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Item 2. Management’s Discussion and Analysis

2023-11-06 compared with 2023-08-07 · 120 added, 88 removed, 236 unchanged (47% of the section changed)

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

(AbbVie or the company) as of June 30, 2023 and December 31, 2022 and the results of operations for the three and six months ended June 30, 2023 and 2022.

(AbbVie or the company) as of September 30, 2023 and December 31, 2022 and the results of operations for the three and nine months ended September 30, 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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Financial Results

The company's financial performance for the six months ended June 30, 2023 included delivering worldwide net revenues of $26.1 billion, operating earnings of $7.3 billion, diluted earnings per share of $1.26 and cash flows from operations of $10.5 billion.

The company's financial performance for the nine months ended September 30, 2023 included delivering worldwide net revenues of $40.0 billion, operating earnings of $9.6 billion, diluted earnings per share of $2.26 and cash flows from operations of $18.1 billion.

Worldwide net revenues decreased 7% on a reported basis and 6% on a constant currency basis.

Diluted earnings per share was $1.26 for the six months ended June 30, 2023 and included the following after-tax costs:

Diluted earnings per share was $2.26 for the nine months ended September 30, 2023 and included the following after-tax costs:

(i) $5.1 billion related to the amortization of intangible assets;

(ii) $3.3 billion for the change in fair value of contingent consideration liabilities;

and (iii) $629 million related to intangible asset impairment.

and (iii) $2.3 billion related to intangible asset impairment.

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

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• In July 2023, AbbVie initiated its Phase 3 Step-Up HS study to evaluate efficacy and safety of Rinvoq in adults and adolescents with moderate to severe hidradenitis suppurativa (HS) who have failed anti-TNF therapy and/or one approved non-anti-TNF inhibitor therapy for HS.

• In August 2023, AbbVie initiated its Phase 3 Select-SLE study to evaluate Rinvoq in moderate to severe systemic Lupus Erythematosus.

• In October 2023, AbbVie announced that its Phase 2b study evaluating Rinvoq in adults with non-segmental Vitiligo met the primary endpoint.

Based on these data, AbbVie is advancing the program to Phase 3.

• 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.

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Skyrizi was well-tolerated with no new safety signals identified.

• In August 2023, AbbVie submitted regulatory applications to FDA and EMA for Skyrizi for the treatment of adults with moderately to severely active ulcerative colitis.

• In September 2023, AbbVie announced results from the head-to-head Phase 3 SEQUENCE study that evaluated the efficacy and safety of Skyrizi compared to Stelara among adult patients with moderately to severely active Crohn’s disease.

In the study, Skyrizi met both primary endpoints at week 24 and achieved superiority of endoscopic remission at week 48 versus Stelara.

In addition, all secondary endpoints achieved statistical significance for superiority versus Stelara.

Skyrizi was well-tolerated with no new safety signals identified.

• 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 (DLBCL).

2023 Form 10-Q |

• In May 2023, AbbVie announced that the FDA approved Epkinly (epcoritamab) as the first and only bispecific antibody to treat adult patients with relapsed or refractory (R/R) DLBCL.

• In July 2023, AbbVie announced that the CHMP of the EMA has adopted a positive opinion recommending the granting of conditional marketing authorization for epcoritamab as a monotherapy for the treatment of adult patients with R/R DLBCL after two or more lines of systemic therapy.

• In September 2023, AbbVie announced that the EC approved Tepkinly (epcoritamab) for adults with R/R DLBCL after two or more lines of systemic therapy.

• In May 2023, AbbVie voluntarily withdrew, 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.

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are not affected.

2023 Form 10-Q |

• In July 2023, AbbVie announced top-line results from the Phase 3 TRANSFORM-1 clinical trial evaluating the safety and efficacy of navitoclax, a BCL-XL/BCL-2 inhibitor, in combination with ruxolitinib in adult patients with primary or secondary myelofibrosis (MF).

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The company plans to wait for additional follow up data on the primary, secondary and other endpoints, expected in the fourth quarter of this year, before engaging with regulatory agencies regarding potential next steps.

• In September 2023, AbbVie announced top-line results from the Phase 3 CANOVA study evaluating the safety and efficacy of Venclexta plus dexamethasone (VenDex) for patients with t(11;14)-positive relapsed or refractory (R/R) multiple myeloma who have received two or more prior treatments.

The data did not demonstrate that the treatment combination significantly improved progression-free survival (PFS), the primary endpoint of the trial.

Patients receiving VenDex showed improvement in median PFS with the combination of study comparator pomalidomide and dexamethasone (PomDex);

however, the results did not reach statistical significance.

The company plans to discuss the data with health authorities in the near future to further understand the potential of Venclexta as a biomarker-driven therapy in multiple myeloma.

Juvederm Collection

• In May 2023, AbbVie announced that the FDA approved Skinvive by Juvederm to improve skin smoothness of the cheeks in adults over the age of 21.

Botox Cosmetic

• In September 2023, AbbVie announced positive top-line results from the second of three Phase 3 clinical studies evaluating Botox Cosmetic for the treatment of moderate to severe platysma prominence associated with platysma muscle activity.

All primary and secondary endpoints were met in the second Phase 3 study and results were consistent with findings from the first Phase 3 study.

A Phase 3 open-label extension study is ongoing, with results expected later this year.

The company plans to include data from the full Phase 3 study program as part of an upcoming FDA regulatory submission expected near the end of the year.

• In October 2023, AbbVie announced positive top-line results from two pivotal Phase 3 clinical studies evaluating trenibotulinumtoxinE ( BoNT/E) for the treatment of moderate to severe glabellar lines.

All primary and secondary endpoints were met for both Phase 3 studies and results support BoNT/E as a novel botulinum neurotoxin serotype E characterized by a rapid onset of action as early as 8 hours after administration and short duration of effect within 2-3 weeks.

2023 Form 10-Q |

• 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.

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

• In June 2023, AbbVie announced that the CHMP of the EMA has adopted a positive opinion recommending the approval of Qulipta for the prophylaxis of migraine in adults who have four or more migraine days per month.

• In August 2023, AbbVie announced that the EC approved Aquipta (Qulipta) for the preventive treatment of migraine in adults who have four or more migraine days per month.

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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Total $ 1,110 $ 695 59.8 % 59.6 % $ 2,714 $ 1,752 54.9 % 56.4 %

Hematologic Oncology

Imbruvica United States $ 678 $ 849 (20.2) % (20.2) % $ 1,982 $ 2,585 (23.4) % (23.4) %

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Total $ 590 $ 515 14.6 % 14.0 % $ 1,699 $ 1,493 13.8 % 15.5 %

Epkinly Collaboration revenues $ 14 $ — n/m n/m $ 14 $ — n/m n/m

Botox Cosmetic United States $ 388 $ 370 5.0 % 5.0 % $ 1,217 $ 1,232 (1.1) % (1.1) %

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Ubrelvy United States $ 230 $ 160 43.7 % 43.7 % $ 574 $ 483 18.8 % 18.8 %

International 2 — n/m n/m 4 — n/m n/m

International 3 — >100.0 % >100.0 % 7 — >100.0 % >100.0 %

Total $ 233 $ 160 45.6 % 45.6 % $ 581 $ 483 20.3 % 20.3 %

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Total $ 132 $ 62 >100.0 % >100.0 % $ 294 $ 106 >100.0 % >100.0 %

Other Neuroscience United States $ 65 $ 145 (55.9) % (55.9) % $ 140 $ 318 (56.3) % (56.3) %

International 5 5 4.7 % 11.4 % 9 9 5.7 % 12.0 %

Total $ 70 $ 150 (53.8) % (53.6) % $ 149 $ 327 (54.6) % (54.4) %

2023 Form 10-Q |

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2023 2022 2023 2022

Other Neuroscience United States $ 55 $ 82 (31.9) % (31.9) % $ 195 $ 400 (51.3) % (51.3) %

International 6 5 6.2 % 9.6 % 15 14 6.4 % 11.8 %

Total $ 61 $ 87 (29.9) % (29.7) % $ 210 $ 414 (49.3) % (49.1) %

Ozurdex United States $ 34 $ 35 (4.5) % (4.5) % $ 107 $ 104 2.6 % 2.6 %

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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 decreased 25% for the three and six months ended June 30, 2023.

