SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
OR
For the fiscal year ended
OR
For the transition period from to
Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .
Commission file number
(Exact name of Registrant as specified in its charter) |
(Jurisdiction of incorporation) |
(Address of principal executive offices) |
General Counsel Telephone: + Email: |
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) |
Securities registered or to be registered, pursuant to Section 12(b) of the Act.
Title of each class |
| Name of each exchange on which registered |
| Trading Symbol |
evidenced by American Depositary Receipts, each American Depositary Share representing one Class B non-voting share of Grifols, S.A. | The |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None. |
(Title of Class) |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None. |
(Title of Class) |
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
⌧
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
◻ Yes ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
⌧
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ◻ | Non-accelerated filer ◻ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ◻
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
⌧ Yes ◻ No
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ◻ |
| Other ◻ |
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
◻ Item 17 ◻ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
GRIFOLS, S.A.
TABLE OF CONTENTS
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MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 159 | |
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Management’s Report on Internal Control over Financial Reporting | 159 | |
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PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | 161 | |
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DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 165 | |
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GENERAL INFORMATION
As used in this annual report on Form 20-F, unless the context otherwise requires or as is otherwise indicated:
· | all references to “Grifols,” the “Company,” “we,” “us” and “our” refer to Grifols, S.A., a company (sociedad anónima) organized under the laws of Spain, and our consolidated subsidiaries; |
· | all references to the “Group” or the “Grifols Group” are to Grifols, S.A. and the group of companies owned or controlled by Grifols, S.A; and |
· | see “Glossary of Terms” for further explanations and/or definitions of terms referenced in this Form 20-F. |
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
The basis of presentation of financial information of Grifols in this document is in conformity with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, and other legislative provisions containing the applicable legislation governing our financial information, unless indicated otherwise.
All references in this annual report on Form 20-F to (i) “euro,” “€” or “EUR” are to the common currency of the European Union and (ii) “U.S. dollar,” “$” or “USD” are to the currency of the United States.
The functional and presentation currency of Grifols is the euro. All tabular disclosures are presented in thousands of euros except share and per share amounts, percentages and as otherwise indicated. Certain monetary amounts and other figures included in this annual report on Form 20-F have been subject to rounding adjustments. Accordingly, any discrepancies in any tables between the totals and the sums of amounts listed are due to rounding.
Constant Currency
Net revenue variance in constant currency is determined by comparing adjusted current period figures, calculated using prior period monthly average exchange rates, to the prior period net revenue. The resulting percentage variance in constant currency is considered to be a non-IFRS-IASB financial measure. Net revenue variance in constant currency calculates net revenue variance without the impact of foreign exchange fluctuations. We believe that constant currency variance is an important measure of our operations because it neutralizes foreign exchange impact and illustrates the underlying change from one year to the next. We believe that this presentation provides a useful period-over-period comparison as changes due solely to exchange rate fluctuations are eliminated. Net revenue variance in constant currency, as defined and presented by us, may not be comparable to similar measures reported by other companies. Net revenue variance in constant currency has limitations, particularly because the currency effects that are eliminated constitute a significant element of our net revenue and could impact our performance significantly. We do not evaluate our results and performance without considering variances in constant currency on the one hand and changes prepared in accordance with IFRS-IASB on the other. We caution you to follow a similar approach by considering data regarding constant currency period-over-period revenue variance only in addition to, and not as a substitute for or superior to, other measures of financial performance prepared in accordance with IFRS-IASB. We present the fluctuation derived from IFRS-IASB net revenue next to the fluctuation derived from non IFRS-IASB net revenue.
See below for a reconciliation of reported net revenues to net revenues in constant currency:
Year Ended December 31, | Year Ended December 31, |
| |||||||||||
2021 | 2020 | % var | 2020 | 2019 | % var |
| |||||||
(in millions of euros) | (in millions of euros) |
| |||||||||||
Net Revenue |
| 4,933.1 |
| 5,340.0 |
| 7.6 | % | 5,340.0 |
| 5,098.7 |
| 4.7 | % |
Variation due to exchange rate effects |
| 208.5 |
|
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| 68.0 |
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Constant Currency Net Revenue |
| 5,141.6 |
| 5,340.0 |
| 3.7 | % | 5,408.0 |
| 5,098.7 |
| 6.1 | % |
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PRESENTATION OF MARKET INFORMATION
Market information (including market share, market position and industry data for our operating activities and those of our subsidiaries or of companies acquired by us) or other statements presented in this annual report on Form 20-F regarding our position (or that of companies acquired by us) relative to our competitors largely reflect the best estimates of our management. These estimates are based upon information obtained from customers, trade or business organizations and associations, other contacts within the industries in which we operate and, in some cases, upon published statistical data or information from independent third parties. Except as otherwise stated, our market share data, as well as our management’s assessment of our comparative competitive position, has been derived by comparing our sales figures for the relevant period to our management’s estimates of our competitors’ sales figures for such period, as well as upon published statistical data, information taken from filings with the Securities and Exchange Commission and information from independent third parties, and, in particular, the reports published and the information made available by, among others, the Marketing Research Bureau, or the MRB. You should not rely on the market share and other market information presented herein as precise measures of market share or of other actual conditions.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains statements that constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as “may,” “anticipate,” “believe,” “estimate,” “predict,” “expect,” “intend,” “forecast,” “will,” “would,” “should” or the negative of such terms or other variations on such terms or comparable or similar words or expressions.
These forward-looking statements reflect, as applicable, our management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. These factors include, but are not limited to:
· | the complexity of our manufacturing processes and the susceptibility of our biological intermediates to contamination; |
· | our need to continually monitor our products for possible unexpected side effects; |
· | our ability to adhere to government regulations so that we may continue to manufacture and distribute our products; |
· | the impact of disruptions in our supply of plasma or in the operations of our plasma collection centers; |
· | the impact of competing products and pricing and the actions of competitors; |
· | the continued impact of the ongoing virus named “SARS-CoV-2” (the “Coronavirus” or “COVID-19”) pandemic; |
· | the impact of product liability claims on our business; |
· | our reliance on a plasma supply free of transmittable disease; |
· | interest rates and availability and cost of financing opportunities; |
· | the impact of interest rate fluctuations; |
· | unexpected shut-downs of our manufacturing and storage facilities or delays in opening new planned facilities; |
· | reliance on third parties for manufacturing of products and provision of services; |
· | our ability to commercialize products in development; |
· | our ability to protect our intellectual property rights; |
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· | U.S. healthcare legislation, new legislation, regulatory action or legal proceedings affecting, among other things, the U.S. healthcare system, pharmaceutical pricing and reimbursement, including Medicaid, Medicare and the Public Health Service Program; |
· | legislation or regulations in markets outside of the United States affecting product pricing, reimbursement, access, or distribution channels; and |
· | changes in legal requirements affecting the industries in which we operate. |
Please review a more detailed discussion of these and other risks that may impact our business set forth in this Form 20-F under “Item 3.D. Risk Factors.”
Forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including those listed above, and actual results may differ materially from those expressed or implied in the forward-looking statements.
All written and oral forward-looking statements concerning matters addressed in this annual report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this annual report. The forward-looking statements contained in this annual report speak only as of the date of this annual report. Except as required by law, we do not undertake to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
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PART I
Item 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. | Directors and Senior Management |
Not applicable.
B. | Advisers |
Not applicable.
C. | Auditor |
Not applicable.
Item 2.OFFER STATISTICS AND EXPECTED TIMETABLE
A. | Offer Statistics |
Not applicable.
B. | Method and Expected Timetable |
Not applicable.
Item 3.KEY INFORMATION
A. | [Reserved] |
B. | Capitalization and Indebtedness |
Not Applicable.
C. | Reasons for the Offer and Use of Proceeds |
Not Applicable.
D. | Risk Factors |
Summary
Our company, our business and our securities are subject to a number of risks which are described more comprehensively elsewhere in this item D. We present below a summary of our key risk factors.
Risks Relating to Our Structure:
· | Our substantial level of indebtedness could adversely affect our financial condition, restrict our ability to react to changes to our business, and prevent us from fulfilling our obligations; |
· | Despite our substantial indebtedness, we may still incur significantly more debt. This could exacerbate the risks associated with our substantial leverage; |
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· | To service our indebtedness and other obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control, including our ability to receive dividends and other distributions from our subsidiaries, while covenants in our debt agreements restrict our business in many ways; |
· | The phasing out and ultimate replacement of LIBOR with an alternative reference rate and changes in the manner of calculating other reference rates may adversely impact the value of loans and other financial instruments we hold that are linked to LIBOR or other reference rates in ways that are difficult to predict and could adversely impact our financial condition and results of operations; and |
· | The ability to enforce civil liabilities under U.S. securities laws may be limited. |
Risks Relating to the Company and Our Business:
· | Plasma and plasma derivative products are fragile, and improper handling of our plasma or plasma derivative products could adversely affect results of operations. Furthermore, our manufacturing processes are complex and involve biological intermediates that may be susceptible to contamination and variations in yield; |
· | Once our products are approved and marketed, we must continually monitor them for signs that their use may result in serious and unexpected side effects, which could jeopardize our reputation and our ability to continue marketing our products. We may also be required to conduct post-approval clinical trials as a condition to licensing a product. Moreover, we may not be able to commercialize products in development; |
· | Our ability to continue manufacturing and distributing our products depends on our continued adherence to cGMP regulations at our facilities; |
· | A significant disruption in our supply of plasma could have a material adverse effect on our business and our growth plans; |
· | The Coronavirus pandemic has had, and could continue to have, a material, adverse impact on us; |
· | A significant portion of our net revenue has historically been derived from sales of our immunoglobulin (“IG”) products and we expect that they will continue to comprise a significant portion of our sales. Any adverse market event with respect to these products could have a material adverse effect on us; |
· | We face significant competition, including from companies with greater financial resources; |
· | Technological changes in the production of plasma derivative and diagnostic products could render our production process uneconomical; |
· | Product liability claims or product recalls involving our products or products we distribute could have a material adverse effect on our business; |
· | Our future success depends on our ability to retain members of our senior management and to attract, retain and motivate qualified personnel; |
· | Our business requires substantial capital to operate and grow and to achieve our strategy of realizing increased operating leverage, including the completion of several large capital projects; |
· | Our results of operations and financial condition may be affected by adverse changes in foreign currency exchange rates, especially a significant shift in the value of the euro as compared to the U.S. dollar; |
· | If our shipping distribution channels or the San Diego, Clayton, Emeryville, Los Angeles or Parets facilities were to suffer a crippling accident, or if a force majeure event materially affected our ability to operate, produce and |
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distribute saleable products, a substantial part of our manufacturing capacity could be shut down for an extended period and our distribution processes could be disrupted;
· | We rely in large part on the services of third parties for the manufacture, sale, distribution and delivery of our products. If these third parties fail to timely perform their obligations, or if we experience equipment difficulties, or if the suppliers of our equipment or disposable goods fail to deliver key product components or supplies in a timely manner, our manufacturing ability would be impaired and our product sales could suffer; |
· | Complex and evolving U.S. and international laws and regulations regarding privacy and data security and increased risk of cybersecurity incidents to our information technology systems could result in increased costs of operations and a significant disruption to our business; |
· | In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how. Our success depends in large part on our ability to obtain and maintain protection in the United States and other countries of the intellectual property relating to or incorporated into our technology and products; and |
Risks Relating to the Healthcare Industry:
· | The United States Patient Protection and Affordable Care Act and the companion Healthcare and Education Reconciliation Act, each enacted in March 2010, may adversely affect our business; |
· | Impact of government regulations over product development and regulatory approvals, as well as government pressures and constraints on reimbursement may adversely affect our business; and |
· | We are subject to extensive government regulatory compliance and ethics oversight, and the failure to comply with laws and regulations governing the sales and marketing of our products or an adverse decision in lawsuits may result in adverse consequences to us. |
Risks Relating to Our Shares and American Depositary Shares:
· | If we discover material weaknesses or significant deficiencies in our internal control over financial reporting, it may adversely affect our ability to provide timely and reliable financial information and satisfy our reporting obligations under U.S. federal securities laws, which also could affect the market price of our American Depositary Shares or our ability to remain listed on NASDAQ; |
· | The Grifols Family may exercise significant influence over the conduct of our business; |
· | The market price of our Class B ADSs on NASDAQ may be volatile; |
· | Fluctuations in the exchange rate between the U.S. dollar and the euro may increase the risk of holding our ADSs or shares; |
· | Subscription (or preemptive) rights may be unavailable to U.S. holders of our shares or ADSs; and |
· | ADS holders may be subject to limitations on the transfer of their ADSs. |
Risks Relating to Our Structure
Our substantial level of indebtedness could adversely affect our financial condition, restrict our ability to react to changes to our business, and prevent us from fulfilling our obligations under our debt.
We have a significant amount of indebtedness. As of December 31, 2021, our current and non-current financial liabilities were €10,207.2 million, of which a substantial majority (€7,768.5 million) was long-term debt.
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Our high level of indebtedness could have significant adverse effects on our business, such as:
· | making it more difficult for us to satisfy our obligations with respect to our outstanding debt; |
· | making us more vulnerable to economic downturns and adverse developments in our business; |
· | impairing our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes; |
· | reducing the funds available to us for operations and other purposes due to the substantial portion of our cash flow that we use to pay interest on our indebtedness; |
· | placing a prior ranking claim on the underlying assets of all of the indebtedness outstanding under our purchase money indebtedness, equipment financing and real estate mortgages; |
· | limiting our ability to fund a change of control offer; |
· | placing us at a competitive disadvantage compared to our competitors that may have proportionately less debt; |
· | limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and |
· | restricting us from making strategic acquisitions or exploiting other business opportunities. |
We expect to use cash flow from operations to pay our expenses and amounts due under our outstanding indebtedness. Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our business may not generate sufficient cash flow from operations in the future and our anticipated growth in revenue and cash flow may not be realized, either or both of which could result in our being unable to repay indebtedness or to fund other liquidity needs. If we do not have enough liquidity, we may be required to refinance all or part of our then existing debt, sell assets or incur more debt. We may not be able to accomplish any of these alternatives on terms acceptable to us, or at all. In addition, the terms of existing or future debt agreements may restrict us from adopting any of these alternatives. The failure to generate sufficient cash flow or to achieve any of these alternatives could materially and adversely affect our business, results of operations and financial condition.
Despite our substantial indebtedness, we may still incur significantly more debt. This could exacerbate the risks associated with our substantial leverage.
We may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. Our business is capital intensive, and we regularly seek additional capital. Although the indenture governing the 2017 Notes (as defined herein), the indenture governing the 2019 Notes (as defined herein), the indenture governing the 2021 Notes (as defined herein), the First Lien Credit Facilities (as defined herein) and the European Investment Bank Term Loans (as defined herein) contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions, including secured debt, could be substantial. Incurring additional debt to current debt levels could exacerbate the leverage-related risks described above. For more information on our indebtedness, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit.”
To service our indebtedness and other obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future. A significant reduction in our operating cash flows resulting from changes in economic conditions, increased competition or other events beyond our control could increase the need for additional or alternative sources of liquidity and could have a material adverse effect on our business, financial condition, results of operations, prospects and our ability to service our debt and other obligations. If we are unable to service our indebtedness, we will be forced to
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adopt an alternative strategy that may include actions such as reducing capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital. We cannot assure you that any of these alternative strategies could be effected on satisfactory terms, if at all, or that they would yield sufficient funds to make required payments on our indebtedness.
In addition, our borrowings under the First Lien Credit Facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease.
We cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the First Lien Credit Facilities or otherwise in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before the maturity of such indebtedness. We cannot assure you that we will be able to refinance any of our indebtedness, including the First Lien Credit Facilities, the 2017 Notes, the 2019 Notes, the 2021 Notes and the European Investment Bank Term Loans, on commercially reasonable terms or at all. For more information on our indebtedness, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit.”
Covenants in our debt agreements restrict our business in many ways.
The agreements governing our indebtedness and other financial obligations applicable to us contain various covenants, with customary caveats, that limit our ability and/or our restricted subsidiaries’ ability to, among other things:
· | incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons; |
· | issue redeemable stock and preferred equity; |
· | pay dividends or make distributions to the shareholders of Grifols or redeem or repurchase capital stock; |
· | prepay, redeem or repurchase debt; |
· | make loans, investments and capital expenditures; |
· | enter into agreements that restrict distributions from our restricted subsidiaries; |
· | sell assets and capital stock of our subsidiaries; |
· | enter into certain transactions with affiliates; and |
· | consolidate or merge with or into, or sell substantially all of our assets to, another person. |
A breach of any of these covenants could result in a default under our debt agreements. Upon the occurrence of an event of default, the respective creditors could elect to declare all amounts outstanding under the debt agreements to be immediately due and payable and, in the case of the First Lien Credit Facilities, 2021 Notes, 2019 Notes, 2017 Notes and the EIB Term Loans, terminate all commitments to extend further credit. If we were unable to repay those amounts, the respective creditors could proceed against the collateral granted to them to secure that indebtedness. We have pledged a significant portion of our assets as collateral under the First Lien Credit Facilities, the European Investment Bank Term Loans and the 2019 Notes. If the respective creditors under our existing indebtedness accelerate the repayment of borrowings, we may not have sufficient assets to repay our indebtedness.
Our ability to meet our financial obligations depends on our ability to receive dividends and other distributions from our subsidiaries.
Our principal assets are the equity interests that we hold in our operating subsidiaries. As a result, we are dependent on dividends and other distributions from our subsidiaries to generate the funds necessary to meet our financial obligations, including the payment of principal and interest on our outstanding debt. Our subsidiaries may not generate sufficient cash from operations to enable us to make principal and interest payments on our indebtedness or may have preferential dividends which are required to be paid prior
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to any dividends to us. For example, in the case of each of Biomat USA, Inc. (“Biomat USA”) and Biomat Newco Corp (“Biomat Newco”), our U.S.-based plasma collection subsidiaries, to the extent dividends are declared by their respective shareholders, the GIC Investor (as defined Item 4 of this Part I, “Information on the Company—A. History of and Development of the Company—Important Milestones”) would be entitled to receive preferred dividends. Such dividends are equal to $4,168,421.05 per share annually payable by each of Biomat USA (in respect of its ten preferential shares) and Biomat Newco (in respect of its nine preferential shares) and carry additional rights with them as well as including redemption rights and a liquidation preference of $52,105,263.16 per share. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Dispositions—The Biomat Transactions.”
In addition, any payment of dividends, distributions, loans or advances to us by our subsidiaries could be subject to restrictions on dividends or, in the case of foreign subsidiaries, restrictions on repatriation of earnings under applicable local law and monetary transfer restrictions in the jurisdictions in which our subsidiaries operate. In addition, payments to us by our subsidiaries will be contingent upon our subsidiaries’ earnings. Our subsidiaries are permitted under the terms of our indebtedness to incur additional indebtedness that may restrict payments from those subsidiaries to us. We cannot assure you that agreements governing current and future indebtedness of our subsidiaries will permit those subsidiaries to provide us with sufficient cash to fund payments on our indebtedness when due.
Our subsidiaries are legally distinct from us and, except for existing and future subsidiaries that guarantee certain indebtedness, have no obligation, contingent or otherwise, to pay amounts due on our debt or to make funds available to us for such payment.
We are a foreign private issuer under the rules and regulations of the Securities and Exchange Commission and, thus, are exempt from a number of rules under the Securities Exchange Act of 1934 and are permitted to file less information with the Securities and Exchange Commission than a company incorporated in the United States.
As a foreign private issuer under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are exempt from certain rules under the Exchange Act, including the proxy rules under Section 14 of the Exchange Act, which impose certain disclosure and procedural requirements for proxy solicitations. Moreover, we are not required to file periodic reports and financial statements with the Securities and Exchange Commission, or the SEC, as frequently or as promptly as U.S. companies with securities registered under the Exchange Act; we are not required to file financial statements prepared in accordance with United States generally accepted accounting principles; and we are not required to comply with SEC Regulation FD, which imposes certain restrictions on the selective disclosure of material non-public information. In addition, our officers, directors and principal shareholders are not subject to the reporting or short-swing profit recovery provisions of Section 16 of the Exchange Act or the rules under the Exchange Act with respect to their purchases and sales of our Class A shares or Class B shares. Accordingly, you may receive less information about us than you would receive about a company incorporated in the United States and may be afforded less protection under the U.S. federal securities laws than you would be afforded with respect to a company incorporated in the United States. If we lose our status as a foreign private issuer at some future time, we will no longer be exempt from such rules and, among other things, will be required to file periodic reports and financial statements as if we were a company incorporated in the United States. The costs incurred in fulfilling these additional regulatory requirements could be substantial.
Additionally, pursuant to The NASDAQ Stock Market LLC (“NASDAQ”) listing rules (the “NASDAQ Listing Rules”) as a foreign private issuer, we may elect to follow our home country practice in lieu of the corporate governance requirements of the NASDAQ Listing Rule 5600 Series, with the exception of those rules that are required to be followed pursuant to the provisions of NASDAQ Listing Rule 5615(a)(3). We have elected to follow Spanish practices in lieu of the requirements of the NASDAQ Listing Rule 5600 Series to the extent permitted under NASDAQ Listing Rule 5615(a)(3). See Item 16.G. of Part II, “Corporate Governance.”
Our business could suffer as a result of the United Kingdom’s decision to end its membership in the European Union.
The United Kingdom (“U.K.”), formally left the European Union (“E.U.”), on January 31, 2020, and on December 24, 2020, the U.K. and the E.U. reached an agreement on a new partnership governing the rules that apply between the U.K. and the E.U. On January 1, 2021, provisional application of the agreement took effect. Despite the existence of a new deal, the decision of the U.K. to exit from the E.U., or Brexit, may lead to legal uncertainty and potentially divergent laws and regulations between the U.K. and the E.U., as the United Kingdom determines which E.U. laws to replicate or replace. We cannot predict whether or not the U.K. will significantly alter its current laws and regulations in respect of the pharmaceutical industry and, if so, what impact any such alteration
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would have on us or our business. Moreover, we cannot predict the impact that Brexit will have on (i) the marketing of pharmaceutical products or (ii) the process to obtain regulatory approval in the U.K. for product candidates.
Further, Brexit may cause disruptions to our business, and create uncertainty affecting our relationships with existing and potential customers, suppliers and employees. The effects of Brexit could potentially disrupt some of our target markets and jurisdictions in which we operate, and may create global economic uncertainty. Any of these effects of Brexit, among others, could materially adversely affect our business, business opportunities, results of operations, financial condition and cash flows.
The phasing out and ultimate replacement of LIBOR with an alternative reference rate and changes in the manner of calculating other reference rates may adversely impact the value of loans and other financial instruments we hold that are linked to LIBOR or other reference rates in ways that are difficult to predict and could adversely impact our financial condition and results of operations.
In July 2017, the U.K.’s Financial Conduct Authority, which regulates LIBOR, announced its intention to phase out LIBOR by the end of 2021. After December 31, 2021, the ICE Benchmark Administration ceased publication of all EUR, CHF, JPY and GBP LIBOR tenors and two of the seven U.S. dollar LIBOR tenors (1 Week and 2 Months tenors).The ICE Benchmark Administration intends to continue publication of the remaining five U.S. dollar LIBOR tenors (Overnight, 1, 3, 6, and 12 Months tenors) until June 2023. As LIBOR is phased out, it will be replaced with an alternative reference rate that will be calculated in a different manner. Similar changes have occurred or may occur with respect to other reference rates.
The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, identified the Secured Overnight Financing Rate, or SOFR, as the preferred alternative reference rate to U.S. dollar LIBOR and recommended a paced transition plan with specific steps and timelines designed to encourage the adoption and implementation of a reference rate based on SOFR. SOFR is a more generic measure than LIBOR and considers the cost of borrowing cash overnight, collateralized by U.S. Treasury securities. Given the inherent differences between LIBOR and SOFR or any other alternative benchmark rate that may be established, there are many uncertainties regarding a transition from LIBOR. Our First Lien Credit Facilities contain a fallback provision providing for alternative rate calculations in the event LIBOR is unavailable, prior to any LIBOR rate transition. As a result, our level of interest payments we incur may change and the new rates we incur may not be as favorable to us as those in effect prior to any LIBOR phase-out.
The ability to serve process and enforce civil liabilities under U.S. securities laws may be limited.
We are a company organized under the laws of Spain, and many of our subsidiaries are also incorporated outside of the United States. A substantial portion of our assets and the assets of our subsidiaries are located outside of the United States. In addition, nearly all of our directors and officers and certain of our subsidiaries’ officers and directors are nationals or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or certain of our subsidiaries or their directors or officers with respect to matters arising under the Securities Act of 1933 (the “Securities Act”) or to enforce against them judgments of courts of the United States predicated upon civil liability under the Securities Act. It may also be difficult to recover fully in the United States on any judgment rendered against such persons or against us or certain of our subsidiaries.
In addition, there is doubt as to the enforceability in Spain of original actions, or of actions for enforcement of judgments of U.S. courts of liabilities, predicated solely upon the securities laws of the United States. If a judgment was obtained outside Spain and efforts were made to enforce the judgment in Spain, there is some doubt that Spanish courts would agree to recognize and enforce a foreign judgment. Accordingly, even if you obtain a favorable judgment in a U.S. court, you may be required to re-litigate your claim in Spain.
Risks Relating to the Company and Our Business
Our manufacturing processes are complex and involve biological intermediates that may be susceptible to contamination and variations in yield.
Plasma is a raw material that is susceptible to damage and contamination and may contain human pathogens, any of which would render the plasma unsuitable for further manufacturing. For instance, contamination or improper storage of plasma by us or
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third-party suppliers may require us to destroy some of our raw material. If unsuitable plasma is not identified and discarded prior to its release to our manufacturing processes, it may be necessary to discard intermediate or finished product made from that plasma or to recall any finished product released to the market, resulting in a charge to cost of goods sold.
The manufacture of our plasma products is an extremely complex process of fractionation (separating the plasma into component proteins), purification, filling and finishing. Our products can become non-releasable or otherwise fail to meet our specifications through a failure of one or more of our product testing, manufacturing, process controls and quality assurance processes. We may detect instances in which an unreleased product was produced without adherence to our manufacturing procedures or plasma used in our production process was not collected or stored in a compliant manner consistent with Current Good Marketing Practice (“cGMP”) regulations enforced by the U.S. Food and Drug Administration (“FDA”) or other regulations, which would likely result in our determination that the impacted products should not be released and therefore should be destroyed.
Once we have manufactured our plasma-derived products, they must be handled carefully and kept at appropriate temperatures. Our failure, or the failure of third parties that supply, ship or distribute our products, to properly care for our plasma-derived products may require that such products be destroyed.
While we expect to write off small amounts of work in process inventories in the ordinary course of business due to the complex nature of plasma, our processes and our products, unanticipated events may lead to write-offs and other costs materially in excess of our expectations. Such write-offs and other costs could cause material fluctuations in our profitability. Furthermore, contamination of our products could cause investors, consumers or other third parties with whom we conduct business to lose confidence in the reliability of our manufacturing procedures, which could adversely affect our sales and profits. In addition, faulty or contaminated products that are unknowingly distributed could result in patient harm, threaten the reputation of our products and expose us to product liability damages and claims.
Due to the nature of plasma, there will be variations in the biologic properties of the plasma we collect or purchase for fractionation that may result in fluctuations in the obtainable yield of desired fractions, even if cGMP regulations are followed. Lower yields may limit production of our plasma-derived products due to capacity constraints. If such batches of plasma with lower yields impact production for extended periods, it may reduce the total volume of product that we could market and increase our cost of goods sold, thereby reducing our profitability.
Our manufacture of intermediate immunoassay antigens and antibodies to screen human donated blood and blood products is also a complex biologic process, subject to substantial production risks. These processes typically involve an upstream or fermentation process and a downstream or purification process. Since in the upstream process we deal with living cells, we may face a contamination by undesired cells which would eventually translate in a low yield. Yields in general can also be greatly affected by the different nutrients compositions added to the reactors in this fermentation step. Likewise during the purification step, we can face low yields due to poor resins composition, equipment failure or procedural mistakes.
Once our products are approved and marketed, we must continually monitor them for signs that their use may result in serious and unexpected side effects, which could jeopardize our reputation and our ability to continue marketing our products. We may also be required to conduct post-approval clinical trials as a condition to licensing a product.
As for all pharmaceutical products, the use of our products sometimes produces undesirable side effects or adverse reactions or events (collectively, “adverse events”). For the most part these adverse events are known, are expected to occur at some frequency and are described in the products’ labeling. Known adverse events of a number of our products include allergic or anaphylactic reactions including shock and the transmission of infective agents. Further, the use of certain products sometimes produces additional adverse events, which are detailed below.
· | The use of albumin sometimes produces the following adverse events: hypervolemia, circulatory overload, pulmonary edema, hyperhydration and allergic manifestations including urticaria, chills, fever and changes in respiration, pulse and blood pressure. |
· | The use of blood clotting Factor IX sometimes produces the following adverse events: the induction of neutralizing antibodies; thromboembolism, including myocardial infarction; disseminated intravascular coagulation; venous |
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thrombosis and pulmonary embolism; and, in the case of treatment for immune tolerance induction, nephrotic syndrome.
· | The use of the antihemophilic blood clotting Factor VIII sometimes produces the following adverse events: the induction of neutralizing antibodies, thromboembolic events and hemolytic anemia or hemolysis. |
· | The use of immunoglobulins sometimes produces the following adverse events: nausea, vomiting, asthenia, pyrexia, rigors, injection site reaction, allergic or anaphylactic reaction, aseptic meningitis, arthralgia, back pain, dizziness, headache, rash, pruritus, urticaria, hemolysis or hemolytic anemia, hyperproteinemia, increased serum viscosity and hyponatremia, thromboembolic reactions such as myocardial infarction, stroke, pulmonary embolism and deep vein thromboses, transfusion-related acute lung injury and renal dysfunction and acute renal failure. |
· | The use of anti-hepatitis B immunoglobulin sometimes produces the following adverse events: thromboembolic reactions such as myocardial infarction, stroke, pulmonary embolism and deep vein thromboses, aseptic meningitis, hemolytic anemia or hemolysis and acute renal failure. |
· | The use of Koate®-DVI, which we license exclusively in the United States to Kedrion S.p.A, a corporation organized under the laws of Italy, sometimes produces the following adverse events: allergic reactions, tingling in the arm, ear and face, blurred vision, headache, nausea, stomach ache and a jittery feeling. |
· | The use of Prolastin®, Prolastin®-C, alpha-1 proteinase inhibitor, or A1PI, sometimes produces the following adverse events: dyspnea, tachycardia, rash, chest pain, chills, influenza-like symptoms, hypersensitivity, hypotension and hypertension. |
In addition, the use of our products may be associated with serious and unexpected adverse events, or with less serious reactions at a greater than expected frequency. This may be especially true when our products are used in critically ill patient populations. When these unexpected events are reported to us, we must undertake a thorough investigation to determine causality and implications for product safety. These events must also be specifically reported to the applicable regulatory authorities. If our evaluation concludes, or regulatory authorities perceive, that there is an unreasonable risk associated with the product, we would be obligated to withdraw the impacted lot(s) of that product. Furthermore, an unexpected adverse event caused by a new product may be recognized only after extensive use of the product, which could expose us to product liability risks, enforcement action by regulatory authorities and damage to our reputation.
Once we produce a product, physicians are responsible for prescribing and administering the product as we have directed and for the indications described on the labeling. It is not, however, unusual for physicians to prescribe our products for unapproved, or off-label, uses or in a manner that is inconsistent with our directions or the labeling. To the extent such off-label uses and departures from our administration directions become pervasive and produce results such as reduced efficacy or other adverse effects, the reputation of our products in the marketplace may suffer.
Our ability to continue manufacturing and distributing our products depends on our continued adherence to cGMP regulations at our facilities.
The manufacturing processes for our products are governed by detailed written procedures and governmental regulations that set forth cGMP requirements for blood, blood products and other products. Our quality operations unit monitors compliance with these procedures and regulations, and the conformance of materials, manufacturing intermediates and final products to their specifications. Failure to adhere to established procedures or regulations, or to meet a specification, could require that a product or material be rejected and destroyed.
Our adherence to cGMP regulations and the effectiveness of our quality systems are periodically assessed through inspections of our facilities by the FDA, and analogous regulatory authorities of other countries. If deficiencies are noted during an inspection, we must take action to correct those deficiencies and to demonstrate to the regulatory authorities that our corrections have been effective. If serious deficiencies are noted or if we are unable to prevent recurrences, we may have to recall product or suspend operations until appropriate measures can be implemented. We are also required to report certain deviations from procedures to the FDA and even if we determine that the deviations were not material, the FDA could require us to take similar measures. Since cGMP
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reflects ever-evolving standards, we regularly need to update our manufacturing processes and procedures to comply with cGMP. These changes may cause us to incur costs without improving our profitability or the safety of our products. For example, more sensitive testing assays (if and when they become available) may be required or existing procedures or processes may require revalidation, all of which may be costly and time consuming and could delay or prevent the manufacturing of a product or launch of a new product.
Changes in manufacturing processes, including a change in the location where the product is manufactured or a change of a third-party manufacturer, may require prior FDA review and approval or revalidation of the manufacturing processes and procedures in accordance with cGMP regulations. There may be comparable foreign requirements.
Grifols received approval from the FDA to relocate existing immunodiagnostic manufacturing operations to a new consolidated manufacturing facility in Emeryville, California, or our Emeryville facility. The transition, including all FDA licensed antigens regulatory submissions, was completed in 2019. The completion of the transition allowed Grifols to transfer all 21 products to the new Emeryville facility.
To validate our manufacturing processes and procedures following completion of our upgraded facilities, we must demonstrate that the processes and procedures at the upgraded facilities are comparable to those currently in place at our other facilities. To provide such a comparative analysis, both the existing processes and the processes that we expect to be implemented at our upgraded facilities must comply with the regulatory standards prevailing at the time that our expected upgrade is completed. In addition, regulatory requirements, including cGMP regulations, continually evolve. Failure to adjust our operations to conform to new standards as established and interpreted by applicable regulatory authorities would create a compliance risk that could impair our ability to sustain normal operations.
Regulatory authorities, including the FDA and the EMA, routinely inspect our facilities to assess ongoing compliance with cGMP. If the FDA, the European Medicines Office (“EMA”) or other regulatory authorities find our facilities to be out of compliance, our ongoing operations or plans to expand would be adversely affected.
A significant disruption in our supply of plasma could have a material adverse effect on our business and our growth plans.
The majority of our revenue depends on our access to U.S. source plasma (plasma obtained through plasmapheresis), the principal raw material for our plasma derivative products. Our ability to increase revenue depends substantially on increased access to plasma. If we are unable to obtain sufficient quantities of source plasma, we may be unable to find an alternative cost-effective source of plasma and we would be limited in our ability to maintain current manufacturing levels of plasma derivative products. As a result, we could experience a substantial decrease in net revenue or profit margins, a loss of customers, a negative effect on our reputation as a reliable supplier of plasma derivative products or a substantial delay in our production growth plans.
Our current business plan envisages an increase in the production of plasma derivative products, which depends on our ability to increase plasma collections or improve product yield. The ability to increase plasma collections may be limited, our supply of plasma could be disrupted or the cost of plasma could increase substantially, as a result of numerous factors, including:
· | A reduction in the donor pool. Regulators in most of the largest markets for plasma derivative products, including the United States, restrict the use of plasma collected from specific countries and regions in the manufacture of plasma derivative products. For example, the appearance of the variant Creutzfeldt-Jakob, or mad cow disease, resulted in the suspension of the use of plasma collected from U.K. residents and concern over the safety of blood products, which has led to increased domestic and foreign regulatory control over the collection and testing of plasma and the disqualification of certain segments of the population from the donor pool, significantly reducing the potential donor pool. The appearance of new viral strains could further reduce the potential donor pool. Also, changes in socioeconomic conditions could impact the number of donors. Most recently, the ongoing COVID-19 pandemic has also adversely impacted our plasma collection volumes because of, among other things, mobility restrictions. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Consequences of Covid-19.” |
· | Regulatory requirements. See “—Disruption of the operations of our plasma collection centers would cause us to become supply constrained and our financial performance would suffer.” |
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· | Plasma supply sources. In recent years, there has been vertical integration in the industry as plasma derivatives manufacturers have been acquiring plasma collection centers. Any significant disruption in the supply of plasma or an increased demand for plasma may require us to obtain plasma from alternative sources, which may not be available on a timely basis. |
Disruption of the operations of our plasma collection centers would cause us to become supply-constrained and our financial performance would suffer.
In order for plasma to be used in the manufacturing of our products, the individual centers at which the plasma is collected must be licensed and approved by the regulatory authorities, such as the FDA and the EMA, of those countries in which we sell our products. When a new plasma collection center is opened, it must be inspected on an ongoing basis after its approval by the FDA and the EMA for compliance with cGMP and other regulatory requirements, and these regulatory requirements are subject to change. For example, an FDA final rule, effective May 23, 2016, addressed the collection of blood components, such as plasma, intended for transfusion or further manufacturing use, including requirements with respect to donor education, donor history and donor testing. While we believe that our centers have timely adopted the regulations, which generally reflected our existing approaches, the compliance efforts necessary for evolving requirements, such as these, may increase our costs. An unsatisfactory inspection could prevent a new center from being approved for operation or risk the suspension or revocation of an existing approval.
In order for a plasma collection center to maintain its governmental approval to operate, its operations must continue to conform to cGMP and other regulatory requirements. In the event that we determine a plasma collection center did not comply with cGMP in collecting plasma, we may be unable to use and may ultimately destroy plasma collected from that center, which would be recorded as a charge to cost of goods. Additionally, if noncompliance in the plasma collection process is identified after the impacted plasma has been pooled with compliant plasma from other sources, entire plasma pools, in-process intermediate materials and final products could be impacted. Consequently, we could experience significant inventory impairment provisions and write-offs.
We plan to continue to obtain our supplies of plasma for use in our manufacturing processes through collections at our plasma collection centers and through selective acquisitions or remodeling and relocations of existing centers. This strategy is dependent upon our ability to successfully integrate new centers, to obtain FDA and other necessary approvals for any centers not yet approved by the FDA, to maintain a cGMP compliant environment in all centers and to attract donors to our centers.
Our ability to increase and improve the efficiency of production at our plasma collection centers may be affected by: (i) changes in the economic environment and population in selected regions where we operate plasma collection centers; (ii) the entry of competitive centers into regions where we operate; (iii) our misjudging the demographic potential of individual regions where we expect to increase production and attract new donors; (iv) unexpected facility related challenges; or (v) unexpected management challenges at select plasma collection centers.
The Coronavirus pandemic has had, and could continue to have, a material, adverse impact on us.
The outbreak of the respiratory illness caused by a coronavirus named “SARS-CoV-2” (the “Coronavirus” or “COVID-19”) has resulted in governments and businesses worldwide adopting emergency measures to combat the spread of the Coronavirus while seeking to maintain essential services. These measures have included, without limitation, social distancing, the temporary closure of non-essential businesses, stay-at-home and work-from-home policies, self-imposed quarantine periods, border closures and travel bans or restrictions. These measures and conditions have had an adverse impact and may continue to adversely affect our manufacturing and supply chains, clinical trial operations and the ability of our employees to attend work or work effectively, which caused our net plasma supply to be negatively impacted in 2020 and 2021. As a result of a decrease in donors due to mobility restrictions, we increased our donor fees and, consequently, our cost per liter of plasma has also increased during the pandemic. For as long as the measures adopted in response to the COVID-19 pandemic remain in place or are re-introduced, and potentially upon their gradual or complete removal, our revenues, financial condition, profitability and cash flows may be materially adversely affected.
See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Consequences of COVID-19” for additional details.
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A significant portion of our net revenue has historically been derived from sales of our immunoglobulin products and we expect that they will continue to comprise a significant portion of our sales. Any adverse market event with respect to these products could have a material adverse effect on us.
We have historically derived a significant portion of our net revenue from our immunoglobulin products, including our immunoglobulin products. In 2021 and 2020, our IG products accounted for approximately 42% and 47% of our net revenue, respectively. If any of these IG products were to lose significant sales or were substantially or completely displaced in the market, we would lose a significant and material source of our net revenue. Similarly, if either Flebogamma®, Gamunex®-C/Gamunex® or Xembify® were to become the subject of litigation or an adverse governmental ruling requiring us to cease sales of it, our business could be adversely affected. Although we do not currently anticipate any significant decrease in the sales of any of these products, a significant decrease could result from plasma procurement and manufacturing issues resulting in lower product availability for sales and changing market conditions.
We face significant competition.
We face significant competition. Each of Takeda, CSL Behring, Kedrion Biopharma, Octapharma Plasma and Bio Products Laboratory Ltd. now has a 10% liquid intravenous immunoglobulin (“IVIG”) product in the United States. Both Octapharma and Bio Products Laboratory have launched 5% liquid IVIG products. As competition has increased, some of our competitors have discounted the price of immunoglobulin products as many customers have become increasingly price sensitive with respect to immunoglobulin products. If customers demand lower priced products, we may lose sales or be forced to lower our prices.
In 2015, the European Commission granted marketing authorization for CSL’s Respreeza® in all European Union member states. Another competitor is seeking to offer an inhaled formula and submitted a Marketing Authorization Application with the EMA, which remains pending. Our current and future competitors may increase their sales, lower their prices, change their distribution model or improve their products, causing harm to our product sales and market share. Also, if the attrition rate of our A1PI patient base accelerates faster than we have forecasted, we would have fewer patients and lower sales volume.
Other new treatments, such as small molecules, recombinant products, gene therapies or other therapies including Hemlibra, may also be developed for indications for which our products are now used. Recombinant Factor VIII and Factor IX products, which are currently available and widely used in the United States and Europe, compete with our plasma-derived product in the treatment of hemophilia A and B and are perceived by many to have lower risks of disease transmission. Additional recombinant products and new small molecules, some with extended half-lives, compete with our products and reduce the demand for our products. In October 2018, the FDA approved Genentech, Inc.’s emicizumab-kxwh injection treatment, Hemlibra, a non-plasma product to control bleeding in patients with hemophilia A. The use of Hemlibra presents a significant competitive risk for the use of plasma derived and recombinant Factor VIII. Additionally, numerous novel gene therapies are under development for the treatment of hemophilia which may further compete with our existing plasma derived therapies.
Furthermore, while we are investigating additional indications for the use of albumin, these new possibilities are countered by the fact that there are alternatives from competitors for albumin use in the main application we apply it, as a plasma volume expander.
We are only one of a number of companies that produce an alpha-1 anti-trypsin for the treatment of patients with hereditary emphysema and our competitors continually develop new methods of administration for this therapy. Additionally, new treatments such as gene therapy are in development by other companies and, regardless of the uncertainties surrounding the potential safety and efficacy of such new treatments, they help increasing our level of competition.
The introduction of products approved for alternative routes of administration, including subcutaneous, may also adversely affect sales of our products. For example, CSL Behring and Takeda introduced preparations of human immunoglobin at a 20% concentration for the treatment of people who need antibody replacement and Takeda has an immune globulin with a recombinant human hyaluronidase indicated for the treatment of primary immunodeficiency (“Pl”) in adults. Although we have FDA approval for similar concentrations and routes of administration, the level of competition remains significant and trending up as other players continue developing their operations in this expanding area of therapy.
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Other companies are developing different therapies for the treatment of autoimmune diseases and other disorders that are currently treated with our immunoglobulins. If an increased use of alternative products for Factor VIII, Factor IX, albumin, alpha-1 or immunoglobulins makes it uneconomical to produce our plasma-derived products, or if further technological advances improve these products or create other competitive alternatives to our plasma derivative products, our financial condition and results of operations could be materially adversely affected. We expect in the future to face greater competition from biosimilar products which could further adversely affect our financial performance.
We do not currently sell therapeutic recombinant products. We have recombinant versions of A1PI and plasmin in our pipeline, but we cannot be certain that any of these products will be approved or sold in the future. Additionally, we have recombinant versions of polyvalent and specific immune globulins under development. However, we cannot be certain that we will succeed in developing these products for licensed commercial use. As a result, our product offerings may remain plasma-derived, even if our competitors offer competing recombinant products.
We face competition from companies with greater financial resources.
We operate in highly competitive markets. Our principal competitors include Takeda, CSL Behring and Octapharma. Some of our competitors have significantly greater financial resources than us. As a result, they may be able to devote more funds to research and development and new production technologies, as well as to the promotion of their products and business. These competitors may also be able to sustain for longer periods a deliberate substantial reduction in the price of their products or services. The development by a competitor of a similar or superior product or increased pricing competition may result in a reduction in our net revenue or a decrease in our profit margins.
Technological changes in the production of plasma derivative and diagnostic products could render our production process uneconomical.
Technological advances have accelerated changes in recent years. Future technological developments could render our production processes uneconomical and may require us to invest substantial amounts of capital to upgrade our facilities. Such investments could have a material adverse effect on our financial condition and results of operations. In addition, we may not be able to fund such investments from existing funds or raise sufficient capital to make such investments.
The discovery of new pathogens could slow our growth and adversely affect profit margins.
The possible appearance of new pathogens could trigger the need for changes in our existing inactivation and production methods, including the administration of new detection tests. Such a development could result in delays in production until the new methods are in place, as well as increased costs that may not be readily passed on to our customers. See also “—The Coronavirus pandemic has had, and could continue to have, a material, adverse impact on us.”
Product liability claims or product recalls involving our products or products we distribute could have a material adverse effect on our business.
Our business exposes us to the risk of product liability claims. We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and an even greater risk when we commercially sell any products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in any or all of the following:
· | decreased demand for our products and any product candidates that we may develop; |
· | injury to our reputation; |
· | withdrawal of clinical trial participants; |
· | costs to defend the related litigation; |
· | substantial monetary awards to trial participants or patients; |
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· | loss of revenue; and |
· | the inability to commercialize any products that we may develop. |
Like many plasma fractionators, we have been, and may in the future be, involved in product liability or related claims relating to our products, including claims alleging the transmission of disease through the use of such products. Plasma is a biological matter that is known to be capable of transmitting viruses and pathogens, whether known or unknown. Therefore, our plasma and plasma derivative products, if donors are not properly screened or if the plasma is not properly collected, tested, inactivated, processed, stored and transported, could cause serious disease and possibly death to the patient. Any transmission of disease through the use of one of our products or third-party products sold by us could result in claims by persons allegedly infected by such products.
Our potential product liability also extends to our Diagnostic and Hospital Division products. In addition, we sell and distribute third-party products, and the laws of the jurisdictions where we sell or distribute such products could also expose us to product liability claims for those products. Furthermore, the presence of a defect in a product could require us to carry out a recall of such product.
A product liability claim or a product recall could result in substantial financial losses, negative reputational repercussions and an inability to retain customers. Although we have a program of insurance policies designed to protect us and our subsidiaries from product liability claims, and we self-insure a portion of this risk, claims made against our insurance policies could exceed our limits of coverage. We intend to expand our insurance coverage as our sales grow. However, as product liability insurance is expensive and can be difficult to obtain, a product liability claim could decrease our access to product liability insurance on acceptable terms. In turn, we may not be able to maintain insurance coverage at a reasonable cost and may not be able to obtain insurance coverage that will be adequate to satisfy any liability that may arise. Although we have not experienced a material liability claim, we cannot assure you that we will not experience one in the future.
Our ability to continue to produce safe and effective plasma derivative products depends on a plasma supply free of transmittable diseases.
Although it is currently believed that COVID-19 cannot be transmitted through blood or plasma, the COVID-19 pandemic has affected our ability to collect plasma and the ability by donors to donate blood or plasma. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Consequences of COVID-19” for additional details.
Despite overlapping safeguards, including the screening of donors and other steps to remove or inactivate viruses and other infectious disease-causing agents, the risk of transmissible disease through plasma-derived products cannot be entirely eliminated. If a new infectious disease was to emerge in the human population in the future, the regulatory and public health authorities could impose precautions to limit the transmission of the disease that would impair our ability to procure plasma, manufacture our products or both. Such precautionary measures could be taken before there is conclusive medical or scientific evidence that a disease poses a risk for plasma-derived products.
In recent years, new testing and viral inactivation methods have been developed that more effectively detect and inactivate infectious viruses in collected plasma. There can be no assurance, however, that such new testing and inactivation methods will adequately screen for, and inactivate, infectious agents in the plasma used in the production of our products.
Plasma and plasma derivative products are fragile, and improper handling of our plasma or plasma derivative products could adversely affect results of operations.
Plasma is a raw material that is susceptible to damage. Almost immediately after its collection from a donor, plasma is stored and transported at temperatures that are at or below -20 degrees Celsius (-4 degrees Fahrenheit). Once we manufacture plasma derivative products, they must be handled carefully and kept at appropriate temperatures. Our failure, or the failure of third parties that supply, ship or distribute our plasma and plasma derivative products, to properly care for our plasma or plasma derivative products may require us to destroy some raw materials or products. If the volume of plasma or plasma derivative products damaged by such failures were to be significant, the loss of that plasma or those plasma derivative products could have a material adverse effect on our financial condition and results of operations.
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Our future success depends on our ability to retain members of our senior management and to attract, retain and motivate qualified personnel.
We are highly dependent on the principal members of our executive and scientific teams. The loss of the services of any of these persons might impede the achievement of our research, development, operational and commercialization objectives. In particular, we believe the loss of any member of our senior management team would significantly and negatively impact our business. For details regarding the members of senior management, see Item 6 of this Part I, “Directors, Senior Management and Employees—A. Directors and Senior Management—Senior Management.” We do not maintain “key person” insurance on any of our senior management.
Recruiting and retaining qualified operations, finance and accounting, scientific, clinical and sales and marketing personnel will be critical to our success. We may not be able to attract and retain these personnel on acceptable terms, given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. If we are unable to attract, retain and motivate qualified and experienced personnel, we could lose customers and suffer reduced profitability. Even if we are successful in attracting and retaining such personnel, competition for such employees may significantly increase our compensation costs and adversely affect our financial condition and results of operations.
cGMP regulations also require that the personnel we employ and hold responsible for product manufacturing, including, for example, the collection, processing, testing, storage or distribution of blood or blood components, be adequate in number, educational background, training (including professional training as necessary) and experience, or a combination thereof, and have capabilities commensurate with their assigned functions, a thorough understanding of the procedures or control operations they perform, the necessary training or experience and adequate information concerning the application of relevant cGMP requirements to their individual responsibilities. Our failure to attract, retain and motivate qualified personnel may result in a regulatory violation, affect product quality, require the recall or market withdrawal of affected product or result in a suspension or termination of our license to market our products, or any combination thereof.
Our business requires substantial capital to operate and grow and to achieve our strategy of realizing increased operating leverage, including the completion of several large capital projects.
We have implemented several large capital projects to expand and improve the capacity and structure of our facilities and to improve the structure of our plasma collection centers in the United States. These projects may run over budget or be delayed. We cannot be certain that these projects will be completed in a timely manner or that we will maintain our compliance with cGMP regulations, and we may need to spend additional amounts to achieve compliance. Additionally, by the time these multi-year projects are completed, market conditions may differ significantly from our assumptions regarding the number of competitors, customer demand, alternative therapies, reimbursement and public policy, and as a result, capital returns might not be realized.
We also plan to continue to spend substantial sums on research and development, to obtain the approval of the FDA, and other regulatory agencies, for new indications for existing products, to develop new product delivery mechanisms for existing products and to develop innovative product additions. We face a number of obstacles to successfully converting these efforts into profitable products, including, but not limited to, the successful development of an experimental product for use in clinical trials, the design of clinical study protocols acceptable to the FDA and other regulatory agencies, the successful outcome of clinical trials, our ability to scale our manufacturing processes to produce commercial quantities or successfully transition technology, the approval of the FDA and other regulatory agencies of our products and our ability to successfully market an approved product or new indication.
For example, when a new product is approved, the FDA or other regulatory authorities may require post-approval clinical trials, sometimes called Phase IV clinical trials. If the results of such trials are unfavorable, this could result in the loss of the license to market the product, with a resulting loss of sales.
We are expecting significant capital spending as we are undertaking an investment plan that involves, among other investments, cumulative industrial capital investments to expand the manufacturing capacities of the Bioscience Division as part of our €1.4 billion 2018-2022 capital expenditure plan. The amount and timing of future capital spending is dependent upon a number of factors, including market conditions, regulatory requirements and the extent and timing of particular projects, among other things. Our
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ability to grow our business is dependent upon the timely completion of these projects and obtaining the requisite regulatory approvals.
We may not be able to develop some of our international operations successfully.
We currently conduct sales in over 100 countries. The successful operation of such geographically dispersed resources requires considerable management and financial resources. In particular, we must bridge our business culture to the business culture of each country in which we operate. In addition, international operations and the provision of services in foreign markets are subject to additional risks, such as changing market conditions, currency exchange rate fluctuations, trade wars and barriers, exchange controls, regulatory changes, changes to tax regimes (including proposed changes to U.S. tax laws by the Biden administration and the U.S. Congress), foreign investment limitations, civil disturbances, war and emerging pandemics. Furthermore, if an area in which we have significant operations or an area into which we are looking to expand suffers an economic recession or currency devaluation, our net revenues and accounts receivable collections in that region will likely decline substantially or we may not be able to successfully expand or operate in that region.
Uncertainties regarding the general regulatory and legal environment, particularly in China, could adversely affect our business.
Our international operations are governed by local laws and regulations applicable to foreign investments and foreign-owned enterprises. Our business could be adversely affected by the interpretation and enforcement of and changes in these laws and regulations. These laws and regulations often lack transparency, can be difficult to interpret and may be enforced inconsistently. A significant portion of our revenues is derived from our operations in China. China has not developed integrated legal systems that cover all aspects of our activities. The Chinese legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, Chinese legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. Because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations are uncertain. In addition, the Chinese legal system is based in part on government policies and internal rules that may have retroactive effect and, in some cases, are not published at all. As a result, we may not be aware of any alleged violation of these policies and rules until after the alleged violation has occurred. Any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.
We are susceptible to interest rate variations.
We use issuances of debt and bank borrowings as a source of funding. At December 31, 2021, $2.4 billion and €1.3 billion of our senior interest bearing debt, which represented 40% of our senior interest bearing debt, bore interest at variable rates, at a spread over the LIBOR for our U.S. dollar denominated debt and at a spread over the Euro Interbank Offered Rate, or EURIBOR, for our euro denominated debt. Any increase in interest rates payable by us, which could be adversely affected by, among other things, our inability to meet certain financial ratios, would increase our interest expense and reduce our cash flow, which could materially adversely affect our financial condition and results of operations. See “—Risks Relating to Our Structure—The phasing out and ultimate replacement of LIBOR with an alternative reference rate and changes in the manner of calculating other reference rates may adversely impact the value of loans and other financial instruments we hold that are linked to LIBOR or other reference rates in ways that are difficult to predict and could adversely impact our financial condition and results of operations.” And see Item 11 of this Part I, “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk.”
Our results of operations and financial condition may be affected by adverse changes in foreign currency exchange rates, especially a significant shift in the value of the euro as compared to the U.S. dollar.
A significant portion of our business is conducted in currencies other than our reporting currency, the euro. In 2021, €3.6 billion, or 73%, of our net revenue of €4.9 billion was denominated in U.S. dollars. We are also exposed to currency fluctuations with respect to other currencies, such as the British pound, the Brazilian real, the Canadian dollar and the Argentine, Mexican and Chilean pesos. Currency fluctuations among the euro, the U.S. dollar and the other currencies in which we do business result in foreign currency translation gains or losses that could be significant.
We are also exposed to risk based on the payment of U.S. dollar denominated indebtedness. At December 31, 2021, we had approximately $3 billion of U.S. dollar denominated senior debt. See Item 5 of this Part I, “Operating and Financial Review and
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Prospects—B. Liquidity and Capital Resources” and Item 11 of this Part I, “Quantitative and Qualitative Disclosures About Market Risk—Currency Risk.”
If the San Diego, Clayton, Emeryville, Los Angeles or Parets facilities were to suffer a crippling accident, or if a force majeure event materially affected our ability to operate and produce saleable products, a substantial part of our manufacturing capacity could be shut down for an extended period.
A substantial portion of our revenue is derived from plasma fractionation or products manufactured at our San Diego, Clayton, Emeryville, Los Angeles and Parets facilities. In addition, a substantial portion of our plasma supply is stored at facilities in City of Industry, California, as well as at our Clayton and Parets facilities. If any of these facilities were to be impacted by an accident or a force majeure event such as an earthquake, major fire, storm or explosion, major equipment failure or power failure lasting beyond the capabilities of our backup generators, our revenue would be materially adversely affected. In this situation, our manufacturing capacity could be shut down for an extended period and we could experience a loss of raw materials, work-in-process or finished goods inventory. Other force majeure events such as terrorist acts, influenza pandemic or similar events could also impede our ability to operate our business. In addition, in the event of the reconstruction of our Clayton, Los Angeles or Parets facilities or our plasma storage facilities, gaining the regulatory approval for such new facilities and the replenishment of raw material plasma could be time consuming. During this period, we would be unable to manufacture all of our products at other plants due to the need for FDA and foreign regulatory authority inspection and certification of such facilities and processes.
Our property damage and business interruption insurance may be insufficient to mitigate the losses from any such accident or force majeure event. We may also be unable to recover the value of the lost plasma or work-in-process inventories, as well as the sales opportunities from the products we would be unable to produce.
If we experience equipment difficulties or if the suppliers of our equipment or disposable goods fail to deliver key product components or supplies in a timely manner, our manufacturing ability would be impaired and our product sales could suffer.
We depend on a limited number of companies that supply and maintain our equipment and provide supplies such as chromatography resins, filter media, glass and stoppers used in the manufacture of our products. If our equipment should malfunction, the repair or replacement of the machinery may require substantial time and cost, which could disrupt our production and other operations. Our plasma collection centers rely on disposable goods supplied by third parties and information technology systems hosted by third parties. Our plasma collection centers cannot operate without an uninterrupted supply of these disposable goods and the operation of these systems. Alternative sources for key component parts or disposable goods may not be immediately available. And while we have experienced periodic outages of these systems, a material outage would affect our ability to operate our collection centers.
Any new equipment or change in supplied materials may require revalidation by us or review and approval by the FDA or foreign regulatory authorities, including the EMA, which may be time-consuming and require additional capital and other resources. We may not be able to find an adequate alternative supplier in a reasonable time period, or on commercially acceptable terms, if at all. As a result, shipments of affected products may be limited or delayed. Our inability to obtain our key source supplies for the collection of plasma and manufacture of products may require us to delay shipments of products, harm customer relationships and force us to curtail operations.
If our shipping or distribution channels were to become inaccessible due to a crippling accident, a pandemic, an act of terrorism, a strike, earthquake, major fire or storm, or any other force majeure event, our supply, production and distribution processes could be disrupted.
Not all shipping or distribution channels are equipped to transport plasma. If any of our shipping or distribution channels becomes inaccessible due to a crippling accident, a pandemic, an act of terrorism, a strike, earthquake, major fire or storm or any other force majeure event, we may experience disruptions in our continued supply of plasma and other raw materials, delays in our production process or a reduction in our ability to distribute our products directly to our customers.
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We rely in large part on third parties for the sale, distribution and delivery of our products.
In the United States, we regularly enter into distribution, supply and fulfillment contracts with group purchasing organizations (“GPOs”), home care companies, alternate infusion sites, hospital groups and others. We are highly dependent on these agreements for the successful sale, distribution and delivery of our products. For example, we rely principally on GPOs and on our distributors to sell our immunoglobulin products. If such parties breach, terminate or otherwise fail to perform under these contracts, our ability to effectively distribute our products will be impaired and our business may be materially and adversely affected. In addition, through circumstances outside of our control, such as general economic decline, market saturation or increased competition, we may be unable to successfully renegotiate our contracts or secure terms which are as favorable to us. Furthermore, we rely in certain countries on distributors for sales of our products. Disagreements or difficulties with our distributors supporting our export business could result in a loss of sales.
We rely on the services of third parties for the manufacture of certain products.
We have rights of sale and distribution for several different products, including Tavleese® in the European market. However, for many of these products we rely upon supply from third parties. To the extent such third parties are unable to properly and timely manufacture and deliver the necessary products and services in Europe, our business could be materially affected.
We may not be able to commercialize products in development.
Before obtaining regulatory approval for the sale of our product candidates or for the marketing of existing products for new indicated uses, we must conduct, at our own expense, extensive preclinical tests to demonstrate the safety of our product candidates in animals and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Preclinical and clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates, including, without limitation, the following:
· | regulators or institutional review boards (“IRBs”) may not authorize us to commence a clinical trial or conduct a clinical trial within a country or at a prospective trial site; |
· | the regulatory requirements for product approvals may not be explicit, may evolve over time and may diverge by jurisdiction; |
· | our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or we may be required by regulators, to conduct additional preclinical testing or clinical trials or to abandon projects that we had expected to be promising; |
· | the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower than we anticipate or participants may withdraw from our clinical trials at higher rates than we anticipate, any of which would result in significant delays; |
· | our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner; |
· | we may be forced to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks or if any participant experiences an unexpected serious adverse event; |
· | regulators or IRBs may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements; |
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· | undetected or concealed fraudulent activity by a clinical researcher, if discovered, could preclude the submission of clinical data prepared by that researcher, lead to the suspension or substantive scientific review of one or more of our marketing applications by regulatory agencies and result in the recall of any approved product distributed pursuant to data determined to be fraudulent; |
· | the cost of our clinical trials may be greater than we anticipate; |
· | the supply or quality of our product candidates or other materials necessary to conduct our clinical trials may be insufficient or inadequate, as we currently do not have any agreements with third-party manufacturers for the long-term commercial supply of any of our product candidates; |
· | an audit of preclinical or clinical studies by the FDA or other regulatory authorities may reveal noncompliance with applicable regulations, which could lead to disqualification of the results and the need to perform additional studies; |
· | the effects of our product candidates may not achieve the desired clinical benefits or may cause undesirable side effects, or the product candidates may have other unexpected characteristics; and |
· | our clinical trials, or the ability of regulatory agencies to review the results of our clinical trials, may be delayed as a result of the COVID-19 pandemic. |
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may be delayed in or unable to obtain marketing approval or reimbursement for our product candidates, or be unable to obtain approval for indications that are not as broad as intended or have the product removed from the market after obtaining marketing approval.
Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all. Significant preclinical or clinical trial delays could also shorten the patent protection period during which we may have the exclusive right to commercialize our product candidates or could allow our competitors to bring products to market before we do, impairing our ability to commercialize our products or product candidates.
Even if preclinical trials are successful, we still may be unable to commercialize a product due to difficulties in obtaining regulatory approval for its engineering process or problems in scaling that process to commercial production. Additionally, if produced, a product may not achieve an adequate level of market acceptance by physicians, patients, healthcare payors and others in the medical community to be profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, some of which are beyond our control, including the following:
· | the prevalence and severity of any side effect; |
· | the efficacy and potential advantages over alternative treatments; |
· | the ability to offer our product candidates for sale at competitive prices; |
· | relative convenience and ease of administration; |
· | the willingness of physicians to prescribe new therapies and of the target patient population to try such therapies; |
· | the strength of marketing and distribution support; and |
· | sufficient third-party coverage or reimbursement. |
Therefore, we cannot guarantee that any products we may seek to develop will ever be successfully commercialized, and to the extent they are not successfully commercialized, such products could involve significant expense with no corresponding revenue.
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Complex and evolving U.S. and international laws and regulations regarding privacy and data security and increased risk of cybersecurity incidents to our information technology systems could result in increased costs of operations and a significant disruption to our business.
Our operations are highly dependent on our information technology systems, including internet-based systems, which may be vulnerable to breakdown, cybersecurity incidents, wrongful intrusions, data breaches, malware, ransomware, and malicious attack. In addition, information security risks have generally increased in recent years, increasing our systems’ potential vulnerability, such as to data security breaches or cyber attack, whether by employees or others, which may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of our employees, customers, plasma donors and others. Data security breaches may also adversely impact the conduct of scientific research and clinical trials, including the submission of research results to support marketing authorizations.
Additionally, our information technology systems utilize certain third party service organizations that manage sensitive data, such as personal medical information regarding plasma donors, and our business may be adversely affected if these third party service organizations are subject to data security breaches. We may continue to incur significant expenses to comply with existing privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations.
Federal, state and foreign governments continue to adopt new, or modify existing laws and regulations addressing data privacy and the collection, processing, storage, transfer and use of data. This includes, for example, the E.U.’s regulation, the General Data Protection Regulation (“GDPR”) and the new California Consumer Protection Act (“CCPA”), effective on January 1, 2020. In our efforts to meet the GDPR, CCPA, U.S. Health Insurance Portability and Accountability Act of 1996, as amended, and implementing regulations (“HIPAA”) and other data privacy regulations, we have made and continue to make certain operational changes to our business practices. Other governmental authorities throughout the U.S. and around the world are considering similar types of legislative and regulatory proposals concerning data protection. These privacy, security and data protection laws and regulations could impose increased business operational costs, require changes to our business, require notification to customers or workers of a security breach, or restrict our use or storage of personal information. For example, health information laws and regulations, such as regulations under HIPAA and potential revisions thereto, as proposed in December 2020, include requirements to implement various recordkeeping, operational, notice and other practices intended to safeguard that information, limit its use to allowed purposes and notify affected individuals in the event of privacy and security breaches, establish standards regarding electronic health data transmissions and set rules for specific electronic transactions, such as transactions involving claims submissions to third party payers. Failure to comply with HIPAA and similar state laws could expose us to breach of contract claims, substantial fines, penalties and other liabilities and expenses, costs for remediation and harm to our reputation.
In the United States, the CCPA generally requires companies, such as us, to institute additional protections regarding the collection, use and disclosure of certain personal information of California residents. The California Attorney General announced the finalization of initial CCPA regulations on August 14, 2020, and two new sets of modifications to CCPA regulations have since been proposed and have completed the required public comment process, although they are still subject to internal review and finalization by the California Attorney General, the timing of which is uncertain. In addition to providing for enforcement by the California Attorney General, the CCPA also provides for a private right of action. Entities in violation of the CCPA may be liable for civil penalties. Significantly, in November 2020 California enacted the California Privacy Rights Act (“CPRA”), effective January 1, 2023, which amends the CCPA. The CPRA, among other substantive measures, expands the CCPA’s private right of action, increases consumers’ control over personal information, imposes new compliance obligations on businesses, and enacts new exceptions that may apply to our businesses. Notably, it also creates a new California Privacy Protection Agency that will issue additional regulations by July 1, 2022 and be responsible for enforcement of CCPA and CPRA provisions going forward.
The European Parliament and the Council of the European Union adopted the GDPR, which increased privacy rights for individuals in Europe, extended the scope of responsibilities for data controllers and data processors and imposed increased requirements and potential penalties on companies offering goods or services to individuals who are located in Europe or monitoring the behavior of such individuals (including by companies based outside of Europe). Noncompliance can result in penalties of up to the greater of €20 million, or 4% of global company revenues.
Our efforts to implement programs and controls that comply with the GDPR, CCPA, HIPAA and other data protection requirements are likely to impose additional costs on us, and we cannot predict whether the interpretations of the requirements, or
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changes in our practices in response to new requirements or interpretations of the requirements, could have a material adverse effect on our business.
Our success depends in large part on our ability to obtain and maintain protection in the United States and other countries of the intellectual property relating to or incorporated into our technology and products.
Our success depends in large part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology and products, especially intellectual property related to our purification processes. The patent landscape in the field of biotechnology and pharmaceuticals generally is highly uncertain and involves complex legal and scientific questions. We may not be able to obtain additional issued patents relating to our technology or products. Even if patents are issued to us or to our licensors, they may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of time our products have patent protection. Additionally, most of our patents relate to the processes we use to produce our products, not to the products themselves. In many cases, the plasma-derived products we produce or develop in the future will not, in and of themselves, be patentable. Since our patents relate to processes, if a competitor is able to design and utilize a process that does not rely on our protected intellectual property, such competitor could sell a plasma-derived or other product similar to one we developed or sell.
Our patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States and many other jurisdictions are typically not published until 18 months after their filing, if at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in our or their issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in such patent applications. If a third party has also filed a U.S. patent application covering our product candidates or a similar invention, we may be required to participate in an adversarial proceeding, known as an “interference proceeding,” declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial and our efforts in them could be unsuccessful, resulting in a loss of our anticipated U.S. patent position.
Our patents expire at various dates. Our pending and future patent applications may not issue as patents or, if issued, may not issue in a form that will provide us with any competitive advantage. Even if issued, we cannot guarantee that: any of our present or future patents or patent claims or other intellectual property rights will not lapse or be invalidated, circumvented, challenged or abandoned; our intellectual property rights will provide competitive advantages; our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties; any of our pending or future patent applications will be issued or have the coverage originally sought; our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; or we will not lose the ability to assert our intellectual property rights against, or to license our technology to, others and collect royalties or other payments. In addition, our competitors or others may design around our protected patents or technologies.
Effective protection of our intellectual property rights may be unavailable, limited or not applied for in some countries. Changes in patent laws or their interpretation in the United States and other countries could also diminish the value of our intellectual property or narrow the scope of our patent protection. In addition, the legal systems of certain countries do not favor the aggressive enforcement of patents, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. In order to preserve and enforce our patent and other intellectual property rights, we may need to make claims or file lawsuits against third parties. Such lawsuits could entail significant costs to us and divert our management’s attention from developing and commercializing our products.
We, like other companies in the pharmaceutical industry, may become aware of counterfeit versions of our products becoming available domestically and abroad. Counterfeit products may use different and possibly contaminated sources of plasma and other raw materials, and the purification process involved in the manufacture of counterfeit products may raise additional safety concerns, over which we have no control. Any reported adverse events involving counterfeit products that purport to be our products could harm our reputation and the sale of our products in particular and consumer willingness to use plasma-derived therapeutics in general.
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Unauthorized use of our intellectual property may have occurred or may occur in the future. Although we have taken steps to minimize this risk, any failure to identify unauthorized use and otherwise adequately protect our intellectual property would adversely affect our business. For example, any unauthorized use of our trademarks could harm our reputation or commercial interests. Moreover, if we are required to commence litigation related to unauthorized use, whether as a plaintiff or defendant, such litigation would be time consuming, force us to incur significant costs and divert our attention and the efforts of our management and other employees, which could, in turn, result in lower revenue and higher expenses.
In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how.
We generally seek to protect proprietary information by entering into confidentiality agreements with our employees, consultants, scientific advisors and third parties. These agreements may not effectively prevent disclosure of confidential information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, our trade secrets may otherwise become known or be independently developed by our competitors or other third parties. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to determine and enforce the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. We also rely on contractual protections with our customers, suppliers, distributors, employees and consultants and implement security measures designed to protect our trade secrets. We cannot assure you that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach or that our suppliers, employees or consultants will not assert rights to intellectual property arising out of such contracts.
Since we rely on trade secrets and nondisclosure agreements, in addition to patents, to protect some of our intellectual property, there is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage. We may not be able to detect the unauthorized use of such information, prevent such use or take appropriate and timely steps to enforce our intellectual property rights.
We may infringe or be alleged to infringe intellectual property rights of third parties.
Our products or product candidates may infringe or be accused of infringing one or more claims of an issued patent or may fall within the scope of one or more claims in a published patent application that may be subsequently issued and to which we do not hold a license or other rights. Third parties may own or control these patents or patent applications in the United States and/or abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.
If we are found to be infringing on the patent rights of a third party, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms.
There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the U.S. Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.
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Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We take steps to ensure that our employees do not use the proprietary information or know-how of others in their work for us. We may, however, be subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary information of any such employee’s former employer. Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or be distracting to our management. If we fail to defend any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.
We have in-licensed certain patent rights and co-own certain patent rights with third parties.
Our rights in certain intellectual property that we have in-licensed or co-own with third parties and the value therein may depend on our third party licensors’ or co-owners’, as applicable, performance under our intellectual property agreements with them. If one of these third parties is unable to, or does not, enforce their own rights in such intellectual property or perform under our agreements with them, it could affect our ability to effectively compete in the marketplace and operate our business.
Our in-license agreements for certain patent rights may impose payment and/or other material obligations on us as a licensee. Although we are currently in compliance with all of our material obligations under these licenses, if we were to breach any such obligations, our counterparty licensors may be entitled to terminate the licenses. Such termination may restrict, delay or eliminate our ability to develop and commercialize our products, which could adversely affect our business. We cannot guarantee that the third-party patents and technology we license will not be licensed to our competitors. In the future, we may need to obtain additional licenses, renew existing license agreements or otherwise replace existing technology. We are unable to predict whether these license agreements can be obtained or renewed or whether the technology can be replaced on acceptable terms, or at all.
We may not realize the expected benefits from the entry into new or amended contracts, cost-savings and business improvement initiatives.
We recently acquired plasma collection centers from GC Pharma (in 2020), BPL (in 2021) and Kedrion (in 2021), as well as entered into a plasma supply agreement with Haema AG in Hungary (in 2021). There can be no assurance we will be successful with this plasma acquisition strategy or that we will realize all of the benefits we expect from such new centers. Our cost savings and business improvement initiatives could result in unexpected charges and expenses that negatively impact our financial results and we could fail to achieve the desired efficiencies and estimated cost savings. In addition, if we are not able to effectively implement these initiatives, or if they fail to operate as intended, our financial results could be adversely affected. Additionally, these types of initiatives could yield unintended consequences such as distraction of management and employees, business disruption, an inability to attract or retain key personnel, which could negatively affect our business or financial condition and results of operations. If we are not able to effectively develop, implement and manage our cost savings or business improvement initiatives (including our acquisitions), we may experience operational difficulties and increased costs, which may adversely affect our results of operations.
Risks Relating to the Healthcare Industry
United States Healthcare Reform may adversely affect our business.
The United States Patient Protection and Affordable Care Act and the companion Healthcare and Education Reconciliation Act, each enacted in March 2010, as amended (collectively, the “ACA”), increased federal oversight of private health insurance plans and included a number of provisions designed to reduce Medicare expenditures and the cost of health care generally, to reduce fraud and abuse, and to provide access to increased health coverage. While the ACA has materially expanded the number of individuals in the United States with health insurance, it has faced ongoing legal challenges, including litigation seeking to invalidate some of or all of the law or the manner in which it has been interpreted.
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There are uncertainties due to federal legislative and administrative efforts to repeal (under the previous U.S. presidential administration), substantially change, replace or invalidate portions or all of the ACA. Additionally, federal litigation related to the ACA is proceeding in several courts and could have a significant impact on the United States healthcare industry. The U.S. Supreme Court, in upholding the constitutionality of the ACA and its individual state mandate provision in 2012, simultaneously limited ACA provisions requiring Medicaid expansion, making such expansion a state-by-state decision. In 2017, the U.S. Congress effectively repealed the ACA’s individual mandate provision by eliminating the financial penalty for non-compliance. In the most recent ACA litigation, a federal appeals court found the individual mandate to be unconstitutional, and returned the case to a lower federal court for consideration of whether the remainder of the ACA could survive the excision of the individual mandate. On June 17, 2021, the United States Supreme Court held that plaintiffs do not have standing to challenge the constitutionality of the individual mandate. It is uncertain whether there will be additional challenges to the ACA. Any future legislation, guidance, rules or regulations and/or Executive Orders that materially alter the healthcare industry could have a significant impact on our operations. The uncertain status of the ACA affects our ability to plan, and its repeal without adequate replacement could have a material adverse effect on our United States operations.
Government pressures and constraints on reimbursement may adversely affect our business.
We engage in various manufacturing, processing, marketing and sales activities pertaining to pharmaceutical products in a number of jurisdictions around the world. These activities subject us to several governmental regulations mandating multiple types of controls over pricing and general operations in the various countries in which we operate. The growth of overall healthcare costs as a percentage of gross domestic product in many countries means that governments and payers are under intense pressure to control spending even more tightly.
In the United States, which is our main market, implementation of the ACA and trends in recent years in the healthcare industry have included significant changes including a shift towards managed or value-based care, collective purchasing agreements, consolidation in office-based healthcare providers, and other cost-saving, revenue and payment reduction measures with respect to, for example, several government healthcare programs that cover our products, including Medicaid, Medicare Parts B, C and D and the 340B Program. These trends could have a material adverse impact on our financial performance. For more details of these measures see Item 4 of this Part I, “Information on the Company—E. Regulatory Matters—Pharmaceutical Pricing and Reimbursement.” Global emphasis on healthcare cost containment exerts significant pressures on the pricing of our products and on our ability to obtain and maintain reimbursement rates to cover our products, which may adversely affect our business.
The availability of federal funds to pay for our products under Medicaid and Medicare Part B programs requires that we extend discounts under the 340B Program, and changes to this program under the ACA could adversely affect our financial performance. The 340B Program extends discounts to a variety of community health clinics and other entities that receive health services grants from the 340B Program, as well as hospitals that serve a disproportionate share of certain low income individuals, and the ACA expanded the number of qualified 340B entities eligible to purchase products for outpatient use, adding certain cancer centers, children’s hospitals, critical access hospitals and rural referral centers. The 340B Program price, or ceiling price, cannot exceed the average manufacturer price (“AMP”) (as reported to the U.S. Centers for Medicare Medicaid Services (“CMS”) under the Medicaid drug rebate program) less the Medicaid unit rebate amount. We have entered into a pharmaceutical pricing agreement (“PPA”), with the government in which we have agreed to participate in the 340B Program by charging eligible entities no more than the ceiling price for drugs intended for outpatient use. Evolving requirements with respect to this program continue to be issued by the Health Resources and Services Administration (“HRSA”) of the United States Department of Health and Human Services (“HHS”), the federal agency responsible for oversight of the 340B Program, which creates uncertainty. We expect the healthcare industry will continue to be subject to increasing pricing and cost containment pressures in 2021 and beyond. These pricing and cost containment pressures may impact the reimbursement rates for our products and have an adverse effect on our business. We believe that we meet the requirements of the 340B Program, and are continuing to review and monitor these and other developments affecting the 340B Program.
Continuing efforts of certain regulatory and legislative bodies, as well as the United States Congress, are focused on pricing and reimbursement. The outcome of these continuing discussions remains uncertain, but may have a potential negative impact on our business.
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Impact of government regulations over product development and regulatory approvals may adversely affect our business.
We develop and manufacture pharmaceutical products in a number of jurisdictions around the world. These activities subject us to several governmental regulations mandating specific governmental approvals that are necessary for us to develop our products in the various countries in which we operate. Obtaining market approval for our products is a lengthy, costly and complex regulatory process that requires intensive preclinical and clinical data, and the approval process can vary significantly depending on the regulatory authority of each jurisdiction. Relevant health authorities may, at the time of the filing of the application for a marketing authorization, or later during their review, impose requirements that can evolve over time, including requiring additional clinical trials, and such authorities may delay or refuse to grant approval.
Even where we have obtained marketing approval for a product in one or more major markets, we may need to invest significant time and resources in applying for approval in other markets, and there is no assurance that we will be able to obtain such approval. In recent years, health authorities have become increasingly focused on product safety and on the risk/benefit profile of pharmaceutical products, which could lead to more burdensome and costly approval processes and negatively affect our ability to obtain regulatory approval for products under development. For example, the FDA and the EMA have been implementing strict requirements for approval, particularly in terms of the volume of data needed to demonstrate a product’s efficacy and safety.
In the United States, our main market, even with the changes in the ACA to accelerate the regulatory process for certain products, including biosimilars, it is still a lengthy, costly and complex regulatory process. The ACA introduced a new abbreviated regulatory approval pathway for biological products found to be “biosimilar” to or “interchangeable” with a biological “reference product” previously licensed under a Biologics License Applications (“BLA”). This abbreviated approval pathway is intended to permit a biosimilar product to come to market more quickly and less expensively by relying to some extent on the data generated by the reference product’s sponsor, and the FDA’s previous review and approval of the reference product.
The law provides that no biosimilar application may be accepted for FDA review until four years after the date the reference product was first licensed by the FDA, and that the FDA may not make approval of an application effective until 12 years after the reference product was first licensed. The law also includes an extensive process for the innovator biologic and biosimilar manufacturer to litigate patent infringement, validity, and enforceability, which could increase costs of protecting our reference products. Once approved, biosimilars likely would compete with, and in some circumstances may be deemed under applicable laws to be “interchangeable with,” the previously approved reference product. The extent to which a biosimilar product, once approved, will be substituted for any of our products, in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. The FDA is actively seeking to encourage the entry of biosimilars into the marketplace, including issuing, in July 2018, its Biosimilar Action Plan, intended to enhance the speed of the biosimilar development and approval processes. We expect in the future to face greater competition from biosimilar products, including a possible increase in patent challenges, all of which could adversely affect our financial performance.
Regarding access to our products, the ACA established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and fund Comparative Effectiveness Research, as those terms are defined in the ACA. While the stated intent of Comparative Effectiveness Research is to develop information to guide providers to the most efficacious therapies, outcomes of Comparative Effectiveness Research could influence the reimbursement or coverage for therapies that are determined to be less cost effective than others. Should any of our products be determined to be less cost effective than alternative therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted, which could materially impact our financial results.
Failure to comply with laws and regulations governing the sales and marketing of our products or an adverse decision in lawsuits may result in adverse consequences to us.
We engage in various marketing, promotional and educational activities pertaining to, as well as the sale of, pharmaceutical products in a number of jurisdictions around the world. The promotion, marketing and sale of pharmaceutical products and medical devices is highly regulated and the sales and marketing practices of market participants such as us have been subject to increasing supervision by governmental authorities around the world, and we believe that this trend will continue.
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For example, the laws governing our conduct in the United States are enforceable by criminal, civil and administrative penalties. Violations of laws such as the Federal Food, Drug and Cosmetic Act (“FDCA”), the Federal False Claims Act (“FCA”), the Public Health Service Act (“PHS Act”) or provisions of the U.S. Social Security Act known as the “Anti-Kickback Law” and the “Civil Monetary Penalties Law,” or any regulations promulgated under their authority, may result in jail sentences, fines or exclusion from federal and state programs, as may be determined by Medicare, Medicaid, the Department of Defense, other regulatory authorities and the courts. There can be no assurance that our activities will not come under the scrutiny of regulators and other government authorities or that our practices will not be found to violate applicable laws, rules and regulations or prompt lawsuits by private citizen “relators” under federal or state false claims laws. For a description of fraud and abuse laws see Item 4 of this Part I, “Information on the Company—E. Regulatory Matters—Government Regulation—United States Government Regulation—Anti-fraud and Abuse Regulation.”
Failure to comply with fraud and abuse laws and regulations could also result in other significant civil and criminal penalties and costs, including the loss of licenses and the inability to participate in federal and state health care programs, and could have a material adverse effect on our business. In addition, these measures may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations or incur substantial defense and settlement expenses. The fraud and abuse laws and regulations have been subject to heightened enforcement activity over the past few years, and significant enforcement activity has been the result of “relators” who serve as whistleblowers by filing complaints in the name of the United States (and if applicable, particular states) under applicable false claims laws, and who may receive up to 30% of total government recoveries. Even unsuccessful challenges by regulatory authorities or private relators could result in reputational harm and the incurring of substantial costs. Further, many of these laws are vague or indefinite and have not been interpreted by the courts, and have been subject to frequent modification and varied interpretation by prosecutorial and regulatory authorities, increasing the risk of noncompliance. Most states have adopted similar state false claims laws, and these state laws have their own penalties which may be in addition to FCA penalties, as well as other fraud and abuse laws. While we believe that we are substantially compliant with applicable fraud and abuse laws and regulations, and have adequate compliance programs and controls in place to ensure substantial compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in response to changes in applicable law or interpretation of laws, could have a material adverse effect on our business.
Failure to satisfy requirements under the FDCA can also result in penalties, as well as requirements to enter into consent decrees or orders that prescribe allowable corporate conduct. In this regard, our Los Angeles facility was previously managed pursuant to a consent decree that was entered into in February 1998 based on action by the FDA and the U.S. Department of Justice (the “DOJ”), addressing FDCA violations committed by the former owner of the facility, Alpha Therapeutic Corporation (“Alpha”). The consent decree provided for annual inspection of the plant by the FDA. On March 15, 2012, the United States District Court for the Central District of California entered an order vacating the consent decree on the Los Angeles facility.
Adverse consequences can also result from failure to comply with the requirements of the 340B Program under the PHS Act, which extends discounts to a variety of community health clinics and other entities that receive health services grants under the PHS Act. In early 2016, HRSA finalized a regulation regarding the 340B pricing methodology, providing guidelines for when civil monetary penalties may be issued for “knowing and intentional” manufacturer overcharges of 340B covered entities. Under this regulation, which became effective on January 1, 2019, manufacturers who overcharge could be subject to significant monetary penalties. Such findings could also result in negative publicity that could harm the manufacturer’s reputation or cause business disruption, penalties, or CMP. Under the rule, the CMP may be up to $5,000 for each instance of overcharging a covered entity. If we are ultimately required to change our sales or pricing practices with regard to the distribution of drugs under the 340B program, or if we were required to pay penalties under the applicable regulations, there would be an adverse effect on our revenues and profitability.
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In addition, companies in the United States, Canada and the European Union are generally restricted from promoting approved products for other indications that are not specifically approved by the competent regulatory authorities, nor can companies promote unapproved products. Improper promotion of unapproved drugs or devices or unapproved indications for a drug or device may subject us to warnings from, or enforcement action by, regulatory agencies, harm demand for our products, and subject us to civil and criminal sanctions. Further, sanctions under the FCA have recently been brought against companies accused of promoting off-label uses of drugs, because such promotion induces the use and subsequent claims for reimbursement under Medicare and other federal programs. The ACA significantly strengthened provisions of the FCA, the anti-kickback provisions of Medicare and Medicaid and other health care antifraud provisions, leading to the possibility of greatly increased qui tam suits by relators for perceived violations. Industry data indicates that a significant portion of IVIG volume may be used to fill physician prescriptions for indications not approved by the FDA or similar regulatory authorities. Violations or allegations of violations of the foregoing restrictions could materially and adversely affect our business.
We are required to report detailed pricing information, net of included discounts, rebates and other concessions, to CMS for the purpose of calculating national reimbursement levels, certain federal prices and certain federal and state rebate obligations. We have established systems for collecting and reporting this data accurately to CMS and have instituted a compliance program to assure that the information collected is complete in all respects. If we report pricing information that is not accurate to the federal government, we could be subject to fines and other sanctions (including potential FCA liability) that could adversely affect our business.
To market and sell our products outside of the United States, we must obtain and maintain regulatory approvals and comply with regulatory requirements in such jurisdictions. The approval procedures vary among countries in complexity and timing. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all, which would preclude us from commercializing products in those markets. In addition, some countries, particularly the countries of the European Union, regulate the pricing of prescription pharmaceuticals. In these countries, pricing discussions with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidate to other available therapies. Such trials may be time consuming and expensive and may not show an advantage in efficacy for our products. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, in either the United States or the European Union, we could be adversely affected.
In the United States under a provision in the ACA, referred to as the Physician Payment Sunshine Act or Open Payments Program (the “PPS Act”), we are required to report and disclose payments or other transfers of value made to certain practitioners, such as physicians and teaching hospitals. CMS publishes information from these reports on a publicly available website, including amounts transferred and healthcare provider identities. Under the PPS Act we are required to collect and report detailed information regarding certain financial relationships we have with covered healthcare providers. The PPS Act preempts similar state reporting laws, although we or our subsidiaries may also be required to report under certain state transparency laws that address circumstances not covered by the PPS Act, and some of these state laws are also ambiguous. We are also subject to foreign regulations requiring transparency of certain interactions between suppliers and their customers. While we believe we have substantially compliant programs and controls in place to comply with these reporting requirements, we cannot assure you that regulations will not require us to take additional compliance steps. Our compliance with these rules imposes additional costs on us.
We also are subject to certain laws and regulations concerning the conduct of our foreign operations outside the United States, including the U.S. Foreign Corrupt Practices Act (“FCPA”) and other anti-bribery laws and related laws, and laws pertaining to the accuracy of our internal books and records, which have been the focus of increasing enforcement activity in recent years. Under the FCPA, the United States has increasingly focused on regulating the conduct by U.S. businesses occurring outside of the United States, generally prohibiting remuneration to foreign officials for the purpose of obtaining or retaining business. Also, in some countries we may rely on third parties for the marketing and distribution of our products, and these parties may lack sufficient internal compliance resources, and may operate in foreign markets involving substantial corruption. If our efforts to monitor these parties fail to detect potential wrongdoing, we could be held responsible for the noncompliance of these third parties with applicable laws and regulations, which may have a material adverse effect on our business.
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We could be adversely affected if other government or private third-party payors decrease or otherwise limit the amount, price, scope or other eligibility requirements for reimbursement for the purchasers of our products.
Certain of our products are subject to various cost-containment measures, such as government-imposed industry-wide price reductions, mandatory pricing systems, reference pricing systems, payors limiting access to treatments based on cost-benefit analyses, an increase in imports of drugs from lower-cost countries to higher-cost countries, shifting of the payment burden to patients through higher co-payments, limiting physicians’ ability to choose among competing medicines, mandatory substitution of generic drugs for the patented equivalent, and growing pressure on physicians to reduce the prescribing of patented prescription medicines. Such pressures could have a material adverse impact on our business, financial condition or results of operations, as well as on our reputation.
For example, certain pharmaceutical products, such as plasma derivative products, are subject to price controls in several of our principal markets, including Spain and countries within the European Union. In the United States, where pricing levels for our products are established by governmental payors and negotiated with private third-party payors, if the amount of reimbursement available for a product is reduced, it may cause groups or individuals dispensing the product to discontinue administration of the product, to administer lower doses, to substitute lower cost products or to seek additional price-related concessions. These actions could have a negative effect on our financial results, particularly in cases where our products command a premium price in the marketplace or where changes in reimbursement induce a shift in the location of treatment. The existence of direct and indirect price controls and pressures over our products has affected, and may continue to materially adversely affect, our ability to maintain or increase gross margins. In addition, the growth of overall healthcare costs and certain weak economic and financial environment in certain countries where we do business, as well as increased scrutiny over pharmaceutical pricing practices, such as in the United States, all enhance these pricing pressures.
In the United States pricing concerns include political and legislative efforts to increase transparency around healthcare and pharmaceutical drugs costs. Various pricing proposals have been introduced, some of which could take effect based on action by federal administrative agencies without the need for Congressional action. The uncertainty around these pricing proposals affects our ability to plan, and the proposals, if adopted, in whole or in part, could adversely affect our business. For example, on November 12, 2020, CMS issued final rules imposing price transparency requirements on hospitals and group health plans. Specifically, beginning in 2022, group health plans must post, on a public internet website, in-network provider negotiated rates (which include rates with device suppliers and manufacturers), historical out-of-network allowed amounts and drug pricing information. Our negotiated rates with various providers and group health plans could be published, which could impact our ability to independently negotiate sales contracts and rate agreements.
An increasing number of states in the United States have also proposed or passed legislation that seeks to directly or indirectly regulate pharmaceutical drug pricing, such as by requiring drug manufacturers to provide advance notice of certain price increases, publicly report pricing information or to place a maximum price ceiling on pharmaceutical products purchased by state agencies. State laws regulating pharmaceutical drug pricing may cause us to experience additional pricing pressures on our affected products, and could adversely affect our business.
Also, the intended use of a drug product by a physician can affect pricing. Physicians frequently prescribe legally available therapies for uses that are not described in the product’s labeling and that differ from those tested in clinical studies and that are approved by the FDA or similar regulatory authorities in other countries. These off-label uses are common across medical specialties, and physicians may believe such off-label uses constitute the preferred treatment or treatment of last resort for many patients in varied circumstances. In the United States, many off-label uses of drug products may be reimbursed by Medicare and other third-party payors, generally based on the payors’ determination that the intended use is for a medically accepted indication, for example, based on studies published in peer-reviewed medical journals or information contained in drug compendia, such as the United States Pharmacopeia-National Formulary. However, if reimbursement for off-label uses of products, including IVG, is reduced or eliminated by Medicare or other third-party payors, including those in the United States or the European Union, we could be adversely affected.
Proposed federal and state legislation have targeted drug pricing, including direct negotiations with manufacturers over price, reimbursement and discounts. Plasma protein therapeutics have been excluded from certain aspects of the several legislations; however, there is a continuing risk that our products may be subject to new pricing restrictions.
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We are subject to extensive government regulatory compliance and ethics oversight.
Our business is subject to extensive government regulation and oversight by the many countries in which we operate. We have enacted anticorruption, privacy, healthcare and corporate compliance policies and procedures that govern our business practices and those of our distributors and suppliers. These policies and procedures are effectuated through education, training and monitoring of our employees, distributors and suppliers. In addition, to enhance compliance with applicable healthcare laws and mitigate potential liability in the event of noncompliance, regulatory authorities, such as HHS’s Office of the Inspector General (“OIG”) of the United States, have recommended the adoption and implementation of a comprehensive healthcare compliance program that generally contains the elements of an effective compliance and ethics program described in Section 8B2.1 of the U.S. Sentencing Commission Guidelines Manual. Increasing numbers of U.S.-based pharmaceutical companies have such programs, and we have adopted U.S. healthcare compliance and ethics programs that generally incorporate the OIG’s recommendations. However, our adoption and enforcement of these various policies and procedures does not ensure that we will avoid investigation or the imposition of penalties by applicable government agencies.
Failure to comply with changing regulatory requirements could materially adversely affect our business.
We engage in various manufacturing, processing, marketing and sales activities pertaining to pharmaceutical products in a number of jurisdictions around the world. These activities subject us to several governmental regulations governing our global operations. The laws and regulations of the many jurisdictions that govern our business and operations are subject to varying and evolving interpretations that affect our ability to comply, and future changes, additions, and enforcement approaches, including in light of political changes. For example, in the United States, President Biden’s administration has authorized and encouraged a freeze on certain federal regulations that have been published but are not yet effective, as well as a review of all federal regulations issued during President Trump’s administration. Changes with respect to the applicable laws and regulations may require us to update or revise our operations, services, marketing practices, and compliance programs and controls, and may impose additional and unforeseen costs on us, pose new or previously immaterial risks to us, or may otherwise have a material adverse effect on our business. There can be no assurance that current and future government regulations will not adversely affect our business, and we cannot predict new regulatory priorities, the form, content or timing of regulatory actions, and their impact on the health care industry and on our business and operations.
We are subject to extensive environmental, health and safety laws and regulations.
Our business involves the controlled use and the generation, handling, management, storage, treatment and disposal of hazardous substances, wastes and various biological compounds and chemicals. The risk of contamination or injury from these materials cannot be eliminated. If an accident, spill or release of any regulated chemicals, substances or wastes occurs, we could be held liable for resulting damages, including for investigation, remediation and monitoring of the contamination, including natural resource damages, the costs of which could be substantial. As owners and operators of real property, we could also be held liable for the presence of hazardous substances as a result of prior site uses or activities, without regard to fault or the legality of the original conduct that caused or contributed to the presence or release of such hazardous substance on, at, under or from our property. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials, chemicals and wastes.
Although we maintain workers’ compensation insurance to cover the costs and expenses that may be incurred due to injuries to our employees resulting from the use and handling of these materials, chemicals and wastes, this insurance may not provide adequate coverage against potential liabilities.
