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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2021-11-02 · 124 added, 204 removed, 167 unchanged (66% of the section changed)

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The following is a discussion and analysis of the financial condition of AbbVie Inc.

(AbbVie or the company) as of September 30, 2021 and December 31, 2020 and the results of operations for the three and nine months ended September 30, 2021 and 2020.

(AbbVie or the company) as of March 31, 2022 and December 31, 2021 and the results of operations for the three months ended March 31, 2022 and 2021.

This commentary should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes appearing in Item 1, “Financial Statements and Supplementary Data.”

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Company Overview

AbbVie is a global, research-based biopharmaceutical company.

AbbVie is a global, diversified research-based biopharmaceutical company positioned for success with a comprehensive product portfolio that has leadership positions across immunology, oncology, aesthetics, neuroscience and eye care.

AbbVie uses its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases.

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

The acquisition of Allergan created a diversified biopharmaceutical company positioned for success with a comprehensive product portfolio that has leadership positions in key therapeutic areas of immunology, hematologic oncology, aesthetics, neuroscience, eye care and women's health.

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

See Note 4 to the Condensed Consolidated Financial Statements for additional information on the acquisition.

Subsequent to the acquisition date, AbbVie's consolidated financial statements include the assets, liabilities, operating results and cash flows of Allergan.

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 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 pharmacies and patients.

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, 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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AbbVie intends to continue to advance its mission in a number of ways, including:

(i) maximizing the benefits of the Allergan acquisition to create a more diversified revenue base with multiple long-term growth drivers;

(ii) growing revenues by leveraging AbbVie's commercial strength and international infrastructure across Allergan's therapeutic areas and ensuring strong commercial execution of new product launches;

(iii) continuing to invest in and expand its pipeline in support of opportunities in immunology, oncology, aesthetics, neuroscience, eye care and women's health as well as continued investment in key on-market products;

(i) maximizing the benefits of a diversified revenue base with multiple long-term growth drivers;

(ii) growing revenues by leveraging AbbVie's commercial strength and international infrastructure across therapeutic areas and ensuring strong commercial execution of new product launches;

(iii) continuing to invest in and expand its pipeline in support of opportunities in immunology, oncology, aesthetics, neuroscience and eye care as well as continued investment in key on-market products;

(iv) expanding operating margins;

and (v) returning cash to shareholders via a strong and growing dividend while also reducing debt.

In addition, AbbVie anticipates several regulatory submissions and key data readouts from key clinical trials in the next 12 months.

In addition, AbbVie anticipates several regulatory submissions and data readouts from key clinical trials in the next 12 months.

Financial Results

The company's financial performance for the nine months ended September 30, 2021 included delivering worldwide net revenues of $41.3 billion, operating earnings of $12.9 billion, diluted earnings per share of $4.19 and cash flows from operations of $17.7 billion.

Worldwide net revenues grew by 29% on a reported basis and 28% on a constant currency basis, which included $13.0 billion of contributed revenues from the Allergan acquisition, growth in the immunology portfolio from Skyrizi, Rinvoq and the continued strength of Humira in the U.S.

as well as revenue growth from Venclexta and Imbruvica.

Diluted earnings per share was $4.19 for the nine months ended September 30, 2021 and included the following after-tax costs:

The company's financial performance for the three months ended March 31, 2022 included delivering worldwide net revenues of $13.5 billion, operating earnings of $4.7 billion, diluted earnings per share of $2.51 and cash flows from operations of $4.9 billion.

Worldwide net revenues grew by 4% on a reported basis and 5% on a constant currency basis, reflecting growth across its immunology, neuroscience and aesthetics portfolios.

Diluted earnings per share was $2.51 for the three months ended March 31, 2022 and included the following after-tax costs:

(i) $1.6 billion related to the amortization of intangible assets;

(ii) $2.4 billion for the change in fair value of contingent consideration liabilities;

(iii) $543 million for acquired in-process research and development (IPR&D);

(iv) $500 million as a result of a collaboration agreement extension with Calico Life Sciences LLC;

(v) $427 million of Allergan acquisition and integration expenses;

(vi) $307 million for milestones and other research and development (R&D) expenses;

and (vii) $86 million for charges related to litigation matters.

(ii) $148 million for charges related to litigation matters;

(iii) $145 million for acquired IPR&D and milestones;

and (iv) $121 million of acquisition and integration expenses.

These costs were partially offset by an after-tax benefit of $746 million related to the change in fair value of contingent consideration liabilities.

Additionally, financial results reflected continued funding to support all stages of AbbVie’s pipeline assets and continued investment in AbbVie’s on-market brands.

2021 Form 10-Q |

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

The integration plan is expected to realize more than $2 billion of annual cost synergies over a three-year period, with approximately 50% realized in R&D, 40% in selling, general and administrative (SG&A) and 10% in cost of products sold.

To achieve these integration objectives, AbbVie expects to incur total charges of approximately $2 billion 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 integration plan is expected to realize approximately $2.5 billion of annual cost synergies in 2022.

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

These costs 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.

2022 Form 10-Q |

Recent Global Events

Russia/Ukraine

In response to the military conflict between Russia and Ukraine, the United States and other North Atlantic Treaty Organization member states, as well as certain non-member states, announced targeted economic sanctions and export controls on Russia and Belarus.

These include restrictions on the export and transfer of products containing certain toxins, including Botox, to Russia and Belarus.

With the exception of Botox, AbbVie is not prohibited to continue the sale of essential pharmaceutical products to help ensure patients receive an uninterrupted supply of their medicines.

