What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-06 · 171 added, 111 removed, 682 unchanged (29% of the section changed)

3 unchanged sentences

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June 30, Six months ended

(in millions, except per share data) 2022 2021 2022 2021

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Acquired IPR&D and milestones 269 132 414 317

Other operating income ( 172 ) ( 68 ) ( 172 ) ( 68 )

Total operating costs and expenses 11,288 9,518 20,109 18,425

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Net foreign exchange loss 47 14 72 23

Other income, net ( 776 ) ( 395 )

Other expense, net 1,533 2,658 757 2,263

Earnings before income tax expense 1,183 1,163 6,112 5,030

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Three months ended

June 30, Six months ended

(in millions) 2022 2021 2022 2021

Net earnings $ 928 $ 769 $ 5,421 $ 4,324

Foreign currency translation adjustments, net of tax expense (benefit) of $( 7 ) for the three months ended March 31, 2022 and $( 25 ) for the three months ended March 31, 2021

Foreign currency translation adjustments, net of tax expense (benefit) of $( 12 ) for the three months and $( 19 ) for the six months ended June 30, 2022 and $ 1 for the three months and $( 24 ) for the six months ended June 30, 2021

( 823 ) 244 ( 1,054 ) ( 433 )

Net investment hedging activities, net of tax expense (benefit) of $ 37 for the three months ended March 31, 2022 and $ 103 for the three months ended March 31, 2021

Pension and post-employment benefits, net of tax expense (benefit) of $ 10 for the three months ended March 31, 2022 and $ 19 for the three months ended March 31, 2021

Cash flow hedging activities, net of tax expense (benefit) of $( 2 ) for the three months ended March 31, 2022 and $ 3 for the three months ended March 31, 2021

Other comprehensive loss ( 85 ) ( 178 )

Net investment hedging activities, net of tax expense (benefit) of $ 146 for the three months and $ 183 for the six months ended June 30, 2022 and $( 31 ) for the three months and $ 72 for the six months ended June 30, 2021

536 ( 114 ) 666 260

Pension and post-employment benefits, net of tax expense (benefit) of $ 11 for the three months and $ 21 for the six months ended June 30, 2022 and $ 14 for the three months and $ 33 for the six months ended June 30, 2021

Cash flow hedging activities, net of tax expense (benefit) of $ 5 for the three months and $ 3 for the six months ended June 30, 2022 and $ — for the three months and $ 3 for the six months ended June 30, 2021

Other comprehensive income (loss) ( 212 ) 192 ( 297 ) 14

Comprehensive income 716 961 5,124 4,338

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Condensed Consolidated Balance Sheets

(in millions, except share data) March 31,

(in millions, except share data) June 30,

2022 December 31,

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Stockholders' equity

Common stock, $ 0.01 par value, 4,000,000,000 shares authorized, 1,811,430,573 shares issued as of March 31, 2022 and 1,803,195,293 as of December 31, 2021

Common stock held in treasury, at cost, 44,557,588 shares as of March 31, 2022 and 34,857,597 as of December 31, 2021

Common stock, $ 0.01 par value, 4,000,000,000 shares authorized, 1,812,622,099 shares issued as of June 30, 2022 and 1,803,195,293 as of December 31, 2021

Common stock held in treasury, at cost, 44,595,448 shares as of June 30, 2022 and 34,857,597 as of December 31, 2021

( 4,591 ) ( 3,143 )

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(in millions) Common shares outstanding Common stock Treasury stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Noncontrolling interest Total

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

Balance at March 31, 2021 1,766 $ 18 $ ( 3,017 ) $ 17,712 $ 2,292 $ ( 3,295 ) $ 23 $ 13,733

Net earnings attributable to AbbVie Inc.

— — — — 766 — — 766

Other comprehensive loss, net of tax — — — — — ( 178 ) — ( 178 )

Other comprehensive income, net of tax — — — — — 192 — 192

Dividends declared — — — — ( 2,318 ) — — ( 2,318 )

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Change in noncontrolling interest — — — — — — 2 2

Balance at June 30, 2021 1,767 $ 18 $ ( 3,022 ) $ 17,936 $ 740 $ ( 3,103 ) $ 25 $ 12,594

Balance at March 31, 2022 1,767 $ 18 $ ( 4,585 ) $ 18,731 $ 5,103 $ ( 2,984 ) $ 31 $ 16,314

Net earnings attributable to AbbVie Inc.

