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 June 30, 2025 and December 31, 2024 and the results of operations for the three and six months ended June 30, 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 retired 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 six months ended June 30, 2025 included delivering worldwide net revenues of $28.8 billion, operating earnings of $8.6 billion, diluted earnings per share of $1.24 and cash flows from operations of $6.8 billion. Worldwide net revenues increased 7% on a reported basis and 8% on a constant currency basis. Financial results for the six months ended June 30, 2025 also included the following costs: (i) $3.7 billion related to the amortization of intangible assets; and (ii) $4.3 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 | 27 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 United States government has recently imposed broad-based tariffs targeting specified countries. While the impact of these tariffs on AbbVie’s business and results of operations to date has not been material, the United States 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. AbbVie is also subject to public and legislative pressure with respect to pharmaceutical pricing. In the United States, Executive Order 14297, issued on May 12, 2025, directs the Secretary of Health and Human Services (HHS) to pursue most-favored-nation (MFN) pricing, defined as the lowest price in any Organization for Economic Co-operation and Development country with a gross domestic product per capita of at least 60% of that of the United States. The order directs HHS to implement policies mandating MFN pricing along with other regulatory actions if substantial progress toward voluntary compliance is not achieved. AbbVie continues to evaluate the potential impact of this executive order, and any new or additional legislation, regulations or executive orders related to pharmaceutical pricing may increase uncertainties and associated risks and could adversely impact AbbVie’s business and results of operations. On July 4, 2025, the United States government signed into law the One Big Beautiful Bill Act of 2025 (2025 Act). Included within the 2025 Act are certain new tax provisions, limitations and modifications to existing tax provisions that were previously enacted under the Tax Cuts and Jobs Act of 2017, including rules related to the taxation of income earned outside of the United States and the tax treatment of domestic performed research and development costs. In addition, the legislation contains various effective dates and transition elections. The 2025 Act also includes certain new health care provisions related to the orphan drug exclusion of the Inflation Reduction Act of 2022, and Medicaid, which have various effective dates. AbbVie is currently evaluating the impact of the 2025 Act on its consolidated financial statements. 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. • In July 2025, AbbVie announced positive topline results from Study 2 of its Phase 3 UP-AA trial for Rinvoq as a monotherapy in adults and adolescents with severe alopecia areata. 2025 Form 10-Q | 28 Neuroscience Qulipta • In February 2025, AbbVie initiated a Phase 3 clinical trial to evaluate Qulipta for the preventive treatment of menstrual migraine. • In June 2025, AbbVie announced positive topline results from its Phase 3 TEMPLE head-to-head study evaluating the tolerability, safety and efficacy of Qulipta compared to the highest tolerated dose of topiramate in adult patients with a history of four or more migraine days per month. Oncology Emrelis • In May 2025, AbbVie announced that the U.S. FDA granted accelerated approval for Emrelis (telisotuzumab vedotin-tllv) for the treatment of adult patients with locally advanced or metastatic, non-squamous non-small cell lung cancer with high c-Met protein overexpression who have received a prior systemic therapy. Venclexta • In June 2025, AbbVie announced that the global Phase 3 VERONA trial evaluating Venclexta in combination with azacitidine in the treatment of newly diagnosed higher-risk myelodysplastic syndrome did not meet the primary endpoint of overall survival. No new safety signals were observed. • In July 2025, AbbVie announced the submission of a supplemental New Drug Application (sNDA) to the U.S. FDA for the fixed-duration, all oral combination regimen of Venclexta and acalabrutinib in previously untreated patients with chronic lymphocytic leukemia (CLL). The submission is supported by positive results from the Phase 3 AMPLIFY trial which demonstrated that the combination regimen improved progression-free survival compared to standard chemoimmunotherapy in previously untreated patients with CLL. Epkinly • In May 2025, Genmab A/S (Genmab) announced positive topline results from the Phase 3 trial evaluating Epkinly plus rituximab and lenalidomide versus rituximab and lenalidomide alone in adult patients with relapsed or refractory follicular lymphoma. Aesthetics TrenibotE • In April 2025, AbbVie announced that it submitted a Biologics License Application (BLA) to the U.S. FDA for approval of trenibotulinumtoxinE (TrenibotE) for the treatment of moderate to severe glabellar lines. TrenibotE 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, TrenibotE will be the first neurotoxin of its kind available to patients. Juvederm Collection • In June 2025, AbbVie announced that the U.S. FDA accepted for review the supplemental premarket approval application for Skinvive by Juvederm to reduce neck lines for the improvement of neck appearance. 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. Mavyret • In June 2025, AbbVie announced that the U.S FDA approved a label expansion for Mavyret, an oral pangenotypic direct acting antiviral therapy. It is now approved for the treatment of adults and pediatric patients three years and older with acute or chronic hepatitis C virus infection immediately at the time of diagnosis. 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 | 29 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 June 30, Percent change Six months ended June 30, Percent change At actual currency rates At constant currency rates At actual currency rates At constant currency rates (dollars in millions) 2025 2024 2025 2024 United States $ 11,762 $ 11,106 5.9 % 5.9 % $ 21,741 $ 20,147 7.9 % 7.9 % International 3,661 3,356 9.1 % 8.4 % 7,025 6,625 6.0 % 8.3 % Net revenues $ 15,423 $ 14,462 6.6 % 6.5 % $ 28,766 $ 26,772 7.4 % 8.0 % 2025 Form 10-Q | 30 The following table details AbbVie’s worldwide net revenues: Three months ended June 30, Percent change Six months ended June 30, Percent change At actual currency rates At constant currency rates At actual currency rates At constant currency rates (dollars in millions) 2025 2024 2025 2024 Immunology Skyrizi United States $ 3,843 $ 2,340 64.3 % 64.3 % $ 6,762 $ 3,996 69.2 % 69.2 % International 580 387 49.7 % 47.2 % 1,086 739 46.9 % 49.6 % Total $ 4,423 $ 2,727 62.2 % 61.8 % $ 7,848 $ 4,735 65.8 % 66.2 % Rinvoq United States $ 1,452 $ 1,017 42.7 % 42.7 % $ 2,672 $ 1,742 53.3 % 53.3 % International 576 413 39.6 % 37.5 % 1,074 781 37.6 % 40.1 % Total $ 2,028 $ 1,430 41.8 % 41.2 % $ 3,746 $ 2,523 48.5 % 49.3 % Humira United States $ 802 $ 2,360 (66.0) % (66.0) % $ 1,546 $ 4,131 (62.6) % (62.6) % International 378 454 (16.8) % (17.2) % 755 953 (20.8) % (18.4) % Total $ 1,180 $ 2,814 (58.1) % (58.2) % $ 2,301 $ 5,084 (54.7) % (54.3) % Neuroscience Vraylar United States $ 898 $ 773 16.2 % 16.2 % $ 1,661 $ 1,465 13.4 % 13.4 % International 2 1 72.8 % 76.8 % 4 3 41.8 % 47.4 % Total $ 900 $ 774 16.3 % 16.3 % $ 1,665 $ 1,468 13.5 % 13.5 % Botox Therapeutic United States $ 775 $ 669 15.9 % 15.9 % $ 1,498 $ 1,280 17.0 % 17.0 % International 153 145 5.7 % 6.0 % 296 282 5.2 % 8.6 % Total $ 928 $ 814 14.1 % 14.2 % $ 1,794 $ 1,562 14.9 % 15.5 % Ubrelvy United States $ 330 $ 227 46.5 % 46.5 % $ 563 $ 424 33.0 % 33.0 % International 8 4 73.9 % 76.7 % 15 10 46.7 % 51.2 % Total $ 338 $ 231 47.1 % 47.2 % $ 578 $ 434 33.3 % 33.4 % Qulipta United States $ 237 $ 146 62.8 % 62.8 % $ 409 $ 274 49.5 % 49.5 % International 30 4 >100.0 % >100.0 % 51 7 >100.0 % >100.0 % Total $ 267 $ 150 77.5 % 76.9 % $ 460 $ 281 63.6 % 63.6 % Vyalev United States $ 22 $ — n/m n/m $ 28 $ — n/m n/m International 76 18 >100.0 % >100.0 % 133 27 >100.0 % >100.0 % Total $ 98 $ 18 >100.0 % >100.0 % $ 161 $ 27 >100.0 % >100.0 % Duodopa United States $ 20 $ 23 (13.6) % (13.6) % $ 40 $ 48 (16.6) % (16.6) % International 77 90 (13.7) % (16.3) % 153 180 (14.9) % (14.0) % Total $ 97 $ 113 (13.7) % (15.7) % $ 193 $ 228 (15.2) % (14.5) % Other Neuroscience United States $ 51 $ 57 (11.4) % (11.4) % $ 106 $ 118 (10.4) % (10.4) % International 4 5 (23.3) % (21.3) % 8 9 (12.7) % (8.1) % Total $ 55 $ 62 (12.3) % (12.2) % $ 114 $ 127 (10.5) % (10.2) % Oncology Imbruvica United States $ 543 $ 595 (8.9) % (8.9) % $ 1,072 $ 1,205 (11.1) % (11.1) % Collaboration revenues 211 238 (11.2) % (11.2) % 420 466 (9.7) % (9.7) % Total $ 754 $ 833 (9.5) % (9.5) % $ 1,492 $ 1,671 (10.7) % (10.7) % Venclexta United States $ 321 $ 300 7.4 % 7.4 % $ 633 $ 581 9.1 % 9.1 % International 370 337 9.5 % 9.1 % 723 670 7.8 % 11.3 % Total $ 691 $ 637 8.5 % 8.3 % $ 1,356 $ 1,251 8.4 % 10.3 % Elahere United States $ 138 $ 128 8.0 % 8.0 % $ 303 $ 192 57.5 % 57.5 % International 21 — n/m n/m 35 — n/m n/m Total $ 159 $ 128 24.2 % 23.7 % $ 338 $ 192 75.5 % 75.5 % Epkinly Collaboration revenues $ 49 $ 29 70.5 % 70.5 % $ 85 $ 51 66.8 % 66.8 % International 21 7 >100.0 % >100.0 % 36 12 >100.0 % >100.0 % Total $ 70 $ 36 93.9 % 92.3 % $ 121 $ 63 92.1 % 93.3 % Other Oncology United States $ 2 $ — n/m n/m $ 2 $ — n/m n/m Aesthetics Botox Cosmetic United States $ 410 $ 450 (8.7) % (8.7) % $ 705 $ 839 (15.9) % (15.9) % International 282 279 0.9 % 1.2 % 543 523 3.7 % 5.8 % Total $ 692 $ 729 (5.0) % (4.9) % $ 1,248 $ 1,362 (8.4) % (7.6) % 2025 Form 10-Q | 31 Three months ended June 30, Percent change Six months ended June 30, Percent change At actual currency rates At constant currency rates At actual currency rates At constant currency rates (dollars in millions) 2025 2024 2025 2024 Juvederm Collection United States $ 105 $ 138 (23.6) % (23.6) % $ 180 $ 244 (25.9) % (25.9) % International 155 205 (24.4) % (24.4) % 311 396 (21.5) % (19.8) % Total $ 260 $ 343 (24.0) % (24.0) % $ 491 $ 640 (23.2) % (22.2) % Other Aesthetics United States $ 282 $ 275 1.6 % 1.6 % $ 552 $ 556 (1.0) % (1.0) % International 45 43 5.8 % 6.4 % 90 81 11.7 % 14.5 % Total $ 327 $ 318 2.2 % 2.3 % $ 642 $ 637 0.6 % 0.9 % Eye Care Ozurdex United States $ 30 $ 35 (12.6) % (12.6) % $ 60 $ 69 (12.4) % (12.4) % International 95 89 5.8 % 4.4 % 188 186 0.8 % 2.7 % Total $ 125 $ 124 0.6 % (0.4) % $ 248 $ 255 (2.8) % (1.4) % Lumigan/Ganfort United States $ 52 $ 42 19.9 % 19.9 % $ 100 $ 71 39.4 % 39.4 % International 51 61 (15.4) % (15.2) % 109 123 (11.0) % (7.7) % Total $ 103 $ 103 (0.8) % (0.7) % $ 209 $ 194 7.5 % 9.6 % Alphagan/Combigan United States $ — $ 13 (91.6) % (91.6) % $ 26 $ 28 (3.6) % (3.6) % International 36 36 (3.1) % (0.2) % 70 80 (13.1) % (8.5) % Total $ 36 $ 49 (25.6) % (23.5) % $ 96 $ 108 (10.6) % (7.2) % Other Eye Care United States $ 144 $ 149 (4.3) % (4.3) % $ 261 $ 298 (12.8) % (12.8) % International 106 108 (1.7) % 0.9 % 206 216 (4.4) % 0.3 % Total $ 250 $ 257 (3.2) % (2.1) % $ 467 $ 514 (9.3) % (7.3) % Other Key Products Mavyret United States $ 184 $ 167 9.7 % 9.7 % $ 326 $ 311 4.9 % 4.9 % International 191 202 (5.1) % (6.5) % 355 407 (12.8) % (11.2) % Total $ 375 $ 369 1.6 % 0.8 % $ 681 $ 718 (5.1) % (4.2) % Creon United States $ 404 $ 372 8.4 % 8.4 % $ 759 $ 657 15.4 % 15.4 % Linzess/Constella United States $ 247 $ 211 17.4 % 17.4 % $ 386 $ 468 (17.4) % (17.4) % International 11 10 10.8 % 10.3 % 20 19 7.0 % 9.7 % Total $ 258 $ 221 17.1 % 17.1 % $ 406 $ 487 (16.5) % (16.4) % All other $ 603 $ 810 (25.4) % (24.8) % $ 1,350 $ 1,554 (13.1) % (12.5) % Total net revenues $ 15,423 $ 14,462 6.6 % 6.5 % $ 28,766 $ 26,772 7.4 % 8.0 % 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 62% for the three months and 66% for the six months ended June 30, 2025 primarily driven by continued strong market share uptake as well as market growth across all indications. Net revenues for Rinvoq increased 41% for the three months and 49% for the six months ended June 30, 2025 primarily driven by continued strong market share uptake as well as market growth across all indications. Net revenues for Humira decreased 58% for the three months and 54% for the six months ended June 30, 2025 primarily driven by continued impact of direct biosimilar competition following the loss of exclusivity. Net revenues for Vraylar increased 16% for the three months and 14% for the six months ended June 30, 2025 primarily driven by continued market share uptake as well as market growth. Net revenues for Botox Therapeutic increased 14% for the three months and 16% for the six months ended June 30, 2025 primarily driven by continued market share uptake as well as market growth. Net revenues for Ubrelvy increased 47% for the three months and 33% for the six months ended June 30, 2025 primarily driven by continued market share uptake as well as favorable pricing. Net revenues for Qulipta increased 77% for the three months and 64% for the six months ended June 30, 2025 primarily driven by continued strong 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 10% for the three months and 11% 2025 Form 10-Q | 32 for the six months ended June 30, 2025 primarily driven by decreased demand and unfavorable pricing in the United States as well as decreased collaboration revenues. Net revenues for Venclexta increased 8% for the three months and 10% for the six months ended June 30, 2025 primarily driven by continued market share uptake as well as market growth partially offset by unfavorable pricing. Net revenues for Elahere increased 24% for the three months and 76% for the six months ended June 30, 2025 primarily driven by increased demand. Net revenues for the six months ended June 30, 2025 were also favorably impacted by a full period of Elahere results in 2025 compared to the prior year. Net revenues for Botox Cosmetic decreased 5% for the three months and 8% for the six months ended June 30, 2025. In the United States, Botox Cosmetic net revenues decreased 9% for the three months and 16% for the six months ended June 30, 2025 primarily driven by lower market share and decreased consumer demand. Net revenues for the six months ended June 30, 2025 were also impacted by unfavorable pricing due to consumer loyalty program changes in the United States. Internationally, Botox Cosmetic net revenues increased 1% for the three months and 6% for the six months ended June 30, 2025 primarily driven by increased consumer demand across certain international markets. Net revenues for Juvederm Collection decreased 24% for the three months and 22% for the six months ended June 30, 2025 primarily driven by decreased global consumer demand. Gross Margin Three months ended June 30, Six months ended June 30, (dollars in millions) 2025 2024 % change 2025 2024 % change Gross margin $ 11,077 $ 10,260 8 % $ 20,418 $ 18,476 11 % as a % of net revenues 72 % 71 % 71 % 69 % Gross margin as a percentage of net revenues increased for the three and six months ended June 30, 2025 compared to the prior year primarily due to increased leverage from net revenues growth, lower amortization of intangibles and the favorable impact of acquisition and integration costs incurred during the six months ended June 30, 2024 in connection with the ImmunoGen acquisition partially offset by unfavorable changes in product mix. Selling, General and Administrative Three months ended June 30, Six months ended June 30, (dollars in millions) 2025 2024 % change 2025 2024 % change Selling, general and administrative $ 3,253 $ 3,377 (4) % $ 6,546 $ 6,692 (2) % as a % of net revenues 21 % 23 % 23 % 25 % Selling, general and administrative (SG&A) expenses as a percentage of net revenues decreased for the three and six months ended June 30, 2025 compared to the prior year. SG&A expense as a percentage of net revenues for the three and six months ended June 30, 2025 was favorably impacted by leverage from revenue growth partially offset by increased restructuring charges. SG&A expense for the six months ended June 30, 2025 was also favorably impacted by acquisition and integration costs incurred during the six months ended June 30, 2024 in connection with the ImmunoGen acquisition . Research and Development Three months ended June 30, Six months ended June 30, (dollars in millions) 2025 2024 % change 2025 2024 % change Research and development $ 2,131 $ 1,948 9 % $ 4,198 $ 3,887 8 % as a % of net revenues 14 % 13 % 15 % 15 % Research and development (R&D) expenses as a percentage of net revenues increased for the three months and were flat for the six months ended June 30, 2025 compared to the prior year. R&D expense percentage for the three and six months ended June 30, 2025 was unfavorably impacted by increased funding to support all stages of the company’s pipeline assets. R&D expense percentage for the six months ended June 30, 2025 was also favorably impacted by acquisition and integration costs incurred during the six months ended June 30, 2024 in connection with the ImmunoGen acquisition. 2025 Form 10-Q | 33 Acquired IPR&D and Milestones Three months ended June 30, Six months ended June 30, (dollars in millions) 2025 2024 2025 2024 Upfront charges $ 705 $ 927 $ 951 $ 1,006 Development milestones 118 10 120 95 Acquired IPR&D and milestones $ 823 $ 937 $ 1,071 $ 1,101 Acquired IPR&D and milestones expense for the three and six months ended June 30, 2025 included charges related to the upfront payments of $350 million to Gubra A/S for an exclusive global license to develop and commercialize GUB014295 (ABBV-295) and $335 million to ADARx Pharmaceuticals, Inc. for exclusive options to global license rights to develop and commercialize ADARx’s small interfering RNA (siRNA) therapeutics. Acquired IPR&D and milestones expense for the three and six months ended June 30, 2024 included a charge related to the upfront payment of $250 million to acquire Celsius Therapeutics. See Note 4 to the condensed consolidated financial statements for additional information. Other Non-Operating Expenses (Income) Three months ended June 30, Six months ended June 30, (in millions) 2025 2024 2025 2024 Interest expense $ 740 $ 726 $ 1,440 $ 1,386 Interest income (62) (220) (135) (427) Interest expense, net $ 678 $ 506 $ 1,305 $ 959 Net foreign exchange loss $ 23 $ 1 $ 27 $ 5 Other expense, net 2,639 1,345 4,080 1,931 Interest expense increased for the three and six months ended June 30, 2025 compared to the prior year primarily due to a higher average debt balance . Interest income decreased for the three and six months ended June 30, 2025 compared to the prior year primarily due to a lower average cash and equivalents balance. Other expense, net included charges related to changes in fair value of contingent consideration liabilities of $2.8 billion for the three months and $4.3 billion for the six months ended June 30, 2025 and $1.5 billion for the three months and $2.1 billion for the six months ended June 30, 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 and six months ended June 30, 2025, the change in fair value reflected higher estimated Skyrizi sales, the passage of time and lower discount rates. For the three and six months ended June 30, 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 39% for the three months and 31% for the six months ended June 30, 2025 compared to 36% for the three months and 30% for the six months ended June 30, 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. The increase in the effective tax rate for the three and six months ended June 30, 2025 over the prior year was primarily due to changes in fair value of contingent consideration offset by changes in jurisdictional mix of earnings and business development activities. 2025 Form 10-Q | 34 FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES Six months ended June 30, (in millions) 2025 2024 Cash flows provided by (used in): Operating activities $ 6,788 $ 6,311 Investing activities (1,916) (10,690) Financing activities (3,968) 4,722 Operating cash flows for the six months ended June 30, 2025 increased compared to the prior year primarily due to increased results from operations driven by higher net revenues and lower acquisition-related cash expenses partially offset by higher payments related to litigation matters and higher payments of contingent consideration liabilities. Investing cash flows for the six months ended June 30, 2025 included payments made for other acquisitions and investments of $1.3 billion and capital expenditures of $504 million. Investing cash flows for the six months ended June 30, 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 $1.0 billion and capital expenditures of $434 million. Financing cash flows for the six months ended June 30, 2025 included the issuance of unsecured senior notes totaling $4.0 billion aggregate principal and $2.0 billion under the 364-day term loan credit agreement. Financing cash flows also included the repayment of $3.0 billion aggregate principal of 3.80% senior notes and $3.8 billion aggregate principal of 3.60% senior notes. Financing cash flows for the six months ended June 30, 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 repayments of €1.5 billion aggregate principal amount of 1.38% senior euro notes, €700 million aggregate principal amount of 1.25% senior euro notes, $1.0 billion aggregate principal amount of 3.85% senior notes and $99 million of secured term notes assumed from ImmunoGen in conjunction with the acquisition. Financing cash flows also included cash dividend payments of $5.8 billion for the six months ended June 30, 2025 and $5.5 billion for the six months ended June 30, 2024. The increase in cash dividend payments was primarily driven by the increase in the quarterly dividend rate. On June 20, 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 July 15, 2025, payable on August 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 six months ended June 30, 2025 and 5 million shares for $959 million during the six months ended June 30, 2024. During the six months ended June 30, 2025 and 2024, the company issued and redeemed commercial paper. The balance of commercial paper borrowings outstanding was $3.6 billion as of June 30, 2025, of which $2.0 billion had original maturities greater than three months. There were no commercial paper borrowings 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. 2025 Form 10-Q | 35 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 June 30, 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 June 30, 2025 and December 31, 2024. In April 2025, the company entered into a $4.0 billion 364-day term loan credit agreement. In May 2025, the company borrowed $2.0 billion under this term loan credit agreement which was outstanding and included in short-term borrowings on the condensed consolidated balance sheet as of June 30, 2025. 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. Credit Ratings There were no changes in the company’s credit ratings during the six months ended June 30, 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 six months ended June 30, 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. 2025 Form 10-Q | 36 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.