What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-05 · 171 added, 117 removed, 679 unchanged (30% of the section changed)

3 unchanged sentences

Three months ended

June 30, Six months ended

(in millions, except per share data) 2023 2022 2023 2022

9 unchanged sentences

Net foreign exchange loss 37 47 72 72

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

Other expense, net 1,412 1,533 3,216 757

Earnings before income tax expense 2,610 1,183 3,085 6,112

16 unchanged sentences

Three months ended

June 30, Six months ended

(in millions) 2023 2022 2023 2022

Net earnings $ 2,027 $ 928 $ 2,268 $ 5,421

Foreign currency translation adjustments, net of tax expense (benefit) of $ 12 for the three months ended March 31, 2023 and $( 7 ) for the three months ended March 31, 2022

Net investment hedging activities, net of tax expense (benefit) of $( 60 ) for the three months ended March 31, 2023 and $ 37 for the three months ended March 31, 2022

Pension and post-employment benefits, net of tax expense (benefit) of $ 14 for the three months ended March 31, 2023 and $ 10 for the three months ended March 31, 2022

Cash flow hedging activities, net of tax expense (benefit) of $( 4 ) for the three months ended March 31, 2023 and $( 2 ) for the three months ended March 31, 2022

Foreign currency translation adjustments, net of tax expense (benefit) of $( 6 ) for the three months and $ 6 for the six months ended June 30, 2023 and $( 12 ) for the three months and $( 19 ) for the six months ended June 30, 2022

( 16 ) ( 823 ) 178 ( 1,054 )

Net investment hedging activities, net of tax expense (benefit) of $ 2 for the three months and $( 58 ) for the six months ended June 30, 2023 and $ 146 for the three months and $ 183 for the six months ended June 30, 2022

11 536 ( 213 ) 666

Pension and post-employment benefits, net of tax expense (benefit) of $( 4 ) for the three months and $ 10 for the six months ended June 30, 2023 and $ 11 for the three months and $ 21 for the six months ended June 30, 2022

( 2 ) 48 36 76

Cash flow hedging activities, net of tax expense (benefit) of $( 4 ) for the three months and $( 8 ) for the six months ended June 30, 2023 and $ 5 for the three months and $ 3 for the six months ended June 30, 2022

( 13 ) 27 ( 54 ) 15

Other comprehensive loss ( 20 ) ( 212 ) ( 53 ) ( 297 )

7 unchanged sentences

Condensed Consolidated Balance Sheets

(in millions, except share data) March 31,

(in millions, except share data) June 30,

2023 December 31,

23 unchanged sentences

Stockholders' equity

Common stock, $ 0.01 par value, 4,000,000,000 shares authorized, 1,821,082,016 shares issued as of March 31, 2023 and 1,813,770,294 as of December 31, 2022

Common stock held in treasury, at cost, 57,113,024 shares as of March 31, 2023 and 44,589,000 as of December 31, 2022

Common stock, $ 0.01 par value, 4,000,000,000 shares authorized, 1,821,926,709 shares issued as of June 30, 2023 and 1,813,770,294 as of December 31, 2022

Common stock held in treasury, at cost, 57,127,750 shares as of June 30, 2023 and 44,589,000 as of December 31, 2022

( 6,528 ) ( 4,594 )

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

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

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.

5 unchanged sentences

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

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

Balance at March 31, 2023 1,764 $ 18 $ ( 6,524 ) $ 19,619 $ 2,393 $ ( 2,232 ) $ 29 $ 13,303

Net earnings attributable to AbbVie Inc.

— — — — 2,024 — — 2,024

Other comprehensive loss, net of tax — — — — — ( 20 ) — ( 20 )

Dividends declared — — — — ( 2,628 ) — — ( 2,628 )

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

Stock-based compensation plans and other 1 — 6 220 — — — 226

Change in noncontrolling interest — — — — — — 3 3

Balance at June 30, 2023 1,765 $ 18 $ ( 6,528 ) $ 19,839 $ 1,789 $ ( 2,252 ) $ 32 $ 12,898

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

6 unchanged sentences

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

Balance at March 31, 2023 1,764 $ 18 $ ( 6,524 ) $ 19,619 $ 2,393 $ ( 2,232 ) $ 29 $ 13,303

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

Balance at December 31, 2022 1,769 $ 18 $ ( 4,594 ) $ 19,245 $ 4,784 $ ( 2,199 ) $ 33 $ 17,287

Net earnings attributable to AbbVie Inc.