In March 2022, AbbVie announced the suspension of operations for all aesthetics products in Russia.

In April 2022, AbbVie also announced that all profits from the sales of essential medicines in Russia will be donated to support direct humanitarian relief efforts in Ukraine.

While the company’s operations in Russia, Belarus and Ukraine are not significant, if the conflict escalates and results in broader economic and political concerns, AbbVie’s business could be adversely impacted.

Impact of the Coronavirus Disease 2019 (COVID-19)

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AbbVie’s long-term success depends to a great extent on its ability to continue to discover and develop innovative products and acquire or collaborate on compounds currently in development by other biotechnology or pharmaceutical companies.

AbbVie’s pipeline currently includes more than 80 compounds, devices or indications in development individually or under collaboration or license agreements and is focused on such important specialties as immunology, oncology, aesthetics, neuroscience, eye care and women's health along with targeted investments in cystic fibrosis.

Of these programs, approximately 50 are in mid- and late-stage development.

AbbVie’s pipeline currently includes approximately 90 compounds, devices or indications in development individually or under collaboration or license agreements and is focused on such important specialties as immunology, oncology, aesthetics, neuroscience and eye care.

Of these programs, more than 50 are in mid- and late-stage development.

The following sections summarize transitions of significant programs from mid-stage development to late-stage development as well as developments in significant late-stage and registration programs.

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Significant Programs and Developments

• In January 2021, AbbVie announced top-line results from its Phase 3 KEEPsAKE-1 and KEEPsAKE-2 clinical trials of Skyrizi in adults with active psoriatic arthritis (PsA) met the primary and ranked secondary endpoints.

• In January 2021, AbbVie announced top-line results from its Phase 3 ADVANCE and MOTIVATE induction studies of Skyrizi in patients with Crohn’s Disease met the primary and key secondary endpoints.

• In April 2021, AbbVie submitted a supplemental New Drug Application (sNDA) to the U.S.

Food and Drug Administration (FDA) and a marketing authorization application (MAA) to the European Medicines Agency (EMA) for the treatment of adults with active PsA.

• In January 2022, A bbVie announced that the U.S.

Food and Drug Administration (FDA) approved Skyrizi for the treatment of adults with active psoriatic arthritis (PsA).

• In February 2022, AbbVie announced that the FDA has extended the Prescription Drug User Fee Act action date by three months for Skyrizi for the treatment of moderate to severe Crohn’s disease in patients 16 years.

• In January 2022, Abb Vie announced its submission of a supplemental New Drug Application (sNDA) to the FDA and a marketing authorization application (MAA) to the European Medicines Agency (EMA) for Rinvoq for the treatment of adults with active nr-axSpA with objective signs of inflammation who have responded inadequately to nonsteroidal anti-inflammatory drugs.

2022 Form 10-Q |

• In April 2021, AbbVie received FDA approval of Skyrizi in a single dose pre-filled syringe and pre-filled pen.

This approval will reduce the number of injections administered per treatment.

• In June 2021, AbbVie announced top-line results from its Phase 3 FORTIFY study for Skyrizi in patients with moderate to severe Crohn’s Disease met the co-primary endpoints.

• In September 2021, AbbVie submitted an sNDA to the FDA for Skyrizi for the treatment of patients 16 years and older with moderate to severe Crohn’s Disease.

• In October 2021, AbbVie announced that the Committee for Medicinal Products for Human Use (CHMP) of the EMA granted a positive opinion for Skyrizi alone or in combination with methotrexate for the treatment of active PsA in adults who have had an inadequate response or who have been intolerant to one or more disease-modifying antirheumatic drugs.

• In January 2021, AbbVie announced that the European Commission (EC) approved Rinvoq for the treatment of adults with active PsA and ankylosing spondylitis (AS).

• In February 2021, AbbVie announced its Phase 3 U-ACCOMPLISH induction study of Rinvoq for the treatment of adult patients with moderate to severe ulcerative colitis (UC) met the primary and all ranked secondary endpoints.

• In March 2021, AbbVie announced the FDA extended the review period for the sNDA of Rinvoq for the treatment of adult patients with active PsA by three months to late second quarter 2021.

• In April 2021, AbbVie announced the FDA extended the review period for the sNDA of Rinvoq for the treatment of moderate to severe atopic dermatitis (AD) by three months to early third quarter 2021.

• In June and July 2021, AbbVie announced the FDA will not meet the Prescription Drug User Fee Act (PDUFA) action dates for the sNDAs of Rinvoq for the treatment of adults with active PsA and adults with active AS as well as adults and adolescents with moderate to severe AD.

No formal regulatory action has been taken on the sNDAs for Rinvoq in PsA, AS or AD.

• In June 2021, AbbVie announced the results from its Phase 3 maintenance study of Rinvoq in patients with UC met the primary and all secondary endpoints.

• In August 2021, AbbVie announced that the EC approved Rinvoq for the treatment of moderate to severe AD in adults and adolescents 12 years and older who are candidates for systemic therapy.

• In September 2021, the FDA issued a Drug Safety Communication stating its intention to require revisions to the Boxed Warning for janus kinase (JAK) inhibitors for the treatment of arthritis and other inflammatory conditions, including Rinvoq, to include information about the risks of serious heart-related events, cancer, blood clots and death.

The FDA also stated its intention to limit approved uses to certain patients who have not responded to or cannot tolerate one or more tumor necrosis factor (TNF) blockers.

This communication was based on the FDA’s review of a post-marketing study evaluating the safety of another JAK inhibitor (tofacitinib) in patients with rheumatoid arthritis.