In the United States, Humira sales decreased by 26% for the three and six months ended June 30, 2023 primarily driven by direct biosimilar competition following the loss of exclusivity on January 31, 2023.

Internationally, Humira revenues decreased 17% for the three months and 16% for the six months ended June 30, 2023 primarily driven by the continued impact of direct biosimilar competition.

Global Humira sales decreased 36% for the three months and 29% for the nine months ended September 30, 2023.

In the United States, Humira sales decreased 39% for the three months and 31% for the nine months ended September 30, 2023 primarily driven by direct biosimilar competition following the loss of exclusivity on January 31, 2023.

Internationally, Humira revenues decreased 12% for the three months and 15% for the nine months ended September 30, 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 51% for the three months and 49% for the six months ended June 30, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing.

Net revenues for Rinvoq increased 57% for the three months and 54% for the six months ended June 30, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing.

Net revenues for Skyrizi increased 52% for the three months and 50% for the nine months ended September 30, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing.

Net revenues for Rinvoq increased 60% for the three months and 56% for the nine months ended September 30, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing.

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 21% for the three months and 23% for the six months ended June 30, 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 15% for the three months and 16% for the six months ended June 30, 2023 primarily driven by market growth across all indications as well as favorable pricing.

Internationally, net revenues for the three and six months ended June 30, 2023 were also favorably impacted by continued volume and market share uptake.

Net revenues for Botox Cosmetic increased 1% for the three months and 3% for the six months ended June 30, 2023.

Internationally, Botox Cosmetic net revenues increased 14% for the three months and 16% for the six months ended June 30, 2023 primarily driven

AbbVie's global Imbruvica revenues decreased 20% for the three months and 22% for the nine months ended September 30, 2023 primarily driven by decreased demand and lower market share in the United States as well as decreased collaboration revenues.

2023 Form 10-Q |

by increased investment in key markets, including Asia and Latin America, and recovery from COVID-19 in China.

In the United States, Botox Cosmetic net revenues decreased 7% for the three months and 4% for the six months ended June 30, 2023 primarily driven by decreased consumer demand and unfavorable pricing due to economic pressures impacting consumer discretionary spending.

Net revenues for Juvederm Collection increased 10% for the three months ended June 30, 2023 and remained flat for the six months ended June 30, 2023.

Internationally, Juvederm Collection net revenues increased 28% for the three months and 11% for the six months ended June 30, 2023 primarily driven by increased investment in key markets, including Asia and Latin America, and recovery from COVID-19 in China.

In the United States, Juvederm Collection net revenues decreased 15% for the three months and 16% for the six months ended June 30, 2023 primarily driven by decreased consumer demand due to economic pressures impacting consumer discretionary spending.

Net revenues for Botox Therapeutic increased 11% for the three months and 15% for the six months ended June 30, 2023 primarily driven by market growth as well as market share uptake.

Net revenues for the six months ended June 30, 2023 were also favorably impacted by the timing of shipments.

Net revenues for Vraylar increased 34% for the three months and 33% for the six months ended June 30, 2023 primarily driven by continued volume and market share uptake as well as market growth.

Net revenues for the three and six months ended June 30, 2023 were also favorably impacted by the recent regulatory approval of Vraylar as an adjunctive therapy to antidepressants for the treatment of major depressive disorder in adults.

Net revenues for Ubrelvy increased 6% for the three months and 8% for the six months ended June 30, 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 and six months ended June 30, 2023 primarily driven by continued strong volume and market share uptake as well as market growth.

Net revenues for the three months ended June 30, 2023 were also favorably impacted by the recent regulatory approval of Qulipta for the preventative treatment of chronic migraine in adults.

Net revenues for Venclexta increased 14% for the three months and 15% for the nine months ended September 30, 2023.

In the United States, net revenues increased 8% for the three months and 9% for the nine months ended September 30, 2023 primarily driven by market growth across all indications and favorable pricing.

Internationally, net revenues increased 20% for the three months and 21% for the nine months ended September 30, 2023 primarily driven by market growth across all indications as well as continued market share uptake.

Net revenues for Botox Cosmetic decreased 2% for the three months and increased 2% for the nine months ended September 30, 2023.