— — — — 2,263 — — 2,263

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

Dividends declared — — — — ( 5,258 ) — — ( 5,258 )

Purchases of treasury stock ( 12 ) — ( 1,965 ) — — — — ( 1,965 )

Stock-based compensation plans and other 8 — 31 594 — — — 625

Change in noncontrolling interest — — — — — — ( 1 ) ( 1 )

Balance at June 30, 2023 1,765 $ 18 $ ( 6,528 ) $ 19,839 $ 1,789 $ ( 2,252 ) $ 32 $ 12,898

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

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Condensed Consolidated Statements of Cash Flows (unaudited)

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(in millions) (brackets denote cash outflows) 2023 2022

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Acquired IPR&D and milestones 430 414

Gain on divestitures — ( 172 )

Non-cash litigation reserve adjustments, net of cash payments ( 118 ) 2,190

Impairment of intangible assets 710 —

45 unchanged sentences

Three months ended

June 30, Six months ended

(in millions) 2023 2022 2023 2022

2 unchanged sentences

Interest expense, net $ 454 $ 532 $ 908 $ 1,071

(in millions) March 31,

(in millions) June 30,

2023 December 31,

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Property and Equipment, Net

(in millions) March 31,

(in millions) June 30,

2023 December 31,

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Property and equipment, net $ 4,943 $ 4,935

Depreciation expense was $ 179 million for the three months ended March 31, 2023 and $ 198 million for the three months ended March 31, 2022.

Depreciation expense was $ 190 million for the three months and $ 369 million for the six months ended June 30, 2023 and $ 203 million for the three months and $ 401 million for the six months ended June 30, 2022.

2023 Form 10-Q |

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Three months ended

June 30, Six months ended

(in millions, except per share data) 2023 2022 2023 2022

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Other Licensing & Acquisitions Activity

Cash outflows related to acquisitions and investments totaled $ 353 million for the three months ended March 31, 2023 and $ 185 million for the three months ended March 31, 2022.

AbbVie recorded acquired IPR&D and milestones expense of $ 150 million for the three months ended March 31, 2023 and $ 145 million for the three months ended March 31, 2022.

Cash outflows related to acquisitions and investments totaled $ 513 million for the six months ended June 30, 2023 and $ 394 million for the six months ended June 30, 2022.

AbbVie recorded acquired IPR&D and milestones expense of $ 280 million for the three months and $ 430 million for the six months ended June 30, 2023 and $ 269 million for the three months and $ 414 million for the six months ended June 30, 2022.

Syndesi Therapeutics SA

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

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

In February 2022, AbbVie acquired Syndesi Therapeutics SA and its portfolio of novel modulators of the synaptic vesicle protein 2A, including its lead molecule ABBV-552, previously named SDI-118, and accounted for the transaction as an asset acquisition.

ABBV-552 is a small molecule, which is being evaluated to target nerve terminals to enhance synaptic efficiency.

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

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

Other Arrangements

AbbVie entered into several other arrangements resulting in charges related to upfront payments of $ 132 million for the three months ended March 31, 2023.

Acquired IPR&D and milestones expense also included development milestones of $ 18 million for the three months ended March 31, 2023 and $ 15 million for the three months ended March 31, 2022.

Juvise Pharmaceuticals

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

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

Upon completion of the transaction,

2023 Form 10-Q |

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.

Other Arrangements

AbbVie entered into several other arrangements resulting in charges related to upfront payments of $ 220 million for the three months and $ 352 million for the six months ended June 30, 2023 and $ 222 million for the three and six months ended June 30, 2022.

Acquired IPR&D and milestones expense also included development milestones of $ 60 million for the three months and $ 78 million for the six months ended June 30, 2023 and $ 47 million for the three months and $ 62 million for the six months ended June 30, 2022 .

Note 5 Collaborations

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

The following represent the significant collaboration agreements impacting the periods ended March 31, 2023 and 2022.