Additional or more stringent federal, state, local or foreign laws and regulations affecting our operations may be adopted in the future. We may incur substantial capital costs and operating expenses to comply with any of these laws or regulations and the terms and conditions of any permits required pursuant to such laws and regulations, including costs to install new or updated pollution control equipment, modify our operations or perform other corrective actions at our respective facilities. In addition, fines and penalties may be imposed for noncompliance with environmental and health and safety laws and regulations or for the failure to have or comply with the terms and conditions of required environmental permits.
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Risks Relating to Our Shares and American Depositary Shares
If we discover material weaknesses or significant deficiencies in our internal control over financial reporting, it may adversely affect our ability to provide timely and reliable financial information and satisfy our reporting obligations under U.S. federal securities laws, which also could affect the market price of our American Depositary Shares or our ability to remain listed on NASDAQ.
Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. A “significant deficiency” is a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention of those responsible for oversight of our financial reporting. In addition, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
To the extent that any material weakness or significant deficiency exists in our or our consolidated subsidiaries’ internal control over financial reporting, such material weakness or significant deficiency may adversely affect our ability to provide timely and reliable financial information necessary for the conduct of our business and satisfaction of our reporting obligations under U.S. federal securities laws, which could affect our ability to remain listed on NASDAQ. Ineffective internal and disclosure controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our American Depositary Shares, or ADSs, or the rating of our debt.
See Item 15 of Part 2 “Controls and Procedures” and Note 33 to our consolidated financial statements attached to this annual report on Form 20-F in connection with the restatement of the investment by the GIC Investor.
The Grifols Family may exercise significant influence over the conduct of our business.
The founders of the Company and their relatives (the “Grifols Family”) and Scranton Enterprises B.V. own, directly and indirectly, approximately 36% of our Class A shares. The Class A shares exercise 100% of the voting control of our Company. As a result, the Grifols Family and Scranton Enterprises B.V. may exercise significant influence over matters requiring shareholders’ approval, including, among other things, the election of our board of directors, or the Board, dividend policy and certain fundamental corporate action, such as the issuance of bonds, a merger or a dissolution. Conflicts may arise between the interests of the principal shareholders and those of the other shareholders, and the principal shareholders may choose to resolve the conflict in a way that does not coincide with the interests of the other shareholders.
The market price of our Class B ADSs on NASDAQ may be volatile.
The market price of our Class B ADSs may be volatile as a result of various factors, many of which are beyond our control. These factors include, but are not limited to, the following:
· | market expectations for our financial performance; |
· | actual or anticipated fluctuations in our results of operations and financial condition; |
· | changes in the estimates of our results of operations by securities analysts; |
· | potential or actual sales of blocks of our Class B ADSs in the market by any shareholder or short selling of our Class B ADSs. Any such transaction could occur at any time or from time to time, with or without notice to us; |
· | the entrance of new competitors or new products in the markets in which we operate; |
· | volatility in the market as a whole; and |
· | the risk factors mentioned in this section. |
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The market price of our Class B ADSs may be adversely affected by any of the preceding or other factors regardless of operations and financial condition. For example, on January 7, 2021, our Class B ADSs traded at $19.27 per ADS, on March 10, 2021, they traded at $15.15 per ADS, while January 6, 2022 they traded at $11.30 per ADS. Since December 31, 2020, our Class B ADSs have traded as high as $19.78 per ADS and as low as $10.21 per ADS.
Fluctuations in the exchange rate between the U.S. dollar and the euro may increase the risk of holding our ADSs or shares.
The Spanish securities market for equity securities consists of four stock exchanges located in Madrid, Barcelona, Bilbao and Valencia (collectively, the “Spanish Stock Exchanges”). The majority of the transactions conducted on the Spanish Stock Exchanges are done through the Spanish Automated Quotation System (Sistema de Inteconexión Bursátil Español, or SIBE).
Our Class A shares and Class B shares are listed on the Spanish Stock Exchanges and quoted on SIBE in euros. In addition, our Class B shares are traded in the United States on the NASDAQ Global Select Market in the form of ADSs, evidenced by American Depositary Receipts, or ADRs, in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the euro may result in temporary differences between the value of our ADSs and the value of our shares, which may result in heavy trading by investors seeking to exploit such differences. This may increase the volatility of, and have an adverse effect on, the price of our shares or ADSs.
In addition, as a result of fluctuations in the exchange rate between the U.S. dollar and the euro, the U.S. dollar equivalent of the proceeds that a holder of our ADSs would receive upon the sale in Spain of any shares withdrawn from the ADR depositary and the U.S. dollar equivalent of any cash dividends paid in euros on our shares represented by the ADSs could also decline.
Subscription (or preemptive) rights may be unavailable to U.S. holders of our shares or ADSs.
In the case of a future increase of our registered share capital, existing shareholders will generally be entitled to subscription (or preemptive) rights pursuant to Spanish law, unless waived by a resolution of the shareholders or, if such power has been delegated to the Board pursuant to a shareholders’ resolution, by a resolution of the Board and except in certain situations, such as capital increases made for an in-kind contribution, in which subscription (or preemptive) rights are not applicable by law. Holders of the Class B shares will generally not have a right to vote on any resolution on a capital increase or on the waiver of subscription (or preemptive) rights, unless such resolution does not treat the Class B shares in the same way as the Class A shares, except in the limited circumstances set out in the Articles of Association of Grifols, S.A. as amended (the “Articles of Association”).
Even if preemptive rights are granted, holders of our ADSs or U.S. resident shareholders may not be able to exercise subscription (or preemptive) rights, in which case holders of our ADSs could be substantially diluted, unless a registration statement under the Securities Act, as amended, or the Securities Act, is effective with respect to such rights and the shares for which they give such right or an exemption from the registration requirements of the Securities Act is available.
We intend to evaluate at the time of any rights offering the costs and potential liabilities associated with any such registration requirements, as well as the benefits of enabling the exercise of subscription (or preemptive) rights for the shares. In doing so, we will also evaluate any other factors that we may consider appropriate at the time.
There can be no assurance that we will decide to comply with such registration requirements. If no such registration requirements are satisfied, the depositary will sell the subscription (or preemptive) rights relating to the ADSs on deposit and will distribute the proceeds of such sale, if any, to the holders of the ADSs. If the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case no value will be given for these rights.
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ADS holders may be subject to limitations on the transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when the books of the depositary are closed or if such action is deemed necessary or advisable by the depositary or by us because of any requirement of law or of any government or governmental body or commission or under any provision of the deposit agreement. Moreover, the surrender of ADSs and withdrawal of our shares may be suspended subject to the payment of fees, taxes and similar charges or if we direct the depositary at any time to cease new issuances and withdrawals of our shares during periods specified by us in connection with shareholders’ meetings, the payment of dividends or as otherwise reasonably necessary for compliance with any applicable laws or government regulations.
Item 4.INFORMATION ON THE COMPANY
A. | History of and Development of the Company |
Introduction
We were founded in 1940 in Barcelona, Spain by Dr. José Antonio Grifols i Roig, a specialist and pioneer in blood transfusions and clinical analysis and the grandfather of our current Chairman of the Board. We have been making and selling plasma derivative products for more than 70 years. Over the last 25 years, we have grown from a predominantly domestic Spanish company into a global company by expanding both organically and through acquisitions throughout Europe, the United States, Latin America and Asia.
We were incorporated in Spain as a limited liability company on June 22, 1987 under the name Grupo Grifols, S.A., and we changed our name to Grifols, S.A. in 2005. We conduct business under the commercial name “Grifols.” Our principal executive office is located at Avinguda de la Generalitat, 152 Parque Empresarial Can Sant Joan, 08174 Sant Cugat del Vallès, Barcelona, Spain and our telephone number is +34 93 571 0500. Our registered office is located at c/Jesús y María, 6, Barcelona, Spain.
We are a vertically integrated global producer of plasma derivatives and we believe we rank in the top three largest producers in the industry. Our activities include sourcing raw material, manufacturing various plasma derivative products and selling and distributing final products to healthcare providers. We have expanded our plasma collection network and our manufacturing capacity through a combination of organic growth and acquisitions. As of December 31, 2021 we had 366 operating plasma collection centers located across the United States, Germany, Austria, Hungary Canada and Egypt; and a manufacturing capacity of approximately 17 million liters of plasma per year. We plan to reach a fractionation capacity of approximately 28 million liters and 520 approved plasma collection centers globally by 2026.
We also research, develop, manufacture and market in vitro diagnostics products, including analytical instruments, reagents, software and associated products for use in clinical and blood bank laboratories and hospital products.
Our Class A shares have been listed on the Spanish Stock Exchanges since we completed our initial public offering on May 17, 2006 and are quoted on the SIBE under the ticker symbol “GRF.” Since January 2008, we have been part of the IBEX-35 Index, which comprises the top 35 listed Spanish companies by liquidity and market capitalization. Our Class B shares were issued as part of the consideration for the acquisition of Talecris Plasma Resources, Inc. (“Talecris”), a company that has since been merged into our subsidiary Biomat USA, and are listed on the Spanish Stock Exchanges and quoted on the SIBE under the ticker symbol “GRF.P.” Our Class B shares are also traded in the United States on the NASDAQ Global Select Market in the form of ADSs, evidenced by ADRs, under the symbol “GRFS.” Each ADS represents one of our Class B shares. Our ADSs are currently traded in U.S. dollars. In November 2011, our ADSs were added to the NASDAQ Biotechnology Index.
The SEC maintains an internet site at http://www.sec.gov that contains reports, information statements and other information regarding issuers that file electronically with the SEC.
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Important Milestones
The following are some of our most important milestones:
· | On April 25, 2022, we acquired all of the existing equity interest in Tiancheng (Germany) Pharmaceutical Holdings AG (“Tiancheng Holdings”), which in turn owns 89.88% of the ordinary shares and 1.08% of the preferred equity shares of German publicly traded company Biotest AG, a global company that supplies plasma protein products and biotherapeutic drugs, for a total consideration of approximately €1,091,000,000. In addition, we completed a voluntary tender offer to all remaining shareholders of Biotest AG to acquire their ordinary and preferred shares, where we acquired 1,250,298 ordinary shares (for €43.00 per share) and 8,340,577 preferred shares (for €37.00 per share). This has brought our interest in Biotest AG to 96.2% of the voting rights and 69.72% of the share capital. As a result of these transactions, we have acquired 29 additional plasma collection centers. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting our Financial Condition and Results of Operations—Acquisitions—Biotest AG Acquisition;” |
· | On December 1, 2021, we sold a minority equity interest in the Biomat group, comprised of our U.S.-based plasma collection subsidiaries Biomat Newco, its subsidiary Biomat USA and its subsidiaries Interstate Blood Bank, Inc., Talecris and Biomat USA South, Inc., the latter two of which have since been merged into Biomat USA and dissolved, respectively (collectively, the “Biomat Group”), to Epsom Investment PTE. Ltd. (the “GIC Investor”), to an affiliate of GIC Private Limited, which is a sovereign wealth fund established by the Government of Singapore. Specifically, the GIC Investor acquired 12.9% of Biomat Newco and 12.5% of Biomat USA. The purchase price received was $990 million. We used the net proceeds to (i) prepay $600 million of principal amount of the Revolving Loans under the First Lien Credit Facilities, (ii) prepay $142,360,501.31 of the principal amount of the Dollar Tranche B Term Loans, (iii) prepay $88,003,617.48 of the Euro Tranche B Term Loans and (iv) repurchase €97,535,000.00 of the 2019 Notes under an asset sale offer. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Dispositions—The Biomat Transactions” and “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit;” |
· | On October 15, 2020, we acquired 100% of the equity of Alkahest, Inc. (“Alkahest”), a California biopharmaceutical company, for a total consideration of $146 million. In 2015, we had previously acquired a significant minority stake of Alkahest and, with this transaction, we gain total control of the company; |
· | On October 1, 2020, we acquired a plasma fractionation facility and two purification facilities located in Montreal, Canada, as well as 11 plasma collection centers located in the U.S., from South Korean based GC Pharma (Group) (“GC Pharma”), for a total consideration of $457 million. When the facilities are licensed and approved, we will become the only commercial manufacturer of plasma products in Canada, with a fractionation capacity of 1.5 million liters annually. We plan to be ready to manufacture IVIG and albumin in the Canadian facilities to supply the Canadian market starting in 2023; |
· | On March 30, 2020, we acquired 26.2% of the voting and economic rights in Chinese company Shanghai RAAS Blood Products Co Ltd (“Shanghai RAAS”), in exchange for 45% of the economic rights and 40% of the voting rights in our U.S. subsidiary, Grifols Diagnostic Solutions Inc. (“GDS”); |
· | In June 2018, we completed the acquisition of German based pharmaceutical company Haema AG for a purchase price of €220 million; |
· | In August 2018, we completed the acquisition of U.S. based pharmaceutical company Biotest US Corporation, for a purchase price of $286 million; |
· | In December 2016, we entered into an asset purchase agreement with Hologic Inc. (“Hologic”), to acquire Hologic’s nucleic acid testing (“NAT”) Donor Screening Unit. The transaction closed in January 2017 for a purchase price of $1.9 billion; |
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· | In January 2014, we acquired the diagnostic business of Novartis Corporation (“Novartis”), for a purchase price of $1.7 billion; |
· | In June 2011, we acquired U.S. based biotherapeutics company Talecris Biotherapeutics for a purchase price of $3.7 billion; and |
· | In July 2003, we acquired the assets of Alpha Therapeutics Corporation, including its plasma fractionation plant in Los Angeles, California, for a purchase price of $104 million. |
For further details of our principal capital expenditures and divestitures, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures, Other Intangible Assets and Rights of Use.”
B. | Business Overview |
General
We are one of the leading global specialty plasma therapeutics companies developing, manufacturing and distributing a broad range of biological medicines based on plasma derived proteins. Plasma derivatives are proteins found in human plasma, which once isolated and purified, have therapeutic value. These protein-based therapies extend and enhance the lives of individuals who suffer from chronic and acute, often life-threatening, conditions, including primary and secondary immunological deficiencies, Chronic Inflammatory Demyelinating Polyneuropathy (“CIDP”), A1PI deficiency and related emphysema, immune-mediated ITP, Guillain Barré syndrome, Kawasaki disease, allogeneic bone marrow transplants, hemophilia A and B, von Willebrand disease, traumatic or hemorrhagic shock and severe burns. In addition, we have built a diagnostic business that focuses on researching, developing, manufacturing and marketing in vitro diagnostics products for use in clinical and blood bank laboratories. We also specialize in providing infusion solutions, nutrition products and medical devices for use in hospitals and clinics.
Our products and services are used by healthcare providers in over 100 countries to diagnose and treat patients with hemophilia, immune deficiencies, infectious diseases and a range of other medical conditions, and we have a direct presence, through the operation of commercial subsidiaries, in over 30 countries.
We are a leading producer in the industry in terms of total sales globally. We believe we have a top three market position in various segments of the plasma derivatives industry, including A1PI, IG and albumin as well as in terms of plasma collection centers and fractionation capacity. Our long-term aim is to further strengthen our leadership through the development of new and differentiated plasma-derived therapeutics, and the expansion of our global plasma collection footprint via acquisitions and greenfield projects.
We organize our business into five divisions: Bioscience, Diagnostic, Hospital, Bio Supplies and Others. These divisions also represent our operating segments.
Bioscience. The Bioscience Division includes activities relating to the manufacture of plasma derivatives for therapeutic use, including the reception, analysis, quarantine, classification, fractionation and purification of plasma and the sale and distribution of end products. The main plasma products we manufacture are IG, Factor VIII, A1PI and albumin. We also manufacture intramuscular (hyperimmune) immunoglobulins, ATIII, Factor IX and plasma thromboplastin component, or PTC. The Bioscience Division accounted for €3,815.0 million, or 77.3%, of our total net revenue in 2021.
Diagnostic. The Diagnostic Division focuses on researching, developing, manufacturing and marketing in vitro diagnostics products, including analytical instruments, reagents, software and associated products for use in clinical and blood bank laboratories, covering the entire value chain from donation to transfusion. We concentrate our Diagnostic business in transfusion medicine (immunology, immunohematology) and specialty diagnostics such as hemostasis. The Diagnostic Division’s main customers are blood donation centers, clinical analysis laboratories and hospital immunohematology services. The Nucleic Acid Testing, or NAT, Donor Screening Unit is engaged in research, development, manufacturing and commercialization of assays and instruments based on NAT technology for transfusion and transplantation screening. NAT technology makes it possible to detect the presence of infectious agents in blood and plasma donations, contributing to greater transfusion safety. The Diagnostic Division accounted for €779.1 million, or 15.8%, of our total net revenue in 2021.
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Hospital. The Hospital Division offers technology and services for hospitals, clinics and specialized centers for the manufacture of medicines, as well as physiological saline solution, enteral nutritional fluids and medical devices for interventional therapy. It also includes products that we do not manufacture but that we market as supplementary to the products that we do manufacture. The Hospital Division accounted for €141.2 million, or 2.9%, of our total net revenue in 2021.
Bio Supplies. Net revenue from Bio Supplies primarily consists of revenue related to biological products for non-therapeutic use as well as all income derived from manufacturing agreements with Kedrion and third party sales of Haema AG and Biotest US Corporation. The Bio Supplies Division accounted for €225.8 million, or 4.6%, of our total net revenue in 2021.
Others. Net revenue from Others primarily consists of revenue from the rendering of manufacturing services to third party companies.
Geographic Markets
We believe we are a leading plasma derivatives producer globally, ranking in the top three largest producers in the industry in terms of total sales, along with Takeda and CSL Group. We are the world’s largest producer of A1PI, which is used for the treatment of A1PI deficiency-related emphysema.
We currently operate in over 100 countries through distributors and subsidiaries in 30 countries. The United States is the largest sales region in the world for the plasma derivative sector. For the year ended December 31, 2021, the United States and Canada accounted for 63.9% of our total net revenue, Europe accounted for 18.4% of our total net revenues (of which 7.3% was generated in Spain) and the rest of the world accounted for 17.7% of our total net revenue.
Certain sales regions, particularly in emerging markets, have experienced continuous growth, driven by enhanced socioeconomic conditions and more informed patients who are demanding better quality medical care, as well as increasing government healthcare spending on plasma derivative products. These emerging markets are expected to experience significant growth. Our presence and experience in Latin America, in countries such as Mexico, Colombia, Argentina, Chile and Brazil, where we have been marketing and selling products for over 20 years, has positioned us to benefit from this additional growth in both our Bioscience and Diagnostic divisions. In the Asia-Pacific region, we have established a presence through our subsidiaries and representative offices in Malaysia, China, Thailand, Singapore, Australia, Japan, India, Hong Kong, Taiwan and Indonesia. We have also opened a Middle Eastern representative office in Dubai and Saudi Arabia.
We maintain a continuing focus on international expansion and acquisitions and will continue to selectively consider acquisitions that would generate operation synergies. For specific examples of acquisitions we have made to further enhance our operations, see “—A. History and Development of the Company—Important Milestones” above.
The following chart reflects a summary of net revenue by each of our geographic regions for the past three years:
| Year ended |
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| Year ended |
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| Year ended |
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| ||||
December 31, | % of total | December 31, | % of total | December 31, | % of total |
| |||||||
Summary of Net Revenue by Region | 2021 | net revenue | 2020 | net revenue | 2019(2) | net revenue |
| ||||||
(in thousands of euros, except for percentages) |
| ||||||||||||
European Union(1) |
| 906,449 |
| 18.4 | % | 834,492 |
| 15.6 | % | 799,460 |
| 15.7 | % |
United States and Canada |
| 3,154,549 |
| 63.9 | % | 3,599,746 |
| 67.4 | % | 3,390,811 |
| 66.5 | % |
Rest of the World |
| 872,120 |
| 17.7 | % | 905,800 |
| 17.0 | % | 908,420 |
| 17.8 | % |
Total |
| 4,933,118 |
| 100.0 | % | 5,340,038 |
| 100.0 | % | 5,098,691 |
| 100.0 | % |
(1) | Net revenue earned in the European Union includes net revenue earned in Spain. |
(2) | For comparison purposes, 2019 U.K. figures have been reclassified from European Union to Rest of the World. |
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Principal Activities
We organize our business into five divisions: Bioscience, Diagnostic, Hospital, Bio Supplies and Others. These divisions also represent our operating segments. The following chart presents our total net revenues by each of our divisions for the past three years:
| Year ended |
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| Year ended |
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December 31, | % of total | December 31, | % of total | December 31, | % of total |
| |||||||
Summary of Net Revenue by Division | 2021 | net revenue | 2020 | net revenue | 2019 | net revenue |
| ||||||
(in thousands of euros, except for percentages) |
| ||||||||||||
Bioscience |
| 3,814,983 |
| 77.3 | % | 4,242,502 |
| 79.5 | % | 3,993,462 |
| 78.3 | % |
Diagnostic |
| 779,108 |
| 15.8 | % | 775,889 |
| 14.5 | % | 733,604 |
| 14.4 | % |
Hospital |
| 141,190 |
| 2.9 | % | 118,675 |
| 2.2 | % | 134,441 |
| 2.6 | % |
Bio Supplies |
| 225,765 |
| 4.6 | % | 224,090 |
| 4.2 | % | 266,540 |
| 5.2 | % |
Others |
| 39,620 |
| 0.8 | % | 31,989 |
| 0.6 | % | 22,820 |
| 0.5 | % |
Intersegments |
| (67,548) |
| (1.4) | % | (53,107) |
| (1.0) | % | (52,176) |
| (1.0) | % |
Total |
| 4,933,118 |
| 100.0 | % | 5,340,038 |
| 100.0 | % | 5,098,691 |
| 100.0 | % |
The Bioscience Division
The Bioscience Division is responsible for the research and development, production and marketing of plasma derivative products. In 2021, the Bioscience Division accounted for 77.3% of our total net revenue.
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Operational Structure
The following chart illustrates its operational structure:
From plasma donation to therapeutic application, there are four major steps in the industry value chain process: (i) plasma collection, (ii) transport and logistics, (iii) manufacturing (fractionation and purification) and (iv) marketing and distribution. We are present at all levels of the value chain, from collection centers to distribution of the final products. This vertical integration enables us to leverage our position at each stage to control the overall process, to benefit from lower prices and to introduce complementary products, such as those offered through the Hospital Division and the Diagnostic Division, to our customers.
Plasma Collection
Plasma is the key raw material used in the production of plasma-derived products. We have expanded our plasma collection network through a combination of organic growth by opening new plasma collection centers and acquisitions. We obtain our plasma primarily from the United States and Europe (Germany, Austria and Hungary) through 366 operating plasma collection centers and, to a much lesser extent, through agreements with third parties. Over the last few years, pursuant to the implementation of our business strategy, we have acquired plasma collection centers in the United States, Canada and Europe. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions—Acquisition and Sale of Haema AG and Biotest US Corporation.” below. In 2022, we are advancing on our efforts to
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increase our plasma supply through our expansion plan, comprising organic and inorganic growth. We plan to reach 520 approved plasma collection centers by 2026 globally.
We believe that our plasma requirements through 2022 will be met through plasma collected at our plasma collection centers and purchased from third-party suppliers pursuant to various plasma purchase agreements. As we source the majority of our plasma internally, we have been able to ensure the availability of plasma for our manufacturing needs and assure the quality of the plasma throughout our manufacturing process.
We have implemented mechanisms to ensure that plasma donors meet the guidelines set forth by applicable regulations regarding, among other things, health, age and frequency of donations. Once the plasma donation is completed, as required by applicable United States and European regulations, we test every donation for pathogens such as HIV, hepatitis A, B and C, parvovirus B19 and syphilis. If we discover a unit of plasma that cannot be used in the fractionation process, we notify the donor and remove all plasma previously donated by such donor from our inventory.
Transport and Logistics
Once plasma has been collected, it is frozen at the collection center and sent to fractionation centers. One essential aspect of this process is the implementation of safety procedures to guarantee the quality and safety of the donated plasma. To ensure preservation of the proteins found in plasma, plasma must be kept at or below a temperature of -20 degrees Celsius (-4 degrees Fahrenheit). In accordance with European and United States requirements, we store our plasma at a temperature of -30 degrees Celsius (-22 degrees Fahrenheit). During transportation, plasma is kept at a temperature at or below -20 degrees Celsius. Our frozen plasma is transported by one of two transport companies, which are the same used throughout the industry.
Fractionation and Purification
Once plasma has been obtained, it may be used for plasma transfusions. It may also be frozen (as fresh frozen plasma) and manufactured into plasma derivatives through the fractionation process. The fractionation process consists of the separation of specific proteins through temperature and pH changes, as well as the use of filtration and centrifugation techniques. This process also includes a phase of introducing various viral inactivation procedures. Fractionation occurs in tanks at near freezing temperatures to maintain the integrity of the proteins. All known plasma derivative products can be fractionated from the same batch of plasma. As a result, the development of a new or higher yield plasma derivative product would likely generate incremental sales without increasing the requirement for additional plasma.
We currently operate three Bioscience manufacturing facilities in the United States and Spain. Our plasma derivative products are manufactured at our Clayton, Los Angeles and Parets facilities, which have a combined fractionation capacity of approximately 17 million liters per year. Our Clayton facility is one of the world’s largest integrated protein manufacturing sites, including fractionation, purification and aseptic filling and finishing of plasma-derived proteins.
Currently, the Clayton, Los Angeles and Parets facilities are equipped and licensed to produce certain plasma derivative products for the United States, European and other markets. For example, we produce our Flebogamma® DIF and Gamunex® IVIG products for all of our markets at the Clayton, Los Angeles and Parets facilities.
In addition, on October 1, 2020, we purchased from GC Pharma and other investors a plasma fractionation facility and two purification facilities located in Montreal, Canada (as well as 11 plasma collection centers located in the U.S). The Canadian facilities are currently in the process of contruction and renovation. When the construction and renovation are complete and the facilities are licensed and approved, we will become the only commercial manufacturer of plasma products in Canada, with a fractionation capacity of 1.5 million liters annually. We plan to be ready to manufacture IVIG and albumin in the Canadian facilities to supply the Canadian market starting in 2023.
We optimize utilization of our fractionation capacity by obtaining FDA and EMA licenses, and completing further requirements, that allow us to purify at any of our other facilities intermediate products that are produced at one of our facilities. We have obtained the following FDA licenses, among others:
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· | to use at our Clayton facility the Fraction II+III made at both our Los Angeles and Parets facilities to make Gamunex®; |
· | to use at our Los Angeles facility the Fraction II+III made at both our Los Angeles and Clayton facilities to make Gamunex®; |
· | to use Fraction V obtained at our Los Angeles facility to produce albumin at our Parets facility; |
· | to use Fraction V obtained at both our Clayton and Parets facilities to produce Albutein® in our Los Angeles facility; |
· | to use Fraction IV-1 obtained at our Los Angeles facility to produce Prolastina®, an A1PI we market in Spain, at our Clayton facility; |
· | to use Fraction IV-1 obtained at our Los Angeles facility to produce Prolastin®-C lyophilized at our Clayton facility; |
· | to use Fraction IV-1 obtained at our Clayton facility to produce Prolastin®-C liquid at our Parets facility; |
· | to use the same method currently in place in our Parets facility to produce Alphanate® in our Los Angeles facility; |
· | to use paste from the new fractionation facility at Clayton to produce Gamunex® and Prolastin®; |
· | to produce nano-filtered Gamunex® and the 40 gram vial presentation; and |
· | to use Cryoprecipitate obtained at our Clayton facility to produce Alphanate® at our Clayton facility, which is later sent to our Los Angeles facility to be filled. |
We are continuing our efforts to obtain additional FDA licenses of this nature. The flexibility provided through such licenses allows us to increase production efficiency and to better address changes in demand between the United States, the European Union and other world markets.
For more information on our manufacturing facilities, see “—D. Property, Plant and Equipment” below.
Safety
We have never experienced a recall of any batch of our finished biological products due to a safety risk. In alignment with our commitment to safety and quality, we have voluntarily withdrawn some product lots. All withdrawals were due to a reported rate of adverse drug reactions slightly higher than usual. Our philosophy is that the health of the plasma donor and the patient are the paramount considerations. None of the withdrawn products had a significant impact on patients. We strongly believe that our safety philosophy is consistent with the business objective of generating profit. We also believe that we have a strong reputation for safety in our markets, thus making our products particularly attractive to customers. Our vertically integrated business model allows us to assure the safety and quality of our plasma derivative products through the implementation of our safety standards.
The plasma collection, fractionation and purification process is long, complex and highly regulated. We have adopted and maintain rigorous safety standards that we believe exceed those required by health authorities in Europe and the United States. Grifols is periodically inspected and certified for Good Manufacturing Practices, or GMP, by competent health authorities, such as European authorities, the FDA, and other relevant government authorities of other countries where our products are marketed.
Grifols maintains standards consistent with other industry participants with regard to plasma safety, and is periodically certified by the Plasma Protein Therapeutics Association (“PPTA”), under the International Quality Plasma Program (“IQPP”), for plasma donation centers, and under the Quality Standards of Excellence, Assurance and Leadership Program (“QSEAL”), for fractionation plants. For example, source plasma inventory is held for not less than 60 days after donation, to allow for retrieval and destruction of plasma units if the donor is disqualified during this period (after seroconversion or due to high-risk behavior or international travel). We have also introduced innovative methods such as the Plasma Bottle Sampling™ system, which automatically
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prepares, codes and labels test samples at the time of plasma donation, and the PediGri™ On Line system, which provides full traceability of human plasma raw material throughout the plasma supply chain. See “—Distribution Process” below.
The manufacturing plants have been designed fulfilling the current GMP standards and applicable regulations for clean areas, and are designed to minimize clean areas as well as human intervention, with the objective of lowering the risk of contamination. The facilities are subject to a cleaning and sanitizing plan and to a corrective and preventive maintenance program. Periodically, we voluntarily shut down all of our manufacturing facilities to perform maintenance work, expansion projects and other capital investments. Our manufacturing facilities have never been shut down because of regulatory noncompliance while under our operation. We believe that our voluntary shutdown procedure lowers the risk of any mandatory shutdown.
All of our plasma derived products are manufactured strictly following validated and approved procedures, and in accordance with the corresponding marketing authorization. Also, each manufacturing process includes at least one validated specific virus inactivation or removal step as a precautionary measure to avoid improbable virus contamination.
Since our products are proteins that cannot be terminally sterilized, they therefore are sterilized by filtration before being aseptically filled in their final container. Grifols has patented the Grifols Sterile Filling (“GSF”) system which minimizes the risk of microbial or particulate contamination during the aseptic filling process. During this process, sterilized containers are filled with the product under Grade A laminar air flow. The partially closed containers (vial with stopper and protector) are sterilized prior to filling. The container closure unit remains partially closed until the moment of filling, after which it is immediately sealed thus reducing the risk of contamination by reducing the product and container exposure to the controlled environment. The filling process is recorded which enables us to identify the cause of, and rectify more easily, any related problem. These records are maintained according to our data retention policy.
Once aseptically filled, each unit of product is laser-marked with the objective of individually identifying each container and preventing and detecting counterfeits. This allows us to protect the integrity of our manufacturing process.
After plasma derivatives are manufactured, every unit of each lot is visually inspected in order to detect the presence of foreign particles or other imperfections in the container closure system. Each lot is also tested during production and at the end of the manufacturing process according to the licensed specifications, marketing authorization and corresponding Pharmacopoeia monographs. All processes are overseen by the quality systems in place at Grifols with the objective of ensuring that products are marketed with the appropriate quality, purity, potency and safety.
Finally, once the product is marketed, our Pharmacovigilance system allows us to control all potential adverse reactions resulting from the administration of our products, thus ensuring the safety of our products globally around the world.
We continually invest in the improvement of our manufacturing facilities and plasma fractionation process, as well as in other related systems, in order to ensure the quality and safety of our products.
Distribution Process
With each batch of plasma derivatives, we deliver electronic information regarding the origin, characteristics and controls of each of the units of plasma that we use in the preparation of the batch to our customers. This feature, called the PediGri™ On Line system, allows for healthcare users of our products and regulatory authorities to have immediate and easy access to this information, tangible proof of the full traceability of our products. We have had this system in place since 1996, and we believe we are the only fractionator that provides this feature to customers.
We have our own sales and distribution networks covering substantially all of our markets, staffed with highly trained personnel. A majority of our sales in 2021 were made through our own distribution network, which is experienced in the proper handling of our products. This network provides for greater safety because it allows us to track our products and react quickly in the case of a potential product recall. In countries where we do not have our own distribution network, we use carefully selected distributors who follow all of our safety standards.
For further information, see “—Marketing and Distribution” below.
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Bioscience Products and Services
Collected plasma, whether source or recovered, is fractionated into different component proteins. We fractionate and purify a broad range of plasma derivative products that improve patient care. Our Bioscience Division also sells a non-plasma derivative medicinal product, Tavlesse® (fostamatinib) in the European Union.
The chart below presents our principal products by brand name and their respective therapeutic indications:
Product Description | Main Therapeutic Indications | |
Gamunex®/Gamunex®-C. Immune Globulin Injection (Human), 10% Caprylate/Chomatography Purified. Flebogamma® 5% and 10% DIF. Immune Globulin Intravenous (Human). | IVIG is used for the treatment of: primary and secondary immunological deficiencies; and autoimmune conditions including immune-mediated ITP; Guillain Barré syndrome; Kawasaki disease; chronic inflammatory demyelinating polyneuropathy (“CIDP”); and multifocal motor neuropathy (“MMN”). Severe acute myasthenia exacerbations is an approved indication for Gamunex®-C in Europe. | |
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Xembify®. Immune Globulin Subcutaneous (Human) - klhw 20% solution. | Used to treat Primary Humoral Immunodeficiency (“PI”). In Europe, Xembify® is also indicated to treat hypogammaglobulinaemia and recurrent bacterial infections in patients with chronic lymphocytic leukaemia (“CLL”) in whom prophylactic antibiotics have failed or are contra-indicated, hypogammaglobulinaemia and recurrent bacterial infections in multiple myeloma (“MM”) patients, and hypogammaglobulinaemia in patients pre- and post- allogeneic haematopoietic stem cell transplantation (“HSCT”). | |
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HyperRAB® Rabies Immune Globulin (Human). | Anti-rabies immunoglobulin indicated for postexposure prophylaxis, along with rabies vaccine, for all persons suspected of exposure to rabies who have not been previously vaccinated with a rabies vaccine. | |
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Prolastin®/Prolastin®-C/ Prolastin®-C Liquid/Prolasplan®/ Prolastina®/Pulmolast®/Lynspad®. Alpha 1-Proteinase Inhibitor (Human). | Used to treat adults with clinical evidence of emphysema due to severe hereditary alpha-1 antitrypsin deficiency (“A1PI deficiency”). | |
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Fanhdi™ and Alphanate®. Antihemophilic Factor/von Willebrand Factor Complex (Human). | Used for the prevention, management and control of bleeding in Factor VIII deficiency (hemophilia A) and indication for von Willebrand disease (in the United States, for Alphanate® only). | |
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Koate®-DVI. Antihemophilic Factor (Human). | Used for the prevention and control of bleeding in Factor VIII deficiency (hemophilia A). | |
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Albutein®/ Albutein® FlexBagTM / Human Albumin Grifols®/Plasbumin®. Albumin (Human) 5%, 20% and 25%. | Used to re-establish and maintain circulation volume in the treatment of hypovolemia (i.e., traumatic or hemorrhagic shock, septic shock and severe burns) and to treat complications related to cirrhosis. | |
Vistaseal™/VeraSeal®. Human fibrinogen/human thrombin. | Used as a supplemental treatment in adults where standard surgical techniques are insufficient for improvement of haemostasis, and as suture support in vascular surgery. | |
Tavlesse®. Fostamatinib Disodium Hexahydrate Film Coated Tablets. | Used for the treatment of chronic immune thrombocytopenia (“ITP”) in adult patients who are refractory to other treatments. |
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Gamunex-C® IVIG, a ready-to-use liquid IVIG product, is one of the leading products in the IVIG segment. We believe Gamunex-C® IVIG is one of the premium products in its category since its launch due to a comprehensive set of differentiated product characteristics. We are one of the market leaders in the production and marketing of immunoglobulin, with about 24.6% market share in volume as of November 2021, according to PPTA.
In July 2019, the FDA approved Xembify®, our subcutaneous immunoglobulin product for use to treat primary immunodeficiencies. We launched Xembify® in the United States in the fourth quarter of 2019. In December 2019, Xembify® was also approved in Canada for use to treat primary and secondary immunodeficiencies. We are working with healthcare authorities to obtain approval in Europe and additional markets. Since the fourth quarter of 2021, Xembify® has received approvals in the U.K., Spain, France, Germany, Italy and Sweden to treat primary and select secondary immunodeficiences.
HyperRAB® is the world’s leading human anti-rabies immunoglobulin indicated for postexposure prophylaxis, along with rabies vaccine, for all persons suspected of exposure to rabies who have not been previously vaccinated with rabies vaccine. HyperRAB®, a 300 IU/ml formulation of which is available in the U.S., is the only human rabies immunoglobulin (“HRIG”) provided as a higher-potency formulation, potentially requiring fewer injections in administration of each dose. We had an estimated 85% market share in sales of anti-rabies immunoglobulins in the United States as of December 2021.
In addition, we are the global market leader in the sales of alpha-1-antitrypsin augmentation therapy (“AAT”). Our AAT has 32 licenses in 27 countries worldwide with 19 countries in North America and Europe. Our liquid formulation of AAT (Prolastin®-C Liquid) is FDA approved as a chronic augmentation and maintenance therapy to treat emphysema related to severe hereditary A1PI deficiency. We had an estimated 71% global sales market share for AAT as of December 2021. A worldwide clinical trial is ongoing to meet post-approval regulatory commitments and obtain Prolastin®-C regulatory approval in Europe.
Between Koate®-DVI, Fanhdi and Alphanate,we had an estimated 20% market share in volume globally in the pdFVIII hemophilia A market in 2021 (excluding Von Willebrand disease use).
Grifols albumin brands are sold globally, with an estimated 19% market share in volume. In addition, our albumin products meet U.S., European and Chinese requirements, making them attractive to biotechnology companies and genetic labs, as well as hospitals and physicians. In 2021, we launched in the U.S. Albutein 25% and 5% FlexBagTM, a flexible container designed to add convenience, ease of use, and durability.
Tavlesse® is a novel SYK-inhibitor in-licensed from Rigel Pharmaceuticals for commercialization in Europe and additional markets in the Middle East and North Africa. Tavlesse® is indicated to treat chronic immune thrombocytopenia in adult patients who are refractory to other treatments. EMA regulatory authorization was obtained in January 2020, and commercial sales have commenced in Germany, Spain, Italy, France and the United Kingdom.We plan to launch in additional countries in the E.U., Russia, and the Middle East. Tavlesse® is the first oral therapy commercialized by Grifols Bioscience.
In addition to the products described above, we also produce intramuscular (hyperimmune) immunoglobulins, which are used for the prevention and treatment of tetanus, prevention and treatment of hepatitis B, and Rh factor complications during birth. Also, we produce antithrombin (e.g., AT, ATIII, pdAT) (Anbinex® and Thrombate® III), which is used in the prevention and treatment of thromboembolic complications in patients with antithrombin deficiency; AlphaNine® and Factor IX Grifols®, which are used in the prevention and control of bleeding in patients with hemophilia B; and Niuliva® and Igantibe®, which are used after liver transplants to prevent hepatitis B reinfection of the graft.
We also manufacture Vistaseal™/Veraseal®, a biological fibrin sealant composed of fibrinogen and human thrombin used in surgical operations to expedite the healing process. It is commercialized in the U.S. and Canada, in some E.U. countries (i.e. Germany, Austria, Ireland, Netherlands, Norway, Finland, Sweden, Denmark, France, Italy) as well as in Singapore and the U.K. by Ethicon US, LLC (a Johnson Johnson company).
To sell medicinal products, we must first register the products with the relevant authorities of the jurisdictions where the products are to be marketed and sold. To comply with the regulatory requirements in a given jurisdiction, we have a core team in Spain and the United States that prepares, files and coordinates the registration process with the technical personnel at the subsidiary
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assigned to that jurisdiction. We have 1,047 Bioscience product licenses registered in 89 countries throughout Europe, the United States, Latin America, Asia and the rest of the world. Our most significant government-issued licenses for Bioscience products are:
· | Gamunex®/Gamunex®-C/Flebogamma® DIF. We have 198 licenses for the marketing and sale of one or more IVIG products; |
· | Xembify®. We have 13 licenses for the marketing and sale of this product; |
· | Prolastin®/Prolastin®-C/ Prolastin®-C Liquid/Prolasplan®/Prolastina®/Pulmolast®/Lynspand®. Alpha 1-Proteinase Inhibitor (Human). We have 32 licenses for the marketing and sale of one or more of these A1PI products; |
· | Fanhdi™/Alphanate®/Koate®- DVI Factor VIII. We have 233 licenses for the marketing and sale of one or more of these Factor VIII products; |
· | Albutein®/Human Albumin Grifols®/Plasbumin®. We have 258 licenses for the marketing and sale of one or more of these albumin products in their various concentrations; |
· | VistaSealTM/VeraSeal®. We have 16 licenses for the marketing and sale of this product; and |
· | Tavlesse®. We have EMA authorization for Tavlesse® in the European Union and national authorization in the United Kingdom. Tavlesse® is currently sold in Germany, Spain, Italy, France, and the United Kingdom. |
Pursuant to a consent order issued by the Federal Trade Commission (the “FTC”) on July 20, 2011 to settle certain charges related to our acquisition of Talecris (the “Consent Order”), we have granted Kedrion the exclusive license to sell Koate®-DVI in the United States (see “Financial Information—A. Consolidated Statements and Other Financial Information—Antitrust Approval of Talecris-Grifols Merger”).
In addition to the sale of the products described above, we have entered into a series of arrangements with many Spanish transfusion organizations to fractionate recovered plasma (plasma separated from blood obtained from a blood donation) from such organizations and manufacture plasma derivatives under our own brand name for use by hospitals. We charge the transfusion centers for the fractionation and manufacturing service. We also have contract manufacturing agreements with Italian and Canadian organizations. We also provide virus photo-inactivation of transfusion plasma to hospitals and clinics in Spain. The plasma is inactivated at our manufacturing facilities and then sent back to the clinic or hospital at which it was collected, where it is used for transfusions.
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The Diagnostic Division
The Diagnostic Division focuses on researching, developing, manufacturing and marketing in vitro diagnostics products, including analytical instruments, reagents, software and associated products for use in diagnostic clinical and blood bank laboratories. We believe that we have a significant market share in NAT blood screening solutions. In addition, we have increased our sales of automated immunohematology systems and reagents to hospital transfusion services and blood centers in several key global markets. We also continue to grow our portfolio of clinical and diagnostic products in select areas, including autoimmunity, and have agreements to extend the number of antigens we manufacture for use in clinical and blood bank diagnostic tests. The Diagnostic Division accounted for €779.1 million, or 15.8% of total net revenue in 2021. Our principal diagnostic products are:
Product Description | Main Applications | |
|---|---|---|
| ||
Transfusion Medicine: | ||
Procleix® Panther® systems/Procleix® Panther® with Automation Ready Technology (ART). Automated NAT blood screening systems, assays and software. | Used to detect infectious viruses and parasites in donated blood and plasma including: HIV (Types 1 2); Hepatitis A, Hepatitis B, Hepatitis C and Hepatitis E; parvovirus B19; West Nile Virus; Dengue Virus; Zika Virus and Babesia. | |
WADiana®/Erytra® /Erytra Eflexys® analyzers. Automated immunohematology analyzers that use gel agglutination technology to enable automatic processing of DG Gel® system, including DG Gel® cards, reagent red blood cells, antisera and associated softwareManual and semiautomated equipment are also part of the DG Gel system. | Used to perform routine pre-transfusion compatibility testing, including blood typing, unexpected antibody screening and identification, extended phenotype and cross-match tests, among others. | |
| ||
Antigens. Critical component of certain infectious disease tests. | Used in the manufacture of clinical diagnostic and blood donor screening immunoassays. | |
Clinical and Specialty Diagnostics: | ||
Promonitor®. Highly specific immunoassays for quantification of serum drug levels and anti-drug antibodies of various biological drugs | Used to measure quantity of drug and antibodies for a number of biological drugs, commonly used in the treatment of various inflammatory diseases. | |
AlphaIDTM. Genetic test for patients for alpha-1 deficiency | This is a free cheek swab to screen for alpha-1, the most common genetic form of Chronic Obstructive Pulmonary Disease (“COPD”). |
We assemble the majority of our instrument analyzers at our Parets facility in Spain. We manufacture antigens at our Emeryville facility in the U.S., oligos and other critical components of the transcription-mediated amplified NAT kits for blood and plasma infectious diseases screening at our San Diego facility in the U.S.
The production, marketing and sale of many of our Diagnostic Division products are subject to the prior registration of such products with the relevant authorities of the applicable jurisdictions. We have over 3,190 diagnostic product licenses registered in 76 countries in Europe, the United States, Canada, Latin America, Asia-Pacific, Middle East and Africa.
In addition to the products noted above, we offer our customers solutions developed in collaboration with, or manufactured by, third-parties that we believe complement our product lines. The Diagnostic Division distributes products in over 100 countries in Europe, the Americas, Asia-Pacific, Middle East and Africa.
Our Diagnostic Division includes a complete line of products and systems to perform blood donor screening molecular tests aimed at detecting the pathogenic agents of transfusion-related infectious diseases such as HIV (Types 1 2), Hepatitis A, Hepatitis B, Hepatitis C, Hepatitis E, parvovirus B19, West Nile Virus, Zika Virus, Babesia and Dengue Virus. We control the research and
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development, manufacturing and worldwide commercialization of our Procleix® blood screening products. We believe that our Procleix® NAT solutions continue to lead the market, and are used to screen more blood and plasma donations worldwide each year than any other NAT system.
Transfusion Medicine
We have a leadership position in transfusion medicine, with a broad portfolio of products that range from blood and plasma testing to blood typing. We focus primarily on meeting changing market needs with new and enhanced products for our Procleix® NAT blood screening portfolio and on expanding sales of our immunohematology products (WADiana®, Erytra® and Erytra Eflexis® analyzers and related DG Gel® blood determination cards) in key markets.
We continue to focus on obtaining FDA and other regulatory approvals to expand our portfolio of NAT products. In January 2019, we obtained FDA approval for an assay to detect four species of the Babesia parasite (B. Microti, B. Venatorum, B. Divergens and B. Duncani), known to cause babesiosis, a tick borne disease. The assay is designed to be used for routine screening by U.S. blood banks on the Procleix® Panther® system, where we estimate that we are currently the market leader and continue our efforts to offer innovative solutions to blood banks. We obtained CE mark for the Babesia assay in early 2021.
In October 2019, the Procleix® Panther® System featuring Automated Ready Technology, or ART, obtained Europe’s CE mark, making it available in European markets accepting the certification, and reinforcing our leadership in the blood banking industry. With significant hardware and software improvements on the current platform, the Procleix Panther System featuring ART will help accelerate laboratory efforts to reach higher levels of workflow automation for blood and plasma screening.
In May 2020, Procleix® Panther® System, featuring ART, received FDA approval for use with the following U.S. licensed products: Procleix® Ultrio Elite Assay, Procleix® WNV Assay, Procleix® Zika Virus Assay and the Procleix® Babesia Assay.
Also in May 2020, we obtained CE Mark for the Procleix® SARS-CoV-2 assay to screen blood or plasma for SARS-CoV-2 and plasma from convalescent donors who have recovered from COVID-19 or infection with SARS-CoV-2, for further manufacture. We also received CE Mark for a respiratory claim as an aid in the diagnosis of COVID-19 in specific respiratory specimens that are transported in Specimen Extraction Buffers, which obtained a separate CE Mark. The SARS-CoV-2 respiratory claim is limited to Spain, Northern Ireland and other select E.U. countries on a contractual basis with Hologic. The agreement for this assay with Hologic expired in December 2021 and will not be renewed. In August 2020, we obtained the approval of the Zika assay in Canada.
Also in August 2020, we successfully commercialized the Procleix® UltrioPlex E assay, a new multiplex assay for use on the Procleix® Panther® system, in Japan. The assay, which is a Transcription Mediated Amplification (“TMA”) qualitative in vitro NAT, was designed to detect five viruses in human blood specimens: HIV‐1, HIV‐2, HCV, HBV, and HEV in a single, simultaneous test, improving overall laboratory efficiencies. Early in 2021, the Procleix® UltrioPlex E assay received CE mark. This assay enhances blood safety and represents a significant advance in streamlining a laboratory’s NAT testing operations by allowing for an increased screening of viruses from a single-donor specimen without the need for any additional equipment. The Procleix® UltrioPlex E assay also helps produce less waste with higher results throughput and greater walk-away time for laboratory staff when compared with running current screening solutions separately.
As part of our strategy of geographic expansion and as a leader in this market segment, we continue to consider requests to include NAT screening for blood and plasma donations in countries as they develop their health systems. In 2020, we entered several new countries, such as Guatemala and Czech Republic and, in 2021, we began doing business in Kosovo, Macedonia and Latvia.
We recorded notable demand for the specialty diagnostic test to detect the SARS-CoV-2 virus, mainly in Spain, leading to higher sales of Grifols’ NAT technology systems (Procleix® NAT Solutions), which incorporates TMA.
We continue to experience strong sales of our DG Gel® system blood typing products. In December 2018, Erytra Eflexis®, a fully automated, mid-size analyzer that performs pretransfusion compatibility testing using DG Gel® technology already in use in the E.U., was approved by the FDA. It has a smart and compact design, offering intuitive operation that has expanded our product portfolio, which already includes the WADiana® and Erytra® analyzers and DG Gel® cards. The DG Gel® family of products continued to expand in 2019, with the commercialization in CE mark countries of DG Reader NET, a single card processing platform operating with the same consumables and reagents as our fully automated systems. The DG Reader NET received FDA approval at
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the end of 2019. Also, in November 2019 we received FDA approval for two new red blood cell panels, Data-CytePlus 2 and Data-CyteExtend. Additionally, a Weak D assay, to be used in combination with the DG Gel® system in automation, received FDA approval at the end of 2019. This is a valuable test for donor centers and Grifols Laboratory Solutions and will support our expansion in the region. In the U.S., our blood typing solutions have experienced solid growth. We have expanded commercialization efforts and will continue to promote this area in light of its high growth potential. Recently, we launched in CE mark countries and Australia the new middleware for our immunohematology instruments, our Blood Typing Manager (“BTM”). This middleware complements our blood typing systems portfolio and increases our competitiveness by adding new advanced features that support increasing our customer base.
Through our U.S. subsidiaries Biomat USA and Interstate Blood Bank Inc., we have entered into an agreement with Creative Testing Solutions (“CTS”), a nonprofit blood donor testing laboratory organization in the United States. Pursuant to this agreement, as of April 1, 2022, CTS began to operate for a period of ten years (renewable for up to another ten years) our three testing laboratories located in Memphis, Tennessee and San Marcos and Austin, Texas, to perform donor screening for blood and plasma collections. Grifols Laboratory Solutions will continue to provide specialty testing, including in-process and final product testing, as well as diagnostic solutions for clinical issues related to Molecular and Serological Immunohematology. The facility in Austin, Texas, provides testing, consultation and integrated solutions to optimize patient care for specialists in Hematology, Oncology, Perinatology, Obstetrics, Pharmacy, Transplantation and Transfusion Medicine.
In several countries, we distribute BLOODchip® blood group genotyping tests manufactured by Progenika, a Grifols company. This product line includes ID CORE XT, which determines 37 antigens of red blood cell groups, ID RHD XT, a molecular diagnostic kit that detects the most relevant RhD variations, and ID HPAXT kit to determine 12 Human Platelet Antigen (“HPA”) systems. BIDSXT is the software tool that allows the analysis, interpretation and database management to transmit the results to the Laboratory information system (“LIS”).
In November 2021, consistent with our long-term growth strategy, which focuses on promoting viable and essential business lines, we decided to exit the blood collection bags business. As a result, we are shutting down production of blood collection bags at our plants in Murcia, Spain, and Campo Largo, Brazil.
We operate a product line of high quality antigens, which are critical components of clinical diagnostic and blood screening immunoassay tests sold worldwide, which are produced through a joint business with Ortho Clinical Diagnostic. As part of this joint business, we have a contract with Abbott Laboratories for the supply of high quality antigens used in the manufacture of immunoassay diagnostics. This contract, with a total value of approximately $700 million, extended the supply of antigens until 2026, ensuring higher levels of recurring income in this area. We also extended our agreement with OraSure Technologies through 2022, reinforcing our position as a flexible provider of antigens.
Working together with Ortho Clinical Diagnostics, we maintain the VITROS® HIV Combo test for the early detection of HIV infection. This is an important milestone in the joint business between the two companies, in which Grifols is responsible for manufacturing the antigens for the test. The test received approval from the FDA in October 2018 to be used on Ortho’s VITROS® ECi/EciQ. The test was previously approved for use on Ortho’s VITROS® 5600 Integrated System and Ortho’s VITROS® 3600 Immunodiagnostic System.
Clinical and Specialty Diagnostics
Operating within our Clinical and Specialty Diagnostics, Progenika manufactures a genetic diagnosis test for Familial Hypercholesterolemia (“FH”) using next generation sequencing technology (“NGS”). The division continues its efforts to broaden the Promonitor® line, used to monitor biologic drugs as sales continue in Chile, select European Union countries, Australia and in the U.S. The Promonitor® product line includes an ELISA (enzyme-linked immunoabsorbent assay) device line also developed by Progenika to monitor patients being treated with biological medicines for rheumatoid arthritis and other chronic inflammatory diseases. We maintain CE marking of two additional tests in the Promonitor® family that enable treatment with the biological product golimumab, and several tests to permit the use of a single dilution to measure quantity of drug and antibodies for a number of biological drugs, commonly used in the treatment of various inflammatory diseases, such as rheumatoid arthritis and ulcerative colitis. We also own PromonitorQuick®, a point-of-care diagnostic kit that detects anti-infliximab antibodies, antibodies that appear in patients with chronic inflammatory diseases who are treated with biological drugs. In 2021, we entered into a co-development agreement with DIESSE Diagnostica Senese to adapt Promonitor® ELISA kits to DIESSE’s Chorus analyzer. This adaptation to monotest and ready-to-use
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devices addresses customer and market needs for improved automation. The development of Promonitor® tests on the Chorus automated system facilitates an improved testing workflow, resulting in earlier feedback for the clinician.
As a result of the development of Promonitor®, we have discontinued production of our Triturus® analyzer, but continue to service it for our existing customer base.
Pursuant to an exclusive agreement with AESKU Diagnostics GmbH Co. (“AESKU”), we distribute autoimmunity diagnostic products in Chile, Portugal, Spain and Mexico. We also serve key U.S. customer segments with AESKU products. One of these diagnostic products is Helios, the only fully automated platform capable of performing all immunofluorescence pipetting and reading steps in the United States, which strengthened our U.S. portfolio of products.
We retain the first FDA approved biological molecular test that uses the DNA of the patient for the diagnostic. This genetic test to detect alpha-1 antitrypsin deficiency (the “A1AT Genotyping Test”) can be conducted on DNA extracted from blood as well as a drop of blood collected on paper (a “Dry Blood Spot”). This test was developed by Progenika Biopharma, a Grifols subsidiary. Although highly complex, the test has been designed so any molecular biology laboratory can process it with minimal human intervention. At the end of 2019, we also introduced AlphaID™, a new simple cheek swab that greatly simplifies the sample collection process. AlphaID™ allow physicians and healthcare providers to obtain a sufficient oral sample for alpha-1 screening, and it is completely free from ordering to results. The test is now available for distribution in the U.S.
The Hospital Division
The Hospital Division provides services and manufactures products used by hospitals, blood banks, plasma collection centers and other healthcare systems. These products include parenteral solutions, robotics and software. It also includes products that we do not manufacture but that we market as supplementary to the products that we do manufacture. The Hospital Division accounted for €141.2 million, or 2.9% of our total net revenue in 2021.
The Medication Management (formerly named Hospital Logistics) and IV compounding segments are also strategic areas for the Hospital Division. With the inclusiv® IV Compounding Portfolio, we provide IV workflow management, GMP quality cleanrooms, expert consulting, and a range of automation solutions for hospital pharmacies, increasing the safety of their sterile compounding needs. With the hardware and software solutions offered by the Medication Management area, we are the market leader in Spain and Chile, and have a strong presence in other countries in Latin America in terms of offering solutions to manage hospitals’ medication flow. In 2018, we reinforced the Hospital Division by acquiring the U.S. technology firm MedKeeper, which develops and markets mobile and web-based technology solutions for the management of hospital pharmacies. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions—MedKeeper Acquisition” below. The acquisition complements our Pharmatech line and enhances our presence in the U.S. market.
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IV Therapy is also a key segment of the Hospital Division where we manufacture and distribute directly or through third parties products such as parenteral solutions, which are mainly sold in Spain, Portugal, Chile and the United States. We continue to be the market leader in the Spanish intravenous therapy segment in intravenous solutions, and in 2018 Grifols’ 0.9% Sodium Chloride was marketed in the U.S. for the first time following the FDA approval of all volume Flebolex bags. In 2019, our Anticoagulant Sodium Citrate 4% w/v Solution USP was approved by the FDA, followed by the approval, in 2020, of our 0.9% Sodium Chloride Fleboflex Luer containers. The following table describes the principal hospital products that we manufacture, distribute or install and their respective applications:
Product Description | Main Applications | |
|---|---|---|
Intravenous therapy: |
| |
Intravenous fluid and electrolyte solutions. | Fluid and electrolyte replacement and conduit for the administration of medicines. | |
Irrigation solutions. | Fluids for urological irrigation. | |
Intravenous mixtures. Ready-to-use intravenous mixtures. | Increases safety and efficiency by eliminating the need for the compounding of solutions in hospitals and provides products for third-parties. | |
Other products for the hospital. | Specialized products for patients and hospital pharmacies such as parenteral nutrition bags and vacuum flasks. | |
Pharmatech: |
| |
Inclusiv® IV Compounding Portfolio. Gri-fill® System uses sterile filtration to prepare intravenous mixtures at in-hospital pharmacies. Misterium® are modular clean room facilities we sell in the United States and IBAM. The Kiro Oncology automation system is designed specifically for the preparation of cytotoxic drugs, while Kiro® Fill is used with non-hazardous preparations. PharmacyKeeper is a web and mobile-based application to improve key pharmacy operational processes. | Improves safety of hospital pharmacy preparation procedures by assuring sterility, traceability, user safety and quality to ensure compliance with regulations. | |
Medication Management. Includes a range of software and hardware products to manage and automate inventory, storage, packaging and other processes in operational pharmacies, including our own BlisPack®; and logistic dispensing systems, including Pyxis®, StocKey® and StocKey® RFID Smart Cabinet, and Kardex®. | Used in the logistical organization of hospital pharmacies and warehouses, in the preparation of unit dosing and in hospital management, admissions and accounting. | |
Nutrition: | ||
Dietgrif® enteral liquid diets. Complete diets with all the requirements for balanced nutrition. Different diets include standard fiber, high protein, high energy, and specific diets for diabetes. | For malnourished patients typically suffering from nutritional deficiency due to inadequate intake, weight loss, or increased nutritional requirements and often associated with concomitant disease. | |
Enteral feeding devices. | Provides solutions for patients with a functional and accessible gastrointestinal tract who are not able to consume or absorb enough nutrients to achieve adequate nutrition. | |
Probiotics. Food supplement containing live microorganisms. | Improves medical conditions that are the result of an unbalanced intestinal microbiota. | |
| ||
Medical Devices: | ||
Disposable sterile therapeutic medical products and related technologies to improve patient care. | The products have therapeutics uses in urology, neuroradiology, cardiology, endovascular surgery and anesthesia. | |
Others: | ||
Anticoagulant sodium citrate. | Used in the plasma donor centers as an anticoagulant solution. |
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The production, marketing or sale of our various Hospital Division products are subject to prior registration with authorities of the relevant jurisdictions. We have approximately 153 licenses for our Hospital Division products registered in 44 countries throughout Europe, Latin America, Oceania, Asia, Canada and the United States. Our sales representatives sell primarily to pharmacy, nutrition and gastroenterology units in hospitals and other units in hospitals that use our medical devices, using our own distribution network and external distribution organizations in some Latin American markets.
While our Hospital Division generates most of its revenue in Spain (59.6% of the division’s net revenue in 2021), we continue to promote international expansion. In 2021, 28.2% of the Hospital Division’s revenue came from the U.S. This continued growth in the North American market reinforces the global expansion of our Hospital division and marks an important step forward.
Furthermore, the Hospital Division employs a commercial strategy to promote Pharmatech’s presence in Latin America through the use of specialist distributors in this sector, while also maintaining a direct sales effort.
Intravenous Therapy
We manufacture and distribute intravenous solutions manufactured in our Murcia and Parets plants, in Spain. The FDA approvals of anticoagulant and normal saline have also increased our group’s self-sufficiency with both products being used in our plasma donor centers. We use saline to restore the circulatory volume in donors and we apply 4% sodium citrate as anticoagulant for whole blood in automated apheresis procedures. These FDA approvals represent an important launching point for obtaining authorizations in the future for other products manufactured in the Murcia and Parets facilities. Moreover, these FDA approvals bolstered our global expansion efforts and confirmed our vertical integration strategy of supporting other products and services across divisions.
In addition, we have entered into agreements with ICU Medical, Henry Schein, Nextgen Pharmaceuticals, Codan and other third parties to distribute in the U.S. 0.9% sodium chloride, which is an IV therapy used to replce lost body fluids and salts.
Grifols Partnership
A business line under the Hospital Division, the Grifols Partnership is a contract development and manufacturing platform focused on added value injectable products. Through the Grifols Partnership we have continued to expand our contract manufacturing business, with an increased focus on manufacturing ready-to-use intravenous mixtures for third party partners. In 2020, we signed our largest agreement for third-party manufacturing, for a phenylephrine product to be marketed in the U.S. We already obtained FDA approval for Tirofiban IV (prediluted platelets) and Ibuprofen IV, both ready-to-use in flexible bag products. Additional opportunities are currently under negotiation. The Grifols Partnership uses extra manufacturing capacity to help balance between internal demand, demand from customers, and that of third-party companies. This approach leverages our resources and expertise to bring value to our industry partners while also maximizing use of the Parets facility.
Pharmatech: Medication Management and inclusiv® IV Compounding Portfolio
We provide logistic solutions to hospital pharmacies by selling products related to the logistical organization of hospitals’ pharmacies and warehouses, including packaging instruments and software programs for hospital management, admissions and accounting departments. Most of these medication management products are manufactured by third parties. However, our portfolio includes some products manufactured by Grifols, such as StocKey® Central, an automated Kanban system designed to optimize the material inventory management processes of hospital healthcare, StocKey RFID®, a radiofrequency identification cabinet for the storage of high value medical devices, such as prosthetics and coronary stents, and BlisPack®, a system designed to automate the cutting of pill blister packs and the electronic identification of specific drugs for individual patients to be used by hospitals.
We also manufacture and distribute a complete portfolio of devices, softwares and services used in connection with the preparation of sterile componded intravenous medication, which we refer to as the inclusiv® IV Compounding Portfolio. We commercialize Misterium®, a modular cleanroom solution we install on site to customer specifications, and provide professional consulting services as well as complementary offerings such as Airinspace® products, including medically effective air and surface decontamination systems. As the exclusive distributor of these products in the United States and Spain, we are able to offer a broad portfolio of products for hospital pharmacies and other pharmacies specialized in sterile IV compounding in these countries.
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We are managing the global introduction of the Kiro® Oncology robot, which automates the preparation of intravenous medication for chemotherapy to reduce the risk that health professionals will come into contact with these hazardous products. We expect that the Kiro® Oncology robot will be one of the principal drivers of inclusiv® IV Compounding Portfolio product line growth in the near future. This system enables us to offer to hospital pharmacies worldwide what we believe to be the most complete portfolio of solutions for controlling intravenous medication preparation processes. The Kiro Oncology system is available in both the United States and Europe, where our consumer base saw some growth in 2019. In 2021, sales in some of the regions we operate in continued to face challenges associated with the COVID-19 pandemic. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Consequences of COVID-19.”
With our acquisition of MedKeeper in January 2018, the inclusiv® IV Compounding Portfolio has continued to develop. MedKeeper, with a SaaS business model, adds the missing piece of a compounding portfolio that enables the division to offer a holistic and integrated technology, software and service solution to our customers. PharmacyKeeper® is the leading IV workflow solution and was awarded in 2021, for the fifth consecutive year, as Best In KLAS by KLAS Research. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions—MedKeeper Acquisition” below.
Nutrition
We develop and distribute enteral nutrition products, including accessories such as feeding tubes and nutritional bags, for sale in the Spanish market. The main driver of the segment is the distribution of gastrostomy probes manufactured by Avanos Medical, Inc., a U.S.-based medical technology company, to maintain our market leadership position in Spain with this product line.
Medical Devices
We also sell other medical devices, such as disposable sterile therapeutic medical products for urology, neuroradiology, cardiology and anesthesia. All of these products are manufactured by third parties and complement our portfolio of Hospital Division products. We are increasing our strategic efforts to sell medical devices that complement our portfolio of Bioscience Division products. The main driver of growth in this segment in 2021 has been interventional neuroradiology disposables.
Research and Development
Research and development is a significant aspect of our business. Our principal research and development objectives are (i) to discover and develop new products, (ii) to research new applications for existing products and (iii) the improvement of our manufacturing processes to improve yields, safety and efficiency. Research and development spending was €276.0 million in 2019, €294.2 million in 2020 and €354.9 million in 2021. In addition, as of December 31, 2021, we had 1,108 scientists and support staff dedicated to research and development.
We have several decades of successful innovation history. For example, we developed a unique fractionation design that reduces the risk of contamination, reduces maintenance costs and increases the amount of product extracted per liter of plasma. We also developed the first centrifugation unit for the automated cleaning of blood cells. In addition, we were one of the first fractionators to conduct double viral inactivation processes for Factor VIII and have designed and implemented a new process for the sterile filling of vials that reduces exposure to potential contaminants as compared to other existing processes. Further, we have developed a nanofiltration method of viral inactivation for our IG, alpha-1 PI, and ATIII products. As a result of our continuing investment in research and development, we believe that we are well positioned to continue as a leader in the plasma-derived therapies industry.
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Bioscience Division Initiatives
We have a number of patents and research and development projects in our Bioscience Division underway, 22 of which are in the clinical development phase. The following table reflects the total number of research and development projects in our Bioscience Division by development phase as of the end of the last three years.
As of December 31, | ||||||
Development Phase |
| 2021 |
| 2020 |
| 2019 |
Discovery |
| 21 |
| 15 |
| 15 |
Preclinical |
| 30 |
| 26 |
| 19 |
Clinical |
| 22 |
| 25 |
| 21 |
Post Commercialization Studies |
| 9 |
| 11 |
| 10 |
Rest of projects |
| 14 |
| 19 |
| 19 |
Total Bioscience Research and Development Projects |
| 96 |
| 96 |
| 84 |
The table below presents the most important of our research and development projects:
Product Candidate |
| Therapeutic |
| Product |
| Potential Use |
| Development Phase |
Albumin |
| Alzheimer’s |
| Plasma-derived |
| Alzheimer’s disease |
| Phase III (clinical trial program currently in development) |
Xembify® |
| Hematology and Oncology |
| Plasma-derived |
| Chronic lymphocytic leukemia |
| Phase III (clinical trial program currently in development) |
Albumin | Hepathology | Plasma derived | Liver Cirrhosis | Phase III (clinical trial program currently underway) | ||||
Alpha-1 Proteinase Inhibitor | Pulmonology | Plasma-derived | Emphysema due to congenital deficiency | Phase I/II (clinical trial program currently underway) | ||||
Fibrin Sealant |
| Surgical bleeding |
| Plasma-derived |
| Vascular, organ and soft-tissue surgery |
| Launched in the U.S. during 2019 and in the E.U. in 2020. Post-marketing pediatric clinical trial is underway. |
AMBAR Study. The Alzheimer Management by Albumin Replacement (“AMBAR”), study was a multicenter trial that complemented two previous trials and involved combining therapeutic plasmapheresis with albumin and IVIG in different intervals and in varying doses. Since the AMBAR project was mainly based on albumin, the study also included a treatment arm with albumin alone in order for both approaches, the combination of albumin plus IVIG, and albumin alone, to be covered. Therefore, we conducted a Phase IIb/III clinical trial to demonstrate the efficacy of plasmapheresis with Albutein® and Flebogamma® DIF, for improving the cognitive status of treated patients with Alzheimer’s disease compared with non-treated patients. The study was conducted in collaboration with 41 hospitals in Spain and in the United States. 496 patients were enrolled, and the top line results presented in 2018 showed a reduction of 61% in disease progression in both primary efficacy endpoints measuring cognition and activities of daily living during a 14-month period. Additionally, the AMBAR treatment showed an excellent safety profile with 72% of the treated patients completing the entire study and with approximately 90% of the 4,709 procedures performed showing no adverse effects. In July 2020, clinical trial results were published in the scientific journal Alzheimer’s Dementia: The Journal of the Alzheimer’s Association. Also, during 2020, some different post-hoc data analysis were presented in different scientific congresses.
We incurred costs in the amount of €1.3 million, €2.4 million and €3.2 million in connection with this project in 2021, 2020 and 2019, respectively. We hold significant granted patents and patent applications on the production of albumin and IVIG as well as on the combination of plasma exchange with albumin replacement for the treatment of Alzheimer’s disease.
Xembify® – CLL. The primary objective of this project is to obtain an indication for Xembify® in chronic lymphocytic leukaemia (CLL) as a result of secondary immunodeficiency. CLL is the proliferation and progressive accumulation of morphologically mature but immunologically less mature monoclonal B-cells in the blood, bone marrow, and lymphoid tissues. It is
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widely accepted that both intrinsic (genetic and epigenetic) and extrinsic (micro-environmental stimuli and B cell receptor-mediated antigenic stimulation) events can contribute to the pathogenesis of the disease. CLL is most common in adults and accounts for approximately 40% of all leukaemia cases. CLL is primarily a disease of the elderly population, with less than 10% of the cases occurring in patients younger than 40 years of age. While no definitive cause of CLL has been established, targeted therapy regimens have proven to be efficacious treatments. Hypogammaglobulinemia (“HGG”) is the most predominant inherent immune defect in B-CLL patients and becomes more pronounced with longer disease duration and advanced-stage disease. Infectious complications continue to be one of the major causes of morbidity and mortality in patients with CLL. This Phase 3 clinical program is in development and will begin enrollment in 2022.
Fibrin Sealant. We began clinical trials into the safety and efficacy of the use of fibrin sealant as a supportive treatment for the improvement of hemostasis in vascular, organ and soft-tissue surgery in 2008. In 2014, we completed a clinical trial in the European Union for the use of fibrin sealant in vascular surgery. Three additional clinical trials were performed: (i) a Phase III clinical trial in the United States for the use of fibrin sealant in solid organ surgery; (ii) a Phase III clinical trial in the United States for the use of fibrin sealant in soft-tissue surgery; and (iii) a Phase III clinical trial for the use of fibrin sealant in vascular surgery in the United States. All of the U.S. clinical trials for fibrin sealant were completed in 2015. Marketing authorization approvals were received from the FDA and EMA in November 2017. A distribution agreement was made with a third party, requiring an additional regulatory supplement. Vistaseal® was launched in the U.S. during 2019 and Veraseal® was launched in the E.U. in 2020. Additionally, a Phase IV study to evaluate safety and efficacy of fibrin sealant as an adjunct to haemostasis during surgery in pediatric subjects is ongoing to support the FDA and EMA regulatory licenses.
We incurred costs in the amount of €0.1 million, €0.1 million and €2.7 million in connection with this project in 2021, 2020 and 2019, respectively. We hold significant granted patents on the fibrinogen and thrombin production processes.
Other Bioscience research and development projects undertaken during 2021 included:
· | licensure in the U.S. and market authorization application in the E.U. for a high concentration immunoglobulin for subcutaneous administration; |
· | new container closure systems for Albutein®, Gamunex®-C and Xembify Prefilled syringes; |
· | clinical programs to evaluate new indications of Flebogamma® DIF 5% and Gamunex®-C; |
· | A1PI. New vial sizes of Prolastin® are in development, providing important advancements in manufacturing efficiency as well as improved patient convenience; |
· | clinical studies to evaluate the effects of the prolonged administration of human albumin on cardiovascular, hepatic and renal function in patients with advanced cirrhosis and ascites. |
All clinical trials involve risks and uncertainties. Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during or as a result of preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates. For a discussion of these unforeseen events, see Item 3 of this Part I, “Key Information—D. Risk Factors—Risks Relating to the Company and Our Business—We may not be able to commercialize products in development.” Upon the completion of each of the development stages we evaluate the results achieved as compared to the objectives pursued. Each of the key projects listed above has met our expectations with respect to results at the various development stages and we expect to move forward with the development process for each.
We believe that our current liquidity is sufficient to fund the ongoing costs of our key projects listed above through their completion as well as our other research and development initiatives.
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Diagnostic Division Initiatives
Research and development in the Diagnostic Division supports various business areas, including transfusion medicine, clinical diagnostics, and the recombinant protein business. The Diagnostic Division focuses on the development of in vitro diagnostic reagents/assays, instrumentation, and software for donor screening, which includes pathogens detection to assure safety and blood typing tests to determine donor/recipient blood compatibility. Here, research and development focuses on opportunities to develop new assays for emerging pathogens, increase multiplex test capabilities (simultaneous detection of several analytes in a single reaction), as well as improved automation solutions in order to increase throughput and reduce costs for customers. The Diagnostic Division also develops products for clinical diagnostics, including a board menu of drug and anti-drug ELISA kits and lateral flow point-of-care devices for biological drug monitoring, and assays for genetic testing, as well as detection of alpha-1 antitripsin deficiency. The research and development team employs a diverse technology portfolio including transcription mediated amplification (“TMA”), polymerase chain reaction (“PCR”), next generation sequencing (“NGS”) for molecular assays, immunologic based methods using red blood cells (“RBC”), agglutination, lateral flow, as well as enzymatic reactions using chromogenic substrates. We have also continued research and development of new recombinant proteins and antibodies as critical raw materials to support internal and external customers in various fields such as hemostasis, infectious diseases and immunohematology.
In 2021, the Diagnostic Division obtained CE mark according to new IVD Regulation 2017/746 for several products, in the DG Gel cards class C family, antisera for DG Gel class C family, Promonitor Quick IFX, Promonitor Elisa, A1AT Genotyping Test and ID HPA XT. Regarding new product launches in Europe, our Diagnostic Division obtained the CE mark for the Procleix Babesia assay and the Procleix Parasite Transport Medium and Procleix UltrioPlex E assay under the IVDD. We also obtained FDA approval for the Procleix SARS-CoV-2 assay under “Authorized for Emergency Use Only.”
Additionally, the Diagnostic division is developing medical devices for the extraction and storage of blood components. The related works we had initiated during 2021, however, were dismissed due to the discontinuation of our blood bag business.
Hospital Division Initiatives
Research and development in the Hospital Division focuses on delivering products, integrated technology solutions, and services that improve safety, quality and efficiency in the operational pharmacy. The Hospital Division is comprised of multiple subdivisions including IV Solutions, Contract Manufacturing and Pharmatech. Significant research and development activities are ongoing in each of these subdivisions.
The principal projects currently under development in the IV Solutions subdivision include Dextrose 5% in Fleboflex containers for the U.S. market. Three-liter DEHP-free irrigation bags and DEHP-free sets for the Gri-fill 4.0 device are also being developed to comply with the medical device regulation (“MDR”). In the fluid therapy market, we continue to study the stability of various ready-to-use mixtures in polypropylene packaging in order to increase the range of mixtures available for hospital use.
Within the contract manufacturing product group, which focuses on offering development and manufacturing services for third parties (mainly in the U.S.) the Hospital Division develops ready-to-use mixtures. During 2021, we continued the development of an alpha-1 agonists solution in flexible bags.
This subdivision also works on several cross-divisional initiatives. As part of the AMBAR study, the Hospital Division is collaborating on the development of special devices and containers specifically designed for the procedures and protocols of the study. The partnership with the Bioscience Division includes the development of a plastic holder for syringes of Fibrin Sealant.
Finally, the Pharmatech subdivision is devoted to the development of a comprehensive IV compounding portfolio of integrated technology solutions with devices, software, and services. The portfolio includes Grifols traditional products, like the Gri-fill® system, along with more recently acquired technologies, such as the PharmacyKeeper suite of software solutions and the KIRO robotic systems, including the KIRO Oncology automated IV compounding system for oncology preparations and the KIRO Fill® system for automated filling of non-hazardous IV medication. The RD program in this area is focused on connecting all the technology ecosystems of the IV Compounding portfolio under a single software platform and user experience.
This subdivision has an active research and development program which includes the development of new software and state-of-the-art technology, such as cloud-based systems, mobile apps and Radio-Frequency Identification (“RFID”), to improve
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interoperability, efficiency and overall workflow and productivity in the operational pharmacy. Furthermore, this subdivision was able increase the range of disposables compatible for use by KIRO® compounding devices. We also undertook an initiative focusing on improving customer experience and serviceability.
Other Initiatives
In addition, we are increasing our research and development activities in new fields. We conduct these activities through the creation of joint ventures participated in by Grifols Innovation and New Technologies Ltd (“GIANT”), through agreements to use patents owned by third parties and through selective acquisitions. For example, in 2021 GIANT formed a new company named Grifols Pyrenees Research Center, SL in a joint venture with the Government of Andorra (GIANT owns 80%). The new company was created to develop and manage a new research center specializing in immunology, which will enhance the knowledge of the human immune system and develop new immunological therapies. See Notes 2 and 3 to our financial statements included in this annual report.
Our investments in Araclon and VCN Biosciences in 2012 expanded our research and development capabilities in fields outside of our traditional business segments.
Araclon is dedicated to finding solutions that promote new diagnostic and therapeutic approaches to Alzheimer’s disease, to be applied in the early stages of the disease. Araclon is working on the validation of an early diagnostic test and the development of a vaccine to combat Alzheimer’s disease in the asymptomatic preclinical stage. The vaccine has passed the animal experimentation stage and a Phase I clinical trial in humans has been completed. In 2017 Araclon obtained approval by the AEMPS for a Phase II placebo-controlled trial of the AB40 vaccine in Alzheimer disease patients and completed recruitment in 2019. In 2020, a change in the design of the trial was introduced that allows cross-over of the treatment arms, so all the participants could receive the vaccine. We received the top line data of part A of the trial in mid January 2022 and are currently evaluating the results.
VCN Biosciences is investigating and developing new therapeutic approaches based on oncolytic adenoviruses to treat tumors for which there is currently no effective treatment. Its most advanced project focuses on the treatment of pancreatic cancer. AEMPS approved two Phase I clinical trials for this project and VCN Biosciences began recruiting patients for the Phase I trials in the first quarter of 2014. In 2017 VCN obtained approval by the Spanish Drug Regulatory Agency of another Phase I/II trial of VCN-01 in pediatric patients with Retinoblastoma. Additionally, VCN Biosciences is engaged in a Phase I/II trial involving patients diagnosed with refractory head and neck cancer combining VCN-01 with AstraZeneca’s Durvalumab. The recruitment speed of this trial was adversely affected by the COVID-19 pandemic.
In line with our focus on strategic activities, we started to look for external investors for VCN-Biosciences. On March 10, 2022, the shareholders of VCN-Biosciences and American company Synthetic Biologics closed acquisition by Synthetic Biologics of 100% of the VCN-Biosciences shares.
We completed the acquisition of Alkahest in 2020 (see Item 5 of Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of OperationsAcquisitions—The Alkahest Acquisition”). Alkahest’s platform focuses on identifying proteins that change with age and have a biological impact. To date, Alkahest has identified over 10,000 separate proteins using advanced molecular analysis techniques at the cellular level, some of which we expect to enter in our discovery and development pipeline as new targets. Alkahest also has an active development pipeline with four development stage candidates with multiple therapeutic modalities that are being tested to treat neurodegenerative diseases, cognitive decline, neuromuscular disorders and ophthalmic indications. In 2021 Alkahest had a productive year with the completion of 3 Phase 1 and 5 Phase 2 clinical trials.
In 2016, we acquired 30% of the equity of AlbaJuna Therapeutics, a spin-off company from the IrsiCaixa AIDS Research Institute, promoted jointly by “la Caixa” Foundation and the Department of Health of the Government of Catalonia, and undertook the pre-clinical and clinical development of monoclonal antibodies that neutralize the effect of HIV in the body while increasing the activity of the natural killer cells that have the task of destroying infected cells. In 2020, we selected a candidate and began proof of concept studies in non-human primates (“NHP”). We also started process development and manufacturing activities by late 2020. In 2021, we completed the experimental part of the NHP study and are currently evaluating to define next steps in the preclinical development.
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In February 2021, our subsidiary GigaGen Inc. (“GigaGen”) received FDA approval for a polyclonal product to treat COVID-19. This product represents a new class of drug designed to provide passive immunity to COVID-19 patients or those at high risk. GigaGen conducted clinical trials until the final quarter of 2021, when the trial was terminated due to slower than anticipated recruitment.
Finally, we signed an agreement in the first quarter of 2020 to support a consortium with the IrsiCaixa AIDS Research Institute, the Barcelona Supercomputing Center (“BSC”) and the IRTA (Institute of Agrifood Research and Technology) aimed to discover new antibodies and vaccines against COVID-19. The consortium continued in 2021 with some vaccine and antibodies candidates evaluated in in vivo studies in animals.
Seasonality
Our businesses are not significantly affected by seasonal trends.
Raw Materials
The cost of plasma, the key raw material used in the production of plasma-derived products, increased on a per liter basis in 2021 as compared to 2020, mainly due to the impact of the COVID-19 pandemic. This increase stems primarily from lower-than-expected plasma collection, which in turn caused lower capacity utilization of our facilities. The COVID-19 pandemic also caused an increase in the cost of plasma due to the trend towards greater incentives to reward donors. The cost of plasma also increased on an aggregate basis in 2021 as compared to 2020, mainly because of a combination of (i) greater incentives to donors and (ii) the growth in the number of our plasma centers as a result of acquisitions made in 2020 and 2021. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Consequences of COVID-19” and “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions.”
We continue to monitor the efficiency of our plasma collection platform and have concentrated all of our plasma testing into our six laboratories in Austin and San Marcos, Texas, Memphis, Tennessee, Boca Raton, Florida, Leipzig, Germany and Parets, Spain.
Our long-term aim is to further strengthen our leadership through the development of new and differentiated plasma-derived therapeutics, and the expansion of our global plasma collection footprint via acquisitions and greenfield projects. On April 25, 2022, we acquired all of the existing equity interest in Tiancheng Holdings from Tiancheng International Investment Limited (“TIIL”) and accepted an assignment of certain shareholder loans granted by TIIL to Tiancheng Holdings. Tiancheng Holdings in turn owns 89.88% of the ordinary shares and 1.08% of the preferred equity shares of Biotest AG, a global company that supplies plasma protein products and biotherapeutic drugs, which will give us access to 28 additional plasma collection centers. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions—Biotest AG Acquisition.”
On July 29, 2021, we signed a joint venture agreement with ImmunoTek GH, LLC (“ImmunoTek”) to develop 21 plasma donation centers in the United States, five of which are already operational. Once all centers become operative and ramped-up, which we expect to happen by October 2022, collectively they will supply an additional plasma capacity of 1 million liters annually. On March 31, 2021, we acquired seven U.S.-based plasma donation centers from Kedplasma, LLC for a total purchase price of $55.2 million. On February 28, 2021, we acquired 25 U.S.-based plasma centers from BPL Plasma Inc for $385 million. These plasma centers obtain, in the aggregate, a run-rate of one million liters of plasma per year. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions— Acquisition of plasma donation centers from BPL Plasma, Inc.”
In October 2020, we purchased 11 collection centers in the U.S., as well as a plasma fractionation facility and two purification facilities in Montreal, Canada, from GC Pharma for a total consideration of $457 million on a debt free basis. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions—The GC Pharma Acquisition.”
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Furthermore, the Plasma Supply Agreement among Grifols, Grifols Worldwide Operations Limited (“GWWO”), Biotest Pharmaceuticals Corporation and Haema AG (the “Plasma Supply Agreement”), was extended on January 1, 2019 for a 30-year period, and we continue to operate such companies’ plasma collection centers. We believe our Plasma Supply Agreement will play a key role in fulfilling our plasma requirements through 2022 and beyond, along with plasma collected through our plasma collection centers and plasma purchased from third-party suppliers pursuant to various plasma purchase agreements.
The principal raw materials for our intravenous therapy products are plastic and glass bottles, which we purchase from various European suppliers.
Marketing and Distribution
We currently sell Bioscience, Diagnostic and Hospital products to hospitals and clinics, GPOs, governments and other distributors in over 100 countries.
In the United States, the sales model is complex, with many intermediaries, requiring Grifols to execute multi-faceted arrangements for the distribution of our products. Sales of finished goods are distributed through various channels such as distributors, wholesalers, specialty pharmacies, home health care companies, clinics, hospitals, government entities and directly to physician offices. Payers and purchasers also control access to products, requiring separate negotiations with payers and GPOs. GPOs are entities that act as purchasing intermediaries for their members, which are primarily hospitals. GPOs negotiate the price and volume of supplies, equipment and pharmaceutical products, including plasma derivatives, used by their members.
We market our products to healthcare providers and other decision-makers, such as those in hospitals, through focused sales presentations. Although price and volume are negotiated through contractual agreements with intermediaries, demand for our products is generated through promotional efforts by Grifols’ sales representatives. In the case of GPOs, the actual sales are made to the authorized distributor(s) of each GPO at the contract price, and the distributor then sells the products to the members of that GPO. We promote our products directly to the GPO’s members. For safety and post-sale service reasons, the distributor is required to provide us with the specifics of the ultimate delivery to the client.
The sales, marketing and distribution process is different in Europe, where the bulk of sales are generally made directly to hospitals. We have developed long-standing relationships with major hospitals in most of our European markets, and we believe that hospitals are loyal customers that recognize the high quality and safety of our products, our reliability as a supplier and the strong product expertise and service provided by our sales representatives. Due to the nature of our customer base and the prevalence of repeat sales in the industry, we market our products through focused sales presentations rather than by advertising campaigns.
Sales to Eastern Europe, the Middle East and some Asian countries are made mostly by third parties outside of our sales network. Our sales in Latin America are made mainly by our sales network.
Sales Representatives
We require our sales representatives to be able to highlight the technical differences between our products and those of our competitors. This skill requires a high degree of training, as the salesperson must be able to interact and discuss product differences with doctors, pharmacists and other medical staff. Sales representatives call on office-based healthcare providers and hospital-based healthcare providers, departmental heads, purchasing agents, senior hospital directors, lab directors and pharmacy managers. We compensate our sales representatives by means of a fixed salary and a bonus component based on sales. We divide our sales efforts along the lines of our main product categories. Our sales personnel are primarily located in Europe and the United States, but we also have sales personnel in Latin America and Asia-Pacific.
In our Bioscience Division, we utilize mixed sales units comprised of both marketing and sales personnel. In some countries, we have product line-specific sales units for immunology neurology, pulmonary, intensive care and coagulation factors.
Advertising
We participate in medical conferences, conventions and fairs and occasionally publish advertisements in medical journals and trade magazines. This promotional activity is also supported by online activities.
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Distribution
We believe that having our own distribution network staffed with highly trained personnel is a critical element of a successful sales and marketing effort. Through this network, we are able to provide high-quality pre- and post-sales service, which we believe enhances brand recognition and customer loyalty. Our distribution network is experienced in the proper handling of our products and allows us to know where our products are located, enabling us to act quickly in the event of a suspected problem or product recall.
Our distribution network personnel are located in Europe, Latin America, the United States and Asia-Pacific and handle the distribution of our biological medicine, diagnostic and other medical products as well as goods manufactured by other premier healthcare companies that complement our own products.
During 2021, we distributed the majority of our products through our own distribution network. In some cases, particularly in the field of Diagnostics, we distribute products through marketing partners and third-party distributors. We have a direct presence in 30 countries and we carefully select distributors in the countries where we do not have a direct presence. We have a responsive, effective logistics organization that is able to punctually meet the needs of hospital centers and other customers throughout the world.
Our sales, marketing and distribution network included 1,488 employees as of December 31, 2021, which included 1,285 sales and distribution personnel and 203 marketing employees.
Each of our commercial subsidiaries is responsible for the requirements of the local market. It is our goal for each commercial subsidiary to be recognizable as one of our companies by its quality of service, ethical standards and knowledge of customer needs. Strong local knowledge enables us to build and maintain long-term relationships with customers to earn their trust and confidence.
Patents, Trademarks and Licenses
Patents and Trademarks
Through our patent ownership, co-ownership and licensing, we seek to obtain and maintain intellectual property protection for our primary products.
As of December 31, 2021, we owned 3,525 patents and patent applications in various countries throughout the world, of which 928 are in the final application process. In some countries, these patents grant a 20-year protection period. 1,313 of these patents are set to expire in the next ten years, including the patent for the Grifols Sterile Filling system, which expires in January 2024, and the patent for the process of removing viruses in Fibrinogen solutions, which expires in March 2024.
As of December 31, 2021, we also owned 3,557 trademarks in various countries throughout the world, of which 246 are in the final application process. In addition, we co-own certain patents and patent applications with third parties, including patent rights co-owned with Novartis following the Novartis Acquisition.
We maintain a department with personnel in Spain and Ireland to handle the patent and trademark approval and maintenance process and to monitor possible infringements.
Plasma Derivative Products
As of December 31, 2021, we owned 2,629 patents and patent applications related to plasma derivatives, including 1,224 in Europe, 226 in the United States and Canada and 1,179 in the rest of the world. The most important of these patents relate to:
· | a concentrated subcutaneous alpha-1 antitrypsin; |
· | the use of low volume plasma exchange for the treatment of Alzheimer’s disease; |
· | transferrin for neurodegenerative applications; |
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· | transferrin for the treatment of Hipoxia inducible factor related conditions; |
· | plasmin in wound healing; |
· | the process for removing viruses in Fibrinogen solutions; |
· | a concentrated subcutaneous Immunoglobulin G injection; |
· | concentrated Immunoglobulin M preparations for the treatment of bacterial infections; and |
· | anti-thrombin to treat blunt trauma. |
Hospital and Diagnostic Products
As of December 31, 2021, we owned 791 patents and patent applications related to our Hospital and Diagnostic products, including 455 in Europe, 99 in the United States and Canada and 237 in the rest of the world. The most important of these patents relate to the:
· | Gri-fill® System, a process for the sterile filling of flexible material bags; |
· | BlisPack®, a blister handling machine; |
· | Erytra Eflexys®, a mid-sized instrument to perform pre-transfusion compatibility tests using DG Gel® technology; |
· | innovative containers for human plasma proteins; |
· | novel HIV antigens for blood screening; |
· | novel GpIbα for homeostasis; |
· | soluble recombinant form of CD38 receptor; |
· | screening assays for bloodborne parasites; and |
· | recombinant antigens for detection of COVID-19. |
As of December 31, 2021, we owned 105 patents and patent applications related to other areas of the business, including 28 in Europe, 29 in the United States and Canada and 48 in the rest of the world.
Licenses from Third Parties
We license certain intellectual property rights from third parties, including Singulex and Hologic. Singulex granted us an exclusive worldwide license under certain intellectual property rights for the use and sale of certain products and services for blood donor and plasma screening. Pursuant to an intellectual property license with Hologic, we obtained a fully paid-up license to certain of Hologic’s intellectual property for use in the NAT Donor Screening Unit.
Licenses from Government Authorities
Government authorities in the United States, at the federal, state and local level, and in other countries throughout the European Union, Latin America, Asia and elsewhere, through licenses, approvals, reviews, inspections and other requirements, extensively regulate the research, development, testing, approval, manufacturing, labeling, post-approval monitoring and reporting, packaging, promotion, storage, advertising, distribution, marketing and export and import of healthcare products such as those that we collect, manufacture, sell or are currently developing.
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For example, in order to sell our plasma derivative products we must hold appropriate product licenses from applicable governmental authorities. We have 1,047 bioscience product licenses registered in 89 countries, which include the licenses we hold from the FDA for the sale in the United States of IG, A1PI, albumin, Factor VIII, Factor IX, ATIII and PTC. The production, marketing and sale of many of our Diagnostic Division products are subject to the prior registration of such products with the relevant authorities of the applicable jurisdictions. We have over 3,190 diagnostic product licenses registered in a total of 76 countries in Europe, the United States, Canada, Latin America, Oceania and Asia. With respect to our various Hospital Division products, we have close to 153 licenses for our Hospital Division products registered in 42 countries throughout the European Union, Latin America, Oceania, Asia, Canada and the United States.
Governmental oversight extends to the various facilities involved in our operations. For example, our Parets and Murcia facilities are subject to applicable regulations and standards of the European health authorities. With respect to oversight by the FDA, our Instituto Grifols Bioscience plant at our Parets facility has been registered with the FDA since 1995, and our other manufacturing facilities maintain FDA registration, and all are subject to FDA standards. We lease most of our plasma collection centers as well as our main laboratory facility located in Austin, Texas, and maintain licenses with the appropriate regulatory authorities, including the FDA, for all of these locations.
For more information on government licenses and regulation, see “—Principal Activities” above and “—E. Regulatory Matters” below.
Regulatory
For detailed information regarding the regulations applicable to our business, see “—E. Regulatory Matters” below.
Insurance Coverage
General and Product Liability
We have a program of insurance policies designed to protect us and our subsidiaries (including our United States subsidiaries) from product liability claims. Effective May 1, 2021, we have product liability insurance coverage for up to $220 million per claim and in annual aggregate for Diagnostic, Hospital and Bio Supplies divisions for products manufactured in all of our facilities and for third-party products we sell. That limit is of $500 million per claim and in the annual aggregate for Bioscience Division. This policy expires on April 30, 2022. We have elected to self-insure $188.5 million per claim and in annual aggregate of our global liability program through the purchase by one of our subsidiaries of such portion of the insurance policy. See “—Self-insurance” below.
Our master liability program also protects us and our subsidiaries from certain environmental liabilities arising in those countries in which our subsidiary companies have operations. This risk is covered up to a maximum of $220 million per claim and in annual aggregate, except that amount is $500 million for the Bioscience Division.
Biomat USA, Interstate Blood Bank Inc., BPC Plasma Inc., Plasmavita Healthcare GmbH, Plasmavita Healthcare II GmbH, Haema AG and Haema Plasma Kft maintain a separate liability insurance policy. The policy covers their professional liability for plasmapheresis business activities and expires on April 30, 2022. The maximum amount of coverage for liability claims under the policy is $15 million per claim and in the annual aggregate. In addition, we have general liability coverage for up to $500 million per claim and in the annual aggregate for Biomat USA, Interstate Blood Bank Inc., BPC Plasma Inc., Plasmavita Healthcare GmbH, Plasmavita Healthcare II GmbH, Haema AG and Haema Plasma Kft.
Property Damage and Business Interruption
Our property damage and business interruption insurance program covers us and our subsidiaries (including our United States subsidiaries). This insurance program, which expires on April 30, 2022, covers damages suffered by plants and buildings, equipment and machinery. Under the current terms, the insurer will cover damages to our facilities produced by fire, smoke, lightning and explosions, among others, for up to $1.5 billion per occurrence. It also covers property damage produced by flooding, for up to $110 million per claim and in the annual aggregate.