— — — — 924 — — 924

Other comprehensive loss, net of tax — — — — — ( 212 ) — ( 212 )

Dividends declared — — — — ( 2,511 ) — — ( 2,511 )

Purchases of treasury stock — — ( 9 ) — — — — ( 9 )

Stock-based compensation plans and other 1 — 3 175 — — — 178

Change in noncontrolling interest — — — — — — 4 4

Balance at June 30, 2022 1,768 $ 18 $ ( 4,591 ) $ 18,906 $ 3,516 $ ( 3,196 ) $ 35 $ 14,688

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

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— — — — 4,319 — — 4,319

Other comprehensive income, net of tax — — — — — 14 — 14

Dividends declared — — — — ( 4,634 ) — — ( 4,634 )

Purchases of treasury stock ( 7 ) — ( 797 ) — — — — ( 797 )

Stock-based compensation plans and other 9 — 39 552 — — — 591

Change in noncontrolling interest — — — — — — 4 4

Balance at June 30, 2021 1,767 $ 18 $ ( 3,022 ) $ 17,936 $ 740 $ ( 3,103 ) $ 25 $ 12,594

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

Net earnings attributable to AbbVie Inc.

— — — — 5,414 — — 5,414

Other comprehensive loss, net of tax — — — — — ( 297 ) — ( 297 )

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Change in noncontrolling interest — — — — — — 7 7

Balance at March 31, 2022 1,767 $ 18 $ ( 4,585 ) $ 18,731 $ 5,103 $ ( 2,984 ) $ 31 $ 16,314

Balance at June 30, 2022 1,768 $ 18 $ ( 4,591 ) $ 18,906 $ 3,516 $ ( 3,196 ) $ 35 $ 14,688

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

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Condensed Consolidated Statements of Cash Flows (unaudited)

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(in millions) (brackets denote cash outflows) 2022 2021

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Acquired IPR&D and milestones 414 317

Gain on divestitures ( 172 ) ( 68 )

Non-cash litigation reserve adjustments, net of cash payments 2,190 97

Other, net ( 86 ) ( 30 )

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Milestone payments incurred prior to regulatory approval, which were previously included in research and development expense, are now presented as acquired IPR&D and milestones expense.

The reclassification decreased research and development expense and increased acquired IPR&D and milestones expense by $ 115 million for the three months ended March 31, 2021.

The reclassification decreased research and development expense and increased acquired IPR&D and milestones expense by $ 35 million for the three months and $ 150 million for the six months ended June 30, 2021.

The company believes this presentation assists users of the financial statements to better understand the total upfront and subsequent development milestone payments incurred to acquire in-process research and development projects.

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June 30, Six months ended

(in millions) 2022 2021 2022 2021

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Interest expense, net $ 532 $ 606 $ 1,071 $ 1,228

(in millions) March 31,

(in millions) June 30,

2022 December 31,

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Inventories $ 3,396 $ 3,128

2022 Form 10-Q |

Property and Equipment, Net

(in millions) March 31,

(in millions) June 30,

2022 December 31,

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Property and equipment, net $ 4,958 $ 5,110

Depreciation expense was $ 198 million for the three months ended March 31, 2022 and $ 206 million for the three months ended March 31, 2021.

2022 Form 10-Q |

Depreciation expense was $ 203 million for the three months and $ 401 million for the six months ended June 30, 2022 and $ 201 million for the three months and $ 407 million for the six months ended June 30, 2021.

Note 3 Earnings Per Share

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(in millions, except per share data) 2022 2021 2022 2021

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Note 4 Licensing, Acquisitions and Other Arrangements

Cash outflows related to acquisitions and investments totaled $ 185 million for the three months ended March 31, 2022 and $ 198 million for the three months ended March 31, 2021.

AbbVie recorded acquired IPR&D and milestones charges of $ 145 million for the three months ended March 31, 2022 and $ 185 million for the three months ended March 31, 2021.

Cash outflows related to acquisitions and investments totaled $ 394 million for the six months ended June 30, 2022 and $ 345 million for the six months ended June 30, 2021.

