SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No.Number: 001-35565
AbbVie Inc.
|
| | | | | | | |
(Exact name of registrant as specified in its charter) |
Delaware | | 32-0375147 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. employer identification number) |
1 North Waukegan Road
North Chicago, Illinois 6006460064-6400
Telephone: (847) 932-7900
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒ No ¨
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
|
| | | | | | | | | | |
Large Accelerated Filerx | ☒ | Accelerated Filer¨ | ☐ |
| | | |
Non-Accelerated Filer¨ | ☐ | Smaller reporting company¨ | ☐ |
(Do not check if a smaller reporting company) | | | |
| | Emerging growth company¨ | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | | ABBV | | New York Stock Exchange |
| | | | Chicago Stock Exchange |
1.500% Senior Notes due 2023 | | ABBV23B | | New York Stock Exchange |
1.375% Senior Notes due 2024 | | ABBV24 | | New York Stock Exchange |
1.250% Senior Notes due 2024 | | ABBV24B | | New York Stock Exchange |
0.750% Senior Notes due 2027 | | ABBV27 | | New York Stock Exchange |
2.125% Senior Notes due 2028 | | ABBV28 | | New York Stock Exchange |
2.625% Senior Notes due 2028 | | ABBV28B | | New York Stock Exchange |
2.125% Senior Notes due 2029 | | ABBV29 | | New York Stock Exchange |
1.250% Senior Notes due 2031 | | ABBV31 | | New York Stock Exchange |
As of October 24, 2017,July 31, 2023, AbbVie Inc. had 1,596,429,7401,765,046,680 shares of common stock at $0.01 par value outstanding.
AbbVie Inc. and Subsidiaries
Table of Contents
|
| |
2017 Form 10-Q |
| 1 |
PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AbbVie Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(in millions, except per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
Net revenues | | $ | 13,865 | | | $ | 14,583 | | | $ | 26,090 | | | $ | 28,121 | |
| | | | | | | | |
Cost of products sold | | 4,240 | | | 4,170 | | | 8,226 | | | 8,222 | |
Selling, general and administrative | | 3,268 | | | 5,412 | | | 6,307 | | | 8,539 | |
Research and development | | 1,733 | | | 1,609 | | | 4,025 | | | 3,106 | |
Acquired IPR&D and milestones | | 280 | | | 269 | | | 430 | | | 414 | |
Other operating income | | (169) | | | (172) | | | (179) | | | (172) | |
Total operating costs and expenses | | 9,352 | | | 11,288 | | | 18,809 | | | 20,109 | |
Operating earnings | | 4,513 | | | 3,295 | | | 7,281 | | | 8,012 | |
| | | | | | | | |
Interest expense, net | | 454 | | | 532 | | | 908 | | | 1,071 | |
Net foreign exchange loss | | 37 | | | 47 | | | 72 | | | 72 | |
Other expense, net | | 1,412 | | | 1,533 | | | 3,216 | | | 757 | |
Earnings before income tax expense | | 2,610 | | | 1,183 | | | 3,085 | | | 6,112 | |
Income tax expense | | 583 | | | 255 | | | 817 | | | 691 | |
Net earnings | | 2,027 | | | 928 | | | 2,268 | | | 5,421 | |
Net earnings attributable to noncontrolling interest | | 3 | | | 4 | | | 5 | | | 7 | |
Net earnings attributable to AbbVie Inc. | | $ | 2,024 | | | $ | 924 | | | $ | 2,263 | | | $ | 5,414 | |
| | | | | | | | |
Per share data | | | | | | | | |
Basic earnings per share attributable to AbbVie Inc. | | $ | 1.14 | | | $ | 0.52 | | | $ | 1.27 | | | $ | 3.04 | |
Diluted earnings per share attributable to AbbVie Inc. | | $ | 1.14 | | | $ | 0.51 | | | $ | 1.26 | | | $ | 3.03 | |
| | | | | | | | |
Weighted-average basic shares outstanding | | 1,767 | | | 1,770 | | | 1,768 | | | 1,770 | |
Weighted-average diluted shares outstanding | | 1,771 | | | 1,776 | | | 1,773 | | | 1,777 | |
|
| | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(in millions, except per share data) | | 2017 | | 2016 | | 2017 | | 2016 |
Net revenues | | $ | 6,995 |
