What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-04 · 180 added, 127 removed, 726 unchanged (30% of the section changed)

3 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

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

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Acquired IPR&D and milestones 40 402 454 719

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

Other operating expense, net 229 500 57 432

Total operating costs and expenses 10,209 10,036 30,318 28,461

2 unchanged sentences

Net foreign exchange loss 36 12 108 35

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

Other expense (income), net ( 330 ) 21 427 2,284

Earnings before income tax expense 4,400 3,688 10,512 8,718

16 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

(in millions) 2022 2021 2022 2021

Net earnings $ 3,952 $ 3,180 $ 9,373 $ 7,504

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

Foreign currency translation adjustments, net of tax expense (benefit) of $( 11 ) for the three months and $( 30 ) for the nine months ended September 30, 2022 and $( 8 ) for the three months and $( 32 ) for the nine months ended September 30, 2021

( 989 ) ( 361 ) ( 2,043 ) ( 794 )

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

Net investment hedging activities, net of tax expense (benefit) of $ 165 for the three months and $ 348 for the nine months ended September 30, 2022 and $ 51 for the three months and $ 123 for the nine months ended September 30, 2021

599 184 1,265 444

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

Pension and post-employment benefits, net of tax expense (benefit) of $ 14 for the three months and $ 35 for the nine months ended September 30, 2022 and $ 17 for the three months and $ 50 for the nine months ended September 30, 2021

60 67 136 196

Cash flow hedging activities, net of tax expense (benefit) of $ 14 for the three months and $ 17 for the nine months ended September 30, 2022 and $ 13 for the three months and $ 16 for the nine months ended September 30, 2021

Other comprehensive loss ( 247 ) ( 53 ) ( 544 ) ( 39 )

Comprehensive income 3,705 3,127 8,829 7,465

6 unchanged sentences

Condensed Consolidated Balance Sheets

(in millions, except share data) June 30,

(in millions, except share data) September 30,

2022 December 31,

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Stockholders' equity

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

Common stock, $ 0.01 par value, 4,000,000,000 shares authorized, 1,812,973,038 shares issued as of September 30, 2022 and 1,803,195,293 as of December 31, 2021

Common stock held in treasury, at cost, 44,572,117 shares as of September 30, 2022 and 34,857,597 as of December 31, 2021

( 4,590 ) ( 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 March 31, 2021 1,766 $ 18 $ ( 3,017 ) $ 17,712 $ 2,292 $ ( 3,295 ) $ 23 $ 13,733

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

Net earnings attributable to AbbVie Inc.

— — — — 3,179 — — 3,179

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

Other comprehensive loss, net of tax — — — — — ( 53 ) — ( 53 )

Dividends declared — — — — ( 2,319 ) — — ( 2,319 )

2 unchanged sentences

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

Balance at September 30, 2021 1,768 $ 18 $ ( 3,020 ) $ 18,108 $ 1,600 $ ( 3,156 ) $ 27 $ 13,577

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

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.

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Change in noncontrolling interest — — — — — — ( 2 ) ( 2 )

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

Balance at September 30, 2022 1,768 $ 18 $ ( 4,590 ) $ 19,056 $ 4,953 $ ( 3,443 ) $ 33 $ 16,027

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

1 unchanged sentence

— — — — 7,498 — — 7,498

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

Other comprehensive loss, net of tax — — — — — ( 39 ) — ( 39 )

Dividends declared — — — — ( 6,953 ) — — ( 6,953 )

2 unchanged sentences

Change in noncontrolling interest — — — — — — 6 6

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

Balance at September 30, 2021 1,768 $ 18 $ ( 3,020 ) $ 18,108 $ 1,600 $ ( 3,156 ) $ 27 $ 13,577

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

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Change in noncontrolling interest — — — — — — 5 5

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

Balance at September 30, 2022 1,768 $ 18 $ ( 4,590 ) $ 19,056 $ 4,953 $ ( 3,443 ) $ 33 $ 16,027

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

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Condensed Consolidated Statements of Cash Flows (unaudited)

Six months ended

Nine months ended

September 30,

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

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Acquired IPR&D and milestones 454 719

Other charges related to collaborations — 500

Gain on divestitures ( 172 ) ( 68 )

Non-cash litigation reserve adjustments, net of cash payments 2,261 21

Impairment of intangible assets 770 50

Other, net ( 151 ) ( 185 )

42 unchanged sentences

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 $ 35 million for the three months and $ 150 million for the six months ended June 30, 2021.