AbbVie recorded acquired IPR&D and milestones charges of $ 269 million for the three months and $ 414 million for the six months ended June 30, 2022 and $ 132 million for the three months and $ 317 million for the six months ended June 30, 2021.

Syndesi Therapeutics SA

In February 2022, AbbVie acquired Syndesi Therapeutics SA and its portfolio of novel modulators of the synaptic vesicle protein 2A (SV2A), including its lead molecule SDI-118 and accounted for the transaction as an asset acquisition.

In February 2022, AbbVie acquired Syndesi Therapeutics SA and its portfolio of novel modulators of the synaptic vesicle protein 2A, including its lead molecule SDI-118 and accounted for the transaction as an asset acquisition.

SDI-118 is a small molecule currently in Phase 1b studies, which is being evaluated to target nerve terminals to enhance synaptic efficiency.

Under the terms of the agreement, AbbVie made an upfront payment of $ 130 million which was recorded to acquired IPR&D and milestones expense in the condensed consolidated statement of earnings in the first quarter of 2022.

The agreement also includes additional future payments of up to $ 870 million upon the achievement of certain development, regulatory and commercial milestones.

Under the terms of the agreement, AbbVie made an upfront payment of $ 130 million which was recorded to acquired IPR&D and milestones expense in the

2022 Form 10-Q |

condensed consolidated statement of earnings in the first quarter of 2022.

The agreement also includes additional future payments of up to $ 870 million upon the achievement of certain development, regulatory and commercial milestones.

Juvise Pharmaceuticals

In June 2022, AbbVie and Laboratories Juvise Pharmaceuticals (Juvise) entered into an asset purchase agreement where Juvise acquired worldwide commercial rights of a mature brand Pylera, which is used for the treatment of peptic ulcers with an infection by the bacterium Helicobacter pylori.

The transaction was accounted for as the sale of an asset.

Upon completion of the transaction, AbbVie received net cash proceeds of $ 215 million and recognized a pre-tax gain of $ 172 million which was recorded in other operating income in the condensed consolidated statement of earnings in the second quarter of 2022.

Note 5 Collaborations

The company has ongoing transactions with other entities through collaboration agreements.

The following represent the significant collaboration agreements impacting the periods ended March 31, 2022 and 2021.

The following represent the significant collaboration agreements impacting the periods ended June 30, 2022 and 2021.

Collaboration with Janssen Biotech, Inc.

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(in millions) 2022 2021 2022 2021

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Global - AbbVie's share of other costs (included in respective line items) 69 74 133 144

AbbVie’s receivable from Janssen, included in accounts receivable, net, was $ 336 million at March 31, 2022 and $ 294 million at December 31, 2021.

AbbVie’s payable to Janssen, included in accounts payable and accrued liabilities, was $ 401 million at March 31, 2022 and $ 509 million at December 31, 2021.

AbbVie’s receivable from Janssen, included in accounts receivable, net, was $ 310 million at June 30, 2022 and $ 294 million at December 31, 2021.

AbbVie’s payable to Janssen, included in accounts payable and accrued liabilities, was $ 389 million at June 30, 2022 and $ 509 million at December 31, 2021.

Collaboration with Genentech, Inc.

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(Genentech), a member of the Roche Group, are parties to a collaboration and license agreement executed in 2007 to jointly research, develop and commercialize human therapeutic products containing BCL-2 inhibitors and certain other compound inhibitors which includes Venclexta, a BCL-2 inhibitor used to treat certain hematological malignancies.

AbbVie shares equally with Genentech all pre-tax profits and losses from the development and commercialization of Venclexta in the United States.

2022 Form 10-Q |

shares equally with Genentech all pre-tax profits and losses from the development and commercialization of Venclexta in the United States.

AbbVie pays royalties on Venclexta net revenues outside the United States.

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

2022 Form 10-Q |

The following table shows the profit and cost sharing relationship between Genentech and AbbVie:

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(in millions) 2022 2021 2022 2021

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Foreign currency translation adjustments ( 351 )

Balance as of March 31, 2022 $ 32,298

Balance as of June 30, 2022 $ 32,028

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

As of March 31, 2022, there were no accumulated goodwill impairment losses.

As of June 30, 2022, there were no accumulated goodwill impairment losses.