The following represent the significant collaboration agreements impacting the periods ended June 30, 2023 and 2022.

Collaboration with Janssen Biotech, Inc.

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(in millions) 2023 2022 2023 2022

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Global - AbbVie's share of other costs (included in respective line items) 57 69 112 133

AbbVie’s receivable from Janssen, included in accounts receivable, net, was $ 267 million at March 31, 2023 and $ 295 million at December 31, 2022.

AbbVie’s payable to Janssen, included in accounts payable and accrued liabilities, was $ 293 million at March 31, 2023 and $ 379 million at December 31, 2022.

AbbVie’s receivable from Janssen, included in accounts receivable, net, was $ 268 million at June 30, 2023 and $ 295 million at December 31, 2022.

AbbVie’s payable to Janssen, included in accounts payable and accrued liabilities, was $ 295 million at June 30, 2023 and $ 379 million at December 31, 2022.

Collaboration with Genentech, Inc.

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

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

2023 Form 10-Q |

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

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

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

2023 Form 10-Q |

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

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(in millions) 2023 2022 2023 2022

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Foreign currency translation adjustments 68

Balance as of March 31, 2023 $ 32,220

Balance as of June 30, 2023 $ 32,224

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

As of March 31, 2023, there were no accumulated goodwill impairment losses.

As of June 30, 2023, there were no accumulated goodwill impairment losses.

Intangible Assets, Net

The following table summarizes intangible assets:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in millions) Gross

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Definite-Lived Intangible Assets

Amortization expense was $ 1.9 billion for the three months ended March 31, 2023 and 2022.

Amortization expense was $ 2.1 billion for the three months and $ 4.0 billion for the six months ended June 30, 2023 and $ 1.8 billion for the three months and $ 3.7 billion for the six months ended June 30, 2022.

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

The company monitors intangible assets for impairment on a quarterly basis.

The definite-lived intangible asset related to Imbruvica in the United States has a carrying value of $ 4.8 billion as of March 31, 2023.

Estimated future cash flows are not significantly higher than the intangible asset’s carrying value, reflecting the company’s current expectations of the impact of the Inflation Reduction Act of 2022.

The definite-lived intangible asset related to Imbruvica in the United States has a carrying value of $ 4.3 billion as of June 30, 2023.

Estimated future cash flows are not significantly higher than the intangible asset’s carrying value, reflecting the company’s current expectations of the impact of the Inflation Reduction Act

2023 Form 10-Q |

Future changes to the company’s estimates of the impact of the Inflation Reduction Act and the potential of government selection for price negotiations as well as regulatory, market and competitive developments could unfavorably impact the company’s ability to recover the carrying value of the related intangible asset.

It is reasonably possible that an intangible asset impairment may occur in future periods, which may have a material effect on AbbVie’s results of operations.

2023 Form 10-Q |

Indefinite-Lived Intangible Assets

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Allergan Integration Plan

Following the closing of the Allergan acquisition, AbbVie implemented an integration plan designed to reduce costs, integrate and optimize the combined organization and incurred total cumulative charges of $ 2.3 billion through March 31, 2023 .

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.

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(in millions) 2023 2022 2023 2022

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Total charges $ 84 $ 103 $ 142 $ 213

The following table summarizes the cash activity in the recorded liability associated with the Allergan integration plan for the three months ended March 31, 2023:

The following table summarizes the cash activity in the recorded liability associated with the Allergan integration plan for the six months ended June 30, 2023:

(in millions)

1 unchanged sentence

Payments and other adjustments ( 195 )

Accrued balance as of March 31, 2023 $ 96

Accrued balance as of June 30, 2023 $ 47

2023 Form 10-Q |

Other Restructuring

AbbVie recorded restructuring charges of $ 27 million for the three months ended March 31, 2023 and $ 57 million for the three months ended March 31, 2022.

The following table summarizes the cash activity in the restructuring reserve for the three months ended March 31, 2023:

AbbVie recorded restructuring charges of $ 18 million for the three months and $ 45 million for the six months ended June 30, 2023 and $ 36 million for the three months and $ 93 million for the six months ended June 30, 2022.