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In addition, this policy covers loss of profit for a period of 36 months with a deductible equivalent to up to five business days of lost profits. Pursuant to the loss of profit, in the event that any or all of our plants stop production due to an event not excluded under the policy, the insurer covers fixed expenses, in addition to net profits we did not earn during the term of coverage.
We also have a transit and inventory insurance program, which covers damages to raw materials, supplies, semi-finished products and finished products for up to $25 million per claim for transit and $500 million for inventory in annual aggregate.
Self-insurance
We are self-insuring part of the risks described above through the purchase of a portion of the relevant insurance policies by Squadron Reinsurance DAC, one of our wholly owned subsidiaries. We self-insure $38.5 million per claim per year of our global liability program (except that amount is $188.5 million per claim and in the annual aggregate for the Bioscience Division), the first $230,000 per loss for property damage and the first ten days of lost profits, the first $27,000 per claim for transit losses, the first $200,000 per claim for inventory losses and any transit or inventory losses exceeding $2 million have an additional retention of 10% of loss value with a maximum of $500,000 per loss and an annual aggregate of $3 million. These amounts are in excess of the deductibles for each of the policies that make up our insurance programs.
C. | Organizational Structure |
Grifols, S.A. is the parent company of the Grifols Group, which was comprised at December 31, 2021, of 69 companies. Subsidiaries in which Grifols, S.A. directly or indirectly owned the majority of equity or voting rights have been fully consolidated. In addition, there were 11 companies that were accounted for using the equity method, because Grifols, S.A. owned between 20% and 50% of its share capital and had no power to govern its financial or operating policies.
See Notes 1 and 2(b) to our audited consolidated financial statements included in this annual report on Form 20-F for details of our consolidated and non-consolidated companies.
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D. | Property, Plant and Equipment |
Our headquarters is located in Barcelona, Spain. As of December 31, 2021, we owned or leased facilities in eight countries. We currently own or lease manufacturing facilities in 12 sites in 10 different locations, five of which have plasma fractionation capabilities. The table below shows the geographic location and business purpose of our principal properties as of December 31, 2021.
Location |
| Facility |
| Own/Lease (2) |
| Business Purpose |
|---|---|---|---|---|---|---|
Parets del Vallès, Spain | Industrial Facility One Parets | 66% owned; 34% of the property is leased from a third party | Plasma fractionation Manufacture of plasma derivatives division support activities | |||
Industrial Facility Two Parets | 80% owned; 20% of the property is leased from a third party | Manufacture of Diagnostic and Hospital products | ||||
Industrial Facility Three Parets | 68% owned; 32% of the property is leased from a third party | Plasma storage other operating activities | ||||
Los Angeles, California, U.S. – Valley | Industrial Facility, U.S. | 92% owned; 8% of the property is leased from a third party | Plasma fractionation Plasma purification Manufacture of plasma derivatives | |||
Los Angeles, California, U.S. – City of Industry | City of Industry, U.S. | 100% leased | Plasma storage | |||
Clayton, North Carolina, U.S. | Clayton Facility | 100% owned | Plasma fractionation Plasma purification Manufacture of plasma derivatives | |||
Durham, North Carolina, U.S. | Research Triangle Park | 23% owned, 77% of the property is leased from a third party | Research and Development Labs and Offices | |||
Emeryville, California, U.S. | Emeryville Facility | 100% owned | Manufacture of Diagnostic products | |||
San Carlos, California, U.S. | Alkahest site | 100% leased | Research and Development Labs and Offices | |||
South San Francisco, California, U.S. | GigaGen site | 100% leased | Research and Development Labs and Offices | |||
Murcia, Spain | Industrial Facility Murcia | 100% owned | Manufacture of Hospital products | |||
Fribourg, Switzerland | Industrial Facility Switzerland | 100% leased | Manufacture of Diagnostic products | |||
Melbourne, Australia | Industrial Facility Australia | 100% owned | Manufacture of Diagnostic products | |||
Austin, Texas, U.S. | Plasma Testing Lab | 100% leased | Plasma testing | |||
San Marcos, Texas, U.S. | Plasma Testing Lab | 100% owned | Plasma testing | |||
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Location |
| Facility |
| Own/Lease (2) |
| Business Purpose |
|---|---|---|---|---|---|---|
San Diego, California, U.S. | San Diego Facility | 69% owned; another 31% of the property is leased from a third party | Manufacture of components of the TMA amplified NAT kits | |||
Dublin, Ireland | Global Operations Center | (1) | Operating activities related to the Bioscience Division | |||
Sant Cugat del Vallès, Barcelona, Spain | Headquarters | 100% leased | Headquarters | |||
Derio, Bizkaia, Spain | Progenika Biopharma | 100% owned | Manufacture of Diagnostic products Research and Development | |||
Zaragoza, Spain | Araclon Biotech | 100% leased | Research and Development Labs and Offices | |||
Arrasate, Guipuzcoa, Spain | Kiro Grifols | 100% leased | Manufacture of Hospital equipments and Offices | |||
Denver, Colorado, U.S. | Medkeeper | 100% leased | Hospital Sofware Development | |||
Memphis, Tennessee, US | IBBI | 100% leased | Plasma Lab | |||
Leipzig, Germany | Haema | 100% owned | Headquarters, Lab Warehouse | |||
Montreal, Canada | Industrial Facility Montreal | 100% owned | Plasma fractionation Plasma purification |
(1) | We hold a 999 year leasehold interest in the property. |
(2) | Lease percentage based on property size. |
Plasma Fractionation Plants
Our plasma derivative products are manufactured at our Parets, Los Angeles and Clayton facilities. All of our fractionation facilities have FDA and EMA certification. As of December 31, 2021, our facilities had an aggregate fractionation capacity of approximately 17 million liters of plasma per year, and this capacity is sufficient to cover our current production needs.
The Parets facility has a fractionation capacity of 5.0 million liters per year and a unique design that separates the maintenance area from the clean areas required for the fractionation and purification procedures. This design, which we developed in house, minimizes the risk of contamination and reduces maintenance costs. In addition to licenses from the European Union and other required specific authorities for the production of various plasma derivative products, the Parets facility is also licensed by the FDA. In addition to the plasma fractionation facilities, the Parets site also has protein purification, fill and finish, packaging, storage, research and development and energy co-generation facilities for the Bioscience Division and manufacturing for the Hospital and Diagnostic divisions. The Parets facility holds GMP’s, ISO 13485 and ISO 14001 for the Bioscience, Diagnostic and Hospital plants and ISO 9001 certifications for its diagnostic manufacturing facilities.
The Los Angeles facility has a fractionation capacity of 2.4 million liters per year. The facility contains purification and aseptic filling areas for coagulation factors, IG and albumin. The facility is licensed by the FDA and Grifols is working to certify the Los Angeles facility with ISO 14001 certification, similar to the rest of Grifols’ manufacturing plants.
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The Clayton facility in North Carolina has a fractionation capacity of 9.8 million liters per year. This facility is one of the world’s largest fully integrated facilities for plasma-derived therapies, including plasma receiving, fractionation, purification, filling/freeze drying and packaging capabilities, as well as freezer storage, testing laboratories and a cGMP pilot plant for clinical supply manufacture. This facility holds the ISO 14001 certification, which recognizes excellence and continuous improvement in environmental performance. The scope of the certification includes research, development, production and quality control of pharmaceutical specialties derived from human plasma.
In October 2020, we acquired the Montreal facility as a result of the GC Pharma acquisition. The facility, which is pending licensing and approvals by the appropriate authorities, is designed for a fractionation capacity of one million liters per year, and is currently being revamped to increase the capacity to 1.5 million liters per year. Grifols expects to launch operations in these facilities in 2023, manufacturing IVIG and albumin to supply the Canadian market.
We have completed construction of the new albumin purification, dosing and sterile filling plant in Dublin, Ireland, and such facility is currently in the validation phase.
Global Operations Center
In the last quarter of 2015, we opened a global operations center for our Bioscience Division. The facility, located in Dublin, Ireland, occupies 22,846 square meters and centralizes decision-making with regard to commercial policy, research and development policy and supply chain global management. It houses Bioscience’s global logistics and distribution activities; warehousing of plasma, intermediate paste and finished product, labelling, packaging and final conditioning of the product; as well as regulatory and quality activities relating to the supply of plasma and plasma derivatives. It also centralizes our treasury function and acts as our point of access to the capital markets.
E. | Regulatory Matters |
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, approval, manufacturing, labeling, post-approval monitoring and reporting, packaging, promotion, storage, advertising, distribution, marketing and export and import of healthcare products such as those we collect, manufacture, sell or are currently developing. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. The following is a summary of the overall regulatory landscape for our business.
United States Government Regulation
In the United States, the FDA regulates drugs, biologics, plasma collection and medical devices under the FDCA and, as applicable, the PHS Act, and their implementing regulations. Failure to comply with the applicable FDA requirements at any time during the product-development process, approval process or after approval may result in administrative or judicial sanctions. These sanctions could include, as applicable, the FDA’s imposition of a clinical hold on trials for drugs, devices or biologics, refusal to approve pending applications, withdrawal of an approval, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution or any combination of these sanctions. Any agency or judicial enforcement action could have a material adverse effect on us.
The BLA (Biologics License Application) Approval Process
Drugs that are also biological products, such as our plasma derivative products IG, A1PI, Factor VIII and albumin, and also certain in vitro diagnostic products associated with testing blood and blood components, must also satisfy the requirements of the PHS Act and its implementing regulations. In order for a biological drug product, or for these in vitro diagnostic tests, to be legally marketed in the United States, the product must have a BLA approved by the FDA. Obtaining BLA approval from the FDA is a robust process involving, among other things, completion of preclinical laboratory tests, controlled human clinical trials, submission of manufacturing and chemistry data, and multiple statistical and physical review processes by the FDA. During all phases of clinical
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development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data and clinical trial investigators, including reports regarding adverse events and safety issues.
Given the robust process, certain of our clinical trials may not be completed successfully within any specified period, if at all. Furthermore, we or the FDA may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk, have experienced a serious and unexpected adverse event, or that continued use in an investigational setting may be unethical. Similarly, an IRB can suspend or terminate approval of research if the research is not being conducted in accordance with the IRB’s requirements or if the research has been associated with unexpected serious harm to patients.
Overall, the testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all. In most cases, the BLA must be accompanied by a substantial user fee.
The ACA introduced a new abbreviated regulatory approval pathway for biological products found to be “biosimilars” or “interchangeable” with a biological “reference product” previously licensed under a BLA. This abbreviated approval pathway is intended to permit a biosimilar to come to market more quickly and less expensively by relying to some extent on the data generated by the reference product’s sponsor, and the FDA’s previous review and approval of the reference product. The law provides that no biosimilar application may be accepted for FDA review until 4 years after the date the reference product was first licensed by the FDA, and that the FDA may not make approval of an application effective until 12 years after the reference product was first licensed. Once approved, biosimilars likely would compete with, and in some circumstances may be deemed under applicable laws to be “interchangeable with,” the previously approved reference product. The extent to which a biosimilar, once approved, will be substituted for any of our products, in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. The FDA is actively seeking to encourage the entry of biosimilars into the marketplace, including issuing, in July 2018, its Biosimilar Action Plan, intended to enhance the speed of the biosimilar development and approval processes.
The testing and approval processes to obtain a BLA require substantial time, effort and financial resources, and each process may take several years to complete. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter difficulties or unanticipated costs in our efforts to secure necessary governmental approvals, which could delay or preclude us from marketing our products. The FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the products.
Post-approval Requirements
After regulatory approval of a product is obtained, we are required to comply with a number of post-approval requirements. For example, as a condition of approval of a BLA, the FDA may require post-marketing testing and surveillance to monitor the product’s safety or efficacy. In addition, holders of an approved BLA are required to keep extensive records, to report certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional labeling for their products. Also, quality control and manufacturing procedures must continue to conform to cGMP regulations and practices, as well as the manufacturing conditions of approval set forth in the BLA. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes certain procedural, substantive and recordkeeping requirements. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
Future FDA inspections may identify compliance issues at our facilities or at the facilities of our third-party suppliers that may disrupt production or distribution, or require substantial resources to correct and prevent recurrence of any deficiencies, and could result in fines or penalties by regulatory authorities. In addition, discovery of problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved BLA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing. Newly discovered or developed safety or efficacy data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications. The ACA established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and fund Comparative Effectiveness Research. Also, new government requirements,
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including those resulting from new legislation, may be established that could delay or prevent regulatory approval of our products under development.
Orphan Drug Designation
The FDA may grant orphan drug designation to drugs intended to treat a “rare disease or condition” that affects fewer than 200,000 individuals in the United States, or that affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such a disease or condition will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Orphan drug designation can provide opportunities for grant funding towards clinical trial costs, tax advantages and FDA user fee exemptions. In addition, if a product that has an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or a meaningfully different mode of administration. Competitors may receive approval of different drugs or biologics for the indications for which the orphan product has exclusivity. However, if a company with orphan drug exclusivity is not able to supply the market, the FDA could allow another company with the same drug a license to market for said indication. The FDA granted Gamunex® IVIG orphan drug status, which provided marketing exclusivity for the CIDP indication in the United States through September 2015. Gamunex® IVIG was the first IVIG product approved for CIDP in the United States.
Fast Track Designation
The FDA’s fast track programs, one of which is fast track designation, are designed to facilitate the development and review of new drugs that are intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs for the conditions. Fast track designation applies to a combination of the product and the specific indication for which it is being studied. Thus, it is the development program for a specific drug for a specific indication that receives fast track designation.
The sponsor of a product designated as being in a fast track drug development program may engage in close early communication with the FDA, including through timely meetings and feedback on clinical trials. Products in fast track drug development programs also may receive FDA priority review or accelerated approval; in other words, the review cycle has a six-month review clock instead of a ten- or 12-month review clock. Sponsors may also be able to submit completed portions of an application before the entire application is completed; however, the review clock will not officially begin until the entire completed BLA is submitted to and filed by the FDA. The FDA may notify a sponsor that its program is no longer classified as a fast track development program if the fast track designation is no longer supported by emerging data, the designated drug development program is no longer being pursued, or another product that meets the unmet medical need for the same indication is approved first.
Plasma Collection
The FDA requires a licensing and certification process for each plasma collection center prior to opening and conducts periodic inspections of facilities and processes. Many states also regulate plasma collection, imposing similar obligations and additional inspections and audits. Collection centers are subject to periodic inspections by regulatory authorities, which if noncompliance is alleged, may result in fines, citations, the temporary closing of the centers, loss or suspension of licenses or recall of finished products.
Diagnostic Devices
Certain of our products are regulated as medical devices, which are typically subject to clearance for commercialization in the United States, based on a pre-market notification to the FDA demonstrating the device to be marketed is safe and effective by proving substantial equivalence to a legally marketed device (predicate device). The manufacturers of medical devices must register their establishments with the FDA, and the production of the devices must accord with applicable current good manufacturing practices and quality system regulations. With respect to the manufacture and sale of immunoassay antigens and antibodies to screen human donated blood and blood products, these products are manufactured and sold under a BLA issued by the FDA, and are subject to the heightened regulatory oversight associated with biological products.
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Drug Supply Chain Security Act
The Federal Drug Quality and Security Act of 2013 brought about significant changes with respect to pharmaceutical supply chain requirements and pre-empts state law. Title II of this measure, known as the Drug Supply Chain Security Act (“DSCSA”), is being phased in over 10 years, and is intended to build a national electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States, including certain of our products. The law’s track and trace requirements applicable to manufacturers, wholesalers, repackagers and dispensers (e.g., pharmacies) of prescription drugs began to take effect in January 2015 and will continue to be implemented. The DSCSA product tracing requirements replaced the former FDA drug pedigree requirements and pre-empt state requirements that are inconsistent with, more stringent than, or in addition to, the DSCSA requirements. The DSCSA also establishes certain requirements for the licensing and operation of prescription drug wholesalers and third party logistics providers (“3PLs”), and includes the creation of national wholesaler and 3PL licenses in cases where states do not license such entities. The DSCSA requires that wholesalers and 3PLs distribute drugs in accordance with certain standards regarding the recordkeeping, storage and handling of prescription drugs. According to FDA guidance, states are pre-empted from imposing any licensing requirements that are inconsistent with, less stringent than, directly related to, or covered by the standards established by federal law in this area. Current state licensing requirements will likely remain in effect until the FDA issues new regulations as directed by the DSCSA.
Anti-fraud and Abuse Regulation
Since we supply products and services that are reimbursed by U.S. federal healthcare programs such as Medicare and Medicaid, our activities are also subject to regulation by CMS and enforcement by the OIG. The Anti-Kickback Law prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a government health care program. Many states have similar laws. Courts have interpreted this law very broadly, including by holding that a violation has occurred if even one purpose of the remuneration is to generate referrals, even if there are other lawful purposes. There are statutory and regulatory exceptions, or safe harbors, that outline arrangements that are deemed lawful. However, the fact that an arrangement does not fall within a safe harbor does not necessarily render the conduct illegal under the Anti-Kickback Law. In sum, even legitimate business arrangements between the companies and referral sources could lead to scrutiny by government enforcement agencies and require extensive company resources to respond to government investigations. Also, certain business practices, such as payment of consulting fees to healthcare providers, sponsorship of educational or research grants, charitable donations, interactions with healthcare providers that prescribe products for uses not approved by the FDA and financial support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid any possibility of wrongfully influencing healthcare providers to prescribe or purchase particular products or as a reward for past prescribing.
The FCA is violated by any entity that “presents or causes to be presented” knowingly false claims for payment to the federal government. In addition, the ACA amended the FCA to create a cause of action against any person who knowingly makes a false statement material to an obligation to pay money to the government or knowingly conceals or improperly decreases an obligation to pay or transmit money or property to the government, including clarifying that a federal Anti-Kickback Law violation can be a basis for federal FCA liability. For the purposes of these recent amendments, an “obligation” includes an identified overpayment, which is defined broadly to include “any funds that a person receives or retains under Medicare and Medicaid to which the person, after applicable reconciliation, is not entitled …”
The fraud and abuse laws and regulations have been subject to heightened enforcement activity over the past few years, and significant enforcement activity has been the result of “relators” who serve as whistleblowers by filing complaints in the name of the United States (and if applicable, particular states) under applicable false claims laws, and who may receive up to 30% of total government recoveries. Penalties under fraud and abuse laws may be severe, and could result in significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and could have a material adverse effect on our business. Also, these measures may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations or incur substantial defense and settlement expenses. Even unsuccessful challenges by regulatory authorities or private relators could result in reputational harm and the incurring of substantial costs. Most states have adopted similar state false claims laws, and these state laws have their own penalties which may be in addition to federal FCA penalties, as well as other fraud and abuse laws.
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We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, German anti-corruption laws and other anti-bribery laws and laws pertaining to the accuracy of our internal books and records, which have been the focus of increasing enforcement activity globally in recent years.
The PPS Act has imposed new reporting and disclosure requirements for biologic, drug and device manufacturers with regard to payments or other transfers of value made to certain practitioners, such as physicians and teaching hospitals, and for such manufacturers and for group purchasing organizations, with regard to certain ownership interests held by physicians in the reporting entity. CMS publishes information from these reports on a publicly available website, including amounts transferred and physician and teaching hospital identities. Amendments expanded the law to also require reporting, effective January 1, 2022, of payments or other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse-midwives, and this new requirement will be effective for data collected beginning in calendar year 2021. The PPS Act preempts similar state reporting laws, although we or our subsidiaries may also be required to report under certain state transparency laws that address circumstances not covered by the PPS Act, and some of these state laws, as well as the federal law, can be ambiguous. We are also subject to foreign regulations requiring transparency of certain interactions between suppliers and their customers.
Other Health Care Regulation
In the United States, government actions to seek to increase health-related price transparency may also affect our business. For example, on November 12, 2020, CMS issued final rules imposing price transparency requirements on hospitals and group health plans. Specifically, beginning in 2022, group health plans must post, on a public internet website, in-network provider negotiated rates (which include rates with device suppliers and manufacturers), historical out-of-network allowed amounts and drug pricing information. This may result in the publication of our negotiated rates with various providers and group health plans, which could impact our ability to independently negotiate sales contracts and rate agreements.
Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), enacted on April 16, 2015, established a new payment framework, which modified certain Medicare payments to “eligible clinicians,” including physicians, dentists and other practitioners. Under MACRA, certain eligible clinicians are required to participate in Medicare through the Merit-Based Incentive Payment System (“MIPS”) or Advanced Alternative Payment Models (“APMs”), through which Medicare reimbursement to eligible clinicians includes both positive and negative payment adjustments that take into account quality, promoting interoperability, cost, and improvement activities. Data collected in the first MIPS performance year (2017) determined payment adjustments that began January 1, 2019. MACRA standards continue to evolve, and represent a fundamental change in physician reimbursement that is expected to provide substantial financial incentives for physicians to participate in risk contracts, and to increase physician information technology and reporting obligations. The implications of the implementation of MACRA are uncertain and will depend on future regulatory activity and physician activity in the marketplace. New payment and delivery system reform programs, including those modeled after such federal program, are also increasingly being rolled out at the state level through Medicaid administrators, as well as through the private sector, which may further alter the marketplace and impact our business.
Recently, in addition to other government efforts to control health care costs, there has been increased scrutiny on drug pricing and concurrent efforts to control or reduce drug costs by Congress, the President, executive branch agencies and various states. At the state level, several states have adopted laws that require drug manufacturers to provide advance notice of certain price increases and to report information relating to those price increases, while others have taken legislative or administrative action to establish prescription drug affordability boards or multi-payer purchasing pools to reduce the cost of prescription drugs. At the federal level, several related bills have been introduced and regulations proposed which, if enacted or finalized, respectively, would impact drug pricing and related costs.
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Antitrust and Consumer Protection
The U.S. federal government, most U.S. states and many foreign countries have antitrust laws that prohibit certain types of conduct deemed to be anti-competitive, as well as consumer protection laws that seek to protect consumers from improper business practices. At the U.S. federal level, the FTC oversees enforcement of these types of laws, and states have similar government agencies. Violations of antitrust or consumer protection laws may result in various sanctions, including criminal and civil penalties. Private plaintiffs may also bring civil lawsuits against us in the United States for alleged antitrust law violations, including claims for treble damages.
European Community Government Regulation
In addition to regulations in the United States, we are subject to a variety of regulations in other jurisdictions governing clinical trials and commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of countries outside the United States before we can commence marketing that product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. Also, in addition to approval of final products, plasma collection centers for manufacture into products to be distributed in the European Union must also be approved by the competent European health authority.
Medicines can be authorized in the European Union by using either the centralized authorization procedure or national authorization procedures. The EMA is responsible for the centralized authorization procedure.
Centralized Authorization Procedure
The EMA is responsible for the centralized procedure, or Community authorization procedure, for human medicines. This procedure results in Community marketing authorization, the single marketing authorization that is valid across the European Union, as well as in the European Economic Area/European Free Trade Association states Iceland, Liechtenstein and Norway.
The Community authorization procedure is compulsory for:
· | medicines derived from biotechnology processes, such as genetic engineering; |
· | advanced-therapy medicines, such as gene-therapy, somatic cell-therapy or tissue-engineered medicines; |
· | medicinal products for human use containing a new active substance that did not receive Community marketing authorization when the Community authorization procedure was first implemented, for which the therapeutic indication is the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune diseases and other immune dysfunctions or viral diseases; and |
· | officially designated orphan medicines (medicines for rare diseases). |
The Community authorization procedure is optional for products:
· | containing new active substances for indications other than the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune diseases and other immune dysfunctions or viral diseases; |
· | representing significant therapeutic, scientific or technical innovations; or |
· | for which the granting of a Community marketing authorization would be in the interests of European Union public health. |
Our blood derivative products are not subject to compulsory Community authorization, but it is an option for our new products. Flebogamma® DIF 50 mg/ml and 100 mg/ml, VeraSeal solutions for sealant and Tavlesse (fostamatinib) were approved through the Community authorization procedure.
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Applications through the Community authorization procedure are submitted directly to the EMA. Evaluation by the EMA’s relevant scientific committee takes up to 210 days, at the end of which the committee adopts an opinion on whether the medicine should be marketed. This opinion is then transmitted to the European Commission, which has the ultimate authority for granting marketing authorizations in the European Union.
Once a Community marketing authorization has been granted, the holder of that authorization can begin to make the medicine available to patients and healthcare professionals in all European Union countries.
National Authorization Procedures
Each European Union member state has its own procedures for the authorization, within its own territory, of medicines that fall outside the scope of the Community authorization procedure. There are two possible routes available to companies for the authorization of such medicines in several countries simultaneously.
· | Decentralized procedure. Using the decentralized procedure, companies may apply for simultaneous authorization in more than one European Union country of medicines that have not yet been authorized in any European Union country and that do not fall within the mandatory scope of the centralized procedure. |
· | Mutual-recognition procedure. In the mutual-recognition procedure, a medicine is first authorized in one European Union member state, in accordance with the national procedures of that country. Following such authorization, further marketing authorizations can be sought from other European Union member states in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization. |
Our products Niuliva 250 I.U./ml and Xembify 200 mg/ml were approved through the decentralized procedure. Our products Prolastina® 1000 mg/ml, and Gamunex® 10% and some of the Human Albumin Grifols / Albutein licenses were approved through the mutual-recognition procedure. All our other products were approved pursuant to individual national procedures. We expect to use the mutual-recognition procedure if we want to extend our product licenses to other European countries in the future.
In some cases, disputes arising in these procedures can be referred to the EMA for arbitration as part of a “referral procedure.”
Orphan Drug Designation
Applications for designation of orphan medicines are reviewed by the EMA through the Committee for Orphan Medicinal Products. The criteria for orphan designation are:
· | the medicinal product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting no more than five in 10,000 persons in the European Union at the time of submission of the designation application (prevalence criterion); |
· | the medicinal product is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition, and without incentives it is unlikely that the revenue after marketing of the medicinal product would cover the investment in its development; and |
· | either no satisfactory method of diagnosis, prevention or treatment of the condition concerned is authorized, or, if such method exists, the medicinal product will be of significant benefit to those affected by the condition. |
Companies with an orphan designation for a medicinal product benefit from incentives such as:
· | protocol assistance (scientific advice for orphan medicines during the product-development phase); |
· | direct access to centralized marketing authorization and 10-year marketing exclusivity; |
· | financial incentives (fee reductions or exemptions); and |
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· | national incentives detailed in an inventory made available by the European Commission. |
Since December 2011, orphan medicinal products are eligible for the following level of fee reductions:
· | full (100%) reduction for small- and medium-sized enterprises, or SMEs, for protocol assistance and follow-up, full reduction for non-SME sponsors for pediatric-related assistance and 75% reduction for non-SME sponsors for non-pediatric assistance; |
· | to determine which companies are eligible for SME incentives, the EMA applies the definition of micro-, small- and medium-sized enterprises provided in the Commission of the European Communities’ Commission Recommendation 2003/361/EC. To qualify for assistance, companies must be established in the European Economic Area, employ less than 250 employees and have an annual turnover of not more than €50 million or an annual balance sheet total of not more than €43 million; |
· | full reduction for pre-authorization inspections and 90% reduction for post-authorization inspections for small- and medium-sized enterprises; |
· | full reduction for SMEs for new applications for Community marketing authorization and 10% reduction for non-SME sponsors; and |
· | full reduction for post-authorization activities including annual fees only to small and medium sized enterprises in the first year after granting a marketing authorization. |
We have EMA Orphan Drug Designations for the following products:
· | alpha-1 proteinase inhibitor (for inhalation use) for the treatment of cystic fibrosis; and |
· | alpha-1 proteinase inhibitor (for inhalation use) for the treatment of congenital alpha-1 antitrypsin deficiency. |
Because each of these products is already authorized for a non-orphan indication in the EU, in order to obtain marketing authorization for any of the above-mentioned orphan indications, we would be required to apply for a separate marketing authorization through the Community authorization procedure for such indication, using a different proprietary name. It is not possible to extend the existing marketing authorization to cover the new orphan indication. Orphan and “non-orphan” indications cannot be covered by the same marketing authorization.
United Kingdom Regulatory Process
The United Kingdom (“U.K.”) withdrew from the E.U. on January 31, 2020, and is no longer an E.U. Member State. A transition period, during which E.U. pharmaceutical law continued to be applicable to the U.K., has ended on December 31, 2020.
As of January 1, 2021, the protocol in Ireland/Northern Ireland is applicable and has an impact on marketing authorizations for medicinal products in the U.K. with respect to Northern Ireland.
There are several routes to obtain a marketing authorization in the U.K., Great Britain (England, Scotland and Wales) or Northern Ireland. The options available are determined by the intended market and the type of application. To obtain a marketing authorization, you need to use one of the following procedures:
National Routes:
· | Innovative Licensing and Access Procedure (“ILAP”). The ILAP aims to accelerate the time to market and facilitate patient access for innovative medicines, including new chemical entities, and biological medicines, new indications and repurposed medicines; |
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· | National Procedure (a 150-day procedure). This national 150-day accelerated procedure is available for high-quality applications to market a medicine in the United Kingdom, Great Britain (England, Wales and Scotland) or Northern Ireland; |
· | Rolling review. Permits the submission of your application in module(s), to obtain a marketing authorization in the United Kingdom, Great Britain (England, Wales and Scotland) or Northern Ireland. This is a new route for marketing authorization applications, where an applicant for a new active substance in the U.K., Great Britain, or Northern Ireland submits modules of the eCTD dossier incrementally for pre-assessment by the MHRA, rather than as part of a consolidated full dossier submission. |
This rolling review is intended to streamline the development of novel medicines by offering periodic enhanced regulatory interaction and advice to reduce the risk of failure at the final phase and may be integrated with the Target Development Profile (“TDP”) to provide a clearer pathway for development of innovative medicines.
Marketing authorization applications for any new active substance based on a “full dossier,” including biological products, are eligible for the rolling review;
· | EC Decision Reliance Procedure (a 67-day procedure). For products under evaluation or approved in the E.U. centralized procedure, and for a period of two years from January 1, 2021, Great Britain may rely on decisions taken by the European Commission (“EC”) when considering the approval of new marketing authorizations. |
A letter of intent should be submitted to MHRA at least four weeks before the Committee for Medicinal Products (“CHMP”) opinion is expected. Marketing authorization applications should be submitted to MHRA on receipt of a positive opinion from the CHMP and should contain the entire dossier as reviewed by CHMP, all iterations of the assessment reports and the positive CHMP opinion.
All U.K. national requirements will apply. Confirmation of the EC decision should be provided immediately on receipt to allow determination of a Great Britain marketing authorization as close to the EC approval as practicable.
· | MR/DC Reliance Procedure (a 67-day procedure).The MHRA may rely on marketing authorizations approved through European decentralized (“DC”) and mutual recognition (“MR”) procedures, with a view to granting a marketing authorization in the United Kingdom or Great Britain. |
Applications should include the dossier approved for marketing in the E.U. member states, accompanied by all iterations of the Reference Member State (“RMS”) assessment report and the RMS end of procedure notification. Applications will be reviewed for compliance with U.K.-specific requirements;
· | Unfettered Access from Northern Ireland (a 67-day procedure). Applicants may seek recognition in Great Britain of a marketing authorization approved in Northern Ireland under certain qualifying conditions. |
This route is available for marketing authorizations approved in Northern Ireland via European MR or DC or through the national procedure, if the marketing authorization holder is established in Northern Ireland and the product is distributed from Northern Ireland to Great Britain.
For authorizations approved in E.U. procedures, applications should include the dossier as approved for marketing in Northern Ireland, accompanied by all iterations of the relevant RMS and CHMP assessment reports.
Note that national applications intended to cover marketing of a product in Northern Ireland must continue to comply with the requirements of Directive 2001/83/EC, the European Community’s code relating to medicinal products for human use, and Regulation 726/2004 on European Community procedures and supervision of medicinal products.
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International routes (collaborative procedures):
· | Access consortium. The Access consortium is a medium-sized coalition of regulatory authorities that work together to promote greater regulatory collaboration and alignment of regulatory requirements for companies intending to market a medicine in the U.K., Australia, Canada, Singapore and/or Switzerland. The MHRA joined the consortium in 2020 and commenced work-sharing applications in January 2021; and |
· | Project Orbis. Project Orbis is a program coordinated by the FDA involving the regulatory authorities of Australia (TGA), Canada (Health Canada), the United Kingdom (MHRA), Singapore (HSA) and Brazil (ANVISA) to review and approve promising cancer treatments. |
In addition to the above, the following procedures can be used to obtain a marketing authorization in Northern Ireland:
· | Northern Ireland may be included in DC or MR procedure as a Concerned Member State (CMS). The DC and MR procedures can be used by companies intending to market a medicine in Northern Ireland and other named E.U. countries. One member state will lead the assessment of the application as the RMS. The other member states (including Northern Ireland) receiving applications are called the ‘concerned member states’ (“CMSs”). The procedure takes up to 210 days (DC procedure) or 90 days (MR procedure), excluding time taken to provide further information or data required. If the application is approved, each CMS (including Northern Ireland as a CMS) will issue a national marketing authorization for the product within 30 days of approval. |
· | Marketing authorizations approved in the EU’s DC procedure will automatically have effect in Northern Ireland. The E.U. centralized procedure, including its mandatory scope, continues to apply in Northern Ireland, and therefore, the centralized procedure results in a single marketing authorization to market a product in all E.U. member states, as well as Iceland, Liechtenstein, Norway and Northern Ireland. |
Further information can be found in the U.K.’s website for license applications (www.gov.uk).
Canadian Regulatory Process
Authorization to Market. Therapeutic products can be marketed in Canada after they have been subject to a review to assess their safety, efficacy and quality. A New Drug Submission must be submitted to Health Canada for review, and a Notice of Compliance (“NOC”), and/or a Drug Identification Number (“DIN”), must be received by the sponsor prior to marketing a product in Canada. Responsibility for review of pharmaceutical drug products resides with Health Canada’s Therapeutic Products Directorate (“TPD”), while responsibility for review of biological products is under the Biologics, Radiopharmaceuticals and Genetic Therapies Directorate (“BGTD”). An active DIN is required for any product being marketed in Canada. Our IG, A1PI, albumin and hyperimmune products are subject to these review and authorization processes.
Changes to Market Authorization. There are four classes of changes to existing market authorizations in Canada. Level 1 changes are considered “significantly different” and have the potential to impact safety, efficacy, quality or effectiveness of the product. These require the filing of a Supplemental New Drug Submission, and a NOC must be issued by Health Canada prior to implementation of the change. Level 2 changes are not considered “significant,” but a “Notifiable Change” submission must be filed to Health Canada for review, and approval is provided via a “No Objection” letter to the sponsor. Level 3 changes have minimal potential to impact safety, quality or effectiveness and can be made without prior approval of Health Canada; a summary of these changes is reported to Health Canada with the sponsor’s Annual Drug Notification. Level 4 changes are implemented without any notification to Health Canada, based on no expectation of risk.
Clinical Trials. A Clinical Trial Application (“CTA”), must be submitted to Health Canada prior to conducting any study protocol that proposes the use of a new product, or the use of an existing product, where the indication, target population, route of administration or dosing differs from the current market authorization. The CTA should include summaries of preclinical and clinical studies conducted and (if applicable) chemistry, manufacturing and control data, and is submitted to either TPD (for drug products) or BGTD (for biological products) for review. The TPD or BGTD are responsible for assessing protection and safety of the participants as well as quality of the product; they will issue a “No Objection” letter to sponsors for studies deemed acceptable. Research ethics board approval for each trial is also required prior to conduct of the study.
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Establishment Licensing. All establishments in Canada that are involved in the fabrication, packaging/labeling, testing, import, distribution or warehousing of drug products must have a current establishment license (once an establishment license is issued, an annual report must be submitted by April 1 of each year to maintain the effectiveness of that license). As an importer/distributor, part of the licensing requirements include demonstration that any foreign (non-Canadian) facilities involved in fabrication, packaging/labeling or testing of products imported/distributed under the license comply with cGMP.
Post-Approval Requirements. The Health Products and Food Branch Inspectorate of Health Canada periodically inspects licensed establishments in Canada to verify compliance with cGMP. Manufacturers and importers are required to monitor the safety and quality of their products and must report adverse reactions to the Marketed Health Products Directorate in accordance with a prescribed timeline and format.
Regulatory Process for Markets outside the United States, Europe, United Kingdom and Canada
The majority of regulatory authorities in countries outside the United States, Canada and Europe require that a product first be approved by the FDA or European authority prior to granting the market authorization in their country. There are a limited number of countries (Bahamas, Bermuda, Guam, Oman and Qatar) that do not require further local product registration for products and they may be distributed based on the existing FDA approval.
In addition to requiring the submission of a license application containing documentation supporting the safety, efficacy and quality of the product, many countries require the submission of FDA Export Certificates for our products to provide assurance that such products can be legally marketed in the United States. The Certificate of Pharmaceutical Product (“CPP”), and/or the Certificate to Foreign Government (“CFG”), are issued by the FDA at the request of the manufacturer seeking licensing in the country outside the United States. The CPP conforms to the format established by the World Health Organization (“WHO”), and is intended for use by the importing country when considering whether to license the product in question for sale in that country. The CFG serves to document that the product can be legally marketed in the United States and the manufacturer is in compliance with GMP. A limited number of regulatory authorities in countries outside United States, Canada and Europe conduct onsite inspections to verify GMP compliance. Failure to maintain and document GMP compliance could result in withdrawal of marketing authorization. In addition changes to manufacturing or testing procedures for the product require approval of the change in the United States prior to the submission of the variation to the registration in the international market. These changes may require approval in each market in order to maintain product distribution. Furthermore, any changes in the distributors supporting our export business could result in a loss of sales.
Pharmaceutical Pricing and Reimbursement
In the United States and other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payors. Third-party payors include government health programs, managed care providers, private health insurers and other organizations. These third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Our products may not be considered cost-effective. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
United States Pharmaceutical Pricing and Reimbursement
In the United States, our products are reimbursed or purchased under several government programs, including Medicaid, Medicare Parts B, C and D and the 340B Program, and pursuant to our contract with the Department of Veterans Affairs. Medicaid is a joint state and federal government health plan that provides covered outpatient prescription drugs for low income individuals. Under Medicaid, drug manufacturers pay rebates to the states based on utilization data provided by the states. The rebate amount for most brand name drugs is the greater of 23.1% of the AMP per unit or the difference between the AMP and Best Price per unit and adjusted by the CPI-U, subject to certain exceptions (for example, for certain clotting factors, such as Factor VIII and Factor IX, of the rebate amount is the greater of 17.1% of the AMP per unit or the difference between the AMP and the Best Price per unit and adjusted by the CPI-U. For non-innovator multiple source (generic) drugs, the rebate percentage is equal to a minimum of 13.0% of AMP. The ACA also extended this rebate obligation to prescription drugs covered by Medicaid managed care organizations.
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Medicare Part B reimburses providers for drugs provided in the outpatient setting based upon average sales price (“ASP”). Beginning in 2005, the Medicare drug reimbursement methodology for physician and hospital outpatient schedules changed to ASP + 6%. This payment was based on a volume-weighted average of all brands under a common billing code. After changes in certain prior years, CMS increased the rate back to +6% for 2013 and maintained the same rate from 2014 through 2019, except that effective January 1, 2018, a new CMS rule went into effect substantially reducing reimbursement paid to hospitals and other providers for certain outpatient drugs and biologicals, including certain of our products, if purchased by these providers under the 340B Program. The reimbursement was decreased from ASP + 6% to ASP - 22.5%. On December 27, 2018, the Federal District Court for the District of Columbia issued an opinion finding that this reimbursement cut exceeded CMS’s regulatory authority. However, on July 31, 2020, the District of Columbia Circuit Court of Appeals overturned the Federal District Court for the District of Columbia’s opinion, ruling that CMS acted within its regulatory authority. Since this ruling, CMS has retained the reimbursement as ASP - 22.5% for calendar year 2022. The outcome of this reimbursement change on our business remains uncertain as additional lawsuits may be filed against CMS potentially challenging its regulatory authority. Any outcome may also decrease demand for our products and have an adverse effect on our business.
We believe that we meet the requirements of the 340B Program and are continuing to review and monitor these and other developments affecting the 340B Program, including additional lawsuits that may be filed against CMS and the potential for court-ordered remedies affecting reimbursement under the 340B Program. In addition, under the Bipartisan Budget Act of 2013 and subsequent measures, Medicare is subject to a 2% reduction in federal spending, or “sequestration,” including drugs reimbursed under Medicare, for federal fiscal years 2013 through 2025. The full ramifications of this sequestration for Medicare reimbursement remain uncertain, as further Congressional action may reduce, eliminate or otherwise change this payment reduction. For example, in December 2021, Congress agreed that solely for the period between April through June 2022 a 1% “sequestration” reduction will be in effect. The reduction will return to a 2% rate thereafter.
Among other pricing concerns in the United States is the fact that, in September 2021, pursuant to an executive order by President Biden, the HHS released various drug pricing reform proposals aimed at making drug prices more affordable and equitable for all consumers and throughout the health care system. The areas of focus include reimbursement for drugs under Medicare Parts B, C and D. To advance the goals of its drug pricing reform proposal, the HHS recommended certain legislative policies focused on promoting competition and reducing drug pricing. The extent of HHS and Congressional implementation of these drug pricing reforms is still uncertain and could adversely affect our business. Additionally, in November 2020, the OIG enacted a rule rendering illegal, under the Anti-Kickback Law, many drug rebates routinely paid by manufacturers to health benefit plans or their pharmacy benefit managers (“PBMs”) under Medicare Part D. This rule, which will become effective on December 27, 2022, also created new regulatory safe harbors that provide additional avenues for legal pharmaceutical market practices. The effects of the OIG’s rule affecting certain pharmaceutical market practices are still uncertain and could adversely affect our business.
An increasing number of states in the United States have also proposed or passed legislation that seeks to directly or indirectly regulate pharmaceutical drug pricing, such as by requiring drug manufacturers to publicly report pricing information or to place a maximum price ceiling on pharmaceutical products purchased by state agencies. For example, in October 2017, California enacted a prescription drug price transparency law that requires prescription drug manufacturers to provide advance notice and explanation for certain drug price increases that exceed a specified threshold. Laws of this type may cause us to experience additional pricing pressures on our affected products, and could adversely affect our business.
Medicare Part D is a partial, voluntary prescription drug benefit created by the federal government primarily for persons 65 years old and over. The Medicare Part D drug program is administered through private insurers that contract with CMS. Government payment for some of the costs of prescription drugs may increase demand for any products for which we receive marketing approval. However, to obtain payments under this program, we are required to negotiate prices with private insurers operating pursuant to federal program guidance. These prices may be lower than we might otherwise obtain. In addition, beginning in 2011, the ACA generally required that we provide a 50% discount (the “Coverage Gap Discount”) to patients who have expended certain amounts for drugs and therefore fall within the Medicare Part D coverage gap. In February 2018, legislation was enacted as part of the Bipartisan Budget Act of 2018 that increased this coverage gap discount to 70%, and extended the price reductions of the Coverage Gap Discount Program to include biosimilar drugs.
The availability of federal funds to pay for our products under the Medicaid and Medicare Part B programs requires that we extend discounts under the 340B/PHS drug pricing program. The 340B/PHS drug pricing program extends discounts to a variety of community health clinics and other specified entities that receive health services grants from the PHS, as well as hospitals that serve a
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disproportionate share of certain low income individuals. The PHS ceiling price cannot exceed the AMP (as reported to CMS under the Medicaid drug rebate program) less the Medicaid unit rebate amount. We have entered into a PPA with the government in which we agree to participate in the 340B Program by charging eligible entities no more than the PHS ceiling price for drugs intended for outpatient use. Evolving requirements with respect to this program continue to be issued by the HRSA of HHS, the federal agency responsible for oversight of the 340B Program, which creates uncertainty. For example, effective January 1, 2019, a final HRSA rule codified standards regarding the calculation of the ceiling price for covered outpatient drugs under the 340B Program, as well as regarding the imposition of civil monetary penalties, or CMP, on manufacturers that knowingly and intentionally overcharge covered entities.
We make our products available for purchase by authorized government users of the Federal Supply Schedule (“FSS”), pursuant to their FSS contracts with the Department of Veterans Affairs. Under the Veterans Health Care Act of 1992, companies are required to offer discounted FSS contract pricing to four federal agencies — the Department of Veterans Affairs, the Department of Defense, the Coast Guard and the PHS (including the Indian Health Service) — for federal funding to be made available for reimbursement of products under the Medicaid program and products eligible to be purchased by those four federal agencies. FSS pricing to those four federal agencies must be equal to or less than the ceiling price, which is, at a minimum, 24% off the non-federal AMP for the prior fiscal year.
The ACA imposed a fee on manufacturers and importers of branded prescription drugs and biologics based on their sales to United States government health programs. An aggregate annual fee of $3.0 billion was imposed on all covered entities for 2014 through 2016. The aggregate fee is allocated among applicable manufacturers and importers, including us, based on their relative sales to government health programs. The aggregate fee increased up to $4.0 billion for 2017, $4.1 billion for 2018, and was reduced to $2.8 billion for 2019 and thereafter. Beginning in 2013, the ACA also imposed a new excise tax on many medical devices equal to 2.3% of the sales price, and excludes devices generally purchased by the general public at retail for individual use. However, with respect to the medical device excise tax, a two-year moratorium was imposed under the Consolidated Appropriations Act, 2016, suspending the imposition of the tax on device sales during the period beginning January 1, 2016 and ending December 31, 2017. On January 22, 2018, an additional two-year moratorium was imposed under Public Law No. 115-120, suspending the imposition of the tax on device sales during the period beginning January 1, 2018 and ending on December 31, 2019. On December 20, 2019, the medical device excise tax was repealed under Public Law No. 116-94, eliminating the imposition of the tax for periods after December 31, 2019. In addition, the Prescription Drug User Fee Act (“PDUFA”), first enacted in 1992, sets forth user fees that pharmaceutical and biological companies pay to the FDA for: certain applications for approvals of drugs and biologicals; the establishments where the products are made; and the products themselves. The fees under PDUFA cover a substantial portion of the FDA’s operating budget, and the measure also addresses aspects of the regulatory approval process, such as timing and procedures. PDUFA is subject to reauthorization by Congress every five years, and in December 2016, after a lengthy process involving significant industry and other stakeholder input, the FDA submitted its final recommendations to Congress for the sixth PDUFA reauthorization, which was signed into law in August 2017, and which covers fiscal years 2018 through 2022.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. Federal, state and local governments in the United States have enacted and continue to consider additional legislation to limit the growth of healthcare costs, including the costs of prescription drugs. Existing and future legislation could limit payments for our existing products or for drug candidates that we are developing, including possibly permitting the federal government to negotiate prices directly with manufacturers. In addition, an increasing emphasis on managed care in the United States has increased and will continue to increase the pressure on pharmaceutical pricing. For a discussion of certain risks related to reimbursement and pricing, see Item 3 of this Part I, “Key Information—D. Risk Factors—Risks Relating to the Healthcare Industry—United States Healthcare Reform may adversely affect our business.”
European Union Pharmaceutical Pricing and Reimbursement
Our operations in the E.U. are subject to regulations that affect the pricing and marketing of our products. The governments of E.U. Member States are able to influence the price of pharmaceutical products through their control of national healthcare systems. As such, governments in the E.U. Member States have been introducing healthcare reforms to limit increases in costs, particularly with respect to prescription drugs. Some E.U. Member States have also passed legislation to impose mandatory rebates for pharmaceutical products and financial claw-backs on the pharmaceutical industry. Through health technology assessment organizations that use formal economic metrics such as cost-effectiveness to determine prices, coverage and reimbursement of new
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therapies, E.U. Member States are also seeking to limit healthcare costs. We expect that E.U. Member States will continue to pursue actions to reduce healthcare expenditures.
The E.U. is currently undergoing an analysis of the intellectual property protections extended to pharmaceutical products as well as the overall regulatory framework for the approval and commercialization of medicinal products. This could result in significant changes in the way drugs are approved and marketed, as well as with respect to the duration of exclusivity, in particular for orphan drugs.
Pricing and Reimbursement in Other Countries
Many countries around the world have been taking steps to control healthcare costs, particularly as they relate to prescription drugs. For example, Canada is contemplating regulatory changes that seek to reduce prices for certain medicinal products, such as biologics and medicines for rare diseases. China has organized national price negotiations for certain products directly linked to national drug reimbursement. Drug prices in China may further decline due to a stated national policy of reducing healthcare costs. Furthermore, countries are utilizing tendering processes to generate competition in a bid to control prescription drugs.
Item 4.A.UNRESOLVED STAFF COMMENTS
None.
Item 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following is a review of our financial condition and results of operations as of December 31, 2021 and 2020, and for the three years ended December 31, 2021, and of the key factors that have affected or are expected to be likely to affect our ongoing and future operations. You should read the following discussion and analysis in conjunction with our audited consolidated financial statements and the accompanying notes included elsewhere in this annual report on Form 20-F.
Some of the information contained in this discussion, including information with respect to our plans and strategies for our business and our expected sources of financing, contain forward-looking statements that involve risk and uncertainties. You should read “Cautionary Statement Regarding Forward-Looking Statements” in this Part I for a discussion of the risks related to those statements. You should also read Item 3 of this Part I, “Key Information—D. Risk Factors” for a discussion of certain factors that may affect our business, financial condition and results of operations.
We have prepared our audited consolidated financial statements as of December 31, 2021 and 2020, and for the three years ended December 31, 2021 in accordance with IFRS, as issued by the IASB. The financial information and related discussion and analysis contained in this item are presented in euros except as otherwise specified. Unless otherwise specified the financial information analysis in this annual report on Form 20-F is based on our actual audited consolidated financial statements as of December 31, 2021 and 2020, and for the three years ended December 31, 2021.
See “Presentation of Financial and Other Information” in this Part I for further information on our presentation of financial information.
A. | Operating Results |
Subsequent Events
Asset Sale Offer
On December 1, 2021, the Biomat Transactions were consummated, where we sold a minority equity interest in the Biomat Group to the GIC Investor. In order to permit the consummation of the Biomat Transactions, following a consent solicitation procedure, on August 13, 2021 we entered into an indenture supplement amending the indenture governing the 2019 Notes. Among other modifications, these amendments provided that part of the proceeds of the Biomat Transactions should be used to repurchase a certain amount of the 2019 Notes under an asset sale offer (the “Asset Sale Offer”). We launched the Asset Sale Offer on December 2,
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2021, and the Asset Sale Offer was consummated on January 11, 2022. We repurchased the total principal amount of €97,535,000 (€67,144,000 of 1.625% Notes and €30,391,000 of 2.250% Notes). See “—Dispositions—The Biomat Transactions.”
Acquisition of Biotest AG and Voluntary Tender Offer
On April 25, 2022, we acquired from TIIL 100% of the equity interests in Tiancheng Holdings, which in turn owns 89.88% of the ordinary shares and 1.08% of the preferred equity shares of Biotest AG, for a total consideration of €1,091,000,000. In addition, we completed a voluntary tender offer to all remaining shareholders of Biotest AG to acquire their ordinary and preferred shares, where we purchased 1,250,298 ordinary shares (for €43.00 per share) and 8,340,577 preferred shares (for €37.00 per share). This acquisition and the voluntary tender offer brought our interest in Biotest AG to 96.2% of the voting rights and 69.72% of the share capital. See “—Factors Affecting Our Financial Condition and Results of Operations—Biotest Acquisition.”
Reclassification of the GIC Investor’s Investment in the Biomat Group
On February 28, 2022, we published our audited consolidated financial statements for the year ended December 31, 2021 and filed them with the SEC as a Form 6-K. On April 28, 2022, our audited consolidated financial statements for the year ended December 31, 2021, prepared under IFRS-EU principles, were restated to reclassify in the balance sheet the investment from the GIC Investor in connection with the Biomat Transactions, described in Note 21 to our audited consolidated financial statements, from net equity to financial liability. Together with the GIC Investor, we are analyzing the necessary modifications in the terms and conditions of the agreement in order to classify such investment as equity, thereby reflecting the initial will of the parties. The reclassification of the investment has not affected compliance with the covenants under our debt instruments. See “—Factors Affecting Our Financial Conditions and Results of Operations—Dispositions—The Biomat Transactions” and Note 33 to our audited consolidated financial statements included in this annual report on Form 20-F.
Factors Affecting Our Financial Condition and Results of Operations
Consequences of COVID-19
Due to the COVID-19 pandemic, we experienced several impacts on our operational and financial performance. A lower level of plasma collection due to lockdowns and restricted movement, quarantines and fear of disease, as well as the economic stimulus programs provided by the U.S. government, caused our facilities to operate with reduced capacity utilization and our plasma collection centers to offer higher donor compensation. However, these negative impacts were partially offset by several measures, including savings in operating costs, product price increases and sales of COVID-19 diagnostic tests.
The COVID-19 pandemic has limited donors’ traffic in our plasma collection centers, negatively impacting plasma collection volumes. In addition, travel restrictions, specifically the U.S. border closure with Mexico, put further pressures on those collection centers close to the southern border of the U.S. The government stimulus programs issued to households also lowered the financial incentive for individuals to donate. This decrease in plasma collection levels has resulted in a corresponding decline in processed volumes at our facilities, negatively affecting manufacturing cost absorption. Additionally, our cost per liter increased mainly as a result of higher compensation paid to donors.
We partially offset the negative impacts of the COVID-19 pandemic through mid-single digit price increases, savings in operating costs and short-term agreements related to COVID-19 test sales. We developed our Procleix® SARS-COV2 NAT diagnostic testing kit and entered into agreements with Hologic to sell these clinical diagnostic tests in Spain and Hungary, which resulted in a positive impact in our profit and loss statement of €68 million for the year ended December 31, 2021.
Although our plasma collection decreased by 4% during 2021 as compared to 2020, our collection levels saw a 4% increase in the nine month period ended December 31, 2021 as compared to the same period in 2020. This recovery was mainly driven by the addition of new plasma collection centers to our portfolio, which collectively provided two million liters of additional capacity per year. See “—Acquisitions.”
It remains unclear at this time how the developments in relation to COVID-19 will continue to evolve through the remainder of 2022 and beyond, and the extent to which COVID-19 might further impact our business, results of operations and financial
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condition. See Item 3 of this Part I, “Key Information—D. Risk Factors—Risks Relating to the Company and Our Business—The Coronavirus pandemic has had, and could continue to have, a material, adverse impact on us.”
Price Controls
Certain healthcare products, including plasma derivative products, are subject to price controls in many of the markets where they are sold, including Spain and other countries in the European Union. The existence of price controls over these products has adversely affected in the past, and may continue to adversely affect, our ability to maintain or increase our prices and gross margins.
Plasma Supply Constraints
Plasma is the key raw material used in the production of plasma-derived products. Our ability to continue to increase our revenue depends substantially on increased access to plasma. We currently obtain our plasma mainly from the United States and Europe (Germany, Austria and Hungary) primarily through our plasma collection centers and, to a much lesser extent, through agreements with third parties.
A continued increase in demand for plasma products could lead to industry supply constraints. In response, we and certain of our competitors and independent suppliers could open a number of new plasma collection centers.
As of December 31, 2021, we operated 366 plasma collection centers located across the United States, Europe, across Germany, Austria and Hungary; Canada and Egypt. We have expanded our plasma collection network through a combination of organic growth, by opening new plasma collection centers, and acquisitions. In 2016, we purchased equity interests in the Interstate Blood Bank Group (Interstate Blood Bank, Inc., Bio-Blood Components, Inc. and Plasma Biological Services, LLC, collectively referred to herein as the “IBBI Group”), and on April 10, 2019, we exercised our option to purchase the remaining 51.0% equity interest of the IBBI Group, which has 36 FDA-approved centers (26 plasma collection centers and 10 blood donation centers), as well as an analytical laboratory. On October 1, 2020, we obtained 11 U.S. plasma collection centers from GC Pharma. As part of the GC Pharma acquisition, we must supply certain output of plasma arising from the 11 collection centers for a 24-month period commencing on October 1, 2020. In 2021, we acquired 25 plasma collection centers from BPL and seven U.S. plasma donation centers and one Canadian plasma center from Kedrion.
The COVID-19 pandemic has had an adverse impact on our plasma collection volumes, mainly in the United States. Among the reasons for this negative impact are mobility restrictions, closings of the border with Mexico and stimulus checks paid to American families with children, which lowered the willingness to donate plasma. In 2021, we advanced on our efforts to increase plasma supply through our expansion plan, comprising organic and inorganic growth, such as: (i) plasma collected through our plasma collection centers, including acquiring centers from BPL and Kedrion, (ii) plasma collected through our 30-year Plasma Supply Agreement with each of Haema AG and Biotest US Corporation and (iii) plasma purchased from third-party suppliers pursuant to various plasma purchase agreements. During the year ended December 31, 2021, plasma donations gradually recovered in the United States, with an upward trend in plasma collection following the rollout of vaccination plans and easing of COVID-19 restrictions. In Europe, plasma collections exceed 2020 levels and pre-pandemic levels. Our plasma collection decreased by 4% during 2021 as compared to 2020, although we saw a 4% increase in our collection levels during the nine month period ended December 31, 2021 as compared to the same period in 2020. Our recent acquisitions of plasma collection centers have helped us mitigate in part such decrease. See “—Acquisitions” and “—Consequences of COVID-19” for additional details.
Acquisitions
Biotest Acquisition
On April 25, 2022, we acquired from TIIL 100% of the equity interests in Tiancheng Holdings, a German privately held stock corporation, and accepted an assignment from TIIL of certain shareholder loans granted by TIIL to Tiancheng Holdings. Tiancheng Holdings in turn owns 89.88% of the ordinary shares and 1.08% of the preferred equity shares of Biotest AG, a German stock corporation listed on the Frankfurt Stock Exchange. The purchase price for the acquisition of Tiancheng Holdings was €1,091,000,000, which included a loan receivable of €318 million granted by Tiancheng Holdings to Biotest AG. In addition, we completed a voluntary tender offer to all remaining shareholders of Biotest AG to acquire their ordinary and preferred shares, where
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we acquired 1,250,298 ordinary shares (for €43.00 per share) and 8,340,577 preferred shares (for €37.00 per share). The acquisition and the voluntary tender offer have brought our interest in Biotest AG to 96.2% of the voting rights and 69.72% of the share capital.
In order to fund this acquisition, on October 5, 2021, our wholly-owned subsidiary Grifols Escrow Issuer, S.A.U. (the “Escrow Issuer”) issued €1,400.0 million senior notes that will mature on October 15, 2028 and bear interest at 3.875% per annum and $705.0 million senior notes that will mature on October 15, 2028 and bear interest at 4.750% per annum. Within 15 months from the consummation of the acquisition, which occurred on April 25, 2022, the Escrow Issuer will merge with and into the Company, with the Company as the surviving entity, and we will assume all the obligations of the Escrow Issuer under the notes. See “—B. Liquidity and Capital Resources—Sources of Credit—The 2021 Notes.”
Biotest AG is a global company that specializes in innovative hematology and clinical immunology solutions. Headquartered in Dreieich (Germany), it develops, produces and markets biological medicinal products with applications in hematology, clinical immunology and intensive care. Biotest AG’s current portfolio includes 12 different products with a global commercial footprint in more than 90 countries, employing approximately 2,000 people around the world.
Acquisition of plasma donation centers from Kedplasma, LLC
On March 31, 2021, Grifols acquired seven U.S.-based plasma donation centers from Kedplasma, LLC for a total purchase price of $55.2 million. The seven centers acquired are authorized by the FDA and European health authorities and collect approximately 240,000 liters of plasma per year.
GigaGen Acquisition
On March 8, 2021, Grifols acquired 56% of shares of GigaGen Inc. (“GigaGen”) for a base amount of $80 million. Grifols now owns 100% of GigaGen’s share capital, and financed the transaction with its own funds, without incurring in any debt. Half of the consideration was paid at the closing date and the remaining amount will be paid one year after closing. This agreement is in line with our R+D+i strategy, grounded in an integrated approach that encompasses both in-house projects and investee-led initiatives whose research complements our core operations. Prior to this transaction, Grifols’ percentage stake in GigaGen was recorded using the equity method and, therefore, the difference between the fair value of the previous investment and the book value, estimated in $43 million, has been recognized as income. See Note 11 to our audited consolidated financial statements included in this annual report on Form 20-F for more information regarding this transaction.
Acquisition of plasma donation centers from BPL Plasma, Inc.
On February 28, 2021, Grifols acquired 25 U.S.-based plasma donation centers from BPL Plasma Inc for $38 million. These plasma centers generate, in the aggregate, approximately 1 million liters of plasma per year. The transaction received the applicable regulatory clearances and was financed with our own resources, without incurring debt. See Note 11 to our audited consolidated financial statements included in this annual report on Form 20-F for more information regarding this transaction.
MedKeeper Acquisition
On January 24, 2018, we acquired a majority stake in the U.S. technology firm Goetech, LLC, based in Denver, Colorado, doing business as MedKeeper. This transaction, for a total of $98 million, included a 51% stake in Medkeeper and a call option for Grifols and put option for MedKeeper for the remaining 49% on the third anniversary of the deal.
On November 9, 2020, we acquired, through our subsidiary Grifols Shared Services North America Inc., the remaining 49% interest in MedKeeper for the amount of $60.2 million. MedKeeper’s core business is the development and distribution of web and mobile-based platforms for hospital pharmacies that improve quality standards, productivity in the process, control systems and monitoring different preparations while increasing patient safety. This investment will enhance the activity of the Grifols Hospital Division and it is part of the strategy to underpin this division into the U.S. market. The acquisition complements our Pharmatech line and enhances our presence in the U.S. market.
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The GC Pharma Acquisition
On July 20, 2020, we executed share purchase arrangements with South Korean based GC Pharma and other investors for the purchase of a plasma fractionation facility and two purification facilities located in the city of Montreal, Canada, as well as 11 plasma collection centers located in the U.S., for a total consideration of $457 million, subject to certain working capital and other adjustments.
The Canadian facilities are currently in the process of obtaining needed licenses and regulatory approvals by competent health authorities for the manufacturing of plasma-derived products. When licensed and approved, we will become the only commercial manufacturer of plasma products in Canada, with a fractionation capacity of 1.5 million liters annually. We plan to be ready to manufacture IVIG and albumin in the Canadian facilities to supply the Canadian market starting in 2023.
The GC Pharma acquisition closed on October 1, 2020. As part of the consummation of the GC Pharma acquisition and through a plasma supply agreement, we are committed to supplying a certain output of plasma arising from the 11 plasma collection centers in the U.S. to GC Pharma for a 24-month period concluding on October 1, 2022.
The Alkahest Acquisition
In March 2015, we entered into a definitive agreement to acquire approximately 45% of the equity of California biopharmaceutical company Alkahest for a $37.5 million payment upon entry into the agreement and a further payment of $12.5 million to fund the development of Alkahest’s plasma-based products.
On September 2, 2020, we executed an agreement with the remaining shareholders in Alkahest, to acquire the remaining shares of Alkahest. On December 15, 2020, we closed the transaction and acquired the remaining shares of Alkahest (approximately 55%) in exchange for a total price of $146 million, on a debt free basis. We paid $20 million at the closing of the transaction and the remaining $126 million on February 1, 2021. With this transaction, we gain total control of Alkahest.
Alkahest is a clinical stage biopharmaceutical company targeting neurodegenerative and age-related diseases with transformative therapies derived from a deep understanding of the plasma proteome in aging and disease. Our acquisition of the remaining shares of Alkahest is part of our commitment to the research and development of therapeutic alternatives designed to contribute to both scientific and social development. It is also aligned with our strategy of complementing our range of existing plasma protein therapies and diagnostic products to treat and diagnose serious diseases and to extend the quality of human life.
NSPO Joint Venture
On November 24, 2020, we executed the NSPO JV Agreement, a binding master joint venture agreement with the Egyptian based National Service Projects Organization to incorporate a new company under the laws of Egypt (“Grifols Egypt”). Grifols Egypt is owned by Grifols and NSPO on a 49%-51% basis, respectively. Grifols Egypt will develop and construct 20 plasma collection centers throughout Egypt and will be capable of initially collecting approximately 600,000 liters of plasma annually. In addition, Grifols Egypt will develop a fractionation facility with an annual fractionation capacity of up to one million liters of plasma, a purification and fill finish facility, a warehouse and an analysis laboratory.
For us, Grifols Egypt will free-up plasma and manufacturing capacity and bring diversification to our plasma procurement sources. Additionally, through a future contract manufacturing agreement, we will secure the processing of the plasma collected in Egypt into plasma-derived products to serve Egyptian national needs. The NSPO JV Agreement also provides that for the implementation of any similar project (including the commercialization of plasma or plasma derived products) in certain countries within the Middle East and the entire African continent, Grifols and NSPO shall exclusively work through Grifols Egypt.
Grifols Egypt follows equivalent quality, safety and general operational standards as are applied by us in our worldwide operations, hence, as part of the recognized value to be contributed by Grifols into the Grifols Egypt, we will provide our knowledge and expertise in the industry as well as know-how and technology held by it, providing, among other things, engineering services and quality assurance support to set the infrastructure and processes of Grifols Egypt to the strictest quality and safety standards.
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The Shanghai RAAS Acquisition
On March 7, 2019, we entered into an Agreement for Assets Purchase by Share Issue (the “Shanghai RAAS Agreement”), with Shanghai RAAS. Shanghai RAAS is a leader in China’s plasma derivatives sector and is listed on the Shenzhen Stock Exchange. Pursuant to the Shanghai RAAS Agreement, on March 30, 2020, we acquired 26.2% of the voting and economic rights in Shanghai RAAS in exchange for the contribution of 45% of the economic rights and 40% of the voting rights in our U.S. subsidiary, Grifols Diagnostic Solutions Inc., or GDS. Thus, we have become the largest shareholder of Shanghai RAAS, while we maintain operational, political and economic control of GDS.
As part of the acquisition, we also entered into an Exclusive Strategic Alliance Agreement pursuant to which Shanghai RAAS became the exclusive distributor of our plasma-derived products and transfusional diagnostic solutions in China. In exchange for royalties, we provide technological and know-how support in the bioscience and diagnostic fields to Shanghai RAAS.
Dispositions
The Biomat Transactions
On December 1, 2021, we sold a minority equity interest in the Biomat Group (our group of U.S.-based plasma collection subsidiaries) to the GIC Investor, an affiliate of GIC Private Limited, which is a sovereign wealth fund established by the Government of Singapore. Specifically, the GIC Investor acquired 12.9% of Biomat Newco and 12.5% of Biomat USA. The purchase price received was $990 million. We used the net proceeds from the Biomat Transactions to (i) prepay $600 million of principal amount of the Revolving Loans under the First Lien Credit Facilities, (ii) prepay $142,360,501.31 of the principal amount of the Dollar Tranche B Term Loans, (iii) prepay $88,003,617.48 of the Euro Tranche B Term Loans and (iv) repurchase €97,535,000 of the 2019 Notes under an asset sale offer. See “—B. Liquidity and Capital Resources—Sources of Credit.”
As a result of the transaction, the GIC Investor received ten class B common shares of Biomat USA and nine class B common shares of Biomat Newco. These common shares are non-voting but have the right to receive annual preferential dividends, to the extent dividends are declared, of $4,168,421.05 per share. These shares also granted the GIC Investor with redemption rights of up to one share per year beginning in 2023 at $52,105,263.16 per share. Further, the shares also carry a liquidation preference at the same share price as for redemption rights, plus all unpaid dividends. These rights would be enforceable by the GIC Investor in certain circumstances, such as in the case of a liquidation, dissolution or winding up of Biomat USA, if we cease to control or have at least a 75% voting interest in Biomat USA, or upon the exclusive licensing of all or substantially all intellectual property of Biomat USA. In addition, in the event the payment of dividends did not occur or such redemptions were not made, there would among other things be monetary penalties or holders of the shares could opt to exchange them for shares of Grifols, S.A.
Subject to certain minority shareholder remedies in the charters of Biomat USA and Biomat Newco, we will continue to oversee all aspects of the Biomat Group’s management and operations. All plasma collected by the Biomat Group will continue to be supplied to us for the production of plasma-derived medicines, through a long-term plasma supply agreement. See “Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Subsequent Events—Restatement of the GIC Investor’s Investment in Biomat USA and Biomat Newco” for a description of the restatement of this investment in our consolidated financial statements.
Other Factors
Our financial and operating prospects can also be significantly affected by a number of other internal and external factors, such as unfavorable changes in governmental regulation or interpretation, increased competition, the inability to hire or retain qualified personnel necessary to sustain planned growth, the loss of key senior managers, problems in developing some of the international operations and lack of sufficient capital, among others.
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Operating Results
Overview
The subsequent discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our consolidated results of operations. You are encouraged to read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F.
Year ended December 31, 2021, as compared to the year ended December 31, 2020:
Year Ended December 31, | Change |
| |||||||
Consolidated Statement of Profit and Loss Data |
| 2021 |
| 2020 |
| € |
| % |
|
(in thousands of euros, except for percentages) |
| ||||||||
Continuing Operations |
|
|
|
|
|
|
|
| |
Net revenue |
| 4,933,118 |
| 5,340,038 |
| (406,920) |
| (7.6) | % |
Cost of sales |
| (2,970,522) |
| (3,084,873) |
| 114,351 |
| (3.7) | % |
Gross margin |
| 1,962,596 |
| 2,255,165 |
| (292,569) |
| (13.0) | % |
Research and development |
| (354,881) |
| (294,216) |
| (60,665) |
| (20.6) | % |
Selling, general and administration expenses |
| (1,061,508) |
| (985,616) |
| (75,892) |
| 7.7 | % |
Operating expenses |
| (1,416,389) |
| (1,279,832) |
| (136,557) |
| 10.7 | % |
Other Income |
| 16,302 |
| — |
| 16,302 |
| 100 | % |
Profit/(loss) of equity accounted investees with similar activity to that of the Group |
| 32,555 |
| 20,799 |
| 11,756 |
| 56.5 | % |
Operating result |
| 595,064 |
| 996,132 |
| (401,068) |
| (40.3) | % |
Finance income |
| 11,551 |
| 8,021 |
| 3,530 |
| 44.0 | % |
Finance costs |
| (277,994) |
| (249,639) |
| (28,355) |
| 11.4 | % |
Change in fair value of financial instruments |
| 246 |
| 55,703 |
| (55,457) |
| (99.6) | % |
Exchange differences |
| (11,602) |
| 8,246 |
| (19,848) |
|
| |
Finance result |
| (277,799) |
| (177,669) |
| (100,130) |
| 56.4 | % |
Profit/(loss) of equity accounted investees |
| 33,188 |
| 60,166 |
| (26,978) |
| (44.8) | % |
Profit before income tax from continuing operations |
| 350,453 |
| 878,629 |
| (528,176) |
| (60.1) | % |
Income tax expense |
| (85,126) |
| (169,639) |
| 84,513 |
| (49.8) | % |
Profit after income tax from continuing operations |
| 265,327 |
| 708,990 |
| (443,663) |
| (62.6) | % |
Consolidated profit for the year |
| 265,327 |
| 708,990 |
| (443,663) |
| (62.6) | % |
Net Revenue
Net revenue is calculated by subtracting certain chargebacks, cash discounts, volume rebates, Medicare and Medicaid discounts and other discounts from our gross revenue. See Note 24 to our audited consolidated financial statements included in this annual report on Form 20-F.
Net revenue decreased by 7.6% (3.7% in constant currency), or €0.4 billion, in 2021 reaching €4.9 billion compared to €5.3 billion in 2020. The decrease was largely due to a decrease in Bioscience sales, partially offset by a net revenue increase in the Diagnostic, Hospital, Bio Supplies and Others divisions, as explained below. See “—Factors Affecting Our Financial Condition and Results of Operations—Consequences of COVID-19.”
The following table reflects a summary of net revenue by each of our divisions for 2021, as compared to 2020:
| Year ended |
|
| Year ended |
|
|
|
| |||||
December 31, | % of total | December 31, | % of total |
| |||||||||
Summary of Net Revenue by Division | 2021 | net revenue | 2020 | net revenue | % var | % var CC(1) |
| ||||||
(in thousands of euros, except for percentages) |
| ||||||||||||
Bioscience | 3,814,983 | 77.3 | % | 4,242,502 | 79.5 | % | (10.1) | % | (5.9) | % | |||
Diagnostic |
| 779,108 |
| 15.8 | % | 775,889 |
| 14.5 | % | 0.4 | % | 3.5 | % |
82
Hospital |
| 141,190 |
| 2.9 | % | 118,675 |
| 2.2 | % | 19.0 | % | 20.3 | % |
Bio Supplies |
| 225,766 |
| 4.6 | % | 224,090 |
| 4.2 | % | 0.7 | % | 4.8 | % |
Others |
| 36,620 |
| 0.8 | % | 31,989 |
| 0.6 | % | 23.9 | % | 27.2 | % |
Intersegments |
| (67,549) |
| (1.4) | % | (53,107) |
| (1.0) | % | 27.2 | % | 31.6 | % |
Total |
| 4,933,118 |
| 100.0 | % | 5,340,038 |
| 100.0 | % | (7.6) | % | (3.7) | % |
(1) | Net revenue variance in constant currency is determined by comparing adjusted current period net revenue, calculated using prior period monthly average exchange rates, to the prior period net revenue. See “Presentation of Financial and Other Information—Constant Currency.” |
Bioscience. Net revenue for the Bioscience Division decreased by 10.1% (5.9% at constant currency) from €4.2 billion in 2020 to €3.8 billion in 2021. This decrease was mainly due to lower sales caused by the impact of the COVID-19 pandemic, which adversely affected our plasma collection volumes.
The lower plasma collection volumes triggered a decrease in IVIG volumes and revenue. This impact was partially offset by price increases in the United States, Canada and several E.U. countries, and contributions from new products such as Xembify®, VistasealTM and Tavlesse®. In particular, sales of the subcutaneous immunoglobulin product Xembify® increased by 48.3% (54.5% at constant currency) from 2020 to 2021. See “—Factors Affecting Our Financial Condition and Results of Operations—Consequences of COVID-19.”
Albumin sales maintained their positive trajectory, driven by mid-single-digit growth in China, where we launched our third albumin product (Plasbumin®) in July, and in the Middle East.
Alpha-1 antitrypsin revenues continued to grow in its main markets–Canada and the U.S.– where AlphaDTM, Grifols’ free testing program to detect AATD, has benefitted more than a million people. Demand is also robust in various European countries, including Germany, the Netherlands, Portugal and Italy. Currently, Grifols has three presentations to adapt treatments to patients’ needs. In 2021, we made further inroads to expand their availability in new markets such as Japan and France.
The performance of specialty proteins, supported by anti-rabies immunoglobulin and anti-tetanus immunoglobulin in the U.S., as well as anti-hepatitis B immunoglobulin in South America and APAC, was positive and grew in mid-single digit in 2021. In addition, tetanus vaccine increased mid-to-high single digit due to higher demand in the U.S.
In terms of new products, Tavlesse® (fostamatinib) recorded positive sales performance in those European countries where it has been launched. Within the framework of the agreement with Rigel Pharmaceuticals, it is used to treat chronic immune thrombocytopenia (“ITP”) in adult patients refractory to other treatments. On the other hand, revenues of the biological sealant were particularly robust. The sealant is designed and developed by Grifols to control surgical bleeding using a combination of two plasma proteins (fibrinogen and thrombin) and marketed and distributed by Ethicon under the brand name VistasealTM.
Diagnostic. The Diagnostic Division’s net revenue increased by 0.4% (3.5% at constant currency) from €775.9 million in 2020 to €779.1 million in 2021. This increase was driven by a strong contribution of TMA (Transcription-Mediated Amplification) molecular tests used to detect the SARS-CoV-2 virus and the sales upturn of blood typing solutions. The strong sales of these products helped counterbalance the impact of the mandatory termination of Zika testing in blood and plasma donations.
Hospital. Net revenue increased by 19.0% (20.3% at constant currency) from €118.7 million in 2020 to €141.2 million in 2021. This increase relates to a recovery in hospital investments and treatments as the COVID-19 pandemic began to come under containment. We experienced an improved performance in all of the division’s business lines, particularly Pharmatech, intravenous solutions and third-party manufacturing services.
The Hospital Division also recorded an upswing in sales of intravenous solutions, nutrition and medical devices. It also reactivated its third-party manufacturing services.
Bio Supplies. The division records sales of biological products for the pharmaceutical and diagnostics industry, those related to the fractionation and purification agreements signed with Kedrion and third-party plasma sales.
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Net revenue from Bio Supplies increased by 0.7% (4.8% at constant currency), from €224.1 million in 2020 to €225.8 million in 2021, mainly driven by higher third-party plasma sales, followed by biological products for the pharmaceutical and diagnostics industry and cell culture media.
The following table reflects a summary of net revenue by each of our geographic regions for 2021 as compared to 2020:
Year ended | Year ended |
| |||||||||||
December 31, | % of total net | December 31, | % of total |
| |||||||||
Summary of Net Revenue by Region | 2021 | revenue | 2020 | net revenue | % var | % var CC(1) |
| ||||||
(in thousands of euros, except for percentages) |
| ||||||||||||
European Union(2) |
| 906,449 |
| 18.4 | % | 834,492 |
| 15.6 | % | 8.6 | % | 8.7 | % |
United States and Canada |
| 3,154,548 |
| 63.9 | % | 3,599,746 |
| 67.4 | % | (12.4) | % | (7.9) | % |
Rest of the World |
| 872,121 |
| 17.7 | % | 905,800 |
| 17.0 | % | (3.7) | % | 1.3 | % |
Total |
| 4,933,118 |
| 100.0 | % | 5,340,038 |
| 100.0 | % | (7.6) | % | (3.7) | % |
(1) | Net revenue variance in constant currency is determined by comparing adjusted current period net revenue, calculated using prior period monthly average exchange rates, to the prior period net revenue. See “Presentation of Financial and Other Information—Constant Currency.” |
(2) | Net revenue earned in the European Union includes net revenue earned in Spain. |
Net revenue in the U.S. and Canada decreased by 12.4% (7.9% at constant currency) from €3.6 billion in 2020 to €3.1 billion in 2021, mainly due to lower volume sales of IVIG as a result of plasma supply constraints partially offset by price increases. Meanwhile, sales in the European Union rose by 8.6% (8.7% at constant currency) to €906.4 million in 2021, led by growth in countries like Spain, Italy, Hungary and France. Sales in the Rest of the World decreased by 3.7% (increased by 1.3% at constant currency) in 2021 to €872.1 million principally as a result of performance in China.
Cost of sales
Cost of sales decreased by 3.7% from €3.1 billion in 2020 to €3.0 billion in 2021. Cost of sales as a percentage of net revenue increased to 60.2% compared to 57.8% in 2020. This was mainly due to the higher cost of plasma per liter, mainly as a result of higher donor compensation and lower absorption of fixed costs. See “—Factors Affecting Our Financial Condition and Results of Operations—Consequences of COVID-19,” and Item 4 of this Part I, “Information on the Company—B. Business Overview—Raw Materials.”
Gross Margin
The decrease in gross margin from 42.2% of net revenue in 2020 to 39.8% in 2021 was mainly due to the increase in cost of sales, as described above.
Research and development
Research and development spending increased by 20.6%, from €294.2 million (5.5% of net revenue) in 2020 to €354.9 million (7.2% of net revenue) in 2021. These results underscore our ongoing efforts to integrate and develop cutting-edge projects as those of Alkahest and GigaGen. See Item 4 of this Part I, “Information on the Company—B. Business Overview—Research and Development” for additional details.
Selling, general and administration expenses
Selling, general and administration expenses increased by 7.7% from €985.6 million in 2020 to €1,061.5 million in 2021, mainly as a result of the integration of new companies, such as Alkahest, GigaGen and Green Cross, as well as transaction and restructuring costs, higher freight costs due to global supply chain constraints, and general inflationary pressures.
Finance result
Finance result in 2021 represented a loss of €277.8 million, compared to a loss of €234.2 million in 2020, when excluding the one-time €56.5 million positive change in the fair value of financial instruments in connection with the closing of the Shanghai RAAS
84
transaction in 2020. The increase mainly results from the issuance of the 2021 Notes (as defined herein) to finance the Biotest AG acquisition, in the amounts of €1,400,000,000 and $705,000,000, in the fourth quarter of 2021. See “—B. Liquidity and Capital Resources—Sources of Credit—The 2021 Notes.”
Income tax expense
In 2021, we had a profit before income tax of €350.5 million and income tax expense of €85.1 million, which represents a tax rate of 24.3%. Our effective tax rate increased from 19.3% in 2020 primarily due to a change in the country mix of our taxable income.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
The following discussion and analysis contains information regarding our results of operations for the year ended December 31, 2020, as compared to the year ended December 31, 2019:
Year Ended December 31, | Change |
| |||||||
Consolidated Statement of Profit and Loss Data | 2020 |
| 2019 |
| € |
| % |
| |
(in thousands of euros, except for percentages) |
| ||||||||
Continuing Operations | |||||||||
Net revenue | 5,340,038 |
| 5,098,691 |
| 241,347 |
| 4.7 | % | |
Cost of sales | (3,084,873) |
| (2,757,459) |
| (327,414) |
| 11.9 | % | |
Gross margin | 2,255,165 |
| 2,341,232 |
| (86,067) |
| (3.7) | % | |
Research and development |
| (294,216) |
| (276,018) |
| (18,198) |
| 6.6 | % |
Selling, general and administration expenses |
| (985,616) |
| (942,821) |
| (42,795) |
| 4.5 | % |
Operating expenses |
| (1,279,832) |
| (1,218,839) |
| (60,993) |
| 5.0 | % |
Profit/(loss) of equity accounted investees with similar activity to that of the Group |
| 20,799 |
| 8,972 |
| 11,827 |
| 131.8 | % |
Operating result |
| 996,132 |
| 1,131,365 |
| (135,233) |
| (12.0) | % |
Finance income |
| 8,021 |
| 114,197 |
| (106,176) |
| (93.0) | % |
Finance costs |
| (249,639) |
| (342,965) |
| 93,326 |
| (27.2) | % |
Change in fair value of financial instruments |
| 55,703 |
| 1,326 |
| 54,377 |
| 4,100.8 | % |
Impairment of financial assets at amortized cost |
| — |
| (37,666) |
| 37,666 |
| (100.0) | % |
Exchange differences |
| 8,246 |
| (9,616) |
| 17,862 |
| (185.8) | % |
Finance result |
| (177,669) |
| (274,724) |
| 97,055 |
| (35.3) | % |
Profit/(loss) of equity accounted investees |
| 60,166 |
| (39,538) |
| 99,704 |
| (252.2) | % |
Profit before income tax from continuing operations |
| 878,629 |
| 817,103 |
| 61,526 |
| 7.5 | % |
Income tax expense |
| (169,639) |
| (168,459) |
| (1,180) |
| 0.7 | % |
Profit after income tax from continuing operations |
| 708,990 |
| 648,644 |
| 60,346 |
| 9.3 | % |
Consolidated profit for the year |
| 708,990 |
| 648,644 |
| 60,346 |
| 9.3 | % |
Net Revenue
Net revenue is calculated by subtracting certain chargebacks, cash discounts, volume rebates, Medicare and Medicaid discounts and other discounts from our gross revenue. See Note 24 to our audited consolidated financial statements included in this annual report on Form 20-F.
Net revenue increased by €241,347 from €5.1 billion in 2019 to €5.3 billion in 2020. This 4.7% (6.1% at constant currency) net revenue increase is the result of growth in the Bioscience and Diagnostic divisions, where the contribution of new products accounted for more than 50% of revenue growth.
The following table reflects a summary of net revenue by each of our divisions for 2020, as compared to 2019:
Year ended | Year ended |
| |||||||||||
December 31, | % of total | December 31, | % of total |
|
85
Summary of Net Revenue by Division | 2020 | net revenue | 2019 | net revenue | % var | % var CC(1) |
| ||||||
(in thousands of euros, except for percentages) |
| ||||||||||||
Bioscience |
| 4,242,502 |
| 79.5 | % | 3,993,462 |
| 78.3 | % | 6.2 | % | 7.6 | % |
Diagnostic |
| 775,889 |
| 14.5 | % | 733,604 |
| 14.4 | % | 5.8 | % | 7.3 | % |
Hospital |
| 118,675 |
| 2.2 | % | 134,441 |
| 2.6 | % | (11.7) | % | (10.3) | % |
Bio Supplies |
| 224,090 |
| 4.2 | % | 266,540 |
| 5.2 | % | (15.9) | % | (15.3) | % |
Others |
| 31,989 |
| 0.6 | % | 22,820 |
| 0.5 | % | 40.2 | % | 40.4 | % |
Intersegments |
| (53,107) |
| (1.0) | % | (52,176) |
| (1.0) | % | 1.8 | % | (2.7) | % |
Total |
| 5,340,038 |
| 100.0 | % | 5,098,691 |
| 100.0 | % | 4.7 | % | 6.1 | % |
(1) | Net revenue variance in constant currency is determined by comparing adjusted current period net revenue, calculated using prior period monthly average exchange rates, to the prior period net revenue. See “Presentation of Financial and Other Information—Constant Currency.” |
Bioscience. Net revenue for the Bioscience Division increased by 6.2% (7.6% at constant currency) from €4.0 billion in 2019 to €4.2 billion in 2020. This increase was primarily due to an upturn in immunoglobulins sales in countries including the United States and Canada, an increase in albumin sales, particularly in the United States and China, and the strong contribution of new products like Xembify®, VistasealTM and Tavlesse®.
Immunoglobulins sales remain strong, achieving double-digit growth thanks to solid demand in markets with high per capita consumption, namely, the U.S. and Canada, and several countries in the European Union and Latin America. Grifols has a range of immunoglobulins for both intravenous and subcutaneous administration (Xembify®) to adapt to patients’ diverse needs. Albumin sales also remain strong amid positive growth in the U.S., Canada and China.
Despite the pandemic, alpha-1 antitrypsin revenues continue to grow in the U.S. and Canada, its core markets. Grifols continued to enhance its portfolio in 2020, integrating new products and presentations, including the FDA-approved Prolastin®-C Liquid in 0.5-gram and 4-gram vials. We currently have three presentations to offer patients more treatment alternatives.
In terms of new product launches, of note are the robust sales of the biological sealant, developed and manufactured by Grifols using a combination of two plasma proteins (fibrinogen and thrombin) to control surgical bleeding. Launched in the last quarter of 2019, the product is sold and distributed by Ethicon under the trade name VistasealTM. Also worth highlighting is the market launch of Tavlesse® (fostamatinib) in specific European countries. Sold under an agreement with Rigel Pharmaceuticals, this product is used to treat chronic immune thrombocytopenia (“ITP”) in adult patients who are refractory to other treatments.
Diagnostic. Diagnostic Division net revenue increased by 5.8% (7.3% at constant currency) from €733.6 million in 2019 to €775.9 million in 2020. This increase was primarily due to a significant increase in sales, particularly in Spain, of its TMA (Transcription-Mediated Amplification) molecular test to detect the SARS-CoV-2 virus. TMA is a commonly used technique known for its high sensitivity and capacity to automate large sample volumes.
Sales of Procleix® NAT Solutions, used to analyze blood donations, were also strong in Japan, Australia, the Philippines and Bulgaria, among other countries. These systems are able to screen for a diversity of pathogens, including the human immunodeficiency virus (HIV), hepatitis viruses (A, B, C and E), West Nile virus, Zika, dengue and the causative agents of babesiosis.
The blood-typing line maintains its upward trend in the U.S. and Latin America, where sales continued to grow in countries such as Argentina. Sales include both analyzers (Erytra®, Erytra Eflexis® and Wadiana®) and reagents (DG-Gel® cards, red blood cells and anti-serums).
Hospital. Net revenue from the Hospital Division decreased by 11.7% (10.3% at constant currency) from €134.4 million in 2019 to €118.7 million in 2020. This decrease was primarily due to impact of COVID-19, which caused a slowdown in certain hospital investments and treatments.
We are a leading supplier of technology and services for hospitals, clinics and specialized centers. Its leading-edge automated compounding device (KIRO Fill®) and next-generation suite of web- and mobile-based applications (PharmacyKeeper) optimize
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hospital-pharmacy operations and enhance patient safety by affording greater accuracy and safety in the preparation of intravenous (IV) medications. These advancements improve patient safety and reduce reliance on manual processes.
Our Pharmatech business line offers comprehensive solutions to enhance hospital pharmacy operations, including the inclusiv® product portfolio, comprised by equipment, software and solutions to improve the safety and quality of sterile compound preparations. The division also consolidated sales of its MedKeeper® and Kiro Grifols® technological solutions.
Bio Supplies. Net revenue from Bio Supplies decreased by 15.9% (15.3% at constant currency) from €266.5 million in 2019 to €224.1 million in 2020 mainly as a result of a drop in third-party plasma sales, stemming mainly from the roll-off of specific third party plasma sales contracts. As planned, this will enable Grifols to increase its plasma volume to fuel the growth of plasma-derived therapies.
The following table reflects a summary of net revenue by each of our geographic regions for 2020 as compared to 2019:
Year ended | Year ended |
| |||||||||||
December 31, | % of total | December 31, | % of total |
| |||||||||
Summary of Net Revenue by Region | 2020 | net revenue | 2019(3) | net revenue | % var | % var CC(1) |
| ||||||
(in thousands of euros, except for percentages) |
| ||||||||||||
European Union(2) |
| 834,492 |
| 15.6 | % | 799,460 |
| 15.7 | % | 4.4 | % | 4.5 | % |
United States and Canada |
| 3,599,746 |
| 67.4 | % | 3,390,811 |
| 66.5 | % | 6.2 | % | 7.1 | % |
Rest of the World |
| 905,800 |
| 17.0 | % | 908,420 |
| 17.8 | % | (0.3) | % | 3.4 | % |
Total |
| 5,340,038 |
| 100.0 | % | 5,098,691 |
| 100.0 | % | 4.7 | % | 6.1 | % |
(1) | Net revenue variance in constant currency is determined by comparing adjusted current period net revenue, calculated using prior period monthly average exchange rates, to the prior period net revenue. See “Presentation of Financial and Other Information—Constant Currency.” |
(2) | Net revenue earned in the European Union includes net revenue earned in Spain. |
(3) | For comparison purposes, 2019 U.K. figures have been reclassified from European Union to Rest of the World. |
We believe that our ongoing internationalization has helped to improve our sales performance. We have seen a stabilization in the proportion of net revenue to total net revenue accounted for by Spain, as we continue to focus on increasing sales in regions less affected by austerity measures, with shorter payment periods and better margins. In 2020, 93.6% of net revenue, or €5.0 billion, was derived from countries outside of Spain. International expansion remains a strategic priority to stimulate our organic growth, although each division focuses on specific markets and distinct strategies to optimize sales.
Revenues in the U.S. and Canada grew by 6.2% (7.1% at constant currency) in 2020 as compared to 2019 to €3.6 billion. Meanwhile, sales in the European Union rose by 4.4% (4.5% at constant currency) to €834.5 million between the same periods, led by growth in countries like Spain, Italy, Germany and France. Sales in Rest of the World decreased by 0.3% (increased by 3.4% at constant currency) in 2020 as compared to 2019 to €905.8 million.
Cost of sales
Cost of sales increased by 11.9% from €2.8 billion in 2019 to €3.1 billion in 2020. Cost of sales as a percentage of net revenue increased to 57.8% compared to 54.1% in 2019. This was mainly due to the €205 million impact to adjust Grifols’ inventory value (non-cash), mainly as a result of the effects of the COVID-19 pandemic. See Item 4 of this Part I, “Information on the Company—B. Business Overview—Raw Materials.”
Gross Margin
The decrease in gross margin from 45.9% of net revenue in 2019 to 42.2% in 2020 was mainly due to the aforementioned €205 million impact booked in Cost of sales.
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Research and development
Research and development spending increased from €276.0 million (5.4% of net revenue) in 2019 to €294.2 million (5.5% of net revenue) in 2020. See Item 4 of this Part I, “Information on the Company—B. Business Overview—Research and Development” for additional details.
Selling, general and administration expenses
Selling, general and administration expenses increased by 4.5% from €942.8 million in 2019 to €985.6 million in 2020 mainly as a result of growth in our operating activity, including through the integration of new companies, such as Alkahest and Green Cross.
Finance result
Finance costs decreased by 35.3% from €274.7 million in 2019 to €177.7 million in 2020. This decrease was primarily a result of the completion of the debt-refinancing process in November 2019, a positive €18 million impact from exchange rate differences, and €57 million in capital gains following the closing of the Shanghai RAAS transaction in the first quarter of 2020. See Notes 11 and 27 to our audited consolidated financial statements included in this annual report on Form 20-F for more information regarding our Finance Result.
Income tax expense
In 2020, we had a profit before income tax of €878.6 million and income tax expense of €169.6 million, which represents a tax rate of 19.3%. Our effective tax rate decreased from 20.6% in 2019 primarily due to a change in the country mix of our taxable income.
Regulation
For detailed information regarding the regulations applicable to our business, see Item 4 of this Part I, “Information on the Company—E. Regulatory Matters.”
Inflation
We historically have not been affected materially by inflation in our core geographies.
B. | Liquidity and Capital Resources |
Our principal liquidity and capital requirements consist of costs and expenses relating to:
· | the operation of our business (see “—Operating Results,” “—Liquidity and Capital Resources—Net Cash from Operating Activities” and “—Working Capital” for a description and quantification of costs and expenses relating to our operations); |
· | capital expenditures for existing and new operations (see “—Capital Expenditures” for a description and quantification of our capital expenditures, including capital expenditures on other intangible assets and rights of use additions, incurred in each of the years ended December 31, 2021, 2020 and 2019, as well as our planned capital expenditures for 2022 and 2023); |
· | the purchase price of acquisitions (see “—Recent Developments” and “—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions” for a description of our most recent acquisitions); and |
· | debt service requirements relating to our existing and future debt (see “—Sources of Credit” for a description and quantification of our principal indebtedness). |
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Historically, we have financed our liquidity and capital requirements through internally generated cash flows, mainly attributable to revenue and debt financings. As of December 31, 2021, our cash and cash equivalents totaled €655.5 million. In addition, as of December 31, 2021, we had the equivalent €622.0 million available under our debt agreements, including the equivalent of €534.4 million available as Revolving Loans under our First Lien Credit Facilities.
We expect our cash flows from operations combined with our cash balances and availability under the Revolving Loans from the First Lien Credit Facilities to provide sufficient liquidity to fund our current obligations (primarily debt service and acquisition payments as described above), projected working capital requirements and capital expenditures for at least the next twelve months. Currently, we do not generate significant cash in any country that might have restrictions for funds repatriation, and we estimate that the existing cash located in Ireland, Spain and the United States, along with the cash generated from operations, will be sufficient to meet future cash needs in key countries.
We are committed to deleveraging in the medium term and maintaining elevated and adequate levels of liquidity through (i) internally generated cash flows, and (ii) a substantial decrease in dividend payments in the medium term. We also do not envision any material acquisitions in the medium term.
Our capital expenditures consist primarily of expanding and enhancing our production facilities, replacing fully depreciated items and promoting efficiency of our operations. In addition, we allocate cumulative industrial capital investments to expand the manufacturing capacities of the Bioscience Division, as well as investments in the Diagnostic and Hospital divisions, with the goal of improving the structure of our plasma collection centers in the United States and expanding our manufacturing facilities. We are also expanding and relocating plasma donation centers and improving infrastructures related to raw materials classification, preparation and storage facilities, logistics centers and analysis laboratories.
Our principal existing contractual obligations as of December 31, 2021 are comprised of financial debt obligations, with principal and interest amortization for short- and long-term debt including, among other things, capitalized lease obligations and bilateral credit facilities bearing interest at market rate. In addition, on October 5, 2021, we entered into three cross-currency interest rate swaps of $500 million to hedge part of the Euro equivalent value of the 2021 Notes (see “—Sources of Credit” above and Notes 21 and 30 to our audited consolidated financial statements included in this annual report on Form 20-F for further discussion regarding our debt obligations and related interest rate agreements outstanding at December 31, 2021). We have contractual obligations involving future payments for licenses and royalties based generally on volume of sales.
Historical Cash Flows
The table below presents our net cash from operating, investing and financing activities for each of the years ended December 31, 2021, 2020 and 2019.
Year Ended December 31, | ||||||
2021 | 2020 | 2019 | ||||
(in thousands of euros) | ||||||
Net cash from operating activities |
| 596,975 |
| 1,110,336 |
| 568,933 |
Net cash (used in) investing activities |
| (854,149) |
| (858,115) |
| (548,789) |
Net cash from/(used in) financing activities |
| 2,297,679 |
| (354,401) |
| (332,356) |
Net Cash from Operating Activities
In the year ended December 31, 2021, we generated net cash from operating activities of €597 million. The principal effects on working capital were as follows:
· | increase of €16.8 million in trade and other receivables. The average collection period increased to 32 days (27 days in 2020); |
· | increase of €157.5 million in inventory levels primarily due to an increase in period-to-period plasma volume collections through strategic acquisitions during 2021 and to the increase in the cost of plasma. Inventory turnover was 278 days at December 31, 2021, compared with 237 days reported at December 31, 2020; and |
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· | decrease of €40.4 million in trade payables. The average payment period decreased from 71.6 days at December 31, 2020 to 65.7 days at December 31, 2021. |
In the year ended December 31, 2020, we generated net cash from operating activities of €1.1 billion. The principal effects on working capital were as follows:
· | increase of €40.3 million in trade receivables. The average collection period remained stable at 27 days (26 days in 2019); |
· | decrease of €164.6 million in inventory levels due to lower plasma collections and higher inventory utilization for the production of plasma-derived medicines during 2020, partially offset by the increase in the cost of plasma. Inventory turnover was 237 days at December 31, 2020, compared with 310 days reported at December 31, 2019; and |
· | increase of €34.2 million in trade payables. The average payment period increased from 60 days at December 31, 2019 to 62 days at December 31, 2020. |
In the year ended December 31, 2019, we generated net cash from operating activities of €568.9 million. The principal effects on working capital were as follows:
· | increase of €98.8 million in trade receivables. The average collection period remains stable at 26 days (22 days in 2018); |
· | increase of €323.7 million in inventory levels due to the implementation of several strategic initiatives to better anticipate and meet the robust demand for plasma-derived products. Inventory turnover was 310 days at December 31, 2019, compared with 292 days reported at December 31, 2018; and |
· | decrease of €2.0 million in trade payables, while the average payment period decreased from 65 days at December 31, 2018 to 60 days at December 31, 2019. |
Net Cash from/(Used) in Investing Activities
Net cash used in investing activities amounted to €854.1 million in 2021, €858.1 million in 2020 and €548.8 million in 2019.
Investments made in 2021 included the acquisition of 25 plasma collection centers from BPL for $370 million, seven plasma collection centers from Kedplasma, LLC for $55.2 million, the first payment related to the acquisition of GigaGen for an amount of €38.2 million and the remaining payment for the Alkahest acquisition of $126 million. In addition to the aforementioned acquisitions, we invested €315.1 million in property, plant and equipment and other intangibles in 2021. See “—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions.”
Investments made in 2020 included the acquisition of Green Cross Biotherapeutics and Green Cross North America for $457.2 million (€387.9 million) and the remaining payment for the MedKeeper acquisition of $60.2 million (€51.2 million). We also invested €363 million in property, plant and equipment and other intangibles in 2020.
Investments made in 2019 included the acquisition of the remaining 51% stake in Interstate Blood Bank Group for €89 million, the acquisition of four plasma collection centers from Kedrion GmBH for €20.5 million, and €412 million invested in property, plant and equipment and other intangibles.
Net Cash from/(Used) in Financing Activities
Net cash from financial activities was €2,297.7 million in 2021, primarily as a result of the issuance of the 2021 Notes to finance the Biotest AG acquisition, in the amounts of €1,400,000,000 and $705,000,000 (see “—B. Liquidity and Capital Resources—Sources of Credit—The 2021 Notes.”), and dividend payouts of €259 million. On the other hand, sale of investments includes the
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Biomat Transactions, under which we received a $990 million investment in our subsidiary Biomat USA. See “—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Dispositions.”
Net cash used in financial activities was €354.4 million in 2020, primarily as a result of dividend payments of €113.2 million, net payments related to financial instruments amounting to €243.4 million, including debt repayment of €152.0 million, and lease payment of €78.9 million.
Net cash used in financial activities was €332.4 million in 2019, primarily as a result of dividend payouts of €238.7 million and €84.4 million of fees related to the refinancing.
Working Capital
Our working capital, which is driven primarily by our trade receivables turnover and inventory aging, can vary significantly from period to period depending on the activity. Our capital requirements will depend on many factors, including our rate of sales growth, acceptance of our products, continued access to adequate manufacturing capacities, maintaining cGMP compliant facilities, the timing and extent of research and development activities, and changes in operating expenses, including costs of production and sourcing of plasma, all of which are subject to uncertainty. We anticipate that our cash needs will be significant and that we may need to increase our borrowings under current or future debt agreements in order to fund our operations and strategic initiatives. We anticipate that our working capital will increase in absolute terms in order to grow our business.
Inventory Aging
Inventory aging average decreased from 2019 to 2020, as a result of the adverse impact of the COVID-19 pandemic on plasma volumes collected during the year. Inventory turnover decreased to 237 days at December 31, 2020, compared to 310 days at December 31, 2019.
Inventory aging average increased from 2020 to 2021, primarily as a result of larger plasma volume collections driven by recent strategic acquisitions during 2021 and an increase in the cost of plasma. Inventory turnover increased to 278 days at December 31, 2021, compared to 237 days at December 31, 2020.
See Item 4 of this Part I, “Information on the Company—B. Business Overview—Raw Materials” for additional details.
Trade Receivables
Our receivables had an aging average of 32, 27 and 26 days at December 31, 2021, 2020 and 2019, respectively. We are focused on optimizing our working capital.
We may sell receivables with a maturity beyond 30 days to financial institutions without recourse. We sold €2,975.3 million, €2,736 million and €1,593 million of receivables to third parties during the years ended 2021, 2020 and 2019, respectively. The volume of invoices sold without recourse to various financial institutions which, based on their due date would not have been collected at December 31, 2021, is estimated to €325.7 million (€441.9 million at December 31, 2020 and €466.0 million at December 31, 2019).
Capital Expenditures, Other Intangible Assets and Rights of Use
The following table presents our capital expenditure, other intangible assets and rights of use additions in the years ended December 31, 2021, 2020 and 2019, by division.
Year Ended December 31, | ||||||
2021 | 2020 | 2019(1) | ||||
(in thousands of euros) | ||||||
Bioscience Division |
| 349,890 |
| 289,062 |
| 868,103 |
Hospital Division |
| 12,616 |
| 11,548 |
| 62,298 |
Diagnostic Division |
| 19,991 |
| 34,516 |
| 103,911 |
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Bio Supplies |
| 13,836 |
| 10,915 |
| 65,448 |
Others |
| 15,981 |
| 1,150 |
| 1,768 |
Unallocated |
| 55,380 |
| 107,178 |
| 73,544 |
Total |
| 467,694 |
| 454,369 |
| 1,175,072 |
(1) | The 2019 totals include €747.9 million related to rights of use as a result of the new accounting standard. For more information see IFRS 16 “Leases.” |
January 2019 through December 2021
Facilities. The most important capital projects relating to the expansion and improvement of our manufacturing facilities during 2019, 2020 and 2021 were:
Parets site (Barcelona, Spain):
· | investments to increase purification capacity of fibrin sealant and topic thrombin of €19.8 million in 2019, €3.2 million in 2020 and €1.9 million in 2021; |
· | investments in a plant to manufacture Prolastin-C® of €1.8 million in 2019 and €1.3 million in 2020; |
· | investments to increase the albumin purification capacity of €2.1 million in 2019 and €0.1 million in 2020; |
· | investments to increase Factor VIII manufacturing capacity of €1.6 million in 2019 and €1.0 million in 2021; |
· | investments to increase the production of intravenous solutions bags of €0.7 million in 2019, €2.0 million in 2020 and €3.4 million in 2021; |
· | investments to improve the manufacturing lines of the production of intravenous solutions in glass blottles in the Parets facility of €1.3 million in 2021; and |
· | investments of €0.1 million in 2019, €2.3 million in 2020 and €4.2 million in 2021 to build the extension of the existing Grifols International builing and 2-8ºC chamber for 2,000 pallets. |
Clayton site (North Carolina, United States):
· | construction of a new immunoglobulins purification and filling plant for €33.4 million in 2019, €65.8 million in 2020 and €23.3 million in 2021; |
· | construction of a new 6 million liter fractionation plant for €31.2 million in 2019, €10.4 million in 2020 and €2.4 million in 2021; |
· | investments to expand packaging incubators for €1.1 million in 2020 and €2.0 million in 2021; |
· | investments of €2.9 million in 2019 and €0.4 million in 2020 for the construction of a finished goods warehouse with the capacity to store 6,000 pallet positions; |
· | construction of a Plasma Logistic Center for €0.1 million in 2019, €8.4 million in 2020 and €1.7 million in 2021 to increase the overall plasma storage capacity; and |
· | expansion of Grifols’ current waste water pretreatment plant in Clayton to meet Town of Clayton permit limits for €1.9 million in 2019, €6.2 million in 2020 and €11.1 million in 2021. |
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Los Angeles (California, United States):
· | increasing our albumin purification capacity and including a new presentation in ready-to-use flexible bags for €0.3 million in 2019, €1.0 million in 2020 and €1.5 million in 2021; and |
· | investments to increase Factor VIII manufacturing capacity of €0.3 million in 2019; €0.7 million in 2020 and €0.3 million in 2021. |
Dublin (Ireland):
· | investments to build a new headquarters, global operations and logistics center to serve as part of the new global operations center of the Bioscience Division of €3.4 million in 2019, €4.8 million in 2020 and €0.8 million in 2021; and |
· | investment in a new albumin purification and filling plant for bags of €42.8 million in 2019, €21.7 million in 2020 and €33.0 million in 2021. |
Montreal (Canada):
· | investment of €11.3 million in 2021 to remodel Canada facility for fractionation increase, Albumin manufacturing and Gamunex addition. |
San Diego (California, United States):
· | investments of €6.8 million in 2019, €1.1 million in 2020 and €0.5 million in 2021 to expand manufacturing capacity for our NAT Diagnostic business, including quality control, research and development labs and an RD pilot plant; and |
· | investments of €0.2 million in 2019, €0.5 million in 2020 and €3.0 million in 2021 to build a new immunohematology manufacturing facility in building 10895. |
Emeryville (California, United States):
· | investments of €0.4 million in 2019, €7.3million in 2020 and €4.4 million in 2021 for the new protein manufacturing process and scale up labs based on mammalian cell cultures; and |
Other Investments. Other relevant capital projects relating to the expansion and improvement of our manufacturing facilities during 2019, 2020 and 2021 were:
· | investments in serialization to enhance manufacturing and packaging identification of €4.4 million in 2019, €1.9 million in 2020 and €1.2 million in 2021; |
· | investments in new donor centers and donor center expansions in the United States of €7.9 million in 2019, €6.0 million in 2020 and €39.9 million in 2021; |
· | investments of €7.6 million in 2019, €9.7 million in 2020 and €8.1 million in 2021, to expand our overall lab testing capacity; |
· | investments for a new data center building in Los Angeles to support all IT services and to address current risks with the existing data center for €0.1 million in 2019, €1.0 million in 2020 and €1.7 million in 2021; |
· | Spain: investments of €1.6 million in 2019, €0.6 million in 2020 and €0.3 million in 2021 to increase the capacity to manufacture parenteral solutions by approximately eight million units, reaching approximately 60 million units of |
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total capacity. This increase will allow Grifols to produce a big portion of the anticoagulant solution required for plasma donations, following the vertical integration strategy for Bioscience business;
· | investments of €2 million in 2020 and €1.7 million in 2021 to increase our plastic manufacturing capacity and create vertical integration for the group with synergies between the Bioscience and Hospital divisions; |
· | investments of €2.7 million in 2019, €9.4 million in 2020 and €3.0 million in 2021 for acquisition of a new plot next to our Barcelona manufacturing facilities of 79,180 square meters that will be used to grow our industrial and research capabilities, adding to the current Grifols workforce in the region by more than 3,500 employees; |
· | investments to remodel our commercial offices worldwide of €0.7 million in 2019, €1 million in 2020 and €1.9 million in 2021, including new offices in Beijing, Singapore, Chile, Marseille, Mexico, Tokyo, Czech Republic, Shanghai and a new warehouse in the U.K.; |
· | investments to update manufacturing facilities to EMA regulation related to the manufacturing of sterile medicinal products of €2.6 million in 2019, €3.3 million in 2020 and €4.6 million in 2021; and |
· | investments to increase our IVIG purification capacity of €2.7 million in 2019, €3.3 million in 2020 and €1.2 million in 2021. |
January 2022 through December 2023
Pursuant to the Hologic transaction, which was completed on January 31, 2017, we acquired a facility located in San Diego, California. At the San Diego facility, we manufacture oligos and reagents for the Transcripted Mediated Amplification NAT kits for blood and plasma infectious diseases screening. In that facility, we are also going to create new areas manufacturing immunohematology reagent and kits. In our Emeryville site, we are also investing in expanding our Mammalian manufacturing areas by adding new capabilities for the synthesis of recombinant protein.
We are undertaking a €1.4 billion investment plan from 2018 through 2022 that involves, among other investments, cumulative industrial capital investments to expand the manufacturing capacities of the Bioscience Division, as well as investments in the Diagnostic and Hospital divisions.
The majority of our investments benefit our Bioscience Division, with the goal of improving the structure of our plasma collection centers in the United States and expanding our manufacturing facilities. We aim to optimize utilization of our fractionation capacity by obtaining FDA and EMA licenses and completing other requirements to purify any of our intermediate products at any of our plants.
We are also expanding and relocating plasma donation centers and improving infrastructures related to raw materials classification, preparation and storage facilities, logistics centers and analysis laboratories. As of December 31, 2021, we had 366 operational plasma collection centers and plan to have 520 approved plasma collection centers globally by 2026.
With our acquisition of German company Haema, we have recovered the ability to have plasma collection centers in Europe as we keep expanding our U.S. centers.
The most important planned capital projects relating to the expansion and improvement of our manufacturing facilities are:
· | Clayton: new quality control labs and completion of our new purification and finish facility for 6 million liters plasma equivalent; |
· | Murcia: investments to increase our plastic manufacturing capacity; |
· | Dublin: completion of a purification, fill and finish plant for albumin; |
· | Emeryville: new manufacturing areas for Mammalian cells; |
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· | San Diego: expansion of blood testing systems and immunohematology; |
· | Montreal: new building for plasma fractionation and purification; |
· | Barcelona: construction of a new corporate building in Barcelona with an underground connection to unify the corporate site; |
· | construction of new plasma collection centers as well as further relocation and renovation of our existing centers; |
· | Andorra: new inmunology research center in Andorra; and |
● | Lliҫà utilities and land adequation of the acquired plots in Lliҫà, Spain, between 2019 and 2022. |
Sources of Credit
European Investment Bank Term Loans
On October 28, 2015, GWWO entered into a loan agreement with the European Investment Bank for a term loan of €100 million under the European Fund for Strategic Investments (the “2015 EIB Term Loan”), which was amended on December 5, 2017. The financial terms of the loan agreement include a fixed interest rate of 2.40% for a tenor of ten years from October 28, 2015, and a repayment schedule with amortization in years three through ten. The proceeds of this loan are being used to support our research and development, primarily focusing on the search for new indications for plasmatic proteins, including the treatment of Alzheimer’s disease, vascular disease, cardiovascular surgery and arterial thrombosis, amongst others.
On December 5, 2017, Grifols obtained a new long-term loan with the European Investment Bank totaling €85 million (the “2017 EIB Term Loan”). The financial terms of the loan include a fixed interest rate of 2.019% for a tenor of ten years and a two-year grace period before any payment of principal becomes due and payable. The proceeds of this loan are being used for research and development initiatives, notably the discovery and development of new products (plasma proteins), the finding of new therapeutic indications for existing plasma proteins and the improvement of manufacturing processes to increase yields, safety and efficiency.
On September 7, 2018, Grifols obtained a new long-term loan with the European Investment Bank totaling €85 million (the “2018 EIB Term Loan” and, together with the 2015 EIB Term Loan and the 2017 EIB Term Loan, the “EIB Term Loans”). The financial terms of the loan agreement include a fixed interest rate of 2.145% for a tenor of 10 years and a two-year grace period before any payment of principal becomes due and payable. The proceeds of this loan are being used for research and development initiatives, notably the discovery of new therapeutic indications for plasma-derived protein therapies.
The EIB Term Loans are secured by a perfected first priority security interest (subject to permitted liens, as defined in the documentation governing the EIB Term Loans) on the same collateral securing the First Lien Credit Facilities and the 2019 Notes, each as described below (noting that the blood plasma inventory of GWWO located in Spain is not charged to secure the 2019 Notes), subject to a customary pari passu intercreditor agreement entered into by and among Grifols, GWWO, certain subsidiaries of Grifols party thereto, the European Investment Bank, Bank of America, N.A., as collateral agent under the First Lien Credit Facilities and The Bank of New York Mellon, London branch, as collateral agent under the 2019 Notes.
We entered into an amendment to the EIB Term Loans on August 6, 2021 to permit (i) the consummation of the Biomat Transactions; and (ii) upon the consummation of the Biomat Transactions, the release of Biomat USA and Talecris from their respective guarantees provided under the corresponding guarantee agreement for the EIB Term Loans and that release the liens granted over the assets of Biomat USA and Talecris. The Biomat Transactions were consummated on December 1, 2021.
As of December 31, 2021, we had €180.6 million in aggregate principal amount outstanding of EIB Term Loans.
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First Lien Credit Facilities
On November 15, 2019, we entered into a Credit and Guaranty Agreement (the “First Lien Credit Facilities”) with a syndicate led by Bank of America Europe Designated Activity Company (formerly known as Bank of America Merrill Lynch International Limited Designated Activity Company), Bank of America, N.A., BNP Paribas S.A., Sucursal en España, HSBC France, Banco Bilbao Vizcaya Argentaria S.A., and JP Morgan Securities PLC, as the arrangers (the “Arranging Banks”), which consist of the “Term Loans” and the “Revolving Loans.” The initial Term Loans (consisting of a Dollar Tranche B Term Loan and a Euro Tranche B Term Loan) were fully drawn down on November 15, 2019. Both the Dollar Tranche B Term Loan (in original principal amount equal to $2,500,000,000) and the Euro Tranche B Term Loan (in original principal amount equal to €1,360,000,000) mature eight years from November 15, 2019 and have a repayment schedule with quarterly amortization starting on the last business day of the fiscal quarter ending on March 31, 2020, equal to 0.25% of the aggregate principal amount of the initial Dollar Tranche B Term Loan (or Euro Tranche B Term Loan, as the case may be) outstanding on November 15, 2019, with the remainder payable at maturity.
The Revolving Loans, which initially provided for a commitment of $500,000,000, are available during the period commencing from November 15, 2019 and ending on the sixth anniversary of November 15, 2019. On May 7, 2020, we signed an upsize to the Revolving Loans to increase the lender commitments thereunder from $500,000,000 to $1,000,000,000 with the existing and new revolving lenders. The terms and conditions of which are similar to those entered into on November 15, 2019. As part of the upsize, the applicable margin for Revolving Loans was increased from 0.50% to 1.50% in the case of Base Rate Loans and from 1.50% to 2.50% in the case of Eurocurrency Rate Loans. Additionally, the commitment fee payable in respect of the unused Revolving Commitments was increased from 0.50% to 0.875%. The purpose of the upsize of the Revolving Loans was to reinforce our liquidity position.
The borrower under the revolving facility is GWWO, an Irish entity and our wholly owned direct subsidiary. The borrower under the Euro denominated tranche B facility is Grifols. The borrower under the Dollar-denominated tranche B facility is Grifols Worldwide Operations USA, Inc. (“Grifols Worldwide Operations USA”), a Delaware corporation and a direct wholly owned subsidiary of GWWO. The First Lien Credit Facilities are governed by New York law; however, certain collateral documents are governed under the local law of other jurisdictions.
The interest rates on the Revolving Loans are either (a) the base rate (i.e., the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) (1) if denominated in dollars or any other non-Euro currency, the London Interbank Offered Rate, or LIBOR, with a one-month interest period plus 1.00% and (2) if denominated in Euros, the Euro interbank offered rate, or EURIBOR, with a one-month interest period plus 1.00%) plus 1.50% or (b) LIBOR (if denominated in dollars or any other non-Euro currency) or EURIBOR (if denominated in Euros) plus 2.50%. The interest rate on the Dollar Tranche B Term Loan is either (a) the base rate plus 1.00% or (b) LIBOR plus 2.00%. The interest rate on the Euro Tranche B Term Loan is EURIBOR plus 2.25%.
Borrowings under the First Lien Credit Facilities are subject to mandatory prepayment upon the occurrence of certain events, including the incurrence of certain debt and the sale or other disposition of certain assets. In addition, a portion of the borrowings under the First Lien Credit Facilities are subject to mandatory prepayment in the event we have excess cash flow, as defined therein. Both the Term Loans and the Revolving Loans are guaranteed by Grifols (solely in respect of the obligations of Grifols Worldwide Operations USA and GWWO) and certain subsidiaries of Grifols that together with Grifols represented, as of December 31, 2021, in aggregate, at least 70% of the earnings before interest, tax, depreciation and amortization of Grifols and its subsidiaries (calculated in accordance with the formula set forth in the First Lien Credit Facilities, the “Guarantor Coverage Test”), and are secured by a perfected first priority security interest (subject to permitted liens, as described in the First Lien Credit Facilities) in all of the tangible and intangible assets of the U.S. credit parties and plasma inventory of GWWO and pledges of equity of certain subsidiaries of Grifols (subject to certain exclusions and limitations). The First Lien Credit Facilities include customary affirmative and negative covenants and events of default. Negative covenants include, among other limitations, limitations on additional debt, liens, asset sales and affiliate transactions. Events of defaults include, among other events, violation of covenants, material breaches of representations, cross default to other material debt, bankruptcy and insolvency and material judgments.
The terms of the First Lien Credit Facilities contain limitations on our ability to pay ordinary dividends. We may pay dividends (a) in the ordinary course of business consistent with our dividend policy in an amount not to exceed in respect of any fiscal year, 40% of the consolidated net income of Grifols and its subsidiaries for such fiscal year, which may be paid in installments, the first, no earlier than December of such fiscal year and the last, no later than the following fiscal year or (b) whether or not in the ordinary course of business so long as after giving effect thereto, the leverage ratio is not greater than 3.75x. We may make regularly
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scheduled payments of interest in respect of the 2017 Notes and the Senior Refinancing Notes (as defined in the First Lien Credit Facilities) to the extent required by the terms of the indenture governing the 2017 Notes or the Senior Refinancing Notes Documents (as defined in the First Lien Credit Facilities), as the case may be.
The First Lien Credit Facilities and related security documents were amended on August 13, 2021 to (i) permit the consummation of the Biomat Transactions, (ii) reduce the Guarantor Coverage Test to 60%, and (iii) upon the consummation of the Biomat Transactions, release Biomat USA and Talecris from their respective guarantees provided under the First Lien Credit Facilities and release the liens granted over the assets of Biomat USA and Talecris.The Biomat Transactions were consummated on December 1, 2021, and we used part of the net proceeds therefrom to (i) prepay $600 million of principal amount of the Revolving Loans under the First Lien Credit Facilities, (ii) prepay $142,360,501.31 of the Dollar Tranche B Term Loans and (iii) prepay the Euro equivalent of $88,003,617.48 of the Euro Tranche B Term Loans.
As of December 31, 2021, we had €1,258.5 million and $2,359.5 million in aggregate principal amount outstanding of Term Loans, and €348 million in aggregate principal amount outstanding of Revolving Loans.
The 2017 Notes
On April 26, 2017, Grifols issued €1.0 billion aggregate principal amount of senior unsecured notes that will mature on May 1, 2025 and bear interest at 3.20% per annum (the “2017 Notes”). On May 2, 2017, the 2017 Notes were listed on the Global Exchange Market of the Irish Stock Exchange.
The 2017 Notes pay interest semi-annually in arrears on May 1 and November 1, commencing on November 1, 2017. The 2017 Notes are currently guaranteed on a senior unsecured basis by Grifols and the subsidiaries of Grifols that are guarantors and co-borrowers under the First Lien Credit Facilities. As of the date of this annual report on Form 20-F, the 2017 Notes are guaranteed by Grifols Biologicals LLC, Grifols Shared Services North America, Inc., Grifols Therapeutics LLC, Instituto Grifols, S.A., Grifols International S.A., Grifols USA, LLC, GWWO and Grifols Worldwide Operations USA.
We may redeem the 2017 Notes, in whole or in part, at any time on and after May 1, 2020, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the 2017 Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on May 1 of the years indicated below:
Fiscal Year |
| Percentage |
|
2022 and thereafter |
| 100.000 | % |
We are not required to make mandatory redemption or sinking fund payments with respect to the 2017 Notes.
If we experience a change of control, we must give holders of the 2017 Notes the opportunity to sell to us their 2017 Notes at 101% of their principal amount, plus accrued and unpaid interest.
Grifols and the guarantors of the 2017 Notes may incur additional indebtedness if the fixed charge coverage ratio (as defined in the indenture governing the 2017 Notes) for Grifols and the restricted subsidiaries (as defined in the indenture governing the 2017 Notes) on a consolidated basis for the most recently ended four full fiscal quarters immediately preceding the date on which such additional indebtedness is incurred would have been at least 2.00 to 1.00, determined on a pro forma basis.
The indenture governing the 2017 Notes contains certain covenants limiting, subject to exceptions, carve-outs and qualifications, Grifols’ ability and its restricted subsidiaries’ ability to: (i) pay dividends or make certain other restricted payments or investments; (ii) incur additional indebtedness or provide guarantees of indebtedness and issue disqualified stock; (iii) create liens on assets; (iv) merge, consolidate, or sell all or substantially all of our and our restricted subsidiaries’ assets; (v) enter into certain transactions with affiliates; (vi) create restrictions on dividends or other payments by our restricted subsidiaries; and (vii) create guarantees of indebtedness by restricted subsidiaries. The indenture also contains certain customary events of default.
On August 6, 2021, we entered into an indenture supplement amending the indenture governing the 2017 Notes to (i) permit the consummation of the Biomat Transactions, and (ii) upon the consummation of the Biomat Transactions, release Biomat USA and
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Talecris from their guarantees provided under the indenture governing the 2017 Notes. The Biomat Transactions were consummated on December 1, 2021.
The 2019 Notes
On November 15, 2019 Grifols issued €905.0 million senior secured notes that will mature on February 15, 2025 and bear interest at 1.625% per annum (the “1.625% Notes”) and €770.0 million senior secured notes that will mature on November 15, 2027 and bear interest at 2.250% per annum (the “2.250% Notes” and together with the 1.625% Notes, the “2019 Notes”).
The 2019 Notes are currently guaranteed on a senior secured basis by the wholly-owned subsidiaries of Grifols that are guarantors and co-borrowers under the First Lien Credit Facilities and the EIB Term Loans. As of the date of this annual report on Form 20-F, the 2019 Notes are guaranteed by Grifols Biologicals LLC, Grifols Shared Services North America, Inc., Grifols Therapeutics LLC, Instituto Grifols, S.A., Grifols International S.A., Grifols USA, LLC, GWWO and Grifols Worldwide Operations USA. Subject to permitted liens, all obligations under the 2019 Notes, and the guarantees of those obligations, are secured on a first-priority basis by the tangible and intangible assets of the domestic guarantors, the blood plasma inventory of GWWO (with the exception of blood plasma inventory located in Spain) and pledges of equity of certain subsidiaries of Grifols (subject to certain exclusions and limitations). The collateral securing the 2019 Notes also secures the First Lien Credit Facilities and the EIB Term Loans, subject to the Intercreditor Agreement.
We are not required to make mandatory redemption or sinking fund payments with respect to the 2019 Notes.
If we experience a change of control, we must give holders of the 2019 Notes the opportunity to sell to us their 2019 Notes at 101% of their principal amount, plus accrued and unpaid interest.
Grifols and the guarantors of the 2019 Notes may incur additional indebtedness if the fixed charge coverage ratio (as defined in the indenture governing the 2019 Notes) for Grifols and the restricted subsidiaries (as defined in the indenture governing the 2019 Notes) on a consolidated basis for the most recently ended four full fiscal quarters immediately preceding the date on which such additional indebtedness is incurred would have been at least 2.00 to 1.00, determined on a pro forma basis.
The indenture governing the 2019 Notes contains certain covenants limiting, subject to exceptions, carve-outs and qualifications, Grifols’ ability and its restricted subsidiaries’ ability to: (i) pay dividends or make certain other restricted payments or investments; (ii) incur additional indebtedness or provide guarantees of indebtedness and issue disqualified stock; (iii) create liens on assets; (iv) merge, consolidate, or sell all or substantially all of our and our restricted subsidiaries’ assets; (v) enter into certain transactions with affiliates; (vi) create restrictions on dividends or other payments by our restricted subsidiaries; and (vii) create guarantees of indebtedness by restricted subsidiaries. The indenture also contains certain customary events of default.
On November 15, 2019 the 2019 Notes were listed on the Global Exchange Market of the Irish Stock Exchange.
On August 6, 2021, we entered into an indenture supplement amending the indenture governing the 2019 Notes to (i) permit the consummation of the Biomat Transactions, and (ii) upon the consummation of the Biomat Transactions, release Biomat USA and Talecris from their guarantees and collateral provided under the indenture governing the 2019 Notes. The Biomat Transactions were consummated on December 1, 2021, and, on December 2, 2021, we launched the Asset Sale Offer to repurchase up to a certain amount of the 2019 Notes. The Asset Sale Offer was concluded on January 11, 2022, and we repurchased the total principal amount of €97,535,000 (€67,144,000 of 1.625% Notes and €30,391,000 of 2.250% Notes). See “—A. Operating Results—Subsequent Events—Asset Sale Offer.”
A. The 1.625% Notes
The 1.625% Notes pay interest semi-annually in arrears on February 15 and August 15, commencing on February 15, 2020. Grifols may redeem the 1.625% Notes, in whole or in part, at any time on and after February 15, 2022 at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the 1.625% Notes redeemed, to the applicable redemption date (subject to the right of the holders of the 1.625% Notes on the relevant record date
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to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on February 15 of the years indicated below:
Fiscal Year |
| Percentage |
|
2022 |
| 100.8125 | % |
2023 |
| 100.40625 | % |
2024 and thereafter |
| 100.000 | % |
B. The 2.250% Notes
The 2.250% Notes pay interest semi-annually in arrears on May 15 and November 15, commencing on May 15, 2020. Grifols may redeem the 2.250% Notes, in whole or in part, at any time on and after November 15, 2022 at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the 2.250% Notes redeemed, to the applicable redemption date (subject to the right of the holders of the 2.250% Notes on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on November 15 of the years indicated below:
Fiscal Year |
| Percentage |
|
2022 |
| 101.125 | % |
2023 |
| 100.5625 | % |
2024 and thereafter |
| 100.000 | % |
We may redeem up to 40% of the outstanding 2.250% Notes with money raised in one or more equity offerings by Grifols at any time (which may be more than once) prior to November 15, 2022, as long as at least 50% of the aggregate principal amount of the 2.250% Notes issued remains outstanding immediately following any such offerings (excluding 2.250% Notes held by Grifols and its subsidiaries).
We may redeem some or all of the 2.250% Notes at any time prior to November 15, 2022 upon not less than 15 nor more than 60 days prior notice at a price equal to 100% of the principal plus a premium as defined under the indenture (computed using a discount rate equal to the Bund rate as of such redemption date plus 0.50%), plus accrued and unpaid interest, if any.
The 2021 Notes
On October 5, 2021, the Escrow Issuer, a newly formed wholly owned subsidiary of Grifols that does not hold or otherwise have any interest in any material assets, issued €1,400,000,000 senior notes that will mature on October 15, 2028 and bear interest at 3.875% per annum (the “Euro notes”) and $705,000,000 senior notes that will mature on October 15, 2028 and will bear interest at 4.750% per annum (the “Dollar notes” and together with the Euro notes, the “2021 Notes”). The 2021 Notes were issued to fund the acquisition of Tiancheng Holdings (and indirectly Biotest AG) and a voluntary tender offer for the shares in Biotest AG not owned by Tiancheng Holdings. See “—A. Factors Affecting Our Financial Condition and Results of Operations—Acquisitions—Biotest AG Acquisition.”
On the date of issuance of the 2021 Notes, the Escrow Issuer deposited the gross proceeds from the offering into segregated escrow accounts for the benefit of the holders of the 2021 Notes until such funds were released back to the Escrow Issuer on April 21, 2022 (the “Acquisition Escrow Release Date”) in connection with the consummation of the Biotest AG acquisition on April 25, 2022. Within 15 months from Acquisition Escrow Release Date, the Escrow Issuer will merge with and into the Company, with the Company as the surviving entity, and we will assume all the obligations of the Escrow Issuer under the 2021 Notes (the “Escrow Issuer Merger”).
Prior to the Escrow Issuer Merger, the 2021 Notes will remain general unsecured obligations of the Escrow Issuer unconditionally guaranteed by Grifols and each of our subsidiaries that guarantee the First Lien Credit Facilities. From and after the Acquisition Escrow Release Date, the 2021 Notes will be general unsecured obligations of the Escrow Issuer and will be unconditionally guaranteed by Grifols and our Subsidiaries that guarantee the obligations under the First Lien Credit Facilities (other than Tiancheng Holdings prior to the Transformation), GWWO and Grifols Worldwide Operations USA. Following the Transformation (the change of corporate type of Tiancheng Holdings from AG (stock corporation) to GmbH (limited liability
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company)), which will occur no later than 180 days after the Acquisition Escrow Release Date, Tiancheng Holdings will also become a guarantor of the 2021 Notes.
From and after the Escrow Issuer Merger, the 2021 Notes will be general unsecured obligations of Grifols and will be unconditionally guaranteed by our subsidiaries that guarantee the obligations under the First Lien Credit Facilities (other than Tiancheng Holdings prior to the Transformation), GWWO and Grifols Worldwide Operations USA.
The Escrow Issuer is not required to make mandatory redemption or sinking fund payments with respect to the 2021 Notes.
If we experience a change of control, we must give holders of the 2021 Notes the opportunity to sell to us their 2021 Notes at 101% of their principal amount, plus accrued and unpaid interest.
Following the Escrow Issuer Merger, Grifols and the guarantors of the 2021 Notes may incur additional indebtedness if the fixed charge coverage ratio (as defined in the indenture governing the 2021 Notes) for Grifols and the restricted subsidiaries (as defined in the indenture governing the 2021 Notes) on a consolidated basis for the most recently ended four full fiscal quarters immediately preceding the date on which such additional indebtedness is incurred would have been at least 2.00 to 1.00, determined on a pro forma basis.
The indenture governing the 2021 Notes contains certain covenants limiting, subject to exceptions, carve-outs and qualifications, Grifols’ ability and its restricted subsidiaries’ ability to: (i) pay dividends or make certain other restricted payments or investments; (ii) incur additional indebtedness or provide guarantees of indebtedness and issue disqualified stock; (iii) create liens on assets; (iv) merge, consolidate, or sell all or substantially all of our and our restricted subsidiaries’ assets; (v) enter into certain transactions with affiliates; (vi) create restrictions on dividends or other payments by our restricted subsidiaries; and (vii) create guarantees of indebtedness by restricted subsidiaries. The indenture also contains certain customary events of default.
On October 11, 2021 the 2021 Notes were listed on the Global Exchange Market of the Irish Stock Exchange.
A. The Dollar notes
The Dollar notes accrue interest at the rate of 4.750% per annum pay interest semi-annually in arrears on April 15 and October 15, commencing on April 15, 2022. We may redeem the Dollar notes, in whole or in part, at any time on and after October 15, 2024 at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the Dollar notes redeemed, to the applicable redemption date (subject to the right of holders of the Dollar notes on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
Fiscal Year |
| Percentage |
|
2024 |
| 102.375 | % |
2025 |
| 101.188 | % |
2026 and thereafter |
| 100.000 | % |
From and after the Escrow Issuer Merger and prior to October 15, 2024, we may redeem up to 40% of the aggregate principal amount of the Dollar notes at a redemption price equal to 104.750% of the principal amount thereof with an amount equal to or less than the net cash proceeds that we raise in one or more equity offerings, plus accrued and unpaid interest on such notes, if any, to, but not including, the redemption date.
B. The Euro notes.
The Euro notes accrue interest at the rate of 3.875% per annum pay interest semi-annually in arrears on April 15 and October 15, commencing on April 15, 2022. We may redeem the Euro notes, in whole or in part, at any time on and after October 15, 2024 at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the Euro notes redeemed, to the applicable redemption date (subject to the right of holders of the Euro notes on the relevant record
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date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
Fiscal Year |
| Percentage |
|
2024 |
| 101.938 | % |
2025 |
| 100.969 | % |
2026 and thereafter |
| 100.000 | % |
From and after the Escrow Issuer Merger and prior to October 15, 2024, we may redeem up to 40% of the aggregate principal amount of the Euro notes at a redemption price equal to 103.875% of the principal amount thereof with an amount equal to or less than the net cash proceeds that we raise in one or more equity offerings, plus accrued and unpaid interest on such notes, if any, to, but not including, the redemption date.
The Biomat Transactions
On December 1, 2021, we sold a minority equity interest in the Biomat Group to the GIC Investor. Specifically, the GIC Investor acquired 12.9% of Biomat Newco and 12.5% of Biomat USA. The purchase price received was $990 million.
As a result of the transaction, the GIC Investor received ten class B common shares of Biomat USA and nine class B common shares of Biomat Newco. These common shares are non-voting but have annual preferential dividends of $4,168,421.05 per share of Biomat USA and Biomat Newco. These preferential shares also granted the GIC Investor with redemption rights of up to one share per year beginning in 2023 at $52,105,263.16 per share. This investment was originally recorded as equity, but has been restated as debt in our consolidated financial statements for the year ended December 31, 2021. Together with the GIC Investor, we are analyzing the necessary modifications in the terms and conditions of the agreement in order to classify such investment as equity, thereby reflecting the initial will of the parties. The reclassification of the investment has not affected compliance with the covenants under our debt instruments. See “—A. Operating Results—Subsequent Events— Restatement of the GIC Investor’s Investment in Biomat USA and Biomat Newco” and “—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Dispositions—The Biomat Transactions.”
Other Debt
Certain other credit facilities and lease obligations are in place with various lenders and consist of long-term and short-term indebtedness of both us and Grifols subsidiaries. As of December 31, 2021, we had €219.3 million of aggregate short-term credit under these facilities. The short-term credit facilities have maturity dates occurring in the next 12 months.
C. | Research and Development, Patents and Licenses |
For detailed information regarding our research and development initiatives, see Item 4 of this Part I, “Information on the Company—B. Business Overview—Research and Development.”
D. | Trend Information |
Plasma-derived protein therapies are essential to extend and improve the lives of individuals suffering from chronic, acute and life-threatening conditions including infectious diseases, such as hepatitis, immunological diseases, such as multiple sclerosis, hemophilia, von Willebrand disease, liver dialysis and acute conditions such as burns and severe blood loss. For this reason, the administration of these products cannot be interrupted or postponed without putting patients’ lives at risk. This ensures a stable demand for such products. In addition, because of the nature of the diseases treated, the reimbursement rates for plasma derivative products in the United States are high. Any changes to such rates would likely elicit a strong lobbying response in the United States.
Based on MRB reports, sales in the human plasma-derived product industry have grown at a compound annual rate of 8.8% globally from 2000 to 2018. We believe that many plasma derivative products are underutilized and will continue to benefit from strong demand. Additionally, new indications are being explored for a number of plasma-derived therapies, such as the treatment of
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Alzheimer’s disease. We believe that the volume of global sales of plasma derivative products will continue to grow driven primarily by the same factors that have contributed to its historical growth, including:
· | population growth; |
· | the discovery and approval of new applications and indications for plasma-based products; |
· | an increase in the number of diagnosed patients and diagnosed but previously-untreated patients; |
· | geographic expansion; and |
· | physicians’ greater awareness of conditions and treatments. |
Approximately 18.4% of our sales were generated in the European Union in 2021, as compared to 15.6% in 2020 and 15.7% in 2019. We anticipate that the percentage of our sales generated in the European Union will not significantly increase in 2022.
Our plasma-collection levels began to recover in 2021 in the wake of wider vaccination and the easing of COVID-19 constraints. However, we cannot assure you when or at what speed such recovery will effectively occur. See Item 3 of this Part I, “Key Information—D. Risk Factors—Risks Relating to the Company and Our Business—The Coronavirus pandemic has had, and could continue to have, a material, adverse impact on us” and Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Consequences of COVID-19” for additional details.
There are significant barriers to entry into the plasma derivative products industry, as the industry is highly regulated and requires significant expertise and capital investments. We do not expect these barriers to decrease in the near term.
Regulatory Environment. In order to operate in the plasma derivatives industry, manufacturers and distributors must comply with extensive regulation by the FDA, the EMA and comparable authorities worldwide. As a result, significant investments are required to develop, equip and maintain the necessary storage, fractionation and purification facilities and to develop appropriate sale, marketing and distribution infrastructures. Additionally, only proteins derived from plasma collected at FDA-approved centers can be marketed in the United States, so securing an adequate supply of U.S. source plasma is required to operate in the United States. We expect these regulatory restrictions to continue.
Product Pipeline. We have an expanded portfolio of key products as a result of our recent acquisitions and will continue to invest in research and development with respect to new product and new indications for existing products. Some key research and development projects underway include clinical studies of the use of albumin, diagnostic and vaccine therapies to treat Alzheimer’s disease, of albumin to treat advance cirrhosis and ascites, and of antithrombin in heart surgery.
Capital Expenditures. From 2018 through 2022, we are undertaking a €1.4 billion investment plan that involves among other investments, cumulative industrial capital investments to expand the manufacturing capacities of the Bioscience Division as well as investments in the Diagnostic and Hospital divisions.
E. | Critical Accounting Estimates |
The preparation of consolidated financial statements in accordance with IFRS requires us to make estimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures of contingent assets and liabilities. A detailed description of our significant accounting policies is included in the notes to our audited consolidated financial statements included elsewhere in this annual report on Form 20-F.
Certain of our accounting policies require subjective and complex judgments, often requiring the use of estimates about the effects of matters that are inherently uncertain. We apply estimation methodologies consistently from year to year. Other than changes required due to the issuance of new accounting guidance, there have been no significant changes in our application of critical accounting policies during the periods presented. We periodically review our critical accounting policies and estimates with the Audit Committee of our Board.
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These accounting policies include depreciation, subsequent recognition, impairment, goodwill and amortization, among others. See Note 4 to our audited consolidated financial statements included in this annual report on Form 20-F for more information regarding our Critical Accounting Policies.
More information on newly issued accounting standards is included in Note 2 to our audited consolidated financial statements included in this annual report on Form 20-F.
Item 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. | Directors and Senior Management |
Directors
Set forth below are the names and current positions of the members of the Board:
Name |
| Age |
| Title |
| Type |
| Director Since |
| Term Expires |
Víctor Grifols Roura | 72 | Director, non-executive Chairman of the Board | Proprietary | Jul 1991(1) | May 2025 | |||||
Víctor Grifols Deu | 45 | Director and Chief Executive Officer | Executive | May 2016 | Oct 2024 | |||||
Raimon Grifols Roura | 58 | Director and Chief Executive Officer | Executive | May 2015 | May 2023 | |||||
Tomás Dagá Gelabert | 66 | Director and Vice-Secretary of the Board | Other External | Apr 2000 | May 2023 | |||||
Thomas H. Glanzmann | 63 | Director and Vice-chairman of the Board of Directors | Other External | Apr 2006 | Oct 2024 | |||||
Enriqueta Felip Font | 58 | Director | Independent | May 2019 | May 2023 | |||||
Steven Francis Mayer | 62 | Director | Independent | Jan 2011 | Oct 2024 | |||||
Belén Villalonga Morenés | 53 | Director | Independent | May 2013 | May 2022 | |||||
Marla E. Salmon | 72 | Director | Independent | May 2014 | May 2022 | |||||
Carina Szpilka Lázaro | 53 | Director and Lead Independent Director(2) | Independent | May 2015 | May 2023 | |||||
James Costos | 59 | Director | Independent | Oct 2020 | Oct 2024 | |||||
Iñigo Sánchez-Asiaín Mardones | 58 | Director | Independent | May 2015 | May 2023 | |||||
Nuria Martín Barnés | 63 | Secretary non-member of the Board of Directors | n/a | May 2015 | n/a |
(1) | Between July 8, 1991 and May 30, 2002, Mr. Víctor Grifols Roura was not a director but sat on the Board as representative of our then director Deria, S.A. |
(2) | The lead independent director is a figure introduced by Law 31/2014, adopted on December 3, 2014, that amended the Spanish Companies Act in matters of corporate governance, or Law 31/2014. It is mandatory to appoint a lead independent director when the office of Chairman of the Board and that of chief executive officer is held by the same person. The lead independent director must (i) be an independent director and be authorized to request the calling of a board meeting or the inclusion of new points on the agenda of a board meeting already convened, (ii) coordinate and gather the non-executive directors and (iii) direct, when applicable, the Chairperson’s periodic evaluation by the Board. The Board in its meeting held on February 25, 2022, agreed to appoint Carina Szpilka Lázaro as the Company’s Lead Independent Director although the position has not been mandatory since January 1, 2017 since the offices of Chairman of the Board and Chief Executive Officer are no longer held by the same person |
Director Biographies
Víctor Grifols Roura
Mr. Víctor Grifols Roura is non-executive Chairman and proprietary director since January 1, 2017. From 1987 to 2017, he held the role of Chief Executive Officer and top executive of the Grifols Group, succeeding his father, Mr. Víctor Grifols i Lucas. Mr. Víctor Grifols Roura spearheaded the 1987 reorganization that created Grifols as it is today. Mr. Víctor Grifols Roura originally joined the Group in 1973 as an Export Manager and later served as Sales Manager. Mr. Grifols Roura earned a business administration degree from the University of Barcelona. As part of the approved Company’s succession plan on January 1, 2017, Mr. Víctor Grifols Deu and Mr. Raimon Grifols Roura were appointed co-CEOs of the Company.
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Mr. Víctor Grifols Roura is a shareholder of Deria S.A. (a non-controlling shareholder, pursuant to the revised Spanish Securities Market Act (Real Decreto Legislativo 4/2015, de 23 de octubre, por el que se aprueba el texto refundido de la Ley del Mercado de Valores) as amended and restated (the “Spanish Securities Market Act”). He is also a shareholder of Scranton Enterprises, B.V. (a non-controlling shareholder, pursuant to the Spanish Securities Market Act).
Víctor Grifols Deu
Mr. Víctor Grifols Deu is Grifols’ joint and several Chief Executive Officer together with Mr. Raimon Grifols Roura since January 1, 2017. He succeeded his father, Mr. Víctor Grifols Roura in the position. He is a member of the administration bodies of several companies within the Grifols Group and was appointed executive director in May 2016. He joined the Company in 2001 as an analyst in the Planning and Control Department of the Company. In 2008 he became the director of the Planning and Control Department and was also appointed a member of the Executive Committee. He has been part of the team that analyzed and was responsible for the integration of operations after the acquisition of Alpha Therapeutics, Talecris Biotherapeutics and Novartis’ Transfusion Diagnostic Unit. He graduated in Business Administration and Management from the Ramon Llull University — Sarrià Chemical Institute and holds a postgraduate degree in Business Administration and Management from Michael Smurfit Business School in Dublin.
Mr. Víctor Grifols Deu is a shareholder of Ralledor Holding Spain S.L. (a non-controlling shareholder, pursuant to the revised Spanish Securities Market Act).
Raimon Grifols Roura
Mr. Raimon Grifols Roura is Grifols’ joint and several Chief Executive Officer together with Mr. Víctor Grifols Deu since January 1, 2017. He succeeded his brother, Mr. Víctor Grifols Roura in the position. He is a member of the administration bodies of several companies within the Grifols Group. From 2001 to 2015 he held the role of non-member secretary of the Board of Directors of Grifols, and in 2015 began serving as director and Vice Secretary of the Board of Directors. In May 2016, the Board accepted his resignation as Vice Secretary. Until his appointment as executive director in July 2016, Mr. Grifols Roura was a partner at the law firm Osborne Clarke in Spain. Mr. Grifols Roura earned his law degree from the University of Barcelona (Universidad de Barcelona).
Mr. Raimon Grifols Roura is a shareholder of Deria S.A. (a non-controlling shareholder, pursuant to the Spanish Securities Market Act). He is also a shareholder of Scranton Enterprises, B.V. (a non-controlling shareholder, pursuant to the Spanish Securities Market Act).
Tomás Dagá Gelabert
Mr. Tomás Dagá Gelabert has served as director of Grifols since April 2000 and also as Vice Secretary of the Board since May 2016. He is a partner and founder of the law firm Osborne Clarke in Spain. He was the managing partner of the law firm Osborne Clarke in Spain until June 30, 2017. Prior to joining Osborne Clarke, he worked in the corporate and tax department of Peat Marwick Mitchell Co. in Barcelona. He is currently a member of the administrative bodies of several companies within the Grifols Group. He is a board member of RAAS Blood Products Co., Ltd., as well as a trustee and the secretary of the private foundation Víctor Grífols i Lucas and the secretary non-member of Progenika Biopharma, S.A. Mr. Dagá earned his law degree from the University of Barcelona (Universidad de Barcelona).
Mr. Tomás Dagá Gelabert is a shareholder of Scranton Enterprises, B.V. (a non-controlling shareholder, pursuant to the Spanish Securities Market Act).
Thomas H. Glanzmann
Mr. Thomas H. Glanzmann has served as a director of Grifols since April 2006 and on January 1, 2017 he was appointed non-executive Vice Chairman of the Board of Directors. Since December 2020, he is the Chairman of our Sustainability Committee. He serves as a director on the board and as a member of several committees at Alcon, Inc. (among others, the sustainability, compensation and innovation committees) and is a healthcare advisor to Madison Dearborn and Partners. He is also a founder and General Partner in Medical Technology Venture Partners in California. From 2006 until 2011 he was the CEO and Chairman of Gambro AB. Prior to this Mr. Glanzmann was the CEO and Managing Director of HemoCue AB. Between 1988 and 2004 he held
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various positions at Baxter Healthcare Corporation: Senior Vice President and Senior Corporate Officer of Baxter Healthcare Corporation; President of Baxter Bioscience; Chief Executive Officer of Immuno International; and President of the European Biotech Group. Between 1984 and 1988 he worked at Philip Morris where he was the country manager for Norway, Denmark and Iceland. Mr. Glanzmann holds an MBA from IMD in Lausanne-Switzerland, a B.A. in Political Science from Dartmouth College, U.S., and a Board of Directors Certification from the UCLA Anderson School of Management, U.S.
Enriqueta Felip Font
Ms. Enriqueta Felip Font has served as a director of Grifols since May 2019. She received her degree in Medicine and Surgery from the Autonomous University of Barcelona (UAB), where she also completed her studies for a PhD in Medical Oncology. She was an Associate Professor at the UAB from 2010 to May 2019. She is a Professor of Medicine at the Universitat de Vic (UVicc-UCC). Ms. Felip Font has an extensive professional career and accredited experience in the oncology sector, as well as knowledge in the scientific and research field. She is currently the Section Chief of the Medical Oncology Service at Vall d’Hebron University Hospital and the Principal Investigator of the Vall d’Hebron Institute of Oncology’s Thoracic Tumors and Head and Neck Cancer Group. Ms. Enriqueta Felip Font has been involved in several initiatives with scientific organizations, among them, as member of the Board of Directors of the International Association for the Study of Lung Cancer (IASLC, 2017-2021). She is currently a member of the Scientific Committee of the Institut d’Investigació i Innovació Parc Taulí. Throughout her career, she has obtained several recognitions for her work in the oncology field. In 2015, she was awarded with the first Women for Oncology Award from the European Society of Medical Oncology (ESMO).
Most recently, she featured on Clarivate Analytics’ annual Global Highly Cited Researchers List 2018, 2019 and 2020. Ms. Enriqueta Felip Font has authored more than 250 peer-reviewed articles.
Steven F. Mayer
Mr. Steven F. Mayer has served as a director of Grifols since January 2011. He is currently the CEO of Iron Horse Acquisition Corp. and of Dedication Capital, LLC, private investment firms that he founded. From 2002 until 2018, he held a variety of management positions with Cerberus Capital Management, L.P. and Cerberus California, LLC, affiliated private investment firms, culminating with serving as Senior Managing Director, Co-Head of Global Private Equity, and Chairman of the Cerberus Investment Committee.
Mr. Mayer holds a Bachelor of Arts degree, cum laude, from Princeton University and a Juris Doctor degree, magna cum laude, from Harvard Law School. Mr. Mayer has served as a member of the board of directors or equivalent body of a large number of companies in a wide variety of industries in the United States and Europe. He is currently a member of the Board of Supervisors of Syntellix AG and a director of PrettyParty, LLC.
Belén Villalonga Morenés
Ms. Belén Villalonga Morenés has served as director of Grifols since May 2013. She is a Professor of Management and Organizations, the Yamaichi Faculty Fellow, and a Professor of Finance (by courtesy) at New York University’s Stern School of Business. Between 2001 and 2012 she was a faculty member at Harvard Business School. Her teaching, research, and consulting activities are in the areas of corporate strategy, finance, and governance, with a special focus on family-controlled companies.
She is also an independent director at Ferroglobe PLC (metallurgy) and at Banco Santander International (Santander’s private banking subsidiary in the United States), as well as member of the Strategic Committee of Injat, an investment firm focused on family financials. Further, she was also an independent director for 13 years at Acciona (renewable energy and infrastructure industries) and Talgo (high-speed trains).
Ms. Belén Villalonga Morenés holds a Ph.D. in Management and an M.A. in Economics from the University of California at Los Angeles, where she was a Fulbright Scholar. She also holds a Ph.D. in Business Economics from the Complutense University of Madrid as well as a degree in Economic and Management Sciences from the Colegio Universitario de Estudios Financieros in Madrid.
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Marla E. Salmon
Ms. Marla E. Salmon has served as director of Grifols since May 2014. She is a Professor at the University of Washington, with appointments in global health, nursing, and public affairs. Her career has focused on health policy and health care systems capacity building globally and in the United States, working with governments, international agencies, member-state organizations, and other health–related entities. Her recent scholarship focuses on gender-lens impact investment in the health sector in lower income countries.
Prior to her academic career, she was a member of the U.S. Government’s Senior Executive Service, in the Health and Human Services Department. While there, she served on White House Taskforce on Healthcare Reform, was part of the U.S. Delegation to the World Health Assembly, and chaired the World Health Organization’s Global Advisory Group on Nursing and Midwifery.
She is currently a member of the board of directors of IES Abroad, Inc. and Direct Relief, as well as being a member of the National Academies of Science, Engineering and Medicine’s Health and Medicine Division Committee.
She holds a doctorate in health policy and administration from the Johns Hopkins School of Hygiene and Public Health, two Honoris Causa doctorates in recognition of her national and international service, and other degrees in nursing and political science. She is a member of the National Academy of Medicine and fellow in the American Academy of Nursing.
Carina Szpilka Lázaro
Ms. Carina Szpilka Lázaro has served as a director of Grifols since May 2015 and is the Lead Independent director of Grifols’ Board since February 2022. She earned a degree in Business Administration from the Universidad Pontificia de Comillas in Madrid (ICADE) and an Executive MBA from the Instituto de Empresa de Madrid. She began her professional career in the financial sector working at Banco Santander and Argentaria (now known as BBVA). In 1998 she was part of the team that founded ING Direct in Spain, where she held the position of CEO from 2010 to 2013, having previously held that position in ING Direct France from 2008 to 2010. She is currently an independent director at Abanca and Meliá Hotels International, as well as a partner at KFund Venture Capital and Chairwoman of Adigital. She has received numerous awards. Among others, in 2011 she was given the “Female Executive of the Year” award by the Spanish Federation of Female Directors, Executives, Professionals and Entrepreneurs (Federación Española de Mujeres Directivas - FEDEPE). For four years, she was also a member of the UNICEF Foundation.
James Costos
Mr. James Costos has served as a director of Grifols since October 2020. He is an American diplomat who holds a degree in Political Science from the University of Massachusetts. He has an extensive professional career and accredited experience in different sectors including international relations and the digital and communications sectors. From 2013 to 2017, he was the U.S. Ambassador to the Kingdom of Spain and to the Principality of Andorra. He is currently the President of Secuoya Studios in Madrid. He is a member of the Board of Directors of PJT Partners, a firm providing financial advisory services in investment banking, Senior Advisor of F.C. Barcelona and Senior Managing Director in the Venture Technology Group at Dentons. He is member of various cultural and humanitarian organizations, among others the Reina Sofía Museum, as well as he is a member of the board of the Human Rights Campaign.
Iñigo Sánchez-Asiaín Mardones
Mr. Iñigo Sánchez-Asiaín Mardones has been the Lead Independent director of the Board since May 2015 until 2022 and he has served as director of Grifols, S.A. since May 2015. He earned a degree in Business Administration from the Universidad Pontificia de Comillas in Madrid (ICADE) and an MBA from Harvard Business School. In 2010 he founded Portobello Capital, where he remains a partner and a member of the Executive Committee and Investment Committee, leading the investments in companies such as Angulas Aguinaga, a company where he is Vice-Chairman and member of the Executive Committee, and Hotels Resorts Blue Sea, S.L., where he is a member of the Board of Directors. He is also a member of the Executive Committee at the Harvard Club of Spain, which he has previously chaired. Previously, from 1993 to 2005, he was Deputy General Director at Banco Santander and from 2005-2010 was a partner and member of the board of directors of Ibersuizas Gestión SGECR, S.A.
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Biography of the Secretary Non-Member of the Board
Nuria Martín Barnés
Ms. Nuria Martín Barnés served as Vice-Secretary Non-Member of the Board of Directors from 2001 to 2015, and has served as Secretary Non-Member of the Board of Directors since 2015. Ms. Martín has been the managing Partner at Osborne Clarke Spain since July 1, 2017. Prior to joining Osborne Clarke she worked in the Corporate and Tax Department of KPMG Peat Marwick from 1982 to 1986. Ms. Martín is a trustee of the Probitas Fundación Privada foundation and she is also secretary and member of the board of directors of Compañía General de Inversiones, S.I.C.A.V., S.A., and Gesiuris Asset Management, S.G.I.I.C., S.A. Ms. Martín earned her law degree from the University of Barcelona.
Senior Management
Our senior management currently consists of the following persons:
Name |
| Age |
| Title |
| Since |
Raimon Grifols Roura | 58 | Co-Chief Executive Officer | 2017 | |||
Víctor Grifols Deu | 45 | Co-Chief Executive Officer | 2017 | |||
Alfredo Arroyo Guerra | 65 | Chief Financial Officer | 2013 | |||
Miguel Pascual Montblanch | 62 | President, Commercial Operations Management | 2018 | |||
Vicente Blanquer Torre | 61 | Chief Quality Officer | 2016 | |||
Montserrat Gaja Llamas | 57 | Chief Human Resources Officer | 2021 | |||
David Ian Bell | 67 | Chief Corporate Development Officer General Counsel | 2021 | |||
Nuria Pascual Lapeña | 58 | VP, Corporate Treasury, Risk Management Investor Relation and Sustainability Officer | 2015 | |||
Lafmin Morgan | 57 | Chief Commercial Officer | 2018 | |||
David Dew | 48 | President of the Diagnostic Commercial Division | 2020 | |||
Eduardo Herrero Jiménez | 53 | President of the Bioscience Industrial Group | 2017 | |||
Daniel Fleta Coit | 51 | Chief Industrial Officer | 2019 | |||
Robert Jagt | 56 | President of the Hospital Commercial Division | 2018 | |||
Joel Abelson | 63 | President of the Bioscience Commercial Division | 2018 | |||
Alberto Grifols Roura | 63 | President of the Bio Supplies Division | 2018 | |||
Matt Murawski | 56 | VP, Bioscience, Diagnostic Scientific Development | 2017 | |||
Maria Teresa Rioné Llano | 57 | Chief Communications Officer | 2018 | |||
Albert Grifols Coma-Cros | 44 | Chief Scientific Innovation Officer | 2021 | |||
Xavier Sueiras Gil | 54 | Chief IT Officer | 2018 | |||
Antonio Martinez Martinez | 55 | President, Diagnostic Scientific RD | 2020 | |||
Antoni Jaumà Fages | 51 | President, Diagnostic Manufacturing Operations | 2020 | |||
Christopher Paul Healey | 56 | President, North America Corporate Affairs | 2020 | |||
Sergi Roura Adell | 54 | President, Commercial Tech Support | 2019 | |||
Fernando Rodriguez Haro | 44 | VP Corporate Planning Control | 2016 |
Senior Management Biographies
The following are the biographies of our senior management who are not also directors:
Alfredo Arroyo Guerra
Mr. Arroyo has served as our Corporate Vice President and Chief Financial Officer since January 2007. Previously, Mr. Arroyo served as a CFO and in various Senior Finance positions in companies including KPMG, Carrefour, Chupa Chups, Reckitt Benckiser and Winterthur. Mr. Arroyo received a degree in Economics and is a Certified Public Accountant in Spain.
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Miguel Pascual Montblanch
Mr. Pascual has served as our President Commercial Operations Management (previously President Operations Network) since 2012 and he is also a member of the board of worldwide Grifols commercial affiliates. He joined us in 1974 and has held several positions since that time, beginning as General Manager of Grifols Movaco S.A. until 2007. He was also General Manager of Iberoamerica Sales from June 2007 until 2012.
Vicente Blanquer Torre
Mr. Blanquer has served as our VP Quality and Regulatory Affairs since 2007 and was Corporate Vice President and the Technical Director of the Biological Industrial Group (previously the Pharmaceutical Technical Director) since 1993. He is currently the Chief Quality Officer, responsible for both Bioscience’s quality assurance and quality control. From 1987 until 1993, he was the Deputy Technical Director, responsible for process quality control concerning plasma derivatives manufacturing. Mr. Blanquer received a degree in Pharmacy from the University of Barcelona.
Montserrat Gaja Llamas
Ms. Gaja joined us in 1992. She currently serves as Chief Human Resources Officer. Previously, she served as Deputy Chief Human Resources Officer and VP Compensation Benefits from 2011 to 2020. She also served in different positions in the Administration and Finance departments. Prior to joining us, Ms. Gaja served as Accountant Analyst at Banco de la Pequeña y Mediana Empresa. Ms. Gaja received a Bachelor’s Degree in Economics at the University of Barcelona.
David Ian Bell
Mr. Bell has been the General Counsel NA since 2003 and Chief Corporate Development Officer since 2021. He previously held the position of Chief Innovation Officer from 2016 to 2020. Mr. Bell joined us as a Corporate Vice President of Grifols Shared Services North America, Inc. (previously Grifols, Inc.) in July 2003. He also serves as a member of our Executive Committee in Spain. He additionally serves on the boards of numerous companies affiliated to Grifols. Mr. Bell is responsible for all legal activities of our U.S. operations, including litigation, mergers and acquisitions, real estate transactions, intellectual property and contracts. Prior to joining us, Mr. Bell was Vice President and General Counsel for Alpha. He also spent time as a partner at the U.S. law firm of Knapp, Petersen Clarke where he specialized in complex litigation involving healthcare, pharmaceutical and biotechnology regulation and liability. Mr. Bell attended the University of California, Irvine, Southwestern University School of Law and a postgraduate program at Harvard Law School. He is a member of the California State Bar and is admitted to practice before the United States Supreme Court as well as numerous federal appellate and district courts.
Nuria Pascual Lapeña
Ms. Pascual joined us in 1996. She currently serves as VP, Corporate Treasury, Risk Management, Investor Relations Sustainability Officer. Prior to joining us, she served in various positions at Deutsche Bank and Banco Santander de Negocios. She is a member of the board of directors of several companies related to her family’s businesses. Ms. Pascual received a degree in Economics Business Administration and received a Masters of Sciences in Economics from the London School of Economics and Political Sciences.
Lafmin Morgan
Mr. Morgan has been Chief Commercial Officer since July 2018 and had been President of the Global Bioscience Division for Grifols since 2014. Previously, Mr. Morgan led the Global Marketing function for all Grifols divisions, Bioscience, Hospital and Diagnostics. Mr. Morgan also served as Grifols North American Vice President and General Manager for Pulmonary in 2011. Mr. Morgan joined Grifols (then Talecris Biotherapeutics) in 2010. He was the Vice President of Product Management at Talecris Biotherapeutics where he was responsible for the marketing of Gamunex-C, Prolastin-C, Thrombate, Koate —DVI and the Company’s line of hyperimmune products. Prior to Grifols, Mr. Morgan worked at GSK for 20 years. During that time, he held a variety of positions in a number of different functional areas. Mr. Morgan holds a Bachelor’s Degree in Business Administration and an MBA from the University of North Carolina in Chapel Hill.
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David Dew
Mr. Dew became President of the Grifols Diagnostic Commercial Division in 2020 and had been President of the Global Diagnostic Sales Commercial Operations since he joined Grifols in 2014. Prior to joining Grifols, Mr. Dew was with Novartis Diagnostics from 2007-2014 as Vice President of Americas Commercial Operations and Global Marketing (2011-2014), Senior Director of Sales Marketing Europe Middle East and Africa (2010-2011), and Director of Marketing (2007-2010). Prior to Novartis, Mr. Dew held various commercial leadership positions with Abbott Diagnostics from 2003-2007. Mr. Dew holds an MBA from the University of California at Irvine and a BA in Hospitality Business Management from Washington State University.
Eduardo Herrero Jiménez
Mr. Herrero joined us in 1998 and since January 2018 he has been our President Bioscience Industrial Group. Previously, Mr. Herrero served as President and Managing Director of Biomat, S.A. from 2009 to 2015. Beginning in 2002, he had served as Manager Regulatory Affairs. Mr. Herrero received a Master’s Degree in Pharmacy from the Universitat Politècnica de Barcelona in 1991.
Daniel Fleta Coit
Mr. Fleta joined us in 2001 and since January 2019 he has been our Chief Industrial Officer. Previously, Mr. Fleta served as Deputy Chief Industrial Officer and Managing Director Grifols Engineering S.A. from 2011 to 2018. Beginning in 2005, he has served as Director Pharmaceutical Projects. Mr. Fleta received a degree in Industrial Engineering from the Institut Químic de Sarrià in 1995.
Robert Jagt
Mr. Jagt joined us in 2014 as Vice President Commercial Services and since July 2017 he has been our President of Hospital Commercial Division (previously President Hospital Operations Network). Previously, Mr. Jagt served as Vice President Bioscience Commercial Services Controlling. Mr. Jagt holds a Bachelor of Arts, Business Economics from Wheaton College, Illinois.
Joel Abelson
Mr. Abelson joined us in 2006 and since 2018 he has been our President Bioscience Commercial Division. Previously, Mr. Abelson served as President Global Bioscience Sales Commercial Operations and Corporate Vice President Commercial NA Operations from 2013 to 2016. Beginning in 2011, he has served as President NA Commercial Operations. Mr. Abelson holds a Bachelor of Arts from the Carleton University in Ottawa and a Master’s in Public Administration from the University of Toronto.
Alberto Grifols Roura
Mr. Grifols joined us in 1985 and since 2018 has served as President Bio Supplies Division. Previously he has held several positions, such as; Managing Director of Grifols Argentina S.A., Managing Director of Biomat S.A., Managing Director of Laboratorios Grifols; and President of Instituto Grifols, S.A. from 2011 to 2016. Mr. Grifols received a Master’s degree in Industrial Engineering from the Universitat Politècnica de Terrassa in 1985.
Matt Murawski
Mr. Murawski joined us in 2017 as Vice President of both Diagnostic Research and Innovation Management and Project Management, and currently serves as VP, Bioscience, Diagnostic Scientific Development. Previously, he was the senior executive responsible for business alliances and project execution at Hologic where he coordinated and monitored diagnostic innovation projects, including internal and external investments. Mr. Murawski holds a Bachelor of Science, Finance and a Master’s in Business Administration from DePaul University - Kellstadt School of Business.
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Maria Teresa Rioné Llano
Ms. Rioné joined Grifols in 2018 and currently serves as the Chief Communications Officer. Prior to joining Grifols, Ms. Rioné was Senior Director of Communications Western Europe at Nike Corporation. Ms. Rioné is a graduate in Law with honors in Commercial Law from Universitat de Barcelona and a Master’s in Marketing and Sales Management from IE Business School.
Albert Grifols Coma-Cros
Mr. Grifols Coma-Cros joined Grifols in 2004 and since 2021 serves as Chief Scientific Innovation Officer. He held the position of President at GWWO from 2018 to 2020, and previously he was the Corporate Cash Manager and Global Treasury Director. Mr. Grifols Coma-Cros received a degree in Business Administration from the Universitat Autònoma de Barcelona in 2004.
Xavier Sueiras Gil
Mr. Sueiras joined us in 1997 and has held several positions since that time, starting as Manufacturing Director in Laboratorios Grifols, S.A., later becoming Project Director from 2005 to 2012 in Grifols and then working as VP NA Information Technology and VP Global IT from 2012 to 2015. Since 2018, Mr. Sueiras has served as Chief IT Officer. Mr. Sueiras received a degree in Industrial Engineering from the Universitat Politècnica de Catalunya in 1994.
Antonio Martinez Martinez
Dr. Martinez joined Grifols in 2020 and serves as President of Diagnostic Scientific RD. Prior to Grifols, he served as Chief Executive Officer of Progenika Biopharma S.A., a leading molecular diagnostic company dedicated to personalized medicine he co-founded in 2000 and that was acquired by Grifols in 2013. Mr. Martinez has received the Ernst Young Most Innovative Entrepreneur Award (2010) and the Ruban d´Honneur in the European Business Awards, HSBC Bank (2011). Before receiving a MOD from the Instituto de Empresa, Dr. Martinez obtained his PhD from the University of Navarra with a project aimed at the development of a diagnostic method for cystic fibrosis, an aim that he accomplished in 1992. The output of Dr. Martinez’s research and development work includes more than 70 publications in scientific journals and 20 patent applications on diagnostic methods for genotyping or gene expression.
Antoni Jaumà Fages
Mr. Jaumà joined Grifols in 2002 as the Manufacturing Director of Diagnostic Grifols, S.A., moving to Managing Director in 2013. From 2018 to 2020 he held the position of VP, Diagnostic Industrial Operations in Grifols and since January 2020 Mr. Jaumà has served as President of Diagnostic Manufacturing Operations. Mr. Jaumà received a bachelor’s degree in Chemistry from the Universitat de Barcelona in 1994 and attended a directive business program at IESE Business School in 2008.
Christopher Paul Healey
Mr. Healey joined us in 2005 as Vice President Public Affairs and since 2020 Mr. Healey serves as President of North America Corporate Affairs. Mr. Healey holds a Bachelor of Science in Psychology from the University of Florida in 1987 and a Juris Doctor of Law from the Emory University School of Law in 1992.
Sergi Roura Adell
Mr. Roura joined Grifols in 1995 and has held several positions since that time, starting as Project Manager in the engineering department. With the creation of Grifols Engineering in 2001, he was appointed as Managing Director of Grifols Engineering, S.A. From 2011 to 2016 he was the President of Grifols Therapeutic Inc based in North Carolina, U.S. and from 2017 to 2019 he was the President of Facilities North America. Since 2019, Mr. Roura has served as President, Commercial Tech Support. Mr. Roura received a degree in Industrial Engineering from the Universitat Politecnica de Catalunya in 1994.
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Fernando Rodriguez Haro
Mr. Rodriguez joined Grifols in 2016 as Vice-President, Corporate Planning Control. Previously, Mr. Rodriguez served in various finance leadership roles at AkzoNobel N.V. and Nike Inc. Mr. Rodriguez received a degree in Economics from Universidad Nacional de Córdoba, Argentina and a Master’s in Business Administration from DePaul University - Kellstadt School of Business.
Family Relationships
Mr. Raimon Grifols Roura, director and one of our Co-Chief Executive Officers, Mr. Alberto Grifols Roura, President of the Bio Supplies Division and Mr. Víctor Grifols Roura, a director and non-executive Chairman of the Board, are brothers.
Mr. Raimon Grifols Roura is the uncle of Mr. Víctor Grifols Deu, both being directors and Co-Chief Executive Officers.
Mr. Alberto Grifols Roura, the President of the Bio Supplies Division, is the uncle of Mr. Victor Grifols Deu, one of our Co-Chief Executive Officers.
Mr. Víctor Grifols Deu, director and one of our Co-Chief Executive Officers, is the son of Mr. Víctor Grifols Roura, a director and the non-executive Chairman of the Board.
Messrs. Víctor Grifols Roura, Alberto Grifols Roura and Raimon Grifols Roura are the grandchildren of Mr. José Antonio Grifols i Roig, our founder.
Mr. Raimon Grifols Roura, director and one of our Co-Chief Executive Officers, Mr. Alberto Grifols Roura, President of the Bio Supplies Division and Mr. Victor Grifols Roura, a director and non-executive Chairman of the Board, are cousins of Mr. Albert Grifols Coma-Cros, the Chief Scientific Innovation Officer.
Arrangements Pursuant to Which Certain Directors or Senior Management Were Selected
We have no arrangements.
B. | Compensation |
Compensation of Members of the Board
Our directors are entitled to receive compensation for serving as directors on our Board. The Articles of Association generally set forth the processes for the determination of the compensation paid to the members of the Board. Article 20.bis of the Articles of Association currently in force provides that the directors’ remuneration shall be a fixed amount and that, at least every three years and valid for the three fiscal years following the year it is approved, the general shareholders’ meeting shall approve the directors’ remuneration policy, which, pursuant to Article 26 of the Regulations of the Internal Functioning of the Board of Directors of Grifols, S.A. currently in force (Reglamento de funcionamiento interno del consejo de administración, or the “Board Regulations”), (i) with respect to directors in their role as such shall necessarily determine the maximum amount of the annual remuneration to be paid to all the directors and (ii) with respect to the remuneration of the directors for performing their executive duties must include the amount of the annual fixed remuneration, the different parameters to set the variable components and the main terms and conditions of their contracts including, in particular, duration, severance payments or compensations for the termination of the employment relationship, and exclusivity, post-contractual non-competition, and retention or loyalty agreements. The Board then determines, pursuant to Article 26.2 of the Board Regulations, how much of the shareholder-approved aggregate compensation amount will be allocated to each director as compensation, taking into account the recommendations of our appointments and remuneration committee (Comisión de Nombramientos y Retribuciones, or the “Appointments and Remuneration Committee”), and their dedication to our business.
Our current director remuneration policy was approved at the general shareholders’ meeting held on October 9, 2020 (the “Remuneration Policy”), which is substantially the same policy approved by the general shareholders’ meeting held on May 26, 2017, except for the parameter for determining the achievement of the Company’s annual objectives for the variable remuneration of the executive directors and for some improvements and corrections in the wording.
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The Remuneration Policy has been applied to fiscal year 2021 and remains in force during the fiscal years 2022 and 2023 unless the general shareholders’ meeting expressly modifies it. In this respect, the Appointments and Remuneration Committee together with the Sustainability Committee at its meeting held on December, 9, 2021 approved to propose to the Board, which has approved them at its meeting held on 10 December 2021, certain amendments to the Remuneration Policy that will be included in a new policy to adapt it to the requirements set forth in Law 5/2021, of 12 April, amending the revised text of the Spanish Companies Act and other financial regulations, regarding the promotion of the long-term involvement of shareholders in listed companies. It is expected that these amendments will be included in a new policy proposal. The new policy proposal is expected to be applicable once the General Shareholders’ Meeting to be held during 2022 approves it and, according to the Spanish Companies Act, for a maximum period of three fiscal years.
Our director compensation philosophy, as set forth in Article 27 of the Board Regulations, provides that the remuneration of non-executive directors (consejeros no ejecutivos) shall be established in a manner that provides incentives for our directors to be dedicated and involved while not creating an obstacle to their independence. To that end, Article 27 further establishes that the Board, following the advice of the Appointments and Remuneration Committee, shall take the necessary measures to ensure that non-executive directors’ remuneration adheres to the following guidelines: (a) their remuneration should be relative to their dedication, abilities and functions; and (b) they are excluded from any plans (x) consisting of the delivery of equity awards or options or other instruments linked to the value of our shares, (y) linked to our performance or (z) including retirement benefits. However, non-executive directors may be remunerated with our shares only if they agree to hold them for the duration of the term that they hold their office.
In accordance with the compensation system outlined in the Articles of Association and the Remuneration Policy, the shareholders set the maximum annual amount available for compensation to the non-executive directors at €100,000 per director, other than those non-executive directors of the Board that render remunerated professional services to us. Also, any director that is a member of one of the Board committees (Audit Committee, Appointments and Remuneration Committee and Sustainability Committee) shall receive an additional gross annual remuneration of €25,000 as a result of the heavier workload (thus, the total remuneration would amount to €125,000). Similarly, the chairpersons of each Committee would receive an additional €25,000 for performing their duties as chairperson (thus, the total remuneration would amount to €150,000). The lead independent director would receive an additional remuneration amounting to €50,000 for performing his/her duties (thus, the total remuneration would amount to €150,000). Under no circumstances may the remuneration of a non-executive director exceed €150,000 per year.
As of December 31, 2021, Ms. Enriqueta Felip Font, Mr. James Costos, Mr. Steven F. Mayer, Ms. Belén Villalonga Morenés, Ms. Marla E. Salmon, Ms. Carina Szpilka Lázaro and Mr. Iñigo Sánchez-Asiaín Mardones were our independent directors in conformity with Exchange Act requirements and NASDAQ Listing Rules. Messrs. Dagá and Glanzmann serve as external directors (and not independent) and Mr. Víctor Grifols Roura serves as proprietary director (and not independent) in conformity with Spanish rules.
The total compensation paid to directors in the year ended December 31, 2021, in the aggregate, amounted to €4.4 million. Of the total director compensation amount, the executive directors (consejeros ejecutivos) received €1.8 million in cash in 2021 (€1.8 million in fixed compensation in cash and €0 in variable compensation in cash for their service as executive directors). Both of our Co-Chief Executive Officers have voluntarily waived the payment of the short-term variable remuneration in cash that would have been paid to them for the achievement of the objectives set for the fiscal year 2020 and that would have been paid in March 2021 in a year in which our results were marked by the COVID-19 pandemic as a gesture of responsibility towards our employees, customers and shareholders. In addition, the amount of fixed remuneration received by each of the Co-Chief Executive Officers has not been increased compared to that of the previous year.
In 2021, the executive directors Mr. Raimon Grifols Roura and Mr. Víctor Grifols Deu, received RSUs allocated in fiscal year 2019, which had a vesting period of two years and one day. Hence, in 2021 both were awarded Class B shares in the amount of €295,364.80 and €215,070.40, respectively. In 2020, both were awarded Class B shares with an equivalent value of approximately €341,000 and €192,000, respectively. Directors categorized as “other external” directors (other than those who render remunerated professional service to us) received €150,000 in aggregate in 2021. These figures include accruals for contingent or deferred compensation. None of our directors received attendance fees for meetings of the Board or committees of the Board. Finally, pursuant to Article 20.bis of the Articles of Association, our directors are reimbursed for all expenses incurred in connection with their service as directors.
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For the year ended December 31, 2021, we did not pay any variable compensation to the executive directors. As mentioned above, both our Co-Chief Executive Officers have voluntarily waived the payment of the short-term variable remuneration in cash that would have been paid to them for the achievement of the objectives set for the fiscal year 2020 and that would have been paid in March 2021.
The remuneration of the Chairman of the Board in the years ended December 31, 2021 and 2020 was a fixed annual amount of €965,000, as established under the Remuneration Policy. The compensation of Mr. Grifols Roura has been determined taking into account his proven experience as director and Chairman of the Company, in addition to his knowledge in the sector where we operate. When deciding the remuneration of Mr. Grifols Roura, which is the same fixed amount he had when he held an executive position, excluding any variable amount, the additional duties that he will carry out, as well as those set out in the Spanish Companies’ Act for the position of Chairman of the Board, were taken into account.
Compensation of Senior Management
In 2021, members of our senior management (excluding those who also served as members of the Board) were paid compensation amounting to €15,135,947 in the aggregate. This figure includes accruals for contingent or deferred compensation earned in respect of 2021 service. In 2020, members of our senior management (excluding those who also served as members of the Board) were paid compensation amounting to €17,164,463 in the aggregate. This figure includes accruals for contingent or deferred compensation earned in respect of 2020 service. The breakdown of the aggregate amount paid to such senior management for discharging their duties in the years ended December 31, 2021 and 2020 is set forth in the table below.
Amount paid in the year | ||||
ended December 31, | ||||
Component |
| 2021 |
| 2020 |
(in euros) | ||||
Salaries |
| 11,074,903 |
| 11,599,412 |
Variable Compensation |
| 4,061,044 |
| 5,565,051 |
Stock options or other securities |
| — |
| — |
Other — e.g., life and health insurance |
| 119,510 |
| 116,375 |
Other — e.g., pensions/savings |
| 125,327 |
| 144,002 |
Employment and Severance Arrangements
We have entered into employment contracts with all members of our senior management that entitle them to unilaterally rescind their employment contracts and receive termination benefits of two to five years’ salary in the event that we undergo a change of control. In addition to this, five members of our senior management are contractually entitled to termination benefits of one to four years’ salary under certain circumstances other than a change of control.
See Notes Notes 29(c) and 31(a) to our annual consolidated financial statements included in this annual report for further details of the payments received by employees.
Equity and Other Incentive Programs
In 2021, no compensation was paid pursuant to a profit sharing plan or any stock option and no other equity compensation was awarded to any of our directors or senior management.
Pension and Retirement Compensation Programs
Our directors and senior management employed by our U.S. subsidiaries participate in a tax-qualified 401(k) plan on the same terms as our other employees. The aggregate amount of employer contributions to the 401(k) plans for our directors and senior management during 2021 was €73,074. In addition, the Company made contributions to the pension plan of one member of senior management who resides in Canada, in the amount of €52,253. In 2021, neither we nor our subsidiaries set aside or accrued any other amounts to provide pension, retirement or similar benefits for our directors or senior management.
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C. | Board Practices |
Board of Directors
Pursuant to the Articles of Association, we are managed by a board of directors (the “Board”), which may be composed of not less than three and not more than 15 directors. Our current Board has 12 directors. Directors must be individuals. Under Spanish law, the Board is responsible for management, administration and representation in all matters concerning the business, subject to the provisions of the Articles of Association and the powers conferred at the general shareholders’ meeting.
Appointment and Dismissal
Pursuant to Spanish law and our Articles of Association, directors are elected by our shareholders to serve for a term of four years and may be reelected to serve for an unlimited number of terms, except in the case of independent directors, who pursuant to Spanish law and the regulations of our Board originally approved at the Board meeting held on April 5, 2006, as amended from time to time (the “Board Regulations”), shall not serve as such for more than 12 years. We do not provide for the reelection of directors at staggered intervals or cumulative voting for such directors or otherwise.
A director must be an individual. If a director ceases to hold office prior to the expiration of his or her term, the Board may fill the vacancy by appointing a new director to replace the outgoing director. Any director so appointed will hold office until the next general shareholders’ meeting when the appointment may be confirmed or revoked by our shareholders. If such appointment takes place between the time that a general shareholders’ meeting is called and the time the meeting takes place, then the director so appointed will hold office until the next general shareholders’ meeting, when this appointment is to be confirmed or revoked. Any such appointment will be only for the remainder of the term of the outgoing director, without prejudice to such director’s eventual election. A director may resign, or be removed, from office by a resolution of our general shareholders’ meeting at any time. A director who is also a shareholder may vote freely on any of our shareholders’ resolutions relating to the appointment and dismissal of directors (including the appointment or dismissal of that director).
In addition, pursuant to the Board Regulations, a director must tender a resignation to the Board and the Board may accept such resignation, in its discretion, under the following circumstances: (i) when the director ceases to hold the executive position to which such director’s appointment to the Board was related; (ii) when circumstances arise that might harm the Company’s name or reputation, related or not to their actions within the Company; (iii) when the director becomes unable to hold the office due to a legal cause of ineligibility or incompatibility; (iv) when any criminal charges are brought against or a formal inquiry is opened against him or her by a regulator; (v) when the director has been severely admonished by our Audit Committee for having breached his or her duties as director; (vi) when the director’s participation on the Board may jeopardize our interests or when the reasons for his or her appointment cease to exist; and (vii) in the case of a proprietary director, when the relevant shareholder ceases to hold its stake in us, or reduces its stake below the level that reasonably justified the appointment of such director. When a director leaves his/her position, whether by resignation or resolution of the general shareholders’ meeting before his/her tenure expires, he/she shall explain, in sufficient detail, the reasons behind this decision or, in the case of non-executive directors, his/her opinion of the reasons for the general shareholders’ meeting resolution, in a letter that must be sent to the members of the board via the chairperson or the secretary.
In addition, under Spanish corporate law, a holder of voting shares (or group of shareholders of voting shares acting together) may, subject to availability of seats on the Board, appoint a number of directors proportionate to that shareholder’s (or group of shareholders’) interest in our voting capital. If the voting capital stock represented by the shares held by such shareholder (or group of shareholders) is equal to or greater than the result of dividing our total voting capital stock by the number of directors, such shareholder (or group of shareholders) shall have the right to appoint a proportionate number of directors. For example, a shareholder holding 20 voting shares out of a total of 100 voting shares in a company with five directors will be entitled to appoint one director. Should this power be exercised, shares so pooled shall not participate in the voting for the other members of the Board. However, they may exercise their voting rights with respect to the removal of existing directors. Since such rights apply only to voting shares or Class B shares that have recovered their voting rights, our Class B shares and the Class B ADSs that represent them in the United States do not count towards the proportional representation right.
The Board must appoint a Chairman of the Board from among its members. Mr. Víctor Grifols Roura is the current non-executive Chairman. The Board may also designate one or more Vice Chairmen, who shall be numbered consecutively, and who shall replace the Chairman in the event of impossibility to act or absence. Mr. Thomas H. Glanzmann is the current Vice Chairman.
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The Board must also appoint a Secretary and may also designate one or more Vice-Secretaries. Neither the Secretary nor the Vice-Secretary is required to be a member of the Board; however, the Secretary or the Vice-Secretary will not be entitled to vote on matters before the Board unless he or she is a member of the Board. Mr. Tomás Dagá is the current Vice-Secretary of the Board and Ms. Nuria Martín Barnés is the current Secretary non-member of the Board.
Meetings of the Board
Pursuant to the Articles of Association, a meeting of the Board may be called by the Chairman whenever he considers such a meeting necessary or suitable. The Chairman is also required to call a meeting at the request of one-third of the directors. Meetings of the Board are called using any means of notice at least ten days before the date of the meeting, unless exigent circumstances require a shorter term. Such notice of a meeting of the Board must state the place, date and time as well as the issues to be discussed. The Board is required by Spanish law to hold a meeting at least every three months. Our Articles of Association provide that a majority of the directors (half plus one of the directors present at a meeting) of the Board (represented in person or by proxy by another director on the Board; non-executive directors may only appoint another non-executive director to represent them) constitutes a quorum. Except as otherwise provided by law or specified in the Articles of Association, resolutions of the Board must be passed by an absolute majority of the directors present or represented at a meeting, with the Chairman having the right to cast a deciding vote in the event of a tie.
Pursuant to the Articles of Association the Board may hold meetings by videoconference, conference call or by any other distance communication systems as long as said communications take place in real time and therefore, in one sole act, and both the identity of the participating or voting individual and the security of the electronic communications, are properly guaranteed.
Delegation of Powers
Pursuant to Spanish law and our Articles of Association, the Board may delegate its powers either to an executive committee (Comisión Ejecutiva) or to one or more chief executive officers. Spanish corporate law provides that resolutions appointing an executive committee, any chief executive officer or authorizing the permanent delegation of all, or part of, such board of directors’ powers, requires a two-thirds majority of the members of such board of directors and the registration of such resolution in the Spanish Commercial Registry (Registro Mercantil). The Board may also revoke such powers at any time. In addition, when a member of the Board is appointed chief executive officer or vested with executive functions, he/she will need to enter into an agreement with the Company, which shall be approved by a two-thirds majority of the Board. The director in question will have to refrain from participating in the deliberation and voting process of such agreement.
Under Spanish corporate law, a board of directors may also grant general or specific powers of attorney to any person whether or not that person is a director or a shareholder. General powers of attorney must be registered in the Commercial Registry. However, Spanish law provides that the following powers, among others, may not be delegated: (i) the formulation and submission for approval of the yearly financial statements at the general shareholders’ meeting; and (ii) those powers granted to the board of directors by a general shareholders’ meeting (unless otherwise provided in the relevant shareholders’ resolution).
Mr. Raimon Grifols Roura and Mr. Víctor Grifols Deu currently serve as joint and several Chief Executive Officers of the Company, with delegation of all powers legally delegable from the Board.
Expiration of Current Terms
The periods during which our directors and senior management have served in their offices, as well as the date of expiration of each director’s term, are shown in the tables under “—A. Directors and Senior Management” above.
Termination Benefits
We have entered into employment contracts with all members of our senior management that entitle them to unilaterally rescind their employment contracts and receive termination benefits of two to five years’ salary in the event that we undergo a change of control. In addition to this, five members of our senior management are contractually entitled to termination benefits of one to four years’ salary under certain circumstances other than a change of control.
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See Notes 29(c) and 31(a) to our audited consolidated financial statements included in this annual report on Form 20-F for further details of the payments received by employees.
Diversity
On August 6, 2021, the U.S. Securities and Exchange Commission approved NASDAQ’s proposal to amend its listing standards to encourage greater board diversity and to require board diversity disclosures for NASDAQ-listed companies. Pursuant to the amended listing standards, Grifols, as a foreign private issuer, is required to have at least one diverse member of the Board by August 7, 2023 and two diverse members of the Board by August 6, 2025, or explain the reasons for not meeting this objective. Furthermore, a Board diversity matrix is required to be included in the Annual Report on Form 20-F, containing certain demographic and other information regarding members of the Board.
Grifols currently complies with the diversity requirement, as we currently have four female members on our Board of Directors. The Board diversity matrix is set out below.
Board Diversity Matrix (status as of December 31, 2021)
Country of Principal Executive Offices | Spain | |||
Foreign Private Issuer | Yes | |||
Disclosure Prohibited under Home Country Law | Yes(1) | |||
Total Number of Directors | 12 | |||
Female | Male | Non-Binary | Did not Disclose Gender | |
Part I: Gender Identity | ||||
Directors | 4 | 8 | n.a. | n.a. |
Part II: Demographic Background | ||||
Underrepresented Individual in Home Country Jurisdiction | n.a. | |||
LGBTQ+ | n.a. | |||
Did Not Disclose Demographic Background | n.a. | |||
(1) | In accordance with Article 9.1 of the EU General Data Protection Regulation (GDPR) (Regulation (EU) 2016/679 of 27 April 2016), the categories of data contained in Part I and Part II of the above table are considered special categories of personal data (which includes, among others, personal data revealing racial or ethnic origin, or a natural person’s sex life or sexual orientation). The same article prohibits the processing of these special categories of personal data, unless any of the derogations regulated in Article 9.2 of GDPR apply. |
One of the derogations to this prohibition is contained in Article 9.2.a) of GDPR, which provides that the data subject has given explicit consent to the processing of those personal data for one or more specified purposes, except where Union or Member State law provide that this prohibition may not be lifted by the data subject. Precisely on this point, Article 9.1 of the Spanish Organic Act 3/2018 (Spanish Data Protection Act) provides that, in order to avoid discriminatory situations, the sole consent of natural persons is not enough to lift the general prohibition of processing said special categories of personal data in Spain. Given this general prohibition in Spain, we consider that the lawful manner by which Grifols could process such categories of personal data from its Directors would either be based: (a) on the existence of a EU or EU Member State legal instrument with the status of law applicable to Grifols that enables said processing for reasons of substantial public interest (based on the derogation contained in Article 9.2.g) of GDPR, jointly with Article 9.2 of the Spanish Data Protection Act), or; (b) on special categories of personal data which are manifestly made public by the corresponding Director (based on the derogation contained in Article 9.2.e) of GDPR).
In conclusion, Grifols cannot collect nor share such personal data because (i) there is no legal instrument with the status of law applicable to Grifols that enables such processing and, further, and (ii) Grifols would not be in a position to ascertain whether or not the corresponding Director has manifestly made public such sensitive personal data.
The Policy on Director Diversity in the composition of the Board of Directors was initially approved by the Board of Directors of Grifols on February 22, 2019 and amended on December 11, 2020, with the aim of formalizing the procedures and guidelines followed during the selection process of candidates to form part of the Board of Directors of Grifols to favor an appropriate composition of the same.
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In accordance with the recommendations set out in the Code of Good Governance of Listed Companies (Código de Buen Gobierno de las Sociedades Cotizadas) published by the CNMV, the policy has always had two aims:
· | to guarantee that any proposal for the appointment or re-election of members of the Board of Directors be based on a prior analysis of the required skills by the Board of Directors; and |
· | to support knowledge, experience, age and gender diversity. |
The Board of Directors of Grifols must ensure that the selection process promotes balance and diversity in age, gender, experience and knowledge, as well as that it be free from any bias that may infer any kind of discrimination, in particular, on grounds of gender, disability or any other personal condition. In this respect, any discriminatory circumstance by reason of gender obstructing or hindering the appointment of a female candidate to the Board of Directors must be avoided. The policy provides that efforts must be made to ensure that the Board of Directors has a diverse and balanced composition as a whole, so that its composition enriches the analysis and debate and contributes plural points of view and positions in matters within its competence. In this respect, Grifols must continue to promote measures that encourage Grifols to have a significant number of women in senior management roles.
Committees of the Board
The Board has an Audit Committee, an Appointments and Remuneration Committee and a Sustainability Committee. The following is a brief description of such committees.
Audit Committee
The Board established an Audit Committee in compliance with Articles 24.bis and 24.ter of the Articles of Association and Article 14 of the Board Regulations.
The regulations applicable to the Audit Committee are set forth in the provisions referred to above, as well as the bylaws of the Audit Committee, which were approved by the Board and the Audit Committee on December 9, 2008, and modified in December 2020 in order to adapt its content to the current recommendations of the Good Governance Code of Listed Companies. In connection with the Talecris Biotherapeutics acquisition, at a Board meeting held on May 24, 2011, the Articles of Association and Board Regulations were amended to conform to NASDAQ Listing Rules and to facilitate the listing of our Class B ADSs on NASDAQ. Furthermore, the bylaws of the Audit Committee were modified at a Committee meeting held on March 31, 2015, to adapt them to the requirements imposed by Law 31/2014. In 2017, article 24.ter of the Articles of Association and Article 14 of the Board Regulations concerning the composition and functions of the Audit Committee were amended in order to adequate their content to the latest amendments of the Spanish Companies Act introduced by the currently in force Spanish Audit Act.
Pursuant to our Spanish corporate governance requirements and our Articles of Association and the Board Regulations, the Audit Committee consists of a minimum of three directors and a maximum of five directors who are appointed by the Board based on such directors’ knowledge, competence and experience in accounting, audit and risk management matters (both financial and non-financial). All of the members of the Audit Committee must be non-executive directors, and the majority must be independent directors. As a group, the members of the Committee must have the pertinent technical knowledge in relation to the sector of activity of the Company. In addition, all members of the Audit Committee, including the chairman, must meet the independence, experience and other requirements set forth in the Exchange Act and NASDAQ Listing Rules.
The responsibilities of the Audit Committee include:
· | reporting to the shareholders at general shareholders’ meetings regarding matters for which the Audit Committee is responsible; |
· | recommending to the Board the selection, appointment, re-election, hiring and replacement of the external auditor regardless of the faculties vested in the general shareholders’ meeting and the Board with regard to the approval of such resolutions under Spanish law; |
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· | oversight of our internal audit department, including selecting, appointing and dismissing its manager, monitoring its budget, receiving periodic information on the department’s activities and ensuring that management takes the conclusions and recommendations of the department’s reports into account; |
· | setting up and supervising procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters, as well as the confidential and anonymous submission by employees and other persons related to Grifols of concerns regarding questionable accounting or auditing matters; |
· | exercising oversight of the process for gathering financial and non-financial information and the related internal control system; reviewing the financial statements and the periodic financial statements that should be submitted to the securities regulatory authorities and ensuring that the appropriate accounting standards are followed; reporting to the Board on any change in the accounting standards and on balance sheet and off balance sheet risks; |
· | receiving information from the auditors including relating to auditor independence and conduct of audits of the financial statements, and issuing on an annual basis a written opinion on the independence of the auditor; |
· | reporting on the related-party transactions to be approved by the general meeting or the board of directors and supervise the internal procedure for those whose approval has been delegated; |
· | supervising any transactions entered into with significant shareholders as set forth in the Board Regulations; and |
· | (i) ensuring compliance with the Internal Code of Conduct of Grifols in Matters Relating to the Stock Market, or Stock Market Code of Conduct, the Code of Conduct for Grifols’ Employees, the Board Regulations (each available on our website, at www.grifols.com) and, in general, any other corporate regulations and (ii) making any necessary proposals to improve such regulations. |
The Audit Committee currently consists of Messrs. Steven F. Mayer and Iñigo Sánchez-Asiaín Mardones and Ms. Belén Villalonga Morenés. Each of the members is independent in conformity with Exchange Act requirements and NASDAQ Listing Rules, as well as in conformity with the Spanish Companies Act. Mr. Tomás Dagá Gelabert serves as Secretary non-member of the Audit Committee.
Appointments and Remuneration Committee
The Board established an Appointments and Remuneration Committee in compliance with Article 24.bis and 24. quater of the Articles of Association and Article 15 of the Board Regulations.
Pursuant to Spanish corporate governance requirements and Article 15 of the Board Regulations, the Appointments and Remuneration Committee is required to consist of between three and five members, all of which must be non-executive directors, which includes at least two independent directors.
The responsibilities of the Appointments and Remuneration Committee include:
· | assisting in the nomination of directors, including evaluating potential nominees in light of the level of knowledge, competence and experience necessary to serve on the Board; |
· | establishing a representation target for the gender that is least represented on the Board and prepare guidelines to achieve said target; |
· | reporting and making proposals to the Board on the appointment of members to the various committees of the Board and on the persons who should hold the office of Secretary and Vice-Secretary of the Board; |
· | examining and organizing the orderly and planned succession of the Chairman of the Board and the Chief Executive Officer; |
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· | reporting on proposals for the appointment and removal of any members of senior management made by the Chief Executive Officer; |
· | making proposals on the remuneration plans for the Board and senior management; |
· | periodically reviewing the remuneration plans of senior management, including considering their suitability and performance; and |
· | reporting on transactions in which directors may have a conflict of interest. |
Consistent with NASDAQ Listing Rules for foreign private issuers, our Appointments and Remuneration Committee currently consists of Messrs. Tomás Dagá Gelabert, James Costos and Ms. Marla E. Salmon as directors. Each of Ms. Salmon and Mr. Costos is independent in conformity with Exchange Act requirements and NASDAQ Listing Rules and Mr. Dagá is considered an “Other External” director under the Spanish Companies Act. Ms. Nuria Martín Barnés serves as Secretary non-member of the Appointments and Remuneration Committee.
Sustainability Committee
In its meeting held on December 11, 2020, the Board resolved to amend certain articles of the Regulations of the Internal Functioning of the Board of Directors of Grifols, in order to adapt its content to certain recommendations of the reform of the Good Governance Code of Listed Companies published in June 2020 by the Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores, or “CNMV”), and created a Sustainability Committee.
The regulations applicable to the Sustainability Committee are set forth in article 15 bis. of the Board Regulations, as well as in the Regulations of the Sustainability Committee, which were approved by the Board on February 19, 2021. Pursuant to Article 15 bis of the Board Regulations and the Regulations of the Sustainability Committee, the Sustainability Committee is required to consist of between three and five members, all of which must be non-executive directors, the majority of them being independent.
The responsibilities of the Sustainability Committee include:
· | monitoring compliance with the Company’s internal codes of conduct and corporate governance rules, and ensuring that the corporate culture is aligned with its purpose and values; |
· | monitoring the implementation of the general policy regarding the disclosure of economic-financial, non-financial and corporate information, as well as communication with shareholders and investors, proxy advisors and other stakeholders. Similarly, the way in which the Company communicates and relates with small and medium-sized shareholders should be monitored; |
· | periodically evaluating the effectiveness of the Company’s corporate governance system and environmental and social policy to confirm that it is fulfilling its mission to promote the corporate interest and catering, as appropriate, to the legitimate interests of remaining stakeholders; |
· | ensuring the Company’s environmental and social practices are in accordance with the established strategy and policy; and |
· | monitoring and evaluating the Company’s interaction with its stakeholder groups. |
The Sustainability Committee currently consists of Mr. Thomas H. Glanzmann, Ms. Carina Szpilka Lázaro and Ms. Enriqueta Felip Font. Each of Ms. Szpilka Lázaro and Ms. Felip Font is independent, in conformity with Exchange Act requirements and NASDAQ Listing Rules, and Mr. H. Glanzmann is considered an “Other External” director under the Spanish Companies Act. Ms. Nuria Martín Barnés serves as Secretary non-member of the Sustainability Committee.
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D. | Employees |
The table below indicates the number of employees by department as of December 31, 2021, 2020 and 2019:
As of December 31, | ||||||
Department | 2021 | 2020 | 2019 | |||
Manufacturing |
| 18,736 |
| 19,049 |
| 19,683 |
Research development — technical area |
| 1,088 |
| 1,115 |
| 1,029 |
Administration and others |
| 1,609 |
| 1,661 |
| 1,474 |
General management |
| 313 |
| 301 |
| 314 |
Marketing |
| 203 |
| 219 |
| 195 |
Sales and distribution |
| 1,285 |
| 1,310 |
| 1,308 |
Total |
| 23,234 |
| 23,655 |
| 24,003 |
The table below indicates the number of employees by geographic region as of December 31, 2021, 2020 and 2019:
As of December 31, | ||||||
Geographic Region |
| 2021 |
| 2020 |
| 2019 |
Spain |
| 4,163 |
| 4,292 |
| 4,134 |
North America |
| 16,393 |
| 16,756 |
| 17,479 |
Rest of the World |
| 2,678 |
| 2,607 |
| 2,390 |
Total |
| 23,234 |
| 23,655 |
| 24,003 |
We actively train our employees. The Grifols Academy opened in Spain during the second quarter of 2011. It is a meeting point for advanced training on all processes related to the preparation and production of plasma-derived medicines. In addition, the Grifols Academy serves to actively spread and strengthen the “Grifols’ spirit” that guides employee actions and their understanding of the business. It also acts as a center of technical, scientific and management training for the Group’s personnel, fostering a continued exchange among experts and external bodies, such as professional healthcare associations, hospitals, schools and universities.
The Grifols Academy works closely with the Grifols Academy of Plasmapheresis, which opened in Phoenix, Arizona in 2009. The Grifols Academy of Plasmapheresis has two U.S. campuses, Glendale, Arizona and Indianapolis, Indiana.
Our Spanish employees are mainly represented by two labor unions, the Workers’ Commissions (Comisiones Obreras) and the Workers General Union (Unión General de Trabajadores). The employees of some of our subsidiaries in Spain, Germany, Italy, France, Argentina and Brazil are covered by collective bargaining agreements. The remainder of our employees are not represented by labor unions. We have not experienced any significant work stoppages in the last 15 years. We generally consider our employee relations to be good.
We subscribe to an insurance policy that covers death or permanent disability of employees caused by work accidents. All of our employees are covered under this policy. We implemented a defined contribution pension plan for all our Spanish entities beginning on January 1, 2002, which excludes top management and which requires us to make matching payments to these employees. Our contribution to this pension plan was €0.9 million in the year ended December 31, 2021, compared to €0.9 million and €0.8 million in the years ended December 31, 2020 and 2019, respectively. We also sponsor a savings plan for the benefit of U.S. employees, which qualifies as a defined contribution plan under Section 401(a) of the Internal Revenue Code of 1986, as amended. We make fully vested matching contributions to the savings plan, which totaled $31.8 million in 2021, compared to $32.2 million and $29.4 million for the years ended December 31, 2020 and 2019, respectively. For certain employees in Germany, we have a defined benefit pension plan, as required by statutory law. The pension cost relating to this plan is not material.
E. | Share Ownership |
For information on the direct, indirect and represented holdings of our current directors and executive officers with respect to our Class A shares as of December 31, 2021 see Item 7 of this Part I, “Major Shareholders and Related Party Transactions—A. Major Shareholders.”
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We do not have any agreements, plans or arrangements in effect that provide for the issue or grant of options or shares or securities.
Item 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. | Major Shareholders |
The following table sets forth certain information, including information regarding beneficial ownership of our Class A (voting) shares as of the date of this annual report, for (i) our major shareholders, including, in accordance with applicable Spanish regulations, each person or entity that is known to us to be the beneficial owner of more than 3% of our Class A shares or 1% of our Class A shares in the event of a person or entity domiciled in a tax haven, (ii) each of our directors and (iii) each member of our senior management.
Since our Class A shares are represented through book entries, their exact ownership structure cannot be known, except through the information that the shareholders provide voluntarily or in compliance with applicable regulations, and information provided by the Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A., or Iberclear, on which the shares are settled and cleared, and its participant entities (entidades participantes).
Beneficial ownership is determined in accordance with applicable Spanish regulations.
| Number of |
| Percentage of |
| |
Voting | Voting |
| |||
Name of Beneficial Owner | Shares | rights |
| ||
Major Shareholders |
|
|
|
| |
Deria S.A.(1) |
| 39,183,692 |
| 9.195 | % |
Scranton Enterprises B.V.(2) |
| 34,655,622 |
| 8.133 | % |
Ponder Trade, S.L.(3) |
| 30,209,093 |
| 7.089 | % |
Ralledor Holding Spain S.L. (4) |
| 26,224,374 |
| 6.154 | % |
Capital Research and Management Company |
| 24,115,813 |
| 5.659 | % |
Blackrock, Inc.(5) |
| 15,049,531 |
| 3.532 | % |
Directors |
|
|
|
| |
Víctor Grifols Roura (6) |
| 787,376 |
| * | |
Thomas H. Glanzmann (7) |
| 169,322 |
| * | |
Tomás Dagá Gelabert (8) |
| 152,576 |
| * | |
Víctor Grifols Deu |
| 14,620 |
| * | |
Raimon Grifols Roura |
| 5,280 |
| * | |
Carina Szpilka Lázaro |
| 1,490 |
| * | |
Senior Management |
|
|
|
| |
Vicente Blanquer Torre |
| 44,754 |
| * | |
David Ian Bell |
| 20,000 |
| * | |
Nuria Pascual Lapeña |
| 19,592 |
| * | |
Miquel Pascual Montblanch |
| 15,000 |
| * | |
Eduardo Herrero Jiménez |
| 3,384 |
| * | |
Alberto Grifols Roura |
| 27,000 |
| * | |
Maria Teresa Rioné Llano |
| 5,289 |
| * | |
Albert Grifols Coma-Cros |
| 66,000 |
| * | |
Xavier Sueiras Gil |
| 70 |
| * | |
Montserrat Gaja Llamas |
| 682 |
| * |
* | Less than 1%. |
(1) | The various members of the Grifols Roura family hold their respective shares indirectly through Deria S.A. |
(2) | Scranton Enterprises B.V. is a corporation whose shares are owned by certain of our directors. Some members of the Grifols Family who are directors or executive officers hold part of their shares indirectly through Scranton Enterprises B.V. |
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(3) | There has been a change in the direct holder of Grifols’ shares as a result of the merger of Thorthol Holdings, B.V. (absorbed company) into Ponder Trade, S.L (absorbing company) which was effective as from December 24, 2021. The various members of the Grifols Gras family hold their respective shares indirectly through Ponder Trade, S.L. |
(4) | On February 21, 2022, Ms. Nuria Roura Carreras informed the shareholders of Ralledor Holding Spain S.L., that due to her advanced age, she no longer holds the indirect voting rights of Grifols, S.A. and, therefore, from that date forward the voting rights of Grifols, S.A. have been held directly by Ralledor Holding Spain S.L. |
(5) | Of the total number of 15,049,531 voting rights, 12,767,045 voting rights are held indirectly by Blackrock Inc. through rights over Class A shares and 2,282,486 voting rights through financial instruments. |
(6) | Of the total number of 787,376 voting shares attributed to Mr. Víctor Grifols Roura, 786,376 are held indirectly through Padolç, S.L. |
(7) | 24,000 Class A shares are held indirectly through Glanzmann Enterprises AG, and 106,000 Class A shares are held indirectly through Opulentia Holdings Ltd. |
(8) | Of the total number of 152,576 voting shares attributed to Mr. Tomás Dagá Gelabert, 35,000 are held indirectly through Prismiberica, S.A. |
To our knowledge, we are not controlled, directly or indirectly, by any other corporation, government or any other natural or legal person. We do not know of any arrangements which would result in a change in our control.
Significant Changes in Ownership
Beginning on January 1, 2021 until the date of this filing, in accordance with Spanish reporting requirements, the following transfers of shares were reported to the CNMV:
· | Fidelity International Limited decreased its stake in the Company’s share capital from 2.15% to 0.588%; |
· | Europacific Growth Fund decreased its stake in the Company’s share capital from 3.076% to 2.689%; |
· | Deria S.A. increased its stake in the Company’s share capital from 9.161% to 9.195%; |
· | Capital Research and Management Company increased its stake in the Company’s share capital from 3.01% to 5.659%; |
· | Blackrock Inc. decreased its stake in the Company’s share capital from 4.399% to 3.532%. |
Voting Rights
Each of our Class A shares is entitled to one vote, except that the voting rights of Class A shares held in treasury by us or by any of our direct subsidiaries are suspended. Class A shares held by our major shareholders, directors or senior management do not entitle such shareholders to different voting rights.
Holders of our Class B shares generally do not have voting rights, except with respect to certain extraordinary matters that require approval by a majority of our outstanding Class B shares. However, each of our Class B shares entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each fiscal year the share is outstanding equal to €0.01 per Class B share. In any given fiscal year, we will pay a preferred dividend to the holders of our Class B shares before any dividend out of the distributable profits for such fiscal year is paid to the holders of our Class A shares.
See in Item 10 of this Part I, “Additional Information—B. Memorandum and Articles of Association—Shareholder Rights—Class B Shares—Separate Vote at General Shareholder Meetings on Extraordinary Matters” and “Additional Information — B. Memorandum and Articles of Association — Shareholder Rights” for further details regarding our Class A shares and Class B shares.
B. | Related Party Transactions |
Sale of Haema AG and Biotest US Corporation
In December 2018, we sold our 100% stake in Haema AG and Biotest US Corporation to Scranton Plasma B.V., one of our major shareholders and a related party, for a total of $538 million. Scranton Enterprises B.V. financed the purchase in part through a loan from Grifols Worldwide Operations Limited for an initial principal sum of the euro equivalent of $95 million, with an interest rate of EURIBOR plus 200 basis points. As of December 31, 2021, the euro equivalent of $95 million was outstanding on the loan.
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We have the ability to repurchase the shares sold to Scranton Plasma B.V. at any time. Our Plasma Supply Agreement in place with Haema AG and Biotest US Corporation has been extended for a 30-year period and we continue to operate the companies’ plasma centers. See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions—Acquisition and Sale of Haema AG and Biotest US Corporation” above.
Charitable Contributions
In 2021, we contributed to two charitable foundations, the Mr. Víctor Grifols i Lucas Foundation and the Probitas Private Foundation, which were formed by us, and certain of our current officers and directors serve as patrons of the Probitas Private Foundation.
The Mr. Víctor Grifols i Lucas Foundation provides grants to further the study of bioethics. It was created in 1998 with the mission of promoting bioethics through dialogue between specialists in a range of areas. The Víctor Grifols i Lucas Foundation seeks to foster ethical attitudes in organizations, companies and individuals active in the field of human health, offering a discussion platform that provides a forum for the exchange of different perspectives. Mr. Víctor Grifols i Lucas is our former Chief Executive Officer and is the father of both Mr. Raimon Grifols Roura, our Co-Chief Executive Officer, and Mr. Víctor Grifols Roura, a proprietary director and non-executive Chairman of the Board. We contributed €0.4 million, €0.4 million and €0.4 million to the Víctor Grifols i Lucas Foundation in the years ended December 31, 2021, 2020 and 2019, respectively.
The Probitas Private Foundation provides medical and sanitary assistance to international communities that lack medical and sanitary resources or that have an urgent and essential need for such services due to catastrophes. The Probitas Private Foundation was founded by us in 2008. Mr. Tomás Dagá Gelabert, one of our directors, was a patron of the Probitas Private Foundation until May 27, 2021. We contributed €3.6 million, €9.9 million and €5.1 million to the Probitas Private Foundation in the years ended 2021, 2020 and 2019, respectively. We contribute to the Probitas Private Foundation an amount equal to 0.7% of our profits before tax each year.
Loans
We have not extended any advances or loans to members of the Board or key management personnel nor have we assumed any guarantee commitments on their behalf. We also have not assumed any pension or life insurance obligations on behalf of former or current members of the Board or key management personnel.
C. | Interests of Experts and Counsel |
Not Applicable.
Item 8.FINANCIAL INFORMATION
A. | Consolidated Statements and Other Financial Information |
Financial Statements
See our audited consolidated financial statements and the related notes starting on page F-1 of this annual report on Form 20-F.
Legal Proceedings
Unpaid Royalties Dispute
We are involved in various legal proceedings in the ordinary course of our business. In the event of adverse outcomes of these proceedings, we believe that resulting liabilities will either be covered by insurance or not have a material adverse effect on our financial condition or results of operations.
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GDS, GWWO, Abbott Laboratories, or Abbott, and Novartis Vaccines and Diagnostics, Inc. are in dispute over unpaid royalties payable by Abbot to GDS and Ortho-Clinical Diagnostics, or Ortho, under an HIV License and Option agreement dated August 16, 2019 (the “HIV License”). On September 12, 2019, GDS and Ortho filed a Notice of Arbitration in the U.S. District Court for the Northern District of Illinois. On October 3, 2019, Abbott terminated the HIV License and filed for declaratory relief seeking to invalidate the licensed patent. GDS filed motions to dismiss and to compel arbitration, but the Court continued all pending motions and referred the parties to a Magistrate for a mandatory settlement conference. On the February 5, 2020, the parties attended a mandatory settlement conference ordered by the District Judge, with the magistrate judge presiding. No satisfactory settlement was reached. On March 16, 2020, GDS and Ortho filed an answer and counterclaim to the litigation, while simultaneously pursuing arbitration for the pre-termination amount owed by Abbot. The arbitration hearing was on June 15-16, 2020, and the arbitrator awarded $4 million to GDS/Ortho. The court litigation is continuing. Abbot’s motion to dismiss was denied December 1, 2020. Fact discovery concluded on October 25, 2021. A pre trial hearing was conducted on February 25, 2022 and an order was issued on April 27, 2022 predominantly ruling in Grifols favor on various issues. The case has been set for a status conference on May 10, 2022 to discuss next deadlines.
See Note 29(e) to our annual consolidated financial statements included in this annual report for additional information regarding the legal proceedings in which we are involved.
Antitrust Approval of Talecris-Grifols Merger
On July 20, 2011, the FTC issued the Consent Order, which was a final order to settle its May 31, 2011 charges that our acquisition of Talecris Biotherapeutics was anticompetitive and would have resulted in higher prices for consumers. Pursuant to the Consent Order, we divested to Kedrion, on June 2, 2011, certain assets, including (i) Talecris Biotherapeutics’ Melville, New York manufacturing facility (the “Melville facility”), (ii) United States marketing rights to Koate® antihemophilic factor, (iii) an agreed quantity of plasma and (iv) two plasma collection centers located in Mobile, Alabama and Winston Salem, North Carolina. Further, pursuant to the Consent Order, we and Kedrion entered into a manufacturing agreement under which we supplied to Kedrion, for a period of seven years ending in 2018, Koate®, a private label IVIG and albumin for sale by Kedrion in the United States, and Kedrion exercised an option in 2014 to purchase a non-exclusive license to Koate®-related intellectual property for use in the United States. In accordance with the Consent Order, we leased the Melville Facility from Kedrion until July 1, 2013, when we delivered the facility to Kedrion.
Effective July 1, 2013 Grifols and Kedrion agreed to an early termination of the lease agreement and completed the transfer of operations at the Melville facility to Kedrion. The parties further entered into a three year fractionation agreement whereby Kedrion would continue to fractionate limited amounts of plasma for further manufacture by Grifols.
The Consent Order provides for a monitor to oversee our compliance with the Consent Order and requires us to submit to the FTC annual compliance reports for ten years. We filed our first compliance report, pursuant to paragraph IX.B of the Consent Order, on July 20, 2012. Grifols filed its ninth compliance report in July 2020. There has been no further action by the FTC. We filed the final compliance report in July 2021.
Antitrust Approval of Biotest Pharmaceuticals Corporation Acquisition
In August 2018, the FTC issued a consent order which allowed the acquisition of 24 donor centers and required the divestiture of three centers to Kedrion. The consent order requires annual reports to be made to the FTC for a period of 10 years. We filed the first annual compliance report in March 2020, the second compliance report in March 2021, and the third compliance report in March 2022. There has been no further action by the FTC.
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CFIUS Approval on certain transactions
In September 2019, as a consequence of the share exchange agreement we entered with Shanghai RAAS, Grifols and the Committee on Foreign Investments in the United States (“CFIUS”) entered into a National Security Agreement to ensure the protection of certain data obtained as required from donors of human source plasma collected in the United States and maintained in donor management systems (“DMS”), and pursuant to this agreement, we are obligated to make bi-annual compliance reports to CFIUS. The most recent report was filed and accepted in February 2022 and the next report is due to be filed in August 2022.
Dividend Policy
Class A Shares
Our dividend policy is to pay out approximately 40% of our net consolidated profits. However, the First Lien Credit Facilities and some other documents governing our financial indebtedness contain limitations on our ability to pay cash dividends in the ordinary course of business in accordance with our dividend policy depending on our debt levels and the availability of certain restricted payments baskets. For a further discussion of the terms of the First Lien Credit Facilities and our other financing arrangements, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit” In any event, as a result of our commitment to reduce our debt level, we do not expect to pursue any distribution of cash dividends until debt leverage is below 4.00:1.00.
The declaration and payment of dividends is reviewed annually by the Board based upon a review of our balance sheet and cash flow, the ratio of current assets to current liabilities, our expected capital and liquidity requirements, the provisions of our governing documents and the provisions in our financing arrangements governing cash dividends. The payment of future dividend will be determined by the Board, based upon the factors described above and other factors that it deems relevant at the time that declaration of a dividend is considered. There can be no assurance as to whether or in what amounts any future dividend might be paid.
In addition, the availability of the reserves for distribution is subject to limitations under Spanish law. The distributable reserves of us and our Spanish subsidiaries are limited by the amount of mandatory reserves, which include, for us and each of our Spanish subsidiaries, the legal reserves and the amount of capitalized research and developments pending to be amortized by us and each of our Spanish subsidiaries. This limitation on distributable reserves due to capitalized research and developments expenditure amounted, on a consolidated basis, to €29.5 million at December 31, 2021.
At the general shareholders’ meeting held on May 21, 2021, our shareholders approved a dividend of €0.36 for each Class A share, for an aggregate dividend of €154 million, which was paid to the Class A shareholders on June 7, 2021. The treasury Class A shares did not receive the dividend mentioned above.
The Board intends to propose to shareholders at the upcoming annual general meeting of shareholders that losses for the year ended December 31, 2021, in the amount of €141 million be transferred to reserves. As mentioned above, the Board has not proposed the distribution of dividends to shareholders at the upcoming annual general meeting of shareholders.
Class B Shares
Each Class B share entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each fiscal year the share is outstanding equal to €0.01 per Class B share, if the aggregate preferred dividend does not exceed the distributable profits for that year and provided that the distribution of dividends has been approved by our shareholders. In any given fiscal year, we will pay a preferred dividend to the holders of the Class B shares before any dividend out of the distributable profits for such fiscal year is paid to the holders of Class A shares. The preferred dividend on all issued Class B shares will be paid by us within the nine months following the end of that fiscal year, in an amount not to exceed the distributable profits obtained during that fiscal year.
At the general shareholders’ meeting held on May 21, 2021, our shareholders approved a dividend of €0.36 for each Class B share, for an aggregate dividend of €93.5 million, and a preferred dividend of €0.01 for each Class B share, for an aggregate preferred
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dividend of €2.6 million, which were paid to the Class B shareholders on June 7, 2021. The treasury Class B shares did not receive the dividend mentioned above.
B. | Significant Changes |
See Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Subsequent Events.”
Item 9.THE OFFER AND LISTING
A. | Offer and Listing Details |
Our Class A shares have been listed on the Spanish Stock Exchanges since we completed our initial public offering on May 17, 2006 and are quoted on the Spanish Automated Quotation System under the ticker symbol “GRF.”
Our Class B shares have been listed on the Spanish Stock Exchanges since June 2, 2011 and quoted on the Spanish Automated Quotation System under the ticker symbol “GRF.P.”
Our Class A ADSs are not listed on a national exchange and have traded on the Over the Counter Bulletin Board, an electronic stock listing service provided by NASDAQ, since July 2009.
Our Class B ADSs have been listed and traded on the NASDAQ Global Select Market under the symbol “GRFS” since June 2, 2011. Each Class B ADS represents one Class B share.
B. | Plan of Distribution |
Not Applicable
C. | Market |
Our Class A shares have been listed on the Spanish Stock Exchanges since May 17, 2006 and are quoted on the Spanish Automated Quotation System under the ticker symbol “GRF.” Our Class B shares were issued as part of the consideration for the Talecris acquisition and were listed on the Spanish Stock Exchanges on June 2, 2011 and quoted on the Spanish Automated Quotation System under the ticker symbol “GRF.P.”
Our Class B ADSs have been listed and traded on the NSADAQ Global Select Market under the symbol “GFRS” since June 2, 2011.
Spanish Securities Market
The Spanish Stock Exchanges consist of four stock exchanges located in Madrid, Barcelona, Bilbao and Valencia. The majority of the transactions conducted on them are done through the Spanish Automated Quotation System. During 2021, the Spanish Automated Quotation System accounted for the majority of the total trading volume of equity securities on the Spanish Stock Exchanges.
Spanish Automated Quotation System
The Spanish Automated Quotation System was introduced in 1989 and links the Spanish Stock Exchanges, providing those securities listed on it with a uniform continuous market that eliminates most of the differences among the Spanish Stock Exchanges.
The principal feature of the system is the computerized matching of buy and sell orders at the time of entry of the order. Each order is executed as soon as a matching order is entered, but can be modified or canceled until executed. The activity of the market can be continuously monitored by investors and brokers. The Spanish Automated Quotation System is operated and regulated by the Sociedad de Bolsas, a corporation owned by the companies that manage the Spanish Stock Exchanges. All trades on the Spanish
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Automated Quotation System must be placed through a bank, brokerage firm, an official stock broker or a dealer firm member of a local exchange directly.
There is a pre-opening session held from 8:30 a.m. to 9:00 a.m. local time each trading day, during which orders are placed. The computerized trading hours are from 9:00 a.m. to 5:30 p.m. Each session ends with a five-minute auction, between 5:30 and 5:35 p.m., with a random closedown of 30 seconds. The price resulting from each auction is the closing price of the session.
On March 29, 2021, new rules came into effect regarding the functioning of the Spanish Automated Quotation System, which, among other things, regulates the maximum price fluctuations in the price of stocks. Under the new rules, each stock in the continuous market is assigned a static and a dynamic range within which the price can fluctuate. The price of a stock may rise or fall by its static range (which is public and calculated according to the stock’s average historic price volatility) above or below its opening price (which is the closing price of the previous session). When the stock trades outside of this range, the trading of the stock is suspended for five minutes, during which an auction takes place. After this auction, the price of the stock can once again rise or fall by its static range above or below its last auction price (which will be considered as the new static price before triggering another auction). Furthermore, the price of a stock cannot rise or fall by more than its dynamic price range (which is public and calculated according to the stock’s average intra-day volatility), from the last price at which it has traded. If the price variation exceeds the stock’s dynamic range, a five-minute auction is triggered.
Moreover, there is a block market (el mercado de bloques) allowing for block trades between buyers and sellers from 9:00 a.m. to 5:30 p.m. during the trading session. Under certain conditions, this market allows cross-transactions of trades at prices different from prevailing market prices. Trading in the block market is subject to certain limits with regard to price deviations and volumes.
Between 5:40 p.m. and 8:00 p.m., certain trades may occur benefiting from an exemption to the pre-trade transparency requirements.
Clearance and Settlement System
Until April 1, 2003, transactions carried out on the Spanish Stock Exchanges and the continuous market were cleared and settled through the Servicio de Compensación y Liquidación de Valores, S.A. Since April 1, 2003, the settlement and clearance of all trades on the Spanish Stock Exchanges, the Public Debt Market (Mercado de Deuda Pública), the AIAF Fixed Income Market (Mercado AIAF de Renta Fija) and the Market for Latin-American Stocks in Euros (Mercado de Valores Latinoamericanos en Euros) have been made through Iberclear, which was formed as a result of a merger between the Servicio de Compensación y Liquidación de Valores, S.A and Central de Anotaciones del Mercado de Deuda Pública, which was managed by the Bank of Spain.
Book-entry System
Ownership of shares listed on any Spanish Stock Exchange is required to be represented by entries in a register maintained by Iberclear, and transfers or changes in ownership are effected by entries in such register. The securities register system is structured in two levels: the central registry managed by Iberclear, which keeps the securities balances of the participants, and a detailed registry managed by the participants where securities are listed by holder’s name.
Securities Market Legislation
The Spanish Securities Market Act (today known as Real Decreto Legislativo 4/2015, de 23 de octubre, que aprueba el texto refundido de la Ley del Mercado de Valores), or Securities Market Act, which first came into effect in 1989, among other things:
· | established an independent regulatory authority, the CNMV, to supervise the securities markets; |
· | established a framework for the regulation of trading practices, tender offers and insider trading; |
· | required stock exchange members to be corporate entities; |
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· | required companies listed on a Spanish Stock Exchange to file annual audited financial statements and to make public semi-annual financial information; |
· | established a framework for integrating quotations on the Spanish Stock Exchanges by computer; |
· | exempted the sale of securities from transfer and value added taxes; |
· | deregulated brokerage commissions as of 1992; and |
· | provided for transfer of shares by book-entry or by delivery of evidence of title. The Securities Market Act was amended by, among others, Law 37/1998, which implemented two European Union directives that innovated the Securities Market Act. The first was the recognition that both Spanish and other European Union member state companies authorized to provide investment services have full access to the official secondary securities markets, with full capacity to operate, thereby enabling the direct admission of banking entities into the stock exchange area. The second innovation was that the scope of the Securities Market Act was enlarged to include a list of financial instruments, such as financial exchange contracts, or installment financial contracts, which expanded the categories of securities included. |
The Securities Market Act was further amended by Law 44/2002 (November 22, 2002) on reform measures of the financial system, which introduced certain modifications to the laws governing financial markets and corporations generally, including:
· | provisions requiring listed companies to establish an audit committee, redefining the reporting requirements for relevant events, establishing rules relating to the treatment of confidential and insider information and related party transactions, preventing manipulative and fraudulent practices with respect to market prices and otherwise regarding market transparency; |
· | the establishment of Iberclear; and |
· | the authorization of the Ministry of Economy and Finance (Ministerio de Economía y Hacienda) to regulate financial services electronic contracts. |
On July 17, 2003, the Securities Market Act was amended by Law 26/2003 in order to reinforce the transparency of listed companies. It introduced:
· | information and transparency obligations including detailed requirements of the contents of the corporate website of listed companies and the obligation to file with the CNMV an annual corporate governance report; and |
· | the obligation to implement a series of corporate governance rules including, among others, regulations regarding the boards of directors and the general shareholders’ meeting. |
On March 11, 2005, Royal Decree Law 5/2005 was approved, modifying the Securities Market Act in order to implement Directive 2003/71/EC of the European Parliament and of the Council of the European Union, or Council, on the prospectus to be published when securities are offered to the public or admitted to trading. The Directive (i) harmonizes the requirements for the process of approval of prospectuses, which enables a prospectus to be valid throughout the European Union and (ii) incorporates the application of the country-of-origin principle later set forth in Spanish Royal Decree, or Royal Decree, 1362/2007.
Law 12/2006, of May 16, 2006, amended the Securities Market Act by (i) introducing a new article relating to notifications to the CNMV of transactions that might constitute insider dealing or market manipulation, (ii) completing the regulation of Bolsas y Mercados Españoles, which operates the Spanish Stock Exchanges and financial markets and (iii) clarifying the regulation of significant participations in the entities that manage the clearing and settlement of securities and the Spanish secondary securities markets.
Law 6/2007, of April 12, 2007, amended the Securities Market Act to modify the rules for takeover bids and for issuer transparency. This Law came into effect on August 13, 2007, and partially integrates into the Spanish legal system Directive
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2004/25/EC of the European Parliament and of the Council, of April 21, 2004, on takeover bids and Directive 2004/109/EC of the European Parliament and of the Council, of December 15, 2004, on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC. This Law was further developed by Royal Decree 1066/2007, of July 27, 2007, on rules applicable to takeover bids for securities; by Royal Decree 1362/2007, of October 19, 2007, on transparency requirements for issuers of listed securities; and by Royal Decree 1698/2012, of December 21, 2012, to implement Directive 2010/73/EC of the European Parliament and of the Council, of December 24, 2010 (amending Directive 2003/71/CE and Directive 2004/109/EC).
Law 6/2007 (i) introduced several changes to the periodic financial information (annual, biannual and quarterly) to be published by issuers of listed securities and (ii) introduced new developments to the system that establishes the duty to provide notice of significant stakes in an enterprise. These duties include notification requirements such as:
· | anyone with a right to acquire, transfer or exercise voting rights granted by the shares, regardless of the actual ownership of the shares, and anyone owning, acquiring or transferring other securities or financial instruments that grant a right to acquire shares with voting rights must provide notice of the holding of a significant stake in accordance with the regulations; |
· | directors of listed companies, in addition to providing notice of any transaction concerning the shares or other securities or financial instruments of the issuer that are linked to these shares, must inform the CNMV of their stake upon appointment or resignation; and |
· | listed companies must provide notice of transactions concerning their treasury shares in certain cases, which will be established in the developing regulations. |
Law 12/2010, of June 30, 2010, amended the Securities Market Act to require listed companies to create electronic shareholders forums on their websites to facilitate communication prior to the holding of general meetings. It also established that shareholders of listed companies may create associations to exercise their rights and coordinate the defense of their common interests. Such associations must enroll in a special CNMV registry. Finally, Law 12/2010 also amended the Securities Market Act to change the regulations regarding the composition and functions of audit committees.
Royal Legislative Decree 1/2010, of July 2, 2010, approved the Spanish Companies Act in order to consolidate and clarify the laws applicable to public limited companies, limited share partnerships and limited liability companies.
Law 2/2011, of March 4, 2011, on Sustainable Economy (Ley de Economía Sostenible) amended the Securities Market Act’s provisions related to the requirements for annual reports on corporate governance and management reports. The Law also made certain corporate governance and shareholder disclosure recommendations in the Spanish Unified Good Governance Code for Listed Companies (Código Unificado de Buen Gobierno de las Sociedades Cotizadas, the “CNMV Governance Code), regarding the composition of boards of directors and its committees and the qualification of directors as executive, proprietary or independent mandatory. The CNMV Governance Code for Listed Companies was approved in 2015 and further revised in June 2020. It unified the recommendations and principles that are applicable to Spanish listed companies; removed some principles and recommendations of the CNMV Governance Code that were written into Spanish legislation and introduced some recommendations on the corporate social responsibility of listed companies.
Law 25/2011, of August 1, 2011, amended the Securities Market Act to implement Directive 2007/36/CE of the European Parliament and of the Council, regarding the exercise of certain rights of the shareholders of listed companies, to simplify and promote the right to information and shareholder voting rights.
Law 1/2012, of June 22, 2012, amended the Spanish Companies Act by making corporate websites mandatory for listed companies and introducing other new requirements regarding the creation, amendment, transfer and removal of corporate websites, as well as the obligations of directors arising in connection with the contents of such websites.
Law 31/2014, of December 3, 2014, amended the Spanish Companies Act to improve the corporate governance practices, increase management efficiency and increase the transparency of companies listed on a Spanish Stock Exchange.
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Royal Legislative Decree 4/2015, of October 23, 2015, approved the revised Securities Market Act and, thus, abolished the former Securities Market Act from 1988. Certain adjustments have been made to the structure of the former Securities Market Act to improve its organization and eliminate a number of inconsistencies. Additionally, the new text has also been prepared to transpose Regulation (EU) No 596/2014 of the European Parliament and of the Council of April 16, 2014, on market abuse and, also, the MIFID2 rules (Directive 2014/65/EU of the European Parliament and of the Council of May 15, 2014, on markets in financial instruments and Regulation (EU) No 600/2014 of the European Parliament and of the Council of May 15, 2014).
Royal Decree 878/2015, of October 2, 2015, on the clearing, settlement and recording of transferable securities represented in book-entry form, on the legal regime of the central securities depositaries and central counterparties, and on the transparency requirements for issuers of securities admitted to trading in a regulated, which was published in the Spanish Official Gazette on October 3, 2015, meets the need to develop the latest amendments introduced in the Securities Market Act in matters of book-entries and clearing and settlement of securities, in addition to the need to adapt our legal system to a number of EU Law provisions. The reform of our post-trading system seeks to improve its efficiency and stability, in addition to equating the securities clearing, settlement and recording activities to those of the European markets, thus helping to reduce operational costs and improve the competitiveness of our markets, entities and infrastructures and, consequently, of the financial sector. On April 27, 2016, the new post trading system of clearing and settlement of shares kicked off.
Regulation (EU) No. 596/2014, on market abuse, which was directly applicable in all European Union member states, came into force in 2016 with the aim to ensure that European Union regulation keeps pace with market developments in order to combat market abuse on financial markets as well as across commodity and related derivative markets.
Regulation (EU) No. 2017/1129, of June 14, 2017, which was directly applicable in all European Union member states, came into full force in 2019 to regulate the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC.
Royal Legislative Decree 14/2018, of September 28, 2018, amended the Securities Market Act to integrate into the Spanish legal system Directive 2014/65/E.U. of the European Parliament and of the Council of May 15, 2014, on markets in financial instruments. It is aimed at improving the soundness, transparency and regulation of the Spanish Financial Market´s trading activities, increasing the investor protection and harmonizing the regulations of the Spanish Financial Markets market regulations with the rest of the countries in the Union. The directive has been further integrated into the Spanish legal system by Royal Decree 1464/2018, of December 21, 2018.
Royal Legislative Decree 19/2018, of November 23, 2018, on payment services and other urgent financial measures amends among others, the Securities Market Act in order to integrate into the Spanish legal system, and Regulation (EU) No. 596/2014, on market abuse. The main novelties introduced to the Securities Market Act are (i) the distinction between the concepts of inside information and relevant information, (ii) the removal of the obligation to have an internal code of conduct for securities markets and (iii) the reduction of the notification threshold of people with management responsibilities.
On December 28, 2018, the Spanish Commercial Code, the Companies Act and the Audit Act were amended by Law 11/2018 in order to reinforce the disclosure of non-financial and diversity information, among others, of listed companies. It introduced information and diversity obligations including (i) the obligation to prepare a non-financial information statement on environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters and society matters and (ii) the obligation to ensure that the selection procedures for Company directors facilitate diversity in relation to age, disability and training as well as gender, experience and knowledge.
On June 26, 2020, the CNMV approved the partial review of the CNMV Governance Code. The review updated and adapted various recommendations of such code to various intervening legal amendments approved since its publication and clarified the scope of others that had raised certain doubts. The four key elements of the reform were: (i) promoting the presence of women in boards of directors; (ii) greater importance of non-financial information and sustainability; (iii) more attention to reputational risk and, in general, non-financial risks; and (iv) clarification of aspects related to the remuneration of the board members.
As a result of the amendment of the CNMV Governance Code referred to above, Circular 1/2020 of October 6, 2020, amended (i) Circular 5/2013 of June 12, 2020, by establishing a new template for the annual corporate governance report for listed public companies, savings banks and other entities that issue securities admitted for trading on official securities markets and
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(ii) Circular 4/2013 of June 12, 2020, by establishing a new template for the annual report on remuneration of directors of listed public companies and members of boards of directors and control committees of savings banks that issue securities admitted to trading on official securities markets.
Law 5/2021, of April 12, 2021, among other regulations, amended the Spanish Companies Act, as well as the Spanish Securities Market Act. The purpose of this law is to transpose into Spanish Law Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC with respect to the encouragement of long-term shareholder engagement in listed companies.
As a result of the amendment of the Spanish Companies Act and the Spanish Securities Market Act referred to above, Circular 3/2021 of September 28, 2021, amended (i) Circular 4/2013 of June 12, 2020, by establishing a new template for the annual report on remuneration of directors of listed public companies and members of boards of directors and control committees of savings banks that issue securities admitted to trading on official securities markets and (ii) Circular 5/2013 of June 12, 2020, by establishing a new template for the annual corporate governance report for listed public companies, savings banks and other entities that issue securities admitted for trading on official securities markets.
D. | Selling Shareholders |
Not Applicable.
E. | Dilution |
Not Applicable.
F. | Expense of the Issue |
Not Applicable.
Item 10.ADDITIONAL INFORMATION
A. | Share Capital |
Not Applicable.
B. | Memorandum and Articles of Association |
The following is a summary of the material terms of our Articles of Association and Board Regulations, as amended and currently in effect. This summary is not meant to be complete and is qualified in its entirety by reference to each of the Articles of Association and Board Regulations. Because this is a summary, it does not contain all the information that may be important to you. You should read the Articles of Association and Board Regulations carefully. The current Articles of Association are included as Exhibit 1.1 and Exhibit 1.2 (English translation) to this annual report on Form 20-F. The Articles of Association and the Board Regulations are also available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com under the headings “Investors—Corporate Governance—Articles of Association” and “Investors—Corporate Governance—Board of Directors, Regulations.”
The Articles of Association were originally approved and incorporated with the Commercial Registry on June 22, 1987. The Board Regulations were initially approved by the Board on April 5, 2006.
At the general shareholders’ meeting held on May 29, 2015, the shareholders voted to amend our Articles of Association on matters pertaining to corporate governance in order to ensure compliance with the amended Spanish Companies Act. The shareholders renewed the delegation of authority to the Board to effect a two-to-one split of the Class A and Class B shares, within one year following the date of the meeting, by reducing the nominal value and increasing the number of such shares, without changing the total nominal value of the share capital. Finally, the shareholders provided the Board authorization for the derivative acquisition of treasury
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stock thereby revoking and leaving without effect the authorization granted to the Board during the shareholder meeting on extraordinary matters held on January 25, 2011.
At the general shareholders’ meeting held on May 27, 2016, the shareholders voted to delegate to the Board, with full power of substitution in any of its members, the authority to increase the Company’s share capital at once or in several times and at any given moment, within a maximum term of five (5) years as from the date of the May 27, 2016, general meeting, and in an amount that in no case may exceed half of the Company’s share capital at the time of this authorization. Pursuant to this authorization, the share capital increases will be carried out, if appropriate, by issuing and placing in circulation the new shares (whether of Class A and Class B, exclusively Class A or exclusively Class B), with or without share premium, with a consideration consisting in cash contributions. As long as there are non-voting Class B shares in circulation, the capital increases will observe, when applicable, the provisions of the Company’s Articles of Association as regards the pre-emptive right of acquisition that may correspond in said capital increases. Likewise, as long as Class B shares hold the redemption rights foreseen in paragraph 4 of article 6.bis of the Articles of Association, the nominal value of the Class B shares that may be issued in the execution of this delegation of authorities cannot exceed one fourth of the total amount of the share capital resulting from the capital increase resolution.
At the general shareholders’ meeting held on May 26, 2017, the shareholders voted to amend our Articles of Association concerning the composition and functions of the Audit Committee, in order to conform its content to the latest amendments of the Companies Act introduced by the Audit Act currently in force. The shareholders also voted to amend the regulation of the general shareholders’ meeting, concerning the competences of the general shareholders’ meeting, in order to adapt its content to the latest amendments of the Companies Act, introduced by Law 5/2015 of promotion of business financing (Ley 5/2005 de fomento de la financiación empresarial), on matters of issuance of bonds and other securities. The amendment consists of eliminating the issuance of numbered series of bonds or other securities, whether convertible or not, that may recognize or create a debt expressly as a competence of the general shareholders’ meeting. The shareholders also renewed the delegation of authority to apply for the listing of the Class A shares on NASDAQ, via Class A ADSs, within three years following the date of the meeting.
At the general shareholders’ meeting held on May 24, 2019, the shareholders voted to amend our Articles of Association and the regulations of the General Shareholders’ Meeting with respect to the valid casting of votes through distance voting systems of the General Shareholders’ Meeting in order to extend the deadline for receipt of votes until immediately before midnight on the day prior to the date that the General Shareholders’ Meeting is scheduled at its first call or second call.
At the general shareholders’ meeting held on October 9, 2020, the shareholders voted to amend our Articles of Association and the regulations of the General Shareholders’ Meeting with respect to the right to attend, proxy granting and representation at the General Shareholders’ Meeting, with the purpose of expressly establishing the possibility of attending the General Shareholders’ Meeting by remote, simultaneous and bidirectional connection via telematics means. The shareholders also renewed the delegation of authority to the Board for the derivative acquisition of treasury stock, thereby revoking and voiding the authorization granted to the Board during the General Shareholders’ Meeting held on May 29, 2015. Such authorization is granted for a maximum term of five years. Further, the shareholders renewed the delegation of authority to apply for the listing of the Class A shares on NASDAQ, via Class A ADSs, within three years following the date of the meeting.
At the general shareholders’ meeting held on May 21, 2021, the shareholders voted to renew the delegation of authority to the Board to increase the company’s share capital, thereby revoking and voiding the authorization granted to the Board during the General Shareholders’ Meeting held on May 27, 2016. Such authorization is granted for a maximum term of five years as from the date of the General Shareholders’ Meeting.
The Board, with full power of substitution in any of its members, has the authority to set the terms and conditions of the capital increases and the characteristics of the shares in all aspects not foreseen by the general shareholders’ meeting, as well as to freely offer the new unsubscribed shares within the term(s) of exercise of the pre-emptive right of subscription; establish that, in the event of an incomplete subscription, the share capital will be increased only in the amount of the subscriptions effectively carried out; redraft the articles of the Articles of Association related to share capital and number of shares; exclude, pursuant to the provisions of article 506 of the Companies Act, the pre-emptive right in the terms and conditions set forth therein and up to a maximum of 20% of the Company’s share capital; apply for, when appropriate, the listing of the shares issued pursuant to this authorization, as well as to carry out all the necessary actions and procedures and to file the documents that might be required before the competent bodies of the above-mentioned stock exchange markets, for admission to listing of the new shares issued as a consequence of the agreed capital increase; it is expressly put on record that Grifols agrees to be bound by already existing and future rules related to the Stock
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Exchange matters and, specially, as regards contracting, permanence and exclusion from official listing; request the inclusion of the new shares in the accounting registries of the company Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A.U. (Iberclear).
The full text of the amendments to the Articles of Association detailed above is available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com under the heading “Investors—Corporate Governance.”
General
As of December 31, 2021, our share capital was €119,603,705 and comprised:
· | Class A shares: 426,129,798 ordinary shares with a par value of €0.25 each. All of the Class A shares belong to the same class and series. |
· | Class B shares: 261,425,110 non-voting preference shares with a par value of €0.05 each. All of the Class B shares belong to the same class and series and have the preferential rights set forth in the Articles of Association. |
All of our shares are fully paid and non-assessable. Both share classes are issued in book-entry form, governed by the Securities Market Act, as amended, and such other provisions as may be applicable. The book-entry registry is maintained by Iberclear and its participant entities.
Register
We are a public limited trading company registered with the Commercial Registry of Barcelona. Our fiscal identification number is A-58389123.
Our principal executive office is located at Avinguda de la Generalitat, 152 Parque Empresarial Can Sant Joan, 08174 Sant Cugat del Vallès, Barcelona, Spain. Our registered office is located at c/Jesús y María, 6, Barcelona (08022). We were incorporated on June 22, 1987. Our fiscal year runs from January 1 to December 31.
Corporate Purpose
Article 2 of the Articles of Association states that our corporate purpose is to provide administration, management and supervision services of companies and businesses as well as investments in personal and real estate assets.
Board of Directors
Under Article 31 of the Board Regulations, a director shall abstain from attending or intervening in deliberations that affect matters in which he/she (or any person related to him/her) is personally involved, directly or indirectly. A director cannot carry out professional or commercial transactions with us, directly or indirectly, unless he/she previously informs the Board about the conflict of interest, and the Board, following a report from our Appointments and Remuneration Committee, approves the transaction.
Under Article 15 of the Board Regulations, the Appointments and Remuneration Committee will in all cases be fully composed of non-executive directors, two of which shall be independent directors, and the chairperson must be an independent director.
The Board, with the advice of the Appointments and Remuneration Committee, sets director compensation. As set forth in Article 20.bis of our Articles of Association the directors’ remuneration shall be a fixed amount. Furthermore, as set forth in Article 26 of the Board Regulations, every three years the general shareholders’ meeting must approve the remuneration policy for the directors which shall remain in force for the three fiscal years following the year of its approval and must be in line, where applicable, to the remuneration system laid down in the Articles of Association. As set forth in Article 27 of such Board Regulations, non-executive directors should be excluded from receiving remuneration linked to our profits or welfare systems, other than shares in Grifols, that they must hold until their resignation as directors. Further, the establishment of equity compensation plans in which members of the Board participate must be authorized in the Articles of Association and requires the shareholders’ prior approval at a shareholders’
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meeting. Additionally, the amount of non-executive directors’ remuneration should be calculated in order to incentivize dedication but not become an obstacle to independence.
For more information regarding related party transactions, see Item 7 of this Part I, “Major Shareholders and Related Party Transactions—B. Related Party Transactions.”
We do not impose an age limit requirement for the retirement or non-retirement of directors. We also do not impose a shareholding requirement for director qualification. Article 6 of the Board Regulations does provide, however, that a director cannot qualify as an independent external director if he or she has a significant shareholding in us.
For information regarding the provisions of the Articles of Association as applied to the Board, see Item 6 of this Part I, “Directors, Senior Management and Employees—A. Directors and Senior Management—Directors” and “Directors, Senior Management and Employees—C. Board Practices.”
Shareholder Rights
The following summary of material considerations concerning our share capital briefly describes certain material provisions of the Articles of Association and Spanish law relating to our share capital. Because it is a summary, it is not meant to be complete, is qualified by reference to the applicable Spanish laws and our Articles of Association and does not contain all the information that may be important to you.
Neither Spanish law nor our Articles of Association limit the right to own our securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities.
Under Spanish law, the rights of shareholders may be changed only by an amendment to the articles of association of a company that complies with the requirements explained below under “—Class A Shares—Shareholders’ Meetings and Voting Rights.” Our Articles of Association do not further specify what actions or quorums are required to change the rights of our shareholders, other than that they classify an amendment thereto as an extraordinary matter, as described below in “—Class B Shares—Separate Vote at General Shareholder Meetings on Extraordinary Matters.”
Class A Shares
Shareholders’ Meetings and Voting Rights
Pursuant to Article 13 of our Articles of Association and the Spanish Companies Act, the annual general shareholders’ ordinary meeting shall be held during the first six months of each fiscal year on a date fixed by the Board. Resolutions presented at duly constituted general shareholders’ meetings are, except as indicated herein, passed by a simple majority vote of the voting capital present or represented at the meeting.
Extraordinary meetings may be called by the Board whenever it deems it appropriate or at the request of one or more shareholders representing at least 3% of our share capital. The requesting shareholders must state in their request the matters to be addressed at the meeting. Per Spanish Law and the Articles of Association, we are required to publish a “calling of the meeting”, which sets forth the matters to be voted on at each general shareholders’ meeting, at least one month prior to the date set for the meeting in at least: (i) the Official Gazette of the Commercial Registry (Boletín Oficial del Registro Mercantil) or one of the local newspapers of wide circulation in the province where we are domiciled (currently Barcelona, Spain); (ii) CNMV’s website; and (iii) our website.
Holders of ordinary and Class B shares duly registered in the book-entry records maintained by Iberclear and its participant entities at least five days prior to the day on which a shareholders’ meeting is scheduled, in the manner provided in the notice for such meeting, may attend such meeting (in person or represented by proxy) and, where so entitled, may vote. Holders of our Class B shares generally do not have voting rights, except with respect to certain extraordinary matters that require approval by a majority of our outstanding Class B shares, as set forth below in “—Class B Shares—Separate Vote at General Shareholder Meetings on Extraordinary Matters.”
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For an ordinary or extraordinary general meeting of shareholders to be duly constituted on the first call, the presence in person or by proxy of shareholders representing 25% of our issued voting share capital is required to constitute a quorum and proceed. If a quorum is not obtained on the first call, a meeting is validly convened on the second call regardless of the share capital in attendance.
Under Spanish law, the following shareholder actions require approval by the affirmative vote of the holders of a majority of our Class A shares present in person or represented by proxy at a duly constituted meeting of holders of our Class A shares at which meeting, if (i) on first call, a quorum of at least 50% of the issued voting share capital is present or represented by proxy or (ii) on second call, a quorum of at least 25% of the issued voting share capital is present or represented by proxy (unless on such second call less than 50% of the issued voting share capital is present or represented by proxy, in which case those matters require the affirmative vote of at least two-thirds of the share capital present or represented at such meeting):
· | the issuance of bonds; |
· | an increase or reduction of the share capital, or the suppression/limitation of pre-emptive rights in issuances of new shares; |
· | the transformation of Grifols (change in corporate nature); |
· | a merger, de-merger, split, spin-off or other structural change subject to Law 3/2009; |
· | any other amendment of the Articles of Association; and |
· | a dissolution. |
For purposes of determining the quorum, those shareholders who vote by mail or through the internet are counted as being present at the meeting, as provided by the regulations of the general shareholders’ meeting of Grifols, S.A (Reglamento de la Junta General de Accionistas). Such regulations are available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com under the heading “Investors—Corporate Governance—Shareholders’ General Meeting—Regulations of the General Shareholders’ Meeting.”
In general, resolutions passed at a general shareholders’ meeting are binding upon all shareholders. In very limited circumstances, Spanish law gives dissenting or absent shareholders, including those holding Class B shares, the right to have their Grifols’ shares redeemed by us at prices determined in accordance with established formulas or criteria.
Dividends
Payment of dividends must be proposed by the Board and authorized by our shareholders at a general shareholders’ meeting. Interim dividends may be declared by the Board on account of profits for the then current fiscal year, subject to certain limitations.
Spanish law requires each company to apply at least 10% of its net income each year to a legal reserve until the balance of such reserve is equivalent to at least 20% of such company’s issued share capital. A company’s legal reserve is not available for distribution to its shareholders except upon such company’s liquidation. According to Spanish law, dividends may only be paid out of profits (after deduction of any amounts required to be applied to the legal reserve) or distributable reserves and only if the value of a company’s net worth is not, and as a result of distribution would not be, less than such company’s share capital.
In addition, no profits may be distributed unless the amount of the distributable reserves is at least equal to the amount of research and development expenses recorded as an asset on a company’s consolidated balance sheet.
Spanish law also requires the creation of a non-distributable reserve equal to the amount of goodwill recorded as an asset on a company’s consolidated balance sheet and that an amount at least equal to 5% of such goodwill be transferred from the profit from each financial year to such non-distributable reserve until such time as the non-distributable reserve is of an amount at least equal to the goodwill recorded on such company’s consolidated balance sheet. If, in any given financial year, there are no or insufficient profits
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to transfer an amount equal to 5% of the goodwill recorded as an asset on a company’s consolidated financial statement, Spanish law requires that the shortfall be transferred from freely distributable reserves to the non-distributable legal reserve.
In the event of a reduction in share capital to offset losses, dividends may not be distributed until the legal reserve reaches 10% of the new share capital.
Distributions of dividends to our Class A shareholders will be made in proportion to the capital that they have paid up. The shareholders at the general shareholders’ meeting shall decide the amount, time and form of payment of the dividends. If these details are not so determined, the dividend will be payable at our registered office on the day following the date of the resolution.
The right to a dividend lapses and reverts to us if it is not claimed within five years after it becomes payable. Dividends payable by us to non-residents of Spain may be subject to a Spanish withholding tax of 19%, effective January 1, 2016. However, residents of certain countries are entitled to the benefits of the Convention Between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, as described below in “—E. Taxation—Spanish Tax Considerations.”
As set forth below under “—Class B Shares—Preferred Dividend,” since the issuance of the our Class B shares, the dividend rights of our Class A shareholders have been subordinated to the €0.01 per share preferred dividend of our Class B shares.
Liquidation Rights
Upon our winding-up and liquidation, holders of our Class A shares and Class B shares will be entitled to receive a pro rata portion of any assets remaining after the payment of our debts, taxes and the expenses of the liquidation as follows: (i) before any amount is distributed to the holders of Class A shares, the holders of Class B shares will receive the nominal value and share premium paid up for such Class B shares at the time of issuance and (ii) once such liquidation preference is received, the holders of the Class A shares and Class B shares will share pari passu in the amounts distributed.
Subscription (or Preemptive) Rights and Increases of Share Capital
Pursuant to the Spanish Companies Act, shareholders and holders of convertible bonds have subscription (or preemptive) rights to subscribe for any new shares (or other securities convertible into, or exchangeable for, shares) issued by a company in a capital increase via monetary contributions.
In accordance with the Spanish Companies Act, such subscription (or preemptive) rights may be waived under special circumstances by a resolution passed at a meeting of shareholders or the Board (such as when we listed on the Spanish Stock Exchanges), and the general shareholders’ meeting delegates to the Board the right to increase the share capital or to issue securities convertible into, or exchangeable for, shares and to waive subscription (or preemptive) rights). See Item 3 of this Part I, “Key Information—D. Risk Factors—Risks Relating to Our Shares and American Depositary Shares—Subscription (or preemptive) rights may be unavailable to U.S. holders of our shares or ADSs.”
Further, subscription (or preemptive) rights, in any event, will not be available in the event of certain capital increases, such as those in which we receive an in-kind contribution, those effected to meet the requirements of a convertible bond issue or those for a merger in which shares are issued as consideration. Subscription (or preemptive) rights are transferable, may be traded on the Spanish Automated Quotation System and may be of value to existing shareholders because new shares may be offered for subscription at prices lower than prevailing market prices. In the case of a share capital increase against reserves, the same rule applies to the free allotment (derecho de asignación gratuita) rights.
Finally, as described below in “—Class B Shares—Subscription Rights,” in connection with an issuance of securities where subscription (or preemptive) rights apply, our Class B shares may only be granted preemptive rights with respect to additional Class B shares if our Class A shares are granted preemptive rights with respect to additional Class A shares. The preemptive rights of each class must be otherwise equal.
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Registration and Transfers
Our Class A shares are in book-entry form on Iberclear and are indivisible. Joint holders of one share must designate a single person to exercise their shareholders’ rights, but they are jointly and severally liable to us for all the obligations flowing from their status as shareholders, such as the payment of any pending capital calls.
Iberclear maintains the central registry reflecting the number of shares held by each of its participant entities. Each participant entity, in turn, maintains a registry of the owners of such shares.
Transfers of shares quoted on the Spanish Stock Exchanges are normally made through credit entities or investment companies that are members of the Spanish Stock Exchanges.
Reporting Requirements
Pursuant to Royal Decree 1362/2007, any individual or legal entity that, by whatever means, acquires or transfers shares with voting rights in a company for which Spain is listed as the Country of Origin (Estado Miembro) (as defined therein) and which is listed on an official secondary securities market or other regulated market in the European Union must notify the issuer and the CNMV, if, as a result of such transaction, the proportion of voting rights held by that individual or legal entity reaches, exceeds or thereafter falls below a 3% threshold of that company’s total voting rights. The notification obligations are also triggered at thresholds of 5% and multiples thereof (excluding 55%, 65%, 85%, 95% and 100%). The applicable threshold is 1% (or its successive multiples thereof) for persons or entities located in designated “tax havens” (as defined in Royal Decree 1080/1991) or other jurisdictions lacking adequate supervision.
The individual or legal entity obliged to provide the notification must serve the notification by means of the form approved by the CNMV from time to time for such purpose, within four business days from the date on which the transaction is acknowledged. Royal Decree 1362/2007 deems that a transaction is “acknowledged” within two business days from the date on which such transaction is entered into.
The reporting requirements apply not only to the purchase or transfer of voting shares, but also to those transactions in which, without a purchase or transfer, the proportion of voting rights of an individual or legal entity reaches, exceeds or thereafter falls below the threshold that triggers the obligation to report as a consequence of a change in the total number of voting rights of a company on the basis of the information reported to the CNMV and disclosed by such individual or legal entity.
Regardless of the actual ownership of the voting shares, any individual or legal entity with a right to acquire, transfer or exercise voting rights of the shares, and any individual or legal entity that owns, acquires or transfers, whether directly or indirectly, other securities or financial instruments that grant a right to acquire shares with voting rights, will also have an obligation to notify us and the CNMV of the holding of a significant stake in accordance with the regulations.
Furthermore, all members of the Board must report to both us and the CNMV the percentage and number of voting rights in Grifols held by them at the time of becoming or ceasing to be a member of the Board. All members of the Board must also report any change in the percentage of voting rights they hold, regardless of the amount, as a result of any acquisition or disposition of our shares or voting rights, or financial instruments that carry a right to acquire or dispose of shares that have voting rights attached, including any stock-based compensation that they may receive pursuant to any of our compensation plans.
In addition, pursuant to the Securities Market Act, any member of the Board and any parties closely related to any member of the Board must similarly report any acquisition or disposal of our shares (in this case, either Class A or Class B shares), derivatives or other financial instruments relating to our shares regardless of the size, including information on the percentage of voting rights which they hold as a result of the relevant transaction within five business days of such transaction. In this respect, Regulation (EU) No. 596/2014, on market abuse, introduces certain changes as regards notifications from directors. From a practical viewpoint, the transactions that may be notified are broadened, the notification period is reduced from 5 to 3 business days and the prohibition against directors and executives to trade during 30 calendar days before the publication of an interim or annual financial report (restricted periods or “blackouts”) is regulated. Royal Decree-Law 19/2018, which amends the Securities Market Act and implements Regulation (EU) No. 594/2014, on market abuse, establishes that persons discharging managerial responsibilities, as well as persons closely associated with them, must report to Grifols and the CNMV any acquisition or disposal of our shares (in this case, either
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Class A or Class B shares), derivatives or other financial instruments relating to our shares, once the sum of the amounts of all transactions made within a calendar year reaches the amount of €20,000.
Additional disclosure obligations apply in respect of voting agreements. In this respect, the Spanish Companies Act requires parties to disclose certain types of shareholders’ agreements that affect the exercise of voting rights at a general shareholders’ meeting or contain restrictions or conditions on the transferability of shares or bonds that are convertible or exchangeable into shares.
Moreover, persons holding a net aggregate short position in our shares must report the short position to the CNMV on a confidential basis whenever it reaches 0.2% and notify the CNMV of any subsequent decrease or increase by 0.1% (and successive multiples thereof) within the day immediately following the relevant trade. The CNMV publishes individual net short positions of 0.5% or more and aggregate information on net short positions between 0.2% and 0.5%.
The Articles of Association do not contain additional provisions governing the ownership threshold above which shareholder ownership must be disclosed.
Class B Shares
Our Class B shares have substantially similar dividend and other economic rights as our Class A shares, summarized above in “—Class A Shares,” but differ from the Class A shares in some important respects that are outlined below.
Voting Rights
Holders of our Class B shares generally do not have voting rights, except with respect to certain extraordinary matters, with respect to which approval by a majority of our outstanding Class B shares is required.
Separate Vote at General Shareholder Meetings on Extraordinary Matters
Notwithstanding the lack of voting rights of our Class B shares generally, resolutions on the matters detailed below (each, an “extraordinary matter”) require the approval of a majority of our outstanding Class B shares.
· | Any resolution (i) authorizing us or any of our subsidiaries to repurchase or acquire any of our Class A shares, except for pro rata repurchases available equally to holders of our Class B shares on the same terms and at the same price as offered to holders of our Class A shares or (ii) approving the redemption of any of our shares and any share capital reductions (through repurchases, cancellation of shares or otherwise), other than (a) those redemptions required by law and (b) those redemptions which affect equally our Class A shares and Class B shares and in which each Class B share is treated the same as a Class A share in such transaction. |
· | Any resolution approving the issuance, granting or sale (or authorizing the Board to issue, grant or sell) (i) any of our shares, (ii) any rights or other securities exercisable for or exchangeable or convertible into our shares or (iii) any options, warrants or other instruments giving the right to the holder thereof to purchase, convert, subscribe or otherwise receive any of our securities, except if (a) each Class B share is treated the same as a Class A share in the relevant issuance, grant or sale and, therefore, has a preferential subscription right (derecho de suscripciÓn preferente) or a free allotment right in the relevant issuance, grant or sale to the same extent, if any, as a Class A share or (b) if the issuance is made in accordance with the subscription rights described in “— Subscription Rights” below. |
· | Any resolution approving unconditionally or not (i) a transaction subject to Law 3/2009 (including, without limitation, a merger, split-off, cross-border redomiciliation or global assignment of assets and liabilities), except if in such transaction each Class B share is treated the same as a Class A share or (ii) our dissolution or winding-up, except where such resolution is required by law. |
· | Any resolution for the delisting of any Grifols shares from any stock exchange. |
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· | Generally, any resolution and any amendment of the Articles of Association that directly or indirectly adversely affects the rights, preferences or privileges of our Class B shares (including any resolution that adversely affects our Class B shares relative to our Class A shares or that positively affects our Class A shares relative to our Class B shares, or that affects the provisions in the Articles of Association relating to our Class B shares). |
The general shareholders’ meeting has the power to decide on all matters assigned to it by law or by the Articles of Association and, in particular, without limitation to the foregoing, shall be the only corporate body or office entitled to decide on these extraordinary matters.
Preferred Dividend
Each of our Class B shares entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each fiscal year the share is outstanding equal to €0.01 per Class B share. In any given fiscal year, we will pay a preferred dividend to the holders of our Class B shares before any dividend out of the distributable profits for such fiscal year is paid to the holders of our Class A shares. The preferred dividend on all issued Class B shares will be paid by us within the nine months following the end of that fiscal year, in an amount not to exceed the distributable profits obtained by us during that fiscal year.
If, during a fiscal year, we have not obtained sufficient distributable profits to pay in full, out of those profits, the preferred dividend on all the Class B shares outstanding, the preferred dividend amount exceeding the distributable profits obtained by us will not be paid and will not be accumulated as a dividend payable in the future.
Lack of payment, total or partial, of the preferred dividend during a fiscal year due to insufficient distributable profits to pay in full the preferred dividend for that fiscal year will not cause our Class B shares to recover any voting rights.
As set forth above in “—Class A Shares—Dividends,” the dividend rights of our Class A shareholders are subordinated to the preferred dividend described in this section.
Other Dividends
Each Class B share is entitled to receive, in addition to the preferred dividend referred to above, the same dividends and other distributions (in each case, whether in cash, securities of Grifols or any of our subsidiaries, or any other securities, assets or rights) as one Class A share. Each Class B share is treated as one Class A share for the purpose of any dividends or other distributions made on our Class A shares, including as to the timing of the declaration and payment of any such dividend or distribution.
Redemption Rights
Each holder of our Class B shares is entitled to redeem those shares as set forth in this section if a tender offer for all or part of our share capital is made and settled (in whole or in part), except if holders of our Class B shares were entitled to (i) participate in such offer and (ii) have their shares acquired in such offer equally and on the same terms as holders of our Class A shares (including, without limitation, for the same consideration).
Upon the closing and settlement (in whole or in part) of a tender offer for our shares in which holders of our Class B shares were not entitled to (i) participate and (ii) have their shares acquired in such offer equally and on the same terms as holders of our Class A shares (including, without limitation, for the same consideration), the redemption process will follow the process detailed below.
· | We will, within ten days of the date on which the redemption event occurred (i.e., the date on which the triggering tender offer settled), publish in the Commercial Registry Gazette, the Spanish Stock Exchanges’ Gazettes and in at least two of the newspapers with widest circulation in Barcelona an announcement informing the holders of our Class B shares of the redemption event and the process for the exercise of redemption rights in connection with such redemption event. |
· | Each holder of our Class B shares will be entitled to exercise its redemption right for two months from the first date of settlement of the tender offer triggering the redemption right by notifying us of its decision. We will ensure that |
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mechanisms are in place so that the notification of the exercise of the redemption right may be made through Iberclear.
· | The redemption price to be paid by us for each Class B share for which the redemption right has been exercised will be the sum of (i) the amount in euro of the highest consideration paid in the tender offer triggering the redemption right plus (ii) interest on the amount referred to in (i), from the date such tender offer is first settled until the date of full payment of the redemption price, at a rate equal to the one-year EURIBOR plus 300 basis points. For the purposes of this calculation, the amount in euro corresponding to any non-cash consideration paid in the tender offer will be the market value of such non-cash consideration as of the date the tender offer is first settled. The calculation of such market value shall be supported by at least two independent experts designated by us from auditing firms of international repute. |
· | We will, within 40 days of the date on which the period for notification of the exercise of redemption rights following a tender offer lapses, take all the necessary actions to (i) effectively pay the redemption price for our Class B shares for which the redemption right has been exercised and complete the capital reduction required for the redemption and (ii) reflect the amendment to Article 6 of the Articles of Association (related to share capital) deriving from the redemption. |
The number of our Class B shares redeemed shall not represent a percentage over our total Class B shares issued and outstanding at the time the tender offer is made in excess of the percentage that the sum of our Class A shares (i) to which the tender offer is addressed, (ii) held by the offerors in that offer and (iii) held by persons acting in concert with the offerors or by persons having reached an agreement relating to the offer with the offerors represent over the total Class A shares issued and outstanding at the time the tender offer causing the redemption of our Class B shares is made.
Payment of the redemption price will be subject to us having sufficient distributable reserves but, after a tender offer occurs and until the redemption price for our Class B shares is paid in full, we will not be able to declare or pay any dividends nor any other distributions to our shareholders (in each case, whether in cash, securities of Grifols or any of our subsidiaries, or any other securities, assets or rights).
Liquidation Rights
Each Class B share entitles its holder to receive, upon our winding-up and liquidation, an amount equal to the sum of (i) the nominal value of such Class B share and (ii) the share premium paid up for such Class B share when it was subscribed for.
We will pay the liquidation amount to the holders of our Class B shares before any amount on account of liquidation is paid to the holders of our Class A shares.
Each of our Class B shares entitles its holder to receive, in addition to the liquidation preference amount, the same liquidation amount paid for a Class A share.
Subscription Rights
Each Class B share entitles its holder to the same rights (including preferential subscription rights and free allotment rights) as one Class A share in connection with any issuance, granting or sale of (i) any shares in Grifols, (ii) any rights or other securities exercisable for, exchangeable or convertible into shares in Grifols or (iii) any options, warrants or other instruments giving the right to the holder thereof to purchase, convert, subscribe or otherwise receive any securities in Grifols.
As an exception, the preferential subscription rights and the free allotment rights of the Class B shares will only be for new Class B shares or for instruments giving the right to purchase, convert, subscribe for or otherwise receive Class B shares, and the preferential subscription right and the free allotment right of an Class A share will only be for new Class A shares or for instruments giving the right to purchase, convert, subscribe or otherwise receive Class A shares, for each capital increase or issuance that meets the following three requirements: (i) the issuance of Class A shares and Class B shares is in the same proportion of our share capital as they represent at the time the resolution on the capital increase is passed; (ii) grants of preferential subscription rights or free allotment
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rights, as applicable, to the Class B shares for the Class B shares are under the same terms as the preferential subscription rights or free allotment rights, as applicable, granted to the Class A shares for the Class A shares; and (iii) no other shares or securities are issued.
Registration and Transfers
Class B shares are in book-entry form on Iberclear and are indivisible, as indicated with respect to Class A shares above in “—Class A Shares—Registration and Transfers.”
Change in Control
The Articles of Association do not contain any provisions that would have the effect of delaying, deferring or preventing a change in control of Grifols.
Changes in Share Capital
Changes in share capital are considered extraordinary matters and must be approved by our shareholders in accordance with the procedures explained above in “—Class A Shares—Shareholders’ Meetings and Voting Rights” and “—Class B Shares—Separate Vote at General Shareholder Meetings on Extraordinary Matters.”
A capital increase may be effected by issuing new shares or by increasing the par value of existing shares. A capital reduction may be effected by reducing the par value of existing shares or by redeeming or repurchasing existing shares.
426,129,798 Class A Shares are currently issued and outstanding with a par value of €0.25 per share and 261,425,110 Class B Shares are currently issued and outstanding with a par value of €0.05 per share. As of December 31, 2021, our total share capital stands at €119,603,705.
Sinking Fund
The Articles of Association do not contain any sinking fund provisions.
C. | Material Contracts |
The following contracts have been entered into by us within the two years immediately preceding the date of this annual report on Form 20-F or contain provisions under which we or another member of the Grifols Group has an obligation or entitlement that is material to us:
2017 Notes
For a summary of the material terms of the 2017 Notes, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit—The 2017 Notes.”
2019 Notes
For a summary of the material terms of the 2019 Notes, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit—The 2019 Notes.”
2021 Notes
For a summary of the material terms of the 2021 Notes, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit—The 2021 Notes.”
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First Lien Credit Facilities
For a summary of the material terms of the First Lien Credit Facilities, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit—First Lien Credit Facilities.”
European Investment Bank Term Loans
For a summary of the material terms of the European Investment Bank Term Loans, see Item 5 of this Part I, “Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Credit—European Investment Bank Term Loans.”
Acquisitions
For a summary of the material terms of our acquisitions substantially completed in 2019, 2020 and 2021, see Item 5 of this Part I, “Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Financial Condition and Results of Operations—Acquisitions.”
D. | Exchange Controls |
Restrictions on Foreign Investment
Under present regulations, foreign investors may transfer invested capital, capital gains and dividends out of Spain without limitation on the amount other than applicable taxes. Law 19/2003, of July 4, 2003, updated Spanish exchange control and money laundering prevention provisions, by recognizing the principle of freedom of the movement of capital between Spanish residents and nonresidents.
The law establishes procedures for the declaration of capital movements for purposes of administrative or statistical information and authorizes the Spanish government to take measures which are justified on grounds of public policy or public security. It also provides the mechanism to take exceptional measures with regard to third countries if such measures have been approved by the European Union or by an international organization to which Spain is a party.
The Spanish Stock Exchanges and securities markets are open to foreign investors. Royal Decree 664/1999, on Foreign Investments, of April 23, 1999, established a new framework for the regulation of foreign investments in Spain that, on a general basis, no longer requires any prior consents or authorizations from authorities in Spain (without prejudice to specific regulations for several specific sectors, such as television, radio, mining, telecommunications, etc.). Royal Decree 664/1999 requires notification of all foreign investments in Spain and liquidations of such investments upon completion of such investments to the Investments Registry of the Ministry of Economy and Finance, strictly for administrative statistical and economical purposes. Where the investment or divestiture is made in shares of a Spanish company listed on any of the Spanish Stock Exchanges, the duty to provide notice of a foreign investment or divestiture lies with the relevant entity with whom the shares (in book-entry form) have been deposited or that has acted as an intermediary in connection with the investment or divestiture.
Only investments from tax haven countries require notice before and after execution of the investment, except that no prior notice is required for: (i) investments in listed or publicly negotiable securities or in participations in collective investment schemes that are registered with the CNMV and (ii) investments that do not increase the foreign ownership of the share capital of a Spanish company to over 50%. In specific instances, the Council of Ministers may agree to suspend all or part of Royal Decree 664/1999 following a proposal of the Ministry of Economy and Finance, or, in some cases, a proposal by the head of the government department with authority for such matters and a report of the Foreign Investment Body. These specific instances include a determination that the investments, due to their nature, form or condition, affect or may potentially affect activities relating to the exercise of public powers, national security or public health. Royal Decree 664/1999 is currently suspended for investments relating to national defense. In those cases in respect of which Royal Decree 664/1999 is suspended, the affected investor must obtain prior administrative authorization in order to carry out the investment.
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Exchange Controls
Law 10/2010, on the prevention of money laundering and funding of terrorism, was adopted on April 28, 2010 and entered into force on April 30, 2010. This Law requires a person moving (i) paper money and coins in any currency, (ii) bearer checks in any currency or (iii) any other physical medium, including electronic media, designed for use as payment to the bearer to declare such payment to the Spanish exchange control authorities if it exceeds €10,000 (or the foreign currency equivalent).
E. | Taxation |
In General
Treatment of Holders of ADSs
This section describes the material United States federal income and Spanish tax consequences of owning shares or ADSs. It applies to you only if you hold your shares or ADSs as capital assets for tax purposes. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:
· | a dealer in securities; |
· | a trader in securities that elects to use a mark-to-market method of accounting for securities holdings; |
· | a tax-exempt organization; |
· | a life insurance company; |
· | a person liable for alternative minimum tax under the Code (as defined below); |
· | a person that actually or constructively owns 10% or more of our voting stock; |
· | a person that holds shares or ADSs as part of a straddle or a hedging or conversion transaction; or |
· | a U.S. Holder (as defined below) whose functional currency is not the U.S. dollar. |
This section is based on the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed regulations, published rulings and court decisions, in each case as in effect as of the date hereof and all of which are subject to change, possibly on a retroactive basis, as well as the tax laws of Spain and regulations thereunder and the Convention Between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, or the Treaty, in each case as in effect as of the date hereof and subject to change.
You are a “U.S. Holder” if you are a beneficial owner of shares or ADSs and you are:
· | a citizen or resident of the United States; |
· | a corporation or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
· | an estate whose income is subject to United States federal income tax regardless of its source; or |
· | a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. |
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An “eligible U.S. Holder” is a U.S. Holder that:
· | is a resident of the United States for purposes of the Treaty; |
· | does not maintain a permanent establishment or fixed base in Spain to which shares or ADSs are attributable and through which the U.S. Holder carries on or has carried on business (or, in the case of an individual, performs or has performed independent personal services); and |
· | is otherwise eligible for benefits under the Treaty with respect to income and gain from the shares or ADSs. |
A “non-U.S. Holder” is a beneficial owner of shares or ADSs that is not a U.S. Holder.
In addition, if a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of shares or ADSs, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A beneficial owner of shares or ADSs that is a partnership, and partners in such partnership, should consult their own tax advisors regarding the tax consequences of owning and disposing of shares or ADSs.
You should consult your own tax advisor regarding the United States federal, state and local and the Spanish and other tax consequences of owning and disposing of shares and ADSs in your particular circumstances. In particular, you should confirm your status as an eligible U.S. Holder with your advisor and should discuss any possible consequences of failing to qualify as an eligible U.S. Holder.
This discussion addresses only United States federal income taxation and Spanish income taxation, gift and inheritance taxation, wealth taxation and transfer taxation.
Treatment of Holders of ADRs
In general, and taking into account the earlier assumptions, for United States federal income and Spanish tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those ADRs. Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to United States federal income or to Spanish tax.
Spanish Tax Considerations
This discussion of Spanish tax consequences applies only to owners of ADSs or shares who are eligible U.S. Holders. The following is a summary of material Spanish tax matters and is not exhaustive of all the possible tax consequences to individuals or entities of the acquisition, ownership and disposition of ADSs or shares.
Taxation of Dividends
Under Spanish law, including Royal Legislative Decree 5/2004, of March 5, 2004, as amended by Law 26/2014 (which is effective from January 1, 2015), on the Non-Resident Income Tax Law, dividends paid by a Spanish resident company to a holder of ordinary shares or ADSs not residing in Spain for tax purposes and not operating through a permanent establishment in Spain are subject to Spanish Non-Resident Income Tax of 19%.
We will levy an initial withholding tax on the gross amount of dividends at a 19% tax rate, following the procedures set forth by the Spanish Ministerial Order, or Order, of April 13, 2000. However, under the Treaty and subject to the fulfillment of certain requirements, individuals and entities may be entitled to a reduced rate of 15%.
To benefit from the Treaty’s reduced rate of 15%, an individual or entity must provide the depositary with a certificate from the U.S. Internal Revenue Service, or IRS, stating that, to the knowledge of the IRS, it is a resident of the United States within the meaning of the Treaty. The IRS certificate may be obtained by filing an IRS Form 8802 and is valid for a period of one year from the date of issue, unless it includes a specific year for which a tax resident is considered, in which case the certificate will be deemed applicable during that year.
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According to the Order of April 13, 2000, to get a direct application of the Treaty’s reduced rate of 15%, the certificate referred to above must be provided to the depositary before the tenth day following the end of the month in which the dividends were distributable by us. If an individual or entity fails to timely provide the depositary with the required documentation, it may obtain a refund of the 4% in excess withholding that would result from the Spanish tax authorities in accordance with the procedures below.
Spanish Refund Procedure
According to Royal Decree 1776/2004, of July 30, 2004, as amended, which further develops the Royal Legislative Decree 5/2004 on the Non-Resident Income Tax Law, a refund of the amount withheld in excess of the rate provided by the Treaty can be obtained from the relevant Spanish tax authorities. An eligible U.S. Holder may pursue the refund claim by filing all of the following:
· | a Spanish 210 Form; |
· | the certificate from the IRS referred to above in “—Taxation of Dividends;” and |
· | evidence that non-resident income tax was withheld with respect to it. |
The Spanish Revenue Office must make the refund within six months after the refund claim is filed. If such period lapses without receipt of the refund, the holder is entitled to receive interest for late payment on the amount of the refund claimed.
The refund claim must be filed within four years of the date on which the withheld tax was collected by the Spanish tax authorities. According to Order EHA/3316, of December 17, 2010, for dividends paid as of January 2011, the 210 Form must be filed as from February 1st of the calendar year following the year in which the dividend was paid.
Individuals and entities are urged to consult their own tax advisers regarding refund procedures and any U.S. tax implications of refund procedures.
Taxation of Capital Gains
Under Spanish law, any capital gains derived from securities issued by persons residing in Spain for tax purposes are considered to be Spanish source income and, therefore, are taxable in Spain. For U.S. residents, income from the sale of ADSs or shares will be treated as capital gains for Spanish tax purposes. Spanish Non-Resident Income Tax is levied at a 19% rate on capital gains realized by persons not residing in Spain for tax purposes who are not entitled to the benefit of any applicable treaty for the avoidance of double taxation. Capital gains and losses will be calculated separately for each transaction and losses may not be offset against capital gains.
Notwithstanding the above, capital gains derived from the transfer of shares on an official Spanish secondary securities market by any holder who is a resident of a country that has entered into a treaty for the avoidance of double taxation with Spain containing a clause of “exchange of information” (as defined in Law 36/2006, of November 30, 2006, related to measures to prevent tax fraud) will be exempt from taxation in Spain. In addition, under the Treaty, capital gains realized by an individual or entity upon the disposition of ADSs or shares will not be taxed in Spain. An individual or entity is required to establish that it is entitled to this exemption by providing to the relevant Spanish tax authorities an IRS certificate of residence in the United States, together with the appropriate Spanish 210 tax form, between January 1st and January 20th of the calendar year following the year in which the transfer of shares took place.
Spanish Wealth Tax
Individuals not resident in Spain for tax purposes who hold shares or ADSs located in Spain are subject to the Spanish wealth tax (Law 19/1991), which imposes a tax on property and rights located in Spain or that can be exercised within the Spanish territory on the last day of any year. The Spanish tax authorities may take the view that all shares of Spanish corporations and all ADSs representing such shares are located in Spain for Spanish tax purposes. If the tax authorities take this view, non-residents of Spain who held shares or ADSs on the last day of any year would be subject to the Spanish wealth tax for such year on the average market value of such shares or ADSs during the last quarter of such year (this average price of listed shares is published in the official State Gazette every year). Law 4/2008 amended the Spanish wealth tax law, introducing a 100% tax rebate and eliminating the obligation to file
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any form for tax periods starting as of 1 January 2008. However, this 100% tax rebate was temporarily abolished with effect as of the 2011 fiscal year, and since then this situation has been extended every year. From 2021, the abolition of the rebate has been established as indefinite, thus eliminating the need to stipulate extensions. Notwithstanding the above, there is a tax-free allowance of €700,000.
As a result of the above legislation, non-residents of Spain who hold or held shares, ADSs, or other assets or rights located in Spain according to Spanish wealth tax law, on the last day of the year, the combined value of which exceeds €700,000 might be subject to the Spanish wealth tax on that excess amount at marginal rates varying between 0.2% and 3.5% (the highest bracket increased by 1% since 2021), and would be obliged to file the corresponding wealth tax return.
Law 11/2021 amends the Wealth Tax Law to clarify that all non-residents taxpayers (and not only those who are resident in the EU and EEA jurisdictions) are entitled to apply the tax reliefs approved by the Spanish Regions.
Spanish Inheritance and Gift Taxes
Under Law 29/1987, transfers of shares or ADSs upon death or by gift are subject to Spanish inheritance and gift taxes if the transferee is a resident of Spain for tax purposes, or if the shares or ADSs are located in Spain at the time of gift or death, or the rights attached thereto could be exercised or have to be fulfilled in the Spanish territory, regardless of the residence of the beneficiary. In this regard, the Spanish tax authorities may determine that all shares of Spanish corporations and all ADSs representing such shares are located in Spain for Spanish tax purposes. The applicable tax rate, after applying all relevant factors, ranges between 0% and 81.6% for individuals. Law 11/2021 amends the Gift and Inheritance Tax Law to clarify that all non-residents taxpayers (and not only those who are resident in the EU and EEA jurisdictions) are entitled to apply the tax reliefs approved by the Spanish Regions, following the case-law of the Spanish Supreme Court.
Gifts granted to corporations not resident in Spain are subject to Spanish Non-Resident Income Tax of 19% of the fair market value of the shares as a capital gain. If the donee is a United States corporation, the exclusions available under the Treaty described above in “—Taxation of Capital Gains” will be applicable.
Expenses of Transfer
Transfers of ADSs or shares will be exempt from any Spanish transfer tax or value-added tax. Additionally, no Spanish stamp tax will be levied on such transfers.The transfer of shares or ADSs may be subject to the Spanish Financial Transaction tax (the “Spanish FTT”). The Spanish law which implements the Spanish FTT (the “FTT Law”) was approved on October 7, 2020, and published in the Spanish Official Gazette (Boletín Oficial del Estado) on October 16, 2020. The Spanish FTT came into force three months after the publication of the FTT Law (i.e., on January 16, 2021) and will charge a 0.2% rate on specific acquisitions of listed shares issued by Spanish companies (including ADSs) whose market capitalization exceeds 1 billion euros (€1 billion) (this may be the case of Grifols), regardless of the jurisdiction of residence of the parties involved in the transaction. Transactions in the primary market (such as a capital increase) are exempt from the Spanish FTT. However, the Spanish FTT will subject other transactions involving the acquisition of shares or ADSs depending on the market capitalization of Grifols. Prospective investors are advised to seek their own professional advice in relation to the Spanish FTT.
United States Federal Income Tax Considerations
Taxation of Dividends
U.S. Holders
Under the United States federal income tax laws, and subject to the passive foreign investment company (“PFIC”) rules discussed below, if you are a U.S. Holder, the gross amount of any dividend (including any preferred dividends on our Class B shares) we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) is subject to United States federal income taxation. If you are a noncorporate U.S. Holder, dividends (including any preferred dividends on our Class B shares) paid to you that constitute qualified dividend income will be taxable to you at a maximum tax rate of 20% provided that you hold the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend
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date and meet other holding period requirements. Dividends we pay (including any preferred dividends on our Class B shares) with respect to the shares or ADSs generally will be qualified dividend income.
With respect to any dividend we pay (including any preferred dividends on our Class B shares) you must include any Spanish tax withheld from the dividend payment in the gross amount of such dividend even though you do not in fact receive it. Dividends are taxable to you when you, in the case of shares, or the Depositary, in the case of ADSs, receive such dividend, actually or constructively. Such dividends will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of a dividend distribution that you must include in your income as a U.S. Holder will be the U.S. dollar value of the euro payments made, determined at the spot euro/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include a dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your adjusted tax basis in the shares or ADSs and thereafter as capital gain.
Subject to certain limitations, the Spanish tax withheld in accordance with the Treaty and paid over to Spain will be creditable or deductible against your United States federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 20% tax rate. To the extent a refund of the tax withheld is available to you under Spanish law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against your United States federal income tax liability. See “—Spanish Tax Considerations—Spanish Refund Procedure” above for the procedures for obtaining a tax refund.
Dividends will be income from sources outside the United States, and dividends paid will, depending on your circumstances, be “passive” or “general” income which, in either case, is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you.
A U.S. Holder may make an election to treat all foreign taxes paid as deductible expenses in computing taxable income, rather than as a credit against tax, subject to generally applicable limitations. Such an election, once made, applies to all foreign taxes paid for the taxable year subject to the election. The rules governing foreign tax credits are complex and, therefore, U.S. Holders are strongly encouraged to consult their own tax advisors to determine whether they are subject to any special rules that may limit their ability to make effective use of foreign tax credits and whether or not an election would be appropriate based on their particular circumstances.
Non-U.S. Holders
If you are a non-U.S. Holder, dividends (including any preferred dividends on our Class B shares) paid to you in respect of shares or ADSs will not be subject to United States federal income tax unless such dividends are “effectively connected” with your conduct of a trade or business within the United States, and such dividends are attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis. In such cases you generally will be taxed in the same manner as a U.S. Holder. If you are a corporate non-U.S. Holder, “effectively connected” dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Taxation of Capital Gains
U.S. Holders
Subject to the PFIC rules discussed below, if you are a U.S. Holder and you sell or otherwise dispose of your shares or ADSs, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your adjusted tax basis, determined in U.S. dollars, in your shares or ADSs. Capital gain of a noncorporate U.S. Holder is generally taxed at a maximum rate of 20% where such noncorporate U.S. Holder has a holding period
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greater than one year. Such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.
Non-U.S. Holders
If you are a non-U.S. Holder, you will not be subject to United States federal income tax on gain recognized on the sale or other disposition of your shares or ADSs unless:
· | the gain is “effectively connected” with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis; or |
· | you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale, and certain other conditions exist. |
If you are a corporate non-U.S. Holder, “effectively connected” gains that you recognize may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Passive Foreign Investment Company Considerations
We believe that our shares and ADSs should not be treated as stock of a PFIC for United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If we were to be treated as a PFIC, gain realized on the sale or other disposition of your shares or ADSs would in general not be treated as capital gain. Instead, if you are a U.S. Holder, you would be treated as if you had realized such gain and certain “excess distributions” ratably over your holding period for the shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, your shares or ADSs will be treated as stock in a PFIC if we were a PFIC at any time during your holding period in your shares or ADSs. Certain elections (such as the mark-to-market election or the Qualified Electing Fund (“QEF”) election) may be available that would result in alternative treatments of the ADSs or shares. Dividends that you receive from us will not be eligible for the special tax rates applicable to qualified dividend income if we are treated as a PFIC with respect to you either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.
Medicare Contribution Tax on Unearned Income
A U.S. Holder that is an individual is subject to a 3.8% tax on the lesser of (1) such U.S. Holder’s “net investment income” for the relevant taxable year and (2) the excess of such U.S. Holder’s modified adjusted gross income for the taxable year over a certain threshold (between $125,000 and $250,000, depending on the individual’s circumstances). A U.S. Holder that is an estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of (1) such U.S. Holder’s undistributed “net investment income” for the relevant taxable year and (2) the excess of such U.S. Holder’s adjusted gross income for the taxable year over the amount at which the highest tax bracket begins for that taxable year ($13,050 for 2021). A U.S. Holder’s net investment income will generally include, among other items, the amount of gross dividend income and the amount of any net gains from such U.S. Holder’s disposition of your shares or ADSs, unless such dividends or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). U.S. Holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax to income and gains in respect of their investment in the shares or ADSs.
Backup Withholding and Information Reporting
If you are a noncorporate U.S. Holder, information reporting requirements, on Internal Revenue Service Form 1099, generally will apply to:
· | dividend payments or other taxable distributions made to you within the United States; and |
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· | the payment of proceeds to you from the sale of shares or ADSs effected at a United States office of a broker. |
Additionally, backup withholding may apply to such payments if you are a noncorporate U.S. Holder that:
· | fails to provide an accurate taxpayer identification number; |
· | is notified by the Internal Revenue Service that you have failed to report all interest and dividends required to be shown on your federal income tax returns; or |
· | in certain circumstances, fails to comply with applicable certification requirements. |
If you are a non-U.S. Holder, you are generally exempt from backup withholding and information reporting requirements with respect to:
· | dividend payments made to you outside the United States by us or another non-United States payor; and |
· | other dividend payments and the payment of the proceeds from the sale of shares or ADSs effected at a United States office of a broker, if the income associated with such payments is otherwise exempt from United States federal income tax; and: |
· | the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished the payor or broker one of the following: |
· | an Internal Revenue Service Form W-8BEN, Form W-8BEN-E or an acceptable substitute form upon which you certify, under penalties of perjury, that you are a non-United States person, or |
· | other documentation upon which it may rely to treat the payments as made to a non-United States person in accordance with U.S. Treasury regulations, or |
· | you otherwise establish an exemption. |
Payment of the proceeds from the sale of shares or ADSs effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale of shares or ADSs that is effected at a foreign office of a broker will be subject to information reporting and backup withholding if:
· | the proceeds are transferred to an account maintained by you in the United States; |
· | the payment of proceeds or the confirmation of the sale is mailed to you at a United States address; or |
· | the sale has some other specified connection with the United States as provided in U.S. Treasury regulations, unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption. |
In addition, a sale of shares or ADSs effected at a foreign office of a broker will be subject to information reporting if the broker is:
· | a United States person; |
· | a controlled foreign corporation for United States federal income tax purposes; |
· | a foreign person 50% or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period; or |
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· | a foreign partnership, if at any time during its tax year: |
· | one or more of its partners are “U.S. persons,” as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or |
· | such foreign partnership is engaged in the conduct of a United States trade or business, unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption. Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that you are a United States person. |
Backup withholding is not an additional tax. You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by filing a refund claim with the United States Internal Revenue Service.
Disclosure of Information with Respect to Foreign Financial Assets
Certain U.S. individuals who hold any interest in “specified foreign financial assets,” including our shares or ADSs, during such holder’s taxable year must attach to their U.S. tax return for such year certain information with respect to each such asset if the aggregate value of all of such assets exceeds $50,000 (or a higher dollar amount prescribed by the Internal Revenue Service), unless such shares or ADSs are held in an account maintained by a U.S. payor, such as a U.S. financial institution or the U.S. branch of a foreign bank or insurer. For this purpose, a “specified foreign financial asset” includes any depositary, custodial or other financial account maintained by a foreign financial institution, and certain assets that are not held in an account maintained by a financial institution, including any stock or security issued by a person other than a U.S. person. A taxpayer subject to these rules who fails to furnish the required information may be subject to a penalty of $10,000, and an additional penalty may apply if the failure continues for more than 90 days after the taxpayer is notified of such failure by the Internal Revenue Service, unless the taxpayer demonstrates a reasonable cause for such failure to comply. An accuracy-related penalty of 40% is imposed for an underpayment of tax that is attributable to an “undisclosed foreign financial asset understatement,” which for this purpose is the portion of the understatement of gross income for any taxable year that is attributable to any transaction involving an “undisclosed foreign financial asset,” including any asset that is subject to information reporting requirements under these rules, which would include our shares or ADSs if the dollar threshold described above were satisfied.The applicable statute of limitations for assessment of U.S. federal income taxes is extended to six years if a taxpayer omits from gross income more than $5,000 and such omission is attributable to a foreign financial asset as to which reporting is required under the rules described in the preceding paragraph or would be so required if such rules were applied without regard to the dollar threshold or any other exceptions specified by the Internal Revenue Service. In addition, the statute of limitations will be suspended if a taxpayer fails to provide in a timely manner either information with respect to specified foreign financial assets required to be reported or the annual information reports required for holders of PFIC stock, including PFIC stock for which a QEF election is made. You should consult your own tax advisor concerning any obligation you may have to furnish information to the Internal Revenue Service as a result of holding our shares or ADSs.
F. | Dividends and Paying Agents |
Not Applicable.
G. | Statement by Experts |
Not Applicable.
H. | Documents on Display |
We are subject to the information requirements of the Exchange Act, except that, as a foreign private issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these information requirements, we file or furnish reports and other information with the SEC. Reports and other information filed or furnished by us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 100 F Street, N.E., Washington, D.C. 20549, and at the SEC’s regional offices at 233 Broadway, New York, New York 10279 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
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Copies of such material may also be inspected at the offices of NASDAQ, 4 Times Square, New York, New York 10036, on which our ADSs are listed. In addition, information filed electronically with the SEC is publicly available on the SEC’s website, which does not form part of this annual report on Form 20-F, at http://www.sec.gov.
I. | Subsidiary Information |
Not Applicable.
Item 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The risks inherent in our market-sensitive instruments are potential losses that may arise from adverse changes to interest rates, foreign exchange rates and market prices. We are subject to market risk resulting from changes in interest rates because such changes may affect the cost at which we obtain financing. We are subject to exchange rate risk with respect to our debt denominated in foreign currencies.
Currency Risk
We operate internationally and are exposed to currency risks when operating in foreign currencies, in particular with respect to the U.S. dollar. Currency risk is associated with future commercial transactions, recognized assets and liabilities and net investments in foreign operations.
We hold several investments in foreign operations, the net assets of which are exposed to currency risk. Currency risk affecting net assets of our foreign operations in U.S. dollars are mitigated primarily through borrowings in the relevant foreign currency. Our main exposure to currency risk is to the U.S. dollar, which is used in a significant percentage of our transactions in foreign currencies.
If the U.S. dollar had strengthened by 10% against the euro at December 31, 2021, equity would have increased by €895.3 million and profit would have increased by €15.2 million. This analysis assumes that all other variables are held constant, especially that interest rates remain constant. A 10% weakening of the U.S. dollar against the euro at December 31, 2021 and December 31, 2020 would have had the opposite effect for the amounts shown above, all other variables being held constant.
Interest Rate Risk
Our interest rate risks arise from current and non-current borrowings. Borrowings at variable interest rates expose us to cash flow interest rate risks. The purpose of managing interest rate risk is to balance the debt structure, maintaining part of borrowings at fixed rates and hedging part of variable rate debt.
A significant part of the financing in 2021 accrues interest at fixed rates. This fixed interest debt amounted to €4,373 million as of December 31, 2021, which represented 73.4% of our total debt in euros. The additional loans of €180.6 million in the aggregate from the European Investment Bank represented 3.0% of our total debt in euros.
Our senior euro denominated debt, including fixed and variable interest rate, represented 68% of our total senior debt at December 31, 2021 and 67% at December 31, 2020. Total fixed-interest debt represented a total of 58% of debt at December 31, 2021, and 46% at December 31, 2020.
As of the date of this annual report, we are not participating in interest rate hedges of Euros or U.S. dollars. In previous years, the fair value of interest rate swaps, contracted to reduce the impact of increases in variable interest rates (LIBOR and EURIBOR), were accounted for on a monthly basis. These derivative financial instruments comply with hedge accounting requirements.
If the interest rate had been 100 basis points higher at December 31, 2021, the interest expense would have increased by €35.4 million. A 100 basis points decrease in interest rates at December 31, 2021 would have had the opposite effect for the amounts shown above.
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Market Price Risk
We are subject to price risk with respect to raw materials, which is mitigated by the vertical integration of the hemoderivatives business in a sector that is highly concentrated.
Item 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. | Debt Securities |
Not Applicable.
B. | Warrants and Rights |
Not Applicable.
C. | Other Securities |
Not Applicable.
D. | American Depositary Shares |
Deutsche Bank Trust Company Americas serves as the depositary for both our Class A ADSs and our Class B ADSs, and its principal executive office is located at 60 Wall Street, New York, NY 10005, USA. The custodian is Deutsche Bank Sociedad Anónima Española, and its principal office in Spain is located at Ronda General Mitre 72-74, 08017 Barcelona, Spain.
Each Class A ADS represents the right to receive one half of one Class A ordinary share of Grifols. Each Class B ADS represents the right to receive one Class B non-voting preference share of Grifols.
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The following is a summary of the fee provisions of the deposit agreements for each of the Class A ADSs and Class B ADSs. For more complete information, you should read each deposit agreement in its entirety.
Associated Fee |
| Depositary Action |
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Issuance of ADSs, including issuance resulting from a distribution of shares or rights or other property. Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates. | |
$2.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Distribution of cash proceeds, including cash dividends or sale of rights and other entitlements. | |
$2.00 (or less) per 100 ADSs (or portion of 100 ADSs) per calendar year, provided that this fee, when combined with the fee for distribution of cash proceeds, including cash dividends or sale of rights and other entitlements, shall not exceed $2.00 (or less) per 100 ADSs (or portion of 100 ADSs) in any calendar year | Depositary operation and maintenance costs. | |
Annual fee of $1.00 per 100 ADSs | Inspections of the relevant share register. | |
Registration or transfer fees | Transfer and registration of our shares on its share register to or from the name of the depositary or its agent when you deposit or withdraw our shares. | |
Expenses of the depositary | Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement). Converting foreign currency to U.S. dollars. | |
Taxes and other governmental charges the depositary or the custodian has to pay on any ADS or share underlying an ADS, including any applicable interest and penalties thereon and any share transfer or other taxes or governmental charges, for example, stock transfer taxes, stamp duty or withholding taxes | As necessary. | |
Any fees and expenses incurred by the depositary in connection with the conversion of a foreign currency in compliance with the applicable exchange control and other regulations, and the delivery of deposited securities, including any fees of a central depository, and any additional fees, charges, costs, or expenses, that may be incurred by the depositary from time to time | As necessary. | |
Any additional fees, charges, costs or expenses that may be incurred by the depositary from time to time. | As necessary. |
The depositary collects its fees for issuance and cancellation of our ADSs directly from investors depositing shares or surrendering our ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, by directly billing investors or by charging the book-entry system accounts of participants acting for such investors. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
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The fees and charges holders of our ADSs may be required to pay may vary over time and may be changed by us and by the depositary. Our ADS holders will receive prior notice of such changes.
Fees Paid by the Depositary to Grifols
Deutsche Bank Trust Company Americas, as depositary, has agreed to reimburse or pay on behalf of Grifols certain reasonable expenses related to our ADR programs and incurred by us in connection with the programs, such as investor relations activities and ongoing maintenance expenses and listing fees. It has covered all such expenses incurred by us during 2021 for an amount of $2.1 million. The amounts the depositary reimbursed or paid are not perforce related to the fees it collected from ADS holders.
GLOSSARY OF TERMS
“AAT” means alpha1-antitrypsin, a protein that protects the lungs.
“ACA” refers to the Affordable Care Act, a U.S. regulation.
“AlphaID” is a free cheek swab to test for alpha-1 deficiency in patients.
“AEMPS” refers to the Spanish Agency of Medicines and Medical Products.
“AMP” means the average manufacturer price of certain outpatient drugs covered by Medicaid, as defined under the Medicaid drug rebate program, and is used to help calculate rebates paid by certain drug manufacturers that are shared by the U.S. and state governments.
“Alzheimer’s disease” is the most common form of dementia. This incurable, degenerative, and terminal disease was first described by German psychiatrist and neuropathologist Alois Alzheimer in 1906 and was named after him.
“Albumin” is the most abundant blood plasma protein and is produced in the liver and forms a large proportion of all plasma. Albumin normally constitutes about 60% of human plasma. It is important in regulating blood volume by maintaining the oncotic pressure of the blood compartment.
“ASP” means the average sales price of certain outpatient drugs covered by Medicare Part B, and is used to help calculate reimbursement of such drugs.
“Assays” are systems designed to detect antibodies, antigens or the nucleic acid of an infectious agent. For instance, the WNV assay detects the presence of the West Nile virus in blood donations. The main types of assay used for blood screening are Immunoassays and Nucleic acid technology, or NAT assays.
“ATIII” means intramuscular (hyperimmune) immunoglobulins.
“A1PI” means alpha-1 proteinase inhibitor.
“BIDSXT” means a software tool that allows the analysis, interpretation and database management to transmit the results to the LIS.
“BLA” (Biologics License Application) is a biological license application issued by the FDA, and serves as a U.S. marketing authorization for certain biological drug products.
“BlisPack” a blister handling machine.
“BLOODchip” blood group genotyping tests manufactured by Progenika, a company in which Grifols has a majority stake.
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“Brexit” refers to the withdrawal of the United Kingdom (U.K.) from the European Union (EU).
“CCPR” refers to the California Consumer Protection act, a regulation passed by the U.S. state of California.
“CFIUS” refers to the Committee on Foreign Investment in the United States.
“cGMP” means current Good Manufacturing Practice.
“CIDP” means chronic inflammatory demyelinating polyneuropathy, a neurological disease resulting in weakness, numbness, pain and difficulty in walking.
“Cirrhosis” is a medical condition which is a result of advanced liver disease. It is characterized by the replacement of liver tissue by fibrosis (scar tissue) and regenerative nodules (lumps that occur due to attempted repair of damaged tissue).
“Congenital Alpha-1 Antitrypsin Deficiency” is an inherited disease characterized by reduced levels in the blood of the substance Alpha-1 Antitrypsin, or AAT. This substance is a protein that is normally made by the liver and reaches other organs (such as the lungs) after being released into the blood circulation.
“CLL” means chronic lymphocytic leukaemia.
“CMS” refers to the U.S. Centers for Medicare Medicaid Services.
“CNMV” means the Comisión Nacional del Mercado de Valores.
“CPI-U” means the Consumer Price Index For All Urban Consumers, which measures the changes in the price of a basket of goods and services purchased by urban consumers.
“CPP” is the certificate of pharmaceutical product, a certificate issued in the format recommended by the WHO, which establishes the status of a pharmaceutical product and of the applicant for a certificate in the relevant exporting country.
“CSRC” refers to the Chinese Securities Regulatory Commission.
“DHPR” means dihydropyridine receptors.
“Diabetes” is a metabolic disease in which a person has high blood sugar, either because the pancreas does not produce enough insulin, or because cells do not respond to the insulin that is produced.
“DOJ” refers to the United States Department of Justice.
“ELISA” means enzyme-linked immunosorbent assay.
“EMA” refers to the European Medicines Agency.
“Erytra Eflexis” a fully automated, mid-size analyzer that performs pretransfusion compatibility testing using DG Gel technology.
“Factor VIII” or “FVIII” is an essential blood clotting factor also known as anti-haemophilic factor, or AHF. In humans, Factor VIII is encoded by the F8 gene. Defects in this gene results in hemophilia A, which is a sex-linked disease and occurs predominantly in males. FVIII concentrated from donated blood plasma, or alternatively recombinant FVIII, or rFVIII, can be given to hemophiliacs to restore hemostasis.
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“Factor IX” is an important blood clotting factor also known as Christmas factor or plasma thromboplastin component, or PTC. It is one of the serine proteases of the coagulation system and belongs to the peptidase family S1. In humans, a deficiency of this protein causes haemophilia B, which is a sex-linked disease and occurs predominantly in males.
“FDA” is the U.S. Food and Drug Administration.
“Fibrin Sealant” is surgical adhesive material that is utilized in a variety of surgical situations.
“Fractionation” is the process of fractionating plasma, or separating it into its different components or plasma derivatives.
“FSS” refers to the Federal Supply Schedule, a schedule managed by the U.S. Department of Veterans Affairs, which includes discounted drug pricing for certain U.S. government agency programs.
“GMP” means good manufacturing practices.
“GPO” means group purchasing organization.
“GDPR” refers to the General Data Protection Regulation, an EU regulation.
“Gri-fill System” is a process for the sterile filling of flexible material bags.
“Hematology” is the study of blood, blood-forming organs, and blood diseases.
“Hemoderivative” is a substance obtained by fractionation of human blood plasma.
“Hemophilia A” is a genetic deficiency in clotting Factor VIII, which causes increased bleeding (usually affects males).
“Hemostasis” is a complex process which causes the bleeding process to stop. It refers to the process of keeping blood within a damaged blood vessel (the opposite of hemostasis is hemorrhage). Most of the time this includes the changing of blood from a fluid to a solid state. Intact blood vessels are central to moderating blood’s tendency to clot. Hemostasis has three major steps: 1) vasoconstriction, 2) temporary blockage of a break by a platelet plug, and 3) blood coagulation, or formation of a clot that seals the hole until tissue are repaired.
“HHS” refers to the U.S. Department of Health and Human Services.
“HIPAA” refers to the Health Insurance Portability and Accountability Act of 1996, as amended, a U.S. regulation.
“HIV” refers to the human immunodeficiency virus.
“IFX” means infliximab, a medication used to treat Crohn’s Disease and Ulcerative Colitis.
“IG” means immunoglobulin, which contains the pooled IgG (immunoglobulin (antibody) G) extracted from plasma.
“Immunohematology” is a branch of hematology relating to the study of antigens and antibodies and their effects on blood and the relationships between disorders of the blood and the immune system.
“Immunology” is a broad branch of biomedical science that covers the study of all aspects of the immune system in organisms. It deals with the physiological functioning of the immune system in states of both health and disease; malfunctions of the immune system in immunological disorders (autoimmune diseases, hypersensitivities, immune deficiency, transplant rejection); the physical, chemical and physiological characteristics of the components of the immune system in vitro, in situ, and in vivo.
“IND” means investigational new drug application, which is an application that must be accepted by the FDA and in effect prior to certain drug sponsors commencing clinical trials involving human subjects.
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“IRB” refers to institutional review boards, oversight committees that approve and monitor clinical trials to protect the rights and welfare of human subjects.
“ITP” means idiopathic thrombocytopenic purpura.
“IVIG” means intravenous immunoglobulin, which is a blood product administered intravenously. It contains the pooled IgG (immunoglobulin (antibody) G) extracted from plasma. It is mainly used as treatment in four major categories: (i) immune deficiencies, (ii) inflammatory and autoimmune diseases, (iii) neurological diseases and (iv) acute infections.
“Kawasaki disease” is a rare autoimmune disease that mostly affects children and causes inflammation of vessels, fever and rashes. This disease can be treated with IVIG.
“Koate-DVI” is a medication is used to control and prevent bleeding episodes in people with low levels of factor VIII (hemophilia A).
“LIS” means Laboratory information system.
“Medicaid” is a social healthcare program in the United States for individuals with low income and resources.
“Medicare” is a national insurance program in the United States, primarily for persons 65 years old and over and certain younger persons with disabilities.
“Medicare Part B” is a portion of the Medicare program which includes, in part, reimbursement based on ASP for certain physician-administered drugs and drugs provided in the hospital outpatient setting.
“Medicare Part D” is a portion of the Medicare program which includes certain coverage for prescription drugs generally dispensed to patients by retail pharmacies.
“MM” means multiple myeloma.
“MRB” refers to the Market Research Bureau, Inc., an independent market research firm which supplies blood and plasma products industry data on a global level.
“NAT” means nucleic acid testing.
“NVD” means the share and asset agreement, executed with Novartis Vaccines and Diagnostics, Inc.
“OIG” is the HHS Office of the Inspector General, which is charged with protecting the integrity of HSS programs, including the Medicare and Medicaid programs.
“Orphan drug” is a pharmaceutical agent that has been developed specifically to treat a rare medical condition, the condition itself being referred to as an orphan disease. The assignment of orphan status to a disease and to any drugs developed to treat it is a matter of public policy in many countries, and has resulted in medical breakthroughs that may not have otherwise been achieved due to the economics of drug research and development The Orphan Drug Act (ODA) of January 1983, passed in the United States, with lobbying from the National Organization for Rare Disorders, is meant to encourage pharmaceutical companies to develop drugs for diseases that have a small market. Under the law, companies that develop such a drug (a drug for a disorder affecting fewer than 200,000 people in the United States) may sell it without competition for seven to ten years, and may get clinical trial tax incentives.
“Open Payments Program” imposes new reporting and disclosure requirements for pharmaceutical and medical device manufacturers with regard to payments or other transfers of value made to certain U.S. healthcare practitioners, such as physicians and academic medical centers, and with regard to certain ownership interests held by physicians in reporting entities.
“PDUFA” is the Prescription Drug User Fee Act, which levies a user fee on certain human drug applications.
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“Plasma” is the liquid part of the blood. The majority of plasma is composed of water. The remainder is essential proteins and antibodies that help sustain our body’s vital functions. A shortage of any one of these plasma proteins, such as albumin or immunoglobulins, can give rise to one of many life-threatening illnesses.
“Plasmapheresis” is a technique which separates plasma from other blood components, such as red blood cells, platelets, and other cells. These unused blood components are suspended in saline solution and immediately re-injected back into the donor while the plasma collection process is taking place. Because the donor is only providing plasma and not whole blood, the recovery process is faster and better tolerated, and the donor is therefore able to make donations more frequently. Plasmapheresis was developed by Jose Antonio Grifols Lucas in the year 1951. It is the only procedure that is capable of obtaining sufficient quantities of plasma to cover the needs of manufacturing our many different plasma protein therapies.
“Plasma derivatives” are proteins found in human plasma, which once isolated and purified, have therapeutic value.
“PTC” means plasma thromboplastin component.
“Prolastin” is a concentrated form of alpha1-antitrypsin, or AAT, produced by Grifols and derived from human plasma and approved only for chronic, or ongoing, replacement therapy in people with emphysema caused by genetic AAT deficiency. Given as prescribed, Prolastin raises the levels of AAT in the blood and lungs. Raising the AAT level may help reduce the damage to the lungs caused by destructive enzymes.
“Promonitor” Highly specific ELISA kits for quantification of serum drug levels and anti-drug antibodies of various biological drugs
“Q-Coagulometer, Q-Smart Q-Next and Q-Expert analyzers” Fully automated hemostasis analyzers that use reagents to measure blood coagulation levels.
“RFID” means Radio-Frequency Identification.
“SCIG” means subcutaneous immune globulin, which is a blood product administered subcutaneously. It contains the pooled IgG (immunoglobulin (antibody) G) extracted from plasma and is mainly used as treatment in four major categories: (i) immune deficiencies, (ii) inflammatory and autoimmune diseases, (iii) neurological diseases and (iv) acute infections.
“SME” means small and medium-sized enterprises.
“SYK-inhibitor” a new group of small molecule inhibitors which have been proposed as a therapy for both lymphoma and chronic lymphocytic leukemia.
“TMA” transcription mediated amplification, a technology that allows a clinical laboratory to perform assays for blood screening with fewer steps, less processing time, and faster results. It is used in molecular biology, forensics, and medicine for the rapid identification and diagnosis of pathogenic organisms.
“Triturus analyzers” Open and fully automated analyzer for ELISA (enzyme-linked immunoabsorbent assay), tests with multi-test/multi-batch capability.
“Von Willebrand Disease” is the most common hereditary coagulation abnormality described in humans, although it can also be acquired as a result of other medical conditions. It arises from a qualitative or quantitative deficiency of von Willebrand factor, a multimeric protein that is required for platelet adhesion.
“WADiana/Erytra analyzers” Automated immunohematology analyzers that use gel agglutination technology to enable automatic processing of DG Gel® blood determination cards.
“WHO” refers to the World Health Organization.
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PART II
Item 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not Applicable.
Item 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not Applicable.
Item 15.CONTROLS AND PROCEDURES
A. | Evaluation of Disclosure Controls and Procedures |
Our Chief Executive Officers and our Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this annual report on Form 20-F, have concluded that, as of such date, our disclosure controls and procedures were not effective due to the material weakness described below.
B. | Management’s Report on Internal Control over Financial Reporting |
Our management, under the supervision of our Chief Executive Officer and our Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a 15(f) and 15d 15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance as to the reliability of financial reporting and the preparation of the published financial statements under generally accepted accounting principles. For Grifols, “generally accepted accounting principles” means IFRS as issued by IASB.
Our internal control over the financial reporting system includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of our company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our company assets that could have a material effect on the financial statements.
Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by IASB. Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, they used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on their assessment under these criteria, our management believes that, at December 31, 2021, our internal control over financial reporting is not effective.
KPMG Spain issued and signed on February 25, 2022 an unqualified opinion on our consolidated annual accounts as of and for the year ended December 31, 2021, prepared under IFRS-EU principles, issued for statutory purposes and did not report to the Audit Committee any significant deficiencies on the effectiveness of the internal control over financial reporting.
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Afterwards and without having been provided any new document or evidence, KPMG has changed its initial assessment of the accounting treatment of a financial instrument (Equity vs Debt) which derived in a restatement of our consolidated annual accounts as of and for the year ended December 31, 2021 under IFRS-EU principles. This KPMG change in accounting conclusion reflects the highly complex contractual arrangements related to this financial instrument. At the date of preparation of this annual report on Form 20-F, the parties are analyzing the necessary modifications to the terms and conditions of the agreement in order to classify such transaction as an equity instrument, thereby reflecting the initial will of the parties.
In connection with the preparation of our consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019, we concluded that there was a material weakness related to the design and implementation of controls over the classification of financial instruments subject to complex contractual arrangements attributable to the risk assessment process. This material weakness resulted in material misstatements in the classification of financial instruments that were corrected prior to the issuance of the financial statements.Our management is committed to maintaining a strong internal control environment in compliance with the accounting policies, controls and procedures to provide reasonable assurance as to the reliability of financial reporting and the preparation of the published financial statements under generally accepted accounting principles.
C. | Attestation Report of the Registered Public Accounting Firm |
KPMG, Auditores, S.L, the independent registered public accounting firm who audited our consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019, has issued an attestation report expressing an adverse opinion on the Group’s internal control over financial reporting as stated in their report starting on page F-3 of this annual report on Form 20-F.
KPMG Auditores, S.L. has also audited, and issued an unqualified opinion with respect to our Group’s consolidated financial statements for 2021, which opinion is included on page F-11 of this annual report on Form 20-F.
D. | Changes in Internal Control over Financial Reporting |
Our management has already implemented a remediation plan to reinforce the controls and procedures over the financial reporting by seeking advice from third-party accounting professionals for highly complex transactions.
Other than the already implemented remediation plan described above, there was no change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16.[RESERVED]
Item 16.AAUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that Steven F. Mayer is an “audit committee financial expert,” as defined in Item 16A of Form 20-F, and is an independent director under Rule 10A-3 under the Exchange Act.
Item 16.BCODE OF ETHICS
We have adopted the Employee Code of Conduct, which applies to all of our employees, directors and officers, including our principal executive officer, principal financial officer and principal accounting officer. This Code is intended to meet the definition of “code of ethics” under Item 16B of Form 20-F.
If the Code of Conduct for Grifols’ Employees is amended, or if a waiver is granted, we will disclose such amendment or waiver on our website.
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Item 16.CPRINCIPAL ACCOUNTANT FEES AND SERVICES
The table below sets forth the total fees paid to KPMG Auditores, S.L., our principal accountants, and to other member firms of the KPMG international organization, for services performed in the years 2021 and 2020, and breaks down these amounts by category of service:
| 2021 |
| 2020 | |
(in thousands of euros) | ||||
Audit fees |
| 5,680 |
| 5,567 |
Audit-related fees(1) |
| 828 |
| 399 |
Tax fees |
| 9 |
| 11 |
All other fees(2) |
| 107 |
| 105 |
Total |
| 6,624 |
| 6,082 |
(1) | Audit-related fees are fees for assurance services or other work traditionally provided to us by external audit firms in their role as statutory auditors. |
(2) | All other fees primarily relate to contract compliance services and review of non-financial information. |
The table below sets forth the total fees paid to other auditors for services performed in the years 2021 and 2020, and breaks down these amounts by category of service:
| 2021 |
| 2020 | |
(in thousands of euros) | ||||
Audit fees |
| 88 |
| 58 |
Audit-related fees |
| — |
| — |
Tax fees |
| — |
| — |
All other fees |
| — |
| — |
Total |
| 88 |
| 58 |
Pre-approval Policies and Procedures
Subject to shareholder approval of the independent auditor in accordance with Spanish law, the Audit Committee makes recommendations to the Board regarding the appointment, retainer and replacement of the independent auditor. The Audit Committee is also directly responsible for the compensation and oversight of the work of the independent auditor. We have developed a policy regarding the engagement of professional services by our external auditor, in accordance with the Spanish Audit Law and the Sarbanes-Oxley Act of 2002. This policy generally provides that we will not engage our independent auditors to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee.
In accordance with the pre-approval policy, all audit and permitted non-audit services performed for us by our principal accountants, or any of its affiliates, were approved by the Audit Committee, which concluded that the provision of such services by the independent accountants was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
Item 16.DEXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
Item 16.EPURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
As of December 31, 2021, we held 3,944,430 Class A shares and 5,070,530 Class B in treasury.
The Buy-back Program
On its meeting held on March 11, 2021, our Board of Directors resolved to implement a buy-back program of Grifols’ own shares (the “Buy-back Program”), in accordance with the authorization granted by Grifols’ ordinary general shareholders’ meeting held on October 9, 2020, under item 12 of its agenda.
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The Buy-back Program was carried out pursuant to the provisions of the Regulation (EU) No. 596/2014 of the European Parliament and of the Council of April 16, 2014, on market abuse regulation (the “MAR”) and Commission Delegated Regulation (EU) 2016/1052 of March 8, 2016, supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council (the “Delegated Regulation”) with regard to regulatory technical standards for the conditions applicable to buy-back programs and stabilization measures (with the exception of article 2 para. 1(a) of the Delegated Regulation) (the Delegated Regulation, together with the MAR, the “Buy-back Programme Rules”).
The maximum number of shares allowed to be acquired under the Buy-back Program was 6,875,549, in the aggregate. Specifically, 4,261,298 Class A shares and 2,614,251 Class B shares, representing approximately 1% of our share capital were allowed to be bought back. The maximum net investment allowed was €125 million. The purchase of Class A and Class B shares was to be made on a pro-rata basis, in accordance with the Articles of Association.
Grifols entrusted the execution of the Buy-back Program to an independent bank. This bank made its decisions regarding the number of shares, share price and time at which any share purchase was carried out without any influence of Grifols, in accordance with the Buy-back Program Rules. We did not exercise control over the bank’s decisions in this respect.
The Buy-back Program started on March 12, 2021, and remained in force until June 14, 2021, and the total of 3,944,430 Class A Shares and 2,419,896 Class B Shares were bought back.
Item 16.FCHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
Item 16.GCORPORATE GOVERNANCE
Pursuant to NASDAQ Listing Rules, as a foreign private issuer, we may elect to follow our home country practice in lieu of the corporate governance requirements of the NASDAQ Listing Rule 5600 Series, with the exception of those rules that are required to be followed pursuant to the provisions of NASDAQ Listing Rule 5615(a)(3). We have elected to follow Spanish practices in lieu of the requirements of the NASDAQ Listing Rule 5600 Series to the extent permitted under NASDAQ Listing Rule 5615(a)(3). Set forth below is a summary of the significant differences between the corporate governance practices we follow under Spanish law (as in effect as of December 31, 2021) and those followed by NASDAQ-listed U.S. domestic issuers.
Corporate Governance
Under NASDAQ Listing Rules, a U.S. domestic issuer is required to establish a quorum as specified in its bylaws for any meeting of the holders of common stock, provided, however, that such quorum is not permitted to be less than 33% of the outstanding shares of voting stock. The Articles of Association provide that, on the first call of our general shareholders’ meetings, a duly constituted meeting requires a quorum of at least 25% of our subscribed share capital with voting rights, and, if a quorum is not obtained on the first call, a meeting is validly convened on the second call regardless of the share capital in attendance. However, certain major corporate actions (such as issuing additional ordinary shares, increasing or decreasing our share capital, issuing debt securities, amending the Articles of Association or approving merger transactions) require shareholder approval at a meeting at which at least 50% of our subscribed share capital with voting rights is present or represented on the first call or at least 25% of the share capital with voting rights present or represented on second call. However, when the number of shareholders attending our meeting represents less than 50% of our subscribed share capital with voting rights, resolutions on any of these major corporate actions must be adopted by the affirmative vote of at least two-thirds of the share capital present or represented at such meeting.
In addition, all actions described in Article 6.bis of the Articles of Association, which are considered to affect the economic rights of our Class B shares, must be approved at a shareholders’ meeting by the holders of at least a majority of Class B shares.
Under NASDAQ Listing Rules, U.S. domestic issuers are required to solicit proxies, provide proxy statements for all shareholders’ meetings and provide copies of such proxy materials to NASDAQ. As a foreign private issuer, we are generally exempt from the SEC rules governing the solicitation of shareholder proxies. However, under Spanish law and per the Articles of Association, we are required to publish a calling of the meeting at least one month prior to the date set for each general shareholders’ meeting in at least: (i) the Official Gazette of the Commercial Registry or one of the local newspapers of wide circulation in the province where we
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are domiciled (currently Barcelona, Spain); (ii) CNMV’s website; and (iii) our website. We distribute a copy of the notice of the meeting and a form of proxy to our U.S. shareholders and also make these materials available through our website in advance of such meeting.
Under NASDAQ Listing Rules, shareholders of U.S. domestic issuers must be given the opportunity to vote on equity compensation plans and material revisions thereto, with limited exceptions set forth in NASDAQ Listing Rules, including an exception for foreign private issuers who follow the laws of their home country. Under Spanish law, equity compensation plans involving the issuance of our securities require prior shareholder approval. Additionally, equity compensation plans in which our officers and employees participate can be approved by the Board without shareholder approval. However, the establishment of equity compensation plans in which members of the Board participate must be authorized in the Articles of Association and requires the shareholders’ prior approval at a shareholders’ meeting.
Under NASDAQ Listing Rules, shareholders of U.S. domestic issuers must approve the issuance of securities when such issuance would result in a change in control of such issuer. Under Spanish law, any issuance of our securities, regardless of whether such issuance would result in a change of control, requires prior shareholder approval.
In Spain, companies with securities listed on a Spanish Stock Exchange are:
(i) | recommended to follow the provisions of the CNMV Governance Code; |
(ii) | required by law to publish an Annual Report on Corporate Governance as well as corporate governance information on their websites; |
(iii) | required by law to publish an Annual Report on Remuneration of the members of the Board; and |
(iv) | required by law to comply with the regulations with respect to audit committees and appointment and remuneration committees set forth in the Spanish Companies Act, as amended. |
Board Practices
Independence of Directors
Pursuant to NASDAQ Listing Rules, a majority of the directors of a listed U.S. company are required to be “independent,” as such term is defined by NASDAQ Listing Rules. As a foreign private issuer, we are exempt from such requirement, and Spanish law does not contain any such requirements.
Spanish law establishes the category of directors and the indispensable requirements to determine their independence. The Board Regulations, consistent with Spanish law, recognize two main categories of directors: (i) executive directors; and (ii) external directors, who can be divided into (a) proprietary directors, (b) independent directors and (c) other directors who cannot be considered proprietary or independent.
The definition of “independent director,” as set forth by Spanish law, provides that the persons listed below may not be nominated or designated as independent directors.
(i) | Employees or executive directors of any Group companies, unless three or five years have elapsed, respectively, since the termination of the relationship. |
(ii) | Persons that have received some payment from us or from the Group in addition to their directors’ remuneration, unless the amount involved is not significant to the director. Dividends or pension supplements received by a director for prior employment or professional services are excluded, provided that such payments are non-contingent (i.e., the paying company has no discretionary power to suspend, modify or revoke the payment). |
(iii) | Persons that have been, during the last three years, partners of the external auditors or the firm responsible for the audit report, whether with respect to the audit of us or any other company in the Group for those years. |
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(iv) | Executive directors or senior officers of other companies in which any of our executive directors or senior officers is an external director. |
(v) | Persons that have or had, during the last year, material business relationships with us or with any other company in the Group, whether in their own name or as a significant shareholder, director or senior officer of a company that has or had such a relationship. For purposes of this paragraph (v), “business relationships” means any relationship with suppliers of goods or services, including financial, advisory and consultancy services. |
(vi) | Significant shareholders, executive directors or senior officers of an entity which receives or has received, during the last three years, significant donations from us or the Group. This provision does not apply to those who are merely trustees of a foundation receiving donations. |
(vii) | Spouses or related persons maintaining an analogous relationship or close relatives of one of our executive directors or senior officers. |
(viii) | Any person not proposed for appointment or renewal by the Appointments and Remuneration Committee. |
(ix) | Persons in any of the situations set out in (i), (v), (vi) or (vii) above with regard to a significant shareholder or a shareholder with Board representation. In the case of the family relations set out in (vii) above, the limitation applies not only in connection with the shareholder but also with our proprietary directors. |
(x) | Persons that have been directors for 12 consecutive years. |
The proprietary directors who lose this status as a consequence of the sale of the shareholding by the shareholder they represent, can be reelected as independent directors only when such shareholder has sold the total amount of its shares.
Finally, any member of the Board that owns our shares can be considered independent, as long as the shareholding is not significant and satisfies all the above-mentioned conditions.
We have not determined whether our directors would be considered independent under NASDAQ Listing Rules, except for the three directors who are members of the Audit Committee and as such must meet NASDAQ independence criteria. As of the date of this report, seven members of the Board are independent directors in accordance with the Board Regulations and the CNMV Governance Code.
Furthermore, we follow the Spanish Companies Act, which does not, unlike NASDAQ Listing Rules, require independent directors to hold meetings where only such independent directors are present.
For a detailed discussion of the composition, responsibilities and terms of our Audit Committee, see Item 6 of Part I, “Directors, Senior Management and Employees—C. Board Practices—Committees of the Board—Audit Committee.”
Audit Committee
Responsibilities and Terms. In accordance with NASDAQ Listing Rules, our Audit Committee is in charge of the appointment, compensation, retention and oversight of the services of any registered public accounting firm engaged for the purpose of preparing and issuing any audit report, or for performing other audit reviews or related services. Notwithstanding the above, Spanish laws provide our shareholders with the authority to appoint and replace the independent auditor at a general shareholders’ meeting.
Independence of the Audit Committee. All of the members of our Audit Committee meet the independence criteria set out in NASDAQ Listing Rules. Subsequent to the entry into force of Law 31/2014 and Law 22/2015, Spanish law requires that (a) the Audit Committee be composed of external directors (the majority of them being independent and one of them being appointed due to his knowledge and experience in accounting or auditing matters) and (b) the chairman of the Audit Committee is an independent director. For a further discussion regarding the composition of our Audit Committee, see Item 6 of Part I, “Directors, Senior Management and Employees—C. Board Practices—Committees of the Board—Audit Committee.”
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Internal Audit Department. We have an internal audit department responsible for internal audit matters and ensuring the efficiency of the internal audit control process of our different business units. Our internal audit department reports directly to the Audit Committee, supporting the adequate performance of all its functions.
Appointments and Remuneration Committee
Pursuant to NASDAQ Listing Rules, foreign private issuers are exempt from the requirements regarding independent nominating and compensation committees. Foreign private issuers are permitted to follow their home country corporate governance practice in this respect.
Spanish law requires that all Spanish listed companies have an appointments and remuneration committee comprised of external directors, at least two of whom must be independent, and that the chairman of the appointments and remuneration committee be an independent director.
Our Appointments and Remuneration Committee is comprised exclusively of external directors and is chaired by an independent director. For a detailed discussion of our Appointments and Remuneration Committee, see Item 6 of Part I, “Directors, Senior Management and Employees—C. Board Practices—Committees of the Board—Appointments and Remuneration Committee.”
Internal Code of Conduct on Matters Related to the Securities Market and Business Ethics
Under NASDAQ Listing Rules, we are required to adopt a code of business conduct and ethics applicable to all directors, officers and employees, which must be publicly available. Under Spanish law, listed companies were previously required to have an internal code of conduct on matters related to the securities markets. However, with the entry into force of Royal Legislative Decree 19/2018, of November 23, 2018, on payment services and other urgent financial measures, this obligation has been removed.
Notwithstanding the above, Grifols will continue to apply the internal code of conduct for securities markets that was approved by the Board in its meeting held on October 28, 2016, in order to prevent insider trading, misconduct, and to control possible conflicts of interest.
Additionally, the Board Regulations set out in detail the directors’ main obligations relating to conflicts of interest concerning business opportunities, use of Grifols’ assets, confidentiality and non-competition. Both the Internal Code of Conduct on Matters Related to the Securities Market and the Board Regulations are publicly available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com. Although not mandatory under Spanish laws, the Board of Grifols also approved the Code of Conduct for Grifols Employees, which is publicly available on our website, which does not form part of this annual report on Form 20-F, at www.grifols.com.
Item 16.HMINE SAFETY DISCLOSURE
Not applicable.
Item 16.IDISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
Item 17.FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18 of this Part III.
Item 18.FINANCIAL STATEMENTS
The audited consolidated financial statements as required under Item 18 of this Part III are attached hereto starting on page F-1 of this annual report on Form 20-F. The audit report of KPMG, our independent registered public accounting firm, is included herein preceding the audited consolidated financial statements.
Item 19.EXHIBITS
Exhibit |
| Description |
|---|---|---|
1.1 | ||
2.1 | ||
2.2 | ||
2.3 | ||
2.4 | ||
2.5 | ||
Form of 3.200% Senior Note (included as Exhibit A to Exhibit 2.5) | ||
2.6 | ||
2.7 | ||
Form of 1.625% Senior Note due 2025 (included as Exhibit A to Exhibit 2.7) |
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Exhibit |
| Description |
|---|---|---|
Form of 2.250% Senior Note due 2027 (included as Exhibit B to Exhibit 2.7) | ||
2.8 | ||
2.9 | ||
Form of dollar 4.750% Senior Note due 2028 (included as Exhibit A to Exhibit 2.9)* | ||
Form of euro 3.875% Senior Note due 2028 (included as Exhibit B to Exhibit 2.9)* | ||
4.1 | ||
4.2 | ||
4.3 | ||
8.1 | ||
10.1 | ||
12.1 | Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
12.2 | Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
13.1 | ||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | Inline XBRL Taxonomy Extension Schema | |
101.CAL | Inline XBRL Taxonomy Extension Schema Calculation Linkbase | |
101.DEF | Inline XBRL Taxonomy Extension Schema Definition Linkbase | |
101.LAB | Inline XBRL Taxonomy Extension Schema Label Linkbase | |
101.PRE | Inline XBRL Taxonomy Extension Schema Presentation Linkbase | |
104 | Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| GRIFOLS, S.A. | |
| ||
| By: | /s/ Víctor Grifols Deu |
| Name: Víctor Grifols Deu | |
| Title: Director and Co-Chief Executive Officer | |
| ||
| GRIFOLS, S.A. | |
| ||
| By: | /s/ Raimon Grifols Roura |
| Name: Raimon Grifols Roura | |
| Title: Director and Co-Chief Executive Officer | |
| ||
Date: April 29, 2022 | ||
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GRIFOLS, S.A. AND SUBSIDIARIES
Consolidated Financial Statements
31 December 2021 and 2020
SUMMARY
● | ||
Report of Independent Registered Public Accounting Firm ( | F - 3 | |
F - 7 | ||
F - 9 | ||
F - 10 | ||
F - 11 | ||
F - 12 | ||
● | ||
F - 13 | ||
F - 13 | ||
F - 21 | ||
F - 30 | ||
F - 51 | ||
F - 54 | ||
F - 57 | ||
F - 60 | ||
F - 62 | ||
F - 63 | ||
F - 64 | ||
F - 69 | ||
F - 70 | ||
F - 70 | ||
F - 71 | ||
F - 71 | ||
F - 76 | ||
F - 78 | ||
F - 80 | ||
F - 80 | ||
F - 81 | ||
F - 90 | ||
F - 90 | ||
F - 90 | ||
F - 92 | ||
F - 93 | ||
F - 94 | ||
F - 95 | ||
F - 98 | ||
F - 103 | ||
F - 109 | ||
F - 111 | ||
F - 111 |
F-1
GRIFOLS, S.A. AND SUBSIDIARIES
Consolidated Financial Statements
31 December 2021 and 2020
SUMMARY
● | ||||
| F - 113 | |||
F - 130 | ||||
F - 132 | ||||
F - 134 | ||||
F - 136 | ||||
F-2
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Grifols, S.A.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Grifols, S.A. and subsidiaries (the Company) as of 31 December 2021 and 2020, the related consolidated statements of profit and loss, comprehensive income, changes in consolidated equity, and cash flows for each of the years in the three-year period ended 31 December 2021, and the related notes and Appendix I to V (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of 31 December 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three year period ended 31 December 2021, in conformity with International Financial Reporting Standard as issued by the International Accounting Standard Board and International Financial Reporting Standards as adopted by the European Union.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of 31 December 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated 29 April 2022 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinions
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the Diagnostic goodwill impairment analysis
As discussed in Notes 4 and 7 to the consolidated financial statements, the goodwill balance as of 31 December 2021 was Euros 6,228,901 thousand, of which Euros 2,615,761 thousand related to the Diagnostic cash generating unit (CGU). The Company calculates the recoverable amount of goodwill on an annual basis and whenever there is an indication that goodwill may be impaired.
We identified the evaluation of the goodwill impairment analysis for the Diagnostic CGU as a critical audit matter. Significant auditor judgment was required to evaluate the Company’s impairment test which was performed using a discounted cash flow model. The discounted cash flow model included assumptions related to future cash flows, the perpetual growth rate and the discount rate. Minor changes to these assumptions, particularly perpetual growth rate and the discount rate, could have a significant effect on the Company’s assessment of the carrying value of the goodwill.
F-3
The primary procedures we performed to address this critical audit matter included the following:
We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment assessment process, including controls related to the determination of the fair value less costs of disposals/recoverable amount of the Diagnostic CGU, and the development of the perpetual growth rate and discount rate assumptions.
We involved a valuation professional with specialized skills and knowledge, who assisted in:
| - | Evaluating the Company’s perpetual growth rate for the Diagnostic CGU, by comparing the coherence of the estimate with publicly available market data for comparable entities. |
| - | Evaluating the discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities. |
We challenged the Company’s valuation methodology by performing sensitivity analyses over the perpetual growth rate and discount rate assumptions and comparing the results to the carrying amount.
We evaluated the Company’s ability to forecast the cash flow projections by comparing the historical projections to actual results and the business plans approved by the Company’s governing bodies.
KPMG Auditores, S.L.
We have served as the Company’s auditor since 1990
Barcelona, Spain
29 April 2022
F-4
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Grifols, S.A.
Opinion on Internal Control Over Financial Reporting
We have audited Grifols, S.A. and subsidiaries (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of profit and loss, comprehensive income, changes in consolidated equity, and cash flows for each of the years in the three-year period ended December 31, 2021 and the related notes and Appendix I to V (collectively, the consolidated financial statements), and our report dated April 29, 2022 expressed an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness related to the design and implementation of controls over the classification of financial instruments subject to complex contractual arrangement attributable to the risk assessment has been identified and included in management’s assessment. The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s 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 generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
F-5
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
KPMG Auditores, S.L.
We have served as the Company’s auditor since 1990
Barcelona, Spain
29 April 2022
F-6
GRIFOLS, S.A. AND SUBSIDIARIES
Consolidated Balance Sheet
at 31 December 2021 and 2020
(Expressed in thousands of Euros)
Assets |
| 31/12/21 |
| 31/12/20 |
Goodwill (note 7) | | | ||
Other intangible assets (note 8) | | | ||
Rights of use (note 9) | | | ||
Property, plant and equipment (note 10) | | | ||
Investment in equity-accounted investees (note 11) | | | ||
Non-current financial assets | ||||
Non-current financial assets measured at fair value | | | ||
Non-current financial assets at amortized cost | | | ||
Total non-current financial assets (note 12) | | | ||
Deferred tax assets (note 28) | | | ||
Total non-current assets | | | ||
Inventories (note 13) | | | ||
Current contract assets | | | ||
Trade and other receivables | ||||
Trade receivables | | | ||
Other receivables | | | ||
Current income tax assets | | | ||
Trade and other receivables (note 14) | | | ||
Other current financial assets (note 12) | ||||
Current financial assets measured at fair value | | | ||
Current financial assets at amortized cost | | | ||
Total current financial assets (note 12) | | | ||
Other current assets | | | ||
Cash and cash equivalents (note 15) | | | ||
Total current assets | | | ||
Total assets | | |
The accompanying notes form an integral part of the consolidated financial statements
F-7
GRIFOLS, S.A. AND SUBSIDIARIES
Consolidated Balance Sheet
at 31 December 2021 and 2020
(Expressed in thousands of Euros)
Equity and liabilities |
| 31/12/21 |
| 31/12/20 |
Share capital | | | ||
Share premium | | | ||
Reserves | | | ||
Treasury stock | ( | ( | ||
Profit for the year attributable to the Parent | | | ||
Total equity | | | ||
Cash Flow hedges | | | ||
Other comprehensive Income | ( | ( | ||
Translation differences | | ( | ||
Other comprehensive expenses | | ( | ||
Equity attributable to the Parent (note 16) | | | ||
Non-controlling interests (note 18) | | | ||
Total equity | | | ||
Liabilities |
|
| ||
Grants (note 19) | | | ||
Provisions (note 20) | | | ||
Non-current financial liabilities (note 21) | | | ||
Other non-current liabilities | | | ||
Deferred tax liabilities (note 28) | | | ||
Total non-current liabilities | | | ||
Provisions (note 20) | | | ||
Current financial liabilities (note 21) | | | ||
Trade and other payables |
|
| ||
Suppliers | | | ||
Other payables | | | ||
Current income tax liabilities | | | ||
Total trade and other payables (note 22) | | | ||
Other current liabilities (note 23) | | | ||
Total current liabilities | | | ||
Total liabilities | | | ||
Total equity and liabilities | | |
The accompanying notes form an integral part of the consolidated financial statements
F-8
GRIFOLS, S.A. AND SUBSIDIARIES
Consolidated Statements of Profit and Loss
at 31 December 2021, 2020 and 2019
(Expressed in thousands of Euros)
| 31/12/21 |
| 31/12/20 |
| 31/12/19 | |
Continuing Operations |
|
|
|
|
|
|
Net revenue (notes 6 and 24) |
| |
| |
| |
Cost of sales |
| ( |
| ( |
| ( |
Gross Margin |
| |
| |
| |
Research and development |
| ( |
| ( |
| ( |
Selling, general and administration expenses |
| ( |
| ( |
| ( |
Operating Expenses |
| ( |
| ( |
| ( |
Other Income | | | | |||
Profit/(loss) of equity accounted investees with similar activity to that of the Group (note 11) | | | | |||
Operating Result |
| |
| |
| |
Finance income |
| |
| |
| |
Finance costs |
| ( |
| ( |
| ( |
Change in fair value of financial instruments |
| |
| |
| |
Impairment of financial assets at amortized cost |
| |
| |
| ( |
Exchange differences |
| ( |
| |
| ( |
Finance result (note 27) |
| ( |
| ( |
| ( |
Profit/(loss) of equity accounted investees (note 11) |
| |
| |
| ( |
Profit before income tax from continuing operations |
| |
| |
| |
Income tax expense (note 28) |
| ( |
| ( |
| ( |
Profit after income tax from continuing operations |
| |
| |
| |
Consolidated profit for the year |
| |
| |
| |
Profit attributable to the Parent |
| |
| |
| |
Profit attributable to non-controlling interest (note 18) |
| |
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Basic earnings per share (Euros) (see note 17) |
| |
| |
| |
Diluted earnings per share (Euros) (see note 17) |
| |
| |
| |
The accompanying notes form an integral part of the consolidated financial statements
F-9
GRIFOLS, S.A. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
for the years ended 31 December 2021, 2020 and 2019
(Expressed in thousands of Euros)
| 31/12/21 |
| 31/12/20 |
| 31/12/19 | |
Consolidated profit for the year | | | | |||
Items for reclassification to profit or loss | ||||||
Translation differences | | ( | | |||
Equity accounted investees (note 11) / Translation differences | ( | | ( | |||
Cash flow hedges - effective portion of changes in fair value | | | | |||
Cash flow hedges - amounts taken to profit or loss | ( | | | |||
Tax effect | ( | | | |||
Other | | ( | ( | |||
Other comprehensive income for the year, after tax | | ( | | |||
Total comprehensive income for the year | | ( | | |||
Total comprehensive income attributable to the Parent | | | | |||
Total comprehensive income attributable to non-controlling interests | | ( | |
The accompanying notes form an integral part of the consolidated financial statements
F-10
GRIFOLS, S.A. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the years ended 31 December 2021, 2020 and 2019
(Expressed in thousands of Euros)
| 31/12/21 |
| 31/12/20 |
| 31/12/19 | |
Cash flows from operating activities |
|
|
| |||
Profit before tax | | | | |||
Adjustments for: | | | | |||
Amortization and depreciation (note 26) | | | | |||
Other adjustments: | | | | |||
(Profit) / losses on equity accounted investments (note 11) | ( | ( | | |||
Impairment of assets and net provision charges | | ( | ( | |||
(Profit) / losses on disposal of fixed assets (notes 8, 9 and 10) | | | | |||
Government grants taken to income (note 19) | ( | ( | ( | |||
Finance cost / (income) | | | | |||
Other adjustments | ( | | | |||
Change in operating assets and liabilities | ( | | ( | |||
Change in inventories | ( | | ( | |||
Change in trade and other receivables | ( | ( | ( | |||
Change in current financial assets and other current assets | ( | ( | ( | |||
Change in current trade and other payables | | ( | ( | |||
Other cash flows used in operating activities | ( | ( | ( | |||
Interest paid | ( | ( | ( | |||
Interest received | | | | |||
Income tax (paid) / received | ( | ( | ( | |||
Other received / (paid) | ( | ( | ( | |||
Net cash from operating activities | | | | |||
Cash flows from investing activities |
| |||||
Payments for investments | ( | ( | ( | |||
Group companies, associates and business units (notes 3, 2 (b) and 11) | ( | ( | ( | |||
Property, plant and equipment and intangible assets | ( | ( | ( | |||
Property, plant and equipment | ( | ( | ( | |||
Intangible assets | ( | ( | ( | |||
Other financial assets | ( | ( | ( | |||
Proceeds from the sale of investments | | | | |||
Group companies, associates and business units (notes 3, 2 (b) and 11) | | — | — | |||
Property, plant and equipment | | | | |||
Other financial assets | | — | — | |||
Net cash used in investing activities | ( | ( | ( | |||
Cash flows from financing activities | ||||||
Proceeds from and payments for equity instruments | ( | — | — | |||
Payments for treasury stock | ( | — | — | |||
Proceeds from and payments for financial liability instruments | | ( | ( | |||
Issue | | | | |||
Redemption and repayment | ( | ( | ( | |||
Lease payments | ( | ( | ( | |||
Dividends and interest on other equity instruments | ( | ( | ( | |||
Dividends paid | ( | ( | ( | |||
Dividends received | | | | |||
Other cash flows from / (used in) financing activities | ( | ( | ( | |||
Financing costs included in the amortized costs of the debt | ( | ( | ( | |||
Other amounts from / (used in) financing activities | | | ( | |||
Transaction with minority interests with no loss of control (note 3) | — | — | ( | |||
Net cash from/(used in) financing activities | | ( | ( | |||
Effect of exchange rate fluctuations on cash | | ( | | |||
Net increase / (decrease) in cash and cash equivalents | | ( | ( | |||
Cash and cash equivalents at beginning of the year | | | | |||
Cash and cash equivalents at year end (note 15) | | | |
The accompanying notes form an integral part of the consolidated financial statements
F-11
GRIFOLS, S.A. AND SUBSIDIARIES
Statement of Changes in Consolidated Equity
for the years ended 31 December 2021, 2020 and 2019
(Expressed in thousands of Euros)
Attributable to shareholders of the Parent | ||||||||||||||||||||||||
|
|
|
|
|
| Accumulated other comprehensive income | Equity |
|
| |||||||||||||||
Profit attributable | Other | attributable | ||||||||||||||||||||||
Share | Share | to | Interim | Treasury | Translation | comprehensive | Cash flow | to | Non-controlling | |||||||||||||||
| Capital |
| Premium |
| Reserves |
| Parent |
| dividend |
| Stock |
| differences |
| income |
| hedges |
| Parent |
| interests |
| Equity | |
Balance at 31 December 2018 | | | | | ( | ( | | ( | — | | | | ||||||||||||
Translation differences | — | — | — | — | — | — | | — | — | | | | ||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | ( | — | ( | — | ( | ||||||||||||
Other comprehensive income / (expense) for the year | — | — | — | — | — | — | | ( | — | | | | ||||||||||||
Profit/(loss) for the year | — | — | — | | — | — | — | — | — | | | | ||||||||||||
Total comprehensive income / (expense) for the year | — | — | — | | — | — | | ( | — | | | | ||||||||||||
Net change in treasury stock (note 16 (d)) | — | — | — | — | — | | — | — | — | | — | | ||||||||||||
Acquisition / Divestment of non-controlling interests (note 16 (c)) | — | — | | — | — | — | ( | — | — | | | | ||||||||||||
Other changes | — | — | ( | — | — | — | — | — | — | ( | — | ( | ||||||||||||
Interim dividend | — | — | — | — | ( | — | — | — | — | ( | — | ( | ||||||||||||
Distribution of 2018 profit: | ||||||||||||||||||||||||
Reserves | — | — | | ( | — | — | — | — | — | — | — | — | ||||||||||||
Dividends | — | — | ( | — | — | — | — | — | — | ( | — | ( | ||||||||||||
Interim dividend | — | — | — | ( | | — | — | — | — | — | — | — | ||||||||||||
Operations with shareholders or owners | — | — | | ( | ( | | ( | — | — | ( | | | ||||||||||||
Balance at 31 December 2019 | | | | | ( | ( | | ( | — | | | | ||||||||||||
Translation differences | — | — | — | — | — | — | ( | — | — | ( | ( | ( | ||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | ( | — | ( | — | ( | ||||||||||||
Other comprehensive income / (expense) for the year | — | — | — | — | — | — | ( | ( | — | ( | ( | ( | ||||||||||||
Profit/(loss) for the year | — | — | — | | — | — | — | — | — | | | | ||||||||||||
Total comprehensive income / (expense) for the year | — | — | — | | — | — | ( | ( | — | | ( | ( | ||||||||||||
Net change in treasury stock (note 16 (d)) | — | — | — | — | — | | — | — | — | | — | | ||||||||||||
Acquisition / Divestment of non-controlling interests (note 16 (c)) | — | — | | — | — | — | — | — | — | | ( | — | ||||||||||||
Other changes | — | — | ( | — | — | — | — | — | — | ( | | ( | ||||||||||||
Distribution of 2019 profit: | ||||||||||||||||||||||||
Reserves | — | — | | ( | — | — | — | — | — | — | — | — | ||||||||||||
Dividends | — | — | ( | — | — | — | — | — | — | ( | — | ( | ||||||||||||
Interim dividend | — | — | — | ( | | — | — | — | — | — | — | — | ||||||||||||
Operations with shareholders or owners | — | — | | ( | | | — | — | — | | ( | ( | ||||||||||||
Balance at 31 December 2020 | | | | | — | ( | ( | ( | — | | | | ||||||||||||
Translation differences | — | — | — | — | — | — | | — | — | | | | ||||||||||||
Cash flow hedges | — | — | — | — | — | — | — | — | | | — | | ||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | | — | | — | | ||||||||||||
Other comprehensive income / (expense) for the year | — | — | — | — | — | — | | | | | | | ||||||||||||
Profit/(loss) for the year | — | — | — | | — | — | — | — | — | | | | ||||||||||||
Total comprehensive income / (expense) for the year | — | — | — | | — | — | | | | | | | ||||||||||||
Net change in treasury stock (note 16 (d)) | — | — | — | — | — | ( | — | — | — | ( | — | ( | ||||||||||||
Acquisition / Divestment of non-controlling interests (note 16 (c)) | — | — | ( | — | — | — | — | — | — | ( | | ( | ||||||||||||
Other changes | — | — | ( | — | — | — | — | — | — | ( | | ( | ||||||||||||
Distribution of 2020 profit: | ||||||||||||||||||||||||
Reserves | — | — | | ( | — | — | — | — | — | — | — | — | ||||||||||||
Dividends | — | — | ( | — | — | — | — | — | — | ( | ( | ( | ||||||||||||
Interim dividend | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||
Operations with shareholders or owners | — | — | | ( | — | ( | — | — | — | ( | ( | ( | ||||||||||||
Balance at 31 December 2021 | | | | | — | ( | | ( | | | | | ||||||||||||
The accompanying notes form an integral part of the consolidated financial statements
F-12
(1) Nature, Principal Activities and Subsidiaries
Grifols, S.A. (hereinafter the Company) was incorporated with limited liability under Spanish law on 22 June 1987. Its registered and tax offices are in Jesús i Maria, 6, 08022, Barcelona. The Company’s statutory activity consists of providing corporate and business administrative, management and control services, as well as investing in assets and property. Its principal activity involves rendering administrative, management and control services to its subsidiaries.
On 17 May 2006 the Company completed its flotation on the Spanish securities market, which was conducted through the public offering of
The Company’s shares were floated on the Spanish stock exchange IBEX-35 index on 2 January 2008.
All of the Company’s shares are listed on the Barcelona, Madrid, Valencia and Bilbao securities markets and on the Spanish Automated Quotation System (SIBE/Continuous Market). On 2 June 2011, Class B non-voting shares (ADRs) were listed on the NASDAQ (USA) and on the Spanish Automated Quotation System (SIBE/Continuous Market).
Grifols, S.A. is the Parent of the subsidiaries listed in Appendix I of this note to the consolidated financial statements.
Grifols, S.A. and subsidiaries (hereinafter the Group) act on an integrated basis and under common management and their principal activity is the procurement, manufacture, preparation and sale of therapeutic products, especially hemoderivatives.
The main factory locations of the Group’s Spanish companies are in Parets del Vallés (Barcelona) and Torres de Cotilla (Murcia), while the US companies are located in Los Angeles (California), Clayton (North Carolina), Emeryville (California), and San Diego (California).
(2) Basis of Presentation
The consolidated financial statements have been prepared on the basis of the accounting records of Grifols, S.A. and of the Group companies. The consolidated financial statements for 2021 have been prepared under International Financial Reporting Standards as issued by the International Accounting Standard Board (IFRS-IASB) which for Grifols Group purposes, are identical to the standards as endorsed by the International Financial Reporting Standards as adopted by the European Union (IFRS-EU) to present fairly the consolidated equity and consolidated financial position of Grifols, S.A. and subsidiaries at 31 December 2021, as well as the consolidated results from their operations, consolidated cash flows and consolidated changes in equity for the year then ended.
These consolidated financial statements were authorized for issue by the Board of Directors on 28 April 2022 and will be submitted for approval by the shareholders at their General Meeting.
These consolidated financial statements for 2021 show comparative figures for 2020 and voluntarily show figures for 2019 from the consolidated statement of profit and loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows and their corresponding notes thereto. For the purposes of comparing the consolidated statement of profit and loss for 2021, 2020 and 2019 and the consolidated balance sheet for 2021 and 2020, the effects of the application new standards described in note 2 must be taken into account.
The Group adopted IFRS-EU for the first time on 1 January 2004 and has been preparing its financial statements under International Financial Reporting Standards, as adopted by the European Union (IFRS-EU) as required by Spanish capital market regulations governing the presentation of financial statements by companies whose debt or own equity instruments are listed on a regulated market.
F-13
In accordance with the provision of section 357 of the Irish Companies Act 2014, the Company has irrevocably guaranteed all liabilities of an Irish subsidiary undertaking, Grifols Worldwide Operations Limited (Ireland) (see Appendix I), for the financial year ended 31 December 2021 as referred to in subsection 1(b) of that Act, for the purposes of enabling Grifols Worldwide Operations Limited to claim exemption from the requirement to file their own financial statements in Ireland.
(a) Relevant accounting estimates, assumptions and judgments used when applying accounting principles
The preparation of the consolidated financial statements in conformity with IFRS-IASB requires management to make judgments, estimates and assumptions that affect the application of Group accounting policies. The following notes include a summary of the relevant accounting estimates and judgments used to apply accounting policies which have the most significant effect on the amounts recognized in the consolidated financial statements.
| ● | Assumptions used to test non-current assets and goodwill for impairment. Relevant cash generating units are tested annually for impairment. These are based on risk-adjusted future cash flows discounted using appropriate interest rates. The key assumptions used are specified in note 7. Assumptions relating to risk-adjusted future cash flows and discount rates are based on business forecasts and are therefore inherently subjective. Future events could cause a change in business forecasts, with a consequent adverse effect on the future results of the Group. To the extent considered a reasonably possible change in key assumptions could result in an impairment of goodwill, a sensitivity analysis has been disclosed to show the effect of changes to these assumptions and the effect of the cash generating unit (CGU) on the recoverable amount. |
| ● | Evaluation of the capitalization of development costs (see note 4(h)). The key assumption is related to the estimation of sufficient future economic benefits of the projects. |
| ● | The calculation of the income tax expense requires tax legislation interpretations in the jurisdictions where Grifols operates. The decision as to whether the tax authority will accept a given uncertain tax treatment and the expected outcome of outstanding litigation requires significant estimates and judgements. Likewise, Grifols recognizes deferred tax assets, mainly from tax credits and rights to deduct to the extent that it is probable that sufficient taxable income will be available against which temporary differences can be utilized, based on management assumptions regarding amount and payments of future taxable profits (see notes 4(t) and 28). |
| ● | Determination of chargebacks made to certain customers in the United States (see note 4 s) |
No changes have been made to prior year judgments relating to existing uncertainties.
The Group is also exposed to interest rate and currency risks. Refer to sensitivity analysis in note 30.
(b) Basis of consolidation
Appendix I shows details of the percentages of direct or indirect ownership of subsidiaries by the Company at 31 December 2021, 2020 and 2019, as well as the consolidation method used in each case for preparation of the accompanying consolidated financial statements.
Subsidiaries in which the Company directly or indirectly owns the majority of equity or voting rights have been fully consolidated. Associates in which the Company owns between
Although the Group holds
Grifols (Thailand) Ltd. has
F-14
Changes in associates and jointly controlled entities are detailed in note 11.
Changes in subsidiaries
In 2021:
| ● | Grifols Pyrenees Research Center, SL |
Grifols, through its wholly-owned subsidiary Grifols Innovation and New Technologies Limited (“GIANT”), owns
The remaining
| ● | Gigagen, Inc. |
On 8 March 2021, Grifols, through its wholly owned subsidiary Grifols Innovation and New Technologies Limited (“GIANT”), reached an agreement to acquire all of the shares of Gigagen, Inc. for a total consideration of US Dollars
With the acquisition of
| ● | Prometic Plasma Resources, Inc. |
On 31December 2021, Grifols, through its wholly owned subsidiary Grifols Canada Therapeutics Inc., reached an agreement to acquire all of the shares of Prometic Plasma Resources Inc. for a total consideration of US Dollars
| ● | Grifols Escrow Issuer, S.A. |
On August 26, 2021, Grifols, S.A. acquired all of the shares of Grifols Escrow Issuer, S.A. for a total consideration of US Dollars
| ● | Araclon Biotech, SL |
On October 2021 Araclon Biotech, S.L carried out a share capital increases of Euros
The following companies have been incorporated during 2021 and have been included in the consolidated Grifols Group.
| ● | Grifols Middle EastAfrica, LLC |
| ● | Grifols Bio North America, LLC |
| ● | Biomat Holdco, LLC |
| ● | Biomat Newco, Corp |
F-15
In 2020:
| ● | Grifols Diagnostic Solutions, Inc. |
On 30 March 2020, Grifols closed a share exchange agreement with Shanghai RAAS Blood Products Co. Ltd. (hereinafter SRAAS), through which Grifols delivered
| ● | Plasmavita Healthcare GmbH |
On 14 April 2020, Grifols made a contribution of Euros
| ● | Alkahest, Inc. |
On 2 September 2020, the Group reached an agreement with the shareholders of Alkahest Inc. (“Alkahest”) to acquire
| ● | Green Cross |
On 20 July 2020, Grifols executed share purchase arrangements with the South Korean-based GC Pharma (Group) (“GC Pharma”) and other investors for the purchase of a plasma fractionation facility and
| ● | VCN Biosciences, S.L. |
On 2 December 2020, VCN Biosciences, S.L. carried out a share capital increase of Euros
In 2019:
| ● | Interstate Blood Bank |
On 11 May 2016 Grifols acquired a
F-16
| ● | Progenika Biopharma |
On 24 July 2019, the Group acquired
| ● | Araclon Biotech, SL |
On 16 April 2019 and 3 December 2019 Araclon Biotech, S.L carried out
| ● | Instituto Grifols, S.A. |
With effect as of 1 January 2019, Instituto Grifols, S.A. and Gri-Cel, S.A. entered into a merger agreement. The surviving company was Instituto Grifols, S.A.
(c) | Amendments to IFRS in 2021, 2020 and 2019 |
In accordance with IFRS, the following should be noted in connection with the scope of application of IFRS and the preparation of these consolidated financial statements of the Group.
Effective in 2019
Mandatory application for annual periods | ||||||
Standards |
|
| IASB effective date |
| EU effective date | |
IFRS 16 | Leases (Issued on 13 January 2016) | 1 January 2019 | 1 January 2019 | |||
IFRIC 23 | Uncertainty over Income Tax Treatments (issued on 7 June 2017) | 1 January 2019 | 1 January 2019 | |||
IFRS 9 | Prepayment Features with Negative Compensation (issued on 12 October 2017) | 1 January 2019 | 1 January 2019 | |||
IAS 28 | Long-term interests in Associates and Joint Ventures (issued on 12 October 2017) | 1 January 2019 | 1 January 2019 | |||
Various | Annual Improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017) | 1 January 2019 | 1 January 2019 | |||
IAS 19 | Plan Amendment, Curtailment or Settlement (issued on 7 February 2018) | 1 January 2019 | 1 January 2019 | |||
F-17
The application of these standards and interpretations has not had any significant impact on the consolidated financial statements, except for IFRS 16 “Leases”, as follows:
IFRS 16 “Leases”
IFRS 16 brings in a single model for lease accounting by lessees in the statement of financial position. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard. Lessors continue to classify leases as finance or operating leases.
IFRS 16 replaces existing guidance on leases, including IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC-15 Operating leases-Incentives and SIC-27 Evaluating the substance of transactions involving the legal form of a lease.
The Group adopted IFRS 16 for the first time on 1 January 2019 but did not restated comparative figures for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules were therefore recognized in the opening balance sheet at 1 January 2019.
On 1 January 2019 there was no impact on equity due to the first-time application of IFRS 16.
The main policies, estimates and criteria for the application of IFRS 16 are as follows:
| ● | Scope: IFRS 16 evaluation considers all the contracts in which the Group acts as lessee, except for contracts between the Group companies and the cancelable contracts. |
| ● | Transition approach: The Group opted to implement IFRS 16 using the modified retrospective approach, whereby the right-of-use asset was measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the consolidated statement of financial position immediately before the date of initial application. When applying this modified retrospective approach, the Group did not re-express the comparative information. |
| ● | Discount rates: under IFRS 16, a lessee discounts the future lease payments using the interest rate implicit in the lease if that rate can be readily determined. Otherwise, the lessee uses the incremental borrowing rate. The Group uses the incremental borrowing rate. This is the rate that a lessee would have to pay at the commencement date of the lease for a loan over a similar term, and with similar security, to obtain an asset of a similar value to the right–of-use asset. |
At 31 December 2021, an incremental effective interest rate has been applied and varies from
| ● | The lease term is the non-cancellable period considering the initial term of each contract unless Grifols has a unilateral extension or termination option and there is reasonable certainty that this option will be exercised, in which case the corresponding extension term or early termination will be taken into account. |
The Group leases several buildings, equipment and vehicles. Leases agreements are usually made for fixed periods, as shown below:
| Average lease term | |
Buildings and warehouses |
| |
Donor centers |
| |
PCs and hardware |
| |
Machinery |
| |
Vehicles |
|
F-18
The lease terms of the agreements are negotiated on an individual basis and contain a wide range of terms and conditions.
The Group’s activities as a lessor are immaterial, and therefore the application of IFRS 16 did not have a significant impact on the consolidated financial statements.
IFRIC 23 - “Uncertainty in the treatment of income taxes”
IFRIC 23 “Uncertainty in the treatment of income taxes” clarifies how to apply the recognition and measurement requirements of IAS 12 “Income taxes” when there is uncertainty as to the treatment of income taxes. In this situation, an entity reflects the effect of uncertainty when determining taxable earnings, tax bases, unused tax losses, unused tax credits and tax rates.
Grifols did not identify significant uncertain tax lawsuits, and consequently the application of the criteria contained in the mentioned interpretation did not have a significant impact on Grifols for fiscal year 2019 nor in the following. This evaluation consisted of a review of the criteria applied to estimate income tax and the tax loss carryforwards and deductions to be offset, and it was determined that these comply substantially with the current tax regulations where Grifols operates. In this evaluation, it was considered that the deferred tax assets, mainly for tax credits for tax losses carryforwards and deductions to be offset, is the main line item that includes assumptions and uncertainties to estimate their recognition (see note 28(b)). The recognition and/or recoverability of such assets is based on the ability to generate future taxable profits. In this analysis, the following assumptions are considered:
| ● | Future taxable income based on the economic plans and budgets approved for the various Grifols Group companies, |
| ● | Tax regulation of the different countries in which they operate, |
| ● | Scheduled calendar for reversal of deferred tax liabilities. |
In this regard, the Group estimated that of the total amount of tax credits for tax losses recognized in the balance sheet as of December 31, 2019 amounting Euros
Finally, a scenario of discrepancies with the taxation authorities that imply the need to make significant adjustments to the tax result or the balances of assets and/or liabilities related to the income tax was considered unlikely based on our experience of the different tax inspections carried out in the different jurisdictions where Grifols operates.
As mentioned in note 28, Grifols assesses uncertain tax treatments and recognizes the effect of the uncertainty on taxable profit or loss. At December 31, 2021, Grifols has adequately hedged potential tax claim liabilities with no individually significant uncertain tax treatments.
F-19
Effective in 2020
|
|
| Mandatory application for annual periods | |||
Standards | EU effective date | IASB effective date | ||||
IAS 1 |
| Definition of Material (issued on 31 October 2018) | 1 January 2020 | 1 January 2020 | ||
| ||||||
Various |
| Amendments to references to the Conceptual Framework in IFRS Standards (issued on 29 March 2018) | 1 January 2020 | 1 January 2020 | ||
IFRS 3 |
| Amendment to IFRS 3 Business Combination (issued on 22 October 2018) | 1 January 2020 | 1 January 2020 | ||
IFRS 9 |
|
| ||||
IAS 39 |
| Interest rate Benchmark Reform (issued on 26 September 2019) | 1 January 2020 | 1 January 2020 | ||
IFRS 7 |
|
| ||||
IFRS 16 |
| As a consequence of the Covid 19 - Related Rent concessions (issued on 28 May 2020) | 1 June 2020 | 1 June 2020 | ||
Effective in 2021
The following standards published by the IASB and the IFRS Interpretations Committee and adopted by the European Union for application in Europe came into force in 2021 and, therefore, have been taken into account in the preparation of these consolidated financial statements:
| Mandatory application for annual periods | |||||
Standards | EU effective date | IASB effective date | ||||
IFRS 4 |
| Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (issued on 25 June 2020) |
| 1 January 2021 |
| 1 January 2021 |
Various |
| Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (issued on 27 August 2020) | 1 January 2021 | 1 January 2021 | ||
IFRS 16 |
| Amendment to IFRS 16 Leases Covid 19-Related Rent Concessions beyond 30 June 2021 (issued on 31 March 2021) | 1 April 2021 | 1 April 2021 | ||
F-20
The application of these standards and interpretations has had no significant impact on these consolidated financial statements.
Standards issued but not effective in 2021
At the date these consolidated financial statements were authorized for issue, the following IFRS, amendments and IFRIC interpretations have been published by the European Union but their application is not mandatory until the future periods indicated below:
|
|
| Mandatory application for annual periods | |||
Standards | EU effective date | IASB effective date | ||||
IFRS 17 |
| Insurance Contracts (issued on 18 May 2017); including |
| 1 January 2023 |
| 1 January 2023 |
IFRS 17 |
| Amendments to IFRS 17 Isurance contracts: Initial Application of IFRS 17 and IFRS 9 - Comparative Information (issued on 9 December 2021) Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and | pending | pending | ||
IAS 1 |
| Classification of Liabilities as Current or Non-current - Deferral of Effective Date (issued on 23 January 2020 and 15 July 2020 respectively). | pending | 1 January 2023 | ||
IAS 1 |
| Amendments issued 12 February 2021 to:• IAS 1 Presentation of Financial Statements ;• IFRS Practice Statement 2: Disclosure of Accounting policies |
| 1 January 2023 |
| 1 January 2023 |
IAS 8 | Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estitmates (issued on 12 February 2021) | 1 January 2023 | 1 January 2023 | |||
IAS 12 |
| Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (issued on 7 May 2021) |
| pending |
| 1 January 2023 |
Various |
| Amendments issued 14 May 2020 to:• IFRS 3 Business Combinations: references to the Conceptual Framework;• IAS 16 Property, Plant and Equipment: Proceeds before Intended Use; • IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts — Cost of Fulfilling a Contract ; and• Annual Improvements to IFRSs 2018-2020: IFRS 1, IFRS 9, |
| 1 January 2022 |
| 1 January 2022 |
The Group has not applied any of these standards or interpretations in advance of their effective date.
The application of these standards and interpretations has had no significant impact on these consolidated financial statements.
(3) Business Combinations
2021
| ● | Gigagen, Inc. |
On 8 March 2021, Grifols, through its wholly owned subsidiary Grifols Innovation and New Technologies Limited (“GIANT”), reached an agreement to acquire all of the shares of Gigagen, Inc. for a total consideration of US Dollars
F-21
GigaGen is a U.S. biotechnology company specializing in the discovery and early development of recombinant biotherapeutic drugs. GigaGen’s research focuses on the discovery of new biological treatments based on antibodies derived from millions of donor-derived immune system cells.
With the acquisition of
From the total amount agreed, as of 31 December 2021, an amount of Euros
The Group has recognized an amount of Euros
Aggregate details of the cost of the business combination, the fair value of the net assets acquired and the goodwill at the acquisition date are shown below:
| Thousandss of |
| Thousandss of | |
Euros | US Dollars | |||
Consideration paid |
|
|
|
|
First repurchase of non-controlling interests |
| |
| |
Second repurchase of non-controlling interests (discounted amount) |
| |
| |
Total consideration paid |
| |
| |
Fair value of the previous investment in the company |
| |
| |
Fair value of net assets acquired |
| |
| |
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired) (note 7) |
| |
| |
The amounts determined at the acquisition date of the assets, liabilities and contingent liabilities acquired are as follows:
Fair value | ||||
Thousandss of | Thousands of | |||
| Euros |
| US Dollars | |
Development costs in progress (note 8) |
| |
| |
Property, plant and equipment (note 8) |
| |
| |
Non-current financial assets |
| |
| |
Trade and other receivables |
| |
| |
Other current assets |
| |
| |
Cash and cash equivalents |
| |
| |
Total assets |
| |
| |
Non current liabilities |
| ( |
| ( |
Current liabilities |
| ( |
| ( |
Total liabilities and contingent liabilities |
| ( |
| ( |
Total net assets identified |
| |
| |
The fair value of the RD projects in progress has been estimated based on market approach of comparable transactions.
F-22
The resulting goodwill was allocated to the others segment and includes the specialized RD workforce and the portfolio of future early stage products.
The acquired business has generated consolidated results for the Group during the period from the acquisition date to year-end in the amount of Euros
If the acquisition had occurred as of 1 January 2021, the Group’s net revenues and results would not have changed significantly.
| ● | BPL Plasma, Inc. |
On 28 February 2021, Biomat USA, Inc. the Group’s American subsidiary, acquired
The transaction has received the necessary regulatory approvals and has been financed with its own resources, without issuing debt.
Grifols will obtain approximately
The Group has recognized transaction costs of Euros
Aggregate details of the cost of the business combination, the provisional definitive fair value of the net assets acquired and the provisional definitive goodwill at the acquisition date are shown below:
Thousands of Euros | Thousands of US Dollars | |||
Consideration paid | ||||
First payment performed |
| |
| |
Cash paid at the transaction closing date |
| |
| |
Total consideration paid |
| |
| |
Fair value of net assets acquired |
| |
| |
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired) (note 7) |
| |
| |
The amounts determined at the acquisition date of the assets, liabilities and contingent liabilities acquired are as follows:
| Fair value | |||
Thousands of Euros |
| Thousands of US Dollars | ||
Property, plant and equipment (note 10) |
| |
| |
Non-current financial assets |
| |
| |
Inventories |
| |
| |
Total assets |
| |
| |
Current liabilities |
| ( |
| ( |
Total liabilities and contingent liabilities |
| ( |
| ( |
Total net assets identified |
| |
| |
The resulting goodwill has been allocated to the Bioscience segment and includes the donor database, licenses and workforce.
F-23
| ● | Acquisition of plasma centers from Kedplasma, LLC. |
On 31 March 2021, Biomat USA, Inc., the Group’s American subsidiary, acquired
Grifols will have immediate access to the plasma obtained at these centers, which obtain approximately
The transaction has received the necessary regulatory approvals and has been financed with equity without issuing debt.
The Group has recognized transaction costs of Euros
Aggregate details of the cost of the business combination, the definitive fair value of the net assets acquired and the definitive goodwill at the acquisition date are shown below:
| Thousands of Euros |
| Thousands of US Dollars | |
Consideration paid Cash paid |
| |
| |
Total consideration paid |
| |
| |
Fair value of net assets acquired |
| |
| |
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired) (note 7) |
| |
| |
The amounts determined at the acquisition date of the assets, liabilities and contingent liabilities acquired are as follows:
| Fair value | |||
Thousands of Euros |
| Thousands of US Dollars | ||
Property, plant and equipment (note 10) |
| |
| |
Inventories |
| |
| |
Total assets |
| |
| |
Total net assets identified |
| |
| |
The resulting goodwill has been allocated to the Bioscience segment and includes the donor database, licenses and workforce.
| ● | Prometic Plasma Resources, Inc. |
On 31 December 2021, Grifols, through its wholly owned subsidiary Grifols Canada Therapeutics Inc., acquired all of the shares of Prometic Plasma Resources Inc. for a total consideration of US Dollars
The purchase price has been assigned provisionally to Goodwill in the consolidated balance sheet, considering that the initial accounting has not been completed at the end of the reporting period.
2020
F-24
(a) Plasmavita
In November 2017, Grifols established Plasmavita Healthcare GmbH (hereinafter Plasmavita), a joint venture between Grifols (
On 14 April 2020, Grifols made a contribution of Euros
- | Grifols has a casting vote for any decision, determination and approval, with respect to the annual budget of Plasmavita and the distribution of dividends. Grifols has the power to make key business decisions. |
- | Grifols is involved in the decision-making related to exposure or rights to variable returns from the investee. |
- | Grifols has the casting vote to distribute dividends. |
Considering the above, it was concluded that Grifols has control over Plasmavita and, therefore, it is considered part of the group and it has been fully consolidated.
Details of the aggregate business combination cost, the fair value of the net assets acquired and the goodwill at the acquisition date are provided below:
| Thousands of Euros | |
Consideration paid |
| |
Cash paid |
| |
Total consideration paid |
| |
Fair value of the previous investment in the company | | |
Fair value of net assets acquired |
| |
Minority interest | ( | |
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired) (note 7) |
| |
The amounts determined at the date of acquisition of assets, liabilities and contingent liabilities are as follows:
| Fair Value | |
| Thousand of Euros | |
Intangible assets (note 8) |
| |
Rights of use (note 9) |
| |
Property, plant and equipment (note 10) |
| |
Investment in group companies |
| |
Non-current financial assets |
| |
Inventories |
| |
Trade and other receivables |
| |
Other current assets |
| |
Cash and cash equivalents |
| |
Total assets |
| |
Deferred tax liabilities |
| ( |
Other non current liabilites |
| ( |
Current liabilities |
| ( |
Total liabilities and contingent liabilities |
| ( |
Total net assets acquired |
| |
The resulting goodwill has been allocated to the Bioscience segment, and it includes the donor data base, licenses and workforce
F-25
If the acquisition had taken place on 1 January 2020, the net amount of the Group´s revenue and profit would not have differed significantly. The revenue and consolidated profit generated by Plasmavita between the acquisition date and 31 December 2020 are not significant for the Group.
The difference between the fair value of the previous investment and the book value amounted to Euros
(b) Alkahest, Inc.
On 2 September 2020, Grifols signed an agreement to acquire all the shares of Alkahest Inc. (“Alkahest”) for a total amount of Euros
| ● | Grifols has a casting vote for any decision, determination and approval, with respect to the annual budget of Alkahest and the distribution of dividends. Grifols has the power to decide on key business decisions. |
| ● | Grifols is involved in the decision-making related to exposure or rights to variable returns from the investee. |
Considering the above, it was concluded that Grifols has control over Alkahest and, therefore, it is considered part of the group and it has been fully consolidated. Until that date, the previous
On 15 October 2020, and as a result of the aforementioned share purchase agreement, Grifols proceeded to acquire
At 31 December 2020, the amount payable totaled Euros
Details of the aggregate business combination cost, the fair value of the net assets acquired and the goodwill at the acquisition date are provided below:
|
| Thousand of US | ||
| Thousand of Euros | Dollars | ||
Cost of the business combination | ||||
First repurchase of non-controlling interests |
| |
| |
Second repurchase of non-controlling interests (discounted amount) |
| |
| |
Total business combination cost |
| |
| |
Fair value of the previous investment in the company |
| |
| |
Fair value of net assets acquired |
| |
| |
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired) |
| |
| |
F-26
The amounts determined at the date of acquisition of assets, liabilities and contingent liabilities are as follows:
Fair Value | ||||
|
| Thousand of | ||
Thousand of Euros |
| US Dollars | ||
Other Intangible Assets (note 8) |
| |
| |
Property, plant and equipement (note 10) |
| |
| |
Other non current assets |
| |
| |
Trade and other reeceivables |
| |
| |
Other current assets |
| |
| |
Cash and cash equivalents |
| |
| |
Total assets |
| |
| |
Non-current financial liabilities |
| ( |
| ( |
Deferred tax liability |
| ( |
| ( |
Other non-current liabilities |
| ( |
| ( |
Trade and other payables |
| ( |
| ( |
Other current liabilities |
| ( |
| ( |
Total Liabilities |
| ( |
| ( |
Fair value of net assets acquired |
| |
| |
The resulting goodwill has been allocated to the Others segment and it mainly includes the workforce.
The fair value of research and clinical development projects in progress that include products for neurodegenerative disorders, neuromuscular and ophthalmologic diseases have been estimated according to an income approach based on risk-adjusted discounted free cash flows.
Had the acquisition taken place on 1 January 2020, the net amount of the Group´s revenue would not have changed significantly, and the net profit would have decreased by Euros
(c) Green Cross
On 20 July 2020, Grifols signed share purchase arrangements with the South Korean based GC Pharma Group and other investors for the acquisition of a plasma fractionation facility and
The consideration was paid with Grifols’ own cash resources, and at the close of the Transaction certain equity, working capital and cash targets were guaranteed.
The factories are currently in the process of obtaining the required licenses and regulatory approvals from the competent health authorities for the manufacturing of plasma-derived products. When licensed and approved, Grifols will become the only commercial manufacturer of plasma products in Canada, with a fractionation capacity of
Grifols plans to be ready to manufacture IVIG and Albumin at the factories to be able to supply the Canadian market starting in 2023.
The collection centers achieved a collection volume of
Upon the consummation of the Transaction, and by means of a plasma supply agreement, the Group has also committed to supplying certain output of plasma arising out of the collection centers to GC Pharma for a
F-27
Details of the aggregate business combination cost, the fair value of the net assets acquired and the goodwill at the acquisition date are provided below:
|
| Thousands of US | ||
Thousands of Euros | Dollars | |||
Consideration paid |
|
| ||
Cash paid |
| |
| |
Total consideration paid |
| |
| |
Fair value of net assets acquired |
| |
| |
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired) |
| |
| |
The amounts determined at the date of acquisition of assets, liabilities and contingent liabilities are as follows:
Fair Value | ||||
| Thousand of Euros |
| Thousand of US Dollars | |
Other Intangible Assets |
| |
| |
Rights of Use |
| |
| |
Property, plant and equipement |
| |
| |
Deferred tax assets |
| |
| |
Other non current assets |
| |
| |
Inventories |
| |
| |
Trade and other reeceivables |
| |
| |
Other current assets |
| |
| |
Cash and cash equivalents |
| |
| |
Total assets |
| |
| |
Non-current financial liabilities |
| ( |
| ( |
Current financial liabilities |
| ( |
| ( |
Trade and other payables |
| ( |
| ( |
Total Liabilities |
| ( |
| ( |
Fair value of net assets acquired |
| |
| |
The resulting goodwill was allocated to the Bioscience segment, and it includes the donor data base, current licenses and future authorizations and workforce
Had the acquisition taken place on 1 January 2020, the net amount of the Group´s revenue would have increased by Euros
2019
(a) | Acquisition of assets used in plasma donor centers |
On 31 May 2019 the Group, through its subsidiary Haema AG, acquired
F-28
Aggregate details of the combination cost, fair value of the net assets acquired and goodwill at the acquisition date are as follows:
|
| Thousands of Euros |
| ||
Cost of the business combination |
|
|
Payment in cash |
| |
Total business combination cost |
| |
Fair value of net assets acquired |
| |
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired) (note 7) |
| |
The resulting goodwill was allocated to the Bioscience segment and it included the donor data base, FDA licenses and workforce.
The fair value of net assets acquired mainly included property, plant and equipment amounting to Euros
(b) | Acquisition of Interstated Blood Bank, Inc. Group |
On 11 May 2016 Grifols acquired a
In April 2019, the Group exercised the call option and has completed the acquisition of the remaining shares of the IBBI group companies.
Details of the aggregate business combination cost, the fair value of the net assets acquired and the goodwill at the acquisition date are provided below:
| Thousands of Euros |
| Thousands of US Dollars | |
Consideration paid |
|
|
|
|
Cash paid |
| |
| |
Total consideration paid |
| |
| |
Fair value of the previous investment in the company |
| |
| |
Fair value of the call option |
| |
| |
Fair value of net assets acquired |
| |
| |
Goodwill (excess of the cost of the business combination over the fair value of net assets acquired) (note 7) |
| |
| |
F-29
The amounts determined at the date of acquisition of assets, liabilities and contingent liabilities are as follows:
Fair value | ||||
| Thousands of Euros |
| Thousands of US Dollars | |
Intangible assets (note 8) |
| |
| |
Property, plant and equipment (note 10) |
| |
| |
Inventories |
| |
| |
Trade and other receivables |
| |
| |
Other current assets |
| |
| |
Cash and cash equivalents |
| |
| |
Total assets |
| |
| |
Non-current liabilities |
| ( |
| ( |
Current liabilities |
| ( |
| ( |
Total liabilities and contingent liabilities |
| ( |
| ( |
Total net assets acquired |
| |
| |
The resulting goodwill was allocated to the Bioscience segment.
The difference between the fair value of the previous investment and the book value amounts to Euros
IBBI’s net revenue and profit between the acquisition date and 31 December 2019 amounted to Euros
(4) Significant Accounting Policies
(a) Subsidiaries and associates
Subsidiaries are entities, including special purpose entities (SPE), over which the Group exercises control, either directly or indirectly, through subsidiaries. The Group controls a subsidiary when it has the substantive rights in force that provide the ability to manage relevant activities. The Group is exposed or has the right to variable returns for its involvement in the subsidiaries when the returns obtained vary depending on the economic performance of the subsidiaries.
The income, expenses and cash flows of subsidiaries are included in the consolidated financial statements from the date of acquisition, which is when the Group takes control. Subsidiaries are excluded from the consolidated Group from the date on which control is lost.
Transactions and balances with Group companies and unrealized gains or losses have been eliminated upon consolidation.
The accounting policies of subsidiaries have been adapted to those of the Group for transactions and other events in similar circumstances.
The financial statements of consolidated subsidiaries have been prepared as of the same date and for the same reporting period as the financial statements of the Company.
F-30
Associates are entities over which the Company, either directly or indirectly through subsidiaries, exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those entities. The existence of potential voting rights that are exercisable or convertible at the end of each reporting period, including potential voting rights held by the Group or other entities, are considered when assessing whether an entity has significant influence.
Investments in associates are initially recognized at acquisition cost, including any cost directly attributable to the acquisition and any consideration receivable or payable contingent on future events or on compliance with certain conditions.
Subsequently, investments in associates are accounted for using the equity method from the date that significant influence commences until the date that significant influence ceases.
The excess of the cost of the investment over the Group’s share of the fair values of the identifiable net assets is recognized as goodwill, which is included in the carrying amount of the investment. Any shortfall, once the cost of the investment and the identification and measurement of the associate’s net assets have been evaluated, is recognized as income when determining the investor’s share of the profit and loss of the associate for the year in which it was acquired.
The accounting policies of associates have been harmonized in terms of timing and measurement, applying the policies described for subsidiaries.
The Group’s share of the profit and loss of an associate from the date of acquisition is recognized as an increase or decrease in the value of the investments, with a credit or debit to share of the profit and loss for the year of “equity-accounted investees” in the consolidated statement of profit and loss (consolidated statement of comprehensive income). The Group’s share of other comprehensive income of associates from the date of acquisition is recognized as an increase or decrease in the investments in associates with a balancing entry recognized by type in other comprehensive income. The distribution of dividends is recognized as a decrease in the value of the investment. The Group’s share of profit and loss, including impairment losses recognized by the associates, is calculated based on income and expenses arising from application of the acquisition method.
When the Group’s share of the losses in an investment accounted for using the equity method equals or exceeds its interest in the entity, the Group does not recognize additional losses, unless it has incurred in obligations or made payments on behalf of the other entity.
The Group’s share of the profit and loss of an associate and changes in equity is calculated to the extent of the Group’s interest in the associate at year end and does not reflect the possible exercise or conversion of potential voting rights. However, the Group’s share is calculated taking into account the possible exercise of potential voting rights and other derivative financial instruments which, in substance, currently allow access to the economic benefits associated with the interests held, such as entitlement to a share in future dividends and changes in the value of associates.
Information on the subsidiaries and associates included in the consolidated Group is presented in Appendix I.
(b) Business combinations
On the date of transition to IFRS-IASB, the Group applied the exception permitted under IFRS 1 “First-time adoption of International Financial Reporting Standards”, whereby only those business combinations performed as from 1 January 2004 have been recognized using the acquisition method. Entities acquired prior to that date were recognized in accordance with accounting prevailing at that time, taking into account the necessary corrections and adjustments at the transition date.
The Group applies the revised IFRS 3 “Business combinations” in transactions made subsequent to 1 January 2010.
The Group applies the acquisition method for business combinations.
The acquisition date is the date on which the Group obtains control of the acquiree.
F-31
The cost of the business combination is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred or assumed, equity instruments issued and any additional consideration contingent on future events or the fulfilment of certain conditions, in exchange for control of the acquiree.
The consideration paid excludes all amounts that do not form part of the exchange for the acquired business. Acquisition-related costs are accounted for as expenses when incurred. Share increase costs are recognized as equity when the increase takes place and borrowing costs are deducted from the financial liability when it is recognized.
At the acquisition date the Group recognizes at fair value the assets acquired and liabilities assumed. Liabilities assumed include any contingent liabilities that represent present obligations arising from past events for which the fair value can be reliably measured. The Group also recognizes indemnification assets transferred by the seller at the same time and following the same measurement criteria as the item that is subject to indemnification from the acquired business, taking into consideration, where applicable, the insolvency risk and any contractual limit on the indemnity amount.
This criterion does not include non-current assets or disposal groups of assets which are classified as held for sale, long-term defined benefit employee benefit liabilities, share-based payment transactions, deferred tax assets and liabilities and intangible assets arising from the acquisition of previously transferred rights.
Assumed assets and liabilities are classified and designated for subsequent measurement in accordance with the contractual terms, economic conditions, operating or accounting policies and other factors that exist at the acquisition date, except for leases and insurance contracts.
The excess between the consideration transferred and the value of net assets acquired and liabilities assumed, less the value assigned to non-controlling interests, is recognized as goodwill. Where applicable, any shortfall, after evaluating the consideration transferred, the value assigned to non-controlling interests and the identification and measurement of net assets acquired, is recognized in profit and loss.
When a business combination has been provisionally determined, net identifiable assets have initially been recognized at their provisional value, and any adjustments made during the measurement period have been recorded as if they had been known at that date. Where applicable, comparative figures for the prior year have been restated. Adjustments to the provisional values only reflect information relating to events and circumstances existing at the acquisition date and which, had they been known, would have affected the amounts recognized at that date. Once this period has elapsed, adjustments are only made to initial values when errors must be corrected. Any potential benefits arising from tax losses and other deferred tax assets of the acquiree that have not been recorded as they did not qualify for recognition at the acquisition date, are accounted for as income tax revenue, provided the adjustments were not made during the measurement period.
The contingent consideration is classified in accordance with underlying contractual terms as a financial asset or financial liability, equity instrument or provision. Provided that subsequent changes to the fair value of a financial asset or financial liability do not relate to an adjustment of the measurement period, they are recognized in consolidated profit and loss. The contingent consideration classified, where applicable, as equity is not subject to subsequent change, with settlement being recognized in equity. The contingent consideration classified, where applicable, as a provision is recognized subsequently in accordance with the relevant measurement standard.
(c) Non-controlling interests
Non-controlling interests in subsidiaries acquired after 1 January 2004 are recognized at the acquisition date at the proportional part of the fair value of the identifiable net assets. Non-controlling interests in subsidiaries acquired prior to the transition date were recognized at the proportional part of the equity of the subsidiaries at the date of first consolidation.
Non-controlling interests are disclosed in the consolidated balance sheet under equity separately from equity attributable to the Parent. Non-controlling interests’ share in consolidated profit and loss for the year (and in consolidated comprehensive income for the year) is disclosed separately in the consolidated statement of profit and loss (consolidated statement of comprehensive income).
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The consolidated profit and loss for the year, consolidated comprehensive income and changes in equity of the subsidiaries attributable to the Group and non-controlling interests after consolidation adjustments and eliminations, is determined in accordance with the percentage ownership at year end, without considering the possible exercise or conversion of potential voting rights. However, Group and non-controlling interests are calculated taking into account the possible exercise of potential voting rights and other derivative financial instruments which, in substance, currently allow access to the economic benefits associated with the interests held, such as entitlement to a share in future dividends and changes in the value of subsidiaries.
Profit and loss and each component of other comprehensive income are assigned to equity attributable to shareholders of the Parent and to non-controlling interests in proportion to their interest, although this implies a balance receivable from non-controlling interests. Agreements signed between the Group and the non-controlling interests are recognized as a separate transaction.
The increase and reduction of non-controlling interests in a subsidiary in which control is retained is recognized as an equity instrument transaction. Consequently, no new acquisition cost arises on increases, nor is a gain recorded on reductions; rather, the difference between the consideration transferred or received and the carrying amount of the non-controlling interests is recognized in the reserves of the investor, without prejudice to reclassifying consolidation reserves and reallocating other comprehensive income between the Group and the non-controlling interests. When a Group’s interest in a subsidiary diminishes, non-controlling interests are recognized at their share of the net consolidated assets, including goodwill.
(d) Joint arrangements
Joint arrangements are those in which there is a contractual agreement to share the control over an economic activity, in such a way that the decisions over relevant activities require the unanimous consent of the Group and the remaining venturers. Under IFRS 11 “Joint arrangements” investments in joint arrangements are classified as joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than on the legal structure of the joint agreement.
Interests in joint ventures are accounted for using the equity method, after initially being recognized at cost in the consolidated balance sheet.
The acquisition cost of investments in joint arrangements is determined consistently with that established for investments in associates.
(e) Foreign currency transactions and balances
| (i) | Functional and presentation currency |
The consolidated financial statements are presented in thousands of Euros, which is the functional and presentation currency of the Parent.
| (ii) | Foreign currency transactions, balances and cash flows |
Foreign currency transactions are translated into the functional currency using the previous month’s exchange rate for all transactions performed during the current month. This method does not differ significantly from applying the exchange rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies have been translated into thousands of Euros at the closing rate, while non-monetary assets and liabilities measured at historical cost have been translated at the exchange rate prevailing at the transaction date. Non-monetary assets measured at fair value have been translated into thousands of Euros at the exchange rate at the date that the fair value was determined.
In the consolidated statement of cash flows, cash flows from foreign currency transactions have been translated into thousands of Euros at the exchange rates prevailing at the dates the cash flows occur. The effect of exchange rate fluctuations on cash and
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cash equivalents denominated in foreign currencies is recognized separately in the statement of cash flows as “Effect of exchange rate fluctuations on cash and cash equivalents”.
Exchange gains and losses arising on the settlement of foreign currency transactions and the translation into thousands of Euros of monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss.
| (iii) | Translation of foreign operations |
The translation into thousands of Euros of foreign operations for which the functional currency is not the currency of a hyperinflationary economy is based on the following criteria:
(f) Borrowing costs
In accordance with IAS 23 “Borrowing Costs”, the Group recognizes borrowing costs directly attributable to the purchase, construction or production of qualifying assets as an increase in the value of these assets. Qualifying assets are those which require a substantial period of time before they can be used or sold. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization is determined as the actual borrowing costs incurred, less any investment income on the temporary investment of those funds. Capitalized borrowing costs corresponding to general borrowing are calculated as the weighted average of the qualifying assets without considering specific funds. The amount of borrowing costs capitalized cannot exceed the amount of borrowing costs incurred during that period. The capitalized borrowing costs include adjustments to the carrying amount of financial liabilities arising from the effective portion of hedges entered into by the Group.
The Group begins capitalizing borrowing costs as part of the cost of a qualifying asset when it incurs expenditure for the asset, interest is accrued, and it undertakes activities that are necessary to prepare the asset for its intended use or sale, and ceases capitalizing borrowing costs when all or substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Nevertheless, capitalization of borrowing costs is suspended when active development is interrupted for extended periods.
The remaining interest costs are recognized as an expense in the year in which they are incurred.
(g) Property, plant and equipment
| (i) | Initial recognition |
Property, plant and equipment are recognized at cost, less accumulated depreciation and any accumulated impairment losses. Land is not subject to depreciation. The cost of self-constructed assets is determined using the same principles as for an acquired asset, while also considering the criteria applicable to production costs of inventories. Capitalized production costs are recognized by allocating the costs attributable to the asset to “Self-constructed non-current assets” in the consolidated statement of profit and loss.
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| (ii) | Depreciation |
Property, plant and equipment are depreciated by allocating the depreciable amount of an asset on a systematic basis over its useful life. The depreciable amount is the cost or deemed cost of an asset, less its residual value. The Group determines the depreciation charge separately for each item for a component of property, plant and equipment with a cost that is significant in relation to the total cost of the asset.
Property, plant and equipment are depreciated using the following criteria:
| Depreciation method |
| Rates | |
Buildings |
| Straight line |
| |
Other property, technical equipment and machinery |
| Straight line |
| |
Other property, plant and equipment |
| Straight line |
|
The Group reviews residual values, useful lives and depreciation methods at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.
| (iii) | Subsequent recognition |
Subsequent to initial recognition of the asset, only those costs incurred which will probably generate future profits and for which the amount may reliably be measured are capitalized. Costs of day-to-day servicing are recognized in profit and loss as incurred.
Replacements of property, plant and equipment which qualify for capitalization are recognized as a reduction in the carrying amount of the items replaced. Where the cost of the replaced items has not been depreciated independently and it is not possible to determine the respective carrying amount, the replacement cost is used as indicative of the cost of items at the time of acquisition or construction.
| (iv) | Impairment |
The Group tests for impairment and reversals of impairment losses on property, plant and equipment based on the criteria set out in note 4(j) below.
(h) Intangible assets
| (i) | Goodwill |
Goodwill is generated on the business combinations and is calculated using the criteria described in the section on business combinations.
Goodwill is not amortized but is tested for impairment annually or more frequently whenever there is an indication that goodwill may be impaired. Goodwill acquired in business combinations is allocated to the cash-generating units (CGUs) or groups of CGUs which are expected to benefit from the synergies of the business combination and the criteria described in note 7 are applied. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Gains and losses on the sale of an entity include the carrying amount of the goodwill related to the entity sold.
| (ii) | Internally generated intangible assets |
Any research and development expenditure incurred during the research phase of projects is recognized as an expense when incurred.
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Costs related with development activities are capitalized when:
| ● | The Group has technical studies that demonstrate the feasibility of the production process; |
| ● | The Group has undertaken a commitment to complete production of the asset, to make it available for sale or internal use; |
| ● | The asset will generate sufficient future economic benefits; |
| ● | The Group has sufficient technical and financial resources to complete development of the asset and has devised budget control and cost accounting systems that enable monitoring of budgetary costs, modifications and the expenditure actually attributable to the different projects. |
The cost of internally generated assets by the Group is calculated using the same criteria established for determining production costs of inventories. The production cost is capitalized by allocating the costs attributable to the asset to self-constructed non-current assets in the consolidated statement of profit and loss.
Expenditure on activities that contribute to increasing the value of the different businesses in which the Group as a whole operates is expensed when incurred. Replacements or subsequent costs incurred on intangible assets are generally recognized as an expense, except where they increase the future economic benefits expected to be generated by the assets.
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
| (iii) | Other intangible assets |
Other intangible assets are carried at cost, or at fair value if they arise on business combinations, less accumulated amortization and impairment losses.
Intangible assets with indefinite useful lives are not amortized but tested for impairment at least annually.
| (iv) | Intangible assets acquired in business combinations |
The cost of identifiable intangible assets acquired in business combinations normally includes the fair value of RD projects, Intellectual Property Patents, current contracts and products currently being marketed, and are included within “Other intangible assets” and “Development expenses” as appropriate.
| (v) | Useful life and amortization rates |
The Group assesses whether the useful life of each intangible asset acquired is finite or indefinite. An intangible asset is regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset will generate net cash inflows.
Intangible assets with finite useful lives are amortized by allocating the depreciable amount of an asset on a systematic basis over its useful life, by applying the following criteria:
| Amortisation method |
| Rates | |
Development expenses |
| Straight line |
| |
Concessions, patents, licences, trademarks and similar |
| Straight line |
| |
Computer software |
| Straight line |
| |
Currently marketed products |
| Straight line |
|
The depreciable amount is the cost or deemed cost of an asset, less its residual value.
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The Group does not consider the residual value of its intangible assets to be material. The Group reviews the residual value, useful life and amortization method for intangible assets at each financial year end. Changes to initially established criteria are accounted for as a change in accounting estimates.
(i) Leases
The Group changed its accounting policies in relation to leases when it is a lessee as a result of adopting IFRS 16. The policy is described in note 2(c) and the impact of the change in notes 2 (c) and 9.
| (i) | Definitions |
Lease contracts
A lease contract is a contract that fulfills the following conditions:
| ● | There is an identified asset explicitly specified in the contract or implicitly specified when it is made available for use by the Group. When the asset is a portion of an asset’s capacity it could also be an identified asset if it is physically distinct (a floor of a building, a storage location in a warehouse) or the Group has the right to receive substantially all its of capacity. |
| ● | The lessee has the right to direct the use of the identified asset that means the right to determine how and for what purpose the asset will be used. |
| ● | The lessee has the right to obtain all the economic benefits from that use throughout the period of use. |
Non-lease contracts
Even if an asset is specified in the contract, if the lessor has a substantive substitution right throughout the period of use, the asset is not identified and the contract does not contain a lease.
When the lessee does not have the right to control the use of the asset, the contract does not contain a lease.
Non-lease contracts are not under this policy and the accounting treatment will be that of a service contract (usually recognized as an expense).
| (ii) | Accounting policies |
Lease contracts, where the Group acts as lessee, is recognized at inception of the contract as:
| ● | A lease liability representing its obligation to make future lease payments and, |
| ● | A right of use representing its right to use the identified asset. |
Exception: lease contracts that fulfill any of the following conditions will be recognized as monthly expense over the lease term:
| ● | For lease contracts where the lease term is 12 months or less at the commencement date. |
| ● | For lease contracts where the value of the leased asset (individually), when new, is lower than US Dollars 5,000 or its equivalent in another currency. |
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Lease liability
Initial measurement
The lease liability corresponds to the present value of the lease payments during the lease term using the interest rate implicit in the lease or, if this cannot be readily determined, the incremental borrowing lending rate, as follows:
| ● | Lease payments |
Only lease components included in the lease contract are part of the liability calculation:
| - | Fixed payments, less any lease incentives receivable; |
| - | Variable lease payments that depend on a known index or a rate; |
| - | The exercise price of the purchase option if the lessee is reasonably certain to exercise that option; |
| - | Any amount already paid at the contract commencement date must not be included. |
Non-lease components that could be included in a lease contract (e.g. maintenance services, electricity, water, gas and other services such as surveillance, cleaning, etc.) are not part of the lease liability and must be recognized as an expense as soon as the service is rendered to Grifols using the corresponding account according to its nature.
| ● | Lease term |
The lease term is the non-cancellable period considering the initial term of each contract unless Grifols has a unilateral option to extend or terminate the lease and there is reasonable certainty that this option will be exercised, in which case the corresponding extension term or early termination will be taken into account.
The lease liability is calculated at the present value of the future lease payments during the lease term, using an incremental discount rate, except for those contracts in which the implicit interest rate is used because it is specifically mentioned in the contract.
| ● | Discount rate |
Under IFRS 16, a lessee shall discount the future lease payments using the lease implicit interest rate if this can be reliably determined. Otherwise, the lessee shall use the incremental borrowing rate. The Group uses the incremental borrowing rate. This is the rate that a lessee would have to pay at the commencement date of the lease for a loan of a similar term, and with a similar security, to obtain an asset of similar value to the right-of-use asset in a similar economic environment.
The incremental borrowing rate is determined considering the following criteria:
-Geographical areas
-Financial terms
-Lease contracts terms
-Reference rate: Risk free rate
-Financing spread
Subsequent measurement
Subsequently, the lease financial liability will be increased by the interest on the lease liability and reduced by the payments made. The liability will be remeasured if there are changes in the amounts payable and the lease terms.
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Lease liabilities will:
| ● | Increase the carrying amount to interest on the lease liability; |
| ● | Reduce the carrying amount to reflect the lease payments made; and |
| ● | Remeasure (increase or reduce) the carrying amount to reflect any reassessment or lease modifications. The balancing entry will be a lease expense for retrospective lease payments or right-of-use-assets for future lease payments. The discount rate to be used depends on the event causing the reassessment or modification. |
Right-of-use asset (ROU asset)
Initial measurement
ROU assets are initially measured at cost, which comprises:
| ● | The amount of the initial measurement of the lease liability, |
| ● | Any lease payments made to the lessor at or before the commencement date, |
| ● | Estimated costs to dismantle or to remove the underlying asset, |
| ● | Less any discount or incentive received from the lessor. |
Subsequent measurement
The ROU asset is measured at cost, less any accumulated depreciation and any accumulated impairment losses.
Net book value of the ROU asset must be adjusted as for any re-measurement of the lease liability.
Depreciation method and useful life
Depreciation method: straight-line basis. Depreciation starts at the lease commencement date (when the asset is available for use).
Useful life:
| ● | If the purchase option is reasonably certain to be exercised: Useful life of the underlying asset. |
| ● | Otherwise: The earlier of the end of the useful life of the right-of-use asset or the end of the lease term. |
(j) | Impairment of goodwill, other intangible assets and other non-financial assets subject to depreciation or amortization |
The Group evaluates whether there are indications of possible impairment losses on non-financial assets subject to amortization or depreciation, to verify whether the carrying amount of these assets exceeds the recoverable amount.
The Group tests goodwill, intangible assets with indefinite useful lives and intangible assets with finite useful lives that are not available for use for potential impairment at least annually, irrespective of whether there is any indication that the assets may be impaired.
The recoverable amount of the assets is the higher of their fair value less costs of disposal and their value in use. An asset’s value in use is calculated, where applicable, based on an estimate of the future cash flows expected to derive from the use of the asset, expectations about possible variations in the amount or timing of those future cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would reflect in pricing the future cash flows deriving from the asset.
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Negative differences arising from comparison of the carrying amounts of the assets with their recoverable amounts are recognized in the consolidated statement of profit and loss. Recoverable amount is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs.
Impairment losses recognized for cash-generating units are first allocated to reduce, where applicable, the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset. The carrying amount of each asset may not be reduced below the highest of its fair value less costs of disposal, its value in use and zero.
At the end of each reporting period the Group assesses whether there is any indication that an impairment loss recognized in prior periods may no longer exist or may have decreased. Impairment losses on goodwill are not reversible. Impairment losses on other assets are only reversed if there has been a change in the estimates used to calculate the recoverable amount of the asset.
A reversal of an impairment loss is recognized in consolidated profit and loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss may not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized.
A reversal of an impairment loss for a CGU is allocated to the assets of each unit, except goodwill, pro rata with the carrying amounts of those assets. The carrying amount of an asset may not be increased above the lower of its recoverable amount and the carrying amount that would have been disclosed, net of amortization or depreciation, had
(k) Financial instruments
(i) | Classification of the financial instruments |
Financial instruments are classified at the time of their initial recognition as a financial asset, a financial liability or an equity instrument, in accordance with the economic substance of the contractual agreement and with the definitions of financial assets, financial liabilities or equity instruments indicated in IAS 32 “Financial instruments: Presentation”.
For purposes of its valuation, the Group classifies financial instruments in the categories of financial assets and financial liabilities at fair value through profit or loss, separating those initially designated from those held for trading or mandatorily measured at fair value through profit or loss, financial assets and financial liabilities valued at amortized cost and financial assets measured at fair value through other comprehensive income, separating the equity instruments designated as such, from other financial assets. The classification depends on the Group’s business model to manage the financial assets and the contractual terms of the cash flows.
The Group classifies a financial asset at amortized cost if it is held in the framework of a business model whose objective is to hold financial assets to obtain contractual cash flows and the contractual terms of the financial asset give rise, on specified dates, to cash flows which are only principal and interest payments on the outstanding principal amount (OPIP).
The Group classifies a financial asset at fair value through changes in other comprehensive income, if it is maintained in the framework of a business model whose objective is achieved by obtaining contractual cash flows and selling financial assets and the contractual conditions of the financial asset give rise to, at specified dates, to cash flows that are OPIP.
The business model is determined by the key personnel of the Group and at a level that reflects the way in which they jointly manage groups of financial assets to achieve a specific business objective. The Group’s business model represents the way in which it manages its financial assets to generate cash flows.
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Financial assets that are part of a business model whose objective is to hold assets to receive contractual cash flows are managed to generate cash flows in the form of contractual collections during the life of the instrument. The Group manages the assets held in the portfolio to receive these specific contractual cash flows. To determine whether cash flows are obtained through the collection of contractual cash flows from financial assets, the Group considers the frequency, value and timing of sales in prior years, the reasons for those sales and expectations in relation to with the future sales activity. However, the sales themselves do not determine the business model and, therefore, cannot be considered in isolation. Instead, it is the information on past sales and future sales expectations that provides indicative data on how to achieve the stated objective of the Group with respect to the management of financial assets and, more specifically, the way where cash flows are obtained.
For assets measured at fair value, losses and gains will be recognized in profit or loss or other comprehensive income. For investments in equity instruments that are not held for trading, it will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for investments in equity at fair value through other comprehensive income (COCI).
The Group reclassifies investments in debt when and only when its business model to manage those assets changes.
(ii) | Measurement |
At the time of initial recognition, the Group values a financial asset at its fair value plus, in the case of a financial asset that is not at fair value through profit or loss, the costs of the transaction that are directly attributable to the acquisition. The transaction costs of financial assets at fair value through profit or loss are taken to results.
In order to determine the fair value of financial assets or liabilities, the Group uses market data as much as possible. Based on the factors used for the measurement, the fair values are hierarchized based on the following levels:
| ● | Level 1: quoted prices (unadjusted) within current markets for assets or liabilities identical to those under consideration. |
| ● | Level 2: factors other than the prices considered in Level 1 that come directly from the asset or liability in question, such as those that may derive directly from the price. |
| ● | Level 3: factors not based on data directly from the market. |
In the event that the factors used to determine the fair value of an asset or liability are included in different levels of hierarchy, the fair value will be determined in its entirety based on the significant component located at the lowest level of hierarchy.
(iii) | Offsetting principles |
A financial asset and a financial liability are offset only when the Group has the legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
(iv) | Financial assets and liabilities at fair value through profit or loss |
Financial assets or liabilities at fair value through profit or loss are those that are classified as held for trading or have been designated from the moment of initial recognition.
A financial asset or liability is classified as held for trading if:
| ● | It is acquired or incurred mainly for the purpose of selling it or repurchasing it in the near term. |
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| ● | On initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking, or |
| ● | It is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument. |
Financial assets and liabilities at fair value through profit or loss are initially recognized at fair value. Transaction costs directly attributable to the purchase or issue are recognized as an expense as incurred.
After initial recognition, they are recognized at fair value through profit or loss. The fair value is not reduced by the transaction costs that may be incurred by their eventual sale or disposal by other means.
The Group does not reclassify any financial asset or liability to or from this category as long as it is recognized in the consolidated statement of financial position.
(v) | Financial assets at amortized cost |
Financial assets at amortized cost are initially recognized at their fair value, including the transaction costs incurred, and are subsequently measured at amortized cost, using the effective interest method.
(vi) | Debt instruments |
The subsequent valuation of the debt instruments depends on the Group’s business model to manage the asset and the characteristics of the cash flows of the asset. The Group’s debt instruments consist mainly of trade and other receivables, which the Group classifies as financial assets at amortized cost.
Financial assets at amortized cost are assets that the Group holds for the collection of contractual cash flows when these cash flows represent only payments of principal and interest, and are valued at amortized cost. Interest income from these financial assets is included in finance income in accordance with the effective interest rate method.
| (vii) | Equity instruments |
The Group holds financial assets owned, mainly equity instruments, which are measured at fair value. When Group management has chosen to present the gains and losses on the fair value of the equity investments in other comprehensive income, after the initial recognition, the equity instruments are measured at fair value, recognizing the loss or gain in other comprehensive income. The amounts recognized in other comprehensive income are not subject to reclassification to profit or loss, without prejudice to reclassification to reserves at the time when the instruments are derecognized. Dividends from such investments continue to be recognized in income for the year as other income when the Group’s right to receive payments is established.
(viii)Impairment
As of 1 January 2018, the Group evaluates, on a prospective basis, the expected credit losses associated with its debt instruments recorded at amortized cost. The Group uses the practical expedients permitted by IFRS 9 to assess the expected credit losses related to commercial accounts using a simplified approach, eliminating the need to evaluate when there has been a significant increase in credit risk. The simplified approach requires that the expected losses be recorded from the initial recognition of receivables, so that the Group determines expected credit losses as a probability-weighted estimate of such losses over the expected life of the financial instrument.
The practical expedient applied is the use of a provision matrix based on the segmentation into groups of homogeneous assets, applying the historical information of percentages of non-payment for said groups and applying reasonable information about the future economic conditions.
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The percentage of non-payment is calculated according to the current experience of non-payment during the last year, as it is a very dynamic market and is adjusted for the differences between current and historical economic conditions and considering projected information, which is reasonably available.
(ix) | Derecognition of financial assets |
The Group applies the criteria for the derecognition of financial assets to a part of a financial asset or to a part of a group of similar financial assets or to a financial asset or a group of similar financial assets.
Financial assets are derecognized when the rights to receive cash flows related to them have expired or have been transferred and the Group has substantially transferred the risks and rewards derived from their ownership.
(x) | Financial liabilities at amortized cost |
Financial liabilities, including trade payables and other accounts payable, that are not classified at fair value through profit or loss, are initially recognized at their fair value, less, if applicable, the transaction costs that are directly attributable to the issue. Subsequent to the initial recognition, liabilities classified under this category are valued at amortized cost using the effective interest rate method.
(xi) | Derecognition and modification of financial liabilities |
The Group derecognizes a financial liability or part thereof when it has complied with the obligation contained in the liability, or is legally exempt from the main liability contained in the liability, either by virtue of a judicial process or by the creditor.
The Group considers that the conditions are substantially different if the present value of the discounted cash flows under the new conditions, including any commission paid net of any commission received, and using the original effective interest rate to make the discount, differs at least at
If the exchange is recorded as a cancellation of the original financial liability, the costs or commissions are recognized in consolidated results forming part of the result of the same. Otherwise, the costs or commissions adjust the carrying amount of the liability and are amortized by the amortized cost method during the remaining life of the modified liability.
The Group recognizes the difference between the carrying amount of the financial liability or a part of it that is canceled or assigned to a third party and the consideration paid, including any assigned asset different from the cash or liability assumed in profit or loss.
(l)Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date the derivative contract is signed and at the closing date. The gain or loss recognition method depends on whether the derivative financial instrument has been designated as a hedging instrument and, if so, the nature of the item being hedged.
For the purpose of their recognition, derivative financial instruments are classified as:
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(i) Cash flow hedges that qualify for hedge accounting
Hedge effectiveness
The effectiveness of the hedge is determined at the beginning of the hedging relationship and through periodic evaluations of the effectiveness in order to ensure that there exists an economic relationship between the hedged item and the hedging instrument.
In order to evaluate the effectiveness of derivatives such as cross-currency euro/dollar swaps, the Group uses the hypothetical derivative method. This hypothetical derivative is built without including the credit risk and the currency spread. According to the hypothetical derivative method, the cumulative change in the fair value of the real currency swap, excluding the currency spread effect, is compared to the cumulative change in the fair value of the hypothetical swap. Therefore, the hypothetical derivative is built as a cross-currency swap with euro fixed payment and a dollar fixed reception without the inclusion of the credit risk or the currency spread and with a nil fair value at the date of designation.
Accounting
At the inception of the hedging relationship, the Group documents the economic relationship between the hedging instruments and the hedged items, including whether changes in cash flows of the hedging instruments are expected to offset changes in cash flows of the hedged items. The Group documents its risk management objective and strategy for undertaking its hedging transactions.
The effective portion of changes in the fair value of derivative financial instruments that are designated and qualify as cash flow hedges is recognized in the cash flow reserve within equity. For cross-currency swaps it the currency spread of the hedging relationship is excluded in order to be recognized as hedging costs within equity. The gain or loss related to the ineffective portion is recognized immediately in income for the year, under “Changes in fair value of financial instruments”.
Cumulative amounts in the cash flow reserve within equity are recognized in the statement of profit and loss when the hedged item affects profit or loss or when ineffectiveness is identified.
The fair values of derivative financial instruments designated in hedging relationships are disclosed in note 30. Movements in the hedging reserve included in equity are shown in note 16 (c).
(ii) Cash flow hedges that do not qualify for hedge accounting
Derivative financial instruments which do not meet the criteria for applying hedge accounting are classified as held for trading. The fair value changes are recognized immediately in the consolidated statement of profit and loss.
(m) Equity instruments
The Group’s acquisition of equity instruments of the Parent is recognized separately at cost of acquisition in the consolidated balance sheet as a reduction in equity, regardless of the motive of the purchase. Any gains or losses on transactions with treasury equity instruments are not recognized in consolidated profit and loss.
The subsequent redemption of Parent shares, where applicable, leads to a reduction in share capital in an amount equivalent to the par value of such shares. Any positive or negative difference between the cost of acquisition and the par value of the shares is debited or credited to reserves. Transaction costs related with treasury equity instruments, including issue costs related to a business combination, are accounted for as a reduction in equity, net of any tax effect.
F-44
(n) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
The costs of conversion of inventories include costs directly related to the units of production and a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. The allocation of fixed indirect overheads is based on the higher of normal production capacity or actual production.
The raw material used to produce hemoderivatives is human plasma, which is obtained from our donation centers using the plasmapheresis method. The cost of inventories includes the amount paid to plasma donors, or the amount billed by the seller when purchased from third parties, as well as the cost of products and devices used in the collection process, rental expenses and storage. This plasma has to be stored before use, which is an essential part of the production process. During the storage period, the plasma undergoes various virological tests and should be kept in quarantine in accordance with FDA and European Medicines Agency regulations, in order to guarantee that all the plasma is suitable for use in the production process.
To the extent that plasma storage costs are necessary to the production process, they are included as cost of inventories.
Indirect costs such as general management and administration costs are recognized as expenses in the period in which they are incurred.
The cost of raw materials and other supplies and the cost of merchandise are allocated to each inventory unit on a weighted average cost basis.
The transformation cost is allocated to each inventory unit on a FIFO (first-in, first-out) basis.
The Group uses the same cost model for all inventories of the same nature and with a similar use.
Volume discounts extended by suppliers are recognized as a reduction in the cost of inventories when it is probable that the conditions for discounts to be received will be met. Discounts for prompt payment are recognized as a reduction in the cost of the inventories acquired.
When the cost of inventories exceeds net realizable value, materials are written down to net realizable value, which is understood to be:
| ● | For raw materials and other supplies, replacement cost. Nevertheless, raw materials and other supplies are not written down below cost if the finished goods into which they will be incorporated are expected to be sold at or above cost of production; |
| ● | Merchandise and finished goods, estimated selling price less costs to sell; |
| ● | Work in progress, the estimated selling price of related finished goods, less the estimated costs of completion and the estimated costs necessary to make the sale. |
The previously recognized write-down is reversed against profit and loss when the circumstances that previously caused inventories to be written down no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances. The reversal of the write-down is limited to the lower of the cost and revised net realizable value of the inventories. Write-downs may be reversed with a credit to “Cost of sales”.
F-45
(o) Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand deposits in financial institutions. They also include other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. An investment normally qualifies as a cash equivalent when it has a maturity of less than three months from the date of acquisition.
The Group classifies cash flows relating to interest received and paid as operating activities, and dividends received and distributed are classified under investing and financing activities, respectively.
(p) Government grants
Government grants are recognized when there is reasonable assurance that they will be received and that the Group will comply with the conditions attached.
(i) Capital grants
Outright capital grants are initially recognized as deferred income in the consolidated balance sheet. Income from capital grants is recognized in the consolidated statement of profit and loss in line with the depreciation of the corresponding financed assets.
(ii) Operating grants
Operating grants received to offset expenses or losses already incurred, or to provide immediate financial support not related to future disbursements, are recognized in the consolidated statement of profit and loss.
(iii) Interest rate grants
Financial liabilities comprising implicit assistance in the form of below-market interest rates are initially recognized at fair value. The difference between this value, adjusted where necessary for the issue costs of the financial liability and the amount received, is recognized as a government grant based on the nature of the grant awarded.
(q) Employee benefits
(i) Defined contribution plans
The Group recognizes the contributions payable to a defined contribution plan in exchange for a service in the period in which contributions are accrued. Accrued contributions are recognized as an employee benefit expense in the corresponding consolidated statement of profit and loss in the year that the contribution was made.
(ii) Termination benefits
Termination benefits are recognized at the earlier of the date when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring that involves the payment of termination benefits.
For termination benefits payable as a result of an employee’s decision to accept an offer of benefits, the time when the Group can no longer withdraw the offer of termination benefits is the earlier of when the employee accepts the offer and when a restriction on the Group’s ability to withdraw the offer takes effect.
F-46
For termination benefits payable as a result of the Group’s decision to make an employee redundant, the Group can no longer withdraw the offer when it has informed the affected employees or union representatives of the plan and the actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made. The plan must identify the number of employees to be made redundant, their job classifications or functions and their locations and the expected completion date. The plan must also establish the termination benefits that employees will receive in sufficient detail that employees can determine the type and amount of benefits they will receive when their employment is terminated.
If the Group expects to settle the termination benefits in full more than twelve months after year end, the liability is discounted using the market yield on high quality corporate bonds.
(iii) Short-term employee benefits
The Group recognizes the expected cost of short-term employee benefits in the form of accumulating compensated absences when the employees render service that increases their entitlement to future compensated absences. In the case of non-accumulating compensated absences, the expense is recognized when the absences occur.
The Group recognizes the expected cost of profit-sharing and bonus plans when it has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made.
(iv) Restricted Share Unit Retention Plan (RSU)
The Group gives share-based payments to certain employees who render services to the Company. The fair value of the services received is determined based on the estimated fair value of the shares given at the grant date. Because the equity instruments granted do not vest until the employees complete a specified period of service, those services are accounted for during the vesting period in the statement of profit and loss as an expense for the year, with the corresponding increase in equity. The amount recognized corresponds to that settled once the agreed terms have been met and it will not be adjusted or revalued during the accrual period, as the commitment is settled in the form of shares.
The total amount recognized is calculated based on the incentive payable in shares, increasing in line with percentages agreed by the Group. If an employee decides to leave his/her job prior to the end of the accrual period, he/she will only receive the agreed incentive in the form of shares and the Company will be able to choose whether to settle in cash or using equity instruments.
(r) Provisions
Provisions are recognized when the Group has a present obligation (legal or implicit) as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account all risks and uncertainties surrounding the amount to be recognized as a provision and, where the time value of money is material, the financial effect of discounting provided that the expenditure to be made each period can be reliably estimated. The discount rate used to determine the present value is a pre-tax rate that reflects the evaluations that the current market is making of the time value of money and the specific risks of the obligation. The increase in the provision due to the passage of time is recognized as an interest expense.
If it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed against the consolidated statement of profit and loss item where the corresponding expense was recognized.
F-47
(s) Revenue recognition
Revenue from the sale of goods or services is recognized at an amount that reflects the consideration that the Group expects to be entitled to receive in exchange for transferring goods or services to a customer, at the time when the customer obtains control of the goods or services rendered, this means when the customer has the ability to direct the use of the asset. The consideration that is committed in a contract with a client can include fixed amounts, variable amounts, or both. The amount of the consideration may vary due to discounts, reimbursements, incentives, performance bonuses, penalties or other similar items. Contingent consideration is included in the transaction price when it is highly probable that the amount of revenue recognized is not subject to future significant reversals. Revenue is presented net of the value added tax and any other amount or tax, which in substance corresponds to amounts received on behalf of third parties.
(i) Sale of goods
Revenue from the sale of goods is recognized when the Group meets the performance obligation by transferring the assets committed to the customer. An asset is transferred when the customer obtains control of that asset. When evaluating the satisfaction of the performance obligation, the Group considers the following indicators of the transfer of control, which include, but are not limited to the following:
| ● | The Group has a present right to payment for the asset |
| ● | The customer has the legal right to the asset |
| ● | The Group has transferred the physical possession of the asset |
| ● | The customer has the significant risks and rewards of ownership of the asset |
| ● | The customer has accepted the asset |
The nature of the assets that the Group is committed to transfer is mainly: sale of goods, sale of equipment, fragmentation agreements, maintenance and technical support, training, licenses, royalties and know-how and engineering projects among others.
Transaction price is set under the assumption that goods and/or services are transferred in accordance with the contract terms. The committed consideration to customers can include fixed amounts, variable amounts or both. The transaction price must be estimated taking into account the effect of the variable compensation (when applicable) related to returns, chargeback discounts, volume discounts or other incentives, as long as it is highly probable.
The Group participates in the government-managed Medicaid programs in the United States, accounting for Medicaid rebates by recognizing an accrual at the time a sale is recorded for an amount equal to the estimated claims for Medicaid rebates attributable to the sale. Medicaid rebates are estimated based on historical experience, legal interpretations of the applicable laws relating to the Medicaid program and any new information regarding changes in the program regulations and guidelines that would affect rebate amounts. Outstanding Medicaid claims, Medicaid payments and inventory levels are analyzed for each distribution channel and the accrual is adjusted periodically to reflect actual experience. While rebate payments are generally made in the following or subsequent quarter, any adjustments for actual experience have not been material.
As is common practice in the sector, the purchase contracts signed by some customers with the Group entitle these customers to price discounts for a minimum purchase volume, volume discounts or prompt payment discounts. The Group recognizes these discounts as a reduction in sales and receivables in the same month that the corresponding sales are invoiced based on the customer’s actual purchase figures or on past experience when the customer’s actual purchases will not be known until a later date.
F-48
In the USA, the Group enters into agreements with certain customers to establish contract pricing for the products, which these entities purchase from the authorized wholesaler or distributor (collectively, wholesalers) of their choice. Consequently, when the products are purchased from wholesalers by these entities at the contract price which is less than the price charged by the Group to the wholesaler, the Group provides the wholesaler with a credit referred to as a chargeback. The Group records the chargeback accrual at the time of the sale. The allowance for chargebacks is based on Group’s estimate of the wholesaler inventory levels, and the expected sell-through of the products by the wholesalers at the contract price based on historical chargeback experience and other factors. The Group periodically monitors the factors that influence the provision for chargebacks and makes adjustments when it considers that actual chargebacks may differ from established allowances. These adjustments occur in a relatively short period of time. As these chargebacks are typically settled within 30 to 45 days of the sale, adjustments for actual experience have not been material.
The amount at closing related to other discounts is settled during the following year within a period of 90 to 180 days depending on the type of provision.
(ii) Services rendered
Revenues associated with the rendering of service transactions are recognized by reference to the stage of completion at the consolidated balance sheet date when the outcome of the transaction can be estimated reliably. The outcome of a transaction can be estimated reliably when revenues, the stage of completion, the costs incurred and the costs to complete the transaction can be estimated reliably and it is probable that the economic benefits derived from the transaction will flow to the Group.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of costs incurred that are recoverable.
(t) Income tax
The income tax expense or tax income for the year comprises current tax and deferred tax.
Current tax is the amount of income taxes payable or recoverable in respect of the consolidated taxable profit or consolidated tax loss for the year. Current tax assets or liabilities are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and tax laws that have been enacted or substantially enacted at the reporting date.
Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences, whereas deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences, the carryforward of unused tax losses, and the carryforward of unused tax credits. Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base.
Current and deferred tax are recognized as income or an expense and included in profit and loss for the year, except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different year, directly in equity, or from a business combination.
Grifols periodically evaluates the positions taken in the tax declarations regarding the situations in which the applicable tax regulations are subject to interpretation and establishes provisions, if necessary, based on the amounts expected to be paid to the taxation authorities, whose provision is reflected in the tax gain (loss).
(i) Taxable temporary differences
Taxable temporary differences are recognized in all cases except where:
F-49
(ii) Deductible temporary differences
Deductible temporary differences are recognized provided that:
Tax planning opportunities are only considered when assessing the recoverability of deferred tax assets and if the Group intends to use these opportunities or it is probable that they will be utilized.
(iii) Measurement
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the years when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted. The tax consequences that would follow from the manner in which the Group expects to recover or settle the carrying amount of its assets or liabilities are also reflected in the measurement of deferred tax assets and liabilities.
At year end the Group reviews the fair value of deferred tax assets to write down the balance if it is not probable that sufficient taxable income will be available to apply the tax asset.
Deferred tax assets which do not meet the above conditions are not recognized in the consolidated balance sheet. At year end the Group assesses whether deferred tax assets which were previously not recognized now meet the conditions for recognition.
(iv) Offset and classification
The Group only offsets current tax assets and current tax liabilities if it has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
The Group only offsets deferred tax assets and liabilities where it has a legally enforceable right, where these relate to income taxes levied by the same taxation authority and where the taxation authority permits the entity to settle on a net basis, or to realize the asset and settle the liability simultaneously for each of the future years in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Deferred tax assets and liabilities are recognized in the consolidated balance sheet under non-current assets or liabilities, irrespective of the expected date of recovery or settlement.
(u) Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment, assess its performance and, based on which, differentiated financial information is available.
F-50
(v) Classification of assets and liabilities as current and non-current
The Group classifies assets and liabilities in the consolidated balance sheet as current and non-current. Current assets and liabilities are determined as follows:
(w) Environmental issues
The Group takes measures to prevent, reduce or repair the damage caused to the environment by its activities.
Property, plant and equipment acquired by the Group for long-term use to minimize the environmental impact of its activity and protect and improve the environment, including the reduction and elimination of future pollution from the Group’s operations, are recognized as assets applying the measurement, presentation and disclosure criteria described in note 4(g).
(5) Financial Risk Management Policy
(a) | General |
The Group is exposed to the following risks associated with the use of financial instruments:
● Credit risk
● Liquidity risk
● Market risk: includes interest rate risk, currency risk and other price risks.
This note provides information on the Group’s exposure to each of these risks, the Group’s objectives and procedures to measure and mitigate this risk, and the Group’s capital management strategy. More exhaustive quantitative information is disclosed in note 30 to the consolidated financial statements.
The Group’s risk management policies are established to identify and analyze the risks faced by the Group, define appropriate risk limits and controls and to control risks and comply with limits. Risk management policies and procedures are reviewed regularly so that they reflect changes in market conditions and the Group’s activities. The Group’s management procedures and rules are designed to create a strict and constructive control environment in which all employees understand their duties and obligations.
The Group’s Audit Committee supervises how management controls compliance with the Group’s risk management procedures and policies and reviews whether the risk management policy is suitable considering the risks to which the Group is exposed. This committee is assisted by Internal Audit which acts as supervisor. Internal Audit performs regular and ad hoc reviews of the risk management controls and procedures and reports its findings to the Audit Committee.
F-51
Credit risk
Credit risk is the risk to which the Group is exposed in the event that a customer or counterparty to a financial instrument fails to discharge a contractual obligation, and mainly results from trade receivables and the Group’s investments in financial assets.
Trade receivables
The Group does not predict any significant insolvency risks as a result of delays in receiving payment from some European countries due to their current economic situation. The main risk in these countries is that of late payments, which is mitigated through the possibility of claiming interest as foreseen by prevailing legislation. No significant bad debt or late payment issues have been detected for sales to private entities.
The Group recognizes impairment based on its best estimate of the expected losses on trade and other receivables. The main impairment losses recognized are due to specific losses relating to individually identified risks. At year end, these impairment losses are immaterial.
Concentration of credit risk
For trade receivables the Group uses the simplified approach, estimating lifetime expected credit losses, while for all other financial assets the Group uses the general approach for calculating expected credit losses. In both cases, due to the customers’ credit rating, as well as the internal classification systems currently in place for new customers and considering that collection periods are mostly under
In this context, Grifols made an assessment of possible changes in the credit risk through the estimation of the expected credit loss model, to ensure that it is reflecting the global economic impact of COVID-19. This assessment took into consideration available information on past events, the current situation and future economic forecasts having a potential impact on the credit risk. The update of the model mainly entailed the application of an incremental coefficient to the historical default rate to reflect the greater uncertainty regarding future economic scenarios and its impact on the expected credit loss. Based on the available information, it was concluded that there is no significant impact on the credit portfolio impairment as a result of the economic consequences of COVID-19. In addition, at 31 December 2021, no significant changes were observed in the payment profile of the main customers with which Grifols holds outstanding balances that are not subject to receivable sales and purchases with financial institutions.
Details of exposure to credit risk are disclosed in note 30.
Liquidity risk
Liquidity risk is the risk that the Group cannot meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure where possible, that it always has sufficient liquidity to settle its obligations at the maturity date, both in normal conditions and in times of tension, to avoid incurring unacceptable losses or tarnishing the Group’s reputation.
The Group manages liquidity risk on a prudent basis, based on availability of cash and sufficient committed unused long-term credit facilities, enabling the Group to implement its business plans and carry out operations using stable and secure sources of financing.
In October 2021 Grifols completed the issuance of
On 7 May 2020, the Group concluded the upsize of the multi-currency revolving credit facility from US Dollars
F-52
On 15 November 2019 the Group concluded the refinancing process of its senior secured debt for approximately Euros
In September 2018 the Group received an additional non-current loan from the European Investment Bank totaling Euros
At 31 December 2021 the Group has total cash and cash equivalents of Euros
As in previous years, the Group continues with its quarterly program for optimization of working capital, which is mainly based on contracts to sell receivables without recourse.
Market risk
Market risk comprises the risk of changes in market prices, for example, exchange rates, interest rates, or the prices of equity instruments affecting the Group’s revenues or the value of financial instruments it holds. The objective of managing market risk is to manage and control the Group’s exposure to this risk within reasonable parameters at the same time as optimizing returns.
(i) | Currency risk |
The Group operates internationally and is therefore exposed to currency risk when operating with foreign currencies, especially with regard to the US Dollar. Currency risk is associated with future commercial transactions, recognized assets and liabilities, and net investments in foreign operations.
The Group holds significant investments in foreign operations, the net assets of which are exposed to currency risk. The conversion risk affecting net assets of the Group’s foreign operations in US Dollars is mitigated primarily through borrowings in this foreign currency.
The Group’s main exposure to currency risk is with regard to the US Dollar, which is used in a significant percentage of transactions in foreign functional currencies.
As mentioned in note 21, the Group has issued a US Dollars
The Group applies the cost of hedging method. This method enables the Group to exclude the currency basis spread from the designated hedging instrument and, subject to certain requirements, changes in their fair value attributable to this component are recognized in other comprehensive income.
Details of the Group’s exposure to currency risk at 31 December 2021 and 2020 of the most significant financial instruments are shown in note 30.
F-53
(ii) | Interest rate risk |
The Group’s interest rate risks arise from current and non-current borrowings. Borrowings at variable interest rates expose the Group to cash flow interest rate risks. Fixed-rate borrowings expose the Group to fair value interest rate risk.
The objective of the management of interest rate risk is to achieve a balance in the structure of the debt, keeping part of the external resources issued at a fixed rate and covering part of the variable rate debt through hedges.
A significant part of the financing obtained accrues interest at fixed rates. This fixed interest debt amounts to Euros
Senior debt in Euros represents approximately
Details of the Group’s exposure to interest rate risk at 31 December 2021 and 2020 are shown in note 30.
(iii) | Market price risk |
Price risk affecting raw materials is mitigated by the vertical integration of the hemoderivatives business in a highly concentrated sector.
(b) | Capital management |
The directors’ policy is to maintain a solid capital base in order to ensure investor, creditor and market confidence and sustain future business development. The board of directors defines and proposes the level of dividends paid to shareholders.
The directors consider various arguments to calculate capital structure:
| ● | The directors control capital performance using rates of returns on equity (ROE). In 2021 the ROE stood at |
Thousands of Euros |
| ||||
| 2021 |
| 2020 | ||
Profit attributable to the Parent |
| |
| | |
Equity attributable to the Parent |
| |
| | |
ROE |
| | % | | % |
| ● | In accordance with the senior secured debt contract, the Group is subject to compliance with some covenants. At 31 December 2021 and 2020, the Group complies with the covenants in the contract. |
| ● | Consideration of the Group’s credit rating (see note 21 (d)). |
The Parent held Class B treasury stock equivalent to
(6) Segment Reporting
In accordance with IFRS 8 “Operating Segments”, financial information for operating segments is reported in the accompanying Appendix II, which forms an integral part of this note to the consolidated financial statements.
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Group companies are divided into
Assets, liabilities, income and expenses for segments include directly and reliably attributable items. Items which are not attributed to segments by the Group are:
| ● | Balance sheet: equity, cash and cash equivalents and loans and borrowings. |
| ● | Statement of profit and loss: finance result and income tax. |
(a) | Operating segments |
The operating segments defined by the steering committee are as follows:
| ● | Bioscience: including all activities related with products derived from human plasma for therapeutic use. |
| ● | Hospital: comprising all non-biological pharmaceutical products and medical supplies manufactured by Group companies earmarked for hospital pharmacy. Products related with this business which the Group does not manufacture but markets as supplementary to its own products are also included. |
| ● | Diagnostic: including the marketing of diagnostic testing equipment, reagents and other equipment, manufactured by Group or other companies. |
| ● | Bio Supplies: groups together all transactions related to biological products for non-therapeutic use, Kedrion production agreements, and third-party plasma sales channeled through Haema and Biotest. |
| ● | Others: including the rendering of manufacturing services to third party companies and other research activities. |
Details of sales by groups of products for 2021, 2020 and 2019 are as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Bioscience |
|
|
| |||
Haemoderivatives |
| |
| |
| |
Diagnostic |
| |||||
Transfusional medicine |
| |
| |
| |
Other diagnostic |
| |
| |
| |
Hospital |
|
|
| |||
Fluid therapy and nutrition |
| |
| |
| |
Hospital supplies |
| |
| |
| |
Bio supplies | | | | |||
Others |
| |
| | | |
Total |
| |
| | | |
F-55
At 31 December 2021,
The Group has concluded that hemoderivative products are sufficiently alike to be considered as a whole for the following reasons:
● All these products are human plasma derivatives and are manufactured in a similar way.
● The customers and methods used to distribute these products are similar.
● All these products are subject to the same regulations regarding production and the same regulatory environment.
(b)Geographical information
Geographical information is grouped into
● United States of America and Canada
● Spain
● Rest of the European Union
● Rest of the world
The definition of these
The financial information reported for geographical areas is based on sales to third parties in these markets as well as the location of assets.
(c)Main customers
In 2021,
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(7) Goodwill
Details of and movement in this caption of the consolidated balance sheet at 31 December 2021 were as follows:
Thousands of Euros | ||||||||||||
|
| Balance at |
| Business |
| Translation |
| Balance at | ||||
Segment | 31/12/2020 | Combination | Transfers | differences | 31/12/2021 | |||||||
Net value |
|
|
|
| ||||||||
Grifols UK.Ltd. (UK) |
| Bioscience |
| | — | — | | | ||||
Grifols Italia.S.p.A. (Italy) |
| Bioscience |
| | — | — | — | | ||||
Biomat USA, Inc.(USA) |
| Bioscience |
| | | | | | ||||
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland) |
| Diagnostic |
| | — | — | | | ||||
Grifols Therapeutics, Inc. (USA) |
| Bioscience |
| | — | — | | | ||||
Araclon Biotech, S.L. (Spain) |
| Diagnostic |
| | ( | — | — | — | ||||
Progenika Biopharma, S.A. (Spain) |
| Diagnostic |
| | — | — | — | | ||||
Grifols Diagnostic (Novartis Hologic) (USA, Spain and Hong Kong) |
| Diagnostic |
| | — | — | | | ||||
Kiro Grifols S.L. (Spain) | Hospital | | — | — | — | | ||||||
Goetech LLC (USA) | Hospital | | — | — | | | ||||||
Haema AG (Germany) | Bioscience | | — | — | — | | ||||||
BPC Plasma, Inc. (formerly Biotest Pharma Corp; USA) | Bioscience | | — | — | | | ||||||
Interstate Blood Bank, Inc. (USA) | Bioscience | | — | — | | | ||||||
Plasmavita Healthcare GmbH (Alemania) | Bioscience | | — | — | — | | ||||||
Alkahest, Inc (EEUU) | Others | | — | — | | | ||||||
Grifols Canada Therapeutics, Inc (formerly Green Cross Biotherapeutics, Inc.) (Canada) | Bioscience | | | — | | | ||||||
GCAM, Inc (formerly Green Cross America Inc.) (USA) | Bioscience | | — | ( | | — | ||||||
GigaGen, Inc (ver nota 3) | Others | | — | | | |||||||
|
|
| | | | | | |||||
F-57
Details of and movement in this caption of the consolidated balance sheet at 31 December 2020 are as follows:
Thousands of Euros | ||||||||||||
|
| Balance at |
| Business |
| Translation |
| Balance at | ||||
Segment | 31/12/2019 | Combination |
| Disposals | differences | 31/12/2020 | ||||||
Net value |
|
|
|
| ||||||||
Grifols UK.Ltd. (UK) |
| Bioscience |
| | — | — | ( | | ||||
Grifols Italia.S.p.A. (Italy) |
| Bioscience |
| | — | — | — | | ||||
Biomat USA, Inc.(USA) |
| Bioscience |
| | — | — | ( | | ||||
Grifols Australia Pty Ltd. (Australia) / Medion Diagnostics AG (Switzerland) |
| Diagnostic |
| | — | — | | | ||||
Grifols Therapeutics, Inc. (USA) |
| Bioscience |
| | — | — | ( | | ||||
Araclon Biotech, S.L. (Spain) |
| Diagnostic |
| | — | — | — | | ||||
Progenika Biopharma, S.A. (Spain) |
| Diagnostic |
| | — | — | — | | ||||
Grifols Diagnostic (Novartis Hologic) (USA, Spain and Hong Kong) |
| Diagnostic |
| | — | ( | ( | | ||||
Kiro Grifols S.L. (Spain) | Hospital | | — | — | — | | ||||||
Goetech LLC (USA) | Hospital | | — | — | ( | | ||||||
Haema AG (Germany) | Bioscience | | — | — | — | | ||||||
BPC Plasma, Inc. (formerly Biotest Pharma Corp; USA) | Bioscience | | — | — | ( | | ||||||
Interstate Blood Bank, Inc. (USA) | Bioscience | | — | — | ( | | ||||||
Plasmavita Healthcare GmbH (Germany) |
| Bioscience |
| — | | — | — | | ||||
Alkahest, Inc (USA) | Others | — | | — | ( | | ||||||
Green Cross Biotherapeutics, Inc. (Canada) | Bioscience | — | | — | | | ||||||
Green Cross America Inc.(USA) | Bioscience | — | | — | ( | | ||||||
| | ( | ( | | ||||||||
(See note 3) | ||||||||||||
Impairment testing:
As a result of the acquisition of Talecris in 2011, and for impairment testing purposes, the Group combines the CGUs allocated to the Bioscience segment, grouping them together at segment level, because substantial synergies were expected to arise on the acquisition of Talecris, and due to the vertical integration of the business and the lack of an independent organized market for the products. Because the synergies benefit the Bioscience segment globally they cannot be allocated to individual CGUs. The Bioscience segment represents the lowest level to which goodwill is allocated and is subject to control by Group management for internal control purposes.
As a result of the acquisition of Novartis’ Diagnostic business unit in 2014, the Group decided to combine Araclon, Progenika, Australia and Hologic’s share of NAT donor screening unit acquisition into a single CGU for the Diagnostic business as the acquisition is supporting not only the vertically integration business but also cross-selling opportunities. In addition, for management purposes, the Group’s management is focused on the business more than geographical areas or individual companies.
Due to the acquisition of an additional
The CGUs established by management are:
● Bioscience
● Diagnostic
F-58
● Hospital
The COVID-19 pandemic has caused unprecedented turmoil in the global economy. Our products from Bioscience CGU are considered lifesaving and have been identified as a strategic industry for most governments and therefore are prevented from being suspended. However, at the preparation date of the financial statements, Grifols has estimated a temporary impact derived from COVID-19 (see note 34).
The recoverable amount of the Bioscience CGU and Hospital CGU has been calculated based on its value in use calculated as the present value of the five-year future cash flows discounted at a discount rate considering the related inherent risk.
The recoverable amount of the Diagnostic CGU has been calculated based on its fair value less costs of disposal calculated as the present value of the five-year future cash flows discounted at a discount rate considering the related inherent risk.
Management has determined the gross margin based on past experience and the current situation derived from the COVID-19 pandemic, investments in progress which would imply significant growth in production capacity and its forecast international market development.
Unlike the previous year, the recoverable amount calculations of the CGUs do not use expected cash flow projections based on different scenarios considered in respect of COVID-19 impact since full recovery is expected in 2022.
Cash flows estimated as of the year in which stable growth in the CGU has been reached are extrapolated using the estimated growth rates indicated below. Perpetual growth rates are consistent with the forecasts included in industry reports.
The key assumptions used in calculating impairment testing of the CGUs for 2020 were as follows:
| Perpetual Growth rate |
| Pre-tax discount rate |
| |
Bioscience |
| | % | | % |
Diagnostic |
| | % | | % |
Hospital | | % | | % |
The key assumptions used in calculating impairment testing of the CGUs for 2021 have been as follows:
| Perpetual Growth rate |
| Pre-tax discount rate |
| |
Bioscience |
| | % | | % |
Diagnostic |
| | % | | % |
Hospital | | % | | % |
The discount rate used reflects specific risks relating to the CGUs and the countries in which they operate. The main assumptions used for determining the discount rate are as follows:
● Risk free rate: normalized government bonds at
● Market risk premium: premium based on market research
● Unlevered beta: average market beta
● Debt to equity ratio: average market ratio
F-59
The reasonably possible changes considered for the Bioscience, Diagnostic and Hospital CGUs are a variation in the discount rate, as well as in the estimated perpetual growth rate, as follows:
| Perpetual Growth rate |
| Pre-tax discount rate | |
Bioscience |
| +/- |
| +/- |
Diagnostic |
| +/- |
| +/- |
Hospital |
| +/- |
| +/- |
The reasonably possible changes in key assumptions considered by management in the calculation of the CGU’s recoverable amount would not cause the carrying amount to exceed its recoverable amount.
At 31 December 2021 Grifols’ stock market capitalization totals Euros
(8) Other Intangible Assets
Details of other intangible assets and movement during the years ended 31 December 2021 and 2020 are included in Appendix III, which forms an integral part of these notes to the consolidated financial statements.
Intangible assets acquired from Talecris mainly include currently marketed products. Identifiable intangible assets correspond to Gamunex and have been recognized at fair value at the acquisition date of Talecris and classified as currently marketed products. Intangible assets recognized comprise the rights on the Gamunex product, its commercialization and distribution license, trademark, as well as relations with hospitals. Each of these components is closely linked and fully complementary, are subject to similar risks and have a similar regulatory approval process.
Intangible assets acquired from Progenika mainly include currently marketed products. Identifiable intangible assets correspond to blood, immunology and cardiovascular genotyping. These assets have been recognized at fair value at the acquisition date of Progenika and classified as currently marketed products.
The cost and accumulated amortization of currently marketed products acquired from Talecris and Progenika at 31 December 2020 was as follows:
Thousands of Euros | ||||||||
| Balance at |
|
| Translation |
| Balance at | ||
31/12/2019 | Additions | differences | 31/12/2020 | |||||
Cost of currently marketed products - Gamunex |
| | — |
| ( | | ||
Cost of currently marketed products - Progenika |
| |
| — |
| — |
| |
Accumulated amortisation of currently marketed products - Gamunex |
| ( |
| ( |
| |
| ( |
Accumulated amortisation of currently marketed products - Progenika |
| ( |
| ( |
| |
| ( |
Carrying amount of currently marketed products |
| |
| ( |
| ( |
| |
F-60
The cost and accumulated amortization of currently marketed products acquired from Talecris, Progenika and Gigagen at 31 December 2021 is as follows:
Thousands of Euros | ||||||||
| Balance at |
|
| Translation |
| Balance at | ||
31/12/2020 | Additions | differences | 31/12/2021 | |||||
Cost of currently marketed products - Gamunex |
| | — |
| | | ||
Cost of currently marketed products - Progenika |
| |
| — |
| — |
| |
Accumulated amortisation of currently marketed products - Gamunex |
| ( |
| ( | ( |
| ( | |
Accumulated amortisation of currently marketed products - Progenika |
| ( |
| ( |
| — |
| ( |
Carrying amount of currently marketed products |
| |
| ( |
| |
| |
The estimated useful life of the currently marketed products acquired from Talecris is considered limited, has been estimated at
At 31 December 2021 the residual useful life of currently marketed products is
The estimated useful life of the currently marketed products acquired from Progenika is considered limited, has been estimated at
At 31 December 2021 the residual useful life of currently marketed products acquired from Progenika is
(a) | Self — constructed intangible assets |
At 31 December 2021 the Group has recognized Euros
(b) | Purchase commitments |
At 31 December 2021 the Group has intangible asset purchase commitments amounting to Euros
(c) | Intangible assets with indefinite useful lives and other intangibles in progress |
At 31 December 2021 the Group recognizes plasma center licenses with indefinite useful lives under intangible assets for a carrying amount of Euros
The Group has also an amount of Euros
In 2019, Grifols reached an agreement with the US biotech company Rigel Pharmaceuticals to exclusively commercialize fostamatinib disodium hexahydrate in all potential future indications in Europe and Turkey.
Under terms of the agreement, Grifols made an initial payment of US Dollars
F-61
This asset did not begin to be commercialized and amortized until 2020, as soon as was available for use, that is, after the final approval of the regulator.
(d) | Results on disposal of intangible assets |
The total losses on disposals and sale of intangible assets amounts to Euros
(e) | Impairment testing |
Indefinite-lived intangible assets have been allocated to the cash-generating unit (CGU) of the Bioscience segment. These assets have been tested for impairment together with goodwill (see note 7).
Impairment testing has been analyzed for each of the intangible assets in progress by calculating its recoverable amount based on their fair value.
(9) Leases
Details of leases in the consolidated balance sheet at 31 December 2021 and 2020 are as follows:
Right-of-use assets |
| Thousands of Euros | ||
| 31/12/2021 |
| 31/12/2020 | |
Land and Buildings |
| | | |
Machinery |
| | | |
Computer equipment |
| | | |
Vehicles |
| | | |
| | | ||
Lease liabilities |
| Thousands of Euros | ||
| 31/12/2021 | 31/12/2020 | ||
Non-current |
| | | |
Current |
| | | |
| | | ||
Details by maturity of lease liabilities are shown in the “Liquidity risk” section in note 30.
At 31 December 2021, the Group has recognized an amount of Euros
F-62
At 31 December 2021 and 2020, the amounts recognized in the consolidated statement of profit and loss related to lease agreements are:
Right-of-use depreciation |
| Thousands of Euros | ||
| 31/12/2021 |
| 31/12/2020 | |
Buildings |
| | | |
Machinery |
| | | |
Computer equipment |
| | | |
Vehicles |
| | | |
| | | ||
| Thousands of Euros | |||
| 31/12/2021 |
| 31/12/2020 | |
Finance lease expenses (note 27) |
| | | |
| | | ||
| Thousands of Euros | |||
| 31/12/2021 |
| 31/12/2020 | |
Expenses related to short-term contracts |
| | | |
Expenses related to low-value contracts | | | ||
Other operating lease expenses |
| | | |
| | | ||
At 31 December 2021, the Group has paid a total of Euros
The total amount recognized in the balance sheet corresponds to lease contracts in which the Group is the lessee.
(10) Property, Plant and Equipment
Details of property, plant and equipment and movement in the consolidated balance sheet at 31 December 2021 and 2020 are included in Appendix V, which forms an integral part of this note to the consolidated financial statements.
Property, plant and development under construction at 31 December 2021 and 2020 mainly comprise investments made to extend the companies’ equipment and to increase their productive capacity.
In 2021, the Group has capitalized interests for a total amount of Euros
a) | Insurance |
Group policy is to contract sufficient insurance coverage for the risk of damage to property, plant and equipment. At 31 December 2021 the Group has a combined insurance policy for all Group companies, which more than adequately covers the carrying amount of all the Group’s assets.
b) | Losses on disposal of property, plant and equipment |
Total losses incurred on disposals of property, plant and equipment for 2021 amount to Euros
F-63
c) | Self - constructed property, plant and equipment |
At 31 December 2021 the Group has recognized Euros
d) | Purchase commitments |
At 31 December 2021 the Group has property, plant and equipment purchase commitments amounting to Euros
e) | Impairment testing |
As a result of the discontinuation of the Blood Collection Systems activity, an impairment for some the tangible assets allocated to this business activity has been recognized for a total amount of Euros
Impairment testing for the tangible assets has been analyzed by calculating its recoverable amount based on their fair value.
(11) Equity-Accounted Investees
Details of this caption in the consolidated balance sheet at 31 December 2021 and 2020 are as follows:
|
| Thousands of Euros |
|
| Thousands of Euros | |||
% ownership | 31/12/2021 | % ownership | 31/12/2020 | |||||
Access Biologicals LLC |
| | % | |
| | % | |
Shanghai RAAS Blood Products Co., Ltd. |
| | % | |
| | % | |
Grifols Egypt Plasma Derivatives |
| | % | |
| | % | — |
Total equity accounted investees with similar activity to that of the Group |
| |
| | ||||
Albajuna Therapeutics, S.L |
| | % | |
| | % | |
GigaGen, Inc. |
| | % | — |
| | % | |
Mecwins, S.A. | | % | | | % | | ||
Total of the rest of equity accounted investees | | | ||||||
Total equity-accounted investees | | |
Movement in the investments in equity-accounted investees for the year ended 31 December 2019 is as follows:
Thousands of Euros | ||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||
Equity accounted investees with similar activity to that of the Group | Rest of equity accounted investees | |||||||||||||||||||||||||
Shanghai | ||||||||||||||||||||||||||
Access | RAAS Blood | Albajuna | ||||||||||||||||||||||||
Biologicals | Plasmavita | Products Co., | Therapeutics, | Mecwins, | Medcom | |||||||||||||||||||||
| LLC |
| IBBI Group |
| Healthcare |
| Ltd. |
| Total |
| Alkahest, Inc. |
| S.L |
| Singulex, Inc. |
| GigaGen, Inc. |
| S.A. |
| Advance, S.A |
| Total |
| Total | |
Balance at 1 January |
|
|
|
| — |
| |
| |
| |
| |
| |
| |
| — |
| |
| | |||
|
| |||||||||||||||||||||||||
Acquisitions |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| |
| |
| |
Transfers |
| — |
| ( |
| — |
| — |
| ( |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
Share of profit / (losses) |
|
| |
| |
| — |
| |
| ( |
| |
| — |
| ( |
| ( |
| ( |
| ( |
| ( | |
Share of other comprehensive income / translation differences |
| |
| |
| — |
| — |
| |
| |
| ( |
| |
| |
| — |
| ( |
| |
| |
Impairment losses |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( |
| ( |
Collected dividends |
| ( |
| ( |
| — |
| — |
| ( |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
Balance at 31 December |
| |
| — |
| |
| — |
| |
| |
| |
| — |
| |
| |
| |
| |
| |
F-64
Movement in the investments in equity-accounted investees for the year ended 31 December 2020 is as follows:
Thousands of Euros | ||||||||||||||||||||||
2020 | ||||||||||||||||||||||
Equity accounted investees with similar activity to that of the Group | Rest of equity accounted investees | |||||||||||||||||||||
Shanghai | ||||||||||||||||||||||
Access | RAAS Blood | Albajuna | ||||||||||||||||||||
Biologicals | Plasmavita | Products Co., | Therapeutics, | Medcom | ||||||||||||||||||
| LLC |
| Healthcare |
| Ltd. |
| Total |
| Alkahest, Inc. |
| S.L |
| GigaGen, Inc. |
| Mecwins, S.A. |
| Advance, S.A |
| Total |
| Total | |
Balance at 1 January | | | — | | | | | | | | | |||||||||||
|
| |||||||||||||||||||||
Acquisitions |
| — |
| — |
| |
| |
| — |
| — |
| — |
| — |
| — |
| — |
| |
Transfers |
| — |
| ( |
| — |
| ( |
| ( |
| — |
| — |
| — |
| — |
| ( |
| ( |
Share of profit / (losses) |
| |
| |
| |
| |
| |
| ( |
| ( |
| |
| — |
| |
| |
Share of other comprehensive income / translation differences |
| ( |
| — |
| ( |
| ( |
| ( |
| |
| ( |
| — |
| — |
| ( |
| ( |
Impairment losses |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
| ( |
Collected dividends |
| ( |
| — |
| ( |
| ( |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
Balance at 31 December |
| |
| — |
| |
| |
| — |
| |
| |
| |
| — |
| |
| |
Movement in the investments in equity-accounted investees for the year ended 31 December 2021 is as follows:
| Thousands of Euros | |||||||||||||||||
2021 | ||||||||||||||||||
Equity accounted investees with similar activity to that of the Group | Rest of equity accounted investees | |||||||||||||||||
Shanghai RAAS | Grifols Egypt | Albajuna | ||||||||||||||||
Access |
| Blood Products |
| Plasma | Therapeutics, | |||||||||||||
| Biologicals LLC |
| Co., Ltd. | Derivatives |
| Total |
| S.L |
| GigaGen, Inc. |
| Mecwins, S.A. |
| Total |
| Total | ||
Balance at 1 January |
| |
| |
| — |
| |
| |
| |
| |
| |
| |
Acquisitions |
| — |
| — |
| |
| |
| — |
| — |
| |
| |
| |
Transfers |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( |
| ( |
Share of profit / (losses) |
| |
| |
| ( |
| |
| ( |
| |
| ( |
| |
| |
Share of other comprehensive income / translation differences |
| |
| |
| |
| |
| ( |
| |
| — |
| |
| |
Collected dividends |
| ( |
| ( |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( |
Balance at 31 December |
| |
| |
| |
| |
| |
| — |
| |
| |
| |
The main movements of the equity-accounted investees with similar activity to that of the Group are explained below:
Grifols Egypt Plasma Derivatives (GEPD)
On 29 July 2021, a cooperation agreement was signed with the National Service Projects Organization (NSPO) to help build a platform to bring self-sufficiency in plasma-derived medicines to Egypt. The Company made a first contribution of US Dollars
Shanghai RAAS Blood Products Co. Ltd.
In March 2019, Grifols entered into a share exchange agreement with Shanghai RAAS Blood Products Co. Ltd. (hereinafter SRAAS), through which Grifols would deliver
The exchange ratio determined on that date, was estimated using different valuation methods, among others the stock price for SRAAS and discounted cash flows and market multiples for GDS.
At 30 September 2019, Grifols obtained the authorization from the US agency, “Committee on Foreign Investment in the United States” (CFIUS) and on 13 November 2019, Shanghai RAAS Blood Products, Co. Ltd. obtained the authorization from the Chinese Securities Regulatory Commission (CRSC).
At 31 December 2019, Grifols delivered
F-65
As a consequence, at 31 December 2019, SRAAS was the minority shareholder owner of
The delivery of GDS shares had no impact on the consolidated results of the Grifols Group for 2019 in accordance with IFRS 10 – Consolidated Financial Statements, since it is considered a transaction with non-controlling interest where Grifols retained control over GDS. The impact in the consolidated balance sheet at 31 December 2019 resulted in an increase in the following items: Other current financial assets amounting to Euros
On 30 March 2020, the share exchange agreement was closed and Grifols received SRAAS shares corresponding to
Consequently, the consolidated balance sheet at 31 December 2020, did not longer show any financial asset related to the contractual right, but the interest in SRAAS was recorded as an investment in an associate company because the Group exercises significant influence in accordance with the criteria established in IAS 28 – Investment in Associates and Joint Ventures. SRAAS’ equity-accounted investment was recognized at the value of the shares at the closing date of the transaction. The difference between the contractual right value recognized at 31 December 2019 and SRAAS quoted value at 30 March 2020 was Euros
The impact on the consolidated statement of profit and loss related to the equity method result was included in the Operating Result under “Profit/(loss) of equity accounted investees with similar activity to that of the Group”, since SRAAS is a company dedicated to the plasma product sector.
The transaction costs were recognized as part of the investment value and totaled Euros
At 31 December 2021, the quoted value of SRAAS shares was CNY
Plasmavita Healthcare GmbH
In 2017, Grifols established PLASMAVITA GmbH, a joint venture between Grifols (
On 14 April 2020, Grifols made a contribution of Euros
Access Biologicals LLC.
On 12 January 2017, the group announced the acquisition of
The principal business activity of Access Biologicals is the collection and manufacturing of an extensive portfolio of biological products. Combined with closed-loop material sourcing, it provides critical support for various markets such as in-vitro diagnostic manufacturing, biopharmaceutical, cell culture and diagnostic research development.
F-66
The main movements for the rest of the equity-accounted investees are explained below:
Alkahest, Inc.
On 2 September 2020, Grifols signed an agreement to acquire all the shares of Alkahest Inc. (“Alkahest”) for a total amount of Euros
Likewise, as a result of agreements between shareholders, Grifols obtained control of Alkahest on 2 September 2020. Until that date, the previous
As from this date, Alkahest was incorporated into the Group’s consolidation perimeter by the full consolidation method.
Medcom Advance, S.A.
In February 2019, the Group completed the acquisition of
Mecwins, S.A.
On 22 October 2018 Grifols allocated Euros
Mecwins is a spin-off of the Institute of Micro and Nanotechnology of the Center for Scientific Research (CSIC), specialized in the development of innovative nanotechnological analysis tools for the diagnosis and prognosis of diseases.
Mecwins has developed ultrasensitive optical reading immunoassay technology from nanosensors for the detection of protein biomarkers in blood. This technology has potential applications in fields such as oncology, cardiovascular and infectious diseases.
The injection of capital, in which CRB Inverbio also participated with an additional Euros
GigaGen Inc.
On 5 July 2017, Grifols through its
GIANT and GigaGen entered into a Research and Collaboration Agreement whereby in exchange of a collaboration fee of US Dollars
On 8 March 2021, Grifols, through its wholly owned subsidiary Grifols Innovation and New Technologies Limited (“GIANT”), reached an agreement to acquire all of the shares of Gigagen, Inc. for a total amount of US Dollars
F-67
Singulex, Inc.
On 17 May 2016 Grifols subscribed and paid a capital increase for an amount of US Dollars
During the second half of 2019, Singulex announced the cease of all its operations, after entering bankruptcy. Therefore, the Group impaired both the investment made and loans granted by Grifols to this company.
Interstate Blood Bank, Inc. (IBBI)
On 11 May 2016 Grifols acquired a
In April 2019, the Group exercised the call option and completed the acquisition of the remaining shares of the IBBI group companies (see note 3).
The last financial statements available of the main equity-accounted investments of Grifols are the following:
31/12/2021 | 31/12/2020 | |||||||
Thousands of Euros | Thousands of Euros | |||||||
Access | Access | |||||||
SRAAS | Biologicals | SRAAS |
| Biologicals | ||||
Non-current assets |
|
|
|
| ||||
Current assets |
| |
| |
| | | |
Cash and cash equivalents |
| |
| |
| | | |
Non-current liabilities |
| ( |
| ( |
| ( | ( | |
Non-current financial liabilities |
| ( |
| — |
| — | — | |
Current liabilities |
| ( |
| ( |
| ( | ( | |
Current financial liabilities |
| — |
| ( |
| ( | ( | |
Net assets |
| |
| |
| | | |
31/12/2021 | 31/12/2020 | |||||||
Thousands of Euros | Thousands of Euros | |||||||
Access | Access | |||||||
| SRAAS |
| Biologicals |
| SRAAS |
| Biologicals | |
Net revenue |
| | ||||||
Profit for the year |
|
|
| | ||||
F-68
(12) Financial Assets
Details of non-current financial assets on the consolidated balance sheet at 31 December 2021 and 2020 are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Financial investments in listed shares |
| |
| |
Non-current derivatives (see note 30) | | | ||
Total Non-current financial assets measured at fair value | | | ||
Non-current guarantee deposits |
| |
| |
Other non-current financial assets (a) |
| |
| |
Non-current loans to related parties (see note 31) | | | ||
Total Non-current financial assets measured at amortized cost |
| |
| |
Details of current financial assets on the consolidated balance sheet at 31 December 2021 and 2020 are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Current derivatives (see note 30) | | | ||
Total Non-current financial assets measured at fair value |
| |
| |
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Deposits and guarantees |
| |
| |
Other current financial assets (a) | | | ||
Current loans to third parties |
| |
| |
Total other current financial assets measured at amortized cost |
| |
| |
(a) | Other non-current and current financial assets |
Details of other non-current and current financial assets are as follows:
Thousands of Euros | ||||
31/12/2021 | 31/12/2020 | |||
Other financial assets with related parties (see note 31) |
| |
| |
Other financial assets with third parties |
| |
| |
Total other non-current and current financial assets |
| |
| |
“Other financial assets with third parties” is mainly composed of the cash received from the new bond issue, which will be used to acquire the existing share capital of Tiancheng (Germany) Pharmaceutical Holdings, owner of approximately
Additionally, Grifols closed a collaboration agreement with the U.S. firm ImmunoTek Bio Centers, LLC, specialized in the opening and construction of plasma centers, to open
F-69
(13) Inventories
Details of inventories at 31 December 2021 and 2020 are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Goods for resale |
| |
| |
Raw materials and supplies |
| |
| |
Work in progress and semi-finished goods |
| |
| |
Finished goods |
| |
| |
| |
| | |
Movement in the inventory provision was as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Balance at 1 January |
| |
| |
| |
Net charge for the year |
| |
| |
| |
Cancellations for the year |
| ( |
| ( |
| ( |
Translation differences |
| |
| ( |
| |
Balance at 31 December |
| |
| |
| |
As a result of the discontinuation of the Blood Collection Systems activity, an impairment of some inventory has been recognized for a total amount of Euros
(14) Trade and Other Receivables
Details at 31 December 2021 and 2020 are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Trade receivables |
| |
| |
Receivables from associates (note 31) |
| |
| |
Impairment losses (note 30) |
| ( |
| ( |
Trade receivables |
| |
| |
Other receivables (note 30) |
| |
| |
Personnel |
| |
| |
Advance payments (note 30) |
| |
| |
Taxation authorities, VAT recoverable |
| |
| |
Other public entities |
| |
| |
Other receivables |
| |
| |
Current income tax assets |
| |
| |
Total trade and other receivables |
| |
| |
Other receivables
During 2021, 2020 and 2019 the Grifols Group has sold receivables without recourse to some financial institutions (factors), to which the risks and benefits inherent to the ownership of the assigned credits are substantially transferred. Also, the control over the assigned credits, understood as the factor’s ability to sell them to an unrelated third party, unilaterally and without restrictions, has been transferred to the factor.
F-70
The main conditions of these contracts include the advanced collection of the assigned credits that vary between
These contracts have been considered as without recourse factoring and the amount advanced by the factors has been derecognized from the balance sheet
Likewise, in financial years 2021 and 2020, some receivables assignment contracts were signed with a financial institution, in which Grifols retains the risks and benefits inherent to the ownership of the assigned credits. These contracts have been considered as with resource and the assigned amount remains in the consolidated balance sheet at 31 December 2021 and a short-term debt has been recognized for an amount equal to the consideration received from the factor for the assignment. The amount recognized is Euros
Total receivables without recourse sold to financial institutions through the aforementioned contracts in 2021 amount to Euros
The financial cost of credit rights sold for the Group totals approximately Euros
Details of balances with related parties are shown in note 31.
(15) Cash and Cash Equivalents
Details of this caption of the consolidated balance sheet at 31 December 2021 and 2020 are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Current deposits |
| — |
| |
Cash in hand and at banks |
| |
| |
Total cash and cash equivalents recognized in the balance sheet |
| |
| |
Restricted cash | | — | ||
Total cash and cash equivalents recognized in the statement of cash flows | | | ||
As mentioned in note 21, the Group issued a bond in
(16) Equity
Details of consolidated equity and movement are shown in the consolidated statement of changes in equity.
(a) | Share capital |
At 31 December 2021 and 2020, the Company’s share capital amounts to Euros
| ● | Class A shares: |
| ● | Class B shares: |
F-71
The main characteristics of the Class B shares are as follows:
| ● | Each Class B share entitles its holder to receive a minimum annual preferred dividend out of the distributable profits at the end of each year equal to Euros |
| ● | Each Class B share is entitled to receive, in addition to the above-mentioned preferred dividend, the same dividends and other distributions as for one Grifols ordinary share. |
| ● | Each Class B share entitles the holder to its redemption under certain circumstances, if a takeover bid for all or part of the shares in the Company has been made, except if holders of Class B shares have been entitled to participate in the bid on the same terms as holders of Class A shares. The redemption terms and conditions reflected in the Company’s by-laws limit the amount that may be redeemed, requiring that sufficient distributable reserves be available, and limit the percentage of shares to be redeemed in line with the ordinary shares to which the bid is addressed. |
| ● | In the event the Company were to be wound up and liquidated, each Class B share entitles the holder to receive, before any amounts are paid to holders of ordinary shares, an amount equal to the sum of (i) the par value of the Class B share, and (ii) the share premium paid for the Class B share when it was subscribed. In addition to the Class B liquidation preference amount, each holder is entitled to receive the same liquidation amount that is paid for each ordinary share. |
These shares are freely transferable.
Since 23 July 2012 the ADSs (American Depositary Shares) representing Grifols’ Class B shares (non-voting shares) have had an exchange ratio of 1:1 in relation to Class B shares, ie.
The Company’s knowledge of its shareholders is based on information provided voluntarily or in compliance with applicable legislation. According to the information available to the Company, there are
At 31 December 2021 and 2020, the number of outstanding shares is equal to the total number of Company shares, less treasury stock.
Movement in outstanding shares during 2020 is as follows:
| Class A shares |
| Class B shares | |
Balance at 1 January 2020 |
| |
| |
(Acquisition) / disposal of treasury stock (note 16 (d)) |
| — |
| |
Balance at 31 December 2020 |
| |
| |
Movement in outstanding shares during 2021 is as follows:
| Class A shares |
| Class B shares | |
Balance at 1 January 2021 |
| |
| |
(Acquisition) / disposal of treasury stock (note 16 (d)) |
| ( |
| ( |
Balance at 31 December 2021 |
| |
| |
F-72
(b) | Share premium |
Movement in the share premium is described in the consolidated statement of changes in equity, which forms an integral part of this note to the consolidated financial statements.
(c) | Reserves |
The drawdown of accumulated gains is subject to legislation applicable to each of the Group companies. At 31 December 2021, Euros
Spanish companies are required to transfer at least
In June 2019, Kiro Grifols, S.L. increased capital by an amount of Euro
In July 2019, the Group acquired
In April 2019 and December 2019, the Group subscribed two share capital increases in Araclon Biotech, S.L of Euros
At 31 December 2019, Grifols delivered
On 30 March 2020, the share exchange agreement was closed and Grifols received SRAAS shares corresponding to
On 14 April 2020, Grifols made a contribution of Euros
On 2 September 2020, Grifols signed an agreement to acquire all the shares of Alkahest Inc. (“Alkahest”) for a total amount of Euros
In December 2020 the Group subscribed a share capital increase in VCN Biosciences, S.L. of Euros
In December 2020, Kiro Grifols, S.L. increased capital by an amount of Euros
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In April 2021 Grifols Diagnostic Solutions, Inc paid to Shanghai RAAS Blood Produtcs Co.Ltd. a dividend for an amount of Euros
In June 2021, the Group acquired
In October 2021 the Group subscribed a share capital increase in Araclon Biotech, S.L of Euros
At 31 December 2021 and 2020 reserves include the IFRS-IASB first-time adoption revaluation reserves and legal reserve of certain Group companies.
Legal reserve
Companies in Spain are obliged to transfer
At 31 December 2021 and 2020 the legal reserve of the Parent amounts to Euros
Distribution of the legal reserves of Spanish companies is subject to the same restrictions as those of the Company and at 31 December 2021 and 2020 the balance of the legal reserve of other Spanish companies amounts to Euros
Other foreign Group companies have a legal reserve amounting to Euros
Hedging reserve
The hedging reserve includes the cash flow hedge reserve and the costs of hedging reserve, see note 4(l) for details. The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are designated and qualify as cash flow hedges, as described in note 30.
The group defers the changes in the forward element of forward contracts and the time value of option contracts in the costs of hedging reserve.
(d) | Treasury stock |
Movement in Class A treasury stock during the year ended 31 December 2021 is as follows:
| No. of Class A |
| ||
shares | Thousands of Euros | |||
Balance at 1 January 2021 |
| — |
| — |
Disposal Class A shares |
| — |
| — |
Acquisition Class A shares |
| |
| |
Balance at 31 December 2021 |
| |
| |
At the meeting held on 11 March 2021, the Board of Directors agreed to implement a program to repurchase Grifols’ treasury stock (the Buyback Program), in accordance with the authorization granted by Grifols’ shareholders at an ordinary general meeting held on 9 October 2020, under point twelve of the agenda. The Buyback Program was created with the aim of using
F-74
Grifols’ treasury stock (Class A and Class B) as consideration in certain future acquisitions that Grifols may make (as the company has done on previous occasions).
This Buyback Program began on 12 March 2021 and has been in force until 14 June 2021 (both dates included).
Grifols entrusted the execution of the Buyback Program to an independent bank, and therefore Grifols has not exercised any control over the bank’s decisions in this regard.
At 31 December 2020 the Company did not have any Class A treasury stock.
Movement in Class B treasury stock during 2020 was as follows:
| No. of Class B |
| ||
shares | Thousands of Euros | |||
Balance at 1 January 2020 |
| |
| |
Disposal Class B shares |
| ( |
| ( |
Balance at 31 December 2020 |
| |
| |
Movement in Class B treasury stock during 2021 is as follows:
| No. of Class B |
| ||
shares | Thousands of Euros | |||
Balance at 1 January 2021 |
| |
| |
Disposal Class B shares |
| ( |
| ( |
Acquisition Class B shares | | | ||
Balance at 31 December 2021 |
| |
| |
In March 2021, the Group delivered
In March 2020 the Group delivered
The Parent held Class A and B treasury stock equivalent to
(e) | Distribution of profit |
The profits of Grifols, S.A. and subsidiaries will be distributed as agreed by respective shareholders at their general meetings.
The proposed distribution of profit of the Parent Grifols, S.A. for the years ended 31 December 2021, and the distribution of profit approved for 2020, presented at the general meeting held on 21 May 2021, is as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Voluntary reserve |
| ( |
| |
Dividends |
| — |
| |
Profit of the Parent |
| ( |
| |
F-75
The following dividends were paid in 2020:
31/12/2020 | ||||||
| % of par value |
| Euros per share |
| Thousands of Euros | |
Ordinary shares |
| | % |
| | |
Non-voting shares |
| | % | | ||
Non-voting shares (preferred dividend) |
| | % |
| | |
Total dividends paid |
|
|
|
|
| |
The following dividends were paid in 2021:
31/12/2021 | ||||||
| % of par value |
| Euros per share |
| Thousands of Euros | |
Ordinary shares |
| | % |
| | |
Non-voting shares |
| | % | | ||
Non-voting shares (preferred dividend) |
| | % |
| | |
Total dividends paid |
|
|
|
|
| |
During 2020 and 2021
At a general meeting held on 8 and 9 October 2020 the shareholders of Grifols S.A. approved the distribution of a preferred dividend of Euros
At the general meeting held on 21 May 2021 the shareholders of Grifols S.A. approved the distribution of a preferred dividend of Euros
The distribution of the profit for the years ended 31 December 2020 and 2021 is presented in the consolidated statement of changes in equity.
(f) Restricted Share Unit Retention Plan
The Group has set up a Restricted Share Unit Retention Plan (hereinafter RSU Plan) for certain employees (see note 29). This commitment will be settled using equity instruments and the cumulative accrual amounts to Euros
(17) Earnings Per Share
The calculation of basic earnings per share is based on the profit for the year attributable to the shareholders of the Parent divided by the weighted average number of ordinary shares in circulation throughout the year, excluding treasury stock.
Details of the calculation of basic earnings per share are as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Profit for the year attributable to shareholders of the Parent (Thousands of Euros) |
| |
| |
| |
Weighted average number of ordinary shares outstanding |
| |
| |
| |
Basic earnings per share (Euros per share) |
| |
| |
| |
F-76
The weighted average of the ordinary shares outstanding (basic) is as follows:
Number of shares | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Issued shares outstanding at 1 January |
| |
| |
| |
Effect of shares issued |
| — |
| — |
| — |
Effect of treasury stock |
| ( |
| |
| |
Average weighted number of ordinary shares outstanding (basic) at 31 December |
| |
| |
| |
Diluted earnings per share are calculated by dividing profit for the year attributable to shareholders of the Parent by the weighted average number of ordinary shares in circulation considering the diluting effects of potential ordinary shares.
The RSU Plan granted by the Group and payable in shares, assumes the existence of dilutive potential shares. Diluted earnings per share have been calculated as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Profit for the year attributable to shareholders of the Parent (Thousands of Euros) |
| | |
| | |
Weighted average number of ordinary shares outstanding (diluted) |
| |
| |
| |
Diluted earnings per share (Euros per share) |
| |
| |
| |
The weighted average number of ordinary shares outstanding diluted has been calculated as follows:
Number of shares | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Issued shares outstanding at 1 January |
| |
| |
| |
Effect of RSU shares |
| ( |
| ( |
| ( |
Effect of shares issued |
| — |
| — |
| — |
Effect of treasury stock |
| ( |
| |
| |
Average weighted number of ordinary shares outstanding (diluted) at 31 December |
| |
| |
| |
F-77
(18) Non-Controlling Interests
Details of non-controlling interests and movement at 31 December 2021 are as follows:
Thousands of Euros | ||||||||||||
|
|
| Business |
|
|
| ||||||
combinations / | ||||||||||||
| Balance at |
|
| Perimeter |
| Dividends |
| Translation |
| Balance at | ||
31/12/2020 | Additions | additions | paid | differences | 31/12/2021 | |||||||
Grifols (Thailand) Pte Ltd |
| | | — | — | ( | | |||||
Grifols Malaysia Sdn Bhd |
| | | ( | — | | | |||||
Araclon Biotech, S.A. |
| ( | ( | | — | — | | |||||
VCN Bioscience, S.L |
| | ( | — | — | — | ||||||
Kiro Grifols , S.L. |
| | ( | — | — | — | | |||||
Haema AG |
| | | — | — | — | | |||||
BPC Plasma, Inc (formerly Biotest US Corporation) | | | — | — | | | ||||||
Grifols Diagnostic Solutions, Inc. | | | — | ( | | | ||||||
Plasmavita Healthcare (see note 3) | | | — | — | — | | ||||||
| | | | ( | | | ||||||
Details of non-controlling interests and movement at 31 December 2020 are as follows:
Thousands of Euros | ||||||||||
Business | ||||||||||
combinations / | ||||||||||
| Balance at |
|
| Perimeter | Translation |
| Balance at | |||
31/12/2019 | Additions | additions |
| differences | 31/12/2020 | |||||
Grifols (Thailand) Pte Ltd |
| | | — | ( | | ||||
Grifols Malaysia Sdn Bhd |
| | | — | ( | | ||||
Araclon Biotech, S.A. |
| | ( | | — | ( | ||||
VCN Bioscience, S.L |
| ( | ( | | — | | ||||
Kiro Grifols , S.L. | | ( | | — | | |||||
Haema AG | | | — | — | | |||||
BPC Plasma, Inc (formerly Biotest US Corporation) | | | — | ( | | |||||
Grifols Diagnostic Solutions, Inc. | | | ( | ( | | |||||
Plasmavita Healthcare (see note 3) |
| — | ( | | — | | ||||
Alkahest, Inc. | — | ( | | — | | |||||
| | ( | ( | | ||||||
F-78
At 31 December 2021 and 2020, the summary financial information on the non-controlling interests of Haema AG and BPC Plasma, Inc., is as follows:
Thousands of Euros | Thousands of Euros | |||||||
31/12/2021 | 31/12/2020 | |||||||
BPC Plasma, Inc | BPC Plasma, Inc | |||||||
(formerly Biotest | (formerly Biotest | |||||||
| Haema AG |
| US Corporation) |
| Haema AG |
| US Corporation) | |
Non-current assets |
| |
| |
| |
| |
Current assets |
| |
| |
| |
| |
Total Assets |
| |
| |
| |
| |
Non-current liabilities |
| |
| |
| |
| |
Current liabilities |
| |
| |
| |
| |
Total Liabilities |
| |
| |
| |
| |
Total equity |
| |
| |
| |
| |
31/12/2021 | 31/12/2020 | |||||||
Thousands of Euros | Thousands of Euros | |||||||
BPC Plasma, Inc | BPC Plasma, Inc | |||||||
Haema AG | (formerly Biotest | Haema AG | (formerly Biotest | |||||
US Corporation) | US Corporation) | |||||||
Profit for the year |
| |
| |
| |
| |
At 31 December 2021 and 2020, the summary financial information on the non-controlling interests of GDS Group is as follows:
| Thousands of Euros | |||
| 31/12/2021 |
| 31/12/2020 | |
Non-current assets |
| |
| |
Current assets |
| |
| |
Total Assets |
| |
| |
Non-current liabilities |
| |
| |
Current liabilities |
| |
| |
Total Liabilities |
| |
| |
Total equity |
| |
| |
| Thousands of Euros | |||
| 31/12/2021 |
| 31/12/2020 | |
Profit for the year |
| |
| |
F-79
(19) Grants
Details are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Capital grants |
| |
| |
Interest rate grants (preference loans) (See note 21 (d)) |
| |
| |
| |
| | |
Interest-rate grants (preference loans) reflect the implicit interest on loans extended by the Spanish Ministry of Science and Technology as these are interest free.
Grants totaling Euros
(20) Provisions
Details of provisions at 31 December 2021 and 2020 are as follows:
Thousands of Euros | ||||
Non-current provisions (a) |
| 31/12/2021 |
| 31/12/2020 |
Provisions for pensions and similar obligations |
| |
| |
Other provisions |
| |
| |
Non-current provisions |
| |
| |
Thousands of Euros | ||||
Current provisions (b) |
| 31/12/2021 |
| 31/12/2020 |
Trade provisions |
| |
| |
Current provisions |
| |
| |
| (a) | Non-current provisions |
At 31 December 2021, 2020 and 2019 provisions for pensions and similar obligations mainly comprise a provision made by certain foreign subsidiaries in respect of labor commitments with certain employees.
Movement in provisions during 2019 was as follows:
Thousands of Euros | ||||||||||||
| Balance at |
|
|
|
|
|
| Translation |
| Balance at | ||
31/12/2018 | Net charge | Cancellations | Reclassifications | differences | 31/12/2019 | |||||||
Non-current provisions |
| | | ( | | | | |||||
| | | ( | | | | ||||||
Movement in provisions during 2020 was as follows:
Thousands of Euros | ||||||||||||
| Balance at |
|
|
|
|
|
|
| Translation |
| Balance at | |
31/12/2019 | Net charge | Cancellations | Reclassifications | differences | 31/12/2020 | |||||||
Non-current provisions |
| | | ( | | ( | | |||||
| | | ( | | ( | | ||||||
F-80
Movement in provisions during 2021 is as follows:
Thousands of Euros | ||||||||||||
| Balance at |
|
|
|
|
|
|
| Translation |
| Balance at | |
31/12/2020 | Net charge | Cancellations | Reclassifications | differences | 31/12/2021 | |||||||
Non-current provisions |
| | | ( | ( | | | |||||
| | | ( | ( | | | ||||||
(b) Current provisions
Movement in trade provisions during 2019 was as follows:
Thousands of Euros | ||||||||||
| Balance at |
|
|
|
| Translation |
| Balance at | ||
31/12/2018 | Net charge | Cancellations | differences | 31/12/2019 | ||||||
Trade provisions |
| | ( | ( | | | ||||
| | ( | ( | | | |||||
Movement in trade provisions during 2020 was as follows:
Thousands of Euros | ||||||||||||||
| Balance at |
| Business |
|
|
|
|
| Translation |
| Balance at | |||
31/12/2019 |
| combination |
| Net charge |
| Cancellations |
| Reclassifications |
| differences |
| 31/12/2020 | ||
Trade provisions |
| | | ( | ( | ( | ( | | ||||||
| | | ( | ( | ( | ( | | |||||||
Movement in trade provisions during 2021 is as follows:
Thousands of Euros | ||||||||||||||
| Balance at |
| Business |
|
|
|
|
| Translation |
| Balance at | |||
| 31/12/2020 |
| combination |
| Net charge |
| Cancellations |
| Reclassifications |
| differences |
| 31/12/2021 | |
Trade provisions |
| | | | ( | | | | ||||||
| | | | ( | | | | |||||||
(21) Financial Liabilities
This note provides information on the contractual conditions of the Group’s financial liabilities, which are measured at amortized cost, except for the financial derivatives that are valued at fair value. For further information on exposure to interest rate risk, currency risk and liquidity risk and the fair values of financial liabilities, please refer to note 30.
F-81
Details at 31 December 2021 and 2020 are as follows:
Thousands of Euros | ||||
Financial liabilities |
| 31/12/2021 |
| 31/12/2020 |
Non-current bonds (a) |
| |
| |
Senior secured debt (b) |
| |
| |
Other loans (b) |
| |
| |
Other non-current financial liabilities (d) |
| |
| |
Non-current lease liabilities (note 9) | | | ||
Loan transaction costs | ( | ( | ||
Total non-current financial liabilities |
| |
| |
Current bonds (a) |
| |
| |
Senior secured debt (b) |
| — |
| |
Other loans (b) |
| |
| |
Other current financial liabilities (d) |
| |
| |
Current financial derivatives (note 30) |
| |
| — |
Current lease liabilities (note 9) | | | ||
Loan transaction costs | ( | ( | ||
Total current financial liabilities |
| |
| |
On 5 October 2021, Grifols completed the issuance of two Senior Notes for amounts of Euros
On 7 May 2020, the Group concluded the upsize of the multi-currency revolving credit facility from US Dollars
On 15 November 2019 the Group concluded the refinancing process of its senior secured debt for Euros
Grifols calculated the impact of the IFRS 9 in the new financing process concluding that it did not result in a derecognition of the liability as it has not passed the 10% quantitative test. According to the IASB’s interpretation, when a financial liability measured at amortized cost is modified or exchanged and does not result in the derecognition of the financial liability, a gain or loss should be recognized in profit or loss, calculated as the difference between the original contractual cash flows from the liability and the modified cash flows, discounted at the original effective interest rate of the liability. Following the standard, the Group recognized income of Euros
In September 2018, Grifols obtained a new non-current loan from the European Investment Bank totaling Euros
(a) | Senior Notes |
On 5 October 2021, Grifols Escrow Issuer, S.A. closed the issuance of a senior unsecured corporate bond (Senior Unsecured Notes) in two tranches for amounts of Euros
F-82
The proceeds from the bonds will be used to finance the Euros
In addition, the proceeds will also be used to finance the voluntary public offering for the remaining ordinary and preferred shares of Biotest AG.
The funds have been transferred directly to an escrow account and access to them is restricted pending completion of the transaction and other contractual milestones (see note 3 and 15).
In the event that the transaction is not carried out, the Group is willing to redeem the bonds immediately. Therefore, the liability was classified according to the earliest period in which the Group may be required to repay it.
On 15 November 2019, as part of its refinancing process, Grifols, S.A. issued Euros
On 18 April 2017, Grifols, S.A., issued Euros
Details of movement in the Senior Notes at 31 December 2021 are as follows:
Thousands of Euros | ||||||||
Opening | Opening | |||||||
| outstanding balance |
|
| Exchange |
| outstanding balance | ||
01/01/21 | Issue | differences | 31/12/21 | |||||
Senior unsecured notes (nominal value) 2017 |
| |
| — | — | | ||
Senior secured notes (nominal value) 2019 | | — | — | | ||||
Senior unsecured notes (nominal value) Euros 2021 | — | | — | | ||||
Senior unsecured notes (nominal value) US Dollars 2021 | — | | | | ||||
Total |
| |
| | | | ||
F-83
On 2 December 2021, Grifols, S.A. announced a repurchase offer for the same price plus unpaid accrued interests of the mentioned bonds, up to the equivalent in Euros of US Dollars
There was no movement regarding Senior Notes in 2020.
At 31 December 2021 and 2020 the current obligations caption includes the issue of bearer promissory notes to Group employees, as follows:
31/12/2020 | ||||||||||||||
Promissory | Buy backs or | Interest | ||||||||||||
Nominal amount | notes subscribed | redemptions | pending accrual | |||||||||||
Maturity | of promissory | Interest | (Thousands of | (Thousands of | (Thousands of | |||||||||
| Issue date |
| date |
| notes (Euros) |
| rate |
| Euros) |
| Euros) |
| Euros) | |
Issue of bearer promissory notes |
| 04/05/20 | 04/05/21 | | | % | | ( | ( | |||||
31/12/2021 | ||||||||||||||
Promissory | Buy backs or | Interest | ||||||||||||
Nominal amount | notes subscribed | redemptions | pending accrual | |||||||||||
Maturity | of promissory | Interest | (Thousands of | (Thousands of | (Thousands of | |||||||||
| Issue date |
| date |
| notes (Euros) |
| rate |
| Euros) |
| Euros) |
| Euros) | |
Issue of bearer promissory notes |
| 04/05/21 | 04/05/22 | | | % | | ( | ( | |||||
F-84
(b) | Loans and borrowings |
Details of loans and borrowings at 31 December 2021 and 2020 are as follows:
Thousands of Euros | ||||||||||||||||
31/12/2021 | 31/12/2020 | |||||||||||||||
Amount | Carrying | Amount | Carrying | |||||||||||||
Credit |
| Currency |
| Interest rate |
| Date awarded |
| Maturity date |
| extended |
| amount |
| extended |
| amount |
Senior debt - Tranche B | Euros | Euribor + | 15/11/2019 | 15/11/2027 | | | | | ||||||||
Senior debt - Tranche B |
| US Dollars | Libor + | 15/11/2019 | 15/11/2027 | | | | | |||||||
Total senior debt |
| | | | | |||||||||||
EIB Loan |
| Euros | 20/11/2015 | 20/11/2025 | | | | | ||||||||
EIB Loan | Euros | 22/12/2017 | 22/12/2027 | | | | | |||||||||
EIB Loan | Euros | 25/09/2018 | 25/09/2028 | | | | | |||||||||
Total EIB Loan | | | | | ||||||||||||
Revolving Credit |
| USD | Libor + | 07/05/2020 | 15/11/2025 | | | | — | |||||||
Total Revolving Credit |
| | | | — | |||||||||||
Other non-current loans |
| Euros | 25/03/2010 | 30/09/2024 | | | | | ||||||||
Loan transaction costs |
| — | ( | — | ( | |||||||||||
Non-current loans and borrowings |
|
|
|
|
|
|
| | | | | |||||
Thousands of Euros | ||||||||||||||||
31/12/2021 | 31/12/2020 | |||||||||||||||
Credit |
| Currency |
| Interest rate |
| Date awarded |
| Maturity date |
| Amount extended |
| Carrying amount |
| Amount extended |
| Carrying amount |
Senior debt - Tranche B |
| Euros | Euribor + | 15/11/2019 | 15/11/2027 | (*) | — | (*) | | |||||||
Senior debt - Tranche B | US Dollars | Libor + | 15/11/2019 | 15/11/2027 | (*) | — | (*) | | ||||||||
Total senior debt |
| — | — | — | | |||||||||||
EIB Loan |
| Euros | 20/11/2015 | 20/11/2025 | (*) | | (*) | | ||||||||
EIB Loan | Euros | 22/12/2017 | 22/12/2027 | (*) | | (*) | | |||||||||
Total EIB Loan | — | | — | | ||||||||||||
Other current loans |
| | | | | |||||||||||
Loan transaction costs |
| — | ( | — | ( | |||||||||||
Current loans and borrowings |
|
|
|
|
|
| | | | | ||||||
(*) See amount granted under non-current debt
Current loans and borrowings include accrued interest amounting to Euros
On 15 November 2019 the Group refinanced its Senior Secured Debt with the existing lenders. The new senior debt consists of a Term Loan B (“TLB”), which amount US Dollars
The present value discounted from cash flows under the new agreement, including any fees paid and discounted using the original effective interest rate differed by less than
The costs of refinancing the senior debt amounted to Euros
F-85
The terms and conditions of the senior secured debt are as follows:
| o | Tranche B: |
| ◾ | Tranche B in US Dollars: |
● Original principal amount of US Dollars
● Applicable margin of
● Quasi-bullet repayment structure.
● Maturity in 2027.
| ◾ | Tranche B in Euros: |
● Original principal amount of Euros
● Applicable margin of
● Quasi-bullet repayment structure.
● Maturity in 2027.
Details of Tranche B by maturity at 31 December 2021 are as follows:
US Tranche B | Tranche B in Euros | |||||||||
Principal in Thousands | Amortization in | Principal in Thousands of | ||||||||
| Currency |
| of US Dollars |
| Thousands of Euros |
| Currency |
| Euros | |
Maturity | ||||||||||
2023 |
| US Dollars |
| |
| | Euros | | ||
2024 | US Dollars | | | Euros | | |||||
2025 | US Dollars | | | Euros | | |||||
2026 | US Dollars | | | Euros | | |||||
2027 | US Dollars | | | Euros | | |||||
Total |
| US Dollars |
| |
| | Euros | | ||
At 31 December 2021, the Group has redeemed in advance an amount of Euros
| o | US Dollar |
The costs of refinancing the revolving credit facility in 2020 amounted to Euros
Both the Senior Term Loans and the Revolving Loans are secured by Grifols, S.A. and certain significant subsidiaries of Grifols, S.A., which together with Grifols, S.A., represent, in the aggregate, at least
F-86
The Notes have been issued by Grifols S.A. and are guaranteed on a senior secured basis by subsidiaries of Grifols, S.A. that are guarantors and co-borrower under the New Credit Facilities. The guarantors are Grifols Worldwide Operations Limited, Biomat USA, Inc., Grifols Biologicals Inc., Grifols Shared Services North America, Inc., Talecris Plasma Resources, Inc.., Grifols Therapeutics, Inc., Instituto Grifols, S.A., Grifols Worldwide Operations USA, Inc., Grifols USA, Llc. and Grifols International, S.A.
(c) | Credit rating |
In December 2021, Moody’s Investors Service confirmed the B1 corporate family rating (Ba3 in December 2020), Ba3 rating to the senior secured bank debt that was used to refinance the existing debt structure (Ba2 in December 2020). The outlook is stabilized as negative. The credit rating of the senior unsecured notes is B3 (B2 in December 2020).
In September 2021, Standard Poor’s has confirmed its BB- rating on Grifols (BB in December 2020) and has assigned BB ratings to Grifols’ senior secured debt that was used to refinance the existing debt structure (BB+ in December 2020). The outlook for the rating is downgraded to negative (stable in December 2020). The credit rating of the senior unsecured notes is B+ (B+ in December 2020).
In September 2021, Fitch Ratings has confirmed its corporate global BB- rating on Grifols and has assigned BB+ ratings to Grifols’ senior secured debt and B+ rating to Grifols’ senior unsecured notes. The outlook for the rating is stable.
(d) | Other financial liabilities |
At 31 December 2021 other non-current financial liabilities include an amount of Euros
The main terms and conditions of the agreement with GIC at 31 December 2021 were:
| ● | The distribution of annual preferential dividends to GIC equivalent to US Dollar |
| ● | The redemption right with respect to Class B stock for US Dollars |
| ● | From 1 December 2036, holders of Class B shares of Biomat USA will have the right to request Biomat USA to redeem up to the total of the Class B shares they hold at a value of US Dollars |
| ● | In the event that the dividends or the annual redemption at Biomat USA or Biomat NewCo, where applicable, is not approved, is partially paid, or is otherwise not paid, GIC holds the right to obtain in exchange thereof an undetermined number of shares among the following alternatives (i) an additional number of shares in Biomat USA, in lieu of the non-payment occurred at Biomat USA, (ii) an additional number of shares in Biomat NewCo, in lieu of the non-payment occurred at Biomat NewCo; or (iii) a number of ADRs of Grifols, S.A. in lieu of either (i) or (ii). |
| ● | Grifols holds the right to redeem all of the Class B stock from the fifth year onwards; |
| ● | In the event of liquidation of Biomat USA and Biomat Newco, GIC shall have the right to the preferential liquidation of US Dollars |
F-87
Grifols did not have the discretional right to avoid payment in cash and therefore, the instrument was recorded as a financial liability at 31 December 2021.
The Group does not lose control of Biomat USA and will continue overseeing all aspects of the Biomat Group’s administration and operations.At 31 December 2021 “Other financial liabilities” include interest-free loans extended by governmental institutions amounting to Euros
At 31 December 2021 “Other current financial liabilities” include mainly the amount payable relating to the Gigagen, Inc. acquisition amounting to Euros
At 31 December 2020 “Other current financial liabilities” included mainly the amount payable relating to the Alkahest, Inc. acquisition amounting to Euros
F-88
Details of the maturity of other financial liabilities are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Maturity at: |
|
|
|
|
Up to one year |
| |
| |
Two years |
| |
| |
Three years |
| |
| |
Four years |
| |
| |
Five years |
| |
| |
Over five years |
| |
| |
| |
| | |
(e) | Changes in liabilities derived from financing activities |
Thousands of Euros | ||||||||||
Senior Secured | ||||||||||
debt Other | Finance lease | Other financial | ||||||||
| Bonds |
| loans |
| liabilities |
| liabilities |
| Total | |
Carrying amount at 1 January 2019 |
| |
| |
| |
| |
| |
New financing |
| |
| ( |
| — |
| |
| |
Refunds |
| ( |
| ( |
| ( |
| ( |
| ( |
Interest accrued |
| |
| |
| |
| |
| |
Other movements (note 2) |
| ( |
| |
| |
| — |
| |
Interest paid/received |
| ( |
| ( |
| — |
| — |
| ( |
Business combinations (note 3) |
| — |
| |
| — |
| — |
| |
Foreign exchange differences |
| — |
| |
| |
| |
| |
Balance at 31 December 2019 |
| |
| |
| |
| |
| |
New financing |
| |
| — |
| — |
| — |
| |
Refunds |
| ( |
| ( |
| ( |
| ( |
| ( |
Interest accrued |
| |
| |
| |
| |
| |
Other movements |
| — |
| ( |
| |
| |
| |
Interest paid/received |
| ( |
| ( |
| — |
| — |
| ( |
Business combinations (note 3) |
| — |
| — |
| — |
| |
| |
Foreign exchange differences |
| — |
| ( |
| ( |
| ( |
| ( |
Balance at December 31, 2020 |
| |
| |
| |
| |
| |
New financing | | | — | | | |||||
Refunds | ( | ( | ( | ( | ( | |||||
Interest accrued | | | | | | |||||
Other movements | ( | | | | | |||||
Interest paid/received | ( | ( | — | — | ( | |||||
Business combinations (note 3) | — | — | — | ( | ( | |||||
Foreign exchange differences | | | | | | |||||
Balance at 31 December 2021 | | | | | | |||||
F-89
(22) Trade and Other Payables
Details are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Suppliers |
| |
| |
VAT payable |
| |
| |
Taxation authorities, withholdings payable |
| |
| |
Social security payable |
| |
| |
Other public entities |
| |
| |
Other payables |
| |
| |
Current income tax liabilities |
| |
| |
| |
| | |
Suppliers
Details of balances with related parties are shown in note 31.
The Group’s exposure to currency risk and liquidity risk associated with trade and other payables is described in note 30.
(23) Other Current Liabilities
Details at 31 December are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Salaries payable |
| |
| |
Other payables |
| |
| |
Deferred income |
| |
| |
Advances received |
| |
| |
Other current liabilities |
| |
| |
At December 31, 2021 and December 31, 2020, the advances received are contract liabilities relate to unperformed performance obligations for which Grifols has received a consideration from the customer.
(24) Net Revenues
Net revenues are mainly generated from the sale of goods.
F-90
The distribution of net consolidated revenues for 2021, 2020 and 2019 by segment is as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Bioscience |
| |
| |
| |
Diagnostic |
| |
| |
| |
Hospital |
| |
| |
| |
Bio supplies | | | | |||
Others |
| |
| |
| |
Intersegments | ( | ( | ( | |||
| |
| |
| | |
The geographical distribution of net consolidated revenues is as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
USA and Canada |
| |
| |
| |
Spain |
| |
| |
| |
European Union |
| |
| |
| |
Rest of the world |
| |
| |
| |
Consolidated |
| |
| |
| |
Details of discounts and other reductions in gross income are as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Gross sales |
| |
| |
| |
Chargebacks |
| ( |
| ( |
| ( |
Cash discounts |
| ( |
| ( |
| ( |
Volume rebates |
| ( |
| ( |
| ( |
Medicare and Medicaid |
| ( |
| ( |
| ( |
Other discounts |
| ( |
| ( |
| ( |
Net sales |
| |
| |
| |
Movement in discounts and other reductions in gross income during 2019 was as follows:
Thousands of Euros |
| ||||||||||||
|
|
| Cash |
| Volume |
| Medicare / |
| Other |
|
|
| |
Chargebacks | discounts | rebates | Medicaid | discounts | Total |
| |||||||
Balance at 31 December 2018 |
| |
| |
| |
| |
| |
| | |
Current estimate related to sales made in current and prior year |
| |
| |
| |
| |
| |
| | (1) |
(Actual returns or credits in current period related to sales made in current period) |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | (2) |
(Actual returns or credits in current period related to sales made in prior periods) |
| |
| ( |
| ( |
| ( |
| ( |
| ( | (3) |
Translation differences |
| ( |
| |
| |
| |
| |
| | |
Balance at 31 December 2019 |
| |
| |
| |
| |
| |
| | |
F-91
Movement in discounts and other reductions to gross income during 2020 was as follows:
Thousands of Euros |
| ||||||||||||
|
|
| Cash |
| Volume |
| Medicare / |
| Other |
|
|
| |
Chargebacks | discounts | rebates | Medicaid | discounts | Total |
| |||||||
Balance at 31 December 2019 |
| |
| |
| |
| |
| |
| | |
Current estimate related to sales made in current and prior year |
| |
| |
| |
| |
| |
| | (1) |
(Actual returns or credits in current period related to sales made in current period) |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | (2) |
(Actual returns or credits in current period related to sales made in prior periods) |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | (3) |
Translation differences |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | |
Balance at 31 December 2020 |
| |
| |
| |
| |
| |
| | |
Movement in discounts and other reductions to gross income during 2021 was as follows:
Thousands of Euros |
| ||||||||||||
|
|
| Cash |
| Volume |
| Medicare / |
| Other |
|
|
| |
Chargebacks | discounts | rebates | Medicaid | discounts | Total |
| |||||||
Balance at 31 December 2020 |
| |
| |
| |
| |
| |
| | |
Current estimate related to sales made in current and prior year |
| |
| |
| |
| |
| |
| | (1) |
(Actual returns or credits in current period related to sales made in current period) |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | (2) |
(Actual returns or credits in current period related to sales made in prior periods) |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | (3) |
Translation differences |
| |
| |
| |
| |
| |
| | |
Balance at 31 December 2021 |
| |
| |
| |
| |
| |
| | |
| (1) | Net impact in income statement: estimate for the current year plus prior years’ adjustments. Adjustments made during the year corresponding to prior years’ estimates have not been significant. |
| (2) | Amounts credited and posted against provisions for current period |
| (3) | Amounts credited and posted against provisions for prior period |
(25) Personnel Expenses
Details of personnel expenses by function are as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Cost of sales |
| |
| |
| |
Research and development |
| |
| |
| |
Selling, general administration expenses |
| |
| |
| |
| |
| |
| | |
F-92
Details by nature are as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Wages and salaries |
| |
| |
| |
Contributions to pension plans (see note 29) |
| |
| |
| |
Other social charges |
| |
| |
| |
Social Security |
| |
| |
| |
| |
| |
| | |
At 31 December 2021, as a result of the discontinuation of the Blood Collection Systems activity, the Group has recognized an amount of Euros
(26) Expenses by Nature
(a) Amortization and depreciation
Expenses for the amortization and depreciation of intangible assets, right of use assets and property, plant and equipment, incurred during 2021, 2020 and 2019 classified by functions are as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Cost of sales |
| |
| |
| |
Research and development |
| |
| |
| |
Selling, general administration expenses |
| |
| |
| |
| |
| |
| | |
(b) Other operating income and expenses
Other operating income and expenses incurred during 2021, 2020 and 2019 by function are as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Cost of sales |
| |
| |
| |
Research and development |
| |
| |
| |
Selling, general administration expenses |
| |
| |
| |
| |
| |
| | |
F-93
Details by nature are as follows:
Thousands of Euros | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Changes in trade provisions |
| |
| ( |
| ( |
Professional services |
| |
| |
| |
Commissions |
| |
| |
| |
Supplies and auxiliary materials |
| |
| |
| |
Operating leases (note 9) |
| |
| |
| |
Freight |
| |
| |
| |
Repair and maintenance expenses |
| |
| |
| |
Advertising |
| |
| |
| |
Insurance |
| |
| |
| |
Royalties |
| |
| |
| |
Travel expenses |
| |
| |
| |
External services |
| |
| |
| |
RD Expenses |
| |
| |
| |
Other |
| |
| |
| |
Other operating incomeexpenses |
| |
| |
| |
(27) Finance Result
Details are as follows:
Thousands of Euros | ||||||
| 31/12/2020 |
| 31/12/2020 |
| 31/12/2019 | |
Finance income |
| |
| |
| |
Finance costs from Senior Unsecured Notes |
| ( |
| ( |
| ( |
Finance costs from senior debt (note 21 (b)) |
| ( |
| ( |
| ( |
Finance costs from sale of receivables (note 14) |
| ( |
| ( |
| ( |
Capitalized interest (note 10) |
| |
| |
| |
Finance lease expenses (note 9) | ( | ( | ( | |||
Other finance costs |
| ( |
| ( |
| ( |
Finance costs |
| ( |
| ( |
| ( |
Impairment and gains / (losses) on disposal of financial instruments |
| — |
| — |
| ( |
Change in fair value of financial instruments (note 11) |
| |
| |
| |
Exchange differences |
| ( |
| |
| ( |
Finance result |
| ( |
| ( |
| ( |
2019 finance income from senior debt includes income of Euros
During 2021 the Group has capitalized interest at a rate of between
“Change in fair value of financial instruments” at 31 December 2020 includes the difference between the contractual right value recognized at 31 December 2019 and the quoted value of SRAAS at 30 March 2020 for an amount of Euros
At 31 December 2019, as part of the share exchange agreement with Shanghai RAAS Blood Products Co. Ltd., Grifols delivered
F-94
(28) Taxation
Grifols, S.A. is authorized to file consolidated tax returns in Spain with Grifols Movaco, S.A., Laboratorios Grifols, S.A., Instituto Grifols, S.A., Biomat, S.A., Grifols Viajes, S.A., Grifols International, S.A., Grifols Engineering, S.A., Gripdan Invest, S.L., Araclon Biotech, Aigües Minerals de Vilajuiga, S.A. and VCN Biosciences, S.L. Grifols, S.A., in its capacity as Parent, is responsible for the filing and settlement of the consolidated tax return. Under prevailing tax law, Spanish companies pay
The North American company Grifols Shared Services North America, Inc. is also authorized to file consolidated tax returns in the USA with Grifols Biologicals Inc., Grifols USA, LLC., Biomat USA, Inc., Grifols Therapeutics Inc., Talecris Plasma Resources, Inc, Interstate Blood Bank, Inc. and Goetech, LLC.. The profits of the companies domiciled in the USA, determined in accordance with prevailing tax legislation, are subject to tax of approximately
Grifols assesses the effect of uncertain tax treatments and recognizes the effect of the uncertainty on taxable earnings. At 31 of December 2021, the potential obligations deriving from tax claims are properly covered. There are no lawsuits or uncertain tax treatments that are individually material.
(a) | Reconciliation of accounting and taxable income |
Details of the income tax expense and income tax related to profit for the year are as follows:
Thousands of Euros | ||||||
| 31/12/2021 | 31/12/2020 | 31/12/2019 | |||
Profit before income tax from continuing operations |
| |
| |
| |
Tax at |
| |
| |
| |
Permanent differences |
| |
| ( |
| |
Effect of different tax rates |
| ( |
| ( |
| ( |
Tax credits (deductions) |
| ( |
| ( |
| ( |
Prior year income tax expense |
| |
| |
| ( |
Other income tax expenses/(income) |
| ( |
| |
| ( |
Total income tax expense |
| |
| |
| |
Deferred tax |
| |
| |
| |
Current tax |
| |
| |
| |
Total income tax expense |
| |
| |
| |
The effect of the different tax rates is basically due to a change of country mix in profits
F-95
(b) | Deferred tax assets and liabilities |
Details of deferred tax assets and liabilities are as follows:
Thousands of Euros | ||||||
Tax effect | ||||||
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 | |
Assets |
|
|
|
|
|
|
Provisions |
| |
| |
| |
Inventories |
| |
| |
| |
Tax credits (deductions) |
| |
| |
| |
Tax loss carryforwards |
| |
| |
| |
Other |
| |
| |
| |
Subtotal, assets |
| |
| |
| |
Goodwill |
| ( |
| ( |
| ( |
Fixed assets, amortisation and depreciation |
| |
| ( |
| ( |
Intangible assets |
| ( |
| ( |
| ( |
Subtotal, net liabilities |
| ( |
| ( |
| ( |
Deferred assets, net |
| |
| |
| |
Liabilities |
|
|
| |||
Goodwill |
| ( |
| ( |
| ( |
Intangible assets |
| ( |
| ( |
| ( |
Fixed assets |
| ( |
| ( |
| ( |
Debt cancellation costs |
| ( |
| ( |
| ( |
Subtotal, liabilities |
| ( |
| ( |
| ( |
Tax loss carryforwards |
| |
| |
| |
Inventories |
| |
| |
| |
Provisions | | | | |||
Other |
| |
| |
| |
Subtotal, net assets |
| |
| |
| |
Net deferred Liabilities |
| ( |
| ( |
| ( |
Movement in deferred tax assets and liabilities is as follows:
Thousands of Euros | ||||||
Deferred tax assets and liabilities |
| 31/12/2021 |
| 31/12/2020 |
| 31/12/2019 |
Balance at 1 January |
| ( |
| ( |
| ( |
Movements during the year |
| ( |
| ( |
| ( |
Business combination (note 3) |
| ( |
| ( |
| — |
Translation differences |
| ( |
| |
| |
Balance at 31 December |
| ( |
| ( |
| ( |
Detail of assets and liabilities by jurisdiction at 31 December 2021 are as follows:
| USA | Spain | Other | Total | ||||
31/12/2021 |
| 31/12/2021 |
| 31/12/2021 |
| 31/12/2021 | ||
Net deferred tax |
| ( |
| ( |
| |
| ( |
Tax credit rigths |
| — |
| |
| — |
| |
Tax loss carryforwards |
| |
| |
| |
| |
| ( |
| |
| |
| ( |
F-96
Detail of assets and liabilities by jurisdiction at 31 December 2020 are as follows:
| USA | Spain | Other | Total | ||||
31/12/2020 |
| 31/12/2020 |
| 31/12/2020 |
| 31/12/2020 | ||
Net deferred tax |
| ( |
| ( |
| ( |
| ( |
Tax credit rigths |
| — |
| |
| |
| |
Tax loss carryforwards |
| |
| |
| |
| |
| ( |
| |
| |
| ( |
Detail of assets and liabilities by jurisdiction at 31 December 2019 are as follows:
| USA | Spain | Other | Total | ||||
31/12/2019 |
| 31/12/2019 |
| 31/12/2019 |
| 31/12/2019 | ||
Net deferred tax |
| ( |
| ( |
| ( |
| ( |
Tax credit rigths |
| |
| |
| |
| |
Tax loss carryforwards |
| — |
| |
| — |
| |
| ( |
| |
| ( |
| ( |
The Spanish companies have opted to apply accelerated depreciation to certain additions to property, plant and equipment, which has resulted in the corresponding deferred tax liability.
The remaining assets and liabilities recognized in 2021, 2020 and 2019 were recognized in the statement of profit and loss.
Estimated net deferred tax assets to be reversed in a period of less than 12 months amount to Euros
The majority of the tax deductions pending application from Spanish companies related mainly to research and development, mature in
Tax loss carryforwards pending to be offset derived from the US companies are available for
The Group has not recognized as deferred tax assets the tax effect of the unused tax loss carryforwards of Group companies, which amount to Euros
The commitments from Spanish companies from the reversal of deferred tax related to provisions of investments in subsidiaries are not significant.
(c) | Years open to inspection |
Under prevailing legislation, taxes cannot be considered to be definitively settled until the returns filed have been inspected by the taxation authorities, or the prescription period has elapsed.
F-97
The main tax audits currently open in the Group are as follows:
| ● | Certain companies of the Group domiciled in Spain have been subject to an inspection by the Spanish State Tax Administration Agency in relation to Corporate Income Tax for the years 2014, 2015 and 2016 and Value Added Tax for the years 2015 and 2016. |
As a result of said procedure, the State Tax Administration Agency has issued assessments containing the results of the inspection, where it is indicated that the treatment of certain transactions and computations mainly related to Transfer Pricing should be adjusted, taking into consideration different interpretations related to the allocation of taxable bases between different jurisdictions. With respect to Corporate Income Tax, the deductibility of certain expenses for the computation of the tax payable has been questioned. These assessments have been signed in conformity by the Group on 8 November 2021. It should be noted that no penalties have been imposed on any of the Group companies for any of the taxes subject to verification.
The results of the inspection did not have a significant impact on the Group’s consolidated financial statements, and the differences determined by the State Tax Administration Agency have been recorded as part of the current tax included under the heading “Current tax liabilities” in the Consolidated Balance Sheet as of 31 December 2021.
If the result of the procedure is considered to be replicable to years not reviewed and open to inspection, the Group has estimated that it is not necessary to record provisions in the consolidated financial statements mainly because the number of transactions that gave rise to the aforementioned assessments has significantly decreased since the years in which they were inspected.
Likewise, having adjusted the allocation of taxable income in accordance with the aforementioned assessments for the purposes of their consideration for the determination of Transfer Pricing, the Group now has a legal right to recover certain amounts from the corresponding Administration, in accordance with the provisions of the European Convention on International Commercial Arbitration with respect to international double taxation. The minimum amount to be recovered, upon which its realization is virtually certain, has been recorded as a non-current receivable included in the caption “other payable” as of 31 December 2021.
| ● | Grifols Shared Services North America, Inc. and subsidiaries: In 2020 notification of an inspection was received relating to the State Income Tax for the fiscal years 2017 and 2018. |
Group management does not expect any significant liability to derive from these inspections.
Based on its experience of the different tax inspections in the different jurisdictions in which Grifols operates, the Group considers it unlikely that there will be a scenario of discrepancy with the taxation authorities that will require significant adjustments to be made to the tax result or to the asset and/or liability balances relating to corporate income tax.
(29) Other Commitments with Third Parties and Other Contingent Liabilities
(a) | Guarantees |
The Group has no significant guarantees extended to third parties.
(b) | Guarantees committed with third parties |
The Group has no significant guarantees extended to third parties, except for those described in note 21.
F-98
(c) | Obligations with personnel |
The Group’s annual contribution to defined contribution pension plans of Spanish Group companies for 2021 has amounted to Euros
In successive years this contribution will be defined through labor negotiations.
In the event that control is taken of the Company, the Group has agreements with
The Group has contracts with
Restricted Share Unit Retention Plan
For the annual bonus, the Group established a Restricted Share Unit Retention Plan (RSU Plan), for eligible employees. Under this plan, employees can choose to receive up to
Grifols Class B Shares and Grifols ADS are valued at grant date.
These RSU’s will have a vesting period of and, subsequently, the RSU’s will be exchanged for Grifols Class B Shares or Grifols ADS (American Depositary Share representing
If an eligible employee leaves the Company or is terminated before the vesting period, he/she will not be entitled to the additional RSU’s.
At 31 December 2021, the Group has settled the RSU plan of 2018 for an amount of Euros
This commitment is treated as equity instrument and the amount totals Euros
Savings plan and profit-sharing plan
The Group has a defined contribution plan (savings plan), which qualifies as a deferred salary arrangement under Section 401 (k) of the Internal Revenue Code (IRC). Once eligible, employees may elect to contribute a portion of their salaries to the savings plan, subject to certain limitations. The Group matches
Other plans
The Group has a defined benefit pension plan for certain former Talecris Biotherapeutics, GmbH employees in Germany as required by statutory law. The pension cost relating to this plan is not material for the periods presented.
F-99
(d) | Purchase commitments |
Details of the Group’s raw material purchase commitments at 31 December 2021 are as follows:
| Thousands of Euros | |
2022 |
| |
2023 |
| |
2024 |
| |
2025 |
| |
2026 |
| |
More than 5 years | — |
(e) | Judicial procedures and arbitration |
Details of legal proceedings in which the Company or Group companies are involved are as follows:
● ABBOTT LABORATORIES v. GRIFOLS DIAGNOSTIC SOLUTIONS INC., GRIFOLS WORLDWIDE OPERATIONS LIMITED AND NOVARTIS VACCINES AND DIAGNOSTICS, INC.
Served: 8 October 2019
US District Court, Northern District of Illinois
Patent Infringement, Civil Action No. 1:19-cv-6587
Abbott Laboratories (“Abbott”), GDS, GWWO and Novartis Vaccines and Diagnostics, Inc. are in dispute over unpaid royalties payable by Abbott to GDS and Ortho-Clinical Diagnostics (“Ortho”) under an HIV License and Option agreement dated 16 August 2019 (the “HIV License”).
On 12 September 2019, GDS and Ortho filed Notice of Arbitration. On 3 October 2019, Abbott terminated the HIV License and filed for Declaratory Relief seeking to invalidate the licensed patent. On 16 March 2020, Grifols and Ortho filed an answer and counterclaim to the litigation, while simultaneously pursuing arbitration for the pre-termination amount owed by Abbott. The arbitration hearing was 15-16 June 2020. Grifols/Ortho were awarded US Dollars
NEXT ACTION: The court litigation is continuing with regard to post termination infringement of Grifols' patents. Abbot’s Motion to Dismiss was denied 1 December 2020. Fact discovery has concluded. The court conducted a Markman (Claim Construction) hearing on February 25, 2022. Order on claim construction expected end of April, 2022.
| ● | SIEMENS HEALTHCARE DIAGNOSTICS, INC. adv. ORTHO-CLINICAL DIAGNOSTICS, INC., GRIFOLS DIAGNOSTIC SOLUTIONS INC. |
Served: 10 November 2020
Contract Dispute
Siemens initiated dispute resolution against Ortho and GDS under the Supply Agreement alleging overpayments after an audit by Siemens.
NEXT ACTION: Arbitration is continuing. All fact witnesses have testified. Yet to be scheduled is the questioning of experts, a final briefing and final oral argument.
F-100
POTENTIAL OUTCOME: Based on current financial calculations, it is probable that there may be a finding for Grifols to pay Siemens under the supply agreement, up to US Dollars
| ● | RAMIREZ-VIVAR, ALFONSO v. GRIFOLS DIAGNOSTIC SOLUTIONS, INC. |
Served: 11 March 2021
Superior Court, CA County of Alameda
Case No.: RG21089519
Wage Hour Class Action
Plaintiff claiming violation of CA wage hour statutes.
NEXT STEP: Plaintiff's deposition taken on 28 June 2021. Parties have continued with written discovery., Person Most Knowledgeable depositions are being scheduled. Belaire-West notices to proposed class members were sent out to proposed class members in March 2022. Class certification motion is currently scheduled to be filed by 2 May 2022.
CLASS POTENTIAL: Approx. 300 CA GDS employees for payroll/wage hour violations per pay period for 4 years
| ● | VAUGHAN, BRIAN, DARNELL, JASON v. BIOMAT USA, INC., TALECRIS PLASMA RESOURCES, INC., INTERSTATE BLOOK BANK, INC. |
Served: 22 June 2020
Circuit Court of Cook County
Case No. 2020CH04519
Illinois Biometric Information Protection Act
Former donor and employee alleging violation of IL Biometric Information Protection Act in potential class action.
NEXT ACTION: Motion to Dismiss and all responsive pleadings have been filed as of 17 December 2021. Await court ruling. Plaintiff has been pushing discovery even with MTD pending. Negotiating discovery parameters. If proposed discovery is limited, we will request a protective order. If it is not, a motion for stay of discovery will be initiated.
CLASS POTENTIAL: Approx.
| ● | CERUS CORPORATION v. LABORATORIOS GRIFOLS, S.A. |
Cerus Corporation (“Cerus”) and Laboratorios Grifols, S.A. (“Grifols”) entered into a Manufacturing and Supply Agreement executed in 2016, pursuant to which Grifols was to manufacture and supply to Cerus processing and filters sets to be used by Cerus in its own product (the “Agreement”). As a result of Grifols’ decision to discontinue the manufacturing, sale and support of its blood bag product business worldwide, Grifols is unable to comply with the Agreement.
In December 2021, Cerus filed a notice of arbitration in the UK pursuant to the terms of the Agreement alleging wrongful termination of the Agreement by Grifols. Furthermore, in January 2022, Cerus filed injunctive measures with the Courts of Rubí (Barcelona) requiring the suspension of the closure of Grifols’ blood bags production facility until the arbitration proceedings is finalized.
F-101
NEXT ACTION: The parties have agreed that the arbitration will be conducted by a 3 person tribunal. Cerus has appointed its arbitrator and Grifols is currently selecting one. The appointed arbitrators will then appoint the third arbitrator. In parallel, the hearing on the injunctive measures is set for March 2022. At the end of February the Parties requested that both the arbitration and the hearing on the injunctive measures be suspended for a period of
| ● | THE STATE CO. FOR MARKETING DRUGS AND MEDICAL APPLIANCES IN IRAQ (KIMADIA) v. LABORATORIOS GRIFOLS, S.A. |
The State Co. for Marketing Drugs and Medical Appliances in Iraq (“KIMADIA”) awarded a tender for the supply of blood bags to Laboratorios Grifols, S.A. (“Grifols”). Grifols, through Hali/Tiba (its agent in Iraq), informed KIMADIA on Grifols’ inability to supply the blood bags pursuant to the tender awarded, due to its decision to discontinue the manufacturing, sale and support of its blood bag product business.
The tender documents set forth a list of penalties and compensations in case the awardee is unable to supply the products to KIMADIA. Further, Hali/Tiba also claims Grifols a compensation for the services performed in relation to the tender.
NEXT ACTION: Grifols is going to initiate discussions with KIMADIA, with the assistance of Hali/Tiba, to agree on a possible compensation to be paid to KIMADIA, so as to avoid any possible judicial proceedings. Currently, the negotiations, which are very slow, are on-going, with the local assistance of Hali/Tiba to try to reduce the possible penalties set forth in the tender documents.
F-102
(30) Financial Instruments
Classification
Disclosure of financial instruments by nature, category and fair value is as follows:
Thousands of Euros | ||||||||||||||||||||||
31/12/2021 | ||||||||||||||||||||||
Carrying amount | Fair Value | |||||||||||||||||||||
Financial assets | Financial | Financial | Other | |||||||||||||||||||
at amortised | Financial assets | assets at FV | liabilities at | financial | ||||||||||||||||||
| costs |
| at FVTPL |
| to OCI | Hedges |
| amortised costs |
| liabilities |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||
Non-current financial assets |
| — | |
| | — |
| — |
| — |
| |
| |
| — |
| |
| | ||
Derivatives instruments | — | — | — | | — | — | | — | | — | | |||||||||||
Trade receivables | — | — | | — | — | — | | — | | — | | |||||||||||
Financial assets measured at fair value | — | |
| | |
| — |
| — |
| |
|
|
|
|
|
|
| ||||
Non-current financial assets | | — |
| — | — |
| — |
| — |
| | |||||||||||
Other current financial assets |
| | — |
| — | — |
| — |
| — |
| |
|
|
|
|
|
|
|
| ||
Trade and other receivables |
| | — |
| — | — | — |
| — |
| |
|
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| | — |
| — | — |
| — |
| — |
| |
|
|
|
|
|
|
|
| ||
Financial assets not measured at fair value |
| | — |
| — | — |
| — |
| — |
| |
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| |||||||||||||||
Derivatives instruments | — | ( | — | — | — | ( | — | ( | — | ( | ||||||||||||
Financial liabilities measured at fair value | — | ( | — | — | — | — | ( | |||||||||||||||
Senior Unsecured Secured Notes |
| — | — |
| — | — |
| ( |
| — |
| ( | ( |
| — |
| — |
| ( | |||
Promissory Notes |
| — | — |
| — | — |
| ( |
| — |
| ( |
|
|
|
|
|
|
| |||
Senior secured debt |
| — | — |
| — | — |
| ( |
| — |
| ( |
| — |
| ( |
| — |
| ( | ||
Other bank loans |
| — | — |
| — | — |
| ( |
| — |
| ( |
|
|
|
|
|
|
|
| ||
Lease liabilities |
| — | — |
| — | — |
| ( |
| — |
| ( |
|
|
|
|
|
|
|
| ||
Other financial liabilities |
| — | — |
| — | — |
| ( |
| — |
| ( |
|
|
|
|
|
|
|
| ||
Other non-current debts | — | — | — | — | — | ( | ( | |||||||||||||||
Trade and other payables |
| — | — |
| — | — |
| ( |
| — |
| ( |
|
|
|
|
|
|
| |||
Other current liabilities |
| — | — |
| — | — |
| — |
| ( |
| ( |
|
|
|
|
|
|
|
| ||
Financial liabilities not measured at fair value |
| — | — |
| — | — |
| ( |
| ( |
| ( |
|
|
|
|
|
|
|
| ||
| | ( |
| | |
| ( |
| ( |
| ( |
|
|
|
|
|
|
|
| |||
F-103
The Group does not provide details of the fair value of certain financial instruments as their carrying amount is very similar to their fair value because of its short term.
Thousands of Euros | ||||||||||||||||||||
31/12/2020 | ||||||||||||||||||||
Carrying amount | Fair Value | |||||||||||||||||||
Financial assets | Financial | Financial | Financial | Other | ||||||||||||||||
at amortised | assests at | assets at FV | liabilities at | financial | ||||||||||||||||
| costs | FV to profit or loss |
| to OCI | amortised costs |
| liabilities |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||
Non-current financial assets |
| — | |
| | — |
| — |
| |
| |
| — |
| |
| | ||
Trade receivables |
| — |
| — |
| |
| — |
| — |
| |
| — |
| |
| — |
| |
Financial assets measured at fair value |
| — | |
| | — |
| — |
| |
|
|
|
|
|
|
| |||
Non-current financial assets |
| | — |
| — | — |
| — |
| |
|
|
|
|
|
|
|
| ||
Other current financial assets |
| | — |
| — | — |
| — |
| |
|
|
|
|
|
|
|
| ||
Trade and other receivables |
| | — |
| — | — | — |
| |
|
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| | — |
| — | — |
| — |
| |
|
|
|
|
|
|
|
| ||
Financial assets not measured at fair value |
| | — |
| — | — |
| — |
| |
|
|
|
|
|
|
|
| ||
Senior Unsecured Secured Notes |
| — | — |
| — | ( |
| — |
| ( |
| ( |
| — |
| — |
| ( | ||
Promissory Notes |
| — | — |
| — | ( |
| — |
| ( |
|
|
|
|
|
|
| |||
Senior secured debt |
| — | — |
| — | ( |
| — |
| ( |
| — |
| ( |
| — |
| ( | ||
Other bank loans |
| — | — |
| — | ( |
| — |
| ( |
|
|
|
|
|
|
| |||
Lease liabilities |
| — | — |
| — | ( |
| — |
| ( |
|
|
|
|
|
|
| |||
Other financial liabilities |
| — | — |
| — | ( |
| — |
| ( |
|
|
|
|
|
|
| |||
Other non-current debts | — | — | — | — | ( | ( | ||||||||||||||
Trade and other payables |
| — | — |
| — | ( |
| — |
| ( |
|
|
|
|
|
|
| |||
Other current liabilities |
| — | — |
| — | — |
| ( |
| ( |
|
|
|
|
|
|
| |||
Financial liabilities not measured at fair value |
| — | — |
| — | ( |
| ( |
| ( |
|
|
|
|
|
|
| |||
| | |
| | ( |
| ( |
| ( |
|
|
|
|
|
|
| ||||
The Group does not provide details of the fair value of certain financial instruments as their carrying amount is very similar to their fair value because of its short term.
Financial derivatives
At 31 December 2021 the Group has recognized the following derivatives:
Thousands of Euros | ||||||||||||
Notional | Notional | |||||||||||
amount at | amount at | Value at | Value at | |||||||||
Financial derivatives | Currency | 31/12/2021 | 31/12/2020 | 31/12/21 | 31/12/20 | Maturity | ||||||
Cross currency interest rate swap |
| US Dollar |
| |
| — |
| |
| — |
| 15/10/2024 |
Foreign exchange rate forward |
| Canadian dollar |
| |
| — |
| ( |
| — |
| 25/01/2022 |
Total |
|
|
|
|
|
|
| |
| — |
|
|
Total Assets (notes 2 and 11) |
|
|
|
|
|
|
| |
| — |
|
|
Total Liabilities (notes 21 and 30) |
|
|
|
|
|
|
| ( |
| — |
|
|
(a)Hedging derivative financial instruments
On 5 October 2021, the Group subscribed
- | The Group receives a loan of Euros |
- | The Group gives a loan of US Dollars |
F-104
The derivative complies with the criteria required for hedge accounting. See further details in notes 4 (l) and 16 (g).
(b)Derivative financial instruments at fair value through profit and loss
The Group has subscribed a foreign exchange forward dated trade to partially hedge the US dollar equivalent value of a Canadian dollar intercompany loan. Since the Group chooses not to apply hedge accounting criteria, gains or losses resulting from changes in the fair value of derivatives are taken directly to “Change in fair value of financial instruments” in the consolidated statement of profit and loss. At 31 December 2021, the Group has recognized a net finance cost of Euros
Credit risk
(a) | Exposure to credit risk |
The carrying amount of financial assets represents the maximum exposure to credit risk. At 31 December 2021 and 2020 the maximum level of exposure to credit risk is as follows:
Thousands of Euros | ||||||
Carrying amount |
| Note |
| 31/12/2021 |
| 31/12/2020 |
Non-current financial assets |
| 12 |
| |
| |
Other current financial assets |
| 12 |
| |
| |
Trade receivables |
| 14 |
| |
| |
Other receivables |
| 14 |
| |
| |
Cash and cash equivalents |
| 15 |
| |
| |
|
|
| |
| | |
The maximum level of exposure to risk associated with receivables at 31 December 2021 and 2020, by geographical area, is as follows.
Thousands of Euros | ||||
Carrying amount |
| 31/12/2021 |
| 31/12/2020 |
Spain |
| |
| |
EU countries |
| |
| |
United States of America |
| |
| |
Other European countries |
| |
| |
Other regions |
| |
| |
| |
| | |
F-105
(b)Impairment losses
A breakdown of the trade and other receivables net of the impairment losses by ageing as of 31 December 2020 is as follows:
Thousands of Euros | ||||||||
Total net trade | ||||||||
Total gross carrying | receivable third | |||||||
| ECL Rate |
| amount |
| Provision |
| party | |
Not matured |
| | % | |
| ( |
| |
Past due 0-30 days |
| | % | |
| ( |
| |
Past due 31-60 days |
| | % | |
| ( |
| |
Past due 61-90 days |
| | % | |
| ( |
| |
Past due 91-180 days |
| | % | |
| ( |
| |
Past due 181-365 days |
| | % | |
| ( |
| |
More than one year |
| | % | | ( | — | ||
Customers with objective evidence of impairment |
|
|
| | ( | — | ||
| | ( | | |||||
A breakdown of the trade and other receivables net of the impairment losses by seniority at 31 December 2021 is as follows:
Thousands of Euros | ||||||||
Total net trade | ||||||||
Total gross carrying | receivable third | |||||||
| ECL Rate |
| amount |
| Provision |
| party | |
Not matured |
| | % | |
| ( |
| |
Past due 0-30 days |
| | % | |
| ( |
| |
Past due 31-60 days |
| | % | |
| ( |
| |
Past due 61-90 days |
| | % | |
| ( |
| |
Past due 91-180 days |
| | % | |
| ( |
| |
Past due 181-365 days |
| | % | |
| ( |
| |
More than one year |
| | % | |
| ( |
| — |
— | ||||||||
Customers with objective evidence of impairment |
|
|
| |
| ( |
| — |
| |
| ( |
| | |||
Unimpaired receivables that are past due mainly relate to public entities.
Movement in the bad debt provision was as follows:
Thousands of Euros | ||||||
| 31/12/2021 | 31/12/2020 |
| 31/12/2019 | ||
Opening balance |
| |
| |
| |
Net charges for the year |
| |
| |
| |
Net cancellations for the year |
| ( |
| ( |
| ( |
Transfers | — | ( | ( | |||
Translation differences |
| |
| ( |
| ( |
Closing balance |
| |
| |
| |
F-106
An analysis of the concentration of credit risk is provided in note 5 (a).
Liquidity risk
The management of the liquidity risk is explained in note 5.
Details of the contractual maturity dates of financial liabilities including committed interest calculated using interest rate forward curves are as follows:
Thousands of Euros | ||||||||||||||||
|
|
| Carrying |
|
|
|
|
|
|
|
|
|
| |||
amount at | Contractual | 6 months | 6 - 12 | 1-2 | 2 - 5 | More than | ||||||||||
Carrying amount | Note | 31/12/21 | flows | or less | months | years | years | 5 years | ||||||||
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans |
| 21 |
| |
| |
| |
| |
| |
| |
| |
Other financial liabilities |
| 21 |
| |
| |
| |
| |
| |
| |
| |
Bonds and other marketable securities |
| 21 |
| |
| |
| |
| |
| |
| |
| |
Lease liabilities |
| 21 |
| |
| |
| |
| |
| |
| |
| |
Payable to suppliers |
| 22 |
| |
| |
| |
| |
| — |
| — |
| — |
Other current liabilities |
| 23 |
| |
| |
| |
| |
| — |
| — |
| — |
Financial derivatives | | | | — | — | — | — | |||||||||
Total |
|
|
| |
| |
| |
| |
| |
| |
| |
Thousands of Euros | ||||||||||||||||
|
| Carrying |
|
|
|
|
|
|
|
|
|
| ||||
amount at | Contractual | 6 months | 6 - 12 | 1-2 | 2 - 5 | More than | ||||||||||
Carrying amount |
| Note |
| 31/12/20 |
| flows |
| or less |
| months |
| years |
| years |
| 5 years |
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans |
| 21 |
| |
| |
| |
| |
| |
| |
| |
Other financial liabilities |
| 21 |
| |
| |
| |
| |
| |
| |
| |
Bonds and other marketable securities |
| 21 |
| |
| |
| |
| |
| |
| |
| |
Lease liabilities |
| 21 |
| |
| |
| |
| |
| |
| |
| |
Payable to suppliers |
| 22 |
| |
| |
| |
| |
| — |
| — |
| — |
Other current liabilities |
| 23 |
| |
| |
| |
| |
| — |
| — |
| — |
Total |
|
|
| |
| |
| |
| |
| |
| |
| |
F-107
Currency risk
The Group’s exposure to currency risk is as follows:
Thousands of Euros | ||||
31/12/2021 | ||||
| Euros (*) |
| Dollars (**) | |
Trade receivables |
| |
| |
Receivables from Group companies |
| |
| |
Loans to Group companies |
| |
| |
Cash and cash equivalents |
| |
| |
Trade payables |
| ( |
| ( |
Payables to Group companies |
| ( |
| ( |
Loans from Group companies |
| ( |
| ( |
Bank loans |
| ( |
| — |
Balance sheet exposure |
| |
| ( |
(*) Balances in Euros in subsidiaries with US Dollars functional currency
(**) Balances in US Dollars in subsidiaries with Euros functional currency
Thousands of Euros | ||||
31/12/2020 | ||||
| Euros (*) |
| Dollars (**) | |
Trade receivables |
| |
| |
Receivables from Group companies |
| |
| |
Loans to Group companies |
| |
| |
Cash and cash equivalents |
| |
| |
Trade payables |
| ( |
| ( |
Payables to Group companies |
| ( |
| ( |
Loans from Group companies |
| ( |
| ( |
Bank loans |
| ( |
| — |
Balance sheet exposure |
| |
| ( |
(*)Balances in Euros in subsidiaries with US Dollars functional currency
(**)Balances in US Dollars in subsidiaries with Euros functional currency
The most significant exchange rates applied at 2021 and 2020 year ends are as follows:
Closing exchange rate | ||||
Euros |
| 31/12/2021 |
| 31/12/2020 |
US Dollars |
| |
| |
A sensitivity analysis for foreign exchange fluctuations is as follows:
Had the US Dollar strengthened by
A
F-108
The Group applies hedge accounting to partially hedge its exposure to currency risk (see note 5).
Interest rate risk
(a) | Interest-rate profile |
To date, the profile of interest on interest-bearing financial instruments is as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Fixed-interest financial instruments |
|
|
|
|
Financial liabilities |
| ( |
| ( |
| ( |
| ( | |
Variable-interest financial instruments | ||||
Financial liabilities |
| ( |
| ( |
| ( |
| ( | |
( | ( | |||
(b) | Sensitivity analysis |
If the interest rate had been
If the interest rate had been
(31) Balances and Transactions with Related Parties
Details of balances with related parties are as follows:
Thousands of Euros | ||||
| 31/12/2021 |
| 31/12/2020 | |
Receivables from associates (note 14) |
| |
| |
Trade payables associates |
| ( |
| ( |
Loans to other related parties (note 12) | | | ||
Other financial assets with other related parties | | | ||
Debts with key management personnel |
| ( |
| ( |
Payables to other related parties |
| ( |
| ( |
| |
| | |
Payables are included in trade and other payables (see note 22).
F-109
(a) | Group transactions with related parties |
Group transactions with related parties during 2019 were as follows:
Thousands of Euros | ||||||||
|
|
| Key management |
| Other related |
| Board of directors | |
Associates | personnel | parties | of the Company | |||||
Net sales |
| |
| — |
| — |
| — |
Purchases | ( |
| — |
| — |
| — | |
Other service expenses |
| ( |
| — |
| ( |
| ( |
Remuneration |
| — |
| ( |
| — |
| ( |
Payments for rights of use |
| — |
| — |
| ( |
| — |
Finance income | | — | — | — | ||||
Finance cost |
| ( |
| — |
| — |
| — |
| ( |
| ( |
| ( |
| ( | |
Group transactions with related parties during 2020 were as follows:
Thousands of Euros | ||||||||
|
|
| Key management |
| Other related |
| Board of directors | |
Associates | personnel | parties | of the Company | |||||
Net sales |
| |
| — |
| — |
| — |
Purchases |
| ( | — | — | — | |||
Other service expenses |
| ( |
| — |
| ( |
| — |
Remuneration |
| — |
| ( |
| — |
| ( |
Payments for rights of use | — | — | ( | — | ||||
Purchase of property, plant and equipment | — | — | ( | — | ||||
Finance income |
| |
| — |
| — |
| — |
| |
| ( |
| ( |
| ( | |
Group transactions with related parties during 2021 are as follows:
Thousands of Euros | ||||||||
|
|
| Key management |
| Other related |
| Board of directors | |
Associates | personnel | parties | of the Company | |||||
Net sales |
| |
| — |
| — |
| — |
Purchases |
| ( | — | — | — | |||
Other service expenses |
| ( |
| — |
| ( |
| — |
Remuneration |
| — |
| ( |
| — |
| ( |
Payments for rights of use | — | — | ( | — | ||||
Purchase of property, plant and equipment | — | — | | — | ||||
Finance income | |
| — |
| — |
| — | |
| |
| ( |
| ( |
| ( | |
Every year the Group contributes
“Other service expenses” include contributions to non-profit organizations totaling Euros
F-110
During 2011
On 28 December 2018, the Group sold Biotest and Haema to Scranton Enterprises B.V (shareholder of Grifols) for US Dollars
Directors representing shareholders´ interests have received remuneration of Euros
The Group has not extended any advances or loans to the members of the board of directors or key management personnel nor has it assumed any guarantee commitments on their behalf. It has also not assumed any pension or life insurance obligations on behalf of former or current members of the board of directors or key management personnel. In addition, certain Company directors and key management personnel have termination benefit commitments (see note 29 (c)).
(b) | Conflicts of interest concerning the directors |
The Company’s directors and their related parties have not entered into any conflict of interest that should have been reported in accordance with article 229 of the revised Spanish Companies Act.
(32) COVID-19 Impact
The impacts from COVID-19 pandemic are detailed in the consolidated Directors’ report included in these notes to the consolidated financial statements.
(33) Subsequent events
a)GIC Transaction
On 28 April 2022, the consolidated annual accounts at 31 December 2021 prepared under IFRS-EU principles have been re-authorized for issue due to the need to carry out a reclassification in the balance sheet of the financial instrument signed with GIC, described in Note 21, from net equity to financial liability. However, at the date of preparation of these consolidated financial statements, the parties are analyzing the necessary modifications in the terms and conditions of the agreement in order to classify such transaction as an equity instrument, thereby reflecting their initial will of the parties.
b)Biotest, AG
F-111
In September 2021, Grifols announced its strategic investment in Biotest, a transaction that underscores the companies’ shared commitment to work together to globally increase the availability of plasma therapies for the benefit of patients around the world.
The investment in Biotest will significantly reinforce Grifols’ scientific and industrial capabilities, helping to increase the availability of plasma medicines and broaden its commercial footprint and RD project portfolio.
Following the opening of
In April 2022, having completed the Public Takeover Offer (PTO) and closed the acquisition of Tiancheng (Germany) Pharmaceutical Holdings, Grifols now controls
Grifols has agreed to acquire the entire share capital of Tiancheng (Germany) Pharmaceutical Holdings AG for EUR
Parallel to the transaction, Grifols has closed the voluntary public tender offer (VTO) to all outstanding shareholders, resulting in the payment of EUR
c)Endpoint Health
On February 2022 Grifols announced a collaboration with Endpoint Health, Inc., a precision-medicine therapeutics company dedicated to addressing urgent needs in immune-driven critical care, to develop an antithrombin (AT) therapy to treat disseminated intravascular coagulation (DIC) caused by severe sepsis or septic shock, a life-threatening response to infection.
As part of the agreement, Grifols will contribute its industry-leading expertise in plasma-protein therapies and be the exclusive supplier of AT, a plasma protein that treats patients with blood clotting issues.
In exchange for a US Dollar
The collaboration with Endpoint Health, which will furnish its proprietary diagnostic test to identify septic patients mostly likely to respond to AT therapy, aims to expand Thrombate®’s indication. Upon FDA approval and according to market sourcing needs for AT at the time, the companies will invest up to US
F-112
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
Acquisition / | 12/31/2021 | 12/31/2020 | 12/31/2019 |
| |||||||||||||||||||
Registered | Registered | Incorporation | % shares | % shares | % shares |
| |||||||||||||||||
Name |
| Offices |
| Office |
| date |
| Activity |
| Statutory Activity |
| Direct |
| Indirect |
| Direct |
| Indirect |
| Direct |
| Indirect |
|
Fully Consolidated Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Diagnostic Grifols, S.A. |
| Spain | Polígono Levante |
| 1987 |
| Industrial |
| Development and manufacture of diagnostic equipment, instruments and reagents. |
| — |
| | % | — |
| | % | — |
| | % | |
Instituto Grifols, S.A. |
| Spain | Polígono Levante |
| 1987 |
| Industrial |
| Plasma fractioning and the manufacture of haemoderivative pharmaceutical products. |
| | % | | % | | % | | % | | % | | % | |
Grifols Worldwide Operations Spain, S.A (formerly Logister, S.A.) Merged with Grifols International in 2018 |
| Spain | Polígono Levante |
| 1987 |
| Services |
| Manufacture, sale and purchase, commercialisation and distribution of all types of computer products and materials. |
| — |
| — | — |
| — | — |
| — | ||||
Laboratorios Grifols, S.A. |
| Spain | Polígono Levante |
| 1989 |
| Industrial |
| Production of glass- and plastic-packaged parenteral solutions, parenteral and enteral nutrition products |
| | % | | % | | % | | % | | % | | % | |
Biomat, S.A. |
| Spain | Polígono Levante |
| 1991 |
| Industrial |
| Analysis and certification of the quality of plasma used by Instituto Grifols, S.A. It also provides |
| | % | | % | | % | | % | | % | | % | |
F-113
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
centres with plasma virus inactivation services (I.P.T.H). | |||||||||||||||||||||||
Grifols Engineering, S.A. |
| Spain | Polígono Levante |
| 2000 |
| Industrial |
| Design and development of the Group’s manufacturing installations and part of the equipment and |
| | % | | % | | % | | % | | % | | % | |
Biomat USA, Inc. |
| United States | 2410 Lillyvale Avenue |
| 2002 |
| Industrial |
| Procuring human plasma. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols Biologicals LLC. |
| United States | 5555 Valley Boulevard |
| 2003 |
| Industrial |
| Plasma fractioning and the production of haemoderivatives. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols Australia Pty Ltd. |
| Australia | Unit 5/80 Fairbank |
| 2009 |
| Industrial |
| Distribution of pharmaceutical products and the development and manufacture of reagents for |
| | % | — |
| | % | — |
| | % | — |
| |
Medion Grifols Diagnostic AG |
| Switzerland | Bonnstrasse,9 |
| 2009 |
| Industrial |
| Development and manufacturing activities in the area of biotechnology and diagnostics. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols Therapeutics LLC. |
| United States | 4101 Research Commons |
| 2011 |
| Industrial |
| Plasma fractioning and the production of haemoderivatives. |
| — |
| | % | — |
| | % | — |
| | % | |
F-114
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
Talecris Plasma Resources, Inc. |
| United States | 4101 Research Commons |
| 2011 |
| Industrial |
| Procurement of human plasma. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols Worldwide Operations Limited |
| Grange Castle Business Park, |
| 2012 |
| Industrial |
| Packaging, labelling, storage, distribution, manufacture and development of pharmaceutical products |
| | % | — |
| | % | — |
| | % | — |
| ||
Progenika Biopharma, S.A. |
| Parque Tecnológico de Vizcaya, |
| 2013 |
| Industrial |
| Development, production and commercialisation of biotechnological solutions. |
| | % | | % | | % | | % | | % | | % | ||
Asociación I+D Progenika |
| Parque Tecnológico de Vizcaya, |
| 2013 |
| Industrial |
| Coordination, representation, management and promotion of the common interests of associated |
| — |
| — | — |
| — | — |
| — | |||||
Grifols Diagnostics Solutions Inc (formerly G-C Diagnostics Corp.) |
| 4560 Horton Street |
| 2013 |
| Industrial |
| Manufacture and sale of blood testing products |
| — | | % | — | | % | — | | % | |||||
Grifols Worldwide Operations USA Inc. |
| 13111 Temple Avenue, City of |
| 2014 |
| Industrial |
| The manufacture, warehousing, and logistical support for biological products. |
| — |
| | % | — |
| | % | — |
| | % | ||
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APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
Grifols Asia Pacific Pte, Ltd |
| Singapore | 501 Orchard Road nº20-01 |
| 2003 |
| Commercial |
| Distribution and sale of medical and pharmaceutical products. |
| | % | — |
| | % | — |
| | % | — |
| |
Grifols Movaco, S.A. |
| Polígono Levante |
| 1987 |
| Commercial |
| Distribution and sale of reagents, chemical products and other pharmaceutical specialities, and of medical and surgical materials, equipment and instruments for use by laboratories and health centres. |
| | % | | % | | % | | % | | % | | % | ||
Grifols Portugal Productos Farmacéuticos e Hospitalares, Lda. |
| Portugal | Rua de Sao Sebastiao,2 |
| 1988 |
| Commercial |
| Import, export and commercialisation of pharmaceutical and hospital equipment and products, particularly Grifols products. |
| | % | | % | | % | | % | | % | | % | |
Grifols Chile, S.A. |
| Chile | Avda. Americo Vespucio, 2242 |
| 1990 |
| Commercial |
| Development of pharmaceutical businesses, which can involve the import, production, commercialisation and export of related products. |
| | % | — |
| | % | — |
| | % | — |
| |
Grifols USA, LLC. |
| United States | 2410 Lillyvale Avenue |
| 1990 |
| Commercial |
| Distribution and marketing of company products. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols Argentina, S.A. |
| Argentina | Bartolomé Mitre 3690/3790, |
| 1991 |
| Commercial |
| Clinical and biological research. Preparation of reagents and therapeutic and diet products. |
| | % | | % | | % | | % | | % | | % |
F-116
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
Manufacture and commercialisation of other pharmaceutical specialities. | |||||||||||||||||||||||
Grifols s.r.o. |
| Czech Republic | Calle Zitna,2 |
| 1992 |
| Commercial |
| Purchase, sale and distribution of chemical-pharmaceutical products, including human plasma. |
| | % | — |
| | % | — |
| | % | — |
| |
Grifols (Thailand) Ltd |
| Thailand | 191 Silom Complex Building, |
| 2003 |
| Commercial |
| Import, export and distribution of pharmaceutical products. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols Malaysia Sdn Bhd |
| Malaysia | Level 18, The Gardens North |
| 2003 |
| Commercial |
| Distribution and sale of pharmaceutical products. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols International, S.A. |
| Spain | Polígono Levante |
| 1997 |
| Commercial |
| Coordination of the marketing, sales and logistics for all the Group’s subsidiaries operating in other |
| | % | | % | | % | | % | | % | | % | |
Grifols Italia S.p.A |
| Italy | Via Carducci, 62d |
| 1997 |
| Commercial |
| Purchase, sale and distribution of chemical-pharmaceutical products. |
| | % | — |
| | % | — |
| | % | — |
| |
Grifols UK Ltd. |
| United Kingdom | Gregory Rowcliffe Milners, 1 |
| 1997 |
| Commercial |
| Distribution and sale of therapeutic and other pharmaceutical products, especially haemoderivatives. |
| | % | — | | % | — |
| | % | — |
| ||
Grifols Brasil, Lda. |
| Brazil | Rua Umuarama, 263 |
| 1998 |
| Commercial |
| Import and export, preparation, distribution and |
| | % | | % | | % | | % | | % | | % |
F-117
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
CEP 83.325-000 Pinhais | sale of pharmaceutical and chemical products for | ||||||||||||||||||||||
Grifols France, S.A.R.L. |
| France | Arteparc, Rue de la Belle du Canet, |
| 1999 |
| Commercial |
| Commercialisation of chemical and healthcare products. |
| | % | | % | | % | | % | | % | | % | |
Grifols Polska Sp.z.o.o. |
| Poland | Grzybowska 87 street00-844 |
| 2003 |
| Commercial |
| Distribution and sale of pharmaceutical, cosmetic and other products. |
| | % | — |
| | % | — |
| | % | — |
| |
Logística Grifols, S.A. de C.V. |
| Mexico | Calle Eugenio Cuzin, nº 909-913 |
| 2008 |
| Commercial |
| Manufacture and commercialisation of pharmaceutical products for human and veterinary use. |
| | % | | % | | % | | % | | % | | % | |
Grifols México, S.A. de C.V. |
| Mexico | Calle Eugenio Cuzin, nº 909-913 |
| 1993 |
| Commercial |
| Production, manufacture, adaptation, conditioning, sale and purchase, commissioning, representation |
| | % | | % | | % | | % | | % | | % | |
Medion Diagnostics GmbH |
| Germany | Lochamer Schlag, 12D |
| 2009 |
| Commercial |
| Distribution and sale of biotechnological and diagnostic products. |
| — |
| — | — |
| — | — |
| — |
F-118
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
Grifols Nordic, AB |
| Sweden | Sveavägen 166 |
| 2010 |
| Commercial |
| Research and development, production and marketing of pharmaceutical products, medical devices and |
| | % | — |
| | % | — |
| | % | — |
| |
Grifols Colombia, Ltda |
| Colombia | Carrera 7 No. 71 52 Torre B piso |
| 2010 |
| Commercial |
| Sale, commercialisation and distribution of medicines, pharmaceutical (including but not limited to |
| | % | | % | | % | | % | | % | | % | |
Grifols Deutschland GmbH |
| Germany | Lyoner Strasse 15, D- |
| 2011 |
| Commercial |
| Procurement of the official permits and necessary approval for the production, commercialisation and |
| | % | — |
| | % | — |
| | % | — |
|
F-119
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
health centres | |||||||||||||||||||||||
Grifols Canada, Ltd. |
| Canada | 5060 Spectrum Way, Suite 405 |
| 2011 |
| Commercial |
| Distribution and sale of biotechnological products. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols Pharmaceutical Technology (Shanghai) Co., Ltd. |
| Unit 901-902, Tower 2, No. |
| 2013 |
| Commercial |
| Pharmaceutical consultancy services (except for diagnosis), technical and logistical consultancy |
| | % | — |
| | % | — |
| | % | — |
| ||
Grifols Switzerland AG |
| Steinengraben, 5 |
| 2013 |
| Commercial |
| Research, development, import and export and commercialisation of pharmaceutical products, devices |
| — | — |
| | % | — |
| | % | — |
| |||
Grifols (H.K.), Limited |
| Units 1505-7 BerKshire House, |
| 2014 |
| Commercial |
| Distribution and sale of diagnostic products. |
| — |
| | % | — |
| | % | — |
| | % | ||
Grifols Japan K.K. |
| Hilton Plaza West Office Tower, 19th floor. 2-2, Umeda 2-chome, Kita-ku Osaka-shi Japón | Hilton Plaza West Office Tower, |
| 2014 |
| Commercial |
| Research, development, import and export and commercialisation of pharmaceutical products, devices |
| | % | — |
| | % | — |
| | % | — |
| |
Grifols India Healthcare Private Ltd |
| Regus Business Centre |
| 2014 |
| Commercial |
| Distribution and sale of pharmaceutical products. |
| | % | | % | | % | | % | | % | | % |
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APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
Mumbai - 400604, | |||||||||||||||||||||||
Grifols Diagnostics Equipment Taiwan Limited |
| 8F., No.367, Fuxing N. RD., |
| 2016 |
| Commercial |
| Distribution and sale of diagnostic products. |
| | % | — |
| | % | — |
| | % | — |
| ||
Grifols Viajes, S.A. |
| Spain | Can Guasch, 2 |
| 1995 |
| Services |
| Travel agency exclusively serving Group companies. |
| | % | | % | | % | | % | | % | | % | |
Squadron Reinsurance Designated Activity Company |
| Ireland | The Metropolitan Building, 3rd |
| 2003 |
| Services |
| Reinsurance of Group companies’ insurance policies. |
| — |
| | % | — |
| | % | — |
| | % | |
Grifols Shared Services North America, Inc. |
| United States | 2410 Lillivale Avenue |
| 2011 |
| Services |
| Support services for the collection, manufacture, sale and distribution of plasma derivatives and related |
| | % | — |
| | % | — |
| | % | — |
| |
Gripdan Invest, S.L |
| Avenida Diagonal 477 Barcelona, |
| 2015 |
| Services |
| Rental of industrial buildings |
| | % | — |
| | % | — |
| | % | — |
| ||
Gri-Cel, S.A. (merged with Instituto Grifols, S.A. in 2019) |
| Spain | Avenida de la Generalitat 152 |
| 2009 |
| Research |
| Research and development in the field of regenerative medicine, awarding of research grants, subscription to collaboration agreements with entities and participation in projects in the area of regenerative medicine. |
| — | — | — | — | — | — | |||||||
Araclon Biotech, S.L. |
| Spain | Paseo de Sagasta, 17 2º izqda. |
| 2012 |
| Research |
| Creation and commercialisation of a blood diagnosis kit for the detection of Alzheimer's and |
| — |
| | % | — |
| | % | — |
| | % |
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APPENDIX I
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Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
development of effective immunotherapy (vaccine) against this disease. | |||||||||||||||||||||||
VCN Bioscience, S.L. |
| Avenida de la Generalitat 152 |
| 2012 |
| Research |
| Research and development of therapeutic approaches for tumours for which there is currently no |
| — |
| | % | — |
| | % | — |
| | % | ||
Grifols Innovation and New Technologies Limited |
| Grange Castle Business Park, |
| 2016 |
| Research |
| Biotechnology research and development |
| — |
| | % | — |
| | % | — |
| | % | ||
PBS Acquisition Corp. (merged with IBBI in 2019) |
| 2711 Centerville Road Suite 400, |
| 2016 |
| Services |
| Engage in any lawful act or activity for which corporations may be organized under the DGCL |
| — |
| — | — |
| — | — |
| — | |||||
Kiro Grifols S.L | Spain | Polígono Bainuetxe, 5, 2º planta, Aretxabaleta, Guipúzcoa | 2014 | Research | Development of machines and equipment to automate and control key points of hospital processes, and hospital pharmacy processes. | | % | — | | % | — | | % | — | |||||||||
Chiquito Acquisition Corp. | 2711 Centerville Road Suite 400, Wilmington, Delaware, New Castle County, United States | 2017 | Corporate | Engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware, as amended from time to time (the DGCL). | — | | % | — | | % | — | | % | ||||||||||
Aigües Minerals de Vilajuiga, S.A. | Carrer Sant Sebastià, 2, 17493 Vilajuïga, Girona | Carrer Sant Sebastià, 2, 17493 Vilajuïga, Girona | 2017 | Industrial | Collection and use of mineral- | | % | | % | | % | | % | | % | | % |
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APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
medicinal waters and obtainment of all necessary administrative concessions for the optimum and widest use of these. | |||||||||||||||||||||||
Goetech LLC (D/B/A Medkeeper) | 7600 Grandview Avenue, Suite 210, Arvada, CO 80002, United States | 2018 | Industrial | Development and distribution of web and mobile-based platforms for hospital pharmacies | — | | % | — | | % | — | | % | ||||||||||
Interstate Blood Bank, Inc. | 5700 Pleasantville Road | 2016 | Industrial | Procuring human plasma. | — | | % | — | | % | — | | % | ||||||||||
Haema, AG | LandsteinerstraBe 1, 04103 Leipzig - Germany | 2018 | Industrial | Procurement of human plasma. | — | — | — | — | — | — | |||||||||||||
BPC Plasma, Inc (formerly Biotest Pharma Corp) | 901 Yamato Rd., Suite 101, Boca Raton FL 33431 - USA | 2018 | Industrial | Procurement of human plasma. | — | — | — | — | — | — | |||||||||||||
Alkahest, Inc. | 3500 South DuPont Hwy, Dover, County of Kent Estados Unidos | 3500 South DuPont Hwy, | 2015 | Research | Development novel plasma-based products for the treatment of cognitive decline in aging and disorders of the central nervous system (CNS). | — | | % | — | % | | % | — | — | |||||||||
Plasmavita Healthcare GmbH | Colmarer Strasse 22, 60528 Frankfurt am Main - Germany | Colmarer Strasse 22, 60528 Frankfurt am Main - Germany | 2018 | Industrial | Procurement of human plasma. | — | | % | — | % | | % | — | — | |||||||||
Plasmavita Healthcare II GmbH | Garnisongasse 4/12, 1090 Vienna, Austria | Garnisongasse 4/12, 1090 Vienna, Austria | 2019 | Industrial | Procurement of human plasma. | — | | % | — | | % | — | — | ||||||||||
Grifols Canada Therapeutics Inc. (formerly Green Cross Biotherapeutics; Inc) | 2911 Avenue Marie Curie, Arrondissement de Saint-Laurent, Quebec | 2020 | Industrial | Conducting business in Pharmceuticals and Medicines Industry | | % | — | — | | % | — | — | |||||||||||
GCAM, Inc. (merged with Biomat USA) | 1561 E Orangethorpe Ave #205, Fullerton, CA 92831 | 2020 | Industrial | To engage in any lawful act or activity for which corporations may | — | — | — | | % | — | — |
F-123
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
be organized under the General Corporation Law of Delaware and engaging in any and all activities necessary or incidental to the foregoing. | |||||||||||||||||||||||
Grifols Laboratory Solutions, Inc | Corporation Trust Center, 1209, Orange Street, Wilmington, New Castle Country, Delaware, 19801 | 2020 | Services | To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware | — | | % | — | | % | — | — | |||||||||||
Grifols Korea Co., Ltd. | 302 Teheran-ro, Gangnam-gu, Seoul (Yeoksam-dong) | 2020 | Commercial | Import, export of diagnostic in vitro products and solutions. | | % | — | | % | — | — | — | |||||||||||
Grifols Middle East Africa LLC | Office No. 534, 5th floor, NamaaBuilding No.155, Ramses Extension Street, Al Hay Al Sades, Nasr City, Cairo | 2021 | Services | Providing consultation (except for those stipulated in Article 27 of the Capital Market Law and its executive regulations) and carry out those commercial activities that are permitted by the law. | | % | | — | — | — | — | ||||||||||||
GigaGen Inc. | 407 Cabot Road | 2021 | Industrial | Engage in any lawful act or activity for which corporations may be organized under General Corporation Law. | — | | % | — | | — | | ||||||||||||
Grifols Pyrenees Research Center, S.L. | C/ Prat de la Creu, 68-76, Planta 3ª, Edifici Administratiu del Comú d'Andorra la Vella | 2021 | Industrial | Constitution, development and management of operations of a research and development center in all areas of immnology, | — | | % | — | — | — | — |
F-124
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
dedicated to find possible solutions for therapeutic applications. | |||||||||||||||||||||||
Grifols Bio North America LLC | 251 Little Falls Drive, Wilmington, New Castle County, 19808, Delaware | 2021 | Industrial | To engage in any lawful business permitted by the Act or the laws of any jurisdiction in which the Company may do business. | — | | % | — | — | — | — | ||||||||||||
Biomat Holdco, LLC. | 251 Little Falls Drive, Wilmington, New Castle County, Delaware, 19808 | 2021 | Services | Engage in any lawful act or activity for which corporations may be organized under General Corporation Law of Delaware. | — | | % | — | — | — | — | ||||||||||||
Biomat Newco, Corp. | 251 Little Falls Drive, Wilmington, New Castle County, Delaware, 19808 | 2021 | Services | Engage in any lawful act or activity for which corporations may be organized under General Corporation Law of Delaware. | — | | % | — | — | — | — | ||||||||||||
Grifols Escrow Issuer, S.A. | Parque Empresarial Can Sant Joan, Avda de la Generalitat, 152-156, Sant Cugat del Vallès, 08174, Barcelona | 2021 | Services | Administration, management and control services for companies and businesses, as well as investment in property, as well as providing advisory services of any investee entities or group companies. | | % | — | — | — | — | — | ||||||||||||
Prometic Plasma Resources, Inc. | 531 Boul. Des Prairies, Building 15 | 2021 | Industrial | Procurement of human plasma. | | % | — | — | — | — | — | ||||||||||||
Aradigm Corporation | 3929 Point Eden Way | 2013 | Research | Development and commercialisation of drugs delivered by inhalation for the | — | | % | — | | % | — | | % |
F-125
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
prevention and treatment of severe respiratory diseases. | |||||||||||||||||||||||
TiGenix N.V. | Romeinse straat 12 bus 2, 3001 Leuven, Belgium | 2013 | Research | Research and development of therapies based on stem cells taken from adipose tissue. | — | — | — | — | — | — | |||||||||||||
Mecwins, S.L. | Avenida Fernandos Casas Novoa, 37 | 2013 | Research | Research and production of nanotechnological, biotechnological and chemical solutions. | — | | % | — | | % | — | | % | ||||||||||
Alkahest, Inc. | 3500 South DuPont Hwy, Dover, | 2015 | Research | Development novel plasma-based products for the treatment of cognitive decline in aging and disorders of the central nervous system (CNS). | — | — | — | — | — | % | |||||||||||||
Albajuna Therapeutics, S.L | Hospital Germans Trias i Pujol, carretera de Canyet, s/n, Badalona | 2016 | Research | Development and manufacture of therapeutic antibodies against HIV. | — | | % | — | | % | — | | % | ||||||||||
Interstate Blood Bank, Inc. | 5700 Pleasantville Road | 2016 | Industrial | Procurement of human plasma. | — | — | — | — | — | — | |||||||||||||
Bio Blood Components Inc. | 5700 Pleasantville Road | 2016 | Industrial | Procurement of human plasma. | — | — | — | — | — | — | |||||||||||||
Plasma Biological Services, LLC | 5700 Pleasantville Road | 2016 | Industrial | Procurement of human plasma. | — | — | — | — | — | — | |||||||||||||
Singulex, Inc. | 4041 Forest Park Avenue St. Louis, Missouri | 2016 | Research | Development of the Single Molecule Counting (SMC™) technology for | — | | % | — | | % | — | | % |
F-126
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
clinical diagnostic and scientific discovery. | |||||||||||||||||||||||
Access Biologicals, LLC. | 995 Park Center Dr, Vista, CA 92081, USA | 2017 | Industrial | Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field. | — | | % | — | | % | — | | % | ||||||||||
Access Biologicals IC-DISC, Inc. | 995 Park Center Dr, Vista, CA 92081, USA | 2017 | Industrial | Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field. | — | | % | — | | % | — | | % | ||||||||||
Access Cell Culture, LLC. | 995 Park Center Dr, Vista, CA 92081, USA | 2017 | Industrial | Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro | — | | % | — | | % | — | | % |
F-127
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
diagnostics, cell culture, and research and development in the diagnostic field. | |||||||||||||||||||||||
Access Manufacturing, LLC. | 995 Park Center Dr, Vista, CA 92081, USA | 2017 | Industrial | Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field. | — | — | — | — | — | — | |||||||||||||
Access Plasma, LLC. | 995 Park Center Dr, Vista, CA 92081, USA | 2017 | Industrial | Manufacture of biological products, including specific sera and plasma-derived reagents, which are used by biotechnology and biopharmaceutical companies for in-vitro diagnostics, cell culture, and research and development in the diagnostic field. | — | | % | — | | % | — | | % | ||||||||||
GigaGen Inc. | 407 Cabot Road | 2017 | Industrial | Engage in any lawful act or activity for which corporations may be organized under General Corporation Law. | — | — | — | | % | — | | % | |||||||||||
Plasmavita Healthcare GmbH | Colmarer Strasse 22, 60528 Frankfurt am Main - Germany | 2018 | Industrial | Procurement of human plasma. | — | — | — | — | — | | % |
F-128
APPENDIX I
GRIFOLS, S.A. AND SUBSIDIARIES
Information on Group Companies, Associates and others for the years ended 31 December 2021, 2020 and 2019
Medcom Advance, S.A | Av. Roma, 35 Entresuelo 1, 08018 Barcelona; Spain | 2019 | Research | Research and development of nanotechnological solutions. | — | | % | — | | % | — | | % | ||||||||||
Plasmavita Healthcare II GmbH | Garnisongasse 4/12, 1090 Vienna, Austria | 2019 | Industrial | Procurement of human plasma. | — | — | — | — | — | | % | ||||||||||||
Shanghai RAAS Blood Products Co. Ltd. | 2009 Wangyuan Road, Fengxian District, Shanghai | 2020 | Industrial | Introducing advanced and applicable technologies, instruments and scientific management systems for manufacturing and diagnosis of blood products, in order to raise the production capacity and enhance quality standards of blood products to the international level. | | % | — | | % | — | — | — | |||||||||||
Grifols Egypt for Plasma Derivatives (S.A.E.) | Tolip El Narges Hotel, Teseen Streett, Fifth Settlement, Cairo | 2021 | Industrial | Establish and operate a plasma fractionation plant whether the plasma is collected locally or imported, as well as its filling and packaging. | | % | — | — | — | — | — |
F-129
APPENDIX II
GRIFOLS, S.A. AND SUBSIDIARIES
Operating Segments for the years ended 31 December 2021, 2020 and 2019
(Expressed in thousands of Euros)
Bioscience | Hospital | Diagnostic | Bio Supplies | Others | Intersegments | Consolidated | ||||||||||||||||||||||||||||||||||||
| 2021 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2019 | 2021 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2019 | 2021 |
| 2020 |
| 2019 | |||
Revenues from external customers |
| |
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| ( |
| ( |
| ( |
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| ||||||||||||||||||||||||||||||||||||||||||
Total operating income |
| |
| |
| |
| |
| |
| | |
| |
| |
| | | | | | | ( | ( | ( | |
| |
| | ||||||||||
Profit/(Loss) for the segment |
| |
| |
| |
| ( |
| ( |
| ( | |
| |
| |
| | | | ( | | | ( | | ( | |
| |
| | ||||||||||
Unallocated expenses |
|
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|
|
|
|
|
|
|
|
|
|
|
| ( |
| ( |
| ( | |||||||||||||||||||
Operating profit/(loss) |
|
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|
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|
| |
| |
| | |||||||||||||||||||
Finance result |
|
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|
|
|
|
|
| ( |
| ( |
| ( | |||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||
Share of profit/(loss) of equity- accounted investee | — | — | — | — | — | — | — | — | ( | — | — | — | | | ( | — | — | — | | | ( | |||||||||||||||||||||
Income tax expense |
|
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|
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|
|
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|
|
| ( |
| ( |
| ( | |||||||||||||||||||
Profit for the year after tax |
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Segment assets |
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| |
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| | |
| |
| |
| | | | | | | ( | ( | ( | |
| |
| | ||||||||||
Equity-accounted investments |
| |
| — |
| |
| — |
| — |
| — | — |
| — |
| — |
| | | | | | | — | — | — | |
| |
| | ||||||||||
Unallocated assets |
| — |
| — |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — | — | — | — | — | — | — | — | — | |
| |
| | ||||||||||
Total assets |
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| | |||||||||||||||||||
Segment liabilities |
| | | | | | | | | |
| | | | | | | — | — | — | |
| |
| | |||||||||||||||||
Unallocated liabilities |
| — | — | — | — | — | — | — | — | — |
| — | — | — | — | — | — | — | — | — | |
| |
| | |||||||||||||||||
Total liabilities |
|
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|
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| |
| |
| | ||||||||||||||||||||||
Other information: |
|
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|
|
|
|
|
|
| ||||||||||||||||||||||
Allocated amortisation and depreciation |
| |
| |
| |
| |
| |
| | |
| |
| |
| | | | | | | — | — | — | |
| |
| | ||||||||||
Unallocated amortisation and depreciation |
| — |
| — |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — | — | — | — | — | — | — | — | — | |
| |
| | ||||||||||
Allocated expenses that do not require cash payments |
| |
| |
| |
| |
| |
| ( | |
| ( |
| ( |
| | | | — | ( | — | — | — | — | |
| |
| | ||||||||||
Unallocated expenses that do not require cash |
| — |
| — |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — | — | — | — | — | — | — | — | — | |
| |
| | ||||||||||
Allocated additions for the year of property, plant |
| |
| |
| |
| |
| |
| | |
| |
| |
| | | | | | | — | — | — | |
| |
| | ||||||||||
Unallocated additions for the year of property, plant |
| — |
| — |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — | — | — | — | — | — | — | — | — | |
| |
| | ||||||||||
This appendix forms an integral part of note 6 to the consolidated financial statements.
F-130
APPENDIX II
GRIFOLS, S.A. AND SUBSIDIARIES
Reporting by geographical area
for the years ended 31 December 2021, 2020 and 2019
(Expressed in thousands of Euros)
Rest of European | USA + Canada | Rest of World | Consolidated | |||||||||||||||||||||||||||
Spain | Union | |||||||||||||||||||||||||||||
| 2021 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2019 | |
Net Revenue |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Assets by geographical area |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Other information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions for the year of property, plant |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
This appendix forms an integral part of note 6 to the consolidated financial statements.
F-131
APPENDIX III
GRIFOLS, S.A. AND SUBSIDIARIES
Changes in Other Intangible Assets
for the year ended
31 December 2021
(Expressed in thousands of Euros)
Balance at |
| Business |
|
| Translation | Balance at | ||||||||
| 31/12/2020 |
| Additions |
| combinations |
| Transfers |
| Disposals |
| differences |
| 31/12/2021 | |
Development costs |
| |
| | |
| — |
| ( |
| |
| | |
Concessions, patents, licenses brands similar |
| |
| | — |
| — |
| — |
| |
| | |
Computer software |
| |
| | — |
| |
| ( |
| |
| | |
Currently marketed products |
| |
| — | — |
| — |
| — |
| |
| | |
Other intangible assets |
| |
| — | — |
| — |
| ( |
| |
| | |
Total cost of intangible assets |
| |
| | |
| |
| ( |
| |
| | |
Accum. amort. of development costs |
| ( |
| ( | — |
| ( |
| |
| ( |
| ( | |
Accum. amort of concessions, patents, licenses, brands similar |
| ( |
| ( | — |
| — |
| — |
| ( |
| ( | |
Accum. amort. of computer software |
| ( |
| ( | — |
| ( |
| |
| ( |
| ( | |
Accum. amort. of currently marketed products |
| ( |
| ( | — |
| — |
| — |
| ( |
| ( | |
Accum. amort. of other intangible assets |
| ( |
| ( | — |
| — |
| — |
| ( |
| ( | |
Total accum. amort intangible assets |
| ( |
| ( | — |
| ( |
| |
| ( |
| ( | |
Impairment of other intangible assets |
| ( |
| ( | — |
| — |
| — |
| ( |
| ( | |
Carrying amount of intangible assets |
| |
| ( | |
| |
| ( |
| |
| | |
(See note 3) |
| |||||||||||||
This appendix forms an integral part of note 8 to the consolidated financial statements.
F-132
APPENDIX III
GRIFOLS, S.A. AND SUBSIDIARIES
Changes in Other Intangible Assets
for the year ended
31 December 2020
(Expressed in thousands of Euros)
Balance at |
| Business |
| Translation | Balance at | ||||||||||
| 31/12/2019 |
| Additions | combinations | Transfers | Disposals | differences | 31/12/2020 | |||||||
Development costs |
| |
| | |
| — |
| — |
| ( |
| |
| |
Concessions, patents, licenses brands similar |
| |
| | |
| ( |
| — |
| ( |
| |
| |
Computer software |
| |
| | |
| |
| ( |
| ( |
| |
| |
Currently marketed products |
| |
| — | — |
| — |
| — |
| ( |
| |
| |
Other intangible assets |
| |
| | — |
| ( |
| ( |
| ( |
| |
| |
Total cost of intangible assets |
| |
| | |
| |
| ( |
| ( |
| |
| |
Accum. amort. of development costs |
| ( |
| ( | — |
| — |
| — |
| |
| ( |
| |
Accum. amort of concessions, patents, licenses, brands similar |
| ( |
| ( | — |
| ( |
| — |
| |
| ( |
| |
Accum. amort. of computer software |
| ( |
| ( | — |
| ( |
| |
| |
| ( |
| |
Accum. amort. of currently marketed products |
| ( |
| ( | — |
| — |
| — |
| |
| ( |
| |
Accum. amort. of other intangible assets |
| ( |
| ( | — |
| |
| |
| |
| ( |
| |
Total accum. amort intangible assets |
| ( |
| ( | — |
| ( |
| |
| |
| ( |
| |
Impairment of other intangible assets |
| ( |
| ( | — |
| — |
| — |
| |
| ( |
| |
Carrying amount of intangible assets |
| |
| ( | |
| |
| ( |
| ( |
| |
|
(See note 3)
This appendix forms an integral part of note 8 to the consolidated financial statements.
F-133
APPENDIX IV
GRIFOLS, S.A. AND SUBSIDIARIES
Movement in Rights of Use
for the year ended
31 December 2021
(Expressed in thousands of Euros)
Balance at |
|
| Translation | Balance at | ||||||||||
| 31/12/2020 |
| Additions | Business combinations |
| Transfers |
| Disposals |
| differences |
| 31/12/2021 | ||
Land and buildings |
| |
| | | |
| ( |
| |
| | ||
Machinery |
| |
| | — | ( |
| ( |
| |
| | ||
Computer equipment |
| |
| | — | ( |
| ( |
| |
| | ||
Vehicles |
| |
| | — | ( |
| ( |
| |
| | ||
|
|
|
|
|
| |||||||||
Total cost of rights of use | | | | | ( | | | |||||||
Accum. depr. of land and buildings |
| ( |
| ( | — | ( |
| |
| ( |
| ( | ||
Accum. depr. of machinery |
| ( |
| ( | — | |
| |
| ( |
| ( | ||
Accum.depr. of computer equipment | ( | ( | — | | | ( | ( | |||||||
Accum. depr. of vehicles |
| ( |
| ( | — | |
| |
| ( |
| ( | ||
|
|
|
|
|
| |||||||||
Total accum. depr. of rights of use |
| ( |
| ( | — | ( |
| |
| ( |
| ( | ||
Carrying amount of rights of use |
| |
| | | |
| ( |
| |
| |
This appendix forms an integral part of note 9 to the consolidated financial statements.
F-134
APPENDIX IV
GRIFOLS, S.A. AND SUBSIDIARIES
Movement in Rights of Use
for the year ended
31 December 2020
(Expressed in thousands of Euros)
Balance at |
|
|
| Translation | Balance at | |||||||||
| 31/12/2019 |
| Additions |
| Business combinations |
| Transfers |
| Disposals |
| differences |
| 31/12/2020 | |
Land and buildings |
| |
| | | — |
| ( |
| ( |
| | ||
Machinery |
| |
| | — | ( |
| ( |
| ( |
| | ||
Computer equipment |
| |
| | — | ( |
| ( |
| ( |
| | ||
Vehicles |
| |
| | | ( |
| ( |
| ( |
| | ||
|
|
|
|
| ||||||||||
Total cost of rights of use | | | | ( | ( | ( | | |||||||
Accum. amort. of land and buildings |
| ( |
| ( | — | ( |
| |
| |
| ( | ||
Accum. amort of machinery |
| ( |
| ( | — | |
| |
| |
| ( | ||
Accum. amort. of computer equipment | ( | ( | — | | | | ( | |||||||
Accum. amort. of vehicles |
| ( |
| ( | — | |
| |
| |
| ( | ||
|
|
|
|
| ||||||||||
Total accum. amort of rights of use |
| ( |
| ( | — | |
| |
| |
| ( | ||
Carrying amount of rights of use |
| |
| | | ( |
| ( |
| ( |
| |
This appendix forms an integral part of note 9 to the consolidated financial statements.
F-135
APPENDIX V
GRIFOLS, S.A. AND SUBSIDIARIES
Movement in Property, Plant and Equipment
for the year ended
31 December 2021
(Expressed in thousands of Euros)
Balances at | Business | Translation | Balances at | |||||||||||
| 31/12/2020 |
| Additions |
| combination |
| Transfers |
| Disposals |
| differences |
| 31/12/2021 | |
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings |
| |
| |
| |
| |
| ( |
| |
| |
Plant and machinery |
| |
| |
| |
| |
| ( |
| |
| |
Fixed Assets under construction |
| |
| |
| ( |
| ( |
| — |
| |
| |
| |
| |
| |
| ( |
| ( |
| |
| | |
Accumulated depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings |
| ( |
| ( |
| — |
| |
| |
| ( |
| ( |
Plant and machinery |
| ( |
| ( |
| — |
| ( |
| |
| ( |
| ( |
| ( |
| ( |
| — |
| ( |
| |
| ( |
| ( | |
Impairment of other property, plant and equipment |
| ( |
| ( |
| — |
| — |
| — |
| ( |
| ( |
Carrying amount |
| |
| |
| |
| ( |
| ( |
| |
| |
|
|
| (See note 3) |
This appendix forms an integral part of note 10 to the consolidated financial statements.
F-136
APPENDIX V
GRIFOLS, S.A. AND SUBSIDIARIES
Movement in Property, Plant and Equipment
for the year ended
31 December 2020
(Expressed in thousands of Euros)
Balances at | Business | Translation | Balances at | |||||||||||
31/12/2019 | Additions | combination | Transfers | Disposals | differences | 31/12/2020 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings |
| |
| |
| |
| ( |
| ( |
| ( |
| |
Plant and machinery |
| |
| |
| |
| |
| ( |
| ( |
| |
Fixed Assets under construction |
| |
| |
| |
| ( |
| — |
| ( |
| |
| |
| |
| |
| ( |
| ( |
| ( |
| | |
Accumulated depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings |
| ( |
| ( |
| — |
| ( |
| |
| |
| ( |
Plant and machinery |
| ( |
| ( |
| — |
| |
| |
| |
| ( |
| ( |
| ( |
| — |
| |
| |
| |
| ( | |
Impairment of other property, plant and equipment |
| ( |
| |
| — |
| — |
| — |
| |
| ( |
Carrying amount |
| |
| |
|
| ( |
| ( |
| ( |
| | |
(See note 3) |
This appendix forms an integral part of note 10 to the consolidated financial statements.
F-137