| | $ | 6,432 |
| | $ | 20,477 |
| | $ | 18,842 |
|
| | | | | | | | |
Cost of products sold | | 1,616 |
| | 1,504 |
| | 4,760 |
| | 4,278 |
|
Selling, general and administrative | | 1,452 |
| | 1,381 |
| | 4,324 |
| | 4,202 |
|
Research and development | | 1,222 |
| | 1,106 |
| | 3,580 |
| | 3,176 |
|
Acquired in-process research and development | | — |
| | 80 |
| | 15 |
| | 160 |
|
Total operating costs and expenses | | 4,290 |
| | 4,071 |
| | 12,679 |
| | 11,816 |
|
Operating earnings | | 2,705 |
| | 2,361 |
| | 7,798 |
| | 7,026 |
|
| | | | | | | | |
Interest expense, net | | 252 |
| | 250 |
| | 752 |
| | 675 |
|
Net foreign exchange loss (gain) | | 9 |
| | (4 | ) | | 28 |
| | 313 |
|
Other expense, net | | 349 |
| | 101 |
| | 484 |
| | 152 |
|
Earnings before income tax expense | | 2,095 |
| | 2,014 |
| | 6,534 |
| | 5,886 |
|
Income tax expense | | 464 |
| | 416 |
| | 1,277 |
| | 1,324 |
|
Net earnings | | $ | 1,631 |
| | $ | 1,598 |
| | $ | 5,257 |
| | $ | 4,562 |
|
| | | | | | | | |
Per share data | | | | | | | | |
Basic earnings per share | | $ | 1.02 |
| | $ | 0.97 |
| | $ | 3.28 |
| | $ | 2.79 |
|
Diluted earnings per share | | $ | 1.01 |
| | $ | 0.97 |
| | $ | 3.27 |
| | $ | 2.78 |
|
Cash dividends declared per common share | | $ | 0.64 |
| | $ | 0.57 |
| | $ | 1.92 |
| | $ | 1.71 |
|
| | | | | | | | |
Weighted-average basic shares outstanding | | 1,597 |
| | 1,632 |
| | 1,596 |
| | 1,624 |
|
Weighted-average diluted shares outstanding | | 1,603 |
| | 1,640 |
| | 1,602 |
| | 1,633 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
| | | | |
20172023 Form 10-Q | | 21 |
AbbVie Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
(in millions) | 2023 | | 2022 | | 2023 | | 2022 |
Net earnings | $ | 2,027 | | | $ | 928 | | | $ | 2,268 | | | $ | 5,421 | |
| | | | | | | |
Foreign currency translation adjustments, net of tax expense (benefit) of $(6) for the three months and $6 for the six months ended June 30, 2023 and $(12) for the three months and $(19) for the six months ended June 30, 2022 | (16) | | | (823) | | | 178 | | | (1,054) | |
Net investment hedging activities, net of tax expense (benefit) of $2 for the three months and $(58) for the six months ended June 30, 2023 and $146 for the three months and $183 for the six months ended June 30, 2022 | 11 | | | 536 | | | (213) | | | 666 | |
Pension and post-employment benefits, net of tax expense (benefit) of $(4) for the three months and $10 for the six months ended June 30, 2023 and $11 for the three months and $21 for the six months ended June 30, 2022 | (2) | | | 48 | | | 36 | | | 76 | |
Cash flow hedging activities, net of tax expense (benefit) of $(4) for the three months and $(8) for the six months ended June 30, 2023 and $5 for the three months and $3 for the six months ended June 30, 2022 | (13) | | | 27 | | | (54) | | | 15 | |
Other comprehensive loss | (20) | | | (212) | | | (53) | | | (297) | |
Comprehensive income | 2,007 | | | 716 | | | 2,215 | | | 5,124 | |
Comprehensive income attributable to noncontrolling interest | 3 | | | 4 | | | 5 | | | 7 | |
Comprehensive income attributable to AbbVie Inc. | $ | 2,004 | | | $ | 712 | | | $ | 2,210 | | | $ | 5,117 | |
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
(in millions) | 2017 | | 2016 | | 2017 | | 2016 |
Net earnings | $ | 1,631 |
| | $ | 1,598 |
| | $ | 5,257 |
| | $ | 4,562 |
|
| | | | | | | |
Foreign currency translation adjustments, net of tax expense (benefit) of $7 for the three months and $40 for the nine months ended September 30, 2017 and $10 for the three months and $30 for the nine months ended September 30, 2016 | 183 |
| | 31 |
| | 602 |
| | 164 |
|
Net investment hedging activities, net of tax expense (benefit) of $(52) for the three months and $(174) for the nine months ended September 30, 2017 and $— for the three months and $— for the nine months ended September 30, 2016 | (90 | ) | | — |
| | (307 | ) | | — |
|
Pension and post-employment benefits, net of tax expense (benefit) of $8 for the three months and $23 for the nine months ended September 30, 2017 and $8 for the three months and $23 for the nine months ended September 30, 2016 | 8 |
| | 15 |
| | 21 |
| | 48 |
|
Marketable security activities, net of tax expense (benefit) of $4 for the three months and $6 for the nine months ended September 30, 2017 and $1 for the three months and $(7) for the nine months ended September 30, 2016 | (28 | ) | | 12 |
| | (18 | ) | | 19 |
|
Cash flow hedging activities, net of tax expense (benefit) of $(14) for the three months and $(29) for the nine months ended ended September 30, 2017 and $1 for the three months and $(3) for the nine months ended September 30, 2016 | (138 | ) | | (8 | ) | | (325 | ) | | (10 | ) |
Other comprehensive income (loss) | (65 | ) | | 50 |
| | (27 | ) | | 221 |
|
Comprehensive income | $ | 1,566 |
| | $ | 1,648 |
| | $ | 5,230 |
| | $ | 4,783 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
| | | | |
20172023 Form 10-Q | | 32 |
AbbVie Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| | (in millions, except share data) | September 30, 2017 | | December 31, 2016 | (in millions, except share data) | June 30, 2023 | | December 31, 2022 |
| (unaudited) | | | | (unaudited) | |
Assets | | | | Assets | |
Current assets | | | | Current assets | | |
Cash and equivalents | $ | 8,446 |
| | $ | 5,100 |
| Cash and equivalents | $ | 8,759 | | | $ | 9,201 | |
Short-term investments | 1,108 |
| | 1,323 |
| Short-term investments | 7 | | | 28 | |
Accounts receivable, net | 4,891 |
| | 4,758 |
| Accounts receivable, net | 11,491 | | | 11,254 | |
Inventories | 1,785 |
| | 1,444 |
| Inventories | 4,055 | | | 3,579 | |
Prepaid expenses and other | 2,700 |
| | 3,562 |
| Prepaid expenses and other | 4,540 | | | 4,401 | |
Total current assets | 18,930 |
| | 16,187 |
| Total current assets | 28,852 | | | 28,463 | |
| | | | |
Investments | 1,971 |
| | 1,783 |
| Investments | 288 | | | 241 | |
Property and equipment, net | 2,697 |
| | 2,604 |
| Property and equipment, net | 4,943 | | | 4,935 | |
Intangible assets, net | 28,167 |
| | 28,897 |
| Intangible assets, net | 62,862 | | | 67,439 | |
Goodwill | 15,748 |
| | 15,416 |
| Goodwill | 32,224 | | | 32,156 | |
Other assets | 1,327 |
| | 1,212 |
| Other assets | 6,198 | | | 5,571 | |
Total assets | $ | 68,840 |
| | $ | 66,099 |
| Total assets | $ | 135,367 | | | $ | 138,805 | |
| | | | |
Liabilities and Equity | | | | Liabilities and Equity | |
Current liabilities | | | | Current liabilities | |
Short-term borrowings | $ | 800 |
| | $ | 377 |
| Short-term borrowings | $ | — | | | $ | 1 | |
Current portion of long-term debt and lease obligations | 3,021 |
| | 25 |
| |
Current portion of long-term debt and finance lease obligations | | Current portion of long-term debt and finance lease obligations | 5,203 | | | 4,135 | |
Accounts payable and accrued liabilities | 9,212 |
| | 9,379 |
| Accounts payable and accrued liabilities | 27,036 | | | 25,402 | |
Total current liabilities | 13,033 |
| | 9,781 |
| Total current liabilities | 32,239 | | | 29,538 | |
| | | | |
Long-term debt and lease obligations | 33,974 |
| | 36,440 |
| |
Long-term debt and finance lease obligations | | Long-term debt and finance lease obligations | 55,812 | | | 59,135 | |
Deferred income taxes | 6,147 |
| | 6,890 |
| Deferred income taxes | 2,124 | | | 2,190 | |
