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Item 2. Management’s Discussion and Analysis

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

(AbbVie or the company) as of September 30, 2022 and December 31, 2021 and the results of operations for the three and nine months ended September 30, 2022 and 2021.

(AbbVie or the company) as of March 31, 2023 and December 31, 2022 and the results of operations for the three months ended March 31, 2023 and 2022.

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

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

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

Outside the United States, AbbVie sells products primarily to wholesalers or through distributors, and depending on the market works through largely centralized national payers system to agree on reimbursement terms.

Certain products are co-marketed or co-promoted with other companies.

AbbVie has approximately 50,000 employees.

AbbVie operates as a single global business segment.

AbbVie operates as a single global business segment and has approximately 50,000 employees.

2023 Strategic Objectives

AbbVie's mission is to discover and develop innovative medicines and products that solve serious health issues today and address the medical challenges of tomorrow while achieving top-tier financial performance through outstanding execution.

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

AbbVie intends to execute its strategy and advance its mission in a number of ways, including:

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

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

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

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

(iv) expanding operating margins;

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

(iv) generating substantial operating cash flows to support investment in innovative research and development, and return cash to shareholders via a strong and growing dividend while also reducing debt.

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

Financial Results

The company's financial performance for the nine months ended September 30, 2022 included delivering worldwide net revenues of $42.9 billion, operating earnings of $12.6 billion, diluted earnings per share of $5.24 and cash flows from operations of $17.5 billion.

Worldwide net revenues grew by 4% on a reported basis and 6% on a constant currency basis, reflecting growth across its immunology, neuroscience and aesthetics portfolios.

Diluted earnings per share was $5.24 for the nine months ended September 30, 2022 and included the following after-tax costs:

(i) $4.8 billion related to the amortization of intangible assets;

(ii) $2.0 billion for charges related to litigation matters;

(iii) $657 million for the change in fair value of contingent consideration liabilities;

(iv) $604 million related to intangible asset impairment;

and (v) $567 million of acquisition and integration expenses.

These costs were partially offset by an after-tax gain of $126 million related to the divestiture of Pylera.

The company's financial performance for the three months ended March 31, 2023 included delivering worldwide net revenues of $12.2 billion, operating earnings of $2.8 billion, diluted earnings per share of $0.13 and cash flows from operations of $4.2 billion.

Worldwide net revenues decreased 10% on a reported basis and 8% on a constant currency basis.

Diluted earnings per share was $0.13 for the three months ended March 31, 2023 and included the following after-tax costs:

(i) $1.8 billion for the change in fair value of contingent consideration liabilities;

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

(iii) $629 million related to intangible asset impairment;

and (iv) $55 million of acquisition and integration expenses.

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

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

The integration plan is expected to realize approximately $2.5 billion of annual cost synergies in 2022.

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

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

2022 Form 10-Q |

Recent Global Events

Russia/Ukraine

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

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

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

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

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

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

Impact of the Coronavirus Disease 2019 (COVID-19)

In response to the ongoing public health crisis posed by COVID-19, AbbVie continues to focus on ensuring the safety of employees.

Throughout the pandemic, AbbVie has followed health and safety guidance from state and local health authorities and implemented safety measures for those employees who are returning to the workplace.

AbbVie also continues to closely manage manufacturing and supply chain resources around the world to help ensure that patients continue to receive an uninterrupted supply of their medicines.

Clinical trial sites are being monitored locally to protect the safety of study participants, staff and employees.

While the impact of COVID-19 on AbbVie's operations to date has not been material, AbbVie continues to experience lower new patient starts in certain products and markets.

AbbVie expects this matter could continue to negatively impact its results of operations throughout the duration of the pandemic.

The extent to which COVID-19 may impact AbbVie's financial condition and results of operations remains uncertain and is dependent on numerous evolving factors, including the measures being taken by authorities to mitigate against the spread of COVID-19, the emergence of new variants and the effectiveness of vaccines and therapeutics.

Research and Development

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

AbbVie’s pipeline currently includes approximately 80 compounds, devices or indications in development individually or under collaboration or license agreements and is focused on such important specialties as immunology, oncology, aesthetics, neuroscience and eye care.

