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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, 2023 and December 31, 2022 and the results of operations for the three and nine months ended September 30, 2023 and 2022.

(AbbVie or the company) as of March 31, 2024 and December 31, 2023 and the results of operations for the three months ended March 31, 2024 and 2023.

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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AbbVie uses its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases.

On February 20, 2024, AbbVie announced Robert A.

Michael, AbbVie's current president and chief operating officer, will succeed Richard A.

Gonzalez as the company's chief executive officer (CEO).

Gonzalez, who has served as CEO since the company's formation in 2013, will retire from the role of CEO and become executive chairman of the board of directors, effective July 1, 2024.

Additionally, the board has appointed Mr.

Michael as a member of the board of directors effective July 1, 2024.

On February 12, 2024, AbbVie completed the acquisition of ImmunoGen, Inc.

The acquisition of ImmunoGen further builds on AbbVie's existing solid tumor pipeline of novel targeted therapies and next-generation immuno-oncology assets, which have the potential to create new treatment possibilities across multiple solid tumors and hematologic malignancies.

AbbVie and ImmunoGen's combined capabilities represent an opportunity to deliver potentially transformative antibody-drug conjugate (ADC) therapies to patients.

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

Subsequent to the acquisition date, AbbVie's consolidated financial statements include the assets, liabilities, operating results and cash flows of ImmunoGen.

AbbVie's products are generally sold worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned distribution centers and public warehouses.

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(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) 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, 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 $2.26 for the nine months ended September 30, 2023 and included the following after-tax costs:

The company's financial performance for the three months ended March 31, 2024 included delivering worldwide net revenues of $12.3 billion, operating earnings of $2.8 billion, diluted earnings per share of $0.77 and cash flows from operations of $4.0 billion.

Worldwide net revenues increased 1% on a reported basis and 2% on a constant currency basis.

Diluted earnings per share was $0.77 for the three months ended March 31, 2024 and included the following after-tax costs:

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

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

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

(ii) $643 million for the change in fair value of contingent

2024 Form 10-Q |

consideration liabilities;

and (iii) $486 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.

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AbbVie’s pipeline currently includes approximately 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 |

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

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 March 2023, the European Commission (EC) issued their final decision on the European Medicines Agency’s (EMA) 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 (CHMP) 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 May 2023, AbbVie announced that the U.S.

Food and Drug Administration (FDA) approved Rinvoq for the treatment of adults with moderately to severely active Crohn’s disease who have had an inadequate response or intolerance to one or more tumor necrosis factor (TNF) blockers.

• 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.

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

• In July 2023, AbbVie announced results from the head-to-head Phase 4 IMMpulse study that evaluated the efficacy and safety of Skyrizi compared to Otezla among adult patients with moderate plaque psoriasis (PsO) eligible for systemic therapy.

In the study, significantly more patients achieved co-primary endpoints with Skyrizi versus Otezla.

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).

• In January 2024, AbbVie initiated a Phase 3 study to evaluate Rinvoq in adults and adolescents with non-segmental vitiligo who are eligible for systemic therapy.

• In April 2024, AbbVie announced positive top-line results from its Phase 3 SELECT-GCA trial for Rinvoq in combination with a 26-week steroid taper regimen in patients with giant cell arteritis achieved its primary endpoint.

• In April 2024, AbbVie announced positive top-line results from the head-to-head Phase 3b/4 Level-Up trial evaluating Rinvoq compared to dupilumab in adolescent and adult patients with moderate to severe atopic dermatitis.

In the study, Rinvoq demonstrated superiority to dupilumab on the primary endpoint and all ranked secondary endpoints.

• In January 2024, AbbVie announced Phase 2 results showing adults with moderate to severe hidradenitis suppurativa (HS) who had previously failed anti-TNF therapy who received lutikizumab achieved higher response rates than placebo in the primary endpoint of achieving HS Clinical Response at week 16.

Based on these data, AbbVie will advance its clinical program of lutikizumab in HS to Phase 3.

• In February 2024, AbbVie announced that the U.S.

Food and Drug Administration (FDA) granted priority review of the supplemental Biologics License Application (sBLA) of Epkinly, for the treatment of adult relapsed or refractory (R/R) follicular lymphoma (FL).

• In March 2024, AbbVie initiated a Phase 3 clinical trial to evaluate Epkinly in combination with rituximab and lenalidomide in patients with previously untreated follicular lymphoma.

• In March 2024, AbbVie announced that the FDA granted full approval for Elahere for the treatment of folate receptor alpha (FRα)-positive, platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal adult cancer patients treated with up to three prior therapies.

• In April 2024, AbbVie announced its decision to discontinue the Phase 3 TRANSFORM-2 study evaluating Navitoclax, a BCL-XL/BCL-2 inhibitor, plus ruxolitinib in patients with relapsed/refractory myelofibrosis following evaluation of the totality of data from the Phase 3 TRANSFORM-1 trial and recent feedback from regulators.

2024 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 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.

This voluntary action is due to requirements rel ated to the accelerated approval status granted by the FDA for MCL and MZL.

Other approved indications for Imbruvica in the U.S.

are not affected.

• 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).

The combination of navitoclax and ruxolitinib met the study’s primary endpoint, demonstrating statistically significant improvement in the number of patients who achieved Spleen Volume Reduction of at least 35 percent at week 24 compared to treatment with ruxolitinib and a placebo.

The study did not meet the first ranked secondary endpoint of improvement in patients’ Total Symptom Score from baseline to week 24.

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.

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.

• 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.

• In March 2024, AbbVie announced the FDA approval of Juvederm Voluma XC for injection in the temple region to improve moderate to severe temple hollowing in adults over the age of 21.

• In January 2024, AbbVie announced the launch of Produodopa (ABBV-951) in the European Union for the treatment of advanced Parkinson's disease with severe motor fluctuations and hyperkinesia (excessive movement) or dyskinesia (involuntary movement), and when available combinations of Parkinson's medicinal products have not given satisfactory results.

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, 2023.

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(dollars in millions)

2023 2022 2023 2022

United States

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2023 2022 2023 2022

Humira United States $ 1,771 $ 2,948 (39.9) % (39.9) %

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Total $ 614 $ 538 14.2 % 16.3 %

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

United States

$ 64 $ — n/m n/m

Epkinly Collaboration revenues

$ 22 $ — n/m n/m

International 5 — n/m n/m

Total $ 27 $ — n/m n/m

Botox Cosmetic United States $ 389 $ 409 (4.9) % (4.9) %

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Qulipta United States $ 128 $ 66 94.5 % 94.5 %

International 1 — n/m n/m 2 — n/m n/m

International 3 — >100.0 % >100.0 %

Total $ 131 $ 66 97.7 % 97.7 %

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2023 2022 2023 2022

Other Neuroscience United States $ 61 $ 75 (18.5) % (18.5) %

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n/m – Not meaningful

(a) Net revenues include ImmunoGen product revenues after the acquisition closing date of February 12, 2024.

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

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.

Global Humira sales decreased 35% for the three months ended March 31, 2024.

In the United States, Humira sales decreased by 40% for the three months ended March 31, 2024 primarily driven by direct biosimilar competition following the loss of exclusivity on January 31, 2023.

Internationally, Humira revenues decreased 12% for the three months ended March 31, 2024 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 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 Skyrizi increased 48% for the three months ended March 31, 2024 primarily driven by continued strong market share uptake and market growth across all indications, partially offset by the timing of retail inventory destocking.

Net revenues for Rinvoq increased 62% for the three months ended March 31, 2024 primarily driven by continued strong market share uptake as well as market growth across all indications.

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 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.

AbbVie's global Imbruvica revenues decreased 5% for the three months ended March 31, 2024 primarily driven by decreased demand and lower market share in the United States as well as decreased collaboration revenues, partially offset by the timing of inventory stocking.

Net revenues for Venclexta increased 16% for the three months ended March 31, 2024 driven by continued market share uptake as well as market growth across all indications.

2024 Form 10-Q |

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.

Net revenues for Elahere were $64 million for the three months ended March 31, 2024 for the period subsequent to the completion of the ImmunoGen acquisition.

Net revenues for Botox Cosmetic decreased 3% for the three months ended March 31, 2024 primarily driven by the unfavorable impact related to timing of customer inventory destocking in the United States.

Net revenues for Juvederm Collection decreased 14% for the three months ended March 31, 2024 primarily driven by the unfavorable impact related to timing of customer inventory destocking in the United States and decreased consumer demand across certain international markets.

Net revenues for Botox Therapeutic increased 5% for the three months ended March 31, 2024 primarily driven by continued market share uptake as well as market growth.

Net revenues for Vraylar increased 24% for the three months ended March 31, 2024 primarily driven by continued market share uptake.

Net revenues for Ubrelvy increased 34% for the three months ended March 31, 2024 primarily driven by continued market share uptake as well as market growth.

Net revenues for Qulipta increased 98% for the three months ended March 31, 2024 primarily driven by continued strong market share uptake.

Net revenues were also favorably impacted by the regulatory approval of Qulipta for the preventive treatment of chronic migraine in adults.

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Gross margin $ 8,216 $ 8,239 — %

as a % of net revenues 67 % 67 %

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.

Gross margin as a percentage of net revenues was flat for the three months ended March 31, 2024 compared to the prior year.

Gross margin percentage for the three months ended March 31, 2024 was unfavorably impacted by changes in product mix, offset by lower amortization of intangibles.

Selling, General and Administrative

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Selling, general and administrative $ 3,315 $ 3,039 9 %

as a % of net revenues 27 % 25 %

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.

Selling, general and administrative (SG&A) expenses as a percentage of net revenues increased for the three months ended March 31, 2024 compared to the prior year.

SG&A expense percentage was unfavorably impacted by acquisition and integration costs incurred in connection with the ImmunoGen acquisition including cash-settled, post-closing expense for ImmunoGen employee incentive awards .

See Note 4 to the condensed consolidated financial statements for additional information.

Research and Development

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Research and development $ 1,939 $ 2,292 (15) %

as a % of net revenues 16 % 19 %

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.

Research and development (R&D) expenses as a percentage of net revenues decreased for the three months ended March 31, 2024 compared to the prior year primarily due to an intangible asset impairment charge of $630 million incurred during the three months ended March 31, 2023, partially offset by increased funding to support all stages of the company’s pipeline assets as well as acquisition and integration costs incurred in connection with the ImmunoGen acquisition including cash-settled, post-closing expense for ImmunoGen employee incentive awards .

See Note 4 to the condensed consolidated financial statements for additional information.

2024 Form 10-Q |

Acquired IPR&D and Milestones

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Acquired IPR&D and milestones $ 164 $ 150

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 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.

Other Non-Operating Expenses (Income)

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(in millions) 2024 2023

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Net foreign exchange loss $ 4 $ 35

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 |

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.

Other expense, net 586 1,804

Interest expense increased for the three months ended March 31, 2024 compared to the prior year primarily due to the incremental interest and debt issuance costs associated with financing the ImmunoGen and proposed Cerevel Therapeutics acquisitions as well as the impact of higher interest rates.

See Note 8 to the condensed consolidated financial statements for additional information related to debt issued to finance the ImmunoGen acquisition.

Interest income increased for the three months ended March 31, 2024 compared to the prior year primarily due to a higher average cash and cash equivalents balance and the impact of higher interest rates.

Other expense, net included charges related to changes in fair value of contingent consideration liabilities of $660 million for the three months ended March 31, 2024 and $1.9 billion for the three months ended March 31, 2023.

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, 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.

For the three months ended March 31, 2024, 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.

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.

Income Tax Expense

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 was 22% for the three months ended March 31, 2024 compared to 49% for the three months ended March 31, 2023.

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 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.

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, including ImmunoGen acquisition-related costs.

The decrease in the effective tax rate for the three months ended March 31, 2024 over the prior year was primarily due to changes in fair value of contingent consideration and impairment of certain intangible assets in the prior year.

2024 Form 10-Q |

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Nine months ended

September 30,

Three months ended

(in millions) 2024 2023

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Financing activities 10,819 (6,192)

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.

Operating cash flows for the three months ended March 31, 2024 decreased compared to the prior year primarily due to ImmunoGen acquisition-related cash expenses, decreased results from operations driven by changes in product mix and increased R&D funding to support all stages of the company’s pipeline assets, partially offset by the timing of working capital.

Investing cash flows for the three months ended March 31, 2024 primarily included $9.8 billion cash consideration paid to acquire ImmunoGen offset by cash acquired of $591 million, payments made for other acquisitions and investments of $190 million and capital expenditures of $193 million.

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

Financing cash flows for the three months ended March 31, 2024 included the issuance of unsecured senior notes totaling $15.0 billion aggregate principal which were used to finance the acquisition of ImmunoGen and proposed acquisition of Cerevel Therapeutics.

Additionally, financing cash flows included the issuance and repayment of $5.0 billion under the term loan credit agreement and the repayment of $99 million of secured term notes assumed from ImmunoGen in conjunction with the acquisition.

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 also included cash dividend payments of $2.8 billion for the three months ended March 31, 2024 and $2.7 billion for the three months ended March 31, 2023.

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

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.

On February 15, 2024, the company announced that its board of directors declared a quarterly cash dividend of $1.55 per share for stockholders of record at the close of business on April 15, 2024, payable on May 15, 2024.

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

AbbVie repurchased 5 million shares for $959 million during the three months ended March 31, 2024 and 10 million shares for $1.6 billion during the three months ended March 31, 2023.

During the three months ended March 31, 2024, the company issued and redeemed $1.7 billion of commercial paper.

There were no commercial paper borrowings outstanding as of March 31, 2024 and December 31, 2023.

AbbVie may issue additional commercial paper or retire commercial paper to meet liquidity requirements as needed.

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

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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.

2024 Form 10-Q |

Credit Facility, Access to Capital and Credit Ratings

Credit Facility

In December 2023, in connection with the acquisition of ImmunoGen and proposed acquisition of Cerevel Therapeutics, AbbVie entered into a $9.0 billion 364-day bridge credit agreement and $5.0 billion 364-day term loan credit agreement.

In February, 2024, AbbVie borrowed and repaid $5.0 billion under the term loan credit agreement.

Subsequent to the $15.0 billion issuance of senior notes, AbbVie terminated both the bridge and term loan credit agreements in the first quarter of 2024.

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

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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 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.

At March 31, 2024, 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, 2024 and December 31, 2023.

Access to Capital

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Credit Ratings

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.

There were no changes in the company’s credit ratings during the three months ended March 31, 2024.

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, 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 |

There have been no significant changes in the company’s application of its critical accounting policies during the three months ended March 31, 2024.

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, 2023.

2024 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