The reclassification decreased research and development expense and increased acquired IPR&D and milestones expense by $ 12 million for the three months and $ 162 million for the nine months ended September 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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Three months ended

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September 30, Nine months ended

September 30,

(in millions) 2022 2021 2022 2021

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Interest expense, net $ 497 $ 585 $ 1,568 $ 1,813

(in millions) June 30,

(in millions) September 30,

2022 December 31,

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Property and Equipment, Net

(in millions) June 30,

(in millions) September 30,

2022 December 31,

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Property and equipment, net $ 4,893 $ 5,110

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.

Depreciation expense was $ 181 million for the three months and $ 582 million for the nine months ended September 30, 2022 and $ 223 million for the three months and $ 630 million for the nine months ended September 30, 2021.

Note 3 Earnings Per Share

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September 30,

(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 $ 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.

Cash outflows related to acquisitions and investments totaled $ 494 million for the nine months ended September 30, 2022 and $ 837 million for the nine months ended September 30, 2021.

AbbVie recorded acquired IPR&D and milestones expense of $ 40 million for the three months and $ 454 million for the nine months ended September 30, 2022 and $ 402 million for the three months and $ 719 million for the nine months ended September 30, 2021.

Syndesi Therapeutics SA

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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.

DJS Antibodies Ltd

Subsequent to September 30, 2022, AbbVie entered into an agreement to acquire DJS Antibodies Ltd (DJS) including its lead program DJS-002 and proprietary HEPTAD platform.

DJS-002 is an LPAR1 antagonist antibody currently in preclinical studies for the treatment of Idiopathic Pulmonary Fibrosis and other fibrotic diseases.

HEPTAD platform is a potential novel approach to antibody discovery with specific capabilities targeting transmembrane protein targets.

Under the terms of the agreement, AbbVie will make an upfront payment of approximately $ 255 million plus additional future payments of up to $ 95 million upon achievement of certain development milestones.

Calico Life Sciences LLC

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

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

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

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

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

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

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

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

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

TeneoOne and TNB-383B

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

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

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

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

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

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 June 30, 2022 and 2021.

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

Collaboration with Janssen Biotech, Inc.

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and its affiliates (Janssen), one of the Janssen Pharmaceutical companies of Johnson & Johnson, for the joint development and commercialization of Imbruvica, a novel, orally active, selective covalent inhibitor of Bruton’s tyrosine kinase and certain compounds structurally related to Imbruvica, for oncology and other indications, excluding all immune and inflammatory mediated diseases or conditions and all psychiatric or psychological diseases or conditions, in the United States and outside the United States.

2022 Form 10-Q |

The collaboration provides Janssen with an exclusive license to commercialize Imbruvica outside of the United States and co-exclusively with AbbVie in the United States.

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Three months ended

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September 30, Nine months ended

September 30,

(in millions) 2022 2021 2022 2021

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Global - AbbVie's share of other costs (included in respective line items) 63 76 196 220

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.

AbbVie’s receivable from Janssen, included in accounts receivable, net, was $ 296 million at September 30, 2022 and $ 294 million at December 31, 2021.

AbbVie’s payable to Janssen, included in accounts payable and accrued liabilities, was $ 379 million at September 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.

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 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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September 30, Nine months ended

September 30,

(in millions) 2022 2021 2022 2021

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AbbVie's share of development costs (included in R&D) 29 34 87 110

2022 Form 10-Q |

Note 6 Goodwill and Intangible Assets

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Foreign currency translation adjustments ( 653 )

Balance as of June 30, 2022 $ 32,028

Balance as of September 30, 2022 $ 31,726

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

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

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

Intangible Assets, Net

The following table summarizes intangible assets:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in millions) Gross

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Definite-Lived Intangible Assets

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 $ 2.0 billion for the three months and $ 5.7 billion for the nine months ended September 30, 2022 and $ 1.9 billion for the three months and $ 5.9 billion for the nine months ended September 30, 2021.

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

2022 Form 10-Q |

In September 2022, the company made a strategic decision to reduce ongoing sales and marketing investment related to Vuity, an on-market product to treat presbyopia.