• In September 2021, AbbVie submitted an sNDA to the FDA and an MAA to the EMA for Rinvoq for the treatment of adults with moderately to severely active UC.

• In October 2021, AbbVie announced the results from Study 1 of the Phase 3 SELECT-AXIS 2 clinical trial for Rinvoq in patients with active AS and inadequate response to biologic disease-modifying antirheumatic drugs met the primary and all ranked secondary endpoints.

• In October 2021, AbbVie announced the results from Study 2 of the Phase 3 SELECT-AXIS 2 clinical trial for Rinvoq in adults with non-radiographic axial spondyloarthritis met the primary and 12 of 14 ranked secondary endpoints.

• In January 2022, Ab bVie announced that the FDA approved Rinvoq for the treatment of moderate to severe atopic dermatitis (AD) in adults and children 12 years of age and older whose disease did not respond to previous treatment and is not well controlled with other pills or injections, including biologic medicines, or when use of other pills or injections is not recommended.

• In February 2022, AbbVie was notified that the European Commission (EC) is requesting the EMA to assess safety concerns associated with JAK inhibitor products authorized in inflammatory diseases and to evaluate the impact of these events on their benefit-risk balance.

The assessment covers all JAK inhibitors approved for use in inflammatory diseases.

The request is for an opinion from the EMA by September 30, 2022.

• In February 2022, AbbVie announced top-line results from its second Phase 3 induction study, U-Excel, for Rinvoq in patients with moderate to severe Crohn’s disease who had an inadequate response or were intolerant to conventional or biologic therapy met the primary and most key secondary endpoints.

• In March 2022, AbbVie announced that the FDA approved Rinvoq for the treatment of adults with moderately to severely active ulcerative colitis who have had an inadequate response or intolerance to one or more tumor necrosis factor (TNF) blockers.

• In April 2022, AbbVie announced that the FDA approved Rinvoq for the treatment of adults with active ankylosing spondylitis who have had an inadequate response or intolerance to one or more TNF blockers.

• In January 2022, AbbVie announced that the FDA granted Breakthrough Therapy Designation to investigational telisotuzumab vedotin (Teliso-V) for the treatment of patients with advanced/metastatic epidermal growth factor receptor wild type, nonsquamous non-small cell lung cancer with high levels of c-Met overexpression whose disease has progressed on or after platinum-based therapy.

• In February 2022, AbbVie submitted an sNDA to the FDA for Imbruvica for the treatment of pediatric and adolescent patients one year and older with chronic graft versus host disease after failure of one or more lines of systemic therapy.

• In March 2022, Genmab A/S (Genmab) announced that FDA granted orphan-drug designation to the investigational medicine, epcoritamab (DuoBody-CD3xCD20), for the treatment of follicular lymphoma.

Genmab and AbbVie are co-developing epcoritamab and will share commercial responsibilities in the U.S.

and Japan, with AbbVie responsible for further global commercialization.

• In April 2022, AbbVie and Genmab announced positive topline results from the first cohort of the EPCORE NHL-1 phase 1/2 clinical trial evaluating epcoritamab (DuoBody-CD3xCD20) in patients with relapsed/refractory large B-cell lymphoma (LBCL) who received at least two prior lines of systemic therapy.

Based on the topline results, the companies will engage global regulatory authorities.

Juvederm Collection

• In February 2022, AbbVie announced that the FDA approved JUVEDERM VOLBELLA XC for improvement of infraorbital hollows in adults over the age of 21.

• In March 2022, AbbVie initiated three Phase 3 clinical trials to evaluate the efficacy and safety of BoNTE (AGN-151586) for the treatment of glabellar lines.

2022 Form 10-Q |

• In May 2021, AbbVie received European Commission approval for Venclyxto in combination with a hypomethylating agent for patients with newly diagnosed AML who are ineligible for intensive chemotherapy.

• In July 2021, AbbVie announced that the FDA granted a Breakthrough Therapy Designation to Venclexta in combination with azacitidine for the potential treatment of adult patients with previously untreated intermediate-, high- and very high-risk myelodysplastic syndromes.

• In June 2021, AbbVie announced results from its Phase 3 GLOW study comparing the efficacy and safety of Imbruvica in combination with Venclexta versus chlorambucil plus obinutuzumab for first-line treatment in patients with chronic lymphocytic leukemia (CLL) or small lymphocytic lymphoma (SLL) met its primary endpoint.

Botox Therapeutic

• In February 2021, AbbVie received FDA approval of Botox for the treatment of detrusor overactivity associated with a neurological condition in certain pediatric patients 5 years of age and older.

• In September 2021, AbbVie announced that the FDA approved Qulipta (atogepant) for the preventive treatment of episodic migraine in adults.

• In October 2021, AbbVie announced top-line results from two Phase 3 clinical trials, Study 3111-301-001 and Study 3111-302-001, evaluating the efficacy and safety of cariprazine (Vraylar) as an adjunctive treatment for patients with major depressive disorder (MDD).

In Study 3111-301-001, Vraylar met its primary endpoint demonstrating statistically significant change from baseline to week six in the Montgomery-Åsberg Depression Rating Scale (MADRS) total score compared with placebo in patients with MDD.

In Study 3111-302-001, Vraylar demonstrated numerical improvement in depressive symptoms from baseline to week six in MADRS total score compared with placebo but did not achieve statistical significance.

Safety data were consistent with the established safety profile of Vraylar across indications with no new safety signals identified.

• In October 2021, AbbVie announced that results from its pivotal Phase 3 M15-736 study of ABBV-951 (foslevodopa/foscarbidopa) in patients with advanced Parkinson’s disease met its primary endpoint in a 12-week study.