The following table summarizes the cash activity in the restructuring reserve for the six months ended June 30, 2023:

(in millions)

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Payments and other adjustments ( 51 )

Accrued balance as of March 31, 2023 $ 169

2023 Form 10-Q |

Accrued balance as of June 30, 2023 $ 149

Note 8 Financial Instruments and Fair Value Measures

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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 March 31, 2023 and December 31, 2022, are designated as cash flow hedges and are recorded at fair value.

These contracts, with notional amounts totaling $ 2.2 billion at June 30, 2023 and $ 1.7 billion at December 31, 2022, are designated as cash flow hedges and are recorded at fair value.

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

Accumulated gains and losses as of March 31, 2023 are reclassified from accumulated other comprehensive income (loss) (AOCI) and included in cost of products sold at the time the products are sold, generally not exceeding six months from the date of settlement.

Accumulated gains and losses as of June 30, 2023 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 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 2019 and the resulting net gain was recognized in other comprehensive loss.

The agreements were net settled upon issuance of the senior notes in 2019 and the resulting net gain was included in AOCI.

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

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

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

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

In June 2023, the company entered into a cross-currency swap contract with a notional amount totaling € 433 million to hedge the company’s exposure to changes in future cash flows of foreign currency denominated debt related to changes in foreign exchange rates.

The cross-currency swap contract was designated as a cash flow hedge and effectively converted the interest and principal payments of the related foreign currency denominated debt to U.S.

The unrealized gains and losses on the contract are included in AOCI and are reclassified to net foreign exchange loss over the term of the related debt.

The company also enters into foreign currency forward exchange contracts to manage its exposure to foreign currency denominated trade payables and receivables and intercompany loans.

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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 $ 7.8 billion at March 31, 2023 and $ 6.5 billion at December 31, 2022.

These contracts had notional amounts totaling $ 10.7 billion at June 30, 2023 and $ 6.5 billion at December 31, 2022.

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 an aggregate principal amount of senior Euro notes designated as net investment hedges of € 5.9 billion at March 31, 2023 and December 31, 2022.

In addition, the company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling € 4.3 billion, SEK 2.2 billion, CAD 750 million and CHF 70 million at March 31, 2023 and € 4.3 billion, SEK 2.0 billion, CAD 750 million and CHF 90 million at December 31, 2022.

The company had an aggregate principal amount of senior Euro notes designated as net investment hedges of € 5.4 billion at June 30, 2023 and € 5.9 billion at December 31, 2022.

In addition, the company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling € 4.2 billion, SEK 1.4 billion, CAD 750 million and CHF 50 million at June 30, 2023 and € 4.3 billion, SEK 2.0 billion, CAD 750 million and CHF 90 million at December 31, 2022.

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 $ 6.0 billion at March 31, 2023 and $ 4.5 billion at December 31, 2022.

Realized and unrealized gains and losses from these hedges are included in AOCI and the

2023 Form 10-Q |

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 $ 5.0 billion at June 30, 2023 and $ 4.5 billion at December 31, 2022.

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.

2023 Form 10-Q |

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

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Derivatives in liability position

(in millions) Balance sheet caption March 31, 2023 December 31, 2022 Balance sheet caption March 31, 2023 December 31, 2022

(in millions) Balance sheet caption June 30,

2023 December 31, 2022 Balance sheet caption June 30,

2023 December 31, 2022

Foreign currency forward exchange contracts

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Not designated as hedges Prepaid expenses and other 44 33 Accounts payable and accrued liabilities 41 41

Cross-currency swap contracts

Designated as cash flow hedges Prepaid expenses and other 9 — Accounts payable and accrued liabilities — —

Interest rate swap 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.

2023 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) 2023 2022 2023 2022

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Designated as net investment hedges 6 304 ( 88 ) 386

Cross-currency swap contracts designated as cash flow hedges 9 — 9 —

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

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $ 46 million into cost of products sold for foreign currency cash flow hedges and pre-tax gains of $ 24 million into interest expense, net for treasury rate lock agreement cash flow hedges during the next 12 months.

Related to AbbVie’s non-derivative, foreign currency denominated debt designated as net investment hedges, the company recognized in other comprehensive loss pre-tax losses of $ 162 million for the three months ended March 31, 2023 and pre-tax gains of $ 99 million for the three months ended March 31, 2022.

