2 unchanged sentences
The summary below provides an overview of many of the risks and uncertainties we encounter that are described in this Annual Report on Form 10-K that could materially and adversely affect Embecta’s business, financial condition or results of operations.
−Removed: An investment in our common stock involves a variety of risks and
−Removed: uncertainties.
+Added: An investment in our common stock involves a variety of risks and uncertainties.
Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results, liquidity, and future prospects.
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• Embecta’s future growth is dependent in part upon the development of new products, and there can be no assurance that such products will be developed or be successful.
−Removed: • If the third parties on which Embecta relies to conduct its clinical trials and to assist it with pre-clinical development do not perform as contractually required or expected, or if market or clinical studies are unfavorable to its products in development, Embecta may not be able to obtain regulatory clearance or approval or commercialize its products.
+Added: • If the third parties on which Embecta relies to conduct its clinical trials and to assist it with pre-clinical development do not perform as contractually required or expected, or if market or clinical or other studies are unfavorable to its products in development, Embecta may not be able to obtain regulatory clearance or approval or commercialize its products.
• Embecta may be unable to maintain strong relationships with physicians and other healthcare professionals which could adversely affect its business.
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• Embecta’s business and operations are subject to risks related to climate change.
−Removed: • Embecta's may be exposed to environmental, social and governance risks.
• Embecta's intellectual property and proprietary technology are material to its business operations and are subject to infringement and other risks.
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• Embecta is subject to a number of restrictive covenants under its indebtedness, including customary operating restrictions and financial covenants, which could restrict Embecta’s ability to pay dividends or adversely affect its financing options and liquidity position.
−Removed: • Embecta is subject to risks associated with public health threats, such as the COVID-19 pandemic, which could have a material adverse effect on Embecta's financial condition and results of operations.
+Added: • Embecta is subject to risks associated with public health threats, such as pandemics, which could have a material adverse effect on Embecta's financial condition and results of operations.
Risks Related to the Separation and Distribution from BD
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• Embecta may not achieve some or all of the expected benefits of the Separation.
−Removed: • In order to conduct its operations and meet its financial reporting and other obligations, Embecta relies on certain services provided by BD pursuant to the transaction documents entered into with BD in connection with the Separation, including the TSA and the LSA.
−Removed: If Embecta is unable to extend the services on the terms contemplated by the Extension or replace the services that BD currently provides to it on terms that are at least as favorable to Embecta as the terms on which BD is providing these services, or if BD otherwise terminates any of the services, Embecta’s business, financial condition and results of operations may be materially adversely affected.
−Removed: Following the end of the transition period, Embecta will be required to rebrand its products to remove the BD name, transfer or obtain new manufacturing, supply chain, regulatory and product licenses and registrations in the name of Embecta, which could adversely affect its ability to attract and maintain end users or which could result in delays or interruptions of Embecta's commercialization and distribution operations or the loss of customers or revenue, all of which could adversely affect its financial condition and results of operations.
+Added: • In order to conduct its operations and meet its financial reporting and other obligations, Embecta relies on certain services provided by BD pursuant to the transaction documents entered into with BD in connection with the Separation.
+Added: If Embecta is unable to extend the services on similar terms or replace the services that BD currently provides to it on terms that are at least as favorable to Embecta as the terms on which BD is providing these services, or if BD otherwise terminates any of the services, Embecta’s business, financial condition and results of operations may be materially adversely affected.
• Following the end of the transition period, Embecta will be required to rebrand its products to remove the BD name, transfer or obtain new manufacturing, supply chain, regulatory and product licenses and registrations in the name of Embecta, which could adversely affect its ability to attract and maintain end users or which could result in delays or interruptions of Embecta's commercialization and distribution operations or the loss of customers or revenue, all of which could adversely affect its financial condition and results of operations.
• Embecta has incurred debt obligations that could adversely affect its business and profitability and its ability to meet other obligations.
−Removed: • Embecta may be affected by significant restrictions under the tax matters agreement, including on its ability to engage in certain corporate transactions for a two-year period after the Separation Date, in order to avoid triggering significant tax-related liabilities.
+Added: • Embecta may be affected by significant restrictions under the tax matters agreement in order to avoid triggering significant tax-related liabilities.
• Embecta may be held liable to BD if it fails to perform under its agreements with BD.
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If such consents or approvals are not obtained, Embecta may not be entitled to the full benefit of such contracts, permits and other assets and rights, which could increase its expenses or otherwise harm its business and financial performance.
−Removed: • The closing of the Separation was deferred in certain jurisdictions, and may not occur at all in such jurisdictions, due to local regulatory requirements, which may adversely affect Embecta’s manufacturing, business, financial condition and results of operations.
+Added: • The closing of the Separation was deferred in certain jurisdictions, and may not occur at all in such jurisdictions, due to local regulatory requirements, which may adversely affect Embecta’s business, financial condition and results of operations.
• Satisfaction of indemnification obligations following the distribution could have a material adverse effect on Embecta’s financial condition, results of operations and cash flows.
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• The price and trading volume of Embecta’s common stock may be volatile, and stockholders could lose all or part of their investment in Embecta.
+Added: • The material weakness in our internal control over financial reporting that has been identified and our ability to remediate such material weakness.
• Embecta cannot guarantee the timing, amount or payment of any dividends on its common stock.
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If any of the events or circumstances described below occurs, our business, financial condition or results of operations could be adversely impacted and the value of an investment in our securities could decline.
−Removed: Investors and prospective investors should consider the risks described below and the information
−Removed: contained under the caption “Cautionary Statements Regarding Forward-Looking Statements” and elsewhere in this Annual Report on Form 10-K before deciding whether to invest in our securities.
+Added: Investors and prospective investors should consider the risks described below and the information contained under the caption “Cautionary Statements Regarding Forward-Looking Statements” and elsewhere in this Annual Report on Form 10-K before deciding whether to invest in our securities.
We may update these risk factors in our future periodic reports.
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Embecta faces significant competition from a wide range of companies in each market in which its products are sold.
−Removed: These include large companies with multiple product lines and non-traditional entrants such as technology companies, some of which may have greater financial and marketing resources than Embecta in the United States or other markets, as well as smaller, more specialized companies.
+Added: These include large companies with multiple product lines and non-traditional entrants such as technology companies, some of
+Added: which may have greater financial and marketing resources than Embecta in the United States or other markets, as well as smaller, more specialized companies.
Embecta’s ability to compete will also be affected by changing preferences and requirements of people with diabetes, as well as changes in the ways healthcare services are delivered.
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The development of new or improved products, processes or technologies by other companies (such as new technologies to administer insulin) that provide better features, pricing, clinical outcomes or economic value may make Embecta’s existing or new products less competitive.
−Removed: In some instances, competitors, including pharmaceutical companies, also offer, or are attempting to develop, alternative therapies, including oral anti-diabetic drugs, GLP-1s and GLP-1 combination products, for disease states (including diabetes) that may be delivered without a medical device, such as pen needles.
+Added: In some instances, competitors, including pharmaceutical companies, also offer, or are attempting to develop, alternative therapies, including oral and once-weekly anti-diabetic drugs, GLP-1s and GLP-1 combination products, for disease states (including diabetes) that may be delivered without a medical device, such as pen needles.
Lower cost producers have also created pricing pressure, particularly in emerging markets.
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Embecta’s ability to generate profits and operating cash flow depends largely upon the continued profitability of its key products, such as its pen needles and syringes.
−Removed: For example, for the fiscal year ended September 30, 2023, sales of pen needles (including both conventional and safety pen needles) accounted for $912 million, or 81%, of total net revenues.
+Added: For example, for the fiscal year ended September 30, 2024, sales of pen needles accounted for approximately $844 million, or 75%, of total net revenues.
Any event that adversely affects the sale or profitability of this product could adversely affect Embecta’s sales, results of operations and cash flows.
−Removed: These adverse events could include a decrease in the demand for such products, the pressure to decrease the price of such products, any increase in costs of manufacturing such products or other supply chain disruptions, increased availability of competitive products, increased competition from the introduction of new products related to the treatment of diabetes or removal from the market of these products for any reason.