Intangible Assets, Net

The following table summarizes intangible assets:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in millions) Gross

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Definite-Lived Intangible Assets

Amortization expense was $ 1.9 billion for the three months ended March 31, 2022 and $ 2.0 billion for the three months ended March 31, 2021.

Amortization expense was $ 1.8 billion for the three months and $ 3.7 billion for the six months ended June 30, 2022 and $ 2.0 billion for the three months and $ 4.0 billion for the six months ended June 30, 2021.

Amortization expense was included in cost of products sold in the condensed consolidated statements of earnings.

2022 Form 10-Q |

Indefinite-Lived Intangible Assets

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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 |

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

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

Severance and employee benefits Other integration

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(in millions) 2022 2021 2022 2021 2022 2021 2022 2021

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Selling, general and administrative ( 4 ) 12 — 29 80 75 146 125

Total charges $ 8 $ 23 $ 102 $ 116

The following table summarizes the cash activity in the recorded liability associated with the integration plan for the three months ended March 31, 2022:

Total charges (benefits) $ ( 11 ) $ 12 $ ( 3 ) $ 35 $ 114 $ 118 $ 216 $ 234

The following table summarizes the cash activity in the recorded liability associated with the integration plan for the six months ended June 30, 2022:

(in millions) Severance and employee benefits Other integration

Accrued balance as of December 31, 2021

Charges (benefits) ( 3 ) 199

Payments and other adjustments ( 90 ) ( 220 )

Accrued balance as of March 31, 2022 $ 208 $ 33

Accrued balance as of June 30, 2022 $ 129 $ 12

Other Restructuring

AbbVie recorded restructuring charges of $ 57 million for the three months ended March 31, 2022 and $ 38 million for the three months ended March 31, 2021.

The following table summarizes the cash activity in the restructuring reserve for the three months ended March 31, 2022:

AbbVie recorded restructuring charges of $ 36 million for the three months and $ 93 million for the six months ended June 30, 2022 and $ 5 million for the three months and $ 43 million for the six months ended June 30, 2021.

The following table summarizes the cash activity in the restructuring reserve for the six months ended June 30, 2022:

(in millions)

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Payments and other adjustments ( 13 )

Accrued balance as of March 31, 2022 $ 72

Accrued balance as of June 30, 2022 $ 92

Note 8 Financial Instruments and Fair Value Measures

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See Note 11 to the company’s Annual Report on Form 10-K for the year ended December 31, 2021 for a summary of AbbVie’s risk management policy and use of derivative instruments.

2022 Form 10-Q |

Financial Instruments

Various AbbVie foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany transactions denominated in a currency other than the functional currency of the local entity.

These contracts, with notional amounts totaling $ 904 million at March 31, 2022 and $ 1.1 billion at December 31, 2021, are designated as cash flow hedges and are recorded at fair value.

These contracts, with notional amounts totaling $ 1.7 billion at June 30, 2022 and $ 1.1 billion at December 31, 2021, are designated as cash flow hedges and are recorded at fair value.

The durations of these forward exchange contracts were generally less than 18 months.

Accumulated gains and losses as of March 31, 2022 are reclassified from accumulated other comprehensive income (loss) (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.

Accumulated gains and losses as of June 30, 2022 are reclassified from accumulated other comprehensive income (loss) (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 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 and the resulting net gain was recognized in other comprehensive loss.

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

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

2022 Form 10-Q |

The company is a party to interest rate swap contracts designated as cash flow hedges with notional amounts totaling $ 750 million at March 31, 2022 and December 31, 2021.

The company is a party to interest rate swap contracts designated as cash flow hedges with notional amounts totaling $ 750 million at June 30, 2022 and December 31, 2021.

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.

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Resulting gains or losses are reflected in net foreign exchange gain or loss in the condensed consolidated statements of earnings and are generally offset by losses or gains on the foreign currency exposure being managed.

These contracts had notional amounts totaling $ 7.0 billion at March 31, 2022 and $ 8.2 billion at December 31, 2021.

These contracts had notional amounts totaling $ 7.2 billion at June 30, 2022 and $ 8.2 billion at December 31, 2021.

The company also uses foreign currency forward exchange contracts or foreign currency denominated debt to hedge its net investments in certain foreign subsidiaries and affiliates.

The company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling € 4.3 billion at March 31, 2022 and December 31, 2021.