Of these programs, more than 40 are in mid- and late-stage development.

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

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

2023 Form 10-Q |

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

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Significant Programs and Developments

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

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

• In June 2022, AbbVie announced that the FDA approved Skyrizi for the treatment of adults with moderately to severely active Crohn’s disease.

• In September 2022, AbbVie announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use adopted a positive opinion recommending the approval of Skyrizi for the treatment of adults with moderately to severely active Crohn's disease who have had inadequate response, lost response or were intolerant to conventional or biologic therapy.

2022 Form 10-Q |

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

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

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

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

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

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

• In May 2022, AbbVie announced positive top-line results from U-ENDURE, its Phase 3 maintenance study for Rinvoq in adult patients with moderate to severe Crohn's disease who had an inadequate response or were intolerant to a conventional or biologic therapy.

The results showed that more patients treated with Rinvoq achieved the co-primary and secondary endpoints at one year compared to placebo.

• In July 2022, AbbVie announced that the EC approved Rinvoq for the treatment of adults with moderately to severely active UC who have had an inadequate response, lost response or were intolerant to either conventional therapy or a biologic agent.

• In July 2022, AbbVie announced its submission of a supplemental New Drug Application (sNDA) to the FDA and a marketing authorization application (MAA) to the EMA for Rinvoq for the treatment of adult patients with moderately to severely active Crohn’s disease.

• In July 2022, AbbVie announced that the EC approved Rinvoq for the treatment of adult patients with active non-radiographic axial spondyloarthritis (nr-axSpA).

• In October 2022, AbbVie announced that the FDA approved Rinvoq for the treatment of adults with active nr-axSpA with objective signs of inflammation who have had an inadequate response or intolerance to TNF blocker therapy.

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

• In May 2022, AbbVie initiated a Phase 3 clinical trial to evaluate Teliso-V versus docetaxel for the treatment of patients with previously treated c-Met overexpressing, epidermal growth factor receptor wild type, advanced/metastatic non-squamous non-small cell lung cancer.

• In August 2022, AbbVie announced that the FDA approved the use of Imbruvica for the treatment of pediatric patients one year and older with chronic graft versus host disease after failure of one or more lines of systemic therapy.

• In August 2022, the National Comprehensive Cancer Network (NCCN) in the United States issued updated guidelines for the management of chronic lymphocytic leukemia (CLL) re-categorizing Imbruvica from “Preferred Regimen” to “Other Recommended Regimen”.

2022 Form 10-Q |

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

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

and Japan, with AbbVie responsible for further global commercialization.

• In June 2022, AbbVie and Genmab announced primary results from the large B-cell lymphoma expansion cohort in the EPCORE NHL-1 phase 2 clinical trial evaluating epcoritamab, an investigational subcutaneous bispecific antibody.

In this study, epcoritamab demonstrated efficacy with durable responses in patients who had previously received at least two prior lines of anti-lymphoma therapy including chimeric antigen receptor T-cell therapy.

• In September 2022, AbbVie and Genmab submitted a biological license application to the FDA for epcoritamab for the treatment of patients with relapsed/refractory large B-cell lymphoma.

• In October 2022, AbbVie and Genmab submitted an MAA to the EMA for epcoritamab for the treatment of patients with relapsed/refractory diffuse large B-cell lymphoma.

Juvederm Collection

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

• In August 2022, AbbVie announced the that the FDA approved Juvederm Volux XC for the improvement of jawline definition in adults over the age of 21 with moderate to severe loss of jawline definition.

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

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

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

• In June 2022, AbbVie submitted an sNDA to the FDA for Qulipta for the preventative treatment of chronic migraine in adults.

• In July 2022, AbbVie submitted an MAA to the EMA for Qulipta for the prophylactic treatment of migraine in adult patients who have at least four migraine days per month.

• In May 2022, AbbVie submitted a New Drug Application to the FDA for ABBV-951 (foscarbidopa/foslevodopa) for the treatment of motor fluctuations in patients with advanced Parkinson's disease.