2023 Form 10-Q |

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $ 29 million into cost of products sold for foreign currency cash flow hedges, pre-tax gains of $ 1 million into net foreign exchange loss for cross-currency swap cash flow hedges and pre-tax gains of $ 24 million into interest expense, net for treasury rate lock agreement cash flow hedges during the next 12 months.

Related to AbbVie’s non-derivative, foreign currency denominated debt designated as net investment hedges, the company recognized in other comprehensive loss pre-tax gains of $ 36 million for the three months and pre-tax losses of $ 126 million for the six months ended June 30, 2023 and pre-tax gains of $ 402 million for the three months and pre-tax gains of $ 501 million for the six months ended June 30, 2022.

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

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(in millions) Statement of earnings caption 2023 2022 2023 2022

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Treasury rate lock agreements designated as cash flow hedges Interest expense, net 6 6 12 12

Cross-currency swap contracts designated as cash flow hedges Net foreign exchange loss 8 — 8 —

Interest rate swap contracts

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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 March 31, 2023:

2023 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 June 30, 2023:

Basis of fair value measurement

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Equity securities 131 107 24 —

Interest rate swap contracts 11 — 11 —

Cross-currency swap contracts 9 — 9 —

Foreign currency contracts 103 — 103 —

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Total liabilities $ 19,693 $ — $ 542 $ 19,151

2023 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, 2022:

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

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

Significant judgment is

2023 Form 10-Q |

employed in determining the appropriateness of certain of these inputs.

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

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(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 was 89 % at March 31, 2023 and 56 % at December 31, 2022.

2023 Form 10-Q |

(b) Excluding approved indications, the estimated probability of payment was 89 % at June 30, 2023 and 56 % at December 31, 2022.

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) 2023 2022

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Ending balance $ 19,151 $ 15,178

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

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

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

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of March 31, 2023 are shown in the table below:

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of June 30, 2023 are shown in the table below:

Basis of fair value measurement

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(Level 2) Significant unobservable inputs

Short-term borrowings $ 1 $ 1 $ — $ 1 $ —

Current portion of long-term debt and finance lease obligations, excluding fair value hedges $ 5,203 $ 5,096 $ 4,816 $ 280 $ —

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Total liabilities $ 61,356 $ 56,490 $ 55,685 $ 805 $ —

2023 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, 2022 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 $ 115 million as of March 31, 2023 and $ 129 million as of December 31, 2022.

No significant cumulative upward or downward adjustments have been recorded for these investments as of March 31, 2023.

The carrying amount of these investments was $ 124 million as of June 30, 2023 and $ 129 million as of December 31, 2022.

No significant cumulative upward or downward adjustments have been recorded for these investments as of June 30, 2023.

Concentrations of Risk

Of total net accounts receivable, three U.S.

wholesalers accounted for 77 % as of March 31, 2023 and 82 % as of December 31, 2022, and substantially all of AbbVie’s pharmaceutical product net revenues in the United States were to these three wholesalers.

2023 Form 10-Q |

Humira (adalimumab) is AbbVie’s single largest product and accounted for approximately 29 % of AbbVie’s total net revenues for the three months ended March 31, 2023 and 35 % for the three months ended March 31, 2022.

wholesalers accounted for 75 % as of June 30, 2023 and 82 % as of December 31, 2022, 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 29 % of AbbVie’s total net revenues for the six months ended June 30, 2023 and 36 % for the six months ended June 30, 2022.

Debt and Credit Facilities

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In March 2023, the company repaid a $ 350 million aggregate principal amount of 2.80 % senior notes at maturity.

In May 2023, the company repaid $ 1.0 billion aggregate principal amount of 2.85 % senior notes at maturity.

In January 2022, the company repaid $ 2.9 billion aggregate principal amount of 3.45 % senior notes that were scheduled to mature in March 2022.

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

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 facilities as of March 31, 2023 and December 31, 2022.

At June 30, 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 facilities as of June 30, 2023 and December 31, 2022.

2023 Form 10-Q |

Note 9 Post-Employment Benefits

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(in millions) 2023 2022 2023 2022 2023 2022 2023 2022

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Amortization of actuarial loss 4 59 8 116 3 6 6 13

Net periodic benefit cost $ ( 1 ) $ 68 $ 11 $ 15

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.