In the United States, Botox Cosmetic net revenues increased 5% for the three months ended September 30, 2023 primarily driven by increased consumer demand due to a recovery in the toxin market.

Internationally, Botox Cosmetic net revenues decreased 11% for the three months ended September 30, 2023 primarily driven by decreased consumer demand due to economic weakening and the timing of shipments in the prior year.

International net revenues increased 6% for the nine months ended September 30, 2023 primarily driven by recovery from COVID-19 in China, partially offset by economic weakening during the third quarter and the timing of shipments in the prior year.

Net revenues for Juvederm Collection decreased 8% for the three months ended September 30, 2023 and 2% for the nine months ended September 30, 2023.

In the United States, Juvederm Collection net revenues decreased 6% for the three months and 13% for the nine months ended September 30, 2023 primarily driven by decreased consumer demand due to economic pressures, partially offset by new product launches.

Internationally, Juvederm Collection net revenues decreased 9% for the three months ended September 30, 2023 primarily driven by decreased consumer demand due to economic weakening and the timing of shipments in the prior year.

International net revenues increased 5% for the nine months ended September 30, 2023 primarily driven by recovery from COVID-19 in China, partially offset by economic weakening in the third quarter and the timing of shipments in the prior year.

Net revenues for Botox Therapeutic increased 7% for the three months and 12% for the nine months ended September 30, 2023 primarily driven by market growth as well as market share uptake.

Net revenues for Vraylar increased 35% for the three months and 34% for the nine months ended September 30, 2023 primarily driven by continued volume and market share uptake as well as market growth.

Net revenues for the nine months ended September 30, 2023 were also favorably impacted by the regulatory approval of Vraylar as an adjunctive therapy to antidepressants for the treatment of major depressive disorder in adults.

Net revenues for Ubrelvy increased 46% for the three months and 20% for the nine months ended September 30, 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 and nine months ended September 30, 2023 primarily driven by continued strong volume and market share uptake as well as market growth.

Net revenues for the three months ended September 30, 2023 were also favorably impacted by the recent regulatory approval of Qulipta for the preventative treatment of chronic migraine in adults.

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as a % of net revenues 53 % 66 % 63 % 69 %

Gross margin as a percentage of net revenues decreased for the three and six months ended June 30, 2023 compared to the prior year.

Gross margin percentage for the three and six months ended June 30, 2023 was unfavorably impacted by higher amortization of intangibles and changes in product mix, partially offset by the favorable impact of tax law changes in Puerto Rico.

Gross margin as a percentage of net revenues decreased for the three and nine months ended September 30, 2023 compared to the prior year.

Gross margin percentage for the three and nine months ended September 30, 2023 was unfavorably impacted by an intangible asset impairment charge of $2.1 billion related to Imbruvica, higher amortization of intangibles and changes in product mix, partially offset by the favorable impact of tax law changes in Puerto Rico.

Selling, General and Administrative

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as a % of net revenues 24 % 22 % 24 % 28 %

SG&A expenses as a percentage of net revenues decreased for the three and six months ended June 30, 2023 compared to the prior year.

SG&A expense percentage was favorably impacted by lower litigation reserve charges for the three and six months ended June 30, 2023 as compared to the prior year.

Litigation reserve charges were $2.2 billion for the three months and $2.4 billion for the six months ended June 30, 2022.

The decrease in SG&A expense percentage for the three and six months ended June 30, 2023 was partially offset by the unfavorable impact of lower net revenues primarily driven by the Humira loss of exclusivity in the United States.

SG&A expenses as a percentage of net revenues increased for the three months and decreased for the nine months ended September 30, 2023 compared to the prior year.

SG&A expense percentage for the three months ended September 30, 2023 was

2023 Form 10-Q |

unfavorably impacted by increased brand investments and lower net revenues primarily driven by the Humira loss of exclusivity in the United States.

SG&A expense percentage for the nine months ended September 30, 2023 was favorably impacted by lower litigation reserve charges, partially offset by lower net revenues primarily driven by the Humira loss of exclusivity in the United States.

Litigation reserve charges were $2.5 billion for the nine months ended September 30, 2022.

Research and Development

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as a % of net revenues 12 % 11 % 14 % 11 %

Research and development (R&D) expenses as a percentage of net revenues increased for the three and six months ended June 30, 2023 compared to the prior year.

R&D expense percentage for the three and six months ended June 30, 2023 was unfavorably impacted by increased funding to support all stages of the company’s pipeline assets and lower net revenues primarily driven by the Humira loss of exclusivity in the United States.

R&D expense percentage for the six months ended June 30, 2023 was also unfavorably impacted by an intangible asset impairment charge of $630 million.

Research and development (R&D) expenses as a percentage of net revenues increased for the three and nine months ended September 30, 2023 compared to the prior year.

R&D expense percentage for the three and nine months ended September 30, 2023 was unfavorably impacted by increased funding to support all stages of the company’s pipeline assets and lower net revenues primarily driven by the Humira loss of exclusivity in the United States.

R&D expense percentage for the nine months ended September 30, 2023 was also unfavorably impacted by an intangible asset impairment charge of $630 million.

Acquired IPR&D and Milestones

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Acquired IPR&D and milestones $ 66 $ 40 $ 496 $ 454

Acquired IPR&D and milestones expense for the six months ended June 30, 2022 included a charge related to the upfront payment of $130 million to acquire Syndesi Therapeutics SA.

Acquired IPR&D and milestones expense for the nine months ended September 30, 2022 included a charge related to the upfront payment of $130 million to acquire Syndesi Therapeutics SA.

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

Other Operating Income

Other operating income for the three and six months ended June 30, 2023 included a one-time gain of $169 million related to the termination of a development liability associated with a previously divested product.

Ot her operating income for the three and six months ended June 30, 2022 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 Helicobactor pylori.

Other Operating Expense (Income)

Other operating expense (income), net included a gain of $169 million for the nine months ended September 30, 2023 and a charge of $229 million for the three and nine months ended September 30, 2022 related to a development liability associated with an asset divested as part of the Allergan acquisition.

Ot her 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 Helicobactor pylori.

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

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Net foreign exchange loss $ 25 $ 36 $ 97 $ 108

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

Interest expense remained flat for the three and six months ended June 30, 2023 compared to the prior year primarily driven by the impact of higher interest rates, offset by lower average debt balances as a result of deleveraging.

Interest income increased for the three and six months ended June 30, 2023 compared to the prior year primarily due to the impact of higher interest rates.

Other expense, net included charges related to changes in fair value of contingent consideration liabilities of $1.6 billion for the three months and $3.4 billion for the six months ended June 30, 2023 and $1.6 billion for the three months and $861 million for the six months ended June 30, 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 and six months ended June 30, 2023, the change in fair value reflected higher estimated Skyrizi sales driven by stronger market share uptake and the passage of time.

The change in fair value for the three months ended June 30, 2023 is also partially offset by higher discount rates.

For the three and six

Other expense (income), net (95) (330) 3,121 427

Interest expense remained flat for the three and nine months ended September 30, 2023 compared to the prior year primarily driven by the impact of higher interest rates, offset by lower average debt balances as a result of deleveraging.

Interest income increased for the three and nine months ended September 30, 2023 compared to the prior year primarily due to the impact of higher interest rates.

2023 Form 10-Q |

months ended June 30, 2022 the change in fair value represented higher estimated Skyrizi sales driven by stronger market share uptake, partially offset by higher discount rates.

Other expense (income), net included charges related to changes in fair value of contingent consideration liabilities of $8 million for the three months and $3.4 billion for the nine months ended September 30, 2023.

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.

For the three months ended September 30, 2023, the change in fair value reflected the passage of time offset by higher discount rates.

For the nine months ended September 30, 2023, the change in fair value reflected higher Skyrizi sales driven by stronger market share uptake and the passage of time, partially offset by higher discount rates.

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

For the nine months ended September 30, 2022, the change in fair value reflected higher estimated Skyrizi sales driven by stronger market share uptake and the passage of time, partially offset by higher discount rates.

Income Tax Expense

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 was 9% for the three months and 20% for the nine months ended September 30, 2023 compared to 10% for the three months and 11% for the nine months ended September 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 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.

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 and business development activities.

The effective tax rate for the nine months ended September 30, 2023 and September 30, 2022 and the three months ended September 30, 2022 were also impacted by changes in fair value of contingent consideration.

The increase in the effective tax rate for the nine months ended September 30, 2023 over the prior year was primarily due to changes in fair value of contingent consideration.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

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Financing activities (12,773) (15,169)

Operating cash flows for the six months ended June 30, 2023 increased compared to the prior year due to the timing of working capital partially offset by decreased results of operations primarily driven by lower net revenues as well as higher payments for income taxes.

Investing cash flows for the six months ended June 30, 2023 included payments made for acquisitions and investments of $513 million and capital expenditures of $353 million.

Investing cash flows for the six months ended June 30, 2022 included payments made for net purchases of investment securities totaling $1.4 billion, acquisitions and investments of $394 million and capital expenditures of $305 million.

Financing cash flows for the six months ended June 30, 2023 included repayments of $1.0 billion floating rate term loan, $1.0 billion aggregate principal amount of 2.85% senior notes and $350 million aggregate principal amount of the company’s 2.80% senior notes.

Financing cash flows for the six months ended June 30, 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 six months ended June 30, 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.

Financing cash flows also included cash dividend payments of $5.3 billion for the six months ended June 30, 2023 and $5.0 billion for the six months ended June 30, 2022.

Operating cash flows for the nine months ended September 30, 2023 increased compared to the prior year due to the timing of working capital partially offset by decreased results of operations primarily driven by lower net revenues as well as higher payments for income taxes.

Investing cash flows for the nine months ended September 30, 2023 included payments made for acquisitions and investments of $670 million and capital expenditures of $572 million.

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.

Financing cash flows for the nine months ended September 30, 2023 included repayments of $1.0 billion floating rate term loan, $1.0 billion aggregate principal amount of 2.85% senior notes and $350 million aggregate principal amount of the company’s 2.80% senior notes.

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 $2.0 billion floating rate term loan due May 2025 and issuance of a new $2.0 billion floating rate term loan as part of the term loan refinancing in February 2022.

Financing cash flows also included cash dividend payments of $7.9 billion for the nine months ended September 30, 2023 and $7.5 billion for the nine months ended September 30, 2022.

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

On June 22, 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 July 14, 2023, payable on August 15, 2023.

2023 Form 10-Q |

On September 8, 2023, the board of directors declared a quarterly cash dividend of $1.48 per share for stockholders of record at the close of business on October 13, 2023, payable on November 15, 2023.

On October 26, 2023, the board of directors declared an increase in the company’s quarterly dividend from $1.48 per share to $1.55 per share beginning with the dividend payable on February 15, 2024 to stockholders of record as of January 16, 2024.

This reflects an increase of approximately 4.7% over the previous quarterly rate.

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

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

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

AbbVie regularly communicates with its customers regarding the status of receivable balances, including their payment plans and obtains positive confirmation of the validity of the receivables.

AbbVie establishes an allowance for credit

2023 Form 10-Q |

losses equal to the estimate of future losses over the contractual life of outstanding accounts receivable.

AbbVie establishes an allowance for credit losses equal to the estimate of future losses over the contractual life of outstanding accounts receivable.

AbbVie may also utilize factoring arrangements to mitigate credit risk, although the receivables included in such arrangements have historically not been a significant amount of total outstanding receivables.

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

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 facility as of June 30, 2023 and December 31, 2022.

At September 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 facility as of September 30, 2023 and December 31, 2022.

Access to Capital

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Credit Ratings

There were no changes in the company’s credit ratings during the six months ended June 30, 2023.

In August 2023, Moody’s Investors Service upgraded AbbVie’s senior unsecured long-term credit rating to A3 with a stable outlook from Baa1 with a positive outlook and affirmed AbbVie’s Prime-2 short-term credit rating.

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 six months ended June 30, 2023.

There have been no significant changes in the company’s application of its critical accounting policies during the nine months ended September 30, 2023.

2023 Form 10-Q |

FORWARD-LOOKING STATEMENTS

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For a discussion of the company's market risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" in AbbVie's Annual Report on Form 10-K for the year ended December 31, 2022.

2023 Form 10-Q |

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