• In March 2023, the European Commission (EC) issued their final decision on the European Medicines Agency’s review of the benefit-risk of medicines in the JAK inhibitor class for the treatment of inflammatory diseases, including Rinvoq.

Confirming the Committee for Medicinal Products for Human Use opinion, the previously approved Rinvoq indication statements were not changed and the dosage and special warnings for all JAK inhibitors were updated to include additional information about the risks associated with JAK inhibitors.

• In April 2023, AbbVie announced that the EC approved Rinvoq for the treatment of adults with moderately to severely active Crohn’s disease who have had an inadequate response, lost response or were intolerant to either conventional therapy or a biologic agent.

• In March 2023, AbbVie announced positive top-line results from its Phase 3 induction study, INSPIRE, for Skyrizi in patients with moderately to severely active ulcerative colitis met the primary and all secondary endpoints.

• In March 2023, AbbVie initiated a Phase 3 clinical trial to evaluate epcoritamab in combination with R-CHOP compared to R-CHOP in patients with newly diagnosed diffuse large B-cell lymphoma.

• In April 2023, AbbVie announced the intent to voluntarily withdraw, in the U.S., accelerated Imbruvica approvals for patients with mantle cell lymphoma (MCL) who have received at least one prior therapy and with marginal zone lymphoma (MZL) who require systemic therapy and have received at least one prior anti-CD20-based therapy.

This voluntary action is due to requirements rel ated to the accelerated approval status granted by the U.S.

Food and Drug Administration (FDA) for MCL and MZL.

Other approved indications for Imbruvica in the U.S.

are not affected.

• In March 2023, AbbVie announced that the FDA issued a Complete Response Letter (CRL) for the New Drug Application (NDA) for ABBV-951 (foscarbidopa/foslevodopa) for the treatment of motor fluctuations in adults with advanced Parkinson’s disease.

In its letter, the FDA requested additional information about the device (pump) as part of the NDA review.

The CRL did not request that AbbVie conduct additional efficacy and safety trials related to the drug.

• In April 2023, A bbVie announced that the FDA approved Qulipta for the preventive treatment of chronic migraine in adults.

For a more comprehensive discussion of AbbVie’s products and pipeline, see the company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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(dollars in millions)

2022 2021 2022 2021

United States

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2022 2021 2022 2021

Humira United States $ 2,948 $ 3,993 (26.1) % (26.1) %

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Vraylar United States $ 560 $ 427 31.2 % 31.2 %

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Total $ 561 $ 427 31.3 % 31.3 %

Duodopa United States $ 25 $ 24 6.5 % 6.5 %

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Ubrelvy United States $ 150 $ 138 9.0 % 9.0 %

Qulipta United States $ 62 $ — n/m n/m $ 106 $ — n/m n/m

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Total $ 152 $ 138 10.0 % 10.0 %

Qulipta United States $ 66 $ 11 >100.0 % >100.0 %

Other Neuroscience United States $ 75 $ 173 (56.7) % (56.7) %

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Ozurdex United States $ 39 $ 33 16.1 % 16.1 %

International 76 74 3.2 % 10.3 %

Total $ 115 $ 107 7.3 % 12.2 %

Lumigan/Ganfort United States $ 63 $ 67 (6.8) % (6.8) %

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

Global Humira sales increased by 4% for the three months and 3% for the nine months ended September 30, 2022 primarily driven by market growth across therapeutic categories, partially offset by direct biosimilar competition in international markets.

In the United States, Humira sales increased by 7% for the three and nine months ended September 30, 2022 primarily driven by market growth across all indications and favorable pricing.

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

Internationally, Humira revenues decreased by 17% for the three months and 14% for the nine months ended September 30, 2022 primarily driven by direct biosimilar competition in international markets.

Net revenues for Skyrizi increased by 78% for the three and nine months ended September 30, 2022 primarily driven by continued strong volume and market share uptake since launch as a treatment for plaque psoriasis as well as market growth.

Net revenues for the three and nine months ended September 30, 2022 were also favorably impacted by recent regulatory approvals and expansion of Skyrizi for the treatment of psoriatic arthritis and Crohn’s disease.