2023 Form 10-Q |

Net periodic benefit cost (credit) $ ( 1 ) $ 68 $ ( 2 ) $ 136 $ 14 $ 16 $ 25 $ 31

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

Note 10 Equity

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(in millions) 2023 2022 2023 2022

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Stock Options

During the three months ended March 31, 2023, primarily in connection with the company's annual grant, AbbVie granted 0.6 million stock options with a weighted-average grant-date fair value of $ 29.95 .

As of March 31, 2023, $ 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 six months ended June 30, 2023, primarily in connection with the company's annual grant, AbbVie granted 0.6 million stock options with a weighted-average grant-date fair value of $ 29.89 .

As of June 30, 2023, $ 9 million of unrecognized compensation cost related to stock options is expected to be recognized as expense over approximately the next two years .

RSUs and Performance Shares

During the three months ended March 31, 2023, primarily in connection with the company's annual grant, AbbVie granted 5.6 million RSUs and performance shares with a weighted-average grant-date fair value of $ 149.74 .

As of March 31, 2023, $ 924 million of unrecognized compensation cost related to RSUs and performance shares is expected to be recognized as expense over approximately the next two years .

During the six months ended June 30, 2023, 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 $ 149.86 .

As of June 30, 2023, $ 802 million of unrecognized compensation cost related to RSUs and performance shares is expected to be recognized as expense over approximately the next two years .

2023 Form 10-Q |

Cash Dividends

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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's remaining stock repurchase authorization was approximately $ 4.8 billion as of March 31, 2023.

2023 Form 10-Q |

AbbVie repurchased 10 million shares for $ 1.6 billion during the six months ended June 30, 2023 and 8 million shares for $ 1.1 billion during the six months ended June 30, 2022.

AbbVie's remaining stock repurchase authorization was approximately $ 4.8 billion as of June 30, 2023.

Accumulated Other Comprehensive Loss

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2023:

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the six months ended June 30, 2023:

(in millions) Foreign currency

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Net current-period other comprehensive income (loss) 178 ( 213 ) 36 ( 54 ) ( 53 )

Balance as of March 31, 2023 $ ( 1,319 ) $ 240 $ ( 1,420 ) $ 267 $ ( 2,232 )

Other comprehensive loss for the three months ended March 31, 2023 included foreign currency translation adjustments totaling a gain of $ 194 million principally due to the impact of the strengthening of the Euro on the translation of the company’s Euro-denominated asset and the offsetting impact of net investment hedging activities totaling a loss of $ 224 million.

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

Balance as of June 30, 2023 $ ( 1,335 ) $ 251 $ ( 1,422 ) $ 254 $ ( 2,252 )

Other comprehensive loss for the six months ended June 30, 2023 included foreign currency translation adjustments totaling a gain of $ 178 million principally due to the impact of the strengthening of the Euro on the translation of the company’s Euro-denominated assets and the offsetting impact of net investment hedging activities totaling a loss of $ 213 million.

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

(in millions) Foreign currency

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

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

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

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 principally due to the impact of the weakening of the Euro on the translation of the company’s Euro-denominated assets and the offsetting impact of net investment hedging activities totaling a gain of $ 666 million.

2023 Form 10-Q |

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(in millions) (brackets denote gains) 2023 2022 2023 2022

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Amortization of actuarial losses and other (b)

$ ( 1 ) $ 56 $ ( 3 ) $ 111

Tax benefit — ( 12 ) — ( 24 )

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Cash flow hedging activities

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

Gains on foreign currency forward exchange contracts (c)

$ ( 26 ) $ ( 18 ) $ ( 56 ) $ ( 26 )

Gains on treasury rate lock agreements (a)

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

Gains on cross-currency swap contracts (d)

( 8 ) — ( 8 ) —

Losses on interest rate swap contracts (a)

Tax expense (benefit) 5 1

Tax expense 9 4 14 5

Total reclassifications, net of tax $ ( 31 ) $ ( 19 ) $ ( 62 ) $ ( 30 )

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(d) Amounts are included in net foreign exchange loss (see Note 8).

