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Item 1A. Risk Factors

2023-02-17 compared with 2022-02-18 · 51 added, 35 removed, 154 unchanged (36% of the section changed)

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Business and Operational Risks

Disruptions to Abbott’s global supply chain, which is large and complex, could negatively affect Abbott’s results of operations .

Abbott’s operations and performance depend on its ability to manage its large and complex global supply chain.

The COVID-19 pandemic has contributed to global supply chain disruptions, which have adversely impacted the cost and availability of certain raw materials, supplies, and services.

While Abbott has taken actions to offset some of these inflationary pressures in its supply chain, Abbott may not be able to completely offset all the increases in its operational costs.

Further, Abbott has experienced, and may continue to experience, availability issues with some services, operations, and materials used in its products.

To date, Abbott has been able to manage the various supply chain challenges without significant supply disruption or shortage for services, raw materials and supplies.

The future extent to which supply chain disruptions may have a material effect on Abbott’s operating results is uncertain.

A more detailed discussion on the supply chain disruptions impact on Abbott’s business is contained in the “Financial Review” section in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.

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, licensing arrangements, and strategic alliances, or dispose of or spin-off some of its businesses, as part of its business strategy.

From time to time, Abbott pursues acquisitions, licensing arrangements, and strategic alliances, or dispose of or spin-off some of its businesses, 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.

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Abbott depends on sophisticated information technology systems and maintains protected personal data, and a cyber attack or other breach affecting these information technology systems or protected data could have a material adverse effect on Abbott’s results of operations.

Similar to other large multi-national companies, the size and complexity of the information technology systems on which Abbott relies for both its infrastructure and products makes them susceptible to a cyber attack, malicious intrusion, breakdown, destruction, loss of data privacy, or other significant disruption.

Similar to other large multi-national companies, the size and complexity of the information technology systems on which Abbott relies for both its infrastructure and products make them susceptible to a cyber attack, malicious intrusion, breakdown, destruction, loss of data privacy, or other significant disruption.

These systems have been and are expected to continue to be the target of malware and other cyber attacks.

In addition, third party hacking attempts may cause Abbott’s information technology systems and related products, protected data, or proprietary information to be compromised or stolen.

A significant attack or other disruption could result in adverse consequences, including increased costs and expenses, manufacturing challenges or disruption, problems with product functionality, damage to customer relations, reputational damage, lost revenue, and legal or regulatory penalties.

A significant attack or other disruption could result in adverse consequences, including increased costs and expenses, manufacturing challenges or disruption, problems with product availability, functionality or safety, damage to customer relations, reputational damage, lost revenue, and legal or regulatory penalties.

Abbott also collects, manages and processes protected personal data, including protected health information, in connection with certain medical products and service offerings.

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There can be no assurance that these measures and efforts will prevent future attacks or other significant disruptions to any of the systems on which Abbott relies or that related product issues will not arise in the future.

Similarly, there can be no assurance that third party information technology providers with whom Abbott contracts will not suffer a significant attack or disruption that impacts customers like Abbott.

Similarly, there can be no assurance that third party information technology providers or other partners with whom Abbott contracts will not suffer a significant attack or disruption that impacts customers like Abbott.

Any significant breach, attack or other disruption involving Abbott’s systems or products could have a material adverse effect on Abbott’s business.

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Failure to launch successful new products or technologies, or new indications or uses for existing products, may cause Abbott’s products or technologies to become obsolete, causing Abbott’s revenues and operating results to suffer.

The manufacture of many of Abbott’s products is a highly exacting and complex process, and if Abbott or one of its suppliers encounters problems manufacturing products, Abbott’s business could suffer.

The manufacture of many of Abbott's products is a highly exacting and complex process, and if Abbott or one of its suppliers or manufacturers encounters problems manufacturing products, Abbott’s business could suffer.

The manufacture of many of Abbott’s products is a highly exacting and complex process, due in part to strict regulatory requirements.

Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials or the global supply chain, cyber attacks, natural disasters, and environmental factors.

Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials or the global supply chain, failure to meet product specifications, cyber attacks, natural disasters, and environmental factors.

In addition, single suppliers are currently used for certain products and materials.

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If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred.

Any of these events 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 lots, batches or products.

To the extent Abbott or one of its suppliers experiences significant manufacturing problems, this could have a material adverse effect on Abbott’s revenues and profitability.

Any of these events could, among other things, lead to increased costs, lost revenue, damage to customer relations, reputational damage, time and expense spent investigating the cause and remediating the problem, if any, a production stoppage at a manufacturing facility, and depending on the cause, similar losses with respect to other lots, batches or products.

To the extent Abbott or one of its suppliers or manufacturers experiences significant manufacturing problems, this could have a material adverse effect on Abbott’s revenues and profitability.

Abbott has significant indebtedness, which could adversely affect its business, including decreasing its business flexibility.

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Legal and Regulatory Risks

Abbott is subject to numerous governmental regulations and it can be costly to comply with these regulations and to develop compliant products and processes.

Abbott is subject to numerous governmental regulations and it is costly to comply with these regulations and to develop compliant products and processes.

Abbott’s products are subject to rigorous regulation by the FDA and numerous international, supranational, federal, and state authorities.

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Abbott must incur expense and spend time and effort to ensure compliance with these complex regulations.

Possible regulatory actions for non-compliance could include warning letters, fines, damages, injunctions, civil penalties, recalls, seizures of Abbott’s products, and criminal prosecution.

Possible regulatory actions for non-compliance include warning letters, fines, damages, injunctions, civil penalties, recalls, consent decrees, seizures of Abbott’s products, and criminal prosecution.

These actions could result in, among other things, substantial modifications to Abbott’s business practices and operations;

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and withdrawals or suspensions of current products from the market.

Any of these events could disrupt Abbott’s business and have a material adverse effect on Abbott’s 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.

Any of these events could disrupt Abbott’s business and have a material adverse effect on Abbott’s revenues, profitability, cash flows, and financial condition.

For information on Abbott’s voluntary recall in February 2022 of certain powder infant formula products manufactured at its facility in Sturgis, Michigan, the manufacturing stoppage at such facility, and the consent decree that Abbott entered into with the FDA on May 16, 2022, see the discussion in the “Financial Review” section in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.

Laws and regulations affecting government benefit programs could impose new obligations on Abbott, require Abbott to change its business practices, and restrict its operations.

Abbott’s industry is subject to various international, supranational, federal, and state laws and regulations pertaining to government benefit program reimbursement, price reporting and regulation, and health care fraud and abuse, including anti-kickback and false claims laws, and international and individual state laws relating to pricing and sales and marketing practices.

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In addition, violations of these laws, or allegations of such violations, could disrupt Abbott’s business and result in a material adverse effect on Abbott’s revenues, profitability, and financial condition.

Changes in the health care regulatory environment may adversely affect Abbott’s business.

Changes in the health care regulatory environment may adversely impact the demand for and price of Abbott’s products.

Both in the U.S.

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Investigators may also conduct additional, and perhaps more extensive, studies.

If new safety issues are reported, Abbott may be required to amend the conditions of use for a product.

When new safety concerns 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 product’s label or narrow its approved intended use, either of which could reduce the product’s market acceptance.

If serious safety issues arise with an Abbott product, sales of the product could be halted by Abbott or by regulatory authorities.

Safety issues affecting suppliers’ or competitors’ products also may reduce the market acceptance of Abbott’s products.

If serious safety concerns arise with an Abbott product, sales of the product have been and could be halted by Abbott or by regulatory authorities.

Safety concerns affecting suppliers’ or competitors’ products also may reduce the market acceptance of Abbott’s products.

In addition, in the ordinary course of business, Abbott is the subject of product liability claims and lawsuits alleging that its products or the products of other companies that Abbott promotes have resulted or could result in an unsafe condition for, or injury to, patients.