• In October 2021, AbbVie announced that the FDA approved Vuity (pilocarpine HCl ophthalmic solution) for the treatment of presbyopia.

• In February 2022, AbbVie submitted an sNDA to the FDA for Vraylar for the adjunctive treatment of major depressive disorder in patients who are receiving ongoing antidepressant therapy.

• In March 2022, AbbVie announced results from the Phase 3 PROGRESS trial for Qulipta in the preventive treatment of chronic migraine in adults met the primary endpoint and resulted in significant improvements in all secondary endpoints after adjustment for multiple comparisons.

• In April 2022, AbbVie announced that the Phase 3 VIRGO trial evaluating the safety and efficacy of investigational twice-daily administration of Vuity 1.25% in adults with presbyopia met its primary efficacy endpoint.

For a more comprehensive discussion of AbbVie’s products and pipeline, see the company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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(dollars in millions)

2021 2020 2021 2020

United States

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2021 2020 2021 2020

Humira United States $ 3,993 $ 3,907 2.2 % 2.2 %

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Total $ 473 $ 405 16.9 % 21.1 %

Botox Cosmetic (a)

United States $ 356 $ 237 49.6 % 49.6 % $ 1,027 $ 384 >100.0 % >100.0 %

Botox Cosmetic United States $ 413 $ 305 35.5 % 35.5 %

International 228 172 32.5 % 38.6 %

Total $ 641 $ 477 34.4 % 36.6 %

Juvederm Collection (a)

United States $ 159 $ 115 37.6 % 37.6 % $ 478 $ 171 >100.0 % >100.0 %

Juvederm Collection United States $ 148 $ 123 20.1 % 20.1 %

International 262 198 32.2 % 37.7 %

Total $ 410 $ 321 27.5 % 30.9 %

Other Aesthetics (a)

United States $ 305 $ 265 15.4 % 15.4 % $ 968 $ 392 >100.0 % >100.0 %

Other Aesthetics United States $ 285 $ 300 (4.9) % (4.9) %

International 38 43 (9.9) % (6.2) %

Total $ 323 $ 343 (5.5) % (5.0) %

Botox Therapeutic (a)

United States $ 534 $ 429 24.4 % 24.4 % $ 1,451 $ 683 >100.0 % >100.0 %

Botox Therapeutic United States $ 500 $ 429 16.5 % 16.5 %

International 114 103 10.7 % 17.1 %

Total $ 614 $ 532 15.4 % 16.6 %

United States $ 461 $ 358 29.0 % 29.0 % $ 1,239 $ 550 >100.0 % >100.0 %

Vraylar United States $ 427 $ 346 23.4 % 23.4 %

Duodopa United States $ 24 $ 25 (5.6) % (5.6) %

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Total $ 121 $ 129 (6.7) % (0.8) %

United States $ 162 $ 38 >100.0 % >100.0 % $ 369 $ 60 >100.0 % >100.0 %

Other Neuroscience (a)

United States $ 166 $ 203 (17.8) % (17.8) % $ 489 $ 306 59.7 % 59.7 %

Ubrelvy United States $ 138 $ 81 70.0 % 70.0 %

Qulipta United States $ 11 $ — n/m n/m

Other Neuroscience United States $ 173 $ 156 11.0 % 11.0 %

International 4 4 11.4 % 12.2 %

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Lumigan/Ganfort (a)

United States $ 63 $ 62 (0.1) % (0.1) % $ 201 $ 97 >100.0 % >100.0 %

International 75 87 (12.9) % (15.8) % 229 128 79.4 % 69.3 %

Total $ 138 $ 149 (7.5) % (9.2) % $ 430 $ 225 90.7 % 85.0 %

Alphagan/Combigan (a)

United States $ 89 $ 84 6.2 % 6.2 % $ 271 $ 131 >100.0 % >100.0 %

International 39 39 1.2 % (0.9) % 117 61 90.5 % 87.0 %

Total $ 128 $ 123 4.6 % 3.9 % $ 388 $ 192 >100.0 % >100.0 %

United States $ 305 $ 284 7.5 % 7.5 % $ 884 $ 422 >100.0 % >100.0 %

International 14 15 (7.4) % (6.5) % 42 21 >100.0 % >100.0 %

Total $ 319 $ 299 6.7 % 6.7 % $ 926 $ 443 >100.0 % >100.0 %

Other Eye Care (a)

United States $ 128 $ 119 8.1 % 8.1 % $ 375 $ 173 >100.0 % >100.0 %

Lumigan/Ganfort United States $ 67 $ 66 1.5 % 1.5 %

International 73 77 (5.7) % 0.7 %

Total $ 140 $ 143 (2.4) % 1.0 %

Women's Health

Lo Loestrin (a)

United States $ 105 $ 129 (20.3) % (20.3) % $ 300 $ 207 43.7 % 43.7 %

Alphagan/Combigan United States $ 70 $ 80 (11.5) % (11.5) %

International 37 38 (3.9) % 5.5 %

Total $ 107 $ 118 (9.0) % (6.0) %

Orilissa/Oriahnn United States $ 37 $ 24 50.5 % 50.5 % $ 102 $ 84 20.5 % 20.5 %

Restasis United States $ 235 $ 267 (11.9) % (11.9) %

International 11 13 (18.1) % 1.9 %

Total $ 246 $ 280 (12.2) % (11.3) %

Other Women's Health (a)