This strategic decision contributed to a significant decrease in the estimated future cash flows for the product and represented a triggering event which required the company to evaluate the underlying definite lived-intangible asset for impairment.

The company utilized a discounted cash flow analysis to estimate the fair value of the intangible asset resulting in a full impairment of both the gross and net carrying amount.

Based on the revised cash flows, the company recorded a pre-tax impairment charge of $ 770 million to cost of products sold in the condensed consolidated statement of earnings for the third quarter of 2022.

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 (benefits) associated with the Allergan acquisition integration plan:

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September 30,

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

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Selling, general and administrative 4 18 4 47 84 88 230 213

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:

Total charges $ 5 $ 20 $ 2 $ 55 $ 111 $ 150 $ 327 $ 384

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

(in millions) Severance and employee benefits Other integration

Accrued balance as of December 31, 2021

Charges (benefits) ( 3 ) 199

Charges 2 316

Payments and other adjustments ( 107 ) ( 343 )

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

Accrued balance as of September 30, 2022 $ 117 $ 6

Other Restructuring

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:

AbbVie recorded restructuring charges of $ 50 million for the three months and $ 143 million for the nine months ended September 30, 2022 and $ 13 million for the three months and $ 56 million for the nine months ended September 30, 2021.

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

(in millions)

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Payments and other adjustments ( 25 )

Accrued balance as of June 30, 2022 $ 92

Accrued balance as of September 30, 2022 $ 120

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 $ 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.

These contracts, with notional amounts totaling $ 1.8 billion at September 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 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.

Accumulated gains and losses as of September 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 income (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 loss.

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

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

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 September 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 $ 7.2 billion at June 30, 2022 and $ 8.2 billion at December 31, 2021.

These contracts had notional amounts totaling $ 6.8 billion at September 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 € 4.8 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 had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling € 4.5 billion at September 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 September 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 June 30, 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 September 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.

1 unchanged sentence

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 June 30, 2022 December 31, 2021 Balance sheet caption June 30, 2022 December 31, 2021

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

Foreign currency forward exchange contracts

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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.

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

2022 Form 10-Q |

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

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(in millions) 2022 2021 2022 2021

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Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $ 150 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 |

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 $ 431 million for three months and pre-tax gains of $ 932 million for the nine months ended September 30, 2022 and pre-tax gains of $ 141 million for the three months and pre-tax gains of $ 397 million for the nine months ended September 30, 2021.

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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September 30,

(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.

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:

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 September 30, 2022:

Basis of fair value measurement

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Total liabilities $ 15,065 $ — $ 509 $ 14,556

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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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.

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

2022 Form 10-Q |

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.

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

June 30, 2022 December 31, 2021

September 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 June 30, 2022 and December 31, 2021.

2022 Form 10-Q |

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

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 $ 14,556 $ 14,919

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

The change in fair value recognized in net earnings is recorded in other expense (income), 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 June 30, 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 September 30, 2022 are shown in the table below:

Basis of fair value measurement

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Total liabilities $ 69,965 $ 63,035 $ 62,164 $ 871 $ —

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 $ 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.

The carrying amount of these investments was $ 143 million as of September 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 September 30, 2022.

Concentrations of Risk

Of total net accounts receivable, three U.S.

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.

wholesalers accounted for 79 % as of September 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.

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

In July 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 September 2022, the company repaid $ 1.0 billion aggregate principal amount of 3.2 % senior notes that were scheduled to mature in November 2022.

This payment was made by exercising, under the terms of the notes, 60-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.

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

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

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

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

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

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

2022 Form 10-Q |

Note 9 Post-Employment Benefits

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

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Net periodic benefit cost $ 68 $ 76 $ 204 $ 229 $ 16 $ 15 $ 47 $ 45

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 |

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

Note 10 Equity

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Stock Options

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 .

During the nine months ended September 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 September 30, 2022, $ 8 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 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 .

During the nine months ended September 30, 2022, primarily in connection with the company's annual grant, AbbVie granted 5.9 million RSUs and performance shares with a weighted-average grant-date fair value of $ 146.30 .

As of September 30, 2022, $ 692 million of unrecognized compensation cost related to RSUs and performance shares is expected to be recognized as expense over approximately the next two years .