Net revenues for Rinvoq increased by 59% for the three and nine months ended September 30, 2022 primarily driven by continued strong volume and market share uptake since launch for the treatment of moderate to severe rheumatoid arthritis as well as market growth.

Net revenues for the three and nine months ended September 30, 2022 were also favorably impacted by recent regulatory approvals and expansion of Rinvoq for the treatment of psoriatic arthritis, atopic dermatitis, ankylosing spondylitis and ulcerative colitis.

Global Humira sales decreased 24% for the three months ended March 31, 2023.

In the United States, Humira sales decreased by 26% for the three months ended March 31, 2023 primarily driven by direct biosimilar competition following the loss of exclusivity on January 31, 2023.

Internationally, Humira revenues decreased 15% for the three months ended March 31, 2023 primarily driven by the continued impact of direct biosimilar competition.

AbbVie continues to pursue strategies to maintain broad formulary access of Humira and manage the impact of biosimilar erosion.

Net revenues for Skyrizi increased 46% for the three months ended March 31, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing and the timing of retail inventory destocking.

Net revenues for Rinvoq increased 51% for the three months ended March 31, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing and the timing of retail inventory destocking.

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

AbbVie's global Imbruvica revenues decreased by 17% for the three months and 14% for the nine months ended September 30, 2022 as a result of decreased market demand and lower market share in the United States.

The decrease in net revenues for the three and nine months ended September 30, 2022 was also partially offset by increased collaboration revenues.

Net revenues for Venclexta increased by 11% for the three months and 18% for the nine months ended September 30, 2022 primarily due to continued expansion of Venclexta for the treatment of patients with CLL and acute myeloid leukemia.

AbbVie's global Imbruvica revenues decreased 25% for the three months ended March 31, 2023 primarily driven by decreased demand and lower market share in the United States as well as decreased collaboration revenues.

Net revenues for Venclexta increased 18% for the three months ended March 31, 2023 primarily driven by continued volume and market share uptake across all indications as well as favorable pricing.

Net revenues for Botox Cosmetic increased 6% for the three months ended March 31, 2023 primarily driven by increased market penetration in key international markets, partially offset by decreased consumer demand in the Unites States due to economic pressures impacting consumer discretionary spending.

2023 Form 10-Q |

Net revenues for Botox Cosmetic increased by 22% for the three months and 26% for the nine months ended September 30, 2022 due to increased consumer demand driven by investment in key international markets and moderated market growth in the United States reflecting increased economic pressures impacting consumer discretionary spending.

Net revenues for Juvederm Collection increased by 5% for the three and nine months ended September 30, 2022.

In the United States, net revenues decreased by 22% for the three months and 12% for the nine months ended September 30, 2022 due to increased economic pressures impacting consumer discretionary spending and increased pricing promotions.

International net revenues increased by 28% for the three months and 18% for the nine months ended September 30, 2022 due to increased consumer demand driven by investment in key markets and recovery from the COVID-19 pandemic, partially offset by the suspension of aesthetic operations in Russia.

Net revenues for Botox Therapeutic increased by 10% for the three months and 13% for the nine months ended September 30, 2022 due to market growth.

Net revenues for Vraylar increased by 20% for the three months and 19% for the nine months ended September 30, 2022 due to higher market share and market growth.

Net revenues for Ubrelvy decreased by 1% for the three months ended September 30, 2022 due to the timing of patient access program allowances, partially offset by market share uptake since launch and market growth.

Net revenues increased by 31% for the nine months ended September 30, 2022 primarily due to increased market share uptake since launch, partially offset by the timing of patient access program allowances.

Net revenues for Mavyret decreased by 4% for the three months and 5% for the nine months ended September 30, 2022 due to the continued disruption of global hepatitis C virus markets due to the COVID-19 pandemic.

Net revenues for Juvederm Collection decreased 7% for the three months ended March 31, 2023 primarily driven by decreased consumer demand in the United States due to economic pressures impacting consumer discretionary spending.

Net revenues for Botox Therapeutic increased 19% for the three months ended March 31, 2023 primarily driven by market growth and the timing of shipments.