United States $ 57 $ 74 (20.9) % (20.9) % $ 153 $ 108 44.0 % 44.0 %

Other Eye Care United States $ 124 $ 117 5.5 % 5.5 %

International 154 159 (2.4) % 4.8 %

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Creon United States $ 287 $ 274 4.7 % 4.7 %

Lupron United States $ 134 $ 99 35.7 % 35.7 % $ 456 $ 461 (1.2) % (1.2) %

International 46 34 34.7 % 31.4 % 135 110 22.8 % 18.7 %

Total $ 180 $ 133 35.4 % 34.5 % $ 591 $ 571 3.4 % 2.6 %

Linzess/Constella (a)

United States $ 253 $ 240 4.8 % 4.8 % $ 728 $ 370 96.4 % 96.4 %

Linzess/Constella United States $ 233 $ 215 7.9 % 7.9 %

International 7 7 6.0 % 10.2 %

Total $ 240 $ 222 7.8 % 7.9 %

Synthroid United States $ 188 $ 189 (0.8) % (0.8) % $ 571 $ 577 (1.1) % (1.1) %

All other (a)

$ 547 $ 829 (34.6) % (35.4) % $ 2,079 $ 1,972 5.4 % 3.7 %

All other $ 1,211 $ 1,476 (18.0) % (17.1) %

Total net revenues $ 13,538 $ 13,010 4.1 % 5.4 %

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

n/m – Not meaningful

The following discussion and analysis of AbbVie’s net revenues by product is presented on a constant currency basis.

Global Humira sales increased by 5% for the three months and 4% for the nine months ended September 30, 2021 primarily driven by market growth across therapeutic categories, partially offset by direct biosimilar competition in certain international markets.

In the United States, Humira sales increased by 10% for the three months and 8% for the nine months ended September 30, 2021 primarily driven by market growth across all indications.

Global Humira sales decreased by 2% for the three months ended March 31, 2022 primarily driven by direct biosimilar competition in certain international markets, partially offset by market growth across therapeutic categories.

In the United States, Humira sales increased by 2% for the three months ended March 31, 2022 primarily driven by market growth across all indications.

This increase was partially offset by slightly lower market share following corresponding market share gains of Skyrizi and Rinvoq.

Internationally, Humira revenues decreased by 17% for the three months and 14% for the nine months ended September 30, 2021 primarily driven by direct biosimilar competition in certain international markets.

Net revenues for Skyrizi increased by 83% for the three months and 90% for the nine months ended September 30, 2021 primarily driven by continued strong volume and market share uptake since launch in 2019 as a treatment for plaque psoriasis as well as market growth over the prior year.

2021 Form 10-Q |

Net revenues for Rinvoq increased more than 100% for the three and nine months ended September 30, 2021 primarily driven by continued strong volume and market share uptake since launch in 2019 for the treatment of moderate to severe rheumatoid arthritis as well as market growth over the prior year.

Net revenues for the three months ended September 30, 2021 were also favorably impacted by recent regulatory approvals and expansion of Rinvoq for the treatment of psoriatic arthritis, atopic dermatitis and ankylosing spondylitis in certain international markets.

Internationally, Humira revenues decreased by 18% for the three months ended March 31, 2022 primarily driven by direct biosimilar competition in certain international markets.

Net revenues for Skyrizi increased by 66% for the three months ended March 31, 2022 primarily driven by continued strong volume and market share uptake since launch as a treatment for plaque psoriasis as well as market growth.

Net revenues for Rinvoq increased by 57% for the three months ended March 31, 2022 primarily driven by continued strong volume and market share uptake since launch for the treatment of moderate to severe rheumatoid arthritis as well as market growth.

Net revenues for the three months ended March 31, 2022 were also favorably impacted by recent regulatory approvals and expansion of Rinvoq for the treatment of psoriatic arthritis, atopic dermatitis and ankylosing spondylitis in certain international markets.

Net revenues for Imbruvica represent product revenues in the United States and collaboration revenues outside of the United States related to AbbVie’s 50% share of Imbruvica profit.

AbbVie's global Imbruvica revenues remained relatively flat for the three months ended September 30, 2021 and increased by 3% for the nine months ended September 30, 2021 primarily due to favorable pricing, partially offset by lower new patient starts due to the COVID-19 pandemic and modest share loss in the United States.

Net revenues for Venclexta increased by 39% for the three months and 34% for the nine months ended September 30, 2021 primarily due to continued expansion of Venclexta for the treatment of patients with first-line CLL, relapsed/refractory CLL and first-line AML.

Net revenues for Botox Cosmetic used in facial aesthetics increased by 37% for the three months and more than 100% for the nine months ended September 30, 2021 due to increased brand investment and strong recovery from the COVID-19 pandemic.

Net revenues for the nine months ended September 30, 2021 were also favorably impacted by a full period of Allergan results in 2021 compared to the prior year.

Net revenues for Juvederm Collection (including Juvederm Ultra XC, Juvederm Voluma XC and other Juvederm products) used in facial aesthetics increased by 27% for the three months and more than 100% for the nine months ended September 30, 2021 due to increased brand investment and strong recovery from the COVID-19 pandemic.

Net revenues for the nine months ended September 30, 2021 were also favorably impacted by a full period of Allergan results in 2021 compared to the prior year.

Net revenues for Botox Therapeutic used primarily in neuroscience and urology therapeutic areas increased by 23% for the three months and more than 100% for the nine months ended September 30, 2021 due to a strong recovery from the COVID-19 pandemic.

Net revenues for the nine months ended September 30, 2021 were also favorably impacted by a full period of Allergan results in 2021 compared to the prior year.

