What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-19 · 277 added, 312 removed, 1560 unchanged (27% of the section changed)

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Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PC AOB ID:

| 2021 Form 10-K

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Acquired in-process research and development 962 1,198 385

Other operating (income) expense — ( 890 ) 500

Other operating expense (income), net 432 — ( 890 )

Total operating costs and expenses 38,273 34,441 20,283

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Accumulated other comprehensive loss ( 2,899 ) ( 3,117 )

Total stockholders' equity (deficit) 13,076 ( 8,172 )

Total stockholders' equity 15,408 13,076

Noncontrolling interest 28 21

Total equity (deficit) 13,097 ( 8,172 )

Total equity 15,436 13,097

Total liabilities and equity $ 146,529 $ 150,565

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Balance at December 31, 2018 1,479 $ 18 $ ( 24,108 ) $ 14,756 $ 3,368 $ ( 2,480 ) $ — $ ( 8,446 )

Adoption of new accounting standards (a)

— — — — ( 1,733 ) — — ( 1,733 )

Net earnings attributable to AbbVie Inc.

— — — — 7,882 — — 7,882

Other comprehensive income, net of tax — — — — — 247 — 247

Other comprehensive loss, net of tax — — — — — ( 1,116 ) — ( 1,116 )

Dividends declared — — — — ( 6,533 ) — — ( 6,533 )

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— — — — 4,616 — — 4,616

Other comprehensive loss, net of tax — — — — — ( 1,116 ) — ( 1,116 )

Other comprehensive income, net of tax — — — — — 479 — 479

Dividends declared — — — — ( 8,278 ) — — ( 8,278 )

Common shares and equity awards issued for acquisition of Allergan plc 286 — 23,166 1,243 — — — 24,409

Purchases of treasury stock ( 10 ) — ( 978 ) — — — — ( 978 )

Stock-based compensation plans and other 10 — 52 948 — — — 1,000

Change in noncontrolling interest — — — — — — 21 21

Balance at December 31, 2020 1,765 18 ( 2,264 ) 17,384 1,055 ( 3,117 ) 21 13,097

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Dividends declared — — — — ( 9,470 ) — — ( 9,470 )

Common shares and equity awards issued for acquisition of Allergan plc 286 — 23,166 1,243 — — — 24,409

Purchases of treasury stock ( 8 ) — ( 934 ) — — — — ( 934 )

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Balance at December 31, 2021 1,768 $ 18 $ ( 3,143 ) $ 18,305 $ 3,127 $ ( 2,899 ) $ 28 $ 15,436

(a) Adoption of new accounting standards primarily includes the cumulative-effect adjustment of Accounting Standards Update (ASU) No.

2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other Than Inventory .

The accompanying notes are an integral part of these consolidated financial statements.

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Gain on divestitures ( 68 ) — ( 330 )

Intangible asset impairment — 1,030 5,070

Impacts related to U.S.

tax reform — — 424

Stemcentrx impairment — — 1,030

Other, net — 832 43

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Net change in commercial paper borrowings — — ( 699 )

Proceeds from issuance of other short-term borrowings — — 3,002

Repayments of other short-term borrowings — — ( 3,000 )

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Interest paid, net of portion capitalized $ 2,712 $ 2,619 $ 1,794

Income taxes paid (received) 1,674 1,447 ( 35 )

Income taxes paid 3,648 1,674 1,447

Supplemental schedule of non-cash investing and financing activities

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The principal business of AbbVie Inc.

(AbbVie or the company) is the discovery, development, manufacture and sale of a broad line of pharmaceutical products.

(AbbVie or the company) is the discovery, development, manufacturing and sale of a broad line of therapies that address some of the world's most complex and serious diseases.

AbbVie's products are generally sold worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned distribution centers and public warehouses.

Certain products (including aesthetic products and devices) are also sold directly to physicians and other licensed healthcare providers.

In the United States, AbbVie distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to retailers, pharmacies and patients.

In the United States, AbbVie distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to retailers, pharmacies, patients or other customers.

Outside the United States, AbbVie sells products primarily to customers or through distributors, depending on the market served.

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On January 1, 2013, AbbVie became an independent, publicly-traded company as a result of the distribution by Abbott Laboratories (Abbott) of 100 % of the outstanding common stock of AbbVie to Abbott's shareholders.

On May 8, 2020, AbbVie completed its previously announced acquisition of Allergan plc (Allergan).

On May 8, 2020, AbbVie completed its acquisition of Allergan plc (Allergan).

Refer to Note 5 for additional information regarding this acquisition.

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Provisions for variable consideration are based on current pricing, executed contracts, government pricing legislation and historical data and are provided for in the period the related revenues are recorded.

Rebate amounts are typically based upon the volume of purchases using contractual or statutory prices, which may vary by product and by payer.

Rebate amounts are

| 2021 Form 10-K

typically based upon the volume of purchases using contractual or statutory prices, which may vary by product and by payer.

For each type of rebate, factors used in the calculation of the accrual include the identification of the products subject to the rebate, the applicable price terms and the estimated lag time between sale and payment of the rebate, which can be significant.

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Actuarial gains and losses are deferred in accumulated other comprehensive income (loss) (AOCI), net of tax and are amortized over the remaining service attribution periods of the employees under the corridor method.

Differences between the expected long-term return on plan assets and the actual annual return are amortized to net periodic benefit cost over a five-year period.

Differences between the expected long-term return on plan assets and the actual annual return are generally amortized to net periodic benefit cost over a five-year period.

Income taxes are accounted for under the asset and liability method.

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Cash and equivalents include money market funds and time deposits with original maturities of three months or less.

2021 Form 10-K |

Investments consist primarily of equity securities, held-to-maturity debt securities, marketable debt securities and time deposits.

Investments in equity securities that have readily determinable fair values are recorded at fair value.

Investments in

| 2020 Form 10-K

equity securities that do not have readily determinable fair values are recorded at cost and are remeasured to fair value based on certain observable price changes or impairment events as they occur.

Investments in equity securities that do not have readily determinable fair values are recorded at cost and are remeasured to fair value based on certain observable price changes or impairment events as they occur.

Held-to-maturity debt securities are recorded at cost.

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AbbVie periodically assesses its marketable debt securities for impairment and credit losses.

When a decline in fair value of marketable debt security is due to credit related factors, an allowance for credit losses is recorded with a corresponding charge to other expense in the consolidated statements of earnings.

When a decline in fair value of marketable debt security is due to credit related factors, an allowance for credit losses is recorded with a corresponding charge to other expense, net in the consolidated statements of earnings.

When AbbVie determines that a non-credit related impairment has occurred, the amortized cost basis of the investment, net of allowance for credit losses, is written down with a charge to other expense, net in the consolidated statements of earnings and an available-for-sale investment's unrealized loss is reclassified from AOCI to other expense, net in the consolidated statements of earnings.

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Depreciation expense was $ 803 million in 2021, $ 666 million in 2020 and $ 464 million in 2019.

| 2021 Form 10-K

Short-term leases with a term of 12 months or less are not recorded on the balance sheet.

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The company records lease liabilities based on the present value of lease payments over the lease term.

AbbVie generally uses an incremental borrowing rate to discount its lease liabilities, as the rate implicit in the lease is typically not

2020 Form 10-K |

readily determinable.

AbbVie generally uses an incremental borrowing rate to discount its lease liabilities, as the rate implicit in the lease is typically not readily determinable.

Certain lease agreements include renewal options that are under the company's control.

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The estimates and assumptions used are consistent with the company's business plans and a market participant's views.

The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the assets and potentially result in different impacts to the company's results of operations.

The use of alternative estimates and assumptions could increase or decrease

2021 Form 10-K |

the estimated fair value of the assets and potentially result in different impacts to the company's results of operations.

Actual results may differ from the company's estimates.

Acquired In-Process Research and Development

In an asset acquisition, the initial costs of rights to IPR&D projects acquired are expensed as IPR&D in the consolidated statements of earnings unless the project has an alternative future use.

These costs include initial payments incurred prior to

| 2020 Form 10-K

regulatory approval in connection with research and development collaboration agreements that provide rights to develop, manufacture, market and/or sell pharmaceutical products.

In an asset acquisition, the initial costs to acquire rights to IPR&D projects are expensed as IPR&D in the consolidated statements of earnings unless the project has an alternative future use.

These costs include initial payments incurred prior to regulatory approval in connection with research and development collaboration agreements that provide rights to develop, manufacture, market and/or sell pharmaceutical products.

In a business combination, the fair value of IPR&D projects acquired are capitalized and accounted for as indefinite-lived intangible assets until the underlying project receives regulatory approval, at which point the intangible asset will be accounted for as a definite-lived intangible asset, or discontinuation, at which point the intangible asset will be written off.

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dollars using period-end exchange rates.

dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recognized in other comprehensive income (loss) (OCI) in the consolidated statements of comprehensive income.

dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recognized in other comprehensive income (loss) in the consolidated statements of comprehensive income.

The net assets of subsidiaries in highly inflationary economies are remeasured as if the functional currency were the reporting currency.

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Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments - Credit Losses (Topic 326) .

The standard changes how credit losses are measured for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, the standard requires the use of a new forward-looking "expected credit loss" model that generally will result in the earlier recognition of allowances for losses.

For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment.

AbbVie adopted the standard in the first quarter of 2020.

Upon adoption of the standard, accounts receivable are stated at amortized cost less allowance for credit losses.

The allowance for credit losses reflects the best estimate of future losses over the contractual life of outstanding accounts receivable and is determined on the basis of historical experience, specific allowances for known troubled accounts, other currently available information including customer financial condition, and both current and forecasted economic conditions.

The adoption did not have a material impact on the company's consolidated financial statements.

The allowance for credit losses was $ 262 million at December 31, 2020.

There were no significant changes in credit loss risk factors that impacted the company's recorded allowance during 2020.

2020 Form 10-K |

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU No.

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The standard also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The standard will be effective for AbbVie starting with the first quarter of 2021.

AbbVie has completed its assessment of the new standard and concluded that the adoption will not have a material impact on its consolidated financial statements.

AbbVie adopted the standard in the first quarter of 2021.

The adoption did not have a material impact on its consolidated financial statements.

| 2021 Form 10-K

Note 3 Supplemental Financial Information

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Acquisition of Allergan

On May 8, 2020, AbbVie completed its previously announced acquisition of all outstanding equity interests in Allergan in a cash and stock transaction.

On May 8, 2020, AbbVie completed its acquisition of all outstanding equity interests in Allergan in a cash and stock transaction.

Allergan is a global pharmaceutical leader focused on developing, manufacturing and commercializing branded pharmaceutical, device, biologic, surgical and regenerative medicine products for patients around the world.

The combination creates a diverse entity with leadership positions across immunology, hematologic oncology, aesthetics, neuroscience, eye care and women's health.

The combination created a diverse entity with leadership positions across immunology, hematologic oncology, aesthetics, neuroscience, eye care and women's health.

AbbVie's existing product portfolio and pipeline is enhanced with numerous Allergan assets and Allergan's product portfolio benefits from AbbVie's commercial strength, expertise and international infrastructure.

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The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2020.

As a result, AbbVie recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date.

Subsequent to the acquisition date, the company made certain measurement period adjustments to the preliminary purchase price allocation, including:

(i) an increase to developed product rights intangible assets of $ 9.1 billion;

(ii) an increase to IPR&D intangible assets of $ 710 million;

(iii) an increase to property and equipment of $ 215 million;

(iv) other individually insignificant adjustments for a net increase to identifiable net assets of $ 73 million;

and (v) a corresponding decrease to goodwill of $ 10.0 billion.

The measurement period adjustments primarily resulted from revised future cash flow estimates for certain intangible assets and completing valuations of property and equipment.

These measurement period adjustments have been reflected in the table below.

The company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.

These adjustments did not have a significant impact on AbbVie's results of operations.

Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value of intangible assets, goodwill and income taxes among other items.

The completion of the valuation will occur no later than one year from the acquisition date.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:

The valuation of assets acquired and liabilities assumed was finalized during the second quarter of 2021.

Measurement period adjustments to the preliminary purchase price allocation during 2021 included (i) an increase to intangible assets of $ 710 million;

(ii) an increase to deferred income tax liabilities of $ 148 million;

(iii) other individually insignificant adjustments for a net increase to identifiable net assets of $ 2 million;

and (iv) a corresponding decrease to goodwill of $ 564 million.

The measurement period adjustments primarily resulted from the completion of the valuation of certain license agreement intangible assets based on facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.

These adjustments did not have a significant impact on AbbVie's results of operations in 2021 and would not have had a significant impact on prior period results if these adjustments had been made as of the acquisition date.

The following table summarizes t he final fair value of assets acquired and liabilities assumed as of the acquisition date:

(in millions)

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Intangible assets

Developed product rights 67,330

Definite-lived intangible assets 68,190

In-process research and development 1,600

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Total assets acquired and liabilities assumed $ 64,084

The fair value step-up adjustment to inventories of $ 1.2 billion is being amortized to cost of products sold when the inventory is sold to customers, which is expected to be within approximately one year from the acquisition date.

Intangible assets relate to $ 67.3 billion of developed product rights and $ 1.8 billion of IPR&D.

The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately twelve years using the estimated pattern of economic benefit.

| 2020 Form 10-K

participant expectations of the cash flows an asset would generate over its remaining useful life.

The fair value step-up adjustment to inventories of $ 1.2 billion was amortized to cost of products sold when the inventory was sold to customers and was fully amortized as of December 31, 2021.

Intangible assets relate to $ 68.2 billion of definite-lived intangible assets and $ 1.6 billion of IPR&D.

The acquired definite-lived intangible assets consist of developed product rights and license agreements and are being amortized over a weighted-average estimated useful life of approximately twelve years using the estimated pattern of economic benefit.

The estimated fair values of identifiable intangible assets were determined using the "income approach" which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life.

Some of the more significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product, the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, competitive trends impacting the asset and each cash flow stream, as well as other factors.

2021 Form 10-K |

The fair value of long-term debt was determined by quoted market prices as of the acquisition date and the total purchase price adjustment of $ 1.3 billion is being amortized as a reduction to interest expense, net over the lives of the related debt.

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Acquisition-related expenses, which were comprised primarily of regulatory, financial advisory and legal fees, totaled $ 781 million for the year ended December 31, 2020 and $ 103 million for the year ended December 31, 2019 which were included in SG&A expenses in the consolidated statements of earnings .

In the fourth quarter of 2021, AbbVie recovered certain acquisition-related regulatory fees totaling $ 401 million which was recorded as a reduction to SG&A expenses in the consolidated statement of earnings for the year ended December 31, 2021.

Pro Forma Financial Information

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The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of AbbVie and Allergan.

In order to reflect the occurrence of the acquisition on January 1, 2019 as required, the unaudited pro forma financial information includes adjustments to reflect incremental amortization expense to be incurred based on the current preliminary fair values of the identifiable intangible assets acquired;

In order to reflect the occurrence of the acquisition on January 1, 2019 as required, the unaudited pro forma financial information includes adjustments to reflect incremental amortization expense to be incurred based on the final fair values of the identifiable intangible assets acquired;

the incremental cost of products sold related to the fair value adjustments associated with acquisition date inventory;

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In addition, the unaudited pro forma financial information is not a projection of future results of operations of the combined company nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition.

Other Licensing & Acquisitions Activity

Cash outflows related to other acquisitions and investments totaled $ 1.4 billion in 2020, $ 1.1 billion in 2019 and $ 736 million in 2018.

AbbVie recorded acquired IPR&D charges of $ 1.2 billion in 2020, $ 385 million in 2019 and $ 424 million in 2018.

Significant arrangements impacting 2020, 2019 and 2018, some of which require contingent milestone payments, are summarized below.

Acquisition of Soliton, Inc.

In December 2021, AbbVie completed its previously announced acquisition of Soliton, Inc.

Soliton's RESONIC (Rapid Acoustic Pulse device) has U.S.

Food and Drug Administration (FDA) 510(k) clearance for the long-term improvement in the appearance of cellulite up to one year.

The transaction was accounted for as a business combination using the acquisition method of accounting.

Total consideration transferred allocated to the purchase price consisted of cash consideration of $ 535 million paid to holders of Soliton common stock, equity-based awards and warrants.

As of the transaction date, AbbVie acquired $ 407 million of intangible assets for developed product rights and assumed deferred tax liabilities totaling $ 63 million.

Other assets and liabilities were insignificant.

The acquisition resulted in the recognition of $ 177 million of goodwill which is not deductible for tax purposes.

Acquisition of Luminera

In October 2020, AbbVie entered into an agreement with Luminera, a privately held aesthetics company based in Israel, to acquire Luminera's full dermal filler portfolio and R&D pipeline including HArmonyCa, a dermal filler intended for facial soft tissue augmentation.

The aggregate accounting purchase price of $ 186 million was comprised of a $ 122 million upfront cash payment and $ 64 million for the acquisition date fair value of contingent consideration liabilities, for which AbbVie may owe up to $ 90 million in future payments upon achievement of certain commercial milestones.

HArmonyCa is currently commercially available in Israel and Brazil and AbbVie will continue to develop this product for its international and U.S.

The agreement was accounted for as a business combination using the acquisition method of accounting.

As of the acquisition date, AbbVie acquired $ 127 million of intangible assets for in-process research and development and $ 33 million of intangible assets for developed

| 2021 Form 10-K

acquisition date, AbbVie acquired $ 127 million of intangible assets for in-process research and development and $ 33 million of intangible assets for developed product rights.

product rights.

Other assets and liabilities assumed were insignificant.

The acquisition resulted in the recognition of $ 12 million of goodwill which is not deductible for tax purposes.

Other Licensing & Acquisitions Activity

Cash outflows related to other acquisitions and investments totaled $ 1.4 billion in 2021, $ 1.4 billion in 2020 and $ 1.1 billion in 2019.

AbbVie recorded acquired IPR&D charges of $ 962 million in 2021, $ 1.2 billion in 2020 and $ 385 million in 2019.

Significant arrangements impacting 2021, 2020 and 2019, some of which require contingent milestone payments, are summarized below.

Calico Life Sciences LLC

In July 2021, AbbVie and Calico Life Sciences LLC (Calico) entered into an extension of their collaboration to discover, develop and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer.

This is the second collaboration extension and builds on the partnership established in 2014 and extended in 2018.

Under the terms of the agreement, AbbVie and Calico will each contribute an additional $ 500 million and the term is extended for an additional three years.

AbbVie’s contribution is payable in two equal installments beginning in 2023.

Calico will be responsible for research and early development until 2025 and will advance collaboration projects into Phase 2a through 2030.

Following completion of the Phase 2a studies, AbbVie will have the option to exclusively license the collaboration compounds.

Upon exercise, AbbVie would be responsible for late-stage development and commercial activities.

Collaboration costs and profits will be shared equally by both parties post option exercise.

During the third quarter of 2021, AbbVie recorded $ 500 million as other operating expense in the consolidated statement of earnings related to its commitments under the agreement.

TeneoOne and TNB-383B

In September 2021, AbbVie acquired TeneoOne, an affiliate of Teneobio, Inc., and TNB-383B, a BCMA-targeting immunotherapeutic for the potential treatment of relapsed or refractory multiple myeloma (R/R MM).

In February 2019, AbbVie and TeneoOne entered a strategic transaction to develop and commercialize TNB-383B, a bispecific antibody that simultaneously targets BCMA and CD3 and is designed to direct the body's own immune system to target and kill BCMA-expressing tumor cells.

AbbVie exercised its exclusive right to acquire TeneoOne and TNB-383B based on an interim analysis of an ongoing Phase 1 study and accounted for the transaction as an asset acquisition.

Under the terms of the agreement, AbbVie made an exercise payment of $ 400 million which was recorded to IPR&D in the consolidated statement of earnings in the third quarter of 2021.

The agreement also included additional payments of up to $ 250 million upon the achievement of certain development, regulatory and commercial milestones.

REGENXBIO Inc.

In September 2021, AbbVie and REGENXBIO Inc.

(REGENXBIO) entered into a collaboration to develop and commercialize RGX-314, an investigational gene therapy for wet age-related macular degeneration, diabetic retinopathy and other chronic retinal diseases.

The collaboration provides AbbVie with an exclusive global license to develop and commercialize RGX-314.

REGENXBIO will be responsible for completion of ongoing trials, AbbVie and REGENXBIO will collaborate and share costs of additional trials, and AbbVie will lead the clinical development and commercialization of RGX-314 globally.

REGENXBIO and AbbVie will share equally in pre-tax profits from net revenues of RGX-314 in the U.S.

and AbbVie will pay REGENXBIO tiered royalties on net revenues outside the U.S.

Upon closing in the fourth quarter of 2021, AbbVie made an upfront payment of $ 370 million to exclusively license RGX-314 which was recorded to IPR&D in the consolidated statement of earnings for the year ended December 31, 2021 .

The agreement also included additional payments of up to $ 1.4 billion upon the achievement of certain development, regulatory and commercial milestones.

I-Mab Biopharma

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The agreement also allows for potential collaboration on future CD47-related therapeutic agents, subject to further licenses to explore each other's related programs in their respective territories.

The terms of the arrangement include an initial upfront payment of $ 180 million to exclusively license lemzoparlimab along with a milestone payment of $ 20 million based on the Phase I results, for a total of $ 200 million, which was recorded to IPR&D in the consolidated statements of earnings in the fourth quarter of 2020 after regulatory approval of the transaction.

In addition, I-Mab will be eligible to receive up to $ 1.7 billion upon the achievement of certain clinical development, regulatory and commercial milestones, and AbbVie will pay tiered royalties from low-to-mid teen percentages on global net revenues outside of greater China.

The terms of the arrangement include an initial upfront payment of $ 180 million to exclusively license lemzoparlimab along with a milestone payment of $ 20 million based on the Phase I results, for a total of $ 200 million, which was recorded to IPR&D in the consolidated statement of earnings in the fourth quarter of 2020 after regulatory approval of the transaction.

In addition, I-Mab will be eligible to receive up to $ 1.7 billion upon the achievement of certain clinical development, regulatory and

2021 Form 10-K |

commercial milestones, and AbbVie will pay tiered royalties from low-to-mid teen percentages on global net revenues outside of greater China.

In June 2020, AbbVie and Genmab A/S (Genmab) entered into a collaboration agreement to jointly develop and commercialize three of Genmab's early-stage investigational bispecific antibody therapeutics and entered into a discovery research collaboration for future differentiated antibody therapeutics for the treatment of cancer.

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For the discovery research partnership, Genmab will conduct Phase 1 studies for these programs and AbbVie retains the right to opt-in to program development.

During 2020, AbbVie made an upfront payment of $ 750 million, which was recorded to IPR&D in the consolidated statements of earnings.

During 2020, AbbVie made an upfront payment of $ 750 million, which was recorded to IPR&D in the consolidated statement of earnings.

AbbVie could make additional payments of up to $ 3.2 billion upon the achievement of certain development, regulatory and commercial milestones for all programs.

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Under the terms of the agreement, Reata reacquired exclusive development, manufacturing and commercialization rights concerning its proprietary Nrf2 activator product platform originally licensed to AbbVie for territories outside of the United States with respect to bardoxolone methyl and worldwide with respect to omaveloxolone and other next-generation Nrf2 activators.

As consideration for the rights reacquired by Reata, AbbVie received a total of $ 250 million as of December 31, 2020 and will receive $ 80 million in cash in 2021.

Total consideration of $ 330 million was recognized in other operating (income) expense in the consolidated statements of earnings in 2019.

As consideration for the rights reacquired by Reata, AbbVie received a total of $ 250 million as of December 31, 2020 and $ 80 million in cash in 2021.

Total consideration of $ 330 million was recognized in other operating (income) expense in the consolidated statement of earnings in 2019.

In addition, AbbVie will receive low single-digit, tiered royalties from worldwide sales of omaveloxolone and certain next-generation Nrf2 activators.

Calico Life Sciences LLC

In June 2018, AbbVie and Calico Life Sciences LLC (Calico) entered into an extension of a collaboration to discover, develop and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer.

Under the terms of the agreement, AbbVie and Calico will each contribute an additional $ 500 million to the collaboration and the term is extended for an additional three years .

Calico will be responsible for research and early development until 2022 and will advance collaboration projects through Phase 2a through 2027.

Following completion of Phase 2a, AbbVie will have the option to exclusively license collaboration compounds.

AbbVie will support Calico in its early research and development efforts and, upon exercise, would be responsible for late-stage development and commercial activities.

Collaboration costs and profits will be shared equally by both parties post option exercise.

During 2018, AbbVie recorded $ 500 million in other operating (income) expense in the consolidated statements of earnings related to its commitments under the agreement.

Other Arrangements

In addition to the significant arrangements described above, AbbVie entered into several other arrangements resulting in charges to IPR&D of $ 192 million in 2021, $ 248 million in 2020 and $ 385 million in 2019 .

In connection with the other

| 2020 Form 10-K

individually insignificant early-stage arrangements entered into in 2020, AbbVie could make additional payments of up to $ 5.1 billion upon the achievement of certain development, regulatory and commercial milestones.

In connection with the other individually insignificant early-stage arrangements entered into in 2021, AbbVie could make additional payments of up to $ 5.5 billion upon the achievement of certain development, regulatory and commercial milestones.

Note 6 Collaborations

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Except in certain cases, Janssen is responsible for approximately 60 % of collaboration development costs and AbbVie is responsible for the remaining 40 % of collaboration development costs.

| 2021 Form 10-K

In the United States, both parties have co-exclusive rights to commercialize the products;

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Genentech's share of United States profits is included in AbbVie's cost of products sold.

AbbVie records sales and marketing costs associated with the United States collaboration as part of SG&A

2020 Form 10-K |

expenses and global development costs as part of R&D expenses, net of Genentech’s share.

AbbVie records sales and marketing costs associated with the United States collaboration as part of SG&A expenses and global development costs as part of R&D expenses, net of Genentech’s share.

Royalties paid for Venclexta revenues outside the United States are also included in AbbVie’s cost of products sold.

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AbbVie's share of development costs (included in R&D) 140 129 128

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Note 7 Goodwill and Intangible Assets

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Balance as of December 31, 2019 $ 15,604

Foreign currency translation adjustments ( 59 )

Balance as of December 31, 2019 15,604

Additions (a)

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Balance as of December 31, 2020 33,124

Additions (b)

Measurement period adjustments (c)

Foreign currency translation adjustments and other ( 358 )

Balance as of December 31, 2021 $ 32,379

(a) Goodwill additions related to the acquisition of Allergan in the second quarter of 2020 and the acquisition of Luminera in the fourth quarter of 2020 (see Note 5).

(b) Goodwill additions related to the acquisition of Soliton in the fourth quarter of 2021 (see Note 5).

The company performs its annual goodwill impairment assessment in the third quarter, or earlier if impairment indicators exist.

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Definite-Lived Intangible Assets

The increase in definite-lived intangible assets during 2020 was primarily due to the acquisition of Allergan in the second quarter of 2020.

The intangible assets will be amortized using the estimated pattern of economic benefit.

Refer to Note 5 for additional information regarding this acquisition.

| 2020 Form 10-K

The increase in definite-lived intangible assets during 2021 was primarily due to the measurement period adjustments from the completion of the valuation of certain license agreements acquired in the Allergan acquisition as well as the acquisition of Soliton.

Refer to Note 5 for additional information regarding these acquisitions and related adjustments.

In 2021, AbbVie also reclassified $ 1.0 billion of indefinite-lived research and development intangible assets to developed product rights upon receiving certain regulatory approvals for Vuity, Qulipta, and HArmonyCa.

Definite-lived intangible assets are amortized over their estimated useful lives, which range between 1 to 16 years with an average of 12 years for developed product rights and 11 years for license agreements.

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Anticipated annual amortization expense $ 7.2 $ 7.5 $ 8.0 $ 8.4 $ 7.9

No definite-lived intangible asset impairment charges were recorded in 2020, 2019 or 2018.

| 2021 Form 10-K

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets represent acquired IPR&D associated with products that have not yet received regulatory approval.

The increase in indefinite-lived research and development assets during 2020 was due to the acquisition of Allergan in the second quarter of 2020 and the acquisition of Luminera in the fourth quarter of 2020.

Refer to Note 5 for additional information regarding these acquisitions.

Indefinite-lived intangible assets as of December 31, 2021 primarily relate to the acquisition of Allergan.

The company performs its annual impairment assessment of indefinite-lived intangible assets in the third quarter, or earlier if impairment indicators exist.

No indefinite-lived intangible asset impairment charges were recorded in 2020.

In 2019, following the announcement of the decision to terminate the rovalpituzumab tesirine (Rova-T) R&D program, the company recorded an impairment charge of $ 1.0 billion which represented the remaining value of the IPR&D acquired as part of the 2016 Stemcentrx acquisition.

This termination was subsequent to the decision to stop enrollment for the TAHOE trial, which resulted in an impairment charge of $ 5.1 billion in 2018.

These impairment charges were recorded to R&D expense in the consolidated statements of earnings in 2019 and 2018.

The impairment charge was recorded to R&D expense in the consolidated statements of earnings in 2019.

Note 8 Integration and Restructuring Plans

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Following the closing of the Allergan acquisition, AbbVie implemented an integration plan designed to reduce costs, integrate and optimize the combined organization.

To achieve these integration objectives, AbbVie expects to incur approximately $ 2 billion of charges through 2022.

To achieve these integration objectives, AbbVie expects to incur total cumulative charges of approximately $ 2 billion of charges through 2022.

These costs will consist of severance and employee benefit costs (cash severance, non-cash severance, including accelerated equity award compensation expense, retention and other termination benefits) and other integration expenses.

The following table summarizes the charges associated with the Allergan acquisition integration plan:

year ended December 31 (in millions) Severance and employee benefits Other integration

Severance and employee benefits Other integration

year ended December 31 (in millions) 2021 2020 2021 2020

Cost of products sold $ 5 $ 109 $ 127 $ 21

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Accrued balance as of December 31, 2020 $ 367 $ 20

2020 Form 10-K |

Charges 65 461

Payments and other adjustments ( 210 ) ( 448 )

Accrued balance as of December 31, 2021 $ 222 $ 33

Other Restructuring

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These charges were recorded in cost of products sold, R&D expense and SG&A expenses in the consolidated statements of earnings based on the classification of the affected employees or operations.

2021 Form 10-K |

The following table summarizes the cash activity in the restructuring reserve for 2021, 2020 and 2019:

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Total lease liabilities $ 925 $ 1,036

| 2020 Form 10-K

The following table summarizes the lease costs recognized in the consolidated statements of earnings:

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Sublease income and finance lease costs were insignificant in 2021, 2020 and 2019.

Lease expense prior to the adoption of ASU No.

2016-02 was $ 161 million in 2018.

| 2021 Form 10-K

The following table presents the weighted-average remaining lease term and weighted-average discount rate for operating and finance leases:

2020 December 31,

years ended December 31 2021 2020 2019

Weighted-average remaining lease term (years)

Operating 7 8 5

Finance 3 3 3

Weighted-average discount rate

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Finance lease cash flows were insignificant in 2021, 2020 and 2019.

Right-of-use assets obtained in exchange for new operating lease liabilities included $ 453 million of right-of-use assets acquired in the Allergan acquisition.

Right-of-use assets obtained in exchange for new operating lease liabilities as of December 31, 2020 included $ 453 million of right-of-use assets acquired in the Allergan acquisition.

The following table summarizes the future maturities of AbbVie's operating and finance lease liabilities as of December 31, 2021:

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2025 105 5 110

2026 91 9 100

Thereafter 317 — 317

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4.73 % 2,700 4.73 % 2,700

4.70 % notes due 2045

4.73 % 2,700 4.73 % 2,700

Senior notes issued in 2016

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Floating rate notes due 2023 0.81 % 1,000 — % —

Floating rate notes due 2025 1.36 % 2,000 1.42 % 2,000

| 2021 Form 10-K

as of December 31 (dollars in millions) Effective

interest rate

2021 Effective

interest rate

Senior notes acquired in 2020

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4.20 % 881 4.20 % 881

| 2020 Form 10-K

as of December 31 (dollars in millions) Effective

interest rate

2020 Effective

interest rate

Senior Euro notes acquired in 2020

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(b) Represents unamortized purchase price adjustments of Allergan debt.

Allergan-Related Financing

In April 2021, the company repaid $ 1.8 billion aggregate principal amount of 2.3 % senior notes that were scheduled to mature in May 2021.

In May 2021, the company repaid € 750 million aggregate principal amount of 0.5 % senior Euro notes that were scheduled to mature in June 2021.

These repayments were made by exercising, under the terms of the notes, 30-day early redemptions at 100% of the principal amounts.

The company also repaid $ 750 million aggregate principal amount of floating rate senior notes at maturity in May 2021.

In September 2021, the company refinanced its $ 1.0 billion floating rate three-year term loan.

As part of the refinancing, the company repaid the existing $ 1.0 billion term loan due May 2023 and borrowed $ 1.0 billion under a new term loan at a lower floating rate.

All other significant terms of the loan, including the maturity date, remained unchanged after the refinancing.

In September 2021, the company repaid $ 1.2 billion aggregate principal amount of 5.0 % senior notes that were scheduled to mature in December 2021.

This repayment was made by exercising, under the terms of the notes, 90-day early redemption at 100% of the principal amount.

In November 2021, the company repaid $ 1.3 billion aggregate principal amount of 3.375 % senior notes and $ 1.8 billion aggregate principal amount of 2.15 % senior notes at maturity.

The company also repaid $ 750 million aggregate principal amount of floating rate senior notes at maturity in November 2021.

2021 Form 10-K |

In January 2022, the company repaid $ 2.9 billion aggregate principal amount of 3.450 % senior notes that were scheduled to mature in March 2022.

This repayment was made by exercising, under the terms of the notes, 60-day early redemption at 100% of the principal amount.

In connection with the acquisition of Allergan, in May 2020, the company borrowed $ 3.0 billion under a $ 6.0 billion term loan credit agreement, of which $ 1.0 billion was outstanding under a floating rate three-year term loan tranche and $ 2.0 billion outstanding under a floating rate five-year term loan tranche as of December 31, 2021.

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The exchange transaction was accounted for as a modification of the assumed debt instruments.

In September 2020, the company repaid $ 650 million aggregate principal amount of 3.375 % Allergan exchange notes at maturity.

In November 2020, the company repaid € 700 million aggregate principal amount of floating rate Allergan exchange notes at maturity and $ 450 million aggregate principal amount of 4.875 % Allergan exchange notes due February 2021 three months prior to maturity.

In November 2019, the company issued $ 30.0 billion aggregate principal amount of unsecured senior notes.

These senior notes rank equally with all other unsecured and unsubordinated indebtedness of the company.

AbbVie may redeem the fixed-rate senior notes prior to maturity at a redemption price equal to the greater of the principal amount or the sum of present values of the remaining scheduled payments of principal and interest on the fixed-rate senior notes to be redeemed plus a make-whole premium.

With exception of the fixed-rate notes due 2021 and 2022, AbbVie may also redeem the fixed-rate senior notes at par between one and six months prior to maturity.

In connection with the offering, debt issuance costs incurred totaled $ 173 million and debt discounts totaled $ 52 million, which are being amortized over the respective terms of the notes to interest expense, net in the consolidated statements of earnings.

AbbVie used the net proceeds to fund a portion of the aggregate cash consideration due to Allergan shareholders in connection with the acquisition described in Note 5 and to pay related fees and expenses.

Other Long-Term Debt

In May 2020, the company repaid $ 3.8 billion aggregate principal amount of 2.5 % senior notes at maturity.

In September 2020, the company repaid $ 650 million aggregate principal amount of 3.375 % senior notes at maturity.

In November 2020, the company repaid € 700 million aggregate principal amount of floating rate senior Euro notes at maturity and $ 450 million aggregate principal amount of 4.875 % senior notes due February 2021 three months prior to maturity.

In September 2019, the company issued € 1.4 billion aggregate principal amount of unsecured senior Euro notes.

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AbbVie may redeem the senior notes prior to maturity at a redemption price equal to the principal amount of the senior notes redeemed plus a make-whole premium and may redeem the senior notes at par between one and three months prior to maturity.

2020 Form 10-K |

connection with the offering, debt issuance costs incurred totaled $ 9 million and debt discounts totaled $ 5 million and are being amortized over the respective terms of the notes to interest expense, net in the consolidated statements of earnings.

In connection with the offering, debt issuance costs incurred totaled $ 9 million and debt discounts totaled $ 5 million and are being amortized over the respective terms of the notes to interest expense, net in the consolidated statements of earnings.

In October 2019, the company used the proceeds to redeem € 1.4 billion aggregate principal amount of 0.375 % senior Euro notes that were due to mature in November 2019.

In May 2018, the company also repaid $ 3.0 billion aggregate principal amount of 1.80 % senior notes at maturity.

In September 2018, the company issued $ 6.0 billion aggregate principal amount of unsecured senior notes.

In November 2019, the company issued $ 30.0 billion aggregate principal amount of unsecured senior notes.

These senior notes rank equally with all other unsecured and unsubordinated indebtedness of the company.

AbbVie may redeem the senior notes prior to maturity at a redemption price equal to the principal amount of the senior notes redeemed plus a make-whole premium, and except for the 3.375 % notes due 2021, AbbVie may redeem the senior notes at par between one and six months prior to maturity.

In connection with the offering, debt issuance costs incurred totaled $ 37 million and debt discounts totaled $ 37 million and are being amortized over the respective terms of the senior notes to interest expense, net in the consolidated statements of earnings.

Of the $ 5.9 billion net proceeds, $ 2.0 billion was used to repay the company's outstanding three-year term loan credit agreement in September 2018 and $ 1.0 billion was used to repay the aggregate principal amount of 2.00 % senior notes at maturity in November 2018.

The company used the remaining proceeds to repay term loan obligations in 2019 as they became due.

With exception of the fixed-rate notes due 2021 and 2022, AbbVie may also redeem the fixed-rate senior notes at par between one and six months prior to maturity.

AbbVie has outstanding $ 4.8 billion aggregate principal amount of unsecured senior notes which were issued in 2018.

AbbVie may redeem the senior notes prior to maturity at a redemption price equal to the principal amount of the senior notes redeemed plus a make-whole premium and AbbVie may redeem the senior notes at par between one month and six months prior to maturity.

AbbVie has outstanding € 2.2 billion aggregate principal amount of unsecured senior Euro notes which were issued in 2016.

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AbbVie may redeem all of the senior notes of each series, at any time, or some of the senior notes of each series, from time to time, at a redemption price equal to the principal amount of the senior notes redeemed plus a make-whole premium.

| 2021 Form 10-K

At December 31, 2021, the company was in compliance with its senior note covenants and term loan covenants.

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There were no commercial paper borrowings outstanding as of December 31, 2021 and December 31, 2020.

The weighted-average interest rate on commercial paper borrowings was 1.8 % in 2020, 2.5 % in 2019 and 2.0 % in 2018.

No commercial paper borrowings were issued during 2021.

The weighted-average interest rate on commercial paper borrowings was 1.8 % in 2020 and 2.5 % in 2019.

In August 2019, AbbVie entered into an amended and restated $ 4.0 billion five-year revolving credit facility that matures in August 2024.

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In March 2019, AbbVie repaid a $ 3.0 billion 364 -day term loan credit agreement that was drawn on in June 2018 and was scheduled to mature in June 2019.

| 2020 Form 10-K

Maturities of Long-Term Debt

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as of and for the years ending December 31 (in millions)

2022 $ 12,428

Thereafter 37,377

Total obligations and commitments 75,962

Fair value hedges, unamortized bond premiums and discounts, deferred financing costs and finance

lease obligations 1,074

Fair value hedges, unamortized bond premiums and discounts, deferred financing costs and finance lease obligations 708

Total long-term debt and finance lease obligations $ 76,670

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collateral is generally not required.

2021 Form 10-K |

Financial Instruments

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Accumulated gains and losses as of December 31, 2021 will be reclassified from AOCI and included in cost of products sold at the time the products are sold, generally not exceeding six months from the date of settlement.

In the third quarter of 2019, the company entered into treasury rate lock agreements with notional amounts totaling $ 10.0 billion to hedge exposure to variability in future cash flows resulting from changes in interest rates related to the issuance of long-term debt in connection with the proposed acquisition of Allergan.

The treasury rate lock agreements were designated as cash flow hedges and recorded at fair value.

The agreements were net settled upon issuance of the senior notes in November 2019 resulting in a gain of $ 383 million recognized in other comprehensive income (loss).

This gain is reclassified to interest expense, net over the lives of the related debt.

In the fourth quarter of 2019, the company entered into interest rate swap contracts with notional amounts totaling $ 2.3 billion at December 31, 2020 and December 31, 2019.

The agreements were net settled upon issuance of the senior notes in November 2019 resulting in a pre-tax gain of $ 383 million recognized in other comprehensive income (loss).

This gain is reclassified to interest expense, net over the term of the related debt.

The company is a party to interest rate swap contracts designed as cash flow hedges with notional amounts totaling $ 750 million at December 31, 2021 and $ 2.3 billion at December 31, 2020.

The effect of the hedge contracts is to change a floating-rate interest obligation to a fixed rate for that portion of the floating-rate debt.

The contracts were designated as cash flow hedges

2020 Form 10-K |

and are recorded at fair value.

Realized and unrealized gains or losses are included in AOCI and are reclassified to interest expense, net over the lives of the floating-rate debt.

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The company had an aggregate principal amount of senior Euro notes designated as net investment hedges of € 5.9 billion at December 31, 2021 and € 6.6 billion at December 31, 2020.

In addition, the company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling € 971 million at December 31, 2020 and € 971 million, £ 204 million, and CHF 62 million at December 31, 2019.

In addition, the company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling € 4.3 billion at December 31, 2021 and € 971 million at December 31, 2020.

The company uses the spot method of assessing hedge effectiveness for derivative instruments designated as net investment hedges.

Realized and unrealized gains and losses from these hedges are included in AOCI and the initial fair value of hedge components excluded from the assessment of effectiveness is recognized in interest expense, net over the life of the hedging instrument.

AbbVie is a party to interest rate swap contracts designated as fair value hedges with notional amounts totaling $ 4.8 billion at December 31, 2020 and $ 10.8 billion at December 31, 2019.

The company is a party to interest rate swap contracts designated as fair value hedges with notional amounts totaling $ 4.5 billion at December 31, 2021 and $ 4.8 billion at December 31, 2020.

The effect of the hedge contracts is to change a fixed-rate interest obligation to a floating rate for that portion of the debt.

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No amounts are excluded from the assessment of effectiveness for cash flow hedges or fair value hedges.

| 2021 Form 10-K

The following table summarizes the amounts and location of AbbVie's derivative instruments on the consolidated balance sheets:

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Designated as net investment hedges Prepaid expenses and other 149 — Accounts payable and accrued liabilities — 11

Designated as net investment hedges Other assets 15 — Other long-term liabilities — —

Not designated as hedges Prepaid expenses and other 26 49 Accounts payable and accrued liabilities 13 33

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While certain derivatives are subject to netting arrangements with the company's counterparties, the company does not offset derivative assets and liabilities within the consolidated balance sheets.

| 2020 Form 10-K

The following table presents the pre-tax amounts of gains (losses) from derivative instruments recognized in other comprehensive income (loss):

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Treasury rate lock agreements designated as cash flow hedges — — 383

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax losses of $ 93 million into cost of products sold for foreign currency cash flow hedges, pre-tax losses of $ 24 million into interest expense, net for interest rate swap cash flow hedges and pre-tax gains of $ 24 million into interest expense, net for treasury rate lock agreement cash flow hedges during the next 12 months.

Related to AbbVie’s non-derivative, foreign currency denominated debt designated as net investment hedges, the company recognized in other comprehensive income (loss) pre-tax losses of $ 907 million in 2020, pre-tax gains of $ 90 million in 2019 and pre-tax gains of $ 178 million in 2018.

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $ 65 million into cost of products sold for foreign currency cash flow hedges, pre-tax losses of $ 7 million into interest expense, net for interest rate swap cash flow hedges and pre-tax gains of $ 24 million into interest expense, net for treasury rate lock agreement cash flow hedges during the next 12 months.

Related to AbbVie’s non-derivative, foreign currency denominated debt designated as net investment hedges, the company recognized in other comprehensive income (loss) pre-tax gains of $ 577 million in 2021, pre-tax losses of $ 907 million in 2020 and pre-tax gains of $ 90 million in 2019.

2021 Form 10-K |

The following table summarizes the pre-tax amounts and location of derivative instrument net gains (losses) recognized in the consolidated statements of earnings, including the net gains (losses) reclassified out of AOCI into net earnings.

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Cash and equivalents $ 8,449 $ 2,758 $ 5,691 $ —

Money market funds and time deposits 12 — 12 —

Debt securities 50 — 50 —

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Total liabilities $ 13,163 $ — $ 166 $ 12,997

Equity securities consist of investments for which the fair values were determined by using the published market price per unit multiplied by the number of units held, without consideration of transaction costs.

Equity securities primarily consist of investments for which the fair values were determined by using the published market prices per unit multiplied by the number of units held, without consideration of transaction costs.

The derivatives entered into by the company were valued using observable market inputs including published interest rate curves and both forward and spot prices for foreign currencies.

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Changes to the inputs described above could have a material impact on the company's financial position and results of operations in any given period.

The fair value of the company's contingent consideration liabilities as of December 31, 2020 was calculated using the following significant unobservable inputs:

The fair value of the company's contingent consideration liabilities was calculated using the following significant unobservable inputs:

years ended December 31 (in millions) Range Weighted Average (a)

Range Weighted Average (a)

Discount rate 0.2 % - 2.6 %

0.1 % - 2.2 %

Probability of payment for unachieved milestones 89 % - 100 %

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(a) Unobservable inputs were weighted by the relative fair value of the contingent consideration liabilities.

(b) Excludes early stage indications with 0 % estimated probability of payment and includes approved indications with 100 % probability of payment.

Excluding approved indications, the estimated probability of payment ranged from 56 % to 89 % at December 31, 2020.

(b) Excluding approved indications, the estimated probability of payment ranged from 56 % to 89 % at December 31, 2021 and 56 % to 89 % at December 31, 2020.

There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy.

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Ending balance $ 14,887 $ 12,997 $ 7,340

(a) Additions during the year ended December 31, 2020 represent contingent consideration liabilities assumed in the Allergan acquisition as well as contingent consideration resulting from the Luminera acquisition.

The change in fair value recognized in net earnings is recorded in other expense, net in the consolidated statements of earnings.

During the fourth quarter of 2020, the company recorded a $ 4.7 billion increase in the Skyrizi contingent consideration liability due to higher estimated future sales driven by stronger market share uptake and favorable clinical trial results as well as lower interest rates.

During the second quarter of 2019, the company recorded a $ 2.3 billion increase in the Skyrizi contingent consideration liability due to higher probabilities of success, higher estimated future sales and declining interest rates.

During the year-ended December 31, 2021, the company recorded a $ 2.7 billion increase in the Skyrizi contingent consideration liability due to higher estimated sales driven by stronger market share uptake, favorable clinical trial results and the passage of time, partially offset by higher discount rates.

During the year-ended December 31, 2020, the company recorded a $ 5.7 billion increase in the Skyrizi contingent consideration liability due to higher estimated future sales driven by stronger market share uptake, lower discount rates, the passage of time and favorable clinical trial results.

The higher probabilities of success resulted from the April 2019 regulatory approvals of Skyrizi for the treatment of moderate to severe plaque psoriasis.

During the third quarter of 2019, the company recorded a $ 91 million decrease in the Stemcentrx contingent consideration liability due to the termination of the Rova-T R&D program.

During the fourth quarter of 2018, the company recorded a $ 428 million decrease in the Stemcentrx contingent consideration liability due to a reduction in probabilities of success of achieving regulatory approval.

| 2021 Form 10-K

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(Level 2) Significant unobservable inputs

Short-term borrowings $ 34 $ 34 $ — $ 34 $ —

Current portion of long-term debt and finance lease obligations, excluding fair value hedges $ 8,461 $ 8,542 $ 8,249 $ 293 $ —

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Of total net accounts receivable, three U.S.

wholesalers accounted for 72 % as of December 31, 2020 and 68 % as of December 31, 2019, and substantially all of AbbVie's net revenues in the United States were to these three wholesalers.

wholesalers accounted for 75 % as of December 31, 2021 and 72 % as of December 31, 2020, and substantially all of AbbVie's pharmaceutical product net revenues in the United States were to these three wholesalers.

Humira (adalimumab) is AbbVie's single largest product and accounted for approximately 37 % of AbbVie's total net revenues in 2021, 43 % in 2020 and 58 % in 2019.

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Amendments — — — ( 397 )

Actuarial loss 1,105 1,703 40 451

Actuarial (gain) loss ( 8 ) 1,105 10 40

Benefits paid ( 281 ) ( 249 ) ( 22 ) ( 17 )

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Accumulated other comprehensive loss $ 3,509 $ 4,171 $ 91 $ 74

The projected benefit obligations (PBO) in the table above included $ 3.5 billion at December 31, 2020 and $ 2.3 billion at December 31, 2019, related to international defined benefit plans.

For plans reflected in the table above, the accumulated benefit obligations (ABO) were $ 10.5 billion at December 31, 2020 and $ 7.6 billion at December 31, 2019.

The projected benefit obligations in the table above included $ 3.2 billion at December 31, 2021 and $ 3.5 billion at December 31, 2020, related to international defined benefit plans.

For plans reflected in the table above, the accumulated benefit obligations were $ 10.5 billion at December 31, 2021 and December 31, 2020.

| 2021 Form 10-K

7 unchanged sentences

Fair value of plan assets 5,447 6,066

The 2020 actuarial losses of $ 1.1 billion for qualified pension plans and $ 40 million for other post-employment plans were primarily driven by a decrease in the assumed discount rate from 2019.

The 2021 actuarial gain of $ 8 million for qualified pension plans and actuarial loss of $ 10 million for other post-employment plans were primarily driven by an increase in the assumed discount rate offset by change in demographic assumptions from 2020.

The 2020 actuarial losses of $ 1.1 billion for qualified pension plans and $ 40 million for other post-employment plans were primarily driven by a decrease in the assumed discount rate from 2019.

A change to AbbVie's U.S.

AbbVie's U.S.

pension plan was modified to close the plan to new entrants effective January 1, 2022.

In addition, a change to AbbVie's U.S.

retiree health benefit plan was approved in 2020 and communicated to employees and retirees in October 2020.

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AbbVie will continue to provide financial support to Medicare-eligible retirees.

This change decreased AbbVie's post-employment benefit obligation and increased AbbVie's unrecognized prior service credit as of December 31, 2020 by $ 397 million.

This change to the U.S.

retiree health benefit plan decreased AbbVie's post-employment benefit obligation and increased AbbVie's unrecognized prior service credit as of December 31, 2020 by $ 397 million.

In connection with the Allergan acquisition, AbbVie assumed certain post-employment benefit obligations which were recorded at fair value.

Upon acquisition in the second quarter of 2020, the excess of projected benefit obligations over the plan assets was recognized as a liability totaling $ 156 million.

2021 Form 10-K |

Amounts Recognized in Other Comprehensive Income (Loss)

2 unchanged sentences

Defined benefit plans

Actuarial loss $ 701 $ 1,231 $ 209

Actuarial loss (gain) $ ( 345 ) $ 701 $ 1,231

Amortization of prior service cost ( 2 ) ( 2 ) —

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Foreign exchange loss (gain) and other ( 27 ) 56 ( 6 )

Total loss $ 528 $ 1,116 $ 56

Total loss (gain) $ ( 662 ) $ 528 $ 1,116

Other post-employment plans

Actuarial loss (gain) $ 40 $ 451 $ ( 287 )

Prior service cost (credit) ( 397 ) — —

Actuarial loss $ 10 $ 40 $ 451

Prior service credit — ( 397 ) —

Amortization of prior service credit 39 4 —

1 unchanged sentence

Total loss (gain) $ 17 $ ( 379 ) $ 450

| 2020 Form 10-K

Net Periodic Benefit Cost

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The assumptions used in calculating the December 31, 2021 measurement date benefit obligations will be used in the calculation of net periodic benefit cost in 2022.

| 2021 Form 10-K

Weighted-Average Assumptions Used in Determining Net Periodic Benefit Cost

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For the December 31, 2021 post-retirement health care obligations remeasurement, the company assumed a 5.9 % pre-65 ( 2.1 % post-65) annual rate of increase in the per capita cost of covered health care benefits.

The rate was assumed to decrease gradually to 4.5 % in 2090 and remain at that level thereafter.

The pre-65 rate was assumed to decrease gradually to 4.5 % ( 1.8 % post-65) in 2029 and remain at that level thereafter.

For purposes of measuring the 2021 post-retirement health care costs, the company assumed a 6.0 % pre-65 ( 2.3 % post-65) annual rate of increase in the per capita cost of covered health care benefits.

The rate was assumed to decrease gradually to 4.5 % for 2050 and remain at that level thereafter.

The pre-65 rate was assumed to decrease gradually to 4.5 % ( 2.0 % post-65) for 2029 and remain at that level thereafter.

2021 Form 10-K |

30 unchanged sentences

government securities (d)

544 397 147 —

Absolute return funds (e)

29 unchanged sentences

Defined Contribution Plan

AbbVie's principal defined contribution plans are the AbbVie Savings Plan and the Allergan Savings Plan.

AbbVie recorded expense of $ 191 million in 2020, $ 102 million in 2019 and $ 89 million in 2018 related to these plans.

AbbVie maintains defined contribution savings plans for the benefit of its eligible employees.

The expense recognized for these plans was $ 267 million in 2021, $ 191 million in 2020 and $ 102 million in 2019.

AbbVie provides certain other post-employment benefits, primarily salary continuation arrangements, to qualifying employees and accrues for the related cost over the service lives of the employees.

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Stock-Based Compensation

AbbVie grants stock-based awards to eligible employees pursuant to the AbbVie 2013 Incentive Stock Program (2013 ISP), which provides for several different forms of benefits, including nonqualified stock options, RSUs and various performance-based awards.

Under the 2013 ISP, 100 million shares of AbbVie common stock were reserved for issuance as awards to AbbVie employees.

In May 2021, stockholders of the company approved the AbbVie Amended and Restated 2013 Incentive Stock Program (the Amended Plan), which amends and restates the AbbVie 2013 Incentive Stock Program (2013 ISP).

AbbVie grants stock-based awards to eligible employees pursuant to the Amended Plan, which provides for several different forms of benefits, including non-qualified stock options, RSUs and various performance-based awards.

Under the Amended Plan, a total of 144 million shares of AbbVie common stock have been reserved for issuance as awards to AbbVie employees.

The 2013 ISP also facilitated the assumption of certain awards granted under Abbott’s incentive stock program, which were adjusted and converted into Abbott and AbbVie stock-based awards as a result of AbbVie's separation from Abbott.

2021 Form 10-K |

AbbVie measures compensation expense for stock-based awards based on the grant date fair value of the awards and the estimated number of awards that are expected to vest.

Forfeitures are estimated based on historical experience at the time of grant and are revised in subsequent periods if actual forfeitures differ from those estimates.

Compensation cost for

2020 Form 10-K |

stock-based awards is amortized over the service period, which could be shorter than the vesting period if an employee is retirement eligible.

Compensation cost for stock-based awards is amortized over the service period, which could be shorter than the vesting period if an employee is retirement eligible.

Retirement eligible employees generally are those who are age 55 or older and have at least 10 years of service.

Stock-based compensation expense is principally related to awards issued pursuant to the 2013 ISP and is summarized as follows:

Stock-based compensation expense is principally related to awards issued pursuant to the 2013 ISP and the Amended Plan and is summarized as follows:

years ended December 31 (in millions) 2021 2020 2019

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Granted 1,147 105.94

Granted in acquisition 11,152 70.48

Exercised ( 4,278 ) 57.77

Lapsed ( 88 ) 107.33

Lapsed and forfeited ( 186 ) 105.28

Outstanding at December 31, 2021 12,374 $ 81.98 4.7 $ 661

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The performance-vested RSUs have the potential to vest in one-third increments during a three-year performance period.

For awards granted in 2020, performance is based on AbbVie's return on invested capital (ROIC) relative to a defined peer group of pharmaceutical, biotech and life science companies.

For awards granted in 2018 and 2019, the tranches tied to 2020 performance are based on AbbVie’s return on equity (ROE) relative to a defined peer group of pharmaceutical, biotech and life sciences companies.

The recipient may receive one share of AbbVie common stock for each vested award.

The performance shares have the potential to vest

For awards granted in 2021 and 2020, performance is based on AbbVie's return on invested capital relative to a defined peer group of pharmaceutical, biotech and life science companies.

For awards granted in 2019, the tranches tied to 2021 performance are based on AbbVie’s return on

| 2021 Form 10-K

over a three-year performance period and may be earned based on AbbVie’s EPS achievement and AbbVie’s total stockholder return (TSR) (a market condition) relative to a defined peer group of pharmaceutical, biotech and life sciences companies.

equity relative to a defined peer group of pharmaceutical, biotech and life sciences companies.

The recipient may receive one share of AbbVie common stock for each vested award.

The performance shares have the potential to vest over a three-year performance period and may be earned based on AbbVie’s EPS achievement and AbbVie’s total stockholder return (TSR) (a market condition) relative to a defined peer group of pharmaceutical, biotech and life sciences companies.

Dividend equivalents on performance-vested RSUs and performance shares accrue during the performance period and are payable at vesting only to the extent that shares are earned.

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Granted 7,556 105.79

Granted in acquisition 8,234 83.96

Vested ( 6,735 ) 91.63

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Shares repurchased under these programs are recorded at acquisition cost, including related expenses and are available for general corporate purposes.

AbbVie repurchased 8 million shares for $ 757 million in 2020 and 4 million shares for $ 300 million in 2019.

AbbVie repurchased 6 million shares for $ 670 million in 2021, 8 million shares for $ 757 million in 2020 and 4 million shares for $ 300 million in 2019.

AbbVie's remaining stock repurchase authorization was $ 2.5 billion as of December 31, 2021.

On February 15, 2018, AbbVie's board of directors authorized a new $ 10.0 billion stock repurchase program, which superseded AbbVie's previous stock repurchase program.

On December 13, 2018, AbbVie's board of directors authorized a $ 5.0 billion increase to the existing $ 10.0 billion stock repurchase program.

Under this authorization, AbbVie repurchased approximately 109 million shares for $ 10.7 billion in 2018.

Under previous stock repurchase programs, AbbVie made open-market share repurchases of approximately 11 million shares for $ 1.3 billion in 2018.

2021 Form 10-K |

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Other comprehensive income (loss) before reclassifications ( 98 ) 95 ( 1,330 ) 12 298 ( 1,023 )

Net losses reclassified from accumulated other comprehensive loss — — 113 4 157 274

Net losses (gains) reclassified from accumulated other comprehensive loss — ( 21 ) 87 ( 2 ) ( 157 ) ( 93 )

Net current-period other comprehensive income (loss) ( 98 ) 74 ( 1,243 ) 10 141 ( 1,116 )

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Balance as of December 31, 2021 $ ( 570 ) $ ( 91 ) $ ( 2,546 ) $ — $ 308 $ ( 2,899 )

Other comprehensive income (loss) included foreign currency translation adjustments totaling gains of $ 1.5 billion in 2020 which were principally due to the impact of the strengthening of the Euro on the translation of the company’s Euro-denominated assets.

Other comprehensive income (loss) included foreign currency translation adjustments totaling losses of $ 98 million in 2019 and $ 391 million in 2018 which were principally due to the impact of the weakening of the Euro on the translation of the company’s Euro-denominated assets.

Other comprehensive loss for 2019 included pension and post-employment benefit plan losses of $ 1.2 billion primarily due to an actuarial loss driven by lower discount rates.

Other comprehensive income (loss) for 2021 included foreign currency translation adjustments totaling losses of $ 1.2 billion and the offsetting impact of net investment hedging activities totaling gains of $ 699 million, which were principally due to the impact of the weakening of the Euro on the translation of the company’s Euro-denominated assets.

Other comprehensive income (loss) for 2020 included foreign currency translation adjustments totaling gains of $ 1.5 billion and the offsetting impact of net investment hedging activities totaling losses of $ 799 million, which were principally due to the impact of the strengthening of the Euro on the translation of the company's Euro-denominated assets.

Other comprehensive income (loss) for 2019 included pension and post-employment benefit plan losses of $ 1.2 billion primarily due to an actuarial loss driven by lower discount rates.

See Note 12 for additional information.

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As of December 31, 2021, no shares of preferred stock were issued or outstanding.

2021 Form 10-K |

Note 14 Income Taxes

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Total income tax expense (benefit) $ 1,440 $ ( 1,224 ) $ 544

2020 Form 10-K |

Effective Tax Rate Reconciliation

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Tax law changes and related restructuring ( 2.0 ) ( 48.5 ) 3.1

Stock-based compensation excess tax benefit ( 0.9 ) ( 0.2 ) ( 1.5 )

Tax audit settlements ( 0.4 ) ( 5.1 ) ( 4.7 )

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The effective income tax rate fluctuates year to year due to the allocation of the company's taxable earnings among jurisdictions, as well as certain discrete factors and events in each year, including changes in tax law, acquisitions and collaborations.

The effective income tax rates in 2020, 2019 and 2018 differed from the statutory tax rate principally due to the impact of foreign operations which reflects the impact of lower income tax rates in locations outside the United States, tax incentives in Puerto Rico and other foreign tax jurisdictions, business development activities, changes in enacted tax rates and laws and related restructuring, the cost of repatriation decisions, tax audit settlements and Boehringer Ingelheim accretion on contingent consideration.

The effective income tax rates in 2021, 2020 and 2019 differed from the statutory tax rate principally due to the impact of foreign operations which reflects the impact of lower income tax rates in locations outside the United States, tax incentives in Puerto Rico and other foreign tax jurisdictions, business development activities, changes in enacted tax rates and laws and related restructuring, tax audit settlements and accretion on contingent consideration.

The 2020 effective income tax rate included the recognition of a net tax benefit of $ 1.7 billion related to changes in tax laws and related restructuring, including certain intra-group transfers of intellectual property and deferred tax remeasurement.

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The company’s accounting policy for the minimum tax on foreign sourced earnings is to report the tax effects on the basis that the minimum tax will be recognized in tax expense in the year it is incurred as a period expense.

In 2018, there was a favorable impact of the effective date of provisions of the Act related to the earnings from certain foreign subsidiaries.

For 2019, the impact of the Act affected the full year earnings of these subsidiaries, resulting in additional tax expense compared to the previous year.

The effective income tax rates for 2019 and 2018 also included the effects of Stemcentrx impairment related expenses.

The effective income tax rates for 2019 also included the effects of Stemcentrx impairment related expenses.

| 2021 Form 10-K

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Net deferred tax liabilities $ ( 735 ) $ ( 1,232 )

The increases in deferred tax liabilities are primarily due to the acquisition of Allergan in which the company recorded the excess of book basis over tax basis of intangible assets.

The increases in deferred tax assets are primarily due to deferred tax asset recognition related to the intra-group transfer of intellectual property.

The decrease in net deferred tax assets is primarily related to the utilization of net operating losses and other carryforwards offset by an increase in advance payments.

The decrease in deferred tax liabilities is primarily related to amortization of intangible assets.

In connection with the Allergan acquisition, the company recorded adjustments within the measurement period in 2021 related to foreign net operating losses and other credit carryforwards that are not expected to be realized.

The adjustments reflected an increase of $ 8.2 billion to deferred tax assets and an offsetting increase to valuation allowances, resulting in no net impact to deferred tax assets.

The company had valuation allowances of $ 9.4 billion as of December 31, 2021 and $ 1.2 billion as of December 31, 2020.

These were principally related to foreign and state net operating losses and other credit carryforwards that are not expected to be realized.

As of December 31, 2021, the company had U.S.

federal and state credit carryforwards of $ 214 million as well as U.S.

federal, state and non-U.S.

net operating loss carryforwards of $ 4.3 billion, which will expire at various times through 2040.

federal, state and foreign net operating loss carryforwards of $ 34.4 billion, which will expire at various times through 2041.

The remaining U.S.

federal and non-U.S.

loss carryforwards of $ 5.8 billion have no expiration.

The company had valuation allowances of $ 1.2 billion as of December 31, 2020 and $ 731 million as of December 31, 2019.

These were principally related to foreign and state net operating losses and credit carryforwards that are not expected to be realized.

federal and foreign loss carryforwards of $ 3.2 billion have no expiration.

The Act significantly changed the timing and manner in which earnings of foreign subsidiaries are subject to U.S.

Therefore, unremitted foreign earnings previously considered indefinitely reinvested that were subject to the Act’s transition tax are no longer considered indefinitely reinvested.

Therefore, unremitted foreign earnings subject to the Act’s transition tax are not considered indefinitely reinvested.

Post-2017 earnings subject to the U.S.

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The unrecognized tax liability is not practicable to determine.

2021 Form 10-K |

Unrecognized Tax Benefits

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Ending balance $ 5,489 $ 5,264 $ 2,661

AbbVie and Abbott entered into a tax sharing agreement, effective on the date of separation, which provides that Abbott is liable for and has indemnified AbbVie against all income tax liabilities for periods prior to the separation.

2020 Form 10-K |

be responsible for unrecognized tax benefits and related interest and penalties for periods after separation or in instances where an existing entity was transferred to AbbVie upon separation.

If recognized, the net amount of potential tax benefits that would impact the company's effective tax rate is $ 5.2 billion in 2021 and $ 5.0 billion in 2020.

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Loss contingency provisions are recorded for probable losses at management’s best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount within a probable range is recorded.

The recorded accrual balance for litigation was approximately $ 60 million as of December 31, 2020 and approximately $ 290 million as of December 31, 2019.

For litigation matters discussed below for which a loss is probable or reasonably possible, the company is unable to estimate the possible loss or range of loss, if any, beyond the amounts accrued.

Initiation of new legal proceedings or a change in the status of existing proceedings may result in a change in the estimated loss accrued by AbbVie.

In addition, other operating income in 2019 included $ 550 million of income from a legal settlement related to an intellectual property dispute with a third party.

While it is not feasible to predict the outcome of all proceedings and exposures with certainty, management believes that their ultimate disposition should not have a material adverse effect on AbbVie’s consolidated financial position, results of operations or cash flows.

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Plaintiffs generally seek monetary damages and/or injunctive relief and attorneys' fees.

The lawsuits pending in federal court consist of four individual plaintiff lawsuits and two consolidated purported class actions:

one brought by Niaspan direct purchasers and one brought by Niaspan end-payers.

| 2021 Form 10-K

pending in federal court consist of four individual plaintiff lawsuits and two consolidated purported class actions:

one brought by Niaspan direct purchasers and one brought by Niaspan end-payors.

The cases are pending in the United States District Court for the Eastern District of Pennsylvania for coordinated or consolidated pre-trial proceedings under the MDL Rules as In re:

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In August 2019, the court certified a class of direct purchasers of Niaspan.

In June 2020, the court denied the end-payers' motion to certify a class.

In June 2020 and August 2021, the court denied the end-payors' motion to certify a class.

In October 2016, the Orange County, California District Attorney’s Office filed a lawsuit on behalf of the State of California regarding the Niaspan patent litigation settlement in Orange County Superior Court, asserting a claim under the unfair competition provision of the California Business and Professions Code seeking injunctive relief, restitution, civil penalties and attorneys’ fees.

| 2020 Form 10-K

In September 2014, the Federal Trade Commission (FTC) filed a lawsuit, FTC v.

AbbVie Inc., et al.

, against AbbVie and others in the United States District Court for the Eastern District of Pennsylvania, alleging that 2011 patent litigation with two generic companies regarding AndroGel was sham litigation and the settlements of that litigation violated federal antitrust law.

In May 2015, the court dismissed the FTC’s settlement-related claim.

In June 2018, following a bench trial, the court found for the FTC on its sham litigation claim and ordered a disgorgement remedy of $ 448 million, plus prejudgment interest.

The court denied the FTC’s request for injunctive relief.

In September 2020, the United States Court of Appeals for the Third Circuit reversed the district court’s finding of sham litigation with respect to one generic company and affirmed with respect to the other but held the FTC lacked authority to obtain a disgorgement remedy and vacated the district court’s award.

The Third Circuit also affirmed the district court’s denial of the FTC’s injunction request and reinstated the FTC’s settlement-related claim for further proceedings in the district court.

In August 2019, direct purchasers of AndroGel filed a lawsuit, King Drug Co.

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, against AbbVie and others in the United States District Court for the Eastern District of Pennsylvania, alleging that 2006 patent litigation settlements and related agreements by Solvay Pharmaceuticals, Inc.

(a company Abbott acquired in February 2010 and now known as AbbVie Products LLC) with three generic companies violated federal antitrust law, and also making allegations similar to those in FTC v.

In May 2020, Perrigo Company and related entities filed a lawsuit against AbbVie and others in the United States District Court for the Eastern District of Pennsylvania, making sham litigation allegations similar to those in FTC v.

(a company Abbott acquired in February 2010 and now known as AbbVie Products LLC) with three generic companies violated federal antitrust law, and also alleging that 2011 patent litigation by Abbott with two generic companies regarding AndroGel was sham litigation and the settlements of those litigations violated federal antitrust law.

In May 2020, Perrigo Company and related entities filed a lawsuit against AbbVie and others in the United States District Court for the Eastern District of Pennsylvania, alleging that Abbott's 2011 AndroGel patent lawsuit filed against Perrigo was sham litigation.

In October 2020, the Perrigo lawsuit was transferred to the United States District Court for New Jersey.

In September 2021, the New Jersey court granted AbbVie's motion for judgment on the pleadings in the Perrigo lawsuit, dismissing it with prejudice.

Perrigo has appealed the dismissal.

Between March and May 2019, 12 putative class action lawsuits were filed in the United States District Court for the Northern District of Illinois by indirect Humira purchasers, alleging that AbbVie’s settlements with biosimilar manufacturers and AbbVie’s Humira patent portfolio violated state and federal antitrust laws.

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Restasis (Cyclosporine Ophthalmic Emulsion) Antitrust Litigation , MDL No.

In May 2021, the parties reached an agreement to settle this matter that is subject to final court approval.

Lawsuits are pending against Forest Laboratories, LLC and others generally alleging that 2012 and 2013 patent litigation settlements involving Bystolic with six generic manufacturers violated federal and state antitrust laws and state unfair and deceptive trade practices and unjust enrichment laws.

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Approximately 251 of the claims are pending in various state courts.

The plaintiffs in these cases, which include states, counties, cities, and Native American tribes, generally seek compensatory damages.

The plaintiffs in these cases, which include states, counties, cities, other municipal entities, Native American tribes, union trust funds and other third-party payors, private hospitals, and personal injury claimants, generally seek compensatory and punitive damages.

In December 2021, a California state court reached a judgment for Allergan and other defendants in the trial of an opioid lawsuit by Orange, Los Angeles, and Santa Clara Counties and the City of Oakland.

In December 2021, Allergan reached an agreement to settle a lawsuit brought by the State of New York and two New York counties, which also provides all other New York counties and political subdivisions the opportunity to participate in the settlement.

2021 Form 10-K |

In July 2019, the New Mexico Attorney General filed a lawsuit, State of New Mexico ex rel.

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In October 2020, the state added a claim under the New Mexico False Advertising Act.

2020 Form 10-K |

Shareholder and Securities Litigation

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Similar lawsuits were filed between July 2017 and October 2019 against AbbVie and in some instances its chief executive officer in the same court by additional investment funds.

The court granted motions dismissing the claims of three investment-fund plaintiffs, which they are appealing.

The court granted motions dismissing the claims of three investment-fund plaintiffs, which they appealed.

In March 2021, in the first of those appeals, the dismissal was affirmed.

One of these plaintiffs refiled its lawsuit in New York state court in June 2020 while the appeal of its dismissal in Illinois is pending.

In November 2020, the New York Supreme Court for the County of New York dismissed that lawsuit.

Plaintiffs seek compensatory and punitive damages.

In November 2020, the New York Supreme Court for the County of New York dismissed that lawsuit, which is being appealed.

In September 2021, the Illinois court granted AbbVie's motion for summary judgment against all remaining plaintiffs on all the remaining claims, dismissing them with prejudice.

The plaintiffs have appealed the dismissals.

In October 2018, a federal securities lawsuit, Holwill v.

AbbVie Inc., et al ., was filed in the United States District Court for the Northern District of Illinois) against AbbVie, its chief executive officer and former chief financial officer, alleging that reasons stated for Humira sales growth in financial filings between 2013 and 2017 were misleading because they omitted alleged misconduct in connection with Humira patient and reimbursement support services and other services and items of value that allegedly induced Humira prescriptions.

In February 2020, a shareholder derivative lawsuit, Elfers v.

Gonzalez, et al.

, was filed in the United States District Court for the District of Delaware alleging that certain AbbVie directors and officers breached their fiduciary duties regarding alleged misconduct in connection with Humira patient and reimbursement support services and other services and items of value and in connection with the announcements of results of AbbVie’s 2018 Dutch auction tender offer.

In December 2020, the court dismissed the lawsuit.

In September 2021, the court granted plaintiffs' motion to certify a class.

Lawsuits are pending against Allergan and certain of its current and former officers alleging they made misrepresentations and omissions regarding Allergan's textured breast implants.

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In September 2019, the court partially granted Allergan's motion to dismiss.

In September 2020, the court denied plaintiffs’ class certification motion because it found the lead plaintiff to be an inadequate representative of the proposed class but allowed another putative class member to propose itself as a new lead plaintiff.

In December 2020, the court appointed a new lead plaintiff.

In September 2021, the court granted plaintiffs' motion to certify a class.

Lawsuits are pending against Allergan and certain of its current and former officers alleging they made misrepresentations and omissions regarding Allergan’s former Actavis generics unit and its alleged anticompetitive conduct with other generic drug companies.

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Allergan Generic Drug Pricing Securities Litigation .

Another individual action in New Jersey state court was dismissed in September 2020.

The plaintiffs seek monetary damages and attorneys’ fees.

In July 2021, the parties reached an agreement to settle the class action lawsuits, which received court approval in November 2021.

Product Liability and General Litigation

Product liability cases are pending in which plaintiffs generally allege that AbbVie did not adequately warn about risk of certain injuries, primarily various birth defects, arising from use of Depakote.

Approximately 92 cases are pending in the United States District Court for the Southern District of Illinois along with one other pending in s tate court.

Plaintiffs generally seek compensatory and punitive damages.

Approximately ninety-eight percent of these pending cases, plus other unfiled claims, are subject to confidential settlement agreements or agreements-in-principle and are expected to be dismissed with prejudice.

In 2018, a qui tam lawsuit, U.S.

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Intellectual Property Litigation

Pharmacyclics LLC, a wholly owned subsidiary of AbbVie, is seeking to enforce its patent rights relating to ibrutinib capsules (a drug Pharmacyclics sells under the trademark Imbruvica).

In February 2018 a lawsuit was filed in the United States District Court for the District of Delaware against Sandoz Inc.

and Lek Pharmaceuticals D.D.

In the case, Pharmacyclics alleges the defendants' proposed generic ibrutinib product infringes certain Pharmacyclics patents and seeks declaratory and injunctive relief.

Janssen Biotech, Inc.

which is in a global collaboration with Pharmacyclics concerning the development and marketing of Imbruvica, is the co-plaintiff in this suit.

and AbbVie Biotechnology Ltd are seeking to enforce their patent rights relating to adalimumab (a drug AbbVie sells under the trademark Humira).

In April 2021 and May 2021, cases were filed in the United States District Court for the Northern District of Illinois against Alvotech hf.

AbbVie alleges defendant’s proposed biosimilar adalimumab product infringes certain AbbVie patents and seeks declaratory and injunctive relief.

In August 2021, the court denied Defendant’s motion to dismiss on jurisdictional grounds in the first case;

a motion in the second case remains pending.

The court has set a trial on a subset of patents for August 2022.

The court order provides that Alvotech will stay off the market until that decision.

Litigation on the remaining patents is stayed.

In October 2021, the May 2021 declaratory judgment action filed by Alvotech hf.

subsidiary Alvotech USA, Inc.

in the United States Eastern District of Virginia was transferred to the Northern District of Illinois and subsequently dismissed.

Pharmacyclics LLC, a wholly owned subsidiary of AbbVie, is seeking to enforce its patent rights relating to ibrutinib tablets (a drug Pharmacyclics sells under the trademark Imbruvica).

Cases were filed in the United States District Court for the

| 2020 Form 10-K

District of Delaware in March 2019 and March 2020 against Alvogen Pine Brook LLC and Natco Pharma Ltd., and in April 2020 against Zydus Worldwide DMCC and Cadila Healthcare Limited.

In each case, Pharmacyclics alleges defendants’ proposed generic ibrutinib tablet product infringes certain Pharmacyclics patents and seeks declaratory and injunctive relief.

Cases were filed in the United States District Court for the District of Delaware in March 2019 against Alvogen Pine Brook LLC and Natco Pharma Ltd..

In August 2021, the court issued a decision holding all asserted patents infringed and valid.

The judgment precludes Defendants from obtaining regulatory approval and launching until the last patent expires in 2036.

Janssen Biotech, Inc.

which is in a global collaboration with Pharmacyclics concerning the development and marketing of Imbruvica, is the co-plaintiff in these suits.

| 2021 Form 10-K

Allergan USA, Inc., Allergan Sales, LLC, and Forest Laboratories Holdings Limited, wholly owned subsidiaries of AbbVie, are seeking to enforce patent rights relating to cariprazine (a drug sold under the trademark Vraylar).

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which is in a global collaboration with Allergan concerning the development and marketing of Vraylar, is the co-plaintiff in this suit.

In January 2019, Allergan, Inc.

and Allergan plc (now Allergan Limited) and Medytox Inc.

(collectively, "Complainants") filed a complaint with the United States International Trade Commission (ITC) against Daewoong Pharmaceuticals Co., Ltd., Daewoong Co., Ltd., and Evolus Inc.

(collectively, "Respondents") requesting the ITC commence an investigation regarding the importation into the United States of Respondents' botulinum neurotoxin products, including Jeuveau, which Complainants assert were developed using Medytox's trade secrets.

Complainants seek permanent exclusion and cease and desist orders covering Respondents' products, including Jeuveau.

In July 2020, the administrative law judge issued an initial ruling in favor of Allergan and Medytox.

In December 2020, the full Commission affirmed, in part, and reversed, in part, the initial ruling.

In August 2020, BTL Industries, Inc.

(BTL) filed an ITC action against Allergan USA, Inc., Allergan Limited, Allergan, Inc., Zeltiq Aesthetics, Inc., Zeltiq Ireland Unlimited Company, and Zimmer Medizinsysteme GmbH, for patent infringement alleging that the CoolTone and CoolSculpting devices infringe its patents and seeking an exclusion order preventing importation of the devices and any components used to make or use the devices.

2021 Form 10-K |

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Total net revenues $ 56,197 $ 45,804 $ 33,266

(a) Net revenues include Allergan product revenues from the date of the acquisition, May 8, 2020, through December 31, 2020.

(a) Net revenues include Allergan product revenues after the acquisition closing date of May 8, 2020.

2021 Form 10-K |

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United States $ 43,510 $ 34,879 $ 23,907

Japan 1,198 1,211 1,591

Canada 1,397 1,159 813

Germany 1,223 1,049 909

Japan 1,090 1,198 1,211

France 936 797 695

Australia 527 395 350

United Kingdom 509 372 855

China 857 471 195

Australia 533 527 395

Spain 519 453 472

Brazil 406 359 350

Italy 506 379 372

United Kingdom 497 509 372

Brazil 368 406 359

All other countries 4,761 3,977 3,566

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Cash dividends declared per common share $ 1.41

(a) Fourth quarter results in 2020 included after-tax charges of $ 4.7 billion related to the change in fair value of contingent consideration liabilities partially offset by an after-tax benefit of $ 1.5 billion due to impacts related to tax law changes.

| 2021 Form 10-K

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the 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 financial statements.

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For Medicaid, we involved a specialist with an understanding of statutory reimbursement requirements to assess the consistency of the Company’s calculation methodologies with applicable government regulations and policy.

| 2021 Form 10-K

Valuation of contingent consideration

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Management utilized its expertise within the industry, including commercial dynamics, trends and utilization, as well as knowledge of clinical development and regulatory approval processes to determine certain of these assumptions.

| 2020 Form 10-K

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s contingent consideration liabilities process including, among others, management’s process to establish the significant assumptions and measure the liability.

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We involved a valuation specialist to assess the Company’s Monte Carlo simulation model and to perform corroborative fair value calculations.

Accounting for Allergan plc acquisition – Valuation of intangible assets

Description of the Matter As discussed in Note 5 to the consolidated financial statements under the caption “Licensing, Acquisitions and Other Arrangements”, the Company completed the acquisition of Allergan plc (“Allergan”) on May 8, 2020 for approximately $64,084 million.

The Company measured the assets acquired and liabilities assumed at fair value, which resulted in the recognition of $69,080 million of intangible assets, comprised of $67,330 million of developed product rights and $1,750 million of in-process research and development (“IPR&D”).

Auditing the valuation of intangible assets was complex and required significant auditor judgment due to the high degree of subjectivity in evaluating certain assumptions required to estimate the fair value of the identified intangible assets.

In particular, the fair value measurement was sensitive to management’s forecasts of net revenues, including growth rates used to estimate future net cash flows for acquired aesthetics and recently launched products.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for acquisitions including, among others, management’s process to establish the significant assumptions used in determining the fair values of intangible assets.

This included testing controls over management’s review of the significant assumptions and other inputs used in the determination of estimated future net revenues, the determination of future net cash flows, estimated growth rates, and review of the valuation model.

To test the estimated fair value of intangible assets, our audit procedures included, among others, inspecting the terms of the executed agreement, evaluating the valuation methods used, and testing the significant assumptions discussed above.

We evaluated the assumptions and judgments considering observable industry and economic trends and standards, external data sources, and historical product trends, including those of comparable products, to the extent applicable.

Estimated future net revenues were evaluated for reasonableness against internal and external analyses, including analyst expectations, industry trends, and market trends.

Our procedures included evaluating the data sources used by management in determining its assumptions and, where necessary, included an evaluation of available information that either corroborated or contradicted management’s conclusions.

We involved a valuation specialist to assess the valuation model and to perform corroborative fair value calculations.

2020 Form 10-K |

Accounting for Allergan plc acquisition – Unrecognized tax benefits

Description of the Matter As discussed in Note 14 under the caption “Income Taxes,” as part of the acquisition of Allergan plc, the Company recorded $2,674 million of unrecognized tax benefits resulting from uncertain tax positions.

The Company applied judgment in evaluating the completeness of unrecognized tax benefits assumed as of the acquisition date.

Some of the more significant judgments inherent in the Company’s evaluation of assumed uncertain tax positions included whether a tax position’s technical merits were more-likely-than-not to be sustained, including consideration of applicable tax statutes and related interpretations and precedents and the expected outcome of proceedings (or negotiations) with taxing and legal authorities.

Auditing the Company’s analysis and accounting for uncertain tax positions was complex due to the interpretation of tax laws and legal rulings in multiple tax paying jurisdictions and required significant judgment in determining whether an assumed tax position’s technical merits were more-likely-than-not to be sustained.

In particular, each assumed unrecognized tax benefit involved unique facts and circumstances and multiple potential outcomes that were evaluated, with many uncertainties around initial recognition, including regulatory changes, litigation and examination activity.

Management utilized outside tax and legal counsel, where appropriate, in its evaluation.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for acquisitions including, among others, management’s process to evaluate the completeness and estimation of unrecognized tax benefits.

This included testing controls over management’s determination of whether an assumed tax position’s technical merits were more-likely-than-not to be sustained and, if so, recognizing the estimated amount of qualified tax benefit.

We also obtained an understanding, evaluated the design and tested the operating effectiveness of controls to ensure that the data used to evaluate and support the significant fair value assumptions and unrecognized tax benefits was complete, accurate and, where applicable, verified to external data sources.

To test the completeness and recognition of unrecognized tax benefits, our audit procedures included, among others, testing management’s process for estimating the unrecognized tax benefits.

Testing management’s process included assessing management’s interpretation of the unique facts, circumstances and related tax laws and legal rulings in each tax paying jurisdiction, examining whether the technical merits of each tax position were more-likely-than-not to be sustained, and evaluating the recognition of the amount of qualified tax benefit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness and recognition of the Company’s unrecognized tax benefits, including consideration of applicable tax statutes and related interpretations and precedents.

/s/ Ernst & Young LLP

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data