Cardinal Health, Inc. and
McKesson Corporation—accounted for substantially all of AbbVie’s sales in the United States. If one
of its significant wholesale distributors encounters financial or other difficulties, such distributor may
decrease the amount of business that it does with AbbVie, and AbbVie may be unable to collect all the
amounts that the distributor owes it on a timely basis or at all, which could negatively impact AbbVie’s
business and results of operations.
Changes in the terms of rebate and chargeback programs, which are common in the pharmaceuticals
industry, could have a material adverse effect on AbbVie’s operations.
Rebates related to government programs, such as fee-for-service Medicaid or Medicaid managed
care programs, arise from laws and regulations. AbbVie cannot predict if additional government
initiatives to contain health care costs or other factors could lead to new or modified regulatory
requirements that include higher or incremental rebates or discounts. Other rebate and discount
programs arise from contractual agreements with private payers. Various factors, including market
factors and the ability of private payers to control patient access to products, may provide payers the
leverage to negotiate higher or additional rebates or discounts that could have a material adverse effect
on AbbVie’s operations.
AbbVie has debt obligations that could adversely affect its business and its ability to meet its obligations.
The amount of debt that AbbVie has incurred and intends to incur could have important
consequences to AbbVie and its investors. These consequences include, among other things, requiring a
portion of AbbVie’s cash flow from operations to make interest payments on this debt and reducing the
cash flow available to fund capital expenditures and other corporate purposes and to grow AbbVie’s
business. To the extent that AbbVie incurs additional indebtedness, these risks could increase. In
addition, AbbVie’s cash flow from operations may not be sufficient to repay all of the outstanding debt
as it becomes due, and AbbVie may not be able to borrow money, sell assets, or otherwise raise funds
on acceptable terms, or at all, to refinance its debt.
AbbVie may need additional financing in the future to meet its capital needs or to make opportunistic
acquisitions, and such financing may not be available on favorable terms, if at all, and may be dilutive to
existing stockholders.
AbbVie may need to seek additional financing for its general corporate purposes. For example, it
may need to increase its investment in research and development activities or need funds to make
acquisitions. AbbVie may be unable to obtain any desired additional financing on terms favorable to it,
if at all. If AbbVie loses its investment grade credit rating or adequate funds are not available on
acceptable terms, AbbVie may be unable to fund its expansion, successfully develop or enhance
products, or respond to competitive pressures, any of which could negatively affect AbbVie’s business.
If AbbVie raises additional funds through the issuance of equity securities, its stockholders will
experience dilution of their ownership interest. If AbbVie raises additional funds by issuing debt or
entering into credit facilities, it may be subject to limitations on its operations due to restrictive
covenants. Failure to comply with these covenants could adversely affect AbbVie’s business.
AbbVie depends on information technology and a failure of those systems could adversely affect AbbVie’s
business.
AbbVie relies on sophisticated information technology systems to operate its business. These
systems are potentially vulnerable to malicious intrusion, random attack, loss of data privacy, or
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