Net revenues for Vraylar for the treatment of schizophrenia, bipolar I disorder and bipolar depression increased by 29% for the three months and more than 100% for the nine months ended September 30, 2021 due to higher market share and market growth.

Net revenues for the nine months ended September 30, 2021 were also favorably impacted by a full period of Allergan results in 2021 compared to the prior year.

Net revenues for Ubrelvy for the acute treatment of migraine with or without aura in adults increased more than 100% for the three and nine months ended September 30, 2021 primarily due to increased market share uptake since launch in 2020.

Net revenues for Mavyret increased by 3% for the three months ended September 30, 2021 primarily driven by partial recovery of global hepatitis C virus (HCV) markets while net revenues decreased by 7% for the nine months ended September 30, 2021 driven by the continued disruption of global HCV markets due to the COVID-19 pandemic.

Net revenues for Lupron increased by 35% for the three months and 3% for the nine months ended September 30, 2021 due to efforts to maximize available inventory for patients as the company manages through an ongoing supply issue impacting availability of certain formulations.

AbbVie's global Imbruvica revenues decreased by 7% for the three months ended March 31, 2022 as a result of lower new patient starts due to the COVID-19 pandemic and share loss in the United States, partially offset by increased collaboration revenues.

Net revenues for Venclexta increased by 21% for the three months ended March 31, 2022 primarily due to continued expansion of Venclexta for the treatment of patients with first-line chronic lymphocytic leukemia (CLL), relapsed/refractory CLL and first-line acute myeloid leukemia.

Net revenues for Botox Cosmetic used in facial aesthetics increased by 37% for the three months ended March 31, 2022 due to increased consumer demand and penetration rates driven by targeted brand investment.

2022 Form 10-Q |

Net revenues for Juvederm Collection (including Juvederm Ultra XC, Juvederm Voluma XC and other Juvederm products) used in facial aesthetics increased by 31% for the three months ended March 31, 2022 due to increased consumer demand and penetration rates driven by targeted brand investment.

Net revenues for Botox Therapeutic used primarily in neuroscience and urology therapeutic areas increased by 17% for the three months ended March 31, 2022 due to market growth, higher market share and strong market recovery from the COVID-19 pandemic.

Net revenues for Vraylar for the treatment of schizophrenia, bipolar I disorder and bipolar depression increased by 23% for the three months ended March 31, 2022 due to higher market share and market growth.

Net revenues for Ubrelvy for the acute treatment of migraine with or without aura in adults increased by 70% for the three months ended March 31, 2022 primarily due to increased market share uptake since launch.

Net revenues for Mavyret decreased by 5% for the three months ended March 31, 2022 driven by the continued disruption of global HCV markets due to the COVID-19 pandemic.

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(dollars in millions) 2021 2020 % change 2021 2020 % change

(dollars in millions) 2022 2021 % change

Gross margin $ 9,486 $ 8,797 8 %

as a % of net revenues 70 % 68 %

Gross margin as a percentage of net revenues increased for the three and nine months ended September 30, 2021 compared to the prior year.

Gross margin percentage for the three months ended September 30, 2021 was favorably impacted by lower amortization of inventory fair value step-up adjustment and intangible assets associated with the Allergan acquisition.

Gross margin percentage for the nine months ended September 30, 2021 was favorably impacted by lower amortization of inventory fair value step-up adjustment associated with the Allergan acquisition, partially offset by higher amortization of intangible assets associated with the Allergan acquisition.

2021 Form 10-Q |

Gross margin as a percentage of net revenues increased for the three months ended March 31, 2022 compared to the prior year.

Gross margin percentage for the three months ended March 31, 2022 was favorably impacted by changes in product mix and lower amortization of intangible assets associated with the Allergan acquisition.

Selling, General and Administrative

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(dollars in millions) 2021 2020 % change 2021 2020 % change

(dollars in millions) 2022 2021 % change

Selling, general and administrative $ 3,127 $ 2,842 10 %

as a % of net revenues 23 % 22 %

SG&A expenses as a percentage of net revenues decreased for the three and nine months ended September 30, 2021 compared to the prior year.

SG&A expense percentage for the three months ended September 30, 2021 was favorably impacted by leverage from revenue growth and synergies realized for the period subsequent to completion of the Allergan acquisition.

SG&A expense percentage for the nine months ended September 30, 2021 was favorably impacted by lower transaction and integration costs related to the acquisition of Allergan as well as leverage from revenue growth and synergies realized for the period subsequent to completion of the Allergan acquisition.

Research and Development and Acquired In-Process Research and Development

SG&A expenses as a percentage of net revenues increased for the three months ended March 31, 2022 compared to the prior year.

SG&A expense percentage for the three months ended March 31, 2022 was unfavorably impacted by litigation reserve charges of $184 million as well as increased brand investment and product launch expenses, partially offset by leverage from revenue growth and increased synergies realized.

Research and Development and Acquired IPR&D and Milestones

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September 30,

(dollars in millions) 2021 2020 % change 2021 2020 % change

(dollars in millions) 2022 2021 % change

Research and development $ 1,497 $ 1,667 (10) %

as a % of net revenues 11 % 13 %

Acquired in-process research and development $ 390 $ 45 >100% $ 557 $ 898 (38) %

R&D expenses as a percentage of net revenues decreased for the three and nine months ended September 30, 2021 compared to the prior year.

R&D expense percentage was favorably impacted by the increased scale of the combined company and synergies realized for the period subsequent to completion of the Allergan acquisition as well as lower integration costs related to the acquisition of Allergan.