The company also had an aggregate principal amount of senior Euro notes designated as net investment hedges of € 5.9 billion at March 31, 2022 and December 31, 2021.

The company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling € 4.8 billion at June 30, 2022 and € 4.3 billion at December 31, 2021.

The company also had an aggregate principal amount of senior Euro notes designated as net investment hedges of € 5.9 billion at June 30, 2022 and December 31, 2021.

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.

The company is a party to interest rate swap contracts designated as fair value hedges with notional amounts totaling $ 4.5 billion at March 31, 2022 and December 31, 2021.

The company is a party to interest rate swap contracts designated as fair value hedges with notional amounts totaling $ 4.5 billion at June 30, 2022 and December 31, 2021.

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.

2022 Form 10-Q |

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

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Derivatives in liability position

(in millions) Balance sheet caption March 31, 2022 December 31, 2021 Balance sheet caption March 31, 2022 December 31, 2021

(in millions) Balance sheet caption June 30, 2022 December 31, 2021 Balance sheet caption June 30, 2022 December 31, 2021

Foreign currency forward exchange contracts

Designated as cash flow hedges Prepaid expenses and other $ 47 $ 51 Accounts payable and accrued liabilities $ 5 $ 2

Designated as cash flow hedges Other assets 4 — Other long-term liabilities — —

Designated as net investment hedges Prepaid expenses and other 32 149 Accounts payable and accrued liabilities — —

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Designated as cash flow hedges Prepaid expenses and other 2 — Accounts payable and accrued liabilities — 7

Designated as fair value hedges Prepaid expenses and other — — Accounts payable and accrued liabilities 16 —

Designated as fair value hedges Other assets — 26 Other long-term liabilities 256 15

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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 condensed consolidated balance sheets.

2022 Form 10-Q |

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

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

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(in millions) 2022 2021 2022 2021

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Interest rate swap contracts designated as cash flow hedges 2 — 6 1

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $ 52 million into cost of products sold for foreign currency cash flow hedges, pre-tax losses of $ 1 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 loss pre-tax gains of $ 99 million for the three months ended March 31, 2022 and pre-tax gains of $ 382 million for the three months ended March 31, 2021.

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $ 73 million into cost of products sold for foreign currency cash flow hedges, pre-tax gains of $ 2 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 $ 402 million for three months and pre-tax gains of $ 501 million for the six months ended June 30, 2022 and pre-tax losses of $ 126 million for the three months and pre-tax gains of $ 256 million for the six months ended June 30, 2021.

2022 Form 10-Q |

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

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(in millions) Statement of earnings caption 2022 2021 2022 2021

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• Level 3 – Valuations using significant inputs that are unobservable in the market and include the use of judgment by the company’s management about the assumptions market participants would use in pricing the asset or liability.

2022 Form 10-Q |

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the condensed consolidated balance sheet as of March 31, 2022:

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the condensed consolidated balance sheet as of June 30, 2022:

Basis of fair value measurement

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Equity securities 74 54 20 —

Interest rate swap contracts 2 — 2 —

Foreign currency contracts 234 — 234 —

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Total liabilities $ 15,496 $ — $ 318 $ 15,178

2022 Form 10-Q |

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the condensed consolidated balance sheet as of December 31, 2021:

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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.

The fair value measurements of the contingent consideration liabilities were determined based on significant unobservable inputs, including the discount rate, estimated probabilities and timing of achieving specified development, regulatory and commercial milestones and the estimated amount of future sales of the acquired products.

The potential contingent consideration payments are estimated by applying a probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for contingent royalty payments, which are then discounted to present value.

Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of inputs, including discount rates, the probabilities of achieving the milestones, the time required to achieve the milestones and estimated future sales.

Significant judgment is

2022 Form 10-Q |

employed in determining the appropriateness of certain of these inputs.

The fair value measurements of contingent consideration liabilities were determined based on significant unobservable inputs, including the discount rate, estimated probabilities and timing of achieving specified development, regulatory and commercial milestones and the estimated amount of future sales of the acquired products.

Potential contingent consideration payments are estimated by applying a probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for contingent royalty payments, which are then discounted to present value.

Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of inputs, including discount rates, probabilities of achieving the milestones, time required to achieve the milestones and estimated future sales.

Significant judgment is employed in determining the appropriateness of certain of these inputs.