+Added: These adverse events could include a decrease in the demand for such products, the pressure to decrease the price of such products, any increase in costs of manufacturing such products or other supply chain disruptions, increased availability and marketability of competitive products, increased competition from the introduction of new products related to the treatment of diabetes or removal from the market of these products for any reason.
Technological breakthroughs in diabetes treatment or prevention may reduce demand for Embecta’s products.
The diabetes treatment industry is subject to technological change and product innovation.
−Removed: A number of companies and medical researchers are pursuing new ways to deliver insulin to patients, including insulin administration technologies that do not require the use of a needle, or to treat diabetes without the use of insulin or by delaying the use of insulin, such as oral anti-diabetic drugs, GLP-1s and GLP-1 combination products.
+Added: A number of companies and medical researchers are developing and commercializing new ways to deliver insulin to patients, including insulin administration technologies that do not require the use of a needle, that reduce the frequency of insulin administration, or that treat diabetes without the use of insulin or by delaying the use of insulin, such as oral and once-weekly anti-diabetic drugs, GLP-1s and GLP-1 combination products.
If they are successful in developing and commercializing these technologies or treatment therapies, the demand for Embecta’s products could decline.
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Pricing under the cannula supply agreement is determined by BD based on several factors, including Embecta's yearly forecast, the cost of raw materials and other cost methodologies.
−Removed: The cannula supply agreement is terminable by BD without cause by providing at least 36 months’ written notice;
+Added: supply agreement is terminable by BD without cause by providing at least 36 months’ written notice;
however, such termination can be effective no earlier than ten years from the Separation.
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Embecta may experience difficulties and delays inherent in manufacturing its products, such as failure of Embecta or its suppliers to comply with applicable regulations and quality assurance guidelines, which failures may lead to:
−Removed: manufacturing shutdowns or manufacturing delays;
+Added: manufacturing suspensions, shutdowns or delays;
delays related to the construction of new facilities or the expansion of existing facilities;
and other manufacturing or distribution problems, including changes in manufacturing production sites and limits to manufacturing capacity resulting from regulatory requirements, changes in types of products produced and physical limitations that could affect supply.
−Removed: In addition, Embecta could experience difficulties or delays in manufacturing its products caused by natural disasters.
+Added: In addition, Embecta could experience difficulties or delays in manufacturing its products caused by the impact of natural disasters, global conflicts, health pandemics, and shipping delays at ports of entry or exit.
Manufacturing difficulties can also result in product shortages, leading to lost sales and reputational harm.
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In the United States, both public and private payers continue to take aggressive steps to control their expenditures for medical devices by placing restrictions on how many and which brands of devices they will provide coverage for across the spectrum of available products.
−Removed: Important competitive factors include quality, price, price guarantees and demonstrated ability to supply markets.
+Added: Important competitive factors include quality, price, price and inflation guarantees and demonstrated ability to supply markets.
Any failure by Embecta to differentiate its products with existing payers based on these and other factors or establish new payer relationships may adversely affect its financial condition and results of operations.
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Embecta is consistently managing the burden of continued pressures associated with payers’ discount requirements to maintain positive formulary positions.
−Removed: If Embecta fails to maintain these formulary positions or reduces prices on its
−Removed: products to maintain these formulary positions, it could adversely affect Embecta’s results of operations.
+Added: If Embecta fails to maintain these formulary positions or reduces prices on its products to maintain these formulary positions, it could adversely affect Embecta’s results of operations.
In addition to the evolving payer market that continues to put price pressure on Embecta’s products, new competitors have emerged.
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For example, in EMEA (which includes Europe, the Middle East and Africa), the demand for medical devices that are paid out of pocket by the end user is limited.
−Removed: Access to these products is largely defined by the availability and size of government reimbursement, or, in a limited number of countries, the ability of manufacturers to negotiate reimbursement directly with insurance companies.
+Added: Access to these products is largely defined by the availability and size of government reimbursement, or, in a limited number of countries, the ability of manufacturers to negotiate reimbursement
+Added: directly with insurance companies.
In China, the most notable threat continues to be access through volume-based procurement and Group Purchasing Organizations ("GPOs"), with potential significant price erosion and cost containment within the healthcare landscape.
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A significant element of Embecta’s strategy is to increase revenue growth by focusing on innovation and new product development.
−Removed: For example, Embecta is currently working on developing an insulin patch pump focused on serving the needs of people with Type 2 diabetes.
−Removed: However, potential products are still in the product development phase, and Embecta has not yet submitted an application to the FDA seeking clearance for these products.
−Removed: In addition, even if Embecta submits an application to the FDA for clearance, there is no assurance that such clearance will be obtained or that Embecta will be able to market and sell such products successfully.
+Added: Even if Embecta submits an application to the FDA for clearance, there is no assurance that such clearance will be obtained or that Embecta will be able to market and sell such products successfully.
New product development requires significant investment in research and development.
−Removed: The results of Embecta’s product development efforts may be affected by a number of factors, including Embecta’s ability to anticipate the needs of people with diabetes, successfully complete clinical trials, obtain regulatory clearance and approvals for its products, manufacture such products in a cost-effective manner, obtain appropriate intellectual property protection for such products, gain and maintain market acceptance of such products, secure distribution channels, and obtain access, coverage and reimbursement for such products.
−Removed: There can be no assurance that Embecta will be able to successfully develop or commercialize any products now in development or that Embecta may seek to develop or commercialize in the future.
−Removed: If the third parties on which Embecta relies to conduct its clinical trials and to assist it with pre-clinical development do not perform as contractually required or expected, or if market or clinical studies are unfavorable to its products in development, Embecta may not be able to obtain regulatory clearance or approval or commercialize its products.
−Removed: Embecta relies on third parties, such as contract research organizations, medical institutions, clinical investigators, contract laboratories and other third parties, to conduct some of its clinical trials, human factors studies and pre-clinical investigations.
−Removed: If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, or if the quality or accuracy of the data they obtain is compromised due to failure to adhere to the clinical protocols or regulatory requirements or for other reasons, Embecta’s pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and Embecta may not be able to obtain regulatory clearance or approval for, or successfully commercialize, its products on a timely basis, or at all, and Embecta’s business and operating results may be adversely affected.
−Removed: Furthermore, such third parties may experience delays in conducting such studies and trials for reasons outside of their control.
+Added: The results of Embecta’s product development efforts may be affected by a number of factors, including Embecta’s ability to anticipate the needs of people with diabetes, successfully complete clinical and other trials, obtain regulatory clearance and approvals for its products, manufacture such products in a cost-effective manner, obtain appropriate intellectual property protection for such products, gain and maintain market acceptance of such products, secure distribution channels, and obtain access, coverage and reimbursement for such products.
+Added: Even if cleared by the FDA or foreign regulatory agencies, future generations of our systems, expanded indications for use of future systems, our software platforms or any other system under development, may not be cleared for the indications that are necessary or desirable for successful commercialization.
+Added: There can be no assurance that Embecta will be able to successfully develop or commercialize any products now in development or that Embecta may seek to fully develop or commercialize such products in the future.
+Added: If the third parties on which Embecta relies to conduct its clinical trials and to assist it with pre-clinical development do not perform as contractually required or expected, or if market or clinical or other studies are unfavorable to its products in development, Embecta may not be able to obtain regulatory clearance or approval or commercialize its products.
+Added: Embecta relies on third parties, such as contract research organizations, medical institutions, clinical investigators, contract laboratories and other third parties, to conduct some of its studies, including clinical trials, human factors studies and pre-clinical investigations.
+Added: If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, or if the quality or accuracy of the data they obtain is compromised due to failure to adhere to the protocols or regulatory requirements or for other reasons, Embecta’s pre-clinical development activities or clinical or other trials may be extended, delayed, suspended or terminated, and Embecta may not be able to obtain regulatory clearance or approval for, or successfully commercialize, its products on a timely basis, or at all, and Embecta’s business and operating results may be adversely affected.
+Added: Furthermore, such third parties may experience delays or challenges in conducting such studies and trials for reasons outside of their control, including, but not limited to, recruiting enough participants for the studies.