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Consequences may also include additional costs, a decrease in market share for the products, lower income or exposure to other claims.

Product liability losses are self-insured.

Product liability claims could have a material adverse effect on Abbott’s profitability and financial condition.

Product liability losses are self-insured and could have a material adverse effect on Abbott’s profitability, cash flows, and financial condition.

Economic and Industry Risks

Abbott is subject to risks related to public health crises, such as widespread outbreaks of infectious diseases like the COVID-19 pandemic.

As a global healthcare company, public health crises, such as the widespread outbreaks of infectious diseases like the COVID-19 pandemic, may negatively impact Abbott's operations.

Health concerns and significant changes in political or economic conditions caused by such outbreaks can cause significant reductions in demand for certain products, increased difficulty in serving customers, disrupt manufacturing and supply chains, and negatively affect Abbott’s operations as well as the operations of its suppliers, distributors and other third-party partners.

Furthermore, such widespread outbreaks may impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates.

To date, the COVID-19 pandemic has affected Abbott's diversified health care business in various ways, with some businesses performing at the levels required to successfully meet new demands, other having faced challenges during periods when the number of COVID-19 cases significantly increased, and still others being relatively less impacted by the pandemic.

Abbott is subject to risks related to public health crises, such as widespread outbreaks of infectious diseases like the COVID-19 pandemic, which has had, and may continue to have, a material effect on Abbott’s business, financial condition and results of operations.

As a global healthcare company, public health crises, such as the widespread outbreaks of infectious diseases like the COVID-19 pandemic, may negatively impact certain of Abbott's operations.

Health concerns and significant changes in political or economic conditions caused by such outbreaks can cause, and during the COVID-19 pandemic have caused, significant reductions in demand for certain products, increased difficulty in serving customers, disruptions to manufacturing and supply chains, and negative effects on certain of Abbott’s operations as well as the operations of its suppliers, distributors and other third-party partners.

Furthermore, such widespread outbreaks may impact, and during the COVID-19 pandemic have impacted, the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, inflation rates (including in the U.S.), foreign currency exchange rates, and interest rates.

In addition, the COVID-19 pandemic has contributed to global supply chain disruptions, which have adversely impacted the cost and availability of certain raw materials, supplies, and services.

With regard to COVID-19 diagnostic testing, the FDA issued Emergency Use Authorizations (EUAs) for several COVID‑19 related products in 2020 and 2021, including Abbott diagnostic tests.

EUAs are authorized for the duration of the COVID-19 public health emergency unless sooner terminated or revoked.

EUAs are authorized pursuant to an EUA Declaration under the U.S.

Food, Drug, and Cosmetic Act and remain in effect until the Secretary of the U.S.

Department of Health and Human Services terminates the EUA Declaration or unless sooner terminated or revoked.

Abbott is actively pursuing the FDA’s customary regulatory approval process for various COVID-19 diagnostic tests which has uncertainty as discussed in “ Abbott is subject to numerous governmental regulations and it can be costly to comply with these regulations and to develop compliant products and processes.

” in “Legal and Regulatory Risks” under “Item 1A.

Risk Factors.” Further, the demand for COVID-19 tests has been, and Abbott expects it to continue to be, highly volatile, primarily driven by the emergence and severity of new variants, which are unpredictable.

In addition, the COVID-19 pandemic has contributed to global supply chain disruptions, which has adversely impacted the cost and availability of certain raw materials, supplies, and services.

While Abbott has taken actions to offset some of these inflationary pressures in its supply chain, Abbott may not be able to completely offset all the increases in its operational costs.

Further, Abbott has experienced, and may continue to experience, availability issues with some services and materials used in its products.

To date, Abbott has been able to manage these challenges without significant supply disruption or shortage for services, raw materials and supplies, however, no assurance can be given that these efforts will continue to be successful.

