Read the Registration Document - Guerbet

3) Risk factorsThe company conducted a review of risks having a potential material adverse impact on its business,financial position or results. Excluding those described below, to the best of its knowledge, it considers thatthere are no other material risks.2) Operating risks• Pharmaceutical risksPharmaceutical risks could potentially result in liability incurred by the company for the effects caused by itsproducts or financial risk resulting thereof (loss of revenue), legal risks (notably recourse by patients),reputational risk (reputational damage vis-à-vis customers).As with all pharmaceutical companies, a system of pharmacovigilance (PhV) or post-marketing surveillanceis in place in the Group that consists of monitoring and reporting to health authorities undesirable effectsarising when one of our products is administered. Furthermore, to manage and limit this risk, the informationnotices of products can be modified and healthcare professionals as well as patients are informed onprecautions of use. Following the inspection in June 2011, UK and French health authorities sent a formalnotice of compliance to Guerbet, requesting in particular that information be updated in all countries withrespect to tolerance of products accompanied by the implementation of the appropriate organisations formanaging PhV information. In this area, the maximum risk of a formal notice of compliance would besuspension of use until the measures taken in response are considered satisfactory by the healthauthorities. This formal notice resulted in a very comprehensive action plan and decisions adopted torespond to the comments of the health authorities. These authorities were informed within the required timeperiod and may return at any time to reinspect the company. To date, Guerbet had responded to allcomments formulated by health authorities and the corresponding formal notice of compliance was lifted inconsequence.Another significant risk for pharmaceutical companies concerns compliance with good manufacturing anddistribution practices. The pharmaceutical plant of Aulnay-Sous-Bois is subject to regular inspections bydrug agencies from around the world starting with the French National Drug and Health Products SafetyAgency (ANSM). The last inspection by this agency was in 2010 when we informed health authorities ofGuerbet's determination to pursue major investments for the manufacturing facilities of our products tobetter meet European requirements in the area of good manufacturing rights for injectable products. After afirst investment devoted to equipment for the preparation of solutions, a new tranche of investments is nowin progress and expected result in the commissioning of a new filling unit by the end of 2013.With respect to new products in an experimental phase, a mandatory civil liability insurance, necessary toobtain the authorisation to conduct the study by the ethics committees, covers risks that may be incurred topersons included in a clinical investigation protocol.In addition a risk management plan that complies with public health requirements exists to prepare for themonitoring that must be conducted during the marketing phase of products. Finally, as required by law, thecompany has implemented a system for ensuring the traceability of products sold making it possible, whennecessary, to immediately recall product batches whether in clinical trial or marketing phases in all countrieswhere they are distributed.• Pricing and product reimbursement risksIn several countries, Guerbet is subject to economic regulatory constraints that govern the price of drugsand healthcare products. In this context, the financial constraints on public healthcare spending, notably inEurope could result in pressure on prices for pharmaceutical products and medical devices sold byGuerbet. Such measures would have an adverse impact on sales and the gross margin.Furthermore, in the highly competitive market of contrast agents, purchasing policies of many hospitals,clinics, radiology centres or purchasing groups, may involve the use tendering procedures that wouldincrease downward pressure on prices of products used.51