In addition, Embecta faces the risk of potential unauthorized disclosure or misappropriation of its intellectual property by contract research organizations, which may reduce Embecta’s trade secret protection and allow its potential competitors to access and exploit its proprietary technology.
−Removed: In addition, if future clinical trials fail to support the efficacy or safety of Embecta’s current or future products or if the data obtained from such studies are unfavorable or inadequate to support satisfactory conclusions about Embecta’s current or future products, Embecta’s sales may be adversely affected and may have a material adverse effect on its business, financial condition and results of operations.
+Added: In addition, if future clinical trials fail to support the efficacy or safety of Embecta’s current or future products or if the data obtained from those and other studies are unfavorable or inadequate to support satisfactory conclusions about Embecta’s current or future products, Embecta’s commercialization efforts or sales may be adversely affected and may have a material adverse effect on its business, financial condition and results of operations.
In addition, future clinical studies or other articles regarding Embecta’s existing products or any competing products may be published that either support a claim, or are perceived to support a claim, that a competitor’s product is clinically more effective or easier to use than Embecta’s existing products or products in development or that any such product is not as effective as Embecta claims.
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• political instability and actual or anticipated military or political conflicts;
−Removed: • trade protection measures and barriers, such as tariffs, and import and export licensing and control requirements;
+Added: • trade protection measures and barriers, such as tariffs, and import and export licensing, control and compliance requirements;
• negative consequences from changes in or interpretations of tax laws;
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Additional tariffs imposed by the United States on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, could result in an increase in supply chain costs that Embecta may not be able to offset or that otherwise adversely impact its results of operations.
−Removed: In addition, political tensions between the United States and China have escalated in recent years.
+Added: In addition, political tensions between the United States and China and certain other countries have escalated in recent years between and among these countries.
Rising political tensions could reduce trade, investment and other economic activities between the two major economies.
Any of these factors could have a material adverse effect on Embecta’s business, prospects, financial condition and results of operations.
−Removed: The departure of the United Kingdom from the European Union (“EU”) (commonly known as “Brexit”) on January 31, 2020 created uncertainties affecting business operations in the United Kingdom, the EU and a number of other countries, including with respect to compliance with the regulatory regimes regarding the labeling and registration of the products
−Removed: Embecta sells in these markets.
+Added: The departure of the United Kingdom ("U.K.") from the European Union (“EU”) (commonly known as “Brexit”) on January 31, 2020 created uncertainties affecting business operations in the United Kingdom, the EU and a number of other countries, including with respect to compliance with the regulatory regimes regarding the labeling and registration of the products Embecta sells in these markets.
+Added: For example, the U.K.
+Added: regulatory regime is currently similar to EU regulations, but the U.K.
+Added: has enacted new legislation like the Medicines and Medical Devices Act.
+Added: Under this legislation, the U.K.
+Added: may adopt changed regulations that may diverge from the EU legislative regime for medicines, including their research, development and commercialization and has issued a consultation document with respect to future change.
Embecta could face increased costs, volatility in exchange rates, market instability and other risks as a result of Brexit.
+Added: In addition, any further divergence of U.K.
+Added: and EU law, including changes in relation to international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on Embecta.
+Added: In 2015, the Italian parliament enacted legislation that, among other things, imposed a “payback” measure on medical device companies that supply goods and services to the Italian National Healthcare System.
+Added: Under the measure, companies are required to make payments to the Italian government if medical device expenditures in a given year exceed regional expenditure ceilings established for that year.
+Added: The payment amounts are calculated based on the amount by which the regional ceilings for the given year were exceeded.
+Added: In response to decrees issued by the Italian Ministry of Health, the
+Added: various Italian regions issued invoices to medical device companies.
+Added: Following the issuance of the invoices, numerous other medical device companies filed appeals with the Italian administrative courts challenging the enforceability of the payback measure, primarily on the basis that the law was unconstitutional.
+Added: The Italian administrative courts referred the question regarding the constitutionality of the law to the Italian Constitutional Court, which in July 2024, issued a ruling upholding the law as constitutional.
+Added: Following the ruling of the Italian Constitutional Court, the appeal before the Italian administrative court will proceed with respect to the remaining legal arguments asserted by the appellants with regard to the enforceability of the payback law.
+Added: Since the law was enacted, Embecta has recognized an estimate for the amount of variable consideration but has not made any payments under the payback law.
+Added: As litigation before Italian Courts is still pending, final resolution is unknown at this time, and it is possible that the amount of the Embecta’s liability could differ from the amount currently accrued.
The military conflict between Russia and Ukraine has resulted in the implementation of sanctions by the United States and other governments against Russia and has caused significant volatility and disruptions to the global markets.
−Removed: It is not possible to predict the short- and long-term implications of this conflict, which could include but are not limited to further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, supply chain challenges and adverse effects on currency exchange rates and financial markets.
+Added: It is not possible to predict the short- and long-term implications of this conflict, which could include but are not limited to further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, supply chain challenges, adverse effects on currency exchange rates and financial markets and disruption to its supplier, channels to market or customers.
In addition, the United States government reported that United States sanctions against Russia in response to the conflict could lead to an increased threat of cyberattacks against United States companies.
These increased threats could pose risks to the security of Embecta’s Information Technology systems, networks and product offerings, as well as the confidentiality, availability and integrity of Embecta’s data.
−Removed: In addition, the recent hostilities in Israel could develop to have a more widespread economic and geopolitical affect in the Middle East and Europe, and/or economic sanctions between or among countries, as well as general geopolitical issues in the Middle East.
−Removed: This may impact oil production capacity, oil prices, and disruptions in supply chain and shipping routes in the Middle East.
+Added: In addition, the hostilities in Israel and the Middle East, including attacks on shipping vessels in the Red Sea, could develop to have a more widespread economic and geopolitical affect in the Middle East and Europe, and/or economic sanctions between or among countries, as well as general geopolitical issues in the Middle East.
+Added: These disruptions have led to supply chain delays and price increases and may impact future oil production capacity, oil prices, and disruptions in supply chain and shipping routes in the Middle East.
These impacts may further cause increases in resin costs, as well as energy costs.
If these conflicts develop beyond these areas or further intensify, they could have an adverse impact on Embecta’s business operations in the EU, the Middle East or other affected areas.
−Removed: Embecta is continuing to monitor the situations in Ukraine, Israel and globally as well as assess their potential impact on Embecta’s business, including impacts to suppliers and customers.
−Removed: Although operations in Russia, Ukraine and Israel do not currently constitute a material portion of Embecta’s business, a significant escalation or further expansion of the conflicts’ current scope or related disruptions to the global markets could have a material adverse effect on Embecta’s results of operations.
+Added: Embecta is continuing to monitor the situations in Russia, Ukraine, Israel and globally as well as assess their potential impact on Embecta’s business, including impacts to suppliers and customers.
+Added: Although operations in Russia, Ukraine and Israel do not currently constitute a material portion of Embecta’s business nor has Embecta assessed that the hostilities have had a material effect on its financial position or results of operations, a significant escalation or further expansion of the conflicts’ current scope or related disruptions to the global markets could have a material adverse effect on Embecta’s results of operations.
Department of the Treasury’s Office of Foreign Assets Control, and the Bureau of Industry and Security at the U.S.
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These events could adversely affect Embecta’s operations and our financial performance.
−Removed: Embecta's business could be negatively impacted by evolving regulations, policies and expectations relating to environmental, social and governance (ESG) initiatives, setting related goals, collecting data and disclosing related information.
+Added: Embecta's business could be negatively impacted by evolving regulations, policies and expectations relating to ESG initiatives, setting related goals, collecting data and disclosing related information.
There is an increasing focus from certain investors, customers, consumers, employees and other stakeholders concerning ESG matters.
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These ESG provisions and initiatives are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with, given the complexity of our supply chain and operations.
−Removed: If our ESG practices fail to meet regulatory requirements or investor, customer, consumer, employee or other stakeholders' evolving expectations and standards in areas including environmental stewardship, support for local communities, Board of Directors and employee diversity, human capital management,
−Removed: employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us.