Significant disruptions or shortages may result in Abbott’s inability to meet customer demand for certain of its products.

Due to the unpredictability of the duration and impact of the current COVID-19 pandemic, the extent to which the COVID-19 pandemic will have a material effect on Abbott’s business, financial condition or results of operations is uncertain.

Risk Factors.” On January 30, 2023, the U.S.

announced that it plans to end the public health emergency on May 11, 2023.

Abbott is evaluating the potential impacts of the end of the public health emergency, and it will continue to monitor further regulatory actions from relevant U.S.

government agencies and assess potential impacts on pandemic-related government policies and product authorizations.

Further, the demand for COVID-19 tests has been volatile over the last two years as the number of COVID-19 cases has fluctuated during the period.

Abbott expects the COVID-19 pandemic to shift to an endemic state in 2023, which would likely result in significantly lower demand for COVID-19 tests.

Due to the unpredictability of the COVID-19 pandemic, including how and when it will shift to an endemic state, the extent to which COVID-19 will continue to have a material effect on Abbott’s business, financial condition or results of operations is uncertain.

A more detailed discussion on the impact of the COVID-19 pandemic on Abbott’s business is contained in the “Financial Review” section in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.

Abbott is subject to cost containment efforts that could cause a reduction in future revenues and operating income.

In the United States and other countries, Abbott’s businesses have experienced downward pressure on product pricing.

In the United States and other countries, Abbott’s businesses have experienced downward pressure on certain product pricing.

Cost containment efforts by governments and private organizations are described in greater detail in the section captioned “Regulation.” To the extent these cost containment efforts are not offset by greater patient access to health care or other factors, Abbott’s future revenues and operating income will be reduced.

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Abbott cannot predict with certainty the timing or impact of the introduction of competitors’ products.

Fluctuation in foreign currency exchange rates may adversely affect Abbott’s financial statements and its ability to realize projected sales and earnings.

Fluctuation in foreign currency exchange rates has adversely affected and may continue to adversely affect Abbott’s financial statements and its ability to realize projected sales and earnings.

Although Abbott’s financial statements are denominated in U.S.

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• differing local product preferences and product requirements;

● trade protection measures, including tariffs, import or export licensing requirements, other governmental restrictions, and changes to international trade agreements;

• trade protection measures, including tariffs, import or export licensing requirements, other governmental restrictions such as trade sanctions, and changes to international trade agreements;

• difficulty in establishing, staffing, and managing operations;

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Many other factors can affect Abbott’s profitability and its financial condition, including:

● changes in or interpretations of laws and regulations, including changes in accounting standards, taxation requirements, product marketing application standards, product labeling standards, source and use laws, and environmental laws;

• changes in or interpretations of laws and regulations, including changes in accounting standards, taxation requirements, product approval standards, product labeling standards, source and use laws, and environmental laws;

• differences between the fair value measurement of assets and liabilities and their actual value, particularly for pensions, retiree health care, stock compensation, intangibles, goodwill, and contingent consideration;

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global climate change, extreme weather and natural disasters;

widespread outbreaks of infectious diseases;

the cost and availability of insurance due to any of the foregoing events;

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• legal difficulties, any of which could preclude or delay commercialization of products or adversely affect profitability, including claims asserting statutory or regulatory violations, and adverse litigation decisions.

Many of these factors may manifest individually or collectively, such as Russia’s invasion of Ukraine which resulted in political instability, sanctions, economic and currency volatility, inflation and other operational and supply disruptions.

To date, Abbott has been able to manage these disruptions without material impact to its results of operations.

However, it is difficult to predict the future implications and consequences of the situation on local, regional or global economies and Abbott’s operations.

There could be additional sanctions, economic volatility, cybersecurity threats, political instability, transportation and other supply disruptions, as well as collection default risk or limited availability of resources to conduct essential business processes that could have a material adverse impact to Abbott’s operations and financial condition.

The resolution and long-term impact of this matter are uncertain and difficult to predict.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors