AbbVie Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of the financial condition of AbbVie Inc. (AbbVie or the company) as of March 31, 2025 and December 31, 2024 and the results of operations for the three months ended March 31, 2025 and 2024. This commentary should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes appearing in Item 1, “Financial Statements and Supplementary Data.” EXECUTIVE OVERVIEW Company Overview AbbVie is a global, diversified research-based biopharmaceutical company positioned for success with a comprehensive product portfolio that has leadership positions across immunology, neuroscience, oncology, aesthetics and eye care. AbbVie uses its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. On February 13, 2025, the board of directors of AbbVie unanimously elected Chief Executive Officer (CEO) Robert A. Michael to succeed Richard A. Gonzalez as Chairman of the board of directors, effective July 1, 2025, at which time Mr. Gonzalez will retire from the board. AbbVie's products are generally sold worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned distribution centers and public warehouses. Certain products (including aesthetic products and devices) are also sold directly to physicians and other licensed healthcare providers. In the United States, AbbVie distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to retailers, pharmacies, patients or other customers. Outside the United States, AbbVie sells products primarily to wholesalers or through distributors, and depending on the market works through largely centralized national payers system to agree on reimbursement terms. Certain products are co-marketed or co-promoted with other companies. AbbVie operates as a single global business segment and has approximately 55,000 employees. 2025 Strategic Objectives AbbVie's mission is to discover and develop innovative medicines and products that solve serious health issues today and address the medical challenges of tomorrow while achieving top-tier financial performance through outstanding execution. AbbVie intends to execute its strategy and advance its mission in a number of ways, including: (i) maximizing the benefits of a diversified revenue base with multiple long-term growth drivers; (ii) leveraging AbbVie's commercial strength and international infrastructure across therapeutic areas and ensuring strong commercial execution of new product launches; (iii) continuing to invest in and expand its pipeline in support of opportunities in immunology, neuroscience, oncology, aesthetics and eye care as well as continued investment in key on-market products; (iv) generating substantial operating cash flows to support investment in innovative research and development, and return cash to shareholders via a strong and growing dividend while also continuing to repay debt. In addition, AbbVie anticipates several regulatory submissions and data readouts from key clinical trials in the next 12 months. Financial Results The company’s financial performance for the three months ended March 31, 2025 included delivering worldwide net revenues of $13.3 billion, operating earnings of $3.7 billion, diluted earnings per share of $0.72 and cash flows from operations of $1.6 billion. Worldwide net revenues increased 8% on a reported basis and 10% on a constant currency basis. Financial results for the three months ended March 31, 2025 also included the following costs: (i) $1.9 billion related to the amortization of intangible assets; and (ii) $1.5 billion for the change in fair value of contingent consideration liabilities. Additionally, financial results reflected continued funding to support all stages of AbbVie’s pipeline assets and continued investment in AbbVie’s on-market brands. 2025 Form 10-Q | 25 Recent Events AbbVie’s business may be impacted by risks associated with global macroeconomic conditions, including international trade disruptions and disputes as well as trade protection measures. For example, the U.S. government has recently imposed broad based tariffs targeting specified countries. While the impact of these tariffs on AbbVie’s operations to date has not been material, the U.S. government may in the future pause, reimpose or increase tariffs and foreign governments have and, in the future, may impose retaliatory trade protection measures. Any new or additional tariffs, particularly those targeting the pharmaceuticals industry, may increase uncertainties and associated risks and could adversely impact AbbVie’s business and results of operations. Research and Development Research and innovation are the cornerstones of AbbVie’s business as a global biopharmaceutical company. AbbVie’s long-term success depends to a great extent on its ability to continue to discover and develop innovative products and acquire or collaborate on compounds currently in development by other biotechnology or pharmaceutical companies. AbbVie’s pipeline currently includes approximately 90 compounds, devices or indications in development individually or under collaboration or license agreements. Of these programs, approximately 50 are in mid- and late-stage development. The company’s pipeline is focused on such important specialties as immunology, neuroscience, oncology, aesthetics and eye care. AbbVie’s recently announced partnership with Gubra marks the company’s entrance into the obesity field, a therapeutic area with significant unmet need. The following sections summarize transitions of significant programs from mid-stage development to late-stage development as well as developments in significant late-stage and registration programs. AbbVie expects multiple mid-stage programs to transition into late-stage programs in the next 12 months. Significant Programs and Developments Immunology Rinvoq • In April 2025, AbbVie announced that the European Commission (EC) granted marketing authorization to Rinvoq for the treatment of giant cell arteritis (GCA) in adult patients. • In April 2025, AbbVie announced that the U.S. Food and Drug Administration (FDA) approved Rinvoq for the treatment of GCA in adult patients. Neuroscience Qulipta • In February 2025, AbbVie initiated a Phase 3 clinical trial to evaluate Qulipta for the preventive treatment of menstrual migraine. Aesthetics BoNT/E • In April 2025, AbbVie announced that it submitted a Biologics License Application (BLA) to the U.S. FDA for approval of trenibotulinumtoxinE (BoNT/E) for the treatment of moderate to severe glabellar lines. BoNT/E is a first-in-class botulinum neurotoxin serotype E characterized by a rapid onset of action as early as 8 hours after administration and short duration of effect of 2-3 weeks. If approved, BoNT/E will be the first neurotoxin of its kind available to patients. Other Emblaveo • In February 2025, AbbVie announced that the U.S. FDA approved Emblaveo (aztreonam and avibactam), as the first fixed-dose, intravenous, monobactam/β-lactamase inhibitor combination antibiotic to treat complicated intra-abdominal infections, including those caused by Gram-negative bacteria. For a more comprehensive discussion of AbbVie’s products and pipeline, see the company’s Annual Report on Form 10-K for the year ended December 31, 2024. 2025 Form 10-Q | 26 RESULTS OF OPERATIONS Net Revenues The comparisons presented at constant currency rates reflect comparative local currency net revenues at the prior year’s foreign exchange rates. This measure provides information on the change in net revenues assuming that foreign currency exchange rates had not changed between the prior and current periods. AbbVie believes that the non-GAAP measure of change in net revenues at constant currency rates, when used in conjunction with the GAAP measure of change in net revenues at actual currency rates, may provide a more complete understanding of the company’s operations and can facilitate analysis of the company’s results of operations, particularly in evaluating performance from one period to another. Three months ended March 31, Percent change At actual currency rates At constant currency rates (dollars in millions) 2025 2024 United States $ 9,979 $ 9,041 10.4 % 10.4 % International 3,364 3,269 2.9 % 8.3 % Net revenues $ 13,343 $ 12,310 8.4 % 9.8 % 2025 Form 10-Q | 27 The following table details AbbVie’s worldwide net revenues: Three months ended March 31, Percent change At actual currency rates At constant currency rates (dollars in millions) 2025 2024 Immunology Skyrizi United States $ 2,919 $ 1,656 76.2 % 76.2 % International 506 352 43.9 % 52.3 % Total $ 3,425 $ 2,008 70.5 % 72.0 % Rinvoq United States $ 1,220 $ 725 68.3 % 68.3 % International 498 368 35.3 % 42.8 % Total $ 1,718 $ 1,093 57.2 % 59.7 % Humira United States $ 744 $ 1,771 (58.0) % (58.0) % International 377 499 (24.4) % (19.5) % Total $ 1,121 $ 2,270 (50.6) % (49.5) % Neuroscience Vraylar United States $ 763 $ 692 10.3 % 10.3 % International 2 2 13.1 % 20.2 % Total $ 765 $ 694 10.3 % 10.3 % Botox Therapeutic United States $ 723 $ 611 18.2 % 18.2 % International 143 137 4.8 % 11.4 % Total $ 866 $ 748 15.8 % 17.0 % Ubrelvy United States $ 233 $ 197 17.6 % 17.6 % International 7 6 23.3 % 29.3 % Total $ 240 $ 203 17.8 % 18.0 % Qulipta United States $ 172 $ 128 34.2 % 34.2 % International 21 3 >100.0 % >100.0 % Total $ 193 $ 131 47.6 % 48.3 % Vyalev United States $ 6 $ — n/m n/m International 57 9 >100.0 % >100.0 % Total $ 63 $ 9 >100.0 % >100.0 % Duodopa United States $ 20 $ 25 (19.4) % (19.4) % International 76 90 (16.0) % (11.7) % Total $ 96 $ 115 (16.7) % (13.3) % Other Neuroscience United States $ 55 $ 61 (9.5) % (9.5) % International 4 4 (1.0) % 6.5 % Total $ 59 $ 65 (8.9) % (8.4) % Oncology Imbruvica United States $ 529 $ 610 (13.3) % (13.3) % Collaboration revenues 209 228 (8.2) % (8.2) % Total $ 738 $ 838 (11.9) % (11.9) % Venclexta United States $ 312 $ 281 11.0 % 11.0 % International 353 333 6.0 % 13.4 % Total $ 665 $ 614 8.3 % 12.3 % Elahere United States $ 165 $ 64 >100.0 % >100.0 % International 14 — n/m n/m Total $ 179 $ 64 >100.0 % >100.0 % Epkinly Collaboration revenues $ 36 $ 22 62.1 % 62.1 % International 15 5 >100.0 % >100.0 % Total $ 51 $ 27 89.8 % 94.8 % Aesthetics Botox Cosmetic United States $ 295 $ 389 (24.3) % (24.3) % International 261 244 6.9 % 11.1 % Total $ 556 $ 633 (12.3) % (10.7) % 2025 Form 10-Q | 28 Three months ended March 31, Percent change At actual currency rates At constant currency rates (dollars in millions) 2025 2024 Juvederm Collection United States $ 75 $ 106 (29.0) % (29.0) % International 156 191 (18.5) % (15.0) % Total $ 231 $ 297 (22.2) % (20.0) % Other Aesthetics United States $ 270 $ 281 (3.5) % (3.5) % International 45 38 18.1 % 23.2 % Total $ 315 $ 319 (0.9) % (0.3) % Eye Care Ozurdex United States $ 30 $ 34 (12.1) % (12.1) % International 93 97 (3.8) % 1.1 % Total $ 123 $ 131 (6.0) % (2.4) % Lumigan/Ganfort United States $ 48 $ 29 69.2 % 69.2 % International 58 62 (6.8) % (0.5) % Total $ 106 $ 91 17.0 % 21.4 % Alphagan/Combigan United States $ 26 $ 15 68.5 % 68.5 % International 34 44 (21.4) % (15.4) % Total $ 60 $ 59 1.9 % 6.3 % Other Eye Care United States $ 117 $ 149 (21.4) % (21.4) % International 100 108 (7.1) % (0.2) % Total $ 217 $ 257 (15.4) % (12.5) % Other Key Products Mavyret United States $ 142 $ 144 (0.7) % (0.7) % International 164 205 (20.4) % (15.8) % Total $ 306 $ 349 (12.3) % (9.6) % Creon United States $ 355 $ 285 24.6 % 24.6 % Linzess/Constella United States $ 139 $ 257 (46.1) % (46.1) % International 9 9 3.1 % 9.3 % Total $ 148 $ 266 (44.4) % (44.2) % All other $ 747 $ 744 0.1 % 0.7 % Total net revenues $ 13,343 $ 12,310 8.4 % 9.8 % n/m – Not meaningful The following discussion and analysis of AbbVie’s net revenues by product is presented on a constant currency basis. Net revenues for Skyrizi increased 72% for the three months ended March 31, 2025 primarily driven by continued strong market share uptake as well as market growth across all indications. Net revenues for Rinvoq increased 60% for the three months ended March 31, 2025 primarily driven by continued strong market share uptake as well as market growth across all indications. Net revenues for Humira decreased 50% for the three months ended March 31, 2025 primarily driven by continued impact of direct biosimilar competition following the loss of exclusivity. Net revenues for Vraylar increased 10% for the three months ended March 31, 2025 primarily driven by continued market share uptake as well as market growth. Net revenues for Botox Therapeutic increased 17% for the three months ended March 31, 2025 primarily driven by continued market share uptake as well as market growth. Net revenues for Ubrelvy increased 18% for the three months ended March 31, 2025 primarily driven by continued market share uptake. Net revenues for Qulipta increased 48% for the three months ended March 31, 2025 primarily driven by continued market share uptake. Net revenues for Imbruvica represent product revenues in the United States and collaboration revenues outside of the United States related to AbbVie’s 50% share of Imbruvica profit. AbbVie's global Imbruvica revenues decreased 12% for the three months ended 2025 Form 10-Q | 29 March 31, 2025 primarily driven by the timing of customer inventory stocking in the prior year, decreased demand and lower market share in the United States as well as decreased collaboration revenues. Net revenues for Venclexta increased 12% for the three months ended March 31, 2025 primarily driven by continued market share uptake. Net revenues for Elahere increased greater than 100% for the three months ended March 31, 2025 primarily driven by a full period of Elahere results in 2025 compared to the prior year. Net revenues for Botox Cosmetic decreased 11% for the three months ended March 31, 2025. In the United States, Botox Cosmetic net revenues decreased 24% primarily driven by unfavorable pricing due to consumer loyalty program changes and decreased market share. Internationally, Botox Cosmetic net revenues increased 11% primarily driven by increased consumer demand across certain international markets and the timing of customer inventory stocking. Net revenues for Juvederm Collection decreased 20% for the three months ended March 31, 2025 primarily driven by decreased global consumer demand and unfavorable pricing due to consumer loyalty program changes in the United States. Gross Margin Three months ended March 31, (dollars in millions) 2025 2024 % change Gross margin $ 9,341 $ 8,216 14 % as a % of net revenues 70 % 67 % Gross margin as a percentage of net revenues increased for the three months ended March 31, 2025 compared to the prior year primarily due to increased leverage from net revenues growth, favorable changes in product mix and acquisition and integration costs incurred during the three months ended March 31, 2024 in connection with the ImmunoGen acquisition. Selling, General and Administrative Three months ended March 31, (dollars in millions) 2025 2024 % change Selling, general and administrative $ 3,293 $ 3,315 (1) % as a % of net revenues 25 % 27 % Selling, general and administrative (SG&A) expenses as a percentage of net revenues decreased for the three months ended March 31, 2025 compared to the prior year primarily due to acquisition and integration costs incurred during the three months ended March 31, 2024 in connection with the ImmunoGen acquisition . Research and Development Three months ended March 31, (dollars in millions) 2025 2024 % change Research and development $ 2,067 $ 1,939 7 % as a % of net revenues 15 % 16 % Research and development (R&D) expenses as a percentage of net revenues decreased for the three months ended March 31, 2025 compared to the prior year primarily due to acquisition and integration costs incurred during the three months ended March 31, 2024 in connection with the ImmunoGen acquisition partially offset by increased funding to support all stages of the company’s pipeline assets. Acquired IPR&D and Milestones Three months ended March 31, (dollars in millions) 2025 2024 Upfront charges $ 246 $ 79 Development milestones 2 85 Acquired IPR&D and milestones $ 248 $ 164 2025 Form 10-Q | 30 Other Non-Operating Expenses (Income) Three months ended March 31, (in millions) 2025 2024 Interest expense $ 700 $ 660 Interest income (73) (207) Interest expense, net $ 627 $ 453 Net foreign exchange loss $ 4 $ 4 Other expense, net 1,441 586 Interest expense increased for the three months ended March 31, 2025 compared to the prior year primarily due to a higher average debt balance . Interest income decreased for the three months ended March 31, 2025 compared to the prior year primarily due to a lower average cash and cash equivalents balance. Other expense, net included charges related to changes in fair value of contingent consideration liabilities of $1.5 billion for the three months ended March 31, 2025 and $660 million for the three months ended March 31, 2024. The fair value of contingent consideration liabilities is impacted by the passage of time and multiple other inputs, including the probability of success of achieving regulatory milestones, discount rates, the estimated amount of future sales of the acquired products and other market-based factors. For the three months ended March 31, 2025, the change in fair value reflected higher estimated Skyrizi sales, the passage of time and lower discount rates. For the three months ended March 31, 2024, the change in fair value reflected higher estimated Skyrizi sales and the passage of time, partially offset by higher discount rates. Income Tax Expense The effective tax rate was 22% for the three months ended March 31, 2025 and 2024. 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. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES Three months ended March 31, (in millions) 2025 2024 Cash flows provided by (used in): Operating activities $ 1,635 $ 4,040 Investing activities (735) (9,588) Financing activities (1,258) 10,819 Operating cash flows for the three months ended March 31, 2025 decreased compared to the prior year primarily due to the timing of working capital and payments related to litigation matters, partially offset by increased results from operations driven by higher net revenues and ImmunoGen acquisition-related cash expenses during the three-months ended March 31, 2024. Investing cash flows for the three months ended March 31, 2025 included $210 million cash consideration paid to acquire Nimble Therapeutics, Inc. offset by cash acquired of $6 million, payments made for other acquisitions and investments of $334 million and capital expenditures of $235 million. Investing cash flows for the three months ended March 31, 2024 included $9.8 billion cash consideration paid to acquire ImmunoGen offset by cash acquired of $591 million, payments made for other acquisitions and investments of $190 million and capital expenditures of $193 million. Financing cash flows for the three months ended March 31, 2025 included the issuance of unsecured senior notes totaling $4.0 billion aggregate principal and the repayment of $3.0 billion aggregate principal of 3.80% senior notes. Financing cash flows for the three months ended March 31, 2024 included the issuance of unsecured senior notes totaling $15.0 billion aggregate principal which were used to finance the acquisitions of ImmunoGen and Cerevel Therapeutics. Additionally, financing cash flows included the issuance and repayment of $5.0 billion under the term loan credit agreement and repayment of $99 million of secured term notes assumed from ImmunoGen in conjunction with the acquisition. 2025 Form 10-Q | 31 Financing cash flows also included cash dividend payments of $2.9 billion for the three months ended March 31, 2025 and $2.8 billion for the three months ended March 31, 2024. The increase in cash dividend payments was primarily driven by the increase in the quarterly dividend rate. On February 13, 2025, the company announced that its board of directors declared a quarterly cash dividend of $1.64 per share for stockholders of record at the close of business on April 15, 2025, payable on May 15, 2025. The timing, declaration, amount of and payment of any dividends by AbbVie in the future is within the discretion of its board of directors and will depend upon many factors, including AbbVie’s financial condition, earnings, capital requirements of its operating subsidiaries, covenants associated with certain of AbbVie’s debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by its board of directors. 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. On February 16, 2023, AbbVie’s board of directors authorized a $5.0 billion increase to the existing stock repurchase authorization. AbbVie repurchased 3 million shares for $606 million during the three months ended March 31, 2025 and 5 million shares for $959 million during the three months ended March 31, 2024. During the three months ended March 31, 2025 and 2024, the company issued and redeemed commercial paper. The balance of commercial paper borrowings outstanding was $1.6 billion as of March 31, 2025 and there were no amounts outstanding as of December 31, 2024. AbbVie may issue additional commercial paper or retire commercial paper to meet liquidity requirements as needed. Credit Risk AbbVie monitors economic conditions, the creditworthiness of customers and government regulations and funding, both domestically and abroad. AbbVie regularly communicates with its customers regarding the status of receivable balances, including their payment plans and obtains positive confirmation of the validity of the receivables. AbbVie establishes an allowance for credit losses equal to the estimate of future losses over the contractual life of outstanding accounts receivable. AbbVie may also utilize factoring arrangements to mitigate credit risk, although the receivables included in such arrangements have historically not been a significant amount of total outstanding receivables. Credit Facility, Access to Capital and Credit Ratings Credit Facility In January 2025, AbbVie entered into a new $3.0 billion five-year revolving credit facility that matures in January 2030 which is in addition to the existing $5.0 billion five-year revolving credit facility that matures in March 2028. The revolving credit facilities are available to support AbbVie’s commercial paper program and enable the company to borrow funds to meet liquidity requirements on an unsecured basis at variable interest rates and contain various covenants. At March 31, 2025, the company was in compliance with all covenants, and commitment fees under the credit facility were insignificant. No amounts were outstanding under the company's credit facility as of March 31, 2025 and December 31, 2024. Subsequent to March 31, 2025, the company entered into a $4.0 billion 364-day term loan credit agreement. No amounts were borrowed under the term loan credit agreement as of the date of filing of this Quarterly Report on Form 10-Q. In December 2023, in connection with the acquisitions of ImmunoGen and Cerevel Therapeutics, AbbVie entered into a $9.0 billion 364-day bridge credit agreement and $5.0 billion 364-day term loan credit agreement. In February 2024, AbbVie borrowed and repaid $5.0 billion under the term loan credit agreement. Subsequent to the $15.0 billion issuance of senior notes, AbbVie terminated both the bridge and term loan credit agreements in the first quarter of 2024. Access to Capital The company intends to fund short-term and long-term financial obligations as they mature through cash on hand, future cash flows from operations or has the ability to issue additional debt. The company’s ability to generate cash flows from operations, issue debt or enter into financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for the company’s products or in the solvency of its customers or suppliers, deterioration in the company’s key financial ratios or credit ratings or other material unfavorable changes in business conditions. At the current time, the company believes it has sufficient financial flexibility to issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms to support the company’s growth objectives. 2025 Form 10-Q | 32 Credit Ratings There were no changes in the company’s credit ratings during the three months ended March 31, 2025. Unfavorable changes to the ratings may have an adverse impact on future financing arrangements; however, they would not affect the company’s ability to draw on its credit facility and would not result in an acceleration of scheduled maturities of any of the company’s outstanding debt. CRITICAL ACCOUNTING POLICIES A summary of the company’s significant accounting policies is included in Note 2, “Summary of Significant Accounting Policies” in AbbVie's Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes in the company’s application of its critical accounting policies during the three months ended March 31, 2025. FORWARD-LOOKING STATEMENTS Some statements in this quarterly report on Form 10-Q are, or may be considered, forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “project,” and similar expressions and uses of future or conditional verbs, generally identify forward-looking statements. AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Such risks and uncertainties include, but are not limited to challenges to intellectual property, competition from other products, difficulties inherent in the research and development process, adverse litigation or government action, changes to laws and regulations applicable to our industry, the impact of global macroeconomic factors, such as economic downturns or uncertainty, international conflict, trade disputes and tariffs, and other uncertainties and risks associated with global business operations. Additional information about the economic, competitive, governmental, technological and other factors that may affect AbbVie’s operations is set forth in Item 1A, “Risk Factors,” in AbbVie’s Annual Report on Form 10-K for the year ended December 31, 2024, which has been filed with the Securities and Exchange Commission. AbbVie notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. AbbVie undertakes no obligation, and specifically declines, to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For a discussion of the company's market risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" in AbbVie's Annual Report on Form 10-K for the year ended December 31, 2024.