Acquired IPR&D expenses represent initial costs to acquire rights to in-process R&D projects through R&D collaborations, licensing arrangements or other asset acquisitions.

Acquired IPR&D expense in the three and nine months ended September 30, 2021 included a charge of $400 million as a result of exercising the company’s exclusive right to acquire 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).

Acquired IPR&D expense in the nine months ended September 30, 2020 included a charge of $750 million as a result of entering a collaboration agreement with Genmab A/S to research, develop and commercialize investigational bispecific antibody therapeutics for the treatment of cancer.

There were no individually significant transactions during the three months ended September 30, 2020.

Other Operating Expense, Net

Other operating expense, net for the three and nine months ended September 30, 2021 included a $500 million charge related to the extension of the Calico collaboration to discover, develop and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer.

Other Non-Operating Expenses

Acquired IPR&D and milestones $ 145 $ 185 (22) %

R&D expenses as a percentage of net revenues decreased for the three months ended March 31, 2022 compared to the prior year.

R&D expense percentage was favorably impacted by the purchase of a priority review voucher from a third party in the first quarter of 2021, increased scale of the combined company and synergies realized as well as lower integration costs related to the acquisition of Allergan.

Acquired IPR&D and milestones expense represents upfront and subsequent development milestone payments incurred prior to regulatory approval to acquire rights to in-process R&D projects through R&D collaborations, licensing arrangements or other asset acquisitions.

Acquired IPR&D and milestones expense in the three months ended March 31, 2022 included a charge of $130 million as a result of acquiring Syndesi Therapeutics SA and its portfolio of novel modulators of the synaptic vesicle protein 2A (SV2A), including its lead molecule SDI-118, which is being evaluated to target nerve terminals to enhance synaptic efficiency.

There were no individually significant transactions during the three months ended March 31, 2021.

2022 Form 10-Q |

Other Non-Operating Expenses (Income)

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(in millions) 2022 2021

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Net foreign exchange loss $ 25 $ 9

Other expense, net 21 115 2,284 989

Interest expense decreased for the three months ended September 30, 2021 compared to the prior year primarily due to a lower average debt balance due to deleveraging and the favorable impact of lower interest rates on the company’s floating rate debt obligations.

Interest expense increased for the nine months ended September 30, 2021 primarily due to a higher average debt balance associated with the incremental Allergan debt acquired partially offset by the favorable impact of lower interest rates on the company’s floating rate debt obligations and deleveraging.

2021 Form 10-Q |

Interest income increased for the three months ended September 30, 2021 compared to the prior year primarily due to a higher average cash and cash equivalents balance, partially offset by the unfavorable impact of lower interest rates.

Interest income decreased for nine months ended September 30, 2021 compared to prior year primarily due to a lower average cash and cash equivalents balance as a result of the cash paid for the Allergan acquisition and the unfavorable impact of lower interest rates.

Other expense, net included charges related to changes in fair value of contingent consideration liabilities of $98 million for the three months and $2.4 billion for the nine months ended September 30, 2021 and $197 million for the three months and $1.1 billion for the nine months ended September 30, 2020.

Other income, net (776) (395)

Interest expense, net decreased for the three months ended March 31, 2022 compared to the prior year primarily due to lower average debt balance due to deleveraging.

Other income, net included a benefit related to changes in fair value of contingent consideration liabilities of $748 million for the three months ended March 31, 2022 and $343 million for the three months ended March 31, 2021.

The fair value of contingent consideration liabilities is impacted by the passage of time and multiple other inputs, including the probability of success of achieving regulatory/commercial milestones, discount rates, the estimated amount of future sales of the acquired products and other market-based factors.

For the three months ended September 30, 2021, the change in fair value represented the passage of time partially offset by higher discount rates.

For the nine months ended September 30, 2021, the change in fair value represented higher estimated Skyrizi sales driven by stronger market share uptake, favorable Skyrizi clinical results and the passage of time.

For the three and nine months ended September 30, 2020, the change in fair value represented lower discount rates and the passage of time.

For the three months ended March 31, 2022 and 2021, the change in fair value was driven by higher discount rates partially offset by the passage of time.

Income Tax Expense

The effective tax rate was 14% for the three and nine months ended September 30, 2021 compared to 7% for the three and nine months ended September 30, 2020.

The effective tax rate was 9% for the three months ended March 31, 2022 compared to 8% for the three months ended March 31, 2021.

The effective tax rate in each period differed from the U.S.

statutory tax rate of 21% principally due to the benefit from 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 and collaborations.

The increase in the effective tax rate for the three and nine months ended September 30, 2021 over the prior year was primarily due to the jurisdictional mix of earnings resulting from collaboration activities and accretion on contingent consideration in 2021.

statutory tax rate of 21% 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 and accretion on contingent consideration.

The increase in the effective tax rate for the three months ended March 31, 2022 over the prior year was primarily due to differences in the company’s jurisdictional mix of earnings.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

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(in millions) 2022 2021

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Financing activities (6,972) (3,174)

Operating cash flows for the nine months ended September 30, 2021 increased compared to the prior year.

Operating cash flows for the nine months ended September 30, 2021 were favorably impacted by higher net revenues of the combined company and lower acquisition-related cash expenses, partially offset by the timing of working capital cash flows and higher income tax payments.

Investing cash flows for the nine months ended September 30, 2021 included payments made for other acquisitions and investments of $837 million, capital expenditures of $600 million and net sales and maturities of investment securities totaling $15 million.