2022 Form 10-Q |

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 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 |

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

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

Accumulated Other Comprehensive Loss

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:

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

(in millions) Foreign currency

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Net current-period other comprehensive income (loss) ( 2,043 ) 1,265 136 98 ( 544 )

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:

Balance as of September 30, 2022 $ ( 2,613 ) $ 1,174 $ ( 2,410 ) $ 406 $ ( 3,443 )

Other comprehensive loss for the nine months ended September 30, 2022 included foreign currency translation adjustments totaling a loss of $ 2.0 billion and the offsetting impact of net investment hedging activities totaling a gain of $ 1.3 billion, 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 nine months ended September 30, 2021:

(in millions) Foreign currency

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Net current-period other comprehensive income (loss) ( 794 ) 444 196 115 ( 39 )

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.

Balance as of September 30, 2021 $ ( 211 ) $ ( 346 ) $ ( 2,871 ) $ 272 $ ( 3,156 )

Other comprehensive loss for the nine months ended September 30, 2021 included foreign currency translation adjustments totaling a loss of $ 794 million and the offsetting impact of net investment hedging activities totaling a gain of $ 444 million, which were 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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Note 11 Income Taxes

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 was 10 % for the three months and 11 % for the nine months ended September 30, 2022 compared to 14 % for the three and nine months ended September 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 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.

The decrease in the effective tax rate for the three and nine months ended September 30, 2022 over the prior year was primarily due to differences in the company’s jurisdictional mix of earnings, accretion on contingent consideration, and acquired IPR&D and milestones.

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 $ 141 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

Subject to certain exceptions specified in the separation agreement by and between Abbott Laboratories (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

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.

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

Perrigo has appealed the dismissal.

The United States Court of Appeals for the Third Circuit affirmed that dismissal in July 2022 and denied Perrigo’s petition for rehearing in August 2022.

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

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In June 2020, the court dismissed the consolidated litigation with prejudice.

The plaintiffs have appealed the dismissal.

In August 2022, the United States Court of Appeals for the Seventh Circuit affirmed that dismissal.

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.

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Namenda Indirect Purchaser Antitrust Litigation in the United States District Court for the Southern District of New York.

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

Lawsuits are pending against Allergan Inc., an Allergan subsidiary, generally alleging that Allergan’s petitioning to the U.S.

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

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

In August 2022, the court granted final approval to the parties’ agreement to settle this matter.

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

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Approximately 3,083 matters are pending against Allergan.

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:

The federal court cases are consolidated for

2022 Form 10-Q |

Prescription Opiate Litigation, MDL No.

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 284 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 has previously reached settlements with certain states, counties, and cities.

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.

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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.

In August 2022, the parties finalized their settlement of this matter.

Shareholder and Securities 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

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

The federal government and state

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.

governments declined to intervene in the lawsuit.

In August 2022, the United States Court of Appeals reversed the district court’s denial of Allergan’s motion to dismiss the case.

Intellectual Property Litigation

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On August 30, 2021, Defendants appealed.

An appellate hearing occurred in October 2022.

Janssen Biotech, Inc.

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

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).

Litigation was filed in the United States District Court for the District of Delaware in December 2019 against Sun Pharmaceutical Industries Limited and Sun Pharma Global FZE;

Aurobindo Pharma Limited and Aurobindo Pharma USA, Inc.;

and Zydus Pharmaceuticals (USA), Inc.

and Cadila Healthcare Limited.

Allergan alleges defendants' proposed generic cariprazine products infringe certain patents and seeks declaratory and injunctive relief.

Gedeon Richter Plc, Inc.

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.

is seeking to enforce patent rights relating to venetoclax (a drug sold under the trademark Venclexta).

Litigation was filed in the United States District Court for the District of Delaware in July 2020 against Dr.

Reddy’s Laboratories, Ltd.

Reddy’s Laboratories, Inc.:

and Alembic Pharmaceuticals Ltd., Alembic Pharmaceuticals, Inc., and Alembic Global Holdings SA.

AbbVie alleges defendants’ proposed generic venetoclax products infringe certain patents and seeks declaratory and injunctive relief.

Genentech, Inc., which is in a global collaboration with AbbVie concerning the development and marketing of Venclexta, is the co-plaintiff in this suit.

2022 Form 10-Q |

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(in millions)

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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