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 was calculated using the following significant unobservable inputs:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in millions) Range Weighted average (a)

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

(b) Excluding approved indications, the estimated probability of payment ranged from 56 % to 89 % at March 31, 2022 and December 31, 2021.

(b) Excluding approved indications, the estimated probability of payment ranged from 56 % to 89 % at June 30, 2022 and December 31, 2021.

2022 Form 10-Q |

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

The following table presents the changes in fair value of total contingent consideration liabilities which are measured using Level 3 inputs:

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(in millions) 2022 2021

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Ending balance $ 15,178 $ 14,989

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

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

Certain financial instruments are carried at historical cost or some basis other than fair value.

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of March 31, 2022 are shown in the table below:

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of June 30, 2022 are shown in the table below:

Basis of fair value measurement

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Total liabilities $ 73,137 $ 69,394 $ 68,223 $ 1,171 $ —

2022 Form 10-Q |

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 2021 are shown in the table below:

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The company records these investments at cost and remeasures them to fair value based on certain observable price changes or impairment events as they occur.

The carrying amount of these investments was $ 147 million as of March 31, 2022 and $ 149 million as of December 31, 2021.

No significant cumulative upward or downward adjustments have been recorded for these investments as of March 31, 2022.

The carrying amount of these investments was $ 148 million as of June 30, 2022 and $ 149 million as of December 31, 2021.

No significant cumulative upward or downward adjustments have been recorded for these investments as of June 30, 2022.

Concentrations of Risk

Of total net accounts receivable, three U.S.

wholesalers accounted for 74 % as of March 31, 2022 and 75 % as of December 31, 2021, 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 35 % of AbbVie’s total net revenues for the three months ended March 31, 2022 and 37 % for the three months ended March 31, 2021.

wholesalers accounted for 76 % as of June 30, 2022 and 75 % as of December 31, 2021, and substantially all of AbbVie’s pharmaceutical product net revenues in the United States were to these three wholesalers.

2022 Form 10-Q |

Humira (adalimumab) is AbbVie’s single largest product and accounted for approximately 36 % of AbbVie’s total net revenues for the six months ended June 30, 2022 and 37 % for the six months ended June 30, 2021.

Debt and Credit Facilities

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

Subsequent to June 30, 2022, the company repaid $ 1.7 billion aggregate principal amount of 3.25 % senior notes that were scheduled to mature in October 2022.

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

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.

Note 9 Post-Employment Benefits

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March 31, Three months ended

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June 30, Three months ended

June 30, Six months ended

(in millions) 2022 2021 2022 2021 2022 2021 2022 2021

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Net periodic benefit cost $ 68 $ 78 $ 136 $ 153 $ 16 $ 15 $ 31 $ 30

The components of net periodic benefit cost other than service cost are included in other income, net in the condensed consolidated statements of earnings.

The components of net periodic benefit cost other than service cost are included in other expense, net in the condensed consolidated statements of earnings.

2022 Form 10-Q |

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(in millions) 2022 2021 2022 2021

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Stock Options

During the three months ended March 31, 2022, primarily in connection with the company's annual grant, AbbVie granted 0.9 million stock options with a weighted-average grant-date fair value of $ 22.83 .

As of March 31, 2022, $ 15 million of unrecognized compensation cost related to stock options is expected to be recognized as expense over approximately the next two years .

During the six months ended June 30, 2022, primarily in connection with the company's annual grant, AbbVie granted 0.9 million stock options with a weighted-average grant-date fair value of $ 22.83 .

As of June 30, 2022, $ 10 million of unrecognized compensation cost related to stock options is expected to be recognized as expense over approximately the next two years .

RSUs and Performance Shares

During the three months ended March 31, 2022, primarily in connection with the company's annual grant, AbbVie granted 5.6 million RSUs and performance shares with a weighted-average grant-date fair value of $ 145.54 .

As of March 31, 2022, $ 955 million of unrecognized compensation cost related to RSUs and performance shares is expected to be recognized as expense over approximately the next two years .

During the six months ended June 30, 2022, primarily in connection with the company's annual grant, AbbVie granted 5.8 million RSUs and performance shares with a weighted-average grant-date fair value of $ 146.20 .

As of June 30, 2022, $ 824 million of unrecognized compensation cost related to RSUs and performance shares is expected to be recognized as expense over approximately the next two years .

Cash Dividends

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

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's remaining stock repurchase authorization was approximately $ 1.4 billion as of March 31, 2022.

AbbVie repurchased 8 million shares for $ 1.1 billion during the six months ended June 30, 2022 and 5 million shares for $ 550 million during the six months ended June 30, 2021.

AbbVie's remaining stock repurchase authorization was approximately $ 1.4 billion as of June 30, 2022.

2022 Form 10-Q |

Accumulated Other Comprehensive Loss

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2022:

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the six months ended June 30, 2022:

(in millions) Foreign currency

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Net current-period other comprehensive income (loss) ( 1,054 ) 666 76 15 ( 297 )

Balance as of March 31, 2022 $ ( 801 ) $ 39 $ ( 2,518 ) $ 296 $ ( 2,984 )

Other comprehensive loss for the three months ended March 31, 2022 included foreign currency translation adjustments totaling a loss of $ 231 million and the offsetting impact of net investment hedging activities totaling a gain of $ 130 million, which were principally due to the impact of the weakening of the Euro on the translation of the company’s Euro-denominated assets.

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2021:

Balance as of June 30, 2022 $ ( 1,624 ) $ 575 $ ( 2,470 ) $ 323 $ ( 3,196 )

Other comprehensive loss for the six months ended June 30, 2022 included foreign currency translation adjustments totaling a loss of $ 1.1 billion and the offsetting impact of net investment hedging activities totaling a gain of $ 666 million, which were principally due to the impact of the weakening of the Euro on the translation of the company’s Euro-denominated assets.

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the six months ended June 30, 2021:

(in millions) Foreign currency

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Net current-period other comprehensive income (loss) ( 433 ) 260 129 58 14

Balance as of March 31, 2021 $ ( 94 ) $ ( 416 ) $ ( 2,988 ) $ 203 $ ( 3,295 )

Other comprehensive loss for the three months ended March 31, 2021 included foreign currency translation adjustments totaling a loss of $ 677 million and the offsetting impact of net investment hedging activities totaling a gain of $ 374 million, which were principally due to the impact of the weakening of the Euro on the translation of the company’s Euro-denominated assets.

Balance as of June 30, 2021 $ 150 $ ( 530 ) $ ( 2,938 ) $ 215 $ ( 3,103 )

Other comprehensive income for the six months ended June 30, 2021 included foreign currency translation adjustments totaling a loss of $ 433 million and the offsetting impact of net investment hedging activities totaling a gain of $ 260 million, which was principally due to the impact of the weakening of the Euro on the translation of the company’s Euro-denominated assets.

2022 Form 10-Q |

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(in millions) (brackets denote gains) 2022 2021 2022 2021

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Amortization of actuarial losses and other (b)

$ 56 $ 74 $ 111 $ 143

Tax benefit ( 12 ) ( 16 ) ( 24 ) ( 30 )

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Losses (gains) on foreign currency forward exchange contracts (c)

$ ( 18 ) $ 22 $ ( 26 ) $ 34

Gains on treasury rate lock agreements (a)

( 6 ) ( 6 ) ( 12 ) ( 12 )

Losses on interest rate swap contracts (a)

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Note 11 Income Taxes

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 was 22 % for the three months and 11 % for the six months ended June 30, 2022 compared to 34 % for the three months and 14 % for the six months ended June 30, 2021.

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

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.

The decrease in the effective tax rate for the three and six months ended June 30, 2022 over the prior year was primarily due to differences in the company’s jurisdictional mix of earnings and accretion on contingent consideration.

Due to the potential for resolution of federal, state and foreign examinations and the expiration of various statutes of limitations, it is reasonably possible that the company’s gross unrecognized tax benefits balance may change within the next 12 months by up to $ 145 million.

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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.

Subject to certain exceptions specified in the separation agreement by and between Abbott and AbbVie, AbbVie assumed the liability for, and control of, all pending and threatened legal matters related to its business, including liabilities for any claims or legal proceedings related to products that had been part of its business, but were discontinued prior to the distribution, as well as assumed or retained liabilities, and will indemnify Abbott for any liability arising out of or resulting from such assumed legal matters.

2022 Form 10-Q |

proceedings related to products that had been part of its business, but were discontinued prior to the distribution, as well as assumed or retained liabilities, and will indemnify Abbott for any liability arising out of or resulting from such assumed legal matters.