+Added: If our ESG practices fail to meet regulatory requirements or investor, customer, consumer, employee or other stakeholders' evolving expectations and standards in areas including environmental stewardship, support for local communities, Board of Directors and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us.
Further, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
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Embecta may not be able to pass on these costs to its customers, which could have a material adverse effect on its results of operations and cash flows.
−Removed: The Russia and Ukraine conflict, the Israel-Hamas war and the growing geopolitical tensions between China and Taiwan, coupled with possible related supply chain shortages may affect the energy power and oil sector’s networks and ability to supply their customers, including Embecta.
−Removed: These disruptions may lead to manufacturing shutdowns, raw material and component shortages, supply chain and logistics constraints, project delays, loss of productivity, divergent product standards and regulations, trade policies, labor shortages, commodity shortages, and price increases, among others.
+Added: The Russia and Ukraine conflict, the Israel-Hamas war, the possibility of military activity in countries near or adjacent to Israel, including attacks on shipping vessels in the Red Sea, and the growing geopolitical tensions between China and Taiwan, coupled with possible related supply chain shortages may affect the energy power and oil sector’s networks and ability to supply their customers, including Embecta.
+Added: These disruptions have led to supply chain delays and price increases and may lead to manufacturing shutdowns, raw material and component shortages, additional supply chain and logistics constraints, project delays, loss of productivity, divergent product standards and regulations, trade policies, labor shortages, commodity shortages, and additional price increases, among others.
Embecta relies on uninterrupted energy to power its manufacturing facilities and any disruption could adversely affect its operations.
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Increases in interest rates may adversely affect the financial condition of Embecta’s distributors and suppliers, thereby adversely affecting their ability to buy Embecta’s products and supply the components or raw materials needed by Embecta, in each case adversely affecting Embecta’s financial condition or results of operations.
−Removed: If the United States Federal Reserve continues to raise the benchmark interest rate, then Embecta would expect the interest expense on its variable rate debt to increase in fiscal 2024.
+Added: If the United States Federal Reserve decides to raise the benchmark interest rate, then Embecta could experience higher interest expense on its variable rate debt in fiscal year 2025.
To the extent Embecta borrows under its revolving credit facility, it will also be subject to risks related to changes in interest rates.
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Embecta’s effective tax rate is derived from a combination of applicable tax rates in the various countries, states and other jurisdictions in which it operates.
−Removed: In preparing its financial statements, Embecta estimates the amount of tax that will become payable in each of these jurisdictions and significant judgement is required in determining our worldwide provision for income taxes.
+Added: In preparing its financial statements, Embecta estimates the amount of tax that will
+Added: become payable in each of these jurisdictions and significant judgement is required in determining our worldwide provision for income taxes.
Embecta’s effective tax rate may, however, differ from the estimated amount due to numerous factors, including a change in overall profitability, geographical mix of earnings before income taxes, tax discrete items that are not recurring in nature, and changes in tax laws, including potential proposed tax legislation.
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In December 2022, European Union member states agreed to adopt the OECD’s minimum tax rules, which are expected to begin going into effect in tax years beginning on January 1, 2024 or later.
−Removed: Certain other countries have enacted the law changes and other countries are considering changes to their tax laws;
+Added: Certain countries have enacted the law changes and other countries are considering changes to their tax laws;
the impact of the changes will go into effect for the Company beginning in fiscal year 2025.
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Despite Embecta’s security measures, however, its information technology and infrastructure may be vulnerable to attacks by increasingly sophisticated intruders or others who try to cause harm to or interfere with its normal use of its systems.
−Removed: They are also susceptible to breach due to employee error, malfeasance, or
−Removed: other disruptions.
+Added: They are also susceptible to breach due to employee error, malfeasance, or other disruptions.
Embecta’s suppliers, distributors, contractors, service providers, and other third parties with whom it does business also could be subject to cyber threats and attacks that are similar in frequency and sophistication.
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There can be no assurance that the various procedures and controls Embecta utilizes to mitigate these threats will be sufficient to prevent disruptions to its systems, in part because (i) cyberattack techniques change frequently and, at times, new techniques are not recognized until launched, and (ii) cyberattacks can originate from a wide variety of sources.
+Added: For example, as multilateral sanctions and tensions continue to escalate against Russia by western nations and their allies in connection with the Russia-Ukraine war, retaliatory actions being undertaken by Russia and supporters of Russia in the form of cyberattacks have increased, including for example against certain U.S.
+Added: infrastructure networks and hospital operations.
+Added: Increasing costs associated with information security, such as increased investment in technology, the cost of compliance and costs resulting from consumer fraud could cause our business and results of operations to suffer materially.
+Added: The methods and techniques used by cyber threat actors to gain entry into our network and access our computer systems, software and data may become more advanced with the use of Artificial Intelligence (“AI”) and may become increasingly difficult or impossible to detect and prevent.
+Added: As these threats continue to evolve, we may be required to invest significant additional resources to modify and enhance our information security and controls or to investigate and remediate any security vulnerabilities.
+Added: While our technology infrastructure is designed to safeguard and protect personal and business information, we have limited ability to monitor the implementation of similar safeguards by our vendors.
Embecta will continue to evaluate organization risk priorities and dedicate resources to protect against unauthorized access, and work to align to industry-leading cybersecurity frameworks to incorporate cybersecurity into its enterprise systems, manufacturing processes and products.
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In addition, medical devices are increasingly connected to the internet, healthcare networks, and other medical devices to provide features that improve healthcare and increase the ability of healthcare providers to treat patients and patients to manage their conditions.
−Removed: For example, Embecta is pursuing collaborations to enable the connectivity and interoperability of its insulin patch pump in development with third-party patient monitoring products, which may in turn be connected with the internet, healthcare networks and other medical devices.
−Removed: These same features may also increase cybersecurity risks and the risks of unauthorized access and use by third parties, as noted by the FDA’s warning that insulin pumps may have cybersecurity vulnerabilities and could be manipulated by hackers, causing danger to people with diabetes.
As such, a cyberattack which intrudes, disrupts, or corrupts Embecta’s devices, products, and services, or related devices, products, and services could impact the quality-of-care patients receive or the confidentiality of patient information.
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Competition for experienced employees, particularly for persons with specialized skills, can be intense.
−Removed: Embecta’s ability to recruit such talent will depend on a number of factors, including compensation and benefits, work location and work environment.
+Added: Embecta’s ability to recruit such talent will depend on a number of factors, including compensation and benefits, work location and work
If Embecta cannot effectively recruit and retain qualified executives and employees, its business could be adversely affected.
Embecta’s business may be adversely affected by work stoppages, union negotiations and labor disputes.
−Removed: As of September 30, 2023, only certain employees, all outside of the United States and representing approximately 35% of our headcount (approximately 17% of those employees are in deferred closing countries), are represented by various unions, works council and other collective bargaining groups.
+Added: As of September 30, 2024, only certain employees, all outside of the United States and representing approximately 35% of our headcount, are represented by various unions, works council and other collective bargaining groups.
As of September 30, 2024, approximately 44% of those employees within these groups have collective bargaining power.
−Removed: In addition, on January 1, 2023, the BD Shanghai, China employees transferred from the BD local legal entity to the Embecta local legal entity.
−Removed: Embecta Shanghai, China employees participate in unions, as required by China regulations, and as was established by BD prior to the transfer.
−Removed: As of September 30, 2023, these unions do not have collective bargaining agreements.
Historically, the effects of collective bargaining and other similar labor agreements have not been significant.
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In addition, the EU has adopted the EU Medical Device Regulation (the “EU MDR”), which imposes stricter requirements for the marketing and sale of medical devices, including in the area of labeling requirements, clinical evidence requirements, quality systems and post-market surveillance.
−Removed: The EU MDR has been fully operational for previously approved self-certified medical devices (class I) since May 2021, and companies have until May 2024 to meet the requirements for medical devices with a valid conformity assessment certificate (class II and III).
−Removed: Complying with and maintaining devices under these regulations requires Embecta to incur significant expenditures.
+Added: The EU MDR has been fully operational for previously approved self-certified medical devices (class I) since May 2021, and previously CE marked products must become compliant when their certification expires, with a transition period ending December 2027 for higher classification devices, or December 2028 for lower classification devices (i.e., class II and III).
Additionally, the availability of EU notified body services certified to assist Embecta with validation of, and compliance with, the new requirements is limited, which may delay the marketing approval for some of Embecta's products under the EU MDR.
−Removed: Any such delays, or any failure to meet these requirements could adversely impact our business in the EU and other non-EU regions that tie their product registrations to EU conformity requirements.
+Added: Any such delays, or any failure to meet
+Added: these requirements could adversely impact our business in the EU and other non-EU regions that tie their product registrations to EU conformity requirements.
Healthcare reform may have a material adverse effect on Embecta’s financial condition and results of operations.
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Embecta cannot predict at this time the full impact of the Affordable Care Act or other new legislation, agency priorities, rulemaking and healthcare reform measures from U.S.
−Removed: federal or state governments, foreign governments, or third-party payors that may be adopted or implemented in the future on Embecta’s financial condition, results of operations and cash
+Added: federal or state governments, foreign governments, or third-party payors that may be adopted or implemented in the future on Embecta’s financial condition, results of operations and cash flows.
Although several legislative initiatives to repeal and replace the Affordable Care Act have been proposed, and legal challenges to the constitutionality of the Affordable Care Act or its component parts have been made, the nature and effect of any modification or repeal of, or legislative substitution for, the Affordable Care Act, or any court decision regarding the Affordable Care Act’s validity, is uncertain, and Embecta cannot predict the effect that any of these events would have on the longer-term viability of the act, or on Embecta’s financial condition, results of operations or cash flows.
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These changes or increased costs could affect Embecta’s business and results of operations.
+Added: Furthermore, AI-based solutions, including generative AI, are increasingly being used in the medical device industry, including by Embecta, with the expectation to use such systems and tools that incorporate AI-based technologies in the future for internal and external purposes.
+Added: The use of AI solutions, such as ChatGPT, Co-Pilot, Grammarly, and Transvoyant by Embecta’s employees or third parties on which we rely could lead to the public disclosure of confidential information (including personal data or proprietary information) in contravention of Embecta’s internal policies, data protection or other applicable laws, or contractual requirements.
+Added: The misuse of AI solutions could also result in unauthorized access and use of personal data of Embecta’s employees, clinical and other trial participants, collaborators, or other third parties.
+Added: In addition, the legal and regulatory landscape surrounding AI technologies is rapidly evolving and uncertain, including in the areas of intellectual property, cybersecurity, and privacy and data protection.
+Added: Evolving rules, regulations, and industry standards governing AI may require us to incur significant costs to modify, maintain, or align our business practices, services and solutions to comply with U.S.
+Added: rules and regulations, the nature of which cannot be determined at this time and may be inconsistent from jurisdiction to jurisdiction.
+Added: Several jurisdictions where we operate are considering or have proposed or enacted legislation and policies regulating AI and non-personal data, such as the European Union’s AI Act and the U.S.’s Executive Order on AI.
+Added: These regulations may impose significant requirements on how we deploy and use AI and handle data.
+Added: While we attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise.
+Added: Failure to appropriately respond to this evolving landscape may also result in legal liability, fines, penalties, regulatory action, loss of trade secrets or other intellectual property, brand and reputational harm, or lead to outcomes with unintended biases or other consequences.
+Added: On the other hand, if Embecta is unable to use AI, it could make our business less efficient and result in competitive disadvantages.
+Added: Any of these events could have a material adverse effect on our business, financial condition and results of operations.
A disruption at one of Embecta's facilities could adversely affect our business and operating results.
Although Embecta operates in multiple locations, manufacturing of its pen needles and syringes is conducted, and its components for such products are primarily stored, at its facilities in the United States, Ireland and China.
−Removed: Political or financial instability, currency fluctuations, the outbreak of pandemics such as COVID-19, labor unrest, transport capacity and costs, port security, supply chain disruptions, wars, weather conditions, natural disasters, or other events that could slow or disrupt port activities and affect foreign trade are beyond Embecta’s control and could materially disrupt its supply of product from any of these locations, increase its costs, and/or adversely affect its results of operations.
−Removed: Further, following the COVID-19 pandemic there may be increased pressure for United States medical device companies to reduce dependency on China for their supply chain and reevaluating nearshoring strategies.
+Added: Political or financial instability, currency fluctuations, the outbreak of pandemics, labor unrest, transport capacity and costs, port security, supply chain disruptions, wars, weather conditions, natural disasters, or other events that could slow or disrupt
+Added: port activities and affect foreign trade are beyond Embecta’s control and could materially disrupt its supply of product from any of these locations, increase its costs, and/or adversely affect its results of operations.
+Added: Further, there may be increased pressure for United States medical device companies to reduce dependency on China for their supply chain and reevaluating nearshoring strategies.
Embecta takes precautions to ensure that its third-party contractors and logistics entities safeguard Embecta’s assets, including insurance, health and safety protocols, and off-site storage of computer data.
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The insurance Embecta maintains may not be adequate to cover its losses in any particular case.
−Removed: With or without insurance, damage to Embecta’s facility, manufacturing equipment, inventory or other property or to any of its suppliers, may have a material adverse effect on Embecta’s business, financial condition and results of operations.
−Removed: A significant amount of Embecta’s inventories of finished goods is stored in distribution centers around the world, but primarily in various distribution centers in the United States and Europe.
−Removed: Embecta takes precautions to safeguard its facilities and data infrastructure.
+Added: With or without insurance, damage to Embecta’s facilities, manufacturing equipment, inventory or other property or to any of its suppliers, may have a material adverse effect on Embecta’s business, financial condition and results of operations.
+Added: A significant amount of Embecta’s inventories of finished goods are stored in distribution centers around the world, but primarily in various distribution centers in the United States, Europe and Asia.
+Added: Embecta takes precautions to safeguard these facilities and data infrastructure.
However, vandalism, terrorism, unplanned power outages, cyberattacks or a natural disaster, such as an earthquake, fire or flood, or other catastrophic event, could damage or destroy Embecta’s inventories of component supplies and finished goods, cause substantial delays in its operations, result in the loss of key information, result in reduced sales, and cause Embecta to incur additional expenses.
Embecta’s insurance coverage may not be sufficient to provide coverage with respect to the damages incurred in any particular case, and its insurance carrier may deny coverage with respect to all or a portion of its claims.
−Removed: Regardless of the level of insurance coverage or other precautions taken, damage to Embecta’s facilities may have a material adverse effect on is business, financial condition and results of operations.
+Added: Regardless of the level of insurance coverage or other precautions taken, damage to these facilities may have a material adverse effect on is business, financial condition and results of operations.
Insurance coverage may be inadequate or unavailable to cover any product liability losses Embecta incurs.
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Any of these restrictions on Embecta's ability to operate its business in its discretion could adversely affect its business by, among other things, limiting Embecta's ability to adapt to changing economic, financial or industry conditions and to take advantage of corporate opportunities, including opportunities to obtain debt financing, repurchase stock, refinance or pay principal on Embecta's outstanding debt, dispose of property, complete acquisitions for cash or debt, or make other investments.
−Removed: In addition, events beyond Embecta's control, including prevailing economic, financial, and industry conditions, could affect Embecta's ability to satisfy applicable financial covenants, and Embecta cannot assure you that it will satisfy them.
+Added: In addition, events beyond Embecta's control, including prevailing economic, financial, and industry
+Added: conditions, could affect Embecta's ability to satisfy applicable financial covenants, and Embecta cannot assure you that it will satisfy them.
Any failure to comply with the restrictions of Embecta's current indebtedness, or any future financing agreements, including as a result of events beyond Embecta's control, may result in an event of default under these agreements, which in turn may result in defaults or acceleration of obligations under these agreements and other agreements, giving Embecta's lenders and other debt holders the right to terminate any commitments they may have made to provide Embecta with further funds and to require Embecta to repay all amounts then outstanding.
−Removed: Embecta is subject to risks associated with public health threats, such as the COVID-19 pandemic, which could have a material adverse effect on Embecta's financial condition and results of operation.
−Removed: Embecta is subject to risks associated with public health threats, such as the COVID-19 pandemic.
+Added: Embecta is subject to risks associated with public health threats, such as pandemics, which could have a material adverse effect on Embecta's financial condition and results of operation.
+Added: Embecta is subject to risks associated with public health threats, such as pandemics.
Public health threats have the potential to significantly impact Embecta’s supply chain if the manufacturing plants that produce its products, raw materials or product components, the distribution centers where Embecta manages its inventory or the operations of its logistics and other service providers, including third parties that sterilize its products, are disrupted, temporarily closed or experience worker shortages for a sustained period of time.
−Removed: Embecta’s manufacturing sites in China, Ireland and the United States, where Embecta manufactures a significant amount of products, largely avoided any significant disruption due to the COVID-19 pandemic.
−Removed: However, notwithstanding that each of these communities has experienced a relative recovery in COVID-19 transmission and a lessening of restrictions related to COVID-19, a future outbreak of a public health threat, including COVID-19, at any of Embecta’s manufacturing sites in China, Ireland and/or the United States or in the surrounding communities, could lead to delays in the manufacturing of Embecta’s products, which could have a material adverse effect on Embecta’s business and results of operations.
+Added: For example, Embecta’s manufacturing sites in China, Ireland and the United States, where Embecta manufactures a significant amount of products, largely avoided any significant disruption due to the COVID-19 pandemic.
+Added: However, notwithstanding that each of these communities has experienced a relative recovery in COVID-19 transmission and a lessening of restrictions related to COVID-19, a future outbreak of a public health threat, including COVID-19, at any of Embecta’s manufacturing sites in China, Ireland and/or the United States or in the surrounding communities, could lead to suspensions or delays in the manufacturing of Embecta’s products, which could have a material adverse effect on Embecta’s business and results of operations.
Moreover, any resurgence in COVID-19 infections, including due to new variants of the virus for which current vaccines may not be effective, and public health measures could result in the imposition of new governmental lockdowns, quarantine requirements or other restrictions to slow the spread of the virus.
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Certain historical financial information of Embecta’s fiscal year 2022 included in this Annual Report on Form 10-K is derived from the accounting records of BD.
−Removed: Accordingly, certain historical financial information included in this Annual Report on Form 10-K does not necessarily reflect the financial condition, results of
−Removed: operations or cash flows that we would have achieved in previous fiscal years as a separate, publicly traded company during such periods or those that Embecta will achieve in the future primarily as a result of the factors described below:
+Added: Accordingly, certain historical financial information included in this Annual Report on Form 10-K does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved in previous fiscal years as a separate, publicly traded company during such periods or those that Embecta will achieve in the future primarily as a result of the factors described below:
• Generally, prior to the Separation, Embecta’s working capital requirements and capital for its general corporate purposes, including capital expenditures and acquisitions, were historically satisfied as part of the corporate-wide cash management policies of BD.
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Embecta may not achieve these and other anticipated benefits for a variety of reasons, including, among others:
−Removed: (1) the ongoing transition and separation activities may demand significant management resources and require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing Embecta’s
+Added: (1) the ongoing transition and separation activities may demand significant management resources and require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing Embecta’s business;
(2) Embecta may be more susceptible to market fluctuations, and other adverse events than if it were still a part of BD because Embecta’s business is less diversified than BD’s businesses prior to the completion of the Separation;
(3) as a standalone company, Embecta may be unable to obtain certain goods, services and technologies at prices or on terms as favorable as those BD obtained prior to completion of the Separation;
−Removed: (4) the Separation may require Embecta to pay costs that could be substantial and material to its financial resources, including accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring key senior management and personnel new to Embecta, tax costs and costs to separate information systems, including its enterprise resource planning systems;
−Removed: (5) under the terms of the tax matters agreement that Embecta entered into with BD, it is restricted from taking certain actions that could cause the distribution or certain related transactions to fail to qualify as tax-free to BD and BD shareholders, or could result in certain other taxes to BD, and these restrictions may limit us for a period of time from pursuing certain strategic transactions and equity issuances or engaging in other transactions that might increase the value of its business;
+Added: (4) under the terms of the tax matters agreement that Embecta entered into with BD, it is restricted from taking certain actions that could cause the distribution or certain related transactions to fail to qualify as tax-free to BD and BD shareholders, or could result in certain other taxes to BD,;
and (6) the contractual arrangements between Embecta and BD are on less favorable terms than the prior existing intercompany arrangements from which Embecta benefited, and such arrangements may be inadequate to provide for the ongoing operation and growth of Embecta’s business.
If Embecta fails to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, it could have a material adverse effect on its competitive position, business, financial condition, results of operations and cash flows.
−Removed: In order to conduct its operations and meet its financial reporting and other obligations, Embecta relies on certain services provided by BD pursuant to the transaction documents entered into with BD in connection with the Separation, including the TSA and the LSA.
−Removed: If Embecta is unable to extend the services on the terms contemplated by the Extension or replace the services that BD currently provides to it on terms that are at least as favorable to Embecta as the terms on which BD is providing these services, or if BD otherwise terminates any of the services, Embecta’s business, financial condition and results of operations may be materially adversely affected.
−Removed: In connection with the Separation, Embecta and BD entered into various agreements, including a Separation and Distribution Agreement, a TSA, an LSA, a tax matters agreement, an employee matters agreement, a cannula supply agreement, contract manufacturing agreements, an intellectual property matters agreement, distribution agreements and other transaction agreements.
−Removed: See “Agreements Related to the Separation” in Item 1.
−Removed: Certain of these agreements provide for the performance of services by each company for the benefit of the other for a period of time after the Separation.
−Removed: Embecta relies on certain services provided by BD pursuant to the TSA, the LSA, and other transaction agreements entered into with BD in connection with the Separation, including with respect to information technology, procurement, quality and regulatory affairs, medical affairs, tax and treasury services, distribution logistics, shared services infrastructure support and enterprise resource planning, accounting and reporting and other systems, in order to conduct its operations and meet its financial reporting and other obligations.
−Removed: Embecta and BD have agreed to extend certain services under the TSA, the LSA and other transaction agreements in a limited set of markets, subject to the condition described below, to support the Interim Business Continuity Processes.
−Removed: The Extension is being entered into to reduce potential operational disruptions related to certain services that BD currently provides to Embecta pursuant to the TSA, the LSA, and other transaction agreements, which Embecta has determined will likely not be fully replaced prior to April 1, 2024, the date by which several such services were to terminate prior to the Extension.
−Removed: The Extension is conditioned upon BD obtaining the Supplemental PLR.
−Removed: Although Embecta believes that BD will be able to obtain the Supplemental PLR, such process may be delayed, the Supplemental PLR may not be obtained, and there can be no assurance that the Supplemental PLR will be obtained by March 31, 2024, or at all.
−Removed: If the Extension does not occur, Embecta’s business, financial condition and results of operations would be adversely affected.
+Added: In order to conduct its operations and meet its financial reporting and other obligations, Embecta relies on certain services provided by BD pursuant to the transaction documents entered into with BD in connection with the Separation.
+Added: If Embecta is unable to extend the services on similar terms or replace the services that BD currently provides to it on terms that are at least as favorable to Embecta as the terms on which BD is providing these services, or if BD otherwise terminates any of the services, Embecta’s business, financial condition and results of operations may be materially adversely affected.
Embecta’s ability to effectively manage and operate its business depends significantly on the systems provided by BD.
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This includes relying on certain services from BD for material financial consolidation and reporting design and operation disclosure controls and procedures.
−Removed: Once the TSA, the LSA, and other transaction agreements, or any extension thereto, expire or terminate, if Embecta is unable to extend or replace the services that BD currently provides to it under the TSA, the LSA and other transaction agreements, until it is able to extend such services, complete the steps necessary to perform these services itself or otherwise materially replace these services on substantially similar terms and conditions, Embecta may not be able to effectively operate its business or maintain effective financial and management controls and reporting systems.
+Added: Once all the transaction agreements, or any extension thereto, expire or terminate, if Embecta is unable to extend or replace the services that BD currently provides to it under these transaction agreements, until it is able to extend such services, complete the steps necessary to perform these services itself or otherwise materially replace these services on substantially similar terms and conditions, Embecta may not be able to effectively operate its business or maintain effective financial and management controls and reporting systems.
This could impair Embecta’s ability to effectively sell, distribute and commercialize its products, generate revenue, comply with local regulatory regulations, meet SEC reporting obligations and internal control over financial reporting, maintain its stock exchange listing, service its existing indebtedness and comply with the debt covenants under its existing indebtedness.
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In addition, Embecta may not be successful in timely, effectively or efficiently implementing these systems and services or in transitioning from BD’s systems to Embecta’s systems.
−Removed: Embecta will continue to engage in the process of creating its
−Removed: own, or engaging third parties separate from BD to provide, systems and services to replace many of the systems and services that BD currently provides to Embecta once the TSA, the LSA and other transaction agreements, or any extension thereto, expires or is terminated including, for example, information technology infrastructure, enterprise resource planning and other systems, logistics, employee, customer, vendor and accounting support services, distribution and regulatory support and services and accounting and reporting systems.
+Added: Embecta will continue to engage in the process of creating its own, or engaging third parties separate from BD to provide, systems and services to replace many of the systems and services that BD currently provides to Embecta once the transaction agreements, or any extension thereto, expires or is terminated including, for example, information technology infrastructure, enterprise resource planning ("ERP") and other systems, logistics, employee, customer, vendor and accounting support services, distribution and regulatory support and services and accounting and reporting systems.
Embecta expects this process to be complex, time-consuming and costly.
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In addition, Embecta’s costs for the operation of these systems may be higher than the amounts reflected in its historical combined financial statements.
−Removed: Following the end of the transition period, Embecta will be required to rebrand its products to remove the BD name, transfer or obtain new manufacturing, supply chain, regulatory and product licenses and registrations in the name of Embecta, which could adversely affect its ability to attract and maintain customers and end users or which could result in delays or interruptions of Embecta's commercialization and distribution operations or the loss of customers and revenue, all of which could adversely affect its financial conditions and results of operations.
+Added: Following the end of the transition period, Embecta will be required to rebrand its products to remove the BD name, transfer or obtain new manufacturing, supply chain, regulatory and product licenses and registrations in the name of Embecta, which could adversely affect its ability to attract and maintain customers and end users or which could result in delays or interruptions of Embecta's commercialization and distribution operations or the loss of customers and revenue, all of which could adversely affect its financial condition and results of operations.
Embecta has historically marketed its products using the “BD” name and logo, which is a globally recognized brand with a strong reputation for high-quality products among people with diabetes and Embecta’s distributors.
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This could result in customer dissatisfaction and turnover to our competitors, which could further result in loss of revenue for Embecta.
−Removed: In addition, Embecta will be required to closely collaborate with its customers, and ensure the proper changes, modifications, system inputs, supply chain logistics, administration, and adjudication operations are properly transitioned within the customer’s internal infrastructure, processes and systems, in order to successfully achieve the transition.
+Added: In addition, Embecta will be required to closely collaborate with its customers, and ensure the proper changes, modifications, system inputs, supply chain logistics, administration, and adjudication operations are properly transitioned within the customer’s internal infrastructure,
+Added: processes and systems, in order to successfully achieve the transition.
Embecta’s or its customer’s inability to properly achieve these transitions could result in disruptions to Embecta’s product end-to-end product flow management and end-user access to products, which could adversely affect Embecta’s financial condition and results of operations.
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Its cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and Embecta may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance its debt.
−Removed: Embecta may be affected by significant restrictions under the tax matters agreement, including on its ability to engage in certain corporate transactions for a two-year period after the distribution, in order to avoid triggering significant tax-related liabilities.
+Added: Embecta may be affected by significant restrictions under the tax matters agreement, in order to avoid triggering significant tax-related liabilities.
Under current United States federal income tax law, a spin-off that otherwise qualifies for tax-free treatment can be rendered taxable to the parent corporation and its stockholders as a result of certain post-spin-off transactions, including certain acquisitions of shares or assets of the spun-off corporation.
Under the tax matters agreement that Embecta entered into with BD, Embecta is restricted from taking certain actions that could prevent the distribution and certain related transactions from being tax-free for United States federal income tax purposes, or could result in certain other taxes to BD.
−Removed: In particular, under the tax matters agreement, for the two-year period following the Separation Date, as described in the section entitled “Agreements Related to the Separation,” in Item 1 of this Annual Report on Form 10-K, Embecta is subject to specific restrictions on its ability to pursue or enter into acquisition, merger, sale and redemption transactions with respect to Embecta stock.
−Removed: These restrictions may limit Embecta’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its stockholders or that might increase the value of its business.
In addition, under the tax matters agreement, Embecta may be required to indemnify BD and its affiliates against any tax-related liabilities incurred by them as a result of the acquisition of Embecta’s stock or assets, even if Embecta does not participate in or otherwise facilitate the acquisition, or as a result of certain other actions taken by Embecta.
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BD received a private letter ruling from the Internal Revenue Service (“IRS”) to the effect that, among other things, the Separation and the Distribution will qualify as a transaction that is tax-free for United States federal income tax purposes under Sections 368(a)(1)(D), 355, and 361 of the Internal Revenue Code of 1986, as amended (the “Code”).
−Removed: It was a condition to the distribution that BD receive (i) a private letter ruling from the IRS, satisfactory to the BD Board of Directors, regarding certain United States federal income tax matters relating to the Separation and Distribution and (ii) an opinion of its outside tax counsel, satisfactory to the BD Board of Directors, regarding the qualification of the contribution of assets from BD to Embecta and the distribution, taken together, as a “reorganization” within the meaning of Sections
−Removed: 368(a)(1)(D) and 355 of the Code and such opinion has not been withdrawn or rescinded.
+Added: It was a condition to the distribution that BD receive (i) a private letter ruling from the IRS, satisfactory to the BD Board of Directors, regarding certain United States federal income tax matters relating to the Separation and Distribution and (ii) an opinion of its outside tax counsel, satisfactory to the BD Board of Directors, regarding the qualification of the contribution of assets from BD to Embecta and the distribution, taken together, as a “reorganization” within the meaning of Sections 368(a)(1)(D) and 355 of the Code and such opinion has not been withdrawn or rescinded.
The opinion of its outside tax counsel and the private letter ruling are based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of BD and Embecta, including facts, assumptions, representations, statements and undertakings relating to the past and future conduct of the companies’ respective businesses and other matters.
If any of these facts, assumptions, representations and statements are or become inaccurate or incomplete, or if any such undertaking is not complied with, BD may not be able to rely on the opinion of its outside tax counsel or the private letter ruling, and the conclusions reached therein could be jeopardized.
−Removed: Further, the Extension is conditioned upon BD obtaining the Supplemental PLR.
Notwithstanding BD’s receipt of a private letter ruling from the IRS and the opinion of its outside tax counsel, the IRS could determine on audit that the distribution or certain related transactions are taxable for United States federal income tax purposes if it determines that any of the facts, assumptions, representations, statements and undertakings upon which the private letter ruling or the opinion was based are incorrect or have been violated, or if it disagrees with any of the conclusions in the opinion.
−Removed: Additionally, although Embecta believes that BD will be able to obtain the Supplemental PLR, such process may be delayed, the Supplemental PLR may not be obtained, and there can be no assurance that the Supplemental PLR will be obtained by March 31, 2024, or at all.
Accordingly, notwithstanding BD’s receipt of a private letter ruling from the IRS and the opinion of its outside tax counsel, there can be no assurance that the IRS will not assert that the distribution or certain related transactions do not qualify for tax-free treatment for United States federal income tax purposes, or that a court would not sustain such a challenge.
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This could require us to expend additional resources in order to obtain the services or assets previously provided under the contract, or require us to seek arrangements with new third parties or obtain letters of credit or other forms of credit support.
−Removed: If Embecta is unable to obtain required consents or approvals, it may be unable to obtain the benefits, permits, assets and contractual commitments that are intended to be allocated to Embecta as part of its Separation from BD, and Embecta may be required to seek alternative arrangements to obtain services and assets that may be more costly and/or of lower quality.
+Added: If Embecta is unable to
+Added: obtain required consents or approvals, it may be unable to obtain the benefits, permits, assets and contractual commitments that are intended to be allocated to Embecta as part of its Separation from BD, and Embecta may be required to seek alternative arrangements to obtain services and assets that may be more costly and/or of lower quality.
The termination or modification of these contracts or permits or the failure to timely complete the transfer or separation of these contracts or permits could negatively affect Embecta’s business, financial condition, results of operations and cash flows.
−Removed: The closing of the Separation was deferred in certain jurisdictions, and may not occur at all in such jurisdictions, due to local regulatory requirements, which may adversely affect Embecta’s manufacturing, business, financial condition and results of operations.
−Removed: The closing of the transfer of certain assets related to the Diabetes Care Business in certain jurisdictions, including China, Mexico, and Italy, as contemplated by the Separation and Distribution Agreement did not occur at the Separation and may not occur due to local regulatory requirements.
+Added: The closing of the Separation was deferred in certain jurisdictions, and may not occur at all in such jurisdictions, due to local regulatory requirements, which may adversely affect Embecta’s business, financial condition and results of operations.
+Added: The closing of the transfer of certain assets related to the Diabetes Care Business in certain jurisdictions, including India, as contemplated by the Separation and Distribution Agreement did not occur at the Separation and may not occur due to local regulatory requirements.
If Embecta is unable to obtain required approval of local regulators or otherwise comply with such local regulatory requirements to effect the Separation in these jurisdictions, it may be unable to obtain the assets that are intended to be allocated to Embecta as part of its separation from BD.
−Removed: A temporary suspension of manufacturing operations associated with the regulatory approvals and transitions, including for inspections, may be required.
−Removed: A temporary suspension of manufacturing operations has already been initiated in China.
−Removed: These temporary
−Removed: suspensions, and any unforeseen delays in the termination of any suspension, may ultimately impact Embecta’s ability to continuously supply its products to such jurisdictions and any other markets that receive such products.
The failure to timely complete the transfer of these local assets or interruptions resulting from these foreign transfers could negatively affect Embecta’s business, financial condition, results of operations and cash flows.
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Such awards will have a dilutive effect on Embecta’s earnings per share, which could adversely affect the market price of Embecta common stock.
+Added: If our remedial measures are insufficient to address material weaknesses in our internal control over financial reporting, our ability to report financial information could be adversely affected, it could result in a material misstatement in our financial statements not being prevented or detected, it could harm our business, it could cause investors to lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock may decline .
+Added: Internal controls related to our account reconciliations and analyses are critical to maintaining adequate oversight of our financial reporting and providing reasonable assurance with respect to our financial reports.
+Added: Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
+Added: As a public company, we are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies.
+Added: In particular, we are required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal control over financial reporting.
+Added: In addition, our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting.
+Added: As disclosed in Item 9A of this Annual Report on Form 10-K, in the process of assessing our internal control over financial reporting, management identified deficiencies in internal controls related to certain account reconciliations and analyses.
+Added: Subsequent to the first and second phases of our ERP implementation, we instituted new internal controls, processes, and procedures ("Control Activities").
+Added: Specifically, these newly designed Control Activities were executed for the first time in fiscal year 2024.
+Added: Management has concluded that these newly designed Control Activities were not designed properly or operating effectively to ensure the appropriate level of management review, precision, and adequate evidence to confirm the completeness and accuracy of data used in the account reconciliations and analyses resulting in a material weakness.
+Added: Specifically, management determined that we did not maintain effective controls over account reconciliations and analyses, thus constituting a material weakness in our internal control over financial reporting.
+Added: As a result of this material weakness, management concluded that our internal control over financial reporting was not effective as of September 30, 2024.
+Added: As described in Item 9A of this Annual Report on Form 10-K, we are implementing additional controls intended to remediate the material weakness.
+Added: There can be no assurance that our remediation efforts will be successful.
+Added: If we are unable to remediate the material weakness timely and sufficiently or are otherwise unable to maintain effective internal control over financial reporting in the future, our ability to report financial information timely and accurately could be adversely affected, we may fail to meet our reporting requirements, and investors may lose confidence in the accuracy and completeness of our financial reports.
+Added: As a result, our business may be harmed, and the market price of our common stock could decline.
+Added: In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
+Added: In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or ensure the fair and accurate presentation of our financial statements included in our periodic reports filed with the SEC.
Embecta cannot guarantee the timing, amount or payment of dividends on its common stock.
Embecta currently expects that it will pay a regular cash dividend.
−Removed: However, the timing, declaration, amount and payment of any dividends will be within the discretion of Embecta’s Board of Directors, and will depend upon many factors, including Embecta’s financial condition, earnings, capital requirements of its operating subsidiaries, covenants associated with certain of Embecta’s debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by Embecta’s Board of Directors.
+Added: However, the timing, declaration, amount and payment of any dividends will be within the discretion of Embecta’s Board of Directors, and will depend upon many factors,
+Added: including Embecta’s financial condition, earnings, capital requirements of its operating subsidiaries, covenants associated with certain of Embecta’s debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by Embecta’s Board of Directors.
Moreover, Embecta cannot guarantee that it will continue to pay any dividends in the future and cannot guarantee the amount of any such dividends.
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Embecta’s amended and restated certificate of incorporation designates the state courts within the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Embecta stockholders, which could discourage lawsuits against Embecta and its directors and officers.
−Removed: Embecta’s amended and restated certificate of incorporation provides that, unless Embecta (through approval of the Board of Directors) consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (1) any derivative action brought on behalf of Embecta, (2) any action asserting a
−Removed: claim of breach of a fiduciary duty owed by any director or officer or other employee of Embecta to Embecta or Embecta’s stockholders, (3) any action asserting a claim against Embecta or any director or officer or other employee of Embecta arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the Delaware General Corporation Law (“DGCL”) or Embecta’s amended and restated certificate of incorporation or amended and restated bylaws (as either may be amended from time to time), (4) any action asserting a claim against Embecta or any director or officer or other employee of Embecta governed by the internal affairs doctrine, which is a conflict of laws principle which recognizes that only one state should have the authority to regulate a corporation’s internal affairs or (5) any action as to which the DGCL (as it may be amended from time to time) confers jurisdiction on the Court of Chancery of the State of Delaware.
+Added: Embecta’s amended and restated certificate of incorporation provides that, unless Embecta (through approval of the Board of Directors) consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (1) any derivative action brought on behalf of Embecta, (2) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of Embecta to Embecta or Embecta’s stockholders, (3) any action asserting a claim against Embecta or any director or officer or other employee of Embecta arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the Delaware General Corporation Law (“DGCL”) or Embecta’s amended and restated certificate of incorporation or amended and restated bylaws (as either may be amended from time to time), (4) any action asserting a claim against Embecta or any director or officer or other employee of Embecta governed by the internal affairs doctrine, which is a conflict of laws principle which recognizes that only one state should have the authority to regulate a corporation’s internal affairs or (5) any action as to which the DGCL (as it may be amended from time to time) confers jurisdiction on the Court of Chancery of the State of Delaware.
If and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware).
−Removed: These exclusive forum provisions will apply to all covered actions, including any covered action in which the plaintiff chooses to assert a claim or claims under federal law in addition to a claim or claims under Delaware law.
+Added: exclusive forum provisions will apply to all covered actions, including any covered action in which the plaintiff chooses to assert a claim or claims under federal law in addition to a claim or claims under Delaware law.
These exclusive forum provisions will not apply to actions asserting only federal law claims under the Securities Act of 1933, as amended, (the "Securities Act") or the Securities Exchange Act of 1934, as amended (the "Exchange Act") regardless of whether the state courts in the State of Delaware have jurisdiction over those claims.
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Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Embecta may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect its business, results of operations and financial condition.
−Removed: Unresolved Staff Comments.
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.