Net revenues for Vraylar increased 31% for the three months ended March 31, 2023 primarily driven by continued volume and market share uptake as well as market growth.

Net revenues for Ubrelvy increased 10% for the three months ended March 31, 2023 primarily driven by continued volume and market share uptake as well as market growth.

Net revenues for Qulipta increased greater than 100% for the three months ended March 31, 2023 primarily driven by continued strong volume and market share uptake since launch for the preventative treatment of episodic migraine in adults.

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Gross margin $ 8,239 $ 9,486 (13) %

as a % of net revenues 67 % 70 %

Gross margin as a percentage of net revenues decreased for the three months and increased for the nine months ended September 30, 2022 compared to the prior year.

Gross margin percentage for the three months ended September 30, 2022 was unfavorably impacted by an intangible asset impairment charge of $770 million and higher amortization of intangible assets, partially offset by changes in product mix.

Gross margin percentage for the nine months ended September 30, 2022 was favorably impacted by changes in product mix and lower amortization of intangible assets, partially offset by an intangible asset impairment charge of $770 million.

Gross margin as a percentage of net revenues decreased for the three months ended March 31, 2023 compared to the prior year.

Gross margin percentage for the three months ended March 31, 2023 was unfavorably impacted by higher amortization of intangible assets and changes in product mix.

Selling, General and Administrative

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Selling, general and administrative $ 3,039 $ 3,127 (3) %

as a % of net revenues 25 % 23 %

Selling, general and administrative (SG&A) expenses as a percentage of net revenues increased for the three and nine months ended September 30, 2022 compared to the prior year.

SG&A expense percentage for the three months ended September 30, 2022 was unfavorably impacted by increased product launch expenses partially offset by leverage from revenue growth and increased synergies realized.

SG&A expense percentage was unfavorably impacted by litigation reserve charges of $2.5 billion for the nine months ended September 30, 2022.

2022 Form 10-Q |

Selling, general and administrative (SG&A) expenses decreased for the three months ended March 31, 2023 compared to the prior year primarily driven by lower litigation reserve charges.

SG&A expenses as a percentage of net revenues increased for the three months ended March 31, 2023 compared to the prior year.

SG&A expense percentage was unfavorably impacted by lower net revenues primarily driven by the Humira loss of exclusivity in the United States.

Research and Development and Acquired IPR&D and Milestones

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Research and development $ 2,292 $ 1,497 53 %

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Acquired IPR&D and milestones $ 150 $ 145 3 %

Research and development (R&D) expenses as a percentage of net revenues decreased for the three and nine months ended September 30, 2022 compared to the prior year.

R&D expense percentage for the three and nine months ended September 30, 2022 was favorably impacted by increased scale of the combined company and synergies realized as well as lower integration costs related to the acquisition of Allergan.

R&D expense percentage for the nine months ended September 30, 2022 was also favorably impacted by the purchase of priority review vouchers from third parties in the prior year.

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

Acquired IPR&D and milestones expense in the nine months ended September 30, 2022 included a charge of $130 million as a result of acquiring Syndesi Therapeutics SA and its portfolio of novel modulators of the synaptic vesicle protein 2A, including its lead molecule SDI-118, which is being evaluated to target nerve terminals to enhance synaptic efficiency.

There were no individually significant transactions during the three months ended September 30, 2022.

Acquired IPR&D and milestones expense in the three and nine months ended September 30, 2021 included a charge of $400 million as a result of exercising the company’s exclusive right to acquire TeneoOne, an affiliate of Teneobio, Inc., and TNB-383B, a BCMA-targeting immunotherapeutic for the potential treatment of relapsed or refractory multiple myeloma (R/R MM).

Other Operating Expense, Net

Other operating expense, net for the three and nine months ended September 30, 2022 included a one-time charge of $229 million related to an asset divested as part of the Allergan acquisition.

Other operating expense, net for the nine months ended September 30, 2022 also included $172 million of income related to the sale of 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.

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

Research and development (R&D) expenses as a percentage of net revenues increased for the three months ended March 31, 2023 compared to the prior year.

R&D expense percentage for the three months ended March 31, 2023 was unfavorably impacted by an intangible asset impairment charge of $630 million.

Acquired IPR&D and milestones expense in the three months ended March 31, 2023 included charges related to upfront payments of $132 million and development milestones of $18 million.

Acquired IPR&D and milestones expense in the three months ended March 31, 2022 included a charge of $130 million related to acquiring Syndesi Therapeutics SA and development milestones of $15 million.

2023 Form 10-Q |

Other Non-Operating Expenses (Income)

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Other expense (income), net 1,804 (776)

Interest expense decreased for the three and nine months ended September 30, 2022 compared to the prior year primarily due to a lower average debt balance as a result of deleveraging, partially offset by the impact of higher interest rates.

Interest income increased for the three and nine months ended September 30, 2022 compared to the prior year primarily due to the impact of higher interest rates.

Other expense (income), net included a benefit related to changes in fair value of contingent consideration liabilities of $214 million for the three months and a charge of $647 million for the nine months ended September 30, 2022 and charges of $98 million for the three months and $2.4 billion for the nine months ended September 30, 2021.

Interest expense increased for the three months ended March 31, 2023 compared to the prior year primarily due to the impact of higher interest rates, partially offset by lower average debt balance as a result of deleveraging.

Interest income increased for the three months ended March 31, 2023 compared to the prior year primarily due to the impact of higher interest rates.

Other expense (income), net included a charge related to changes in fair value of contingent consideration liabilities of $1.9 billion for the three months ended March 31, 2023 and a benefit of $748 million for the three months ended March 31, 2022.

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

For the three months ended September 30, 2022, the change in fair value represented higher discount rates partially offset by the passage of time.

For the nine months ended September 30, 2022, the change in fair value represented higher estimated Skyrizi sales driven

2022 Form 10-Q |

by stronger market share uptake and the passage of time, partially offset by higher discount rates.

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

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

For the three months ended March 31, 2023, the change in fair value reflected higher estimated Skyrizi sales driven by stronger market share uptake, the passage of time, lower discount rates and favorable clinical trial results.

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

Income Tax Expense

The effective tax rate was 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 was 49% for the three months ended March 31, 2023 compared to 9% for the three months ended March 31, 2022.

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 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.

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, changes in fair value of contingent consideration and business development activities.

The increase in the effective tax rate for the three months ended March 31, 2023 over the prior year was primarily due to changes in fair value of contingent consideration, tax law changes in Puerto Rico and impairment of certain intangible assets.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Nine months ended

September 30,

Three months ended

(in millions) 2023 2022

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Financing activities (6,192) (6,972)

Operating cash flows for the nine months ended September 30, 2022 decreased compared to the prior year primarily due to the timing of working capital cash flows and higher income tax payments, partially offset by improved results of operations resulting from revenue growth.

Investing cash flows for the nine months ended September 30, 2022 included payments made for acquisitions and investments of $494 million, capital expenditures of $482 million and net sales and maturities of investment securities totaling $32 million.

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

Financing cash flows for the nine months ended September 30, 2022 included repayment of $2.9 billion aggregate principal amount of the company’s 3.45% senior notes, $1.7 billion aggregate principal amount of the company’s 3.25% senior notes and $1.0 billion aggregate principal amount of the company’s 3.2% senior notes.

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

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

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

Financing cash flows also included cash dividend payments of $7.5 billion for the nine months ended September 30, 2022 and $6.9 billion for the nine months ended September 30, 2021.

Operating cash flows for the three months ended March 31, 2023 decreased compared to the prior year primarily due to decreased results of operations primarily driven by lower net revenues, partially offset by the timing of working capital.

Investing cash flows for the three months ended March 31, 2023 included payments made for acquisitions and investments of $353 million and capital expenditures of $175 million.

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

Financing cash flows for the three months ended March 31, 2023 included repayments of $1.0 billion floating rate term loan and $350 million aggregate principal amount of the company’s 2.80% senior notes.

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

Additionally, financing cash flows for the three months ended March 31, 2022 included a repayment of $2.0 billion floating rate term loan due May 2025 and issuance of a new $2.0 billion floating rate term loan as part of the term loan refinancing in February 2022.

2023 Form 10-Q |

Financing cash flows also included cash dividend payments of $2.7 billion for the three months ended March 31, 2023 and $2.5 billion for the three months ended March 31, 2022.

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

On September 9, 2022, the company announced that its board of directors declared a quarterly cash dividend of $1.41 per share for stockholders of record at the close of business on October 14, 2022, payable on November 15, 2022.

On October 28, 2022, the company announced that its board of directors declared an increase in the company’s quarterly cash dividend from $1.41 per share to $1.48 per share beginning with the dividend payable on February 15, 2023 to stockholders of record as of January 13, 2023.

This reflects an increase of approximately 5.0% over the previous quarterly rate.

On February 16, 2023, the company announced that its board of directors declared a quarterly cash dividend of $1.48 per share for stockholders of record at the close of business on April 14, 2023, payable on May 15, 2023.

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

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

AbbVie repurchased

2022 Form 10-Q |

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.

On February 16, 2023, AbbVie’s board of directors authorized a $5.0 billion increase to the existing stock repurchase authorization.

AbbVie repurchased 10 million shares for $1.6 billion during the three months ended March 31, 2023 and 8 million shares for $1.1 billion during the three months ended March 31, 2022.

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

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Credit Facility

AbbVie currently has a $4.0 billion five-year revolving credit facility that matures in August 2024.

In March 2023, AbbVie entered into an amended and restated five-year revolving credit facility.

The amendment increased the unsecured revolving credit facility commitments from $4.0 billion to $5.0 billion and extended the maturity date of the facility from August 2023 to March 2028.

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

At September 30, 2022, the company was in compliance with all covenants, and commitment fees under the credit facility were insignificant.

No amounts were outstanding under the company's credit facility as of September 30, 2022 and December 31, 2021.

At March 31, 2023, the company was in compliance with all covenants, and commitment fees under the credit facility were insignificant.

No amounts were outstanding under the company's credit facility as of March 31, 2023 and December 31, 2022.

Access to Capital

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Credit Ratings

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

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

There were no changes in the company’s credit ratings during the three months ended March 31, 2023.

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

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A summary of the company’s significant accounting policies is included in Note 2, “Summary of Significant Accounting Policies” in AbbVie's Annual Report on Form 10-K for the year ended December 31, 2022.

There have been no significant changes in the company’s application of its critical accounting policies during the nine months ended September 30, 2022.

There have been no significant changes in the company’s application of its critical accounting policies during the three months ended March 31, 2023.

2023 Form 10-Q |

FORWARD-LOOKING STATEMENTS

Some statements in this quarterly report on Form 10-Q may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.

The words “believe,” “expect,” “anticipate,” “project,” and similar expressions, among others, generally identify forward-looking statements.

AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.

Such risks and uncertainties include, but are not limited to, failure to realize the expected benefits from AbbVie's acquisition of Allergan, failure to promptly and effectively integrate Allergan's businesses, challenges to intellectual property, competition from other products, difficulties inherent in the research and development process, adverse litigation or government action, changes to laws and regulations applicable to our industry and the impact of public health outbreaks, epidemics or pandemics, such as COVID-19.

Some statements in this quarterly report on Form 10-Q are, or may be considered, forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.

The words “believe,” “expect,” “anticipate,” “project,” and similar expressions and use of future or conditional verbs, generally identify forward-looking statements.

AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements.

Such risks and uncertainties include, but are not limited to challenges to intellectual property, competition from other products, difficulties inherent in the research and development process, adverse litigation or government action, and changes to laws and regulations applicable to our industry.

Additional information about the economic, competitive, governmental, technological and other factors that may affect AbbVie’s operations is set forth in Item 1A, “Risk Factors,” in AbbVie’s Annual Report on Form 10-K for the year ended December 31, 2022, which has been filed with the Securities and Exchange Commission.

AbbVie notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995.

AbbVie undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

2022 Form 10-Q |

AbbVie undertakes no obligation, and specifically declines, to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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 2. Management’s Discussion and Analysis