Antitrust Litigation

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(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.

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

In May 2020, Perrigo Company and related entities filed a lawsuit against AbbVie and others, alleging that Abbott’s 2011 AndroGel patent lawsuit filed against Perrigo was sham litigation.

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Lawsuits are pending against Forest Laboratories, LLC, an AbbVie subsidiary, and others generally alleging that 2009 and 2010 patent litigation settlements involving Namenda entered into between Forest and generic companies and other conduct by Forest involving Namenda, violated state antitrust, unfair and deceptive trade practices and unjust enrichment laws.

Plaintiffs generally seek monetary damages, injunctive relief and attorneys’ fees.

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

The lawsuits, purported class actions filed by indirect purchasers of Namenda, are consolidated as In re:

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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.

Plaintiffs generally seek monetary damages, injunctive relief and attorneys’ fees.

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

The lawsuits, purported class actions filed on behalf of direct and indirect purchasers of Bystolic, are consolidated as In re:

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The federal court cases are consolidated for pre-trial purposes in the United States District Court for the Northern District of Ohio under the MDL rules as In re:

National Prescription Opiate Litigation, MDL No.

Approximately 257 matters are pending in various state courts.

The plaintiffs in these cases, which include states, counties, cities, other municipal entities, Native American tribes, union trust funds and other third-party

2022 Form 10-Q |

payors, private hospitals and personal injury claimants, generally seek compensatory and punitive damages.

In March 2022, Allergan reached settlements with the States of Florida and Rhode Island and their political subdivisions.

Prescription Opiate Litigation, MDL No.

Approximately 266 matters are pending in various state courts.

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 May and July 2022, Allergan reached settlements with the State of West Virginia and its political subdivisions and with the City and County of San Francisco, California, respectively.

Allergan previously reached settlements with other plaintiffs.

Allergan is engaged in negotiations with representatives for the remaining states, counties, cities, other municipal entities and Native American tribes regarding a potential settlement, with payments likely to be made over a number of years.

While negotiations are on-going and definitive terms have not been reached, a framework for an agreement exists, including an estimate of a potential settlement amount based on maximum participation in the potential settlement.

AbbVie recorded a charge of $ 2.1 billion to selling, general and administrative expense in the consolidated statement of earnings in the second quarter of 2022 related to this potential settlement.

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.

In July 2022, the parties reached an agreement in principle to settle this matter.

Shareholder and Securities Litigation

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

In May 2022, a shareholder derivative lawsuit, Ranney v.

Gonzalez, et al., was filed in Delaware Chancery Court, alleging that certain AbbVie directors and officers breached their fiduciary duties based on related allegations.

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

In April 2022, a federal securities lawsuit, Nakata v.

AbbVie Inc., was filed in the United States District Court for the Northern District of Illinois against AbbVie and certain officers alleging misstatements regarding the potential effect that safety information about another company’s product would have on the Food and Drug Administration’s approval and labeling for AbbVie’s Rinvoq.

In May and July 2022, two shareholder derivative lawsuits, Treppel Family Trust v.

Gonzalez et al., and Katcher v.

Gonzalez, et al., were filed in the same court, alleging that certain AbbVie directors and officers breached fiduciary and other legal duties based on related allegations.

Product Liability and General Litigation

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Patent Office resulted in false claims for payment being made to federal and state healthcare payors for Namenda XR and Namzaric.

The plaintiff-relator seeks damages and attorneys' fees under the federal False Claims Act and state law analogues.

The plaintiff-relator

2022 Form 10-Q |

seeks damages and attorneys' fees under the federal False Claims Act and state law analogues.

The federal government and state governments declined to intervene in the lawsuit.

Intellectual Property Litigation

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.

In March 2022, the parties settled the case and it was dismissed without prejudice.

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).

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

2022 Form 10-Q |

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 May 2022, the parties settled the cases and they were dismissed without prejudice.

2022 Form 10-Q |

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(in millions)

2022 2021 2022 2021

Humira United States $ 4,664 $ 4,257 $ 8,657 $ 8,164

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(in millions)

2022 2021 2022 2021

Lumigan/Ganfort United States $ 60 $ 72 $ 127 $ 138

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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-Q

Item 1. Financial Statements