Note 11 Income Taxes

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 was 22 % for the three months and 26 % for the six months ended June 30, 2023 compared to 22 % for the three months and 11 % for the six months ended June 30, 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, 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.

The increase in the effective tax rate for the six months ended June 30, 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.

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 $ 603 million.

2023 Form 10-Q |

Note 12 Legal Proceedings and Contingencies

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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 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

2023 Form 10-Q |

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

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

In June 2020 and August 2021, the court denied the end-payors' motion to certify a class, which was affirmed on appeal by the United States Court of Appeals for the Third Circuit in April 2023.

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

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In November 2022, the State of Oregon filed a lawsuit in the Multnomah County, Oregon Circuit Court making similar allegations regarding the 2011 patent litigation with one of the generic companies.

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

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

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

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

In March 2023, the parties’ settlement of this matter received final court approval.

Lawsuits were filed 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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Lawsuits are pending against Allergan and several other manufacturers generally alleging that they improperly promoted and sold prescription opioid products.

Approximately 3,000 matters are pending against Allergan.

Approximately 2,860 matters are pending against Allergan in federal and state courts.

Most of 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:

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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 November 2022, Allergan finalized the terms of a settlement with state and local government entities and Native American tribes.

That settlement is subject to certain conditions, including Allergan's determination that a sufficient number of government entities elect to participate in the settlement.

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

Of these approximately 2,860 lawsuits, approximately 2,420 of them are brought by states, counties, cities, and other municipal entities.

Over 98% of these state, city, and other municipal entity plaintiffs have reached settlement agreements with Allergan and their lawsuits are in the process of being dismissed with prejudice.

Approximately 20 other lawsuits are brought by approximately 180 Native American Tribes.

Over 98% of these Native American Tribes have reached settlement agreements with

2023 Form 10-Q |

Allergan and their lawsuits are in the process of being dismissed with prejudice.

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

In March 2023, AbbVie Inc.

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Shareholder and Securities Litigation

In June 2016, a lawsuit, Elliott Associates, L.P., et al.

AbbVie Inc., was filed by five investment funds against AbbVie in the Cook County, Illinois Circuit Court alleging that AbbVie made misrepresentations and omissions in connection with its proposed transaction with Shire.

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

In September 2021, the Illinois court granted AbbVie's motion for summary judgment on all pending claims in all pending cases, dismissing them with prejudice.

In November 2022, the Illinois appellate court affirmed summary judgment in AbbVie's favor and, in December 2022, denied plaintiffs' petition for rehearing.

In March 2023, the Illinois Supreme Court denied the plaintiff’s petition for review.

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

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Plaintiffs are appealing the court's motion to dismiss and summary judgment rulings.

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

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

In February 2023, that lawsuit was voluntarily dismissed without prejudice.

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

Gonzalez et al., and Katcher v.

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

Gonzalez, et al., were filed in the United States District Court for the Northern District of Illinois , alleging that certain AbbVie directors and officers breached fiduciary and other legal duties in making or allowing alleged misstatements regarding the potential effect that safety information about another company’s product would have on the Food and Drug Administration’s approval and labeling for AbbVie’s Rinvoq .

Product Liability and General Litigation

In April 2023, a putative class action lawsuit, Camargo v.

AbbVie Inc., was filed in the United States District Court for the Northern District of Illinois on behalf of Humira patients who paid for Humira based on its list price or who, after losing insurance coverage, discontinued Humira because they could not pay based on its list price, alleging that Humira’s list price is excessive in violation of multiple states’ unfair and deceptive trade practices statutes.

The plaintiff generally seeks monetary damages, injunctive relief, and attorneys’ fees.

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

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(in millions)

2023 2022 2023 2022

Humira United States $ 3,452 $ 4,664 $ 6,400 $ 8,657

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Total $ 196 $ 185 $ 348 $ 323

Qulipta United States $ 66 $ 11

2023 Form 10-Q |

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(in millions)

2023 2022 2023 2022

Qulipta United States $ 95 $ 33 $ 161 $ 44

International 1 — 1 —

Total $ 96 $ 33 $ 162 $ 44

Other Neuroscience United States $ 65 $ 145 $ 140 $ 318

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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