Investing cash flows for the nine months ended September 30, 2020 primarily included $39.7 billion cash consideration paid to acquire Allergan offset by cash acquired of $1.5 billion, net sales and maturities of investment securities totaling $1.4 billion, payments made for other acquisitions and investments of $1.1 billion and capital expenditures of $519 million.

Financing cash flows for the nine months ended September 30, 2021 included early repayments of $1.8 billion aggregate principal amount of the company’s 2.3% senior notes, $1.2 billion aggregate principal amount of the company’s 5.0% senior notes and €750 million aggregate principal amount of the company’s 0.5% senior euro notes.

Financing cash flows also included repayment of a $1.0 billion floating rate term loan due May 2023 and issuance of a new $1.0 billion floating rate term loan as part of the term loan refinancing in September 2021.

Additionally, financing cash flows included repayment of $750 million aggregate principal amount of floating rate senior notes at maturity in May 2021.

Financing cash flows for the nine months ended September 30, 2020 included the issuance of term loans totaling $3.0 billion under the existing $6.0 billion term loan credit agreement which were used to finance the acquisition of Allergan.

Subsequent to these borrowings, AbbVie terminated the unused commitments of the lenders under the term loan.

Additionally, financing cash flows included the May 2020 repayment of $3.8 billion aggregate principal amount of the company's 2.50% senior notes at maturity and the September 2020 repayment of $650 million aggregate principal amount of 3.375% Allergan exchange notes at maturity.

Cash dividend payments totaled $6.9 billion for the nine months ended September 30, 2021 and $5.6 billion for the nine months ended September 30, 2020.

The increase in cash dividend payments was primarily driven by higher outstanding shares following the 286 million shares of AbbVie common stock issued to Allergan shareholders in May 2020 as well as an increase in the quarterly

Operating cash flows for the three months ended March 31, 2022 were flat compared to the prior year primarily due to improved results of operations resulting from revenue growth, offset by the timing of working capital cash flows.

Investing cash flows for the three months ended March 31, 2022 included payments made for net purchases of investment securities totaling $1.4 billion, acquisitions and investments of $185 million and capital expenditures of $162 million.

Investing cash flows for the three months ended March 31, 2021 included payments made for acquisitions and investments of $198 million, capital expenditures of $188 million and net purchases of investment securities totaling $5 million.

Financing cash flows for the three months ended March 31, 2022 included an early repayment of $2.9 billion aggregate principal amount of the company’s 3.45% senior notes.

Additionally, financing cash flows included repayment of a $2.0 billion floating rate term loan due May 2025 and issuance of a new $2.0 billion floating rate term loan as part of the term loan refinancing in February 2022.

Financing cash flows also included cash dividend payments of $2.5 billion for the three months ended March 31, 2022 and $2.3 billion for the three months ended March 31, 2021.

The increase in cash dividend payments was primarily driven by the increase in the quarterly dividend rate.

2022 Form 10-Q |

dividend rate.

On September 10, 2021, the board of directors declared a quarterly cash dividend of $1.30 per share for stockholders of record at the close of business on October 15, 2021, payable on November 15, 2021.

On October 29, 2021, the company announced that its board of directors declared an increase in the company’s quarterly cash dividend from $1.30 per share to $1.41 per share beginning with the dividend payable on February 15, 2022 to stockholders of record as of January 14, 2022.

This reflects an increase of approximately 8.5% over the previous quarterly rate.

On February 17, 2022, the company announced that its board of directors declared a quarterly cash dividend of $1.41 per share for stockholders of record at the close of business on April 15, 2022, payable on May 16, 2022.

The timing, declaration, amount of and payment of any dividends by AbbVie in the future is within the discretion of its board of directors and will depend upon many factors, including AbbVie’s financial condition, earnings, capital requirements of its operating subsidiaries, covenants associated with certain of AbbVie’s debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by its board of directors.

1 unchanged sentence

The program has no time limit and can be discontinued at any time.

AbbVie repurchased 5 million shares for $550 million during the nine months ended September 30, 2021 and 6 million shares for $500 million during the nine months ended September 30, 2020.

AbbVie repurchased 8 million shares for $1.1 billion during the three months ended March 31, 2022 and 5 million shares for $550 million during the three months ended March 31, 2021.

AbbVie monitors economic conditions, the creditworthiness of customers and government regulations and funding, both domestically and abroad.

6 unchanged sentences

This credit facility enables the company to borrow funds on an unsecured basis at variable interest rates and contains various covenants.

At September 30, 2021, the company was in compliance with all covenants, and commitment fees under the credit facility were insignificant.

No amounts were outstanding under the company's credit facility as of September 30, 2021 and December 31, 2020.

At March 31, 2022, the company was in compliance with all covenants, and commitment fees under the credit facility were insignificant.

No amounts were outstanding under the company's credit facility as of March 31, 2022 and December 31, 2021.

Access to Capital

3 unchanged sentences

Credit Ratings

There were no changes in the company’s credit ratings during the nine months ended September 30, 2021.

In March 2022, Moody’s Investors Service (Moody’s) affirmed its Baa2 senior unsecured long-term rating and the Prime-2 short-term rating.

At the same time, Moody’s revised the outlook to positive from stable.

Unfavorable changes to the ratings may have an adverse impact on future financing arrangements;

2 unchanged sentences

A summary of the company’s significant accounting policies is included in Note 2, “Summary of Significant Accounting Policies” in AbbVie's Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no significant changes in the company’s application of its critical accounting policies during the nine months ended September 30, 2021.

There have been no significant changes in the company’s application of its critical accounting policies during the three months ended March 31, 2022.

2022 Form 10-Q |

10 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis