AbbVie Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AbbVie Inc. and Subsidiaries Condensed Consolidated Statements of Earnings (unaudited) Three months ended September 30, Nine months ended September 30, (in millions, except per share data) 2024 2023 2024 2023 Net revenues $ 14,460 $ 13,927 $ 41,232 $ 40,017 Cost of products sold 4,212 6,485 12,508 14,711 Selling, general and administrative 4,205 3,372 10,897 9,679 Research and development 2,130 1,723 6,017 5,748 Acquired IPR&D and milestones 82 66 1,183 496 Other operating income — — — ( 179 ) Total operating costs and expenses 10,629 11,646 30,605 30,455 Operating earnings 3,831 2,281 10,627 9,562 Interest expense, net 591 398 1,550 1,306 Net foreign exchange loss (gain) ( 3 ) 25 2 97 Other expense (income), net 1,159 ( 95 ) 3,090 3,121 Earnings before income tax expense 2,084 1,953 5,985 5,038 Income tax expense 520 172 1,676 989 Net earnings 1,564 1,781 4,309 4,049 Net earnings attributable to noncontrolling interest 3 3 9 8 Net earnings attributable to AbbVie Inc. $ 1,561 $ 1,778 $ 4,300 $ 4,041 Per share data Basic earnings per share attributable to AbbVie Inc. $ 0.88 $ 1.00 $ 2.41 $ 2.27 Diluted earnings per share attributable to AbbVie Inc. $ 0.88 $ 1.00 $ 2.41 $ 2.26 Weighted-average basic shares outstanding 1,769 1,767 1,769 1,768 Weighted-average diluted shares outstanding 1,772 1,771 1,772 1,772 The accompanying notes are an integral part of these condensed consolidated financial statements. 2024 Form 10-Q | 1 AbbVie Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (unaudited) Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Net earnings $ 1,564 $ 1,781 $ 4,309 $ 4,049 Foreign currency translation adjustments, net of tax expense (benefit) of $ 25 for the three months and $ 1 the nine months ended September 30, 2024 and $( 17 ) for the three months and $( 11 ) nine months ended September 30, 2023 574 ( 457 ) 21 ( 279 ) Net investment hedging activities, net of tax expense (benefit) of $( 91 ) for the three months and $( 11 ) for the nine months ended September 30, 2024 and $ 84 for the three months and $ 26 nine months ended September 30, 2023 ( 330 ) 302 ( 39 ) 89 Pension and post-employment benefits, net of tax expense (benefit) of $( 1 ) for the three months and $ 3 for the nine months ended September 30, 2024 and $ 1 for the three months and $ 11 for the nine months ended September 30, 2023 ( 3 ) 2 15 38 Cash flow hedging activities, net of tax expense (benefit) of $( 8 ) for the three months and $( 3 ) for the nine months ended September 30, 2024 and $ 7 for the three months and $( 1 ) for the nine months ended September 30, 2023 ( 62 ) 52 ( 26 ) ( 2 ) Other comprehensive income (loss) 179 ( 101 ) ( 29 ) ( 154 ) Comprehensive income 1,743 1,680 4,280 3,895 Comprehensive income attributable to noncontrolling interest 3 3 9 8 Comprehensive income attributable to AbbVie Inc. $ 1,740 $ 1,677 $ 4,271 $ 3,887 The accompanying notes are an integral part of these condensed consolidated financial statements. 2024 Form 10-Q | 2 AbbVie Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in millions, except share data) September 30, 2024 December 31, 2023 (unaudited) Assets Current assets Cash and equivalents $ 7,257 $ 12,814 Short-term investments 28 2 Accounts receivable, net 11,472 11,155 Inventories 4,450 4,099 Prepaid expenses and other 4,578 4,932 Total current assets 27,785 33,002 Investments 267 304 Property and equipment, net 5,141 4,989 Intangible assets, net 66,646 55,610 Goodwill 35,295 32,293 Other assets 8,288 8,513 Total assets $ 143,422 $ 134,711 Liabilities and Equity Current liabilities Current portion of long-term debt and finance lease obligations $ 12,570 $ 7,191 Accounts payable and accrued liabilities 30,492 30,650 Total current liabilities 43,062 37,841 Long-term debt and finance lease obligations 58,509 52,194 Deferred income taxes 2,749 1,952 Other long-term liabilities 33,031 32,327 Commitments and contingencies Stockholders' equity Common stock, $ 0.01 par value, 4,000,000,000 shares authorized, 1,831,415,039 shares issued as of September 30, 2024 and 1,823,046,087 as of December 31, 2023 18 18 Common stock held in treasury, at cost, 64,310,426 shares as of September 30, 2024 and 57,105,354 as of December 31, 2023 ( 7,848 ) ( 6,533 ) Additional paid-in capital 21,160 20,180 Accumulated deficit ( 4,964 ) ( 1,000 ) Accumulated other comprehensive loss ( 2,334 ) ( 2,305 ) Total stockholders' equity 6,032 10,360 Noncontrolling interest 39 37 Total equity 6,071 10,397 Total liabilities and equity $ 143,422 $ 134,711 The accompanying notes are an integral part of these condensed consolidated financial statements. 2024 Form 10-Q | 3 AbbVie Inc. and Subsidiaries Condensed Consolidated Statements of Equity (unaudited) (in millions) Common shares outstanding Common stock Treasury stock Additional paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive loss Noncontrolling interest Total Balance at June 30, 2023 1,765 $ 18 $ ( 6,528 ) $ 19,839 $ 1,789 $ ( 2,252 ) $ 32 $ 12,898 Net earnings attributable to AbbVie Inc. — — — — 1,778 — — 1,778 Other comprehensive loss, net of tax — — — — — ( 101 ) — ( 101 ) Dividends declared — — — — ( 2,634 ) — — ( 2,634 ) Purchases of treasury stock — — ( 4 ) — — — — ( 4 ) Stock-based compensation plans and other — — 7 182 — — — 189 Change in noncontrolling interest — — — — — — 3 3 Balance at September 30, 2023 1,765 $ 18 $ ( 6,525 ) $ 20,021 $ 933 $ ( 2,353 ) $ 35 $ 12,129 Balance at June 30, 2024 1,766 $ 18 $ ( 7,838 ) $ 20,879 $ ( 3,768 ) $ ( 2,513 ) $ 43 $ 6,821 Net earnings attributable to AbbVie Inc. — — — — 1,561 — — 1,561 Other comprehensive income, net of tax — — — — — 179 — 179 Dividends declared — — — — ( 2,757 ) — — ( 2,757 ) Purchases of treasury stock — — ( 17 ) — — — — ( 17 ) Stock-based compensation plans and other 1 — 7 281 — — — 288 Change in noncontrolling interest — — — — — — ( 4 ) ( 4 ) Balance at September 30, 2024 1,767 $ 18 $ ( 7,848 ) $ 21,160 $ ( 4,964 ) $ ( 2,334 ) $ 39 $ 6,071 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. — — — — 4,041 — — 4,041 Other comprehensive loss, net of tax — — — — — ( 154 ) — ( 154 ) Dividends declared — — — — ( 7,892 ) — — ( 7,892 ) Purchases of treasury stock ( 12 ) — ( 1,969 ) — — — — ( 1,969 ) Stock-based compensation plans and other 8 — 38 776 — — — 814 Change in noncontrolling interest — — — — — — 2 2 Balance at September 30, 2023 1,765 $ 18 $ ( 6,525 ) $ 20,021 $ 933 $ ( 2,353 ) $ 35 $ 12,129 Balance at December 31, 2023 1,766 $ 18 $ ( 6,533 ) $ 20,180 $ ( 1,000 ) $ ( 2,305 ) $ 37 $ 10,397 Net earnings attributable to AbbVie Inc. — — — — 4,300 — — 4,300 Other comprehensive loss, net of tax — — — — — ( 29 ) — ( 29 ) Dividends declared — — — — ( 8,264 ) — — ( 8,264 ) Purchases of treasury stock ( 7 ) — ( 1,350 ) — — — — ( 1,350 ) Stock-based compensation plans and other 8 — 35 980 — — — 1,015 Change in noncontrolling interest — — — — — — 2 2 Balance at September 30, 2024 1,767 $ 18 $ ( 7,848 ) $ 21,160 $ ( 4,964 ) $ ( 2,334 ) $ 39 $ 6,071 The accompanying notes are an integral part of these condensed consolidated financial statements. 2024 Form 10-Q | 4 AbbVie Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited) Nine months ended September 30, (in millions) (brackets denote cash outflows) 2024 2023 Cash flows from operating activities Net earnings $ 4,309 $ 4,049 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation 558 565 Amortization of intangible assets 5,726 6,057 Deferred income taxes ( 682 ) ( 1,498 ) Change in fair value of contingent consideration liabilities 3,492 3,432 Payments of contingent consideration liabilities ( 1,456 ) ( 407 ) Stock-based compensation 747 622 Acquired IPR&D and milestones 1,183 496 Non-cash litigation reserve adjustments, net of cash payments 341 ( 205 ) Impairment of intangible assets — 2,824 Other, net ( 75 ) ( 219 ) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable ( 180 ) ( 273 ) Inventories ( 191 ) ( 513 ) Prepaid expenses and other assets 461 394 Accounts payable and other liabilities ( 1,070 ) 3,661 Income tax assets and liabilities, net ( 1,405 ) ( 899 ) Cash flows from operating activities 11,758 18,086 Cash flows from investing activities Acquisitions of businesses, net of cash acquired ( 17,493 ) — Other acquisitions and investments ( 1,232 ) ( 670 ) Acquisitions of property and equipment ( 683 ) ( 572 ) Purchases of investment securities ( 46 ) ( 43 ) Sales and maturities of investment securities 516 41 Other, net ( 8 ) 35 Cash flows from investing activities ( 18,946 ) ( 1,209 ) Cash flows from financing activities Proceeds from issuance of other short-term borrowings 5,008 — Repayments of other short-term borrowings ( 5,008 ) — Proceeds from issuance of long-term debt 14,963 — Repayments of long-term debt and finance lease obligations ( 3,851 ) ( 2,355 ) Debt issuance costs ( 99 ) — Dividends paid ( 8,273 ) ( 7,913 ) Purchases of treasury stock ( 1,350 ) ( 1,969 ) Proceeds from the exercise of stock options 204 149 Payments of contingent consideration liabilities — ( 735 ) Other, net 56 50 Cash flows from financing activities 1,650 ( 12,773 ) Effect of exchange rate changes on cash and equivalents ( 19 ) ( 18 ) Net change in cash and equivalents ( 5,557 ) 4,086 Cash and equivalents, beginning of period 12,814 9,201 Cash and equivalents, end of period $ 7,257 $ 13,287 The accompanying notes are an integral part of these condensed consolidated financial statements. 2024 Form 10-Q | 5 AbbVie Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) Note 1 Basis of Presentation Basis of Historical Presentation The unaudited interim condensed consolidated financial statements of AbbVie Inc. (AbbVie or the company) have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the company’s audited consolidated financial statements and notes included in the company’s Annual Report on Form 10-K for the year ended December 31, 2023. It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of the company’s financial position and operating results. Net revenues and net earnings for any interim period are not necessarily indicative of future or annual results. Certain other reclassifications were made to conform the prior period interim condensed consolidated financial statements to the current period presentation. AbbVie completed its previously announced acquisitions of ImmunoGen, Inc. (ImmunoGen) on February 12, 2024 and Cerevel Therapeutics Holdings, Inc. (Cerevel Therapeutics) on August 1, 2024. See Note 4 and Note 8 for additional information regarding these acquisitions. Recent Accounting Pronouncements Recent Accounting Pronouncements Not Yet Adopted ASU No. 2023-09 In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes - Improvements to Income Tax Disclosures (Topic 740) . The standard requires disaggregation of the effective rate reconciliation into standard categories, enhances disclosure of income taxes paid, and modifies other income tax-related disclosures. The standard will be effective for AbbVie starting in annual periods in 2025, with early adoption permitted. AbbVie is currently assessing the impact of adopting this guidance on its consolidated financial statements. ASU No. 2023-07 In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting - Improving Reportable Segment Disclosures (Topic 280) . The standard requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The standard is effective for AbbVie starting in annual periods in 2024 and interim periods in 2025, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. AbbVie is currently assessing the impact of adopting this guidance on its consolidated financial statements. 2024 Form 10-Q | 6 Note 2 Supplemental Financial Information Interest Expense, Net Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Interest expense $ 720 $ 555 $ 2,106 $ 1,660 Interest income ( 129 ) ( 157 ) ( 556 ) ( 354 ) Interest expense, net $ 591 $ 398 $ 1,550 $ 1,306 Inventories (in millions) September 30, 2024 December 31, 2023 Finished goods $ 1,347 $ 1,356 Work-in-process 2,071 1,643 Raw materials 1,032 1,100 Inventories $ 4,450 $ 4,099 Property and Equipment, Net (in millions) September 30, 2024 December 31, 2023 Property and equipment, gross $ 12,279 $ 11,635 Accumulated depreciation ( 7,138 ) ( 6,646 ) Property and equipment, net $ 5,141 $ 4,989 Depreciation expense was $ 191 million for the three months and $ 558 million for the nine months ended September 30, 2024 and $ 196 million for the three months and $ 565 million for the nine months ended September 30, 2023. 2024 Form 10-Q | 7 Note 3 Earnings Per Share AbbVie grants certain restricted stock units (RSUs) that are considered to be participating securities. Due to the presence of participating securities, AbbVie calculates earnings per share (EPS) using the more dilutive of the treasury stock or the two-class method. For all periods presented, the two-class method was more dilutive. The following table summarizes the impact of the two-class method: Three months ended September 30, Nine months ended September 30, (in millions, except per share data) 2024 2023 2024 2023 Basic EPS Net earnings attributable to AbbVie Inc. $ 1,561 $ 1,778 $ 4,300 $ 4,041 Earnings allocated to participating securities 10 11 30 32 Earnings available to common shareholders $ 1,551 $ 1,767 $ 4,270 $ 4,009 Weighted-average basic shares outstanding 1,769 1,767 1,769 1,768 Basic earnings per share attributable to AbbVie Inc. $ 0.88 $ 1.00 $ 2.41 $ 2.27 Diluted EPS Net earnings attributable to AbbVie Inc. $ 1,561 $ 1,778 $ 4,300 $ 4,041 Earnings allocated to participating securities 10 11 30 32 Earnings available to common shareholders $ 1,551 $ 1,767 $ 4,270 $ 4,009 Weighted-average shares of common stock outstanding 1,769 1,767 1,769 1,768 Effect of dilutive securities 3 4 3 4 Weighted-average diluted shares outstanding 1,772 1,771 1,772 1,772 Diluted earnings per share attributable to AbbVie Inc. $ 0.88 $ 1.00 $ 2.41 $ 2.26 Certain shares issuable under stock-based compensation plans were excluded from the computation of EPS because the effect would have been antidilutive. The number of common shares excluded was insignificant for all periods presented. 2024 Form 10-Q | 8 Note 4 Licensing, Acquisitions and Other Arrangements Proposed Acquisition of Aliada Therapeutics Holdings, Inc. Subsequent to September 30, 2024, on October 28, 2024, AbbVie announced that it entered into a definitive agreement to acquire Aliada Therapeutics, Inc. (Aliada) including its lead program ALIA-1758. ALIA-1758 is an anti-pyroglutamate amyloid beta (3pE-Aβ) antibody in development for the treatment of Alzheimer’s Disease. Under the terms of the agreement, AbbVie will make an upfront cash payment of approximately $ 1.4 billion to acquire all outstanding equity of Aliada. Closing of the proposed transaction is subject to regulatory approvals and other customary closing conditions. Acquisition of Cerevel Therapeutics Holdings, Inc. On August 1, 2024, AbbVie completed its previously announced acquisition of Cerevel Therapeutics. Cerevel Therapeutics is a clinical-stage biotechnology company focused on the discovery and development of differentiated therapies for neuroscience diseases. Cerevel Therapeutics neuroscience pipeline includes multiple clinical-stage and preclinical candidates with the potential to treat several diseases including schizophrenia, Parkinson's disease and mood disorders. Under the terms of the agreement, AbbVie acquired all outstanding shares of Cerevel Therapeutics for $ 45.00 per share in cash. The total fair value of the consideration transferred to owners of Cerevel Therapeutics common stock was $ 8.7 billion ($ 8.3 billion, net of cash acquired). The acquisition of Cerevel Therapeutics has been accounted for as a business combination using the acquisition method of accounting. The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2024. As a result, AbbVie recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value of intangible assets, goodwill and income taxes among other items. The completion of the valuation will occur no later than one year from the acquisition date. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: (in millions) Assets acquired and liabilities assumed Cash and equivalents $ 361 Short-term investments 382 Prepaid expenses and other current assets 9 Property and equipment, net 25 Investments 121 Intangible assets, net 8,100 Other noncurrent assets 31 Current portion of long-term debt ( 400 ) Accounts payable and accrued liabilities ( 100 ) Long-term debt ( 246 ) Deferred income taxes ( 1,292 ) Other long-term liabilities ( 31 ) Total identifiable net assets 6,960 Goodwill 1,702 Total assets acquired and liabilities assumed $ 8,662 Intangible assets relate to $ 8.1 billion of acquired in-process research and development (IPR&D) associated with products that have not yet received regulatory approval. The estimated fair values of identifiable intangible assets were determined using the "income approach" which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product, the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, competitive trends impacting the asset and each cash flow stream, as well as other factors. 2024 Form 10-Q | 9 The current portion of long-term debt assumed by AbbVie consists of $ 345 million aggregate principal of 2.5 % convertible senior notes due 2027. Upon acquisition, the convertible senior notes became callable and note holders could redeem the convertible senior notes for cash at a premium. As of the acquisition date, the convertible senior notes were recognized as current portion of long-term debt on the condensed consolidated balance sheets at an aggregate fair value of $ 400 million. Following the acquisition date, the company repaid the convertible senior notes and there were no amounts outstanding as of September 30, 2024. Long-term debt assumed by AbbVie relates to funding agreements entered into by Cerevel Therapeutics prior to the acquisition. Under the agreements, Cerevel Therapeutics received funding to support development of tavapadon and agreed to repay regulatory milestones, sales milestones and royalties contingent upon approval of tavapadon by the U.S. Food and Drug Administration (FDA). The funding agreements were accounted for as financing arrangements and the fair value of the related financing liability was $ 246 million as of the acquisition date. The estimated fair value of the financing liability was determined using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for sales milestones and royalty payments, which are then discounted to present value. Assumptions inherent in the development of fair value include discount rates, estimated probabilities and timing of achieving milestones and estimated amounts of future sales. See Note 8 for additional information. Goodwill was calculated as the excess of the consideration transferred over the fair value of net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recognized from the acquisition of Cerevel Therapeutics represents expected synergies, including the ability to: (i) expand AbbVie’s neuroscience pipeline, (ii) leverage AbbVie’s commercial, regulatory and clinical expertise to maximize Cerevel Therapeutic’s assets and (iii) enhance AbbVie’s existing neuroscience discovery capabilities. The goodwill is not deductible for tax purposes. AbbVie also assumed a licensing agreement entered into by Cerevel Therapeutics with Pfizer Inc. (Pfizer) prior to the acquisition. Under the agreement, Cerevel Therapeutics was granted an exclusive global license under certain Pfizer patent rights to develop, manufacture and commercialize compounds included in Cerevel Therapeutic’s pipeline. AbbVie could make additional payments of up to $ 1.6 billion upon achievement of certain regulatory and commercial milestones for all programs. Additionally, AbbVie will pay tiered royalties on net revenues. Following the acquisition date, the operating results of Cerevel Therapeutics have been included in the condensed consolidated financial statements. For the period from the acquisition date through September 30, 2024, operating losses attributable to Cerevel Therapeutics were $ 299 million, inclusive of $ 161 million of cash-settled, post-closing expense for Cerevel Therapeutics employee incentive awards. AbbVie also issued 0.3 million RSUs to holders of Cerevel Therapeutics equity awards based on a conversion factor described in the transaction agreement. Stock compensation expense related to RSUs issued at the acquisition date was not significant. Acquisition-related expenses, which were comprised primarily of regulatory, financial advisory and legal fees, totaled $ 44 million for the nine months ended September 30, 2024 and were included in selling, general and administrative (SG&A) expense in the condensed consolidated statements of earnings . Acquisition of ImmunoGen, Inc. On February 12, 2024, AbbVie completed its previously announced acquisition of ImmunoGen. ImmunoGen is a commercial-stage biotechnology company focused on the discovery, development and commercialization of antibody-drug conjugates (ADC) for cancer patients. ImmunoGen's oncology portfolio includes its flagship cancer therapy Elahere, a first-in-class ADC approved for platinum-resistant ovarian cancer, and a pipeline of promising next-generation ADC's targeting hematologic malignancies and solid tumors. The combination accelerates AbbVie’s entry into the solid tumor space and strengthens its oncology pipeline. Under the terms of the agreement, AbbVie acquired all outstanding shares of ImmunoGen for $ 31.26 per share in cash. The total fair value of the consideration transferred to owners of ImmunoGen common stock was $ 9.8 billion ($ 9.2 billion, net of cash acquired). The acquisition of ImmunoGen has been accounted for as a business combination using the acquisition method of accounting. The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2024. As a result, AbbVie recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value of intangible assets, goodwill and income taxes among other items. The completion of the valuation will occur no later than one year from the acquisition date. 2024 Form 10-Q | 10 The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date: (in millions) Assets acquired and liabilities assumed Cash and equivalents $ 591 Accounts receivable 171 Inventories 211 Prepaid expenses and other current assets 40 Property and equipment, net 7 Intangible assets, net Developed product rights 7,200 License agreements 125 Acquired in-process research and development 1,280 Other noncurrent assets 273 Current portion of long-term debt ( 99 ) Accounts payable and accrued liabilities ( 312 ) Deferred income taxes ( 899 ) Other long-term liabilities ( 47 ) Total identifiable net assets 8,541 Goodwill 1,249 Total assets acquired and liabilities assumed $ 9,790 The fair value step-up adjustment to inventories of $ 179 million is being amortized to cost of products sold when the inventory is sold to customers, which is expected to be within approximately one year from the acquisition date. Intangible assets relate to $ 7.3 billion of definite-lived intangible assets and $ 1.3 billion of acquired IPR&D associated with products that have not yet received regulatory approval. The acquired definite-lived intangible assets consist of developed product rights and license agreements and are being amortized over a weighted-average estimated useful life of approximately 12 years using the estimated pattern of economic benefit. The estimated fair values of identifiable intangible assets were determined using the "income approach" which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product, the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, competitive trends impacting the asset and each cash flow stream, as well as other factors. Other noncurrent assets primarily consist of $ 250 million of deferred tax assets. The current portion of long-term debt assumed by AbbVie was repaid concurrent with the acquisition at the fair value of $ 99 million. See Note 8 for additional information. Goodwill was calculated as the excess of the consideration transferred over the fair value of net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recognized from the acquisition of ImmunoGen represents expected synergies including, the ability to: (i) expand AbbVie’s product portfolio as well as the potential to increase revenue from future growth platforms, (ii) accelerate AbbVie’s clinical and commercial presence in the solid tumor space within oncology, (iii) leverage the respective strengths of each company, and (iv) enhance AbbVie’s existing ADC development efforts. The goodwill is not deductible for tax purposes. Following the acquisition date, the operating results of ImmunoGen have been included in the condensed consolidated financial statements. For the period from the acquisition date through September 30, 2024, net revenues attributable to ImmunoGen were $ 396 million and operating losses attributable to ImmunoGen were $ 582 million, inclusive of $ 349 million of cash-settled, post-closing expense for ImmunoGen employee incentive awards, $ 158 million of inventory fair value step-up amortization and $ 113 million of intangible asset amortization. AbbVie also issued 0.3 million RSUs to holders of ImmunoGen equity awards based on a conversion factor described in the transaction agreement. Stock compensation expense related to RSUs issued at the acquisition date was not significant. 2024 Form 10-Q | 11 Acquisition-related expenses, which were comprised primarily of regulatory, financial advisory and legal fees, totaled $ 59 million for the nine months ended September 30, 2024 and were included in SG&A expense in the condensed consolidated statements of earnings . Pro Forma Financial Information The following table presents the unaudited pro forma combined results of AbbVie, ImmunoGen and Cerevel Therapeutics for the three and nine months ended September 30, 2024 and 2023 as if the acquisitions of ImmunoGen and Cerevel Therapeutics had occurred on January 1, 2023: Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Net revenues $ 14,460 $ 14,040 $ 41,287 $ 40,263 Net earnings 1,714 1,400 4,583 2,309 The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of AbbVie, ImmunoGen and Cerevel Therapeutics. In order to reflect the occurrence of the acquisitions on January 1, 2023 as required, the unaudited pro forma financial information includes adjustments to reflect incremental amortization expense to be incurred based on the current preliminary fair values of the identifiable intangible assets acquired; the incremental cost of products sold related to the fair value adjustments associated with acquisition date inventory; the additional interest expense associated with the issuance of debt to finance the acquisition; and the reclassification of acquisition-related costs incurred during the three and nine months ended September 30, 2024 to the nine months ended September 30, 2023. The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisitions been completed on January 1, 2023. In addition, the unaudited pro forma financial information is not a projection of future results of operations of the combined company nor does it reflect the expected realization of any synergies or cost savings associated with the acquisitions. Other Licensing & Acquisitions Activity Cash outflows related to other acquisitions and investments totaled $ 1.2 billion for the nine months ended September 30, 2024 and $ 670 million for the nine months ended September 30, 2023. The following table summarizes acquired IPR&D and milestones expense: Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Upfront charges $ 82 $ 44 $ 1,088 $ 396 Development milestones — 22 95 100 Acquired IPR&D and milestones $ 82 $ 66 $ 1,183 $ 496 Celsius Therapeutics, Inc. In June 2024, AbbVie acquired Celsius Therapeutics, Inc. (Celsius Therapeutics) including its lead pipeline asset CEL383. Celsius Therapeutics is a clinical-stage biotechnology company focused on the discovery and development of precision medicine in inflammatory bowel disease. The transaction was accounted as an asset acquisition as CEL383 represented substantially all of the fair value of the gross assets acquired. The upfront payment of $ 250 million was recorded in acquired IPR&D and milestones expense in the condensed consolidated statement of earnings in the second quarter of 2024. AbbVie entered into several other individually insignificant collaborations, licensing agreements or other asset acquisitions in which the related upfront payments were recorded in acquired IPR&D and milestones expense. 2024 Form 10-Q | 12 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 September 30, 2024 and 2023. Collaboration with Janssen Biotech, Inc. In December 2011, Pharmacyclics, a wholly-owned subsidiary of AbbVie, entered into a worldwide collaboration and license agreement with Janssen Biotech, Inc. and its affiliates (Janssen), one of the Janssen Pharmaceutical companies of Johnson & Johnson, for the joint development and commercialization of Imbruvica, a novel, orally active, selective covalent inhibitor of Bruton’s tyrosine kinase and certain compounds structurally related to Imbruvica, for oncology and other indications, excluding all immune and inflammatory mediated diseases or conditions and all psychiatric or psychological diseases or conditions, in the United States and outside the United States. The collaboration provides Janssen with an exclusive license to commercialize Imbruvica outside of the United States and co-exclusively with AbbVie in the United States. Both parties are responsible for the development, manufacturing and marketing of any products generated as a result of the collaboration. The collaboration has no set duration or specific expiration date and provides for potential future development, regulatory and approval milestone payments of up to $ 200 million to AbbVie. The collaboration also includes a cost sharing arrangement for associated collaboration activities. Except in certain cases, Janssen is responsible for approximately 60 % of collaboration development costs and AbbVie is responsible for the remaining 40 % of collaboration development costs. In the United States, both parties have co-exclusive rights to commercialize the products; however, AbbVie is the principal in the end-customer product sales. AbbVie and Janssen share pre-tax profits and losses equally from the commercialization of products. Sales of Imbruvica are included in AbbVie's net revenues. Janssen's share of profits is included in AbbVie's cost of products sold. Other costs incurred under the collaboration are reported in their respective expense line items, net of Janssen's share. Outside the United States, Janssen is responsible for and has exclusive rights to commercialize Imbruvica. AbbVie and Janssen share pre-tax profits and losses equally from the commercialization of products. AbbVie's share of profits is included in AbbVie's net revenues. Other costs incurred under the collaboration are reported in their respective expense line items, net of Janssen's share. The following table shows the profit and cost sharing relationship between Janssen and AbbVie: Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 United States - Janssen's share of profits (included in cost of products sold) $ 282 $ 316 $ 849 $ 925 International - AbbVie's share of profits (included in net revenues) 210 230 676 711 Global - AbbVie's share of other costs (included in respective line items) 38 59 120 171 AbbVie’s receivable from Janssen, included in accounts receivable, net, was $ 233 million at September 30, 2024 and $ 236 million at December 31, 2023. AbbVie’s payable to Janssen, included in accounts payable and accrued liabilities, was $ 282 million at September 30, 2024 and $ 307 million at December 31, 2023. Collaboration with Genentech, Inc. AbbVie and Genentech, Inc. (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. AbbVie pays royalties on Venclexta net revenues outside the United States. AbbVie manufactures and distributes Venclexta globally and is the principal in the end-customer product sales. Sales of Venclexta are included in AbbVie’s net revenues. Genentech’s share of United States profits is included in AbbVie’s cost of products sold. AbbVie records sales and marketing costs associated with the United States collaboration as part of SG&A expenses and global development costs as part of research and development (R&D) expenses, net of Genentech’s share. Royalties paid for Venclexta revenues outside the United States are also included in AbbVie’s cost of products sold. 2024 Form 10-Q | 13 The following table shows the profit and cost sharing relationship between Genentech and AbbVie: Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Genentech's share of profits, including royalties (included in cost of products sold) $ 263 $ 225 $ 733 $ 641 AbbVie's share of sales and marketing costs from U.S. collaboration (included in SG&A) 10 13 25 32 AbbVie's share of development costs (included in R&D) 21 24 63 82 Note 6 Goodwill and Intangible Assets Goodwill The following table summarizes the changes in the carrying amount of goodwill: (in millions) Balance as of December 31, 2023 $ 32,293 Additions (a) 2,951 Foreign currency translation adjustments 51 Balance as of September 30, 2024 $ 35,295 (a) Goodwill additions related to the acquisitions of ImmunoGen and Cerevel Therapeutics (see Note 4). The company performs its annual goodwill impairment assessment in the third quarter, or earlier if impairment indicators exist. As of September 30, 2024, there were no accumulated goodwill impairment losses. Intangible Assets, Net The following table summarizes intangible assets: September 30, 2024 December 31, 2023 (in millions) Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Definite-lived intangible assets Developed product rights $ 81,721 $ ( 26,723 ) $ 54,998 $ 75,142 $ ( 22,455 ) $ 52,687 License agreements 8,316 ( 6,363 ) 1,953 8,191 ( 5,571 ) 2,620 Total definite-lived intangible assets 90,037 ( 33,086 ) 56,951 83,333 ( 28,026 ) 55,307 Indefinite-lived intangible assets 9,695 — 9,695 303 — 303 Total intangible assets, net $ 99,732 $ ( 33,086 ) $ 66,646 $ 83,636 $ ( 28,026 ) $ 55,610 Definite-Lived Intangible Assets The increase in definite-lived intangible assets during 2024 was primarily due to the acquisition of ImmunoGen. The intangible assets will be amortized using the estimated pattern of economic benefit. See Note 4 for additional information regarding the acquisitions. Amortization expense was $ 1.9 billion for the three months and $ 5.7 billion for the nine months ended September 30, 2024 and $ 2.0 billion for the three months and $ 6.1 billion for the nine months ended September 30, 2023. Amortization expense was included in cost of products sold in the condensed consolidated statements of earnings. In August 2023, as part of the Inflation Reduction Act (IRA) of 2022, the company’s oncology product Imbruvica sold in the United States (U.S.) was included on the list of products selected for negotiation by the Centers for Medicare & Medicaid Services. The selection resulted in a significant decrease in the estimated future cash flows for the product and represented a triggering event which required the company to evaluate the underlying definite lived-intangible asset for impairment. The company utilized a discounted cash flow analysis to determine the fair value of $ 1.9 billion, which was lower than the carrying value of $ 4.0 billion and resulted in a partial impairment of both the gross and net carrying amount as of August 29, 2023. Based on the revised cash flows, the company recorded a pre-tax impairment charge of $ 2.1 billion to cost of products sold in the condensed consolidated statement 2024 Form 10-Q | 14 of earnings for the third quarter of 2023. The fair value measurement was based on Level 3 inputs including estimated net revenues, cost of products sold, R&D costs, selling and marketing costs and discount rate. Indefinite-Lived Intangible Assets Indefinite-lived intangible assets represent acquired IPR&D associated with products that have not yet received regulatory approval. The company performs its annual impairment assessment of indefinite-lived intangible assets in the third quarter, or earlier if impairment indicators exist. The increase in indefinite-lived intangible assets during 2024 was primarily due to the acquisitions of ImmunoGen and Cerevel Therapeutics. See Note 4 for additional information regarding the acquisitions. During the first quarter of 2023, the company made a decision to revise the research and development plan for AGN-151607, a novel investigational neurotoxin for the prevention of postoperative atrial fibrillation in cardiac surgery patients. This decision contributed to a delay in the estimated timing of regulatory approval as well as a significant decrease in estimated future cash flows of the product and represented a triggering event which required the company to evaluate the underlying indefinite-lived intangible asset for impairment. The company utilized a discounted cash flow analysis to estimate the fair value which was below the carrying value of the intangible asset. Based on the revised cash flows, the company recorded a pre-tax impairment charge of $ 630 million to research and development expense in the condensed consolidated statements of earnings for the first quarter of 2023. Note 7 Restructuring Plans AbbVie continuously evaluates its operations to identify opportunities to optimize its manufacturing and R&D operations, commercial infrastructure and administrative costs and to respond to changes in its business environment. As a result, AbbVie management periodically approves individual restructuring plans to achieve these objectives. As of September 30, 2024 and 2023, no such plans were individually significant. Restructuring charges were $ 30 million for the three months and $ 94 million for the nine months ended September 30, 2024 and $ 10 million for the three months and $ 55 million for the nine months ended September 30, 2023. These charges are recorded in cost of products sold, R&D expense and SG&A expense in the condensed consolidated statements of earnings based on the classification of the affected employees or the related operations. The following table summarizes the cash activity in the restructuring reserve for the nine months ended September 30, 2024: (in millions) Accrued balance as of December 31, 2023 $ 196 Restructuring charges 84 Payments and other adjustments ( 119 ) Accrued balance as of September 30, 2024 $ 161 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 $ 2.5 billion through December 31, 2023 . These costs consisted 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 ex penses. The Allergan integration plan was substantially complete as of December 31, 2023 and the remaining accrual as of September 30, 2024 is not significant. The following table summarizes the prior year charges associated with the Allergan acquisition integration plan: (in millions) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Cost of products sold $ 20 $ 66 Research and development 1 2 Selling, general and administrative 39 134 Total charges $ 60 $ 202 2024 Form 10-Q | 15 Note 8 Financial Instruments and Fair Value Measures Risk Management Policy See Note 11 to the company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a summary of AbbVie’s risk management policy and use of derivative instruments. Financial Instruments Various AbbVie foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany transactions denominated in a currency other than the functional currency of the local entity. These contracts, with notional amounts totaling $ 2.6 billion at September 30, 2024 and $ 1.8 billion at December 31, 2023, 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 September 30, 2024 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 AOCI. This gain is reclassified to interest expense, net over the term of the related debt. In June 2023, the company entered into a cross-currency swap contract that matured in November 2023 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. dollars. The unrealized gains and losses on the contract were included in AOCI and 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. These contracts are not designated as hedges and are recorded at fair value. 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 $ 7.7 billion at September 30, 2024 and $ 7.9 billion at December 31, 2023. 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 € 3.2 billion at September 30, 2024 and € 5.4 billion at December 31, 2023. In addition, the company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling € 6.2 billion, SEK 1.9 billion, CAD 750 million and CHF 70 million at September 30, 2024 and € 4.9 billion, SEK 1.4 billion, CAD 750 million and CHF 50 million at December 31, 2023. 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 $ 3.5 billion at September 30, 2024 and $ 5.0 billion at December 31, 2023. The effect of the hedge contracts is to change a fixed-rate interest obligation to a floating rate for that portion of the debt. AbbVie records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount. No amounts are excluded from the assessment of effectiveness for cash flow hedges or fair value hedges. 2024 Form 10-Q | 16 The following table summarizes the amounts and location of AbbVie’s derivative instruments on the condensed consolidated balance sheets: Fair value – Derivatives in asset position Fair value – Derivatives in liability position (in millions) Balance sheet caption September 30, 2024 December 31, 2023 Balance sheet caption September 30, 2024 December 31, 2023 Foreign currency forward exchange contracts Designated as cash flow hedges Prepaid expenses and other $ 8 $ 12 Accounts payable and accrued liabilities $ 45 $ 32 Designated as net investment hedges Prepaid expenses and other 12 13 Accounts payable and accrued liabilities 32 66 Designated as net investment hedges Other assets — — Other long-term liabilities 108 69 Not designated as hedges Prepaid expenses and other 24 41 Accounts payable and accrued liabilities 17 36 Interest rate swap contracts Designated as fair value hedges Other assets — — Other long-term liabilities 244 293 Total derivatives $ 44 $ 66 $ 446 $ 496 While certain derivatives are subject to netting arrangements with the company’s counterparties, the company does not offset derivative assets and liabilities within the condensed consolidated balance sheets. The following table presents the pre-tax amounts of gains (losses) from derivative instruments recognized in other comprehensive income (loss): Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Foreign currency forward exchange contracts Designated as cash flow hedges $ ( 45 ) $ 76 $ 30 $ 81 Designated as net investment hedges ( 238 ) 241 ( 16 ) 153 Cross-currency swap contracts designated as cash flow hedges — ( 14 ) — ( 5 ) Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $ 6 million into cost of products sold for foreign currency cash flow hedges and pre-tax gains of $ 21 million into interest expense, net for treasury rate lock agreement cash flow hedges during the next 12 months. Related to AbbVie’s non-derivative, foreign currency denominated debt designated as net investment hedges, the company recognized in other comprehensive income (loss) pre-tax losses of $ 151 million for the three months and pre-tax gains of $ 56 million for the nine months ended September 30, 2024 and pre-tax gains of $ 173 million for the three months and pre-tax gains of $ 47 million for the nine months ended September 30, 2023. 2024 Form 10-Q | 17 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. See Note 10 for the amount of net gains (losses) reclassified out of AOCI. Three months ended September 30, Nine months ended September 30, (in millions) Statement of earnings caption 2024 2023 2024 2023 Foreign currency forward exchange contracts Designated as cash flow hedges Cost of products sold $ 19 $ 11 $ 41 $ 67 Designated as net investment hedges Interest expense, net 32 28 90 85 Not designated as hedges Net foreign exchange loss (gain) ( 30 ) ( 41 ) ( 14 ) ( 7 ) Treasury rate lock agreements designated as cash flow hedges Interest expense, net 6 6 18 18 Cross-currency swap contracts designated as cash flow hedges Net foreign exchange loss (gain) — ( 14 ) — ( 6 ) Interest rate swap contracts Designated as fair value hedges Interest expense, net 60 ( 58 ) 49 ( 44 ) Debt designated as hedged item in fair value hedges Interest expense, net ( 60 ) 58 ( 49 ) 44 Fair Value Measures The fair value hierarchy consists of the following three levels: • Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets that the company has the ability to access; • Level 2 – Valuations based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations in which all significant inputs are observable in the market; and • 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 September 30, 2024: Basis of fair value measurement (in millions) Total Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Cash and equivalents $ 7,257 $ 6,080 $ 1,177 $ — Money market funds and time deposits 10 — 10 — Debt securities 32 — 32 — Equity securities 100 71 29 — Foreign currency contracts 44 — 44 — Total assets $ 7,443 $ 6,151 $ 1,292 $ — Liabilities Interest rate swap contracts $ 244 $ — $ 244 $ — Foreign currency contracts 202 — 202 — Financing liability 253 — — 253 Contingent consideration 21,926 — — 21,926 Total liabilities $ 22,625 $ — $ 446 $ 22,179 2024 Form 10-Q | 18 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, 2023: Basis of fair value measurement (in millions) Total Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Cash and equivalents $ 12,814 $ 6,223 $ 6,591 $ — Money market funds and time deposits 10 — 10 — Debt securities 26 — 26 — Equity securities 111 86 25 — Foreign currency contracts 66 — 66 — Total assets $ 13,027 $ 6,309 $ 6,718 $ — Liabilities Interest rate swap contracts $ 293 $ — $ 293 $ — Foreign currency contracts 203 — 203 — Contingent consideration 19,890 — — 19,890 Total liabilities $ 20,386 $ — $ 496 $ 19,890 Money market funds and time deposits are valued using relevant observable market inputs including quoted prices for similar assets and interest rate curves. Equity securities primarily consist of investments for which the fair values were determined by using the published market prices per unit multiplied by the number of units held, without consideration of transaction costs. The derivatives entered into by the company were valued using observable market inputs including published interest rate curves and both forward and spot prices for foreign currencies. The financing liability is related to funding agreements entered into by Cerevel Therapeutics prior to the acquisition and assumed by AbbVie. The funding agreements represent financial instruments that are accounted for as financing arrangements and the company elected to account for the financing liability in accordance with the fair value option, as permitted under ASC 825 Financial Instruments . The fair value measurement of the financing liability was determined based on significant unobservable inputs. Potential payments are estimated by applying a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for sales milestones and royalty payments, which are then discounted to present value. Changes to the fair value of the financing liability can result from changes to one or a number of inputs, including discount rates, estimated probabilities and timing of achieving milestones and estimated amounts of future sales. The change in fair value recognized in net earnings is recorded in other expense (income), net in the condensed consolidated statements of earnings and the change in fair value attributable to instrument-specific credit risk is recognized in other comprehensive loss. Changes in fair value recognized in other expense (income), net and other comprehensive loss for the three months ended September 30, 2024 were not significant. The fair value measurements of the contingent consideration liabilities were determined based on significant unobservable inputs, including the discount rate, estimated probabilities and timing of achieving specified development, regulatory and commercial milestones and the estimated amount of future sales of the acquired products. The potential contingent consideration payments are estimated by applying a probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for contingent royalty payments, which are then discounted to present value. Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of inputs, including discount rates, 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. 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. 2024 Form 10-Q | 19 The fair value of the company's contingent consideration liabilities was calculated using the following significant unobservable inputs: September 30, 2024 December 31, 2023 Range Weighted average (a) Range Weighted average (a) Discount rate 3.9 % - 5.1 % 4.1 % 4.3 % - 5.9 % 4.5 % Probability of payment for royalties by indication (b) 100 % - 100 % 100 % 89 % - 100 % 99 % Projected year of payments 2024 - 2034 2028 2024 - 2034 2027 (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 December 31, 2023. 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: Nine months ended September 30, (in millions) 2024 2023 Beginning balance $ 19,890 $ 16,384 Change in fair value recognized in net earnings 3,492 3,432 Payments ( 1,456 ) ( 1,142 ) Ending balance $ 21,926 $ 18,674 The change in fair value recognized in net earnings is recorded in other expense (income), net in the condensed consolidated statements of earnings. Contingent consideration payments of amounts up to the initial acquisition date fair value are classified as cash outflows from financing activities and payments of amounts in excess of the initial acquisition date fair value are classified as cash outflows from operating activities in the condensed consolidated statements of cash flows. 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 September 30, 2024 are shown in the table below: Basis of fair value measurement (in millions) Book value Approximate fair value Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Liabilities Current portion of long-term debt and finance lease obligations, excluding fair value hedges $ 12,558 $ 12,486 $ 12,341 $ 145 $ — Long-term debt and finance lease obligations, excluding fair value hedges 58,500 57,177 56,747 430 — Total liabilities $ 71,058 $ 69,663 $ 69,088 $ 575 $ — 2024 Form 10-Q | 20 The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 2023 are shown in the table below: Basis of fair value measurement (in millions) Book value Approximate fair value Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Liabilities Current portion of long-term debt and finance lease obligations, excluding fair value hedges $ 7,191 $ 7,069 $ 6,862 $ 207 $ — Long-term debt and finance lease obligations, excluding fair value hedges 52,460 49,541 48,983 558 — Total liabilities $ 59,651 $ 56,610 $ 55,845 $ 765 $ — AbbVie also holds investments in equity securities that do not have readily determinable fair values. 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 $ 153 million as of September 30, 2024 and $ 159 million as of December 31, 2023. No significant cumulative upward or downward adjustments have been recorded for these investments as of September 30, 2024. Concentrations of Risk Of total net accounts receivable, three U.S. wholesalers accounted for 78 % as of September 30, 2024 and 81 % as of December 31, 2023, and substantially all of AbbVie’s pharmaceutical product net revenues in the United States were to these three wholesalers. Debt and Credit Facilities Financing Related to ImmunoGen and Cerevel Therapeutics Acquisitions In connection with the acquisitions of ImmunoGen and Cerevel Therapeutics, in February, 2024, the company issued $ 15.0 billion aggregate principal amount of unsecured senior notes. The notes are unsecured, unsubordinated obligations of AbbVie and will rank equally in right of payment with all of AbbVie’s existing and future unsecured, unsubordinated indebtedness, liabilities and other obligations. AbbVie may redeem the fixed-rate senior notes prior to maturity at a redemption price equal to the greater of the principal amount or the sum of present values of the remaining scheduled payments of principal and interest on the fixed-rate senior notes to be redeemed plus a make-whole premium. AbbVie may also redeem the fixed-rate senior notes at par between one and six months prior to maturity. In connection with the offering, debt issuance costs incurred totaled $ 99 million and debt discounts totaled $ 37 million, which are being amortized over the respective terms of the notes to interest expense, net in the condensed consolidated statements of earnings. AbbVie used the net proceeds received from the issuance of the notes to finance the acquisition of ImmunoGen, repay its term-loan, repay commercial paper borrowings, pay fees and expenses in respect of the foregoing, finance general corporate purposes and, together with cash on hand, fund AbbVie’s acquisition of Cerevel Therapeutics. See Note 4 for additional information. 2024 Form 10-Q | 21 The following table summarizes issued debt in connection with the acquisitions of ImmunoGen and Cerevel Therapeutics: (in millions) Senior Notes 4.80% Senior Notes due 2027 $ 2,250 4.80% Senior Notes due 2029 2,500 4.95% Senior Notes due 2031 2,000 5.05% Senior Notes due 2034 3,000 5.35% Senior Notes due 2044 750 5.40% Senior Notes due 2054 3,000 5.50% Senior Notes due 2064 1,500 Total debt issued $ 15,000 In December 2023, 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. Interest charged on this borrowing was based on Secured Overnight Financing Rate Reference Rate (SOFR) + 0.975 % with an effective interest rate of 6.29 %. 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 February 2024, concurrent with the ImmunoGen acquisition, the company assumed and repaid an ImmunoGen senior secured term loan at a fair value of $ 99 million. In connection with the acquisition of Cerevel Therapeutics, the company assumed $ 345 million aggregate principal of 2.5 % convertible senior notes due 2027. Upon acquisition, the convertible senior notes became callable and note holders could redeem the convertible senior notes for cash at a premium. As of the acquisition date, the convertible senior notes were recognized as current portion of long-term debt on the condensed consolidated balance sheets at an aggregate fair value of $ 400 million. Following the acquisition date, the company repaid the convertible senior notes and there were no amounts outstanding as of September 30, 2024. The company also assumed funding agreements entered into by Cerevel Therapeutics prior to the acquisition. Under the agreements, Cerevel Therapeutics received funding to support development of tavapadon and agreed to repay regulatory milestones, sales milestones and royalties contingent upon approval of tavapadon by the U.S. Food and Drug Administration (FDA). In addition, upon acquisition the company has the option to satisfy payment obligations early by making a payment equal to the amount of funding provided to Cerevel Therapeutics plus a variable premium. In all circumstances, total repayments under the funding agreements will not exceed $ 531 million in aggregate. The funding agreements were accounted for as financing arrangements and the fair value of the related financing liability was $ 246 million as of the acquisition date. In conjunction with the funding agreements, AbbVie also assumed security agreements entered into by Cerevel Therapeutics prior to the acquisition pursuant to which Cerevel Therapeutics granted the funding investors a security interest in the assets material to the development and commercialization of tavapadon in the United States. Other Long-Term Debt In May 2024, the company repaid a € 1.5 billion aggregate principal amount of 1.38 % senior euro notes at maturity. In June 2024, the company repaid a € 700 million aggregate principal amount of 1.25 % senior euro notes and $ 1.0 billion aggregate principal amount of 3.85 % senior notes at maturity. Subsequent to September 30, 2024, the company refinanced its $ 2.0 billion floating rate three-year term loan. As part of the refinancing, the company repaid the existing $ 2.0 billion term loan due May 2025 and borrowed $ 2.0 billion under a new term loan due April 2027. In January 2023, the company repaid a $ 1.0 billion floating rate three-year term loan that was scheduled to mature in May 2023. 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. Short-Term Borrowings During the nine months ended September 30, 2024, the company issued and redeemed $ 1.7 billion of commercial paper. There were no commercial paper borrowings outstanding as of September 30, 2024 and December 31, 2023. The weighted average interest rate on commercial paper borrowings was 5.54 % for the nine months ended September 30, 2024. 2024 Form 10-Q | 22 In March 2023, AbbVie entered into an amended and restated five-year revolving credit facility. The amendment increased the unsecured revolving credit facility commitments from $ 4.0 billion to $ 5.0 billion and extended the maturity date of the facility from August 2023 to March 2028. This amended facility enables the company to borrow funds on an unsecured basis at variable interest rates and contains various covenants. At September 30, 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 facilities as of September 30, 2024 and December 31, 2023. Note 9 Post-Employment Benefits The following table summarizes net periodic benefit cost relating to the company’s defined benefit and other post-employment plans: Defined benefit plans Other post- employment plans Three months ended September 30, Nine months ended September 30, Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 2024 2023 2024 2023 Service cost $ 71 $ 68 $ 214 $ 203 $ 11 $ 9 $ 32 $ 27 Interest cost 113 108 339 324 10 9 31 28 Expected return on plan assets ( 196 ) ( 181 ) ( 589 ) ( 543 ) — — — — Amortization of prior service cost (credit) — — — 1 ( 9 ) ( 9 ) ( 27 ) ( 27 ) Amortization of actuarial loss 13 4 39 12 4 3 13 9 Net periodic benefit cost (credit) $ 1 $ ( 1 ) $ 3 $ ( 3 ) $ 16 $ 12 $ 49 $ 37 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. 2024 Form 10-Q | 23 Note 10 Equity Stock-Based Compensation Stock-based compensation expense is principally related to awards issued pursuant to the AbbVie 2013 Incentive Stock Program and the AbbVie Amended and Restated 2013 Incentive Stock Program and is summarized as follows: Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Cost of products sold $ 12 $ 9 $ 44 $ 38 Research and development 67 53 274 227 Selling, general and administrative 102 68 429 357 Pre-tax compensation expense 181 130 747 622 Tax benefit ( 33 ) ( 26 ) ( 127 ) ( 111 ) After-tax compensation expense $ 148 $ 104 $ 620 $ 511 In addition to stock-based compensation expense included in the table above and in connection with the acquisitions of ImmunoGen and Cerevel Therapeutics, AbbVie incurred cash-settled, post-closing expense for ImmunoGen and Cerevel Therapeutics employee incentive awards, which is summarized in the table below: (in millions) Three months ended September 30, 2024 Nine months ended September 30, 2024 Cost of products sold $ 5 $ 36 Research and development 58 184 Selling, general and administrative 98 290 Total post-closing cash settled expense $ 161 $ 510 Stock Options During the nine months ended September 30, 2024, 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 $ 31.53 . As of September 30, 2024, $ 8 million of unrecognized compensation cost related to stock options is expected to be recognized as expense over approximately the next two years . RSUs and Performance Shares During the nine months ended September 30, 2024, primarily in connection with the company's annual grant, AbbVie granted 5.5 million RSUs and performance shares with a weighted-average grant-date fair value of $ 176.43 . During the nine months ended September 30, 2024 and in connection with the ImmunoGen and Cerevel Therapeutics acquisitions, AbbVie issued 0.6 million RSUs to holders of ImmunoGen and Cerevel Therapeutics equity awards based on a conversion factor described in each of the transaction agreements. See Note 4 for additional information regarding the ImmunoGen and Cerevel Therapeutics acquisitions. As of September 30, 2024, $ 799 million of unrecognized compensation cost related to RSUs and performance shares is expected to be recognized as expense over approximately the next two years . Cash Dividends The following table summarizes quarterly cash dividends declared during 2024 and 2023: 2024 2023 Date Declared Payment Date Dividend Per Share Date Declared Payment Date Dividend Per Share 10/30/24 02/14/25 $ 1.64 10/26/23 02/15/24 $ 1.55 09/06/24 11/15/24 $ 1.55 09/08/23 11/15/23 $ 1.48 06/21/24 08/15/24 $ 1.55 06/22/23 08/15/23 $ 1.48 02/15/24 05/15/24 $ 1.55 02/16/23 05/15/23 $ 1.48 2024 Form 10-Q | 24 Stock Repurchase Program The company's stock repurchase authorization permits purchases of AbbVie shares from time to time in open-market or private transactions at management's discretion. The program has no time limit and can be discontinued at any time. Shares repurchased under this program are recorded at acquisition cost, including related expenses, and are available for general corporate purposes. On February 16, 2023, AbbVie’s board of directors authorized a $ 5.0 billion increase to the existing stock repurchase authorization. AbbVie repurchased 5 million shares for $ 959 million during the nine months ended September 30, 2024 and 10 million shares for $ 1.6 billion during the nine months ended September 30, 2023. AbbVie's remaining stock repurchase authorization was approximately $ 3.9 billion as of September 30, 2024. Accumulated Other Comprehensive Loss The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2024: (in millions) Foreign currency translation adjustments Net investment hedging activities Pension and post-employment benefits Cash flow hedging activities Total Balance as of December 31, 2023 $ ( 1,106 ) $ 65 $ ( 1,488 ) $ 224 $ ( 2,305 ) Other comprehensive income (loss) before reclassifications 21 31 ( 4 ) 20 68 Net losses (gains) reclassified from accumulated other comprehensive loss — ( 70 ) 19 ( 46 ) ( 97 ) Net current-period other comprehensive income (loss) 21 ( 39 ) 15 ( 26 ) ( 29 ) Balance as of September 30, 2024 $ ( 1,085 ) $ 26 $ ( 1,473 ) $ 198 $ ( 2,334 ) The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2023: (in millions) Foreign currency translation adjustments Net investment hedging activities Pension and post-employment benefits Cash flow hedging activities Total Balance as of December 31, 2022 $ ( 1,513 ) $ 464 $ ( 1,458 ) $ 308 $ ( 2,199 ) Other comprehensive income (loss) before reclassifications ( 279 ) 156 43 61 ( 19 ) Net gains reclassified from accumulated other comprehensive loss — ( 67 ) ( 5 ) ( 63 ) ( 135 ) Net current-period other comprehensive income (loss) ( 279 ) 89 38 ( 2 ) ( 154 ) Balance as of September 30, 2023 $ ( 1,792 ) $ 553 $ ( 1,420 ) $ 306 $ ( 2,353 ) Other comprehensive loss for the nine months ended September 30, 2023 included foreign currency translation adjustments totaling a loss of $ 279 million 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 $ 89 million. 2024 Form 10-Q | 25 The following table presents the impact on AbbVie’s condensed consolidated statements of earnings for significant amounts reclassified out of each component of accumulated other comprehensive loss: Three months ended September 30, Nine months ended September 30, (in millions) (brackets denote gains) 2024 2023 2024 2023 Net investment hedging activities Gains on derivative amount excluded from effectiveness testing (a) $ ( 32 ) $ ( 28 ) $ ( 90 ) $ ( 85 ) Tax expense 7 6 20 18 Total reclassifications, net of tax $ ( 25 ) $ ( 22 ) $ ( 70 ) $ ( 67 ) Pension and post-employment benefits Amortization of actuarial losses (gains) and other (b) $ 8 $ ( 2 ) $ 25 $ ( 5 ) Tax benefit ( 2 ) — ( 6 ) — Total reclassifications, net of tax $ 6 $ ( 2 ) $ 19 $ ( 5 ) Cash flow hedging activities Gains on foreign currency forward exchange contracts (c) $ ( 19 ) $ ( 11 ) $ ( 41 ) $ ( 67 ) Gains on treasury rate lock agreements (a) ( 6 ) ( 6 ) ( 18 ) ( 18 ) Gains on cross-currency swap contracts (d) — 14 — 6 Tax expense 5 2 13 16 Total reclassifications, net of tax $ ( 20 ) $ ( 1 ) $ ( 46 ) $ ( 63 ) (a) Amounts are included in interest expense, net (see Note 8) . (b) Amounts are included in the computation of net periodic benefit cost (see Note 9). (c) Amounts are included in cost of products sold (see Note 8). (d) Amounts are included in net foreign exchange loss (gain) (see Note 8). Note 11 Income Taxes The effective tax rate was 25 % for the three months and 28 % for the nine months ended September 30, 2024 compared to 9 % for the three months and 20 % for the nine months ended September 30, 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, changes in fair value of contingent consideration and business development activities, including ImmunoGen and Cerevel Therapeutics acquisition-related costs. The increase in the effective tax rate for the three months ended September 30, 2024 over the prior year was primarily due to changes in fair value of contingent consideration, impact of foreign operations and business development activities. The increase in the effective tax rate for the nine months ended September 30, 2024 over the prior year was primarily due to the impact of foreign operations and business development activities. It is reasonably possible that the company’s gross unrecognized tax benefits balance may change within the next 12 months by up to $ 58 million in connection with statute of limitation expirations. The company has various federal, state and foreign examinations ongoing. Finalizing examinations with the relevant taxing authorities can include formal administrative and legal proceedings, and as a result, we cannot reasonably estimate the timing of resolution for certain unrecognized tax benefits. Subsequent to September 30, 2024, the company was notified that the administrative proceeding related to its U.S. federal income tax examination for certain tax years was substantially completed. Final resolution of examination of such years may occur in the fourth quarter of 2024. The company anticipates that final resolution will result in a decrease in the gross amount of unrecognized tax benefits on the condensed consolidated balance sheets and recognition of an income tax benefit in the condensed consolidated statement of earnings, which could be material. The Company does not anticipate that such resolution will have a significant impact on its cash flows. 2024 Form 10-Q | 26 Note 12 Legal Proceedings and Contingencies AbbVie is subject to contingencies, such as various claims, legal proceedings and investigations regarding product liability, intellectual property, commercial, securities and other matters that arise in the normal course of business. Loss contingency provisions are recorded for probable losses at management’s best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount within a probable range is recorded. The recorded accrual balance for litigation was approximately $ 2.4 billion as of September 30, 2024 and $ 2.0 billion as of December 31, 2023. For litigation matters discussed below for which a loss is probable or reasonably possible, the company is unable to estimate the possible loss or range of loss, if any, beyond the amounts accrued. Initiation of new legal proceedings or a change in the status of existing proceedings may result in a change in the estimated loss accrued by AbbVie. 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 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 Lawsuits are pending against AbbVie and others generally alleging that the 2005 patent litigation settlement involving Niaspan entered into between Kos Pharmaceuticals, Inc. (a company acquired by Abbott in 2006 and presently a subsidiary of AbbVie) and a generic company violated federal and state antitrust laws and state unfair and deceptive trade practices and unjust enrichment laws. Plaintiffs generally seek monetary damages and/or injunctive relief and attorneys' fees. The lawsuits pending in federal court consist of six individual plaintiff lawsuits and a certified class action by Niaspan direct purchasers. The cases are pending in the United States District Court for the Eastern District of Pennsylvania for coordinated or consolidated pre-trial proceedings under the federal multi-district litigation (MDL) Rules as In re: Niaspan Antitrust Litigation, MDL No. 2460. 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. In August 2019, direct purchasers of AndroGel filed a lawsuit, King Drug Co. of Florence, Inc., et al. v. AbbVie Inc., et al., against AbbVie and others in the United States District Court for the Eastern District of Pennsylvania, alleging that 2006 patent litigation settlements and related agreements by Solvay Pharmaceuticals, Inc. (a company Abbott acquired in February 2010 and now known as AbbVie Products LLC) with three generic companies violated federal antitrust law, and also alleging that 2011 patent litigation by Abbott with two generic companies regarding AndroGel was sham litigation and the settlements of those litigations violated federal antitrust law. In September 2024, AbbVie and plaintiffs reached an agreement to resolve this lawsuit. 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. Government Proceedings Lawsuits are pending against Allergan and several other manufacturers generally alleging that they improperly promoted and sold prescription opioid products. Approximately 440 lawsuits are pending against Allergan in federal and state courts. Most of the federal court lawsuits 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: National Prescription Opiate Litigation, MDL No. 2804. Approximately 35 of the lawsuits are pending in various state courts. The plaintiffs in these lawsuits, 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. Of these approximately 440 lawsuits, approximately 30 of them are brought by states, counties, cities, and other municipal entities, approximately 10 of which are in the process of being dismissed pursuant to the previously announced settlement. Another approximately 45 of the approximately 440 lawsuits are covered by a proposed class settlement between Allergan and a class of acute care hospitals, which is subject to court approval and other contingencies. In March 2023, AbbVie Inc. filed a petition in the United States Tax Court, AbbVie Inc. and Subsidiaries v. Commissioner of Internal Revenue. The petition disputes the Internal Revenue Service determination concerning a $ 572 million income tax benefit recorded in 2014 related to a payment made to a third party for the termination of a proposed business combination. 2024 Form 10-Q | 27 Shareholder and Securities Litigation In October 2018, a federal securities lawsuit, Holwill v. AbbVie Inc., et al., was filed in the United States District Court for the Northern District of Illinois against AbbVie, its chief executive officer and former chief financial officer, alleging that reasons stated for Humira sales growth in financial filings between 2013 and 2018 were misleading because they omitted alleged misconduct in connection with Humira patient and reimbursement support services and other services and items of value that allegedly induced Humira prescriptions. In September 2021, the court granted plaintiffs' motion to certify a class. 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 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. In October 2024, the court granted defendants’ motion to dismiss without prejudice. 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. ex rel. Silbersher v. Allergan Inc., et al., was filed in the United States District Court for the Northern District of California against several Allergan entities and others, alleging that their conduct before the U.S. Patent Office resulted in false claims for payment being made to federal and state healthcare payors for Namenda XR and Namzaric. The plaintiff-relator sought damages and attorneys' fees under the federal False Claims Act and state law analogues. The federal government and state governments declined to intervene in the lawsuit. In March 2023, the court granted Allergan’s motion to dismiss, dismissing plaintiff-relator’s federal law claims with prejudice and state law claims without prejudice. The plaintiff-relator is appealing the court’s motion to dismiss ruling. Lawsuits are pending against various Allergan entities in the United States and other countries including Brazil, Canada, South Korea, and the Netherlands, in which plaintiffs generally allege that they developed, or may develop, breast implant-associated anaplastic large cell lymphoma (ALCL) or other injuries from Allergan’s Biocell® textured breast implants, which were voluntarily withdrawn from worldwide markets in 2019. Approximately 130 ALCL lawsuits and 1,000 other lawsuits are coordinated for pre-trial purposes in the United States District Court for the District of New Jersey under the MDL rules as In re: Allergan Biocell Textured Breast Implant Product Liability Litigation, MDL No. 2921. Approximately 75 ALCL lawsuits and 460 other lawsuits are pending in various state courts. Approximately 50 ALCL and 800 other lawsuits are pending in other countries. Plaintiffs generally seek monetary damages, medical monitoring, and attorneys’ fees. Intellectual Property Litigation AbbVie Inc. is seeking to enforce patent rights relating to venetoclax (a drug sold under the trademark Venclexta). Litigation was filed in the United States District Court for the District of Delaware in July 2020 against Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. AbbVie alleges defendants’ proposed generic venetoclax products infringe certain patents and seeks declaratory and injunctive relief. Genentech, Inc., which is in a global collaboration with AbbVie concerning the development and marketing of Venclexta, is the co-plaintiff in this suit. AbbVie Inc. is seeking to enforce patent rights relating to upadacitinib (a drug sold under the trademark Rinvoq). Litigation was filed in the United States District Court for the District of Delaware in November 2023 against Hetero USA, Inc., Hetero Labs Limited, Hetero Labs Limited Unit-V, Aurobindo Pharma USA, Inc., Aurobindo Pharma Ltd., Sandoz, Inc. Sandoz Private Limited, Sandoz GMBH, and Sun Pharmaceutical Industries, Ltd. AbbVie alleges defendants’ proposed generic upadacitinib products infringe certain patents and seeks declaratory and injunctive relief. AbbVie Inc. is seeking to enforce patent rights related to ubrogepant (a drug sold under the trademark Ubrelvy). Litigation was filed in the United States District Court for the District of New Jersey in March 2024 against Aurobindo Pharma U.S.A., Inc., Aurobindo Pharma Limited, and Apitoria Pharma Private Limited; Zydus Pharmaceuticals (USA) Inc. and Zydus Lifesciences Limited; MSN Pharmaceuticals Inc., MSN Laboratories Private Limited, and MSN Life Sciences Private Limited; and Hetero USA Inc., Hetero Labs Limited Unit-III, and Hetero Labs Limited. AbbVie alleges defendants’ proposed generic ubrogepant products infringe certain patents and seeks declaratory and injunctive relief. Merck Sharp & Dohme LLC, which exclusively licenses certain patents to AbbVie, is a co-plaintiff in the litigation. 2024 Form 10-Q | 28 Note 13 Segment Information AbbVie operates as a single global business segment dedicated to the research and development, manufacturing, commercialization and sale of innovative medicines and therapies. This operating structure enables the Chief Executive Officer, as chief operating decision maker (CODM), to allocate resources and assess business performance on a global basis in order to achieve established long-term strategic goals. Consistent with this structure, a global research and development and supply chain organization is responsible for the discovery, manufacturing and supply of products. Commercial efforts that coordinate the marketing, sales and distribution of these products are organized by geographic region or therapeutic area. All of these activities are supported by a global corporate administrative staff. The determination of a single business segment is consistent with the consolidated financial information regularly reviewed by the CODM for purposes of assessing performance, allocating resources and planning and forecasting future periods. The following table details AbbVie’s worldwide net revenues: Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Immunology Humira United States $ 1,765 $ 3,020 $ 5,896 $ 9,420 International 462 527 1,415 1,680 Total $ 2,227 $ 3,547 $ 7,311 $ 11,100 Skyrizi United States $ 2,778 $ 1,875 $ 6,774 $ 4,648 International 427 251 1,166 721 Total $ 3,205 $ 2,126 $ 7,940 $ 5,369 Rinvoq United States $ 1,170 $ 801 $ 2,912 $ 1,895 International 444 309 1,225 819 Total $ 1,614 $ 1,110 $ 4,137 $ 2,714 Oncology Imbruvica United States $ 618 $ 678 $ 1,823 $ 1,982 Collaboration revenues 210 230 676 711 Total $ 828 $ 908 $ 2,499 $ 2,693 Venclexta United States $ 340 $ 281 $ 921 $ 811 International 337 309 1,007 888 Total $ 677 $ 590 $ 1,928 $ 1,699 Elahere (a) United States $ 139 $ — $ 331 $ — Epkinly Collaboration Revenues $ 31 $ 14 $ 82 $ 14 International 12 — 24 — Total $ 43 $ 14 $ 106 $ 14 Aesthetics Botox Cosmetic United States $ 414 $ 388 $ 1,253 $ 1,217 International 257 232 780 747 Total $ 671 $ 620 $ 2,033 $ 1,964 Juvederm Collection United States $ 105 $ 116 $ 349 $ 363 International 153 205 549 681 Total $ 258 $ 321 $ 898 $ 1,044 Other Aesthetics United States $ 272 $ 255 $ 828 $ 785 International 38 43 119 130 Total $ 310 $ 298 $ 947 $ 915 Neuroscience Botox Therapeutic United States $ 708 $ 626 $ 1,988 $ 1,827 International 140 122 422 388 Total $ 848 $ 748 $ 2,410 $ 2,215 Vraylar United States $ 873 $ 750 $ 2,338 $ 1,967 International 2 1 5 3 Total $ 875 $ 751 $ 2,343 $ 1,970 2024 Form 10-Q | 29 Three months ended September 30, Nine months ended September 30, (in millions) 2024 2023 2024 2023 Duodopa United States $ 24 $ 25 $ 72 $ 74 International 87 93 267 279 Total $ 111 $ 118 $ 339 $ 353 Ubrelvy United States $ 261 $ 230 $ 685 $ 574 International 8 3 18 7 Total $ 269 $ 233 $ 703 $ 581 Qulipta United States $ 168 $ 131 $ 442 $ 292 International 8 1 15 2 Total $ 176 $ 132 $ 457 $ 294 Other Neuroscience United States $ 54 $ 55 $ 172 $ 195 International 30 6 66 15 Total $ 84 $ 61 $ 238 $ 210 Eye Care Ozurdex United States $ 33 $ 34 $ 102 $ 107 International 86 86 272 247 Total $ 119 $ 120 $ 374 $ 354 Lumigan/Ganfort United States $ 58 $ 28 $ 129 $ 142 International 58 63 181 198 Total $ 116 $ 91 $ 310 $ 340 Alphagan/Combigan United States $ 26 $ 30 $ 54 $ 90 International 36 40 116 116 Total $ 62 $ 70 $ 170 $ 206 Restasis United States $ 8 $ 104 $ 70 $ 265 International 13 13 40 43 Total $ 21 $ 117 $ 110 $ 308 Other Eye Care United States $ 115 $ 114 $ 351 $ 334 International 92 93 281 288 Total $ 207 $ 207 $ 632 $ 622 Other Key Products Mavyret United States $ 147 $ 167 $ 458 $ 531 International 155 203 562 590 Total $ 302 $ 370 $ 1,020 $ 1,121 Creon United States $ 338 $ 305 $ 995 $ 892 Linzess/Constella United States $ 225 $ 279 $ 693 $ 799 International 9 9 28 26 Total $ 234 $ 288 $ 721 $ 825 All other $ 726 $ 782 $ 2,280 $ 2,214 Total net revenues $ 14,460 $ 13,927 $ 41,232 $ 40,017 (a) Net revenues include ImmunoGen product revenues after the acquisition closing date of February 12, 2024. 2024 Form 10-Q | 30