Other long-term liabilities | 8,999 |
| | 8,352 |
| Other long-term liabilities | 32,294 | | | 30,655 | |
| | | | |
Commitments and contingencies |
|
| |
|
| Commitments and contingencies | |
| | | | |
Stockholders’ equity | | | | |
Common stock, $0.01 par value, 4,000,000,000 shares authorized, 1,767,419,360 shares issued as of September 30, 2017 and 1,754,900,486 as of December 31, 2016 | 18 |
| | 18 |
| |
Common stock held in treasury, at cost, 171,296,169 shares as of September 30, 2017 and 162,387,762 as of December 31, 2016 | (11,419 | ) | | (10,852 | ) | |
Stockholders' equity | | Stockholders' equity | |
Common stock, $0.01 par value, 4,000,000,000 shares authorized, 1,821,926,709 shares issued as of June 30, 2023 and 1,813,770,294 as of December 31, 2022 | | Common stock, $0.01 par value, 4,000,000,000 shares authorized, 1,821,926,709 shares issued as of June 30, 2023 and 1,813,770,294 as of December 31, 2022 | 18 | | | 18 | |
Common stock held in treasury, at cost, 57,127,750 shares as of June 30, 2023 and 44,589,000 as of December 31, 2022 | | Common stock held in treasury, at cost, 57,127,750 shares as of June 30, 2023 and 44,589,000 as of December 31, 2022 | (6,528) | | | (4,594) | |
Additional paid-in capital | 14,154 |
| | 13,678 |
| Additional paid-in capital | 19,839 | | | 19,245 | |
Retained earnings | 6,547 |
| | 4,378 |
| Retained earnings | 1,789 | | | 4,784 | |
Accumulated other comprehensive loss | (2,613 | ) | | (2,586 | ) | Accumulated other comprehensive loss | (2,252) | | | (2,199) | |
Total stockholders’ equity | 6,687 |
| | 4,636 |
| |
Total stockholders' equity | | Total stockholders' equity | 12,866 | | | 17,254 | |
Noncontrolling interest | | Noncontrolling interest | 32 | | | 33 | |
Total equity | | Total equity | 12,898 | | | 17,287 | |
| | | | |
Total liabilities and equity | $ | 68,840 |
| | $ | 66,099 |
| Total liabilities and equity | $ | 135,367 | | | $ | 138,805 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
| | | | |
20172023 Form 10-Q | | 43 |
AbbVie Inc. and Subsidiaries
Condensed Consolidated Statements of Cash FlowsEquity (unaudited) |
| | | | | | | |
| Nine months ended September 30, |
(in millions) (brackets denote cash outflows) | 2017 | | 2016 |
Cash flows from operating activities | | | |
Net earnings | $ | 5,257 |
| | $ | 4,562 |
|
Adjustments to reconcile net earnings to net cash from operating activities: | | | |
Depreciation | 324 |
| | 307 |
|
Amortization of intangible assets | 808 |
| | 554 |
|
Change in fair value of contingent consideration liabilities | 547 |
| | 143 |
|
Stock-based compensation | 288 |
| | 278 |
|
Upfront costs and milestones related to collaborations | 85 |
| | 230 |
|
Devaluation loss related to Venezuela | — |
| | 298 |
|
Other, net | (73 | ) | | 326 |
|
Changes in operating assets and liabilities, net of acquisitions: | | | |
Accounts receivable | (163 | ) | | (129 | ) |
Inventories | (119 | ) | | 28 |
|
Prepaid expenses and other assets | (22 | ) | | (122 | ) |
Accounts payable and other liabilities | 444 |
| | (975 | ) |
Cash flows from operating activities | 7,376 |
| | 5,500 |
|
| | | |
Cash flows from investing activities | | | |
Acquisitions of businesses, net of cash acquired | — |
| | (2,477 | ) |
Other acquisitions and investments | (180 | ) | | (172 | ) |
Acquisitions of property and equipment | (347 | ) | | (365 | ) |
Purchases of investment securities | (1,838 | ) | | (4,520 | ) |
Sales and maturities of investment securities | 1,890 |
| | 1,579 |
|
Cash flows from investing activities | (475 | ) | | (5,955 | ) |
| | | |
Cash flows from financing activities | | | |
Net change in short-term borrowings | 423 |
| | (406 | ) |
Proceeds from issuance of long-term debt | — |
| | 7,771 |
|
Repayments of long-term debt and lease obligations | (18 | ) | | (2,006 | ) |
Debt issuance costs | — |
| | (52 | ) |
Dividends paid | (3,077 | ) | | (2,784 | ) |
Purchases of treasury stock | (905 | ) | | (4,223 | ) |
Proceeds from the exercise of stock options | 214 |
| | 210 |
|
Payments of contingent consideration liabilities | (268 | ) | | — |
|
Other, net | 47 |
| | 64 |
|
Cash flows from financing activities | (3,584 | ) | | (1,426 | ) |
Effect of exchange rate changes on cash and equivalents | 29 |
| | (300 | ) |
Net change in cash and equivalents | 3,346 |
| | (2,181 | ) |
Cash and equivalents, beginning of period | 5,100 |
| | 8,399 |
|
| | | |
Cash and equivalents, end of period | $ | 8,446 |
| | $ | 6,218 |
|
| | | |
Supplemental schedule of non-cash investing and financing activities | | | |
Issuance of common shares associated with acquisitions of businesses | $ | — |
| | $ | 3,923 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Common shares outstanding | | Common stock | | Treasury stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive loss | | Noncontrolling interest | | Total |
Balance at March 31, 2022 | 1,767 | | | $ | 18 | | | $ | (4,585) | | | $ | 18,731 | | | $ | 5,103 | | | $ | (2,984) | | | $ | 31 | | | $ | 16,314 | |
Net earnings attributable to AbbVie Inc. | — | | | — | | | — | | | — | | | 924 | | | — | | | — | | | 924 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | — | | | (212) | | | — | | | (212) | |
Dividends declared | — | | | — | | | — | | | — | | | (2,511) | | | — | | | — | | | (2,511) | |
Purchases of treasury stock | — | | | — | | | (9) | | | — | | | — | | | — | | | — | | | (9) | |
Stock-based compensation plans and other | 1 | | | — | | | 3 | | | 175 | | | — | | | — | | | — | | | 178 | |
Change in noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | 4 | | | 4 | |
Balance at June 30, 2022 | 1,768 | | | $ | 18 | | | $ | (4,591) | | | $ | 18,906 | | | $ | 3,516 | | | $ | (3,196) | | | $ | 35 | | | $ | 14,688 | |
| | | | | | | | | | | | | | | |
Balance at March 31, 2023 | 1,764 | | | $ | 18 | | | $ | (6,524) | | | $ | 19,619 | | | $ | 2,393 | | | $ | (2,232) | | | $ | 29 | | | $ | 13,303 | |
Net earnings attributable to AbbVie Inc. | — | | | — | | | — | | | — | | | 2,024 | | | — | | | — | | | 2,024 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | — | | | (20) | | | — | | | (20) | |
Dividends declared | — | | | — | | | — | | | — | | | (2,628) | | | — | | | — | | | (2,628) | |
Purchases of treasury stock | — | | | — | | | (10) | | | — | | | — | | | — | | | — | | | (10) | |
Stock-based compensation plans and other | 1 | | | — | | | 6 | | | 220 | | | — | | | — | | | — | | | 226 | |
Change in noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | 3 | | | 3 | |
Balance at June 30, 2023 | 1,765 | | | $ | 18 | | | $ | (6,528) | | | $ | 19,839 | | | $ | 1,789 | | | $ | (2,252) | | | $ | 32 | | | $ | 12,898 | |
| | | | | | | | | | | | | | | |
Balance at December 31, 2021 | 1,768 | | | $ | 18 | | | $ | (3,143) | | | $ | 18,305 | | | $ | 3,127 | | | $ | (2,899) | | | $ | 28 | | | $ | 15,436 | |
Net earnings attributable to AbbVie Inc. | — | | | — | | | — | | | — | | | 5,414 | | | — | | | — | | | 5,414 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | — | | | (297) | | | — | | | (297) | |
Dividends declared | — | | | — | | | — | | | — | | | (5,025) | | | — | | | — | | | (5,025) | |
Purchases of treasury stock | (10) | | | — | | | (1,479) | | | — | | | — | | | — | | | — | | | (1,479) | |
Stock-based compensation plans and other | 10 | | | — | | | 31 | | | 601 | | | — | | | — | | | — | | | 632 | |
Change in noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | 7 | | | 7 | |
Balance at June 30, 2022 | 1,768 | | | $ | 18 | | | $ | (4,591) | | | $ | 18,906 | | | $ | 3,516 | | | $ | (3,196) | | | $ | 35 | | | $ | 14,688 | |
| | | | | | | | | | | | | | | |
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. | — | | | — | | | — | | | — | | | 2,263 | | | — | | | — | | | 2,263 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | — | | | (53) | | | — | | | (53) | |
Dividends declared | — | | | — | | | — | | | — | | | (5,258) | | | — | | | — | | | (5,258) | |
Purchases of treasury stock | (12) | | | — | | | (1,965) | | | — | | | — | | | — | | | — | | | (1,965) | |
Stock-based compensation plans and other | 8 | | | — | | | 31 | | | 594 | | | — | | | — | | | — | | | 625 | |
Change in noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Balance at June 30, 2023 | 1,765 | | | $ | 18 | | | $ | (6,528) | | | $ | 19,839 | | | $ | 1,789 | | | $ | (2,252) | | | $ | 32 | | | $ | 12,898 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
| | | | |
20172023 Form 10-Q | | 4 |
AbbVie Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
| | | | | | | | | | | |
| Six months ended June 30, |
(in millions) (brackets denote cash outflows) | 2023 | | 2022 |
Cash flows from operating activities | | | |
Net earnings | $ | 2,268 | | | $ | 5,421 | |
Adjustments to reconcile net earnings to net cash from operating activities: | | | |
Depreciation | 369 | | | 401 | |
Amortization of intangible assets | 4,018 | | | 3,704 | |
Deferred income taxes | (635) | | | (794) | |
Change in fair value of contingent consideration liabilities | 3,424 | | | 861 | |
Stock-based compensation | 492 | | | 413 | |
Acquired IPR&D and milestones | 430 | | | 414 | |
Gain on divestitures | — | | | (172) | |
Non-cash litigation reserve adjustments, net of cash payments | (118) | | | 2,190 | |
Impairment of intangible assets | 710 | | | — | |
Other, net | (173) | | | (86) | |
Changes in operating assets and liabilities, net of acquisitions: | | | |
Accounts receivable | (275) | | | (1,396) | |
Inventories | (458) | | | (499) | |
Prepaid expenses and other assets | 285 | | | 14 | |
Accounts payable and other liabilities | 1,107 | | | (448) | |
Income tax assets and liabilities, net | (932) | | | (110) | |
Cash flows from operating activities | 10,512 | | | 9,913 | |
| | | |
Cash flows from investing activities | | | |
Acquisitions and investments | (513) | | | (394) | |
Acquisitions of property and equipment | (353) | | | (305) | |
Purchases of investment securities | (35) | | | (1,411) | |
Sales and maturities of investment securities | 36 | | | 50 | |
Other, net | 25 | | | 599 | |
Cash flows from investing activities | (840) | | | (1,461) | |
| | | |
Cash flows from financing activities | | | |
Proceeds from issuance of long-term debt | — | | | 2,000 | |
Repayments of long-term debt and finance lease obligations | (2,353) | | | (4,881) | |
Dividends paid | (5,286) | | | (5,033) | |
Purchases of treasury stock | (1,965) | | | (1,479) | |
Proceeds from the exercise of stock options | 113 | | | 198 | |
Payments of contingent consideration liabilities | (641) | | | (482) | |
Other, net | 20 | | | 26 | |
Cash flows from financing activities | (10,112) | | | (9,651) | |
Effect of exchange rate changes on cash and equivalents | (2) | | | (26) | |
Net change in cash and equivalents | (442) | | | (1,225) | |
Cash and equivalents, beginning of period | 9,201 | | | 9,746 | |
| | | |
Cash and equivalents, end of period | $ | 8,759 | | | $ | 8,521 | |
| | | |
| | | |
| | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| | | | | |
2023 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, 2016.
2022.
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.
Recent Accounting Pronouncements
Recently Adopted Accounting PronouncementsNote 2 Supplemental Financial InformationInterest Expense, Net | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Interest expense | | $ | 552 | | | $ | 556 | | | $ | 1,105 | | | $ | 1,104 | |
Interest income | | (98) | | | (24) | | | (197) | | | (33) | |
Interest expense, net | | $ | 454 | | | $ | 532 | | | $ | 908 | | | $ | 1,071 | |
Inventories | | | | | | | | | | | |
(in millions) | June 30, 2023 | | December 31, 2022 |
Finished goods | $ | 1,177 | | | $ | 1,162 | |
Work-in-process | 1,606 | | | 1,417 | |
Raw materials | 1,272 | | | 1,000 | |
Inventories | $ | 4,055 | | | $ | 3,579 | |
In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805):Clarifying the Definition of a Business. The standard provides clarifying guidance to assist in the evaluation of whether transactions are treated as business combinations or asset acquisitions. AbbVie elected to early adopt the changes prospectively in the first quarter of 2017.Property and Equipment, Net | | | | | | | | | | | |
(in millions) | June 30, 2023 | | December 31, 2022 |
Property and equipment, gross | $ | 11,318 | | | $ | 10,986 | |
Accumulated depreciation | (6,375) | | | (6,051) | |
Property and equipment, net | $ | 4,943 | | | $ | 4,935 | |
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. AbbVie adopted the standard in the first quarter of 2017. As a result, all excess tax benefits associated with stock-based awards are recognized in the statement of earnings when the awards vest or settle, rather than in stockholders' equity. In addition, excess tax benefits in the statement of cash flows are now classified as an operating activity rather than as a financing activity. AbbVie adopted these changes prospectively. Accordingly, the company recognized excess tax benefits in income taxDepreciation expense of $14was $190 million for the three months and $53$369 million for the ninesix months ended SeptemberJune 30, 20172023 and classified them within cash flows from operating activities.
Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU No. 2014-09, Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40). The amendments in this standard supersede most current revenue recognition requirements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. AbbVie can apply the amendments using one of the following two methods: (i) retrospectively to each prior reporting period presented, or (ii) modified retrospectively with the cumulative effect of initially applying the amendments recognized at the date of initial application. AbbVie will adopt the standard effective the first quarter of 2018 and apply the amendments using the modified retrospective method. The company has made substantial progress in its review of the new standard and will complete its assessment by December 31, 2017. AbbVie does not expect significant changes to the amounts or timing of revenue recognition for product sales, which is its primary revenue stream. However, the company expects that the adoption of the new standard will require a cumulative-effect adjustment to retained earnings on January 1, 2018 of approximately $130 million, net of tax, primarily related to certain deferred license revenues that were originally expected to be recognized through early 2020.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires several targeted changes including that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net earnings. These provisions will not impact the accounting for AbbVie's investments
|
| |
2017 Form 10-Q | | 6 |
in debt securities. The new guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. Amendments are to be applied as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. This standard will be effective for AbbVie starting with the first quarter of 2018. The standard does not permit early adoption with the exception of certain targeted provisions. AbbVie is unable to estimate the impact of adopting this standard on its financial statements as it will be dependent upon the composition of its equity investment portfolio as of the adoption date and future changes in fair value subsequent to the adoption date. However, based on historical trends, AbbVie does not believe the adoption will have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard outlines a comprehensive lease accounting model that supersedes the current lease guidance and requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms greater than 12 months. The guidance also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new standard must be adopted using the modified retrospective approach and will be effective for AbbVie starting with the first quarter of 2019, with early adoption permitted. AbbVie will adopt the standard effective in the first quarter of 2019 and is currently assessing the impact of adopting this guidance on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). The standard changes how credit losses are measured for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, the standard requires the use of a new forward-looking "expected credit loss" model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. Additionally, the standard requires new disclosures and will be effective for AbbVie starting with the first quarter of 2020. Early adoption beginning in the first quarter of 2019 is permitted. With certain exceptions, adjustments are to be applied using a modified-retrospective approach by reflecting adjustments through a cumulative-effect impact to retained earnings as of the beginning of the fiscal year of adoption. AbbVie is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740). The new standard requires entities to recognize the income tax consequences of an intercompany transfer of an asset other than inventory when the transfer occurs. Under current U.S. GAAP, the income tax consequences of these intercompany asset transfers are deferred until the asset is sold to a third party or otherwise recovered through use. The standard will be effective for AbbVie starting with the first quarter of 2018. Adjustments for this update are to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings with any adjustments reflected as of the beginning of the fiscal year of adoption. AbbVie is currently assessing the impact of adopting this guidance on its consolidated financial statements. As of September 30, 2017, AbbVie had approximately $1.8 billion of prepaid income tax assets that will be affected by this standard, of which $1.3 billion was included in prepaid expenses and other on the condensed consolidated balance sheet.
In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The standard requires that an employer continue to report the service cost component of net periodic benefit cost in the same income statement line item or items as other employee compensation costs arising from services rendered during the period. The other components of net periodic benefit cost are required to be presented separately outside of income from operations and are not eligible for capitalization. The standard will be effective for AbbVie starting with the first quarter of 2018. Upon adoption, the company will apply the income statement classification provisions of this standard retrospectively and preliminarily expects to reclassify income of approximately $50 million from operating earnings to non-operating income for the year ending December 31, 2017.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The standard simplifies the application of hedge accounting and more closely aligns the accounting with an entity’s risk management activities. The standard will be effective for AbbVie starting with the first quarter of 2019, with early adoption permitted. AbbVie is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.
|
| |
2017 Form 10-Q | | 7 |
Note 2 Supplemental Financial Information
|
| | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Interest expense | | $ | 293 |
| | $ | 271 |
| | $ | 851 |
| | $ | 731 |
|
Interest income | | (41 | ) | | (21 | ) | | (99 | ) | | (56 | ) |
Interest expense, net | | $ | 252 |
| | $ | 250 |
| | $ | 752 |
| | $ | 675 |
|
|
| | | | | | | |
(in millions) | September 30, 2017 | | December 31, 2016 |
Finished goods | $ | 353 |
| | $ | 223 |
|
Work-in-process | 1,271 |
| | 1,080 |
|
Raw materials | 161 |
| | 141 |
|
Inventories | $ | 1,785 |
| | $ | 1,444 |
|
|
| | | | | | | |
(in millions) | September 30, 2017 | | December 31, 2016 |
Property and equipment, gross | $ | 7,894 |
| | $ | 7,526 |
|
Accumulated depreciation | (5,197 | ) | | (4,922 | ) |
Property and equipment, net | $ | 2,697 |
| | $ | 2,604 |
|
Depreciation expense was $111$203 million for the three months and $324$401 million for the ninesix months ended SeptemberJune 30, 2017 and $96 million for the three months and $307 million for the nine months ended September 30, 2016.
2022.
|
| | | | |
20172023 Form 10-Q | | 86 |
Note 3 Earnings Per Share
AbbVie grants certain restricted stock awards (RSAs) and 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 information) | | 2017 | | 2016 | | 2017 | | 2016 |
Basic EPS | | | | | | | | |
Net earnings | | $ | 1,631 |
| | $ | 1,598 |
| | $ | 5,257 |
| | $ | 4,562 |
|
Earnings allocated to participating securities | | 8 |
| | 8 |
| | 26 |
| | 23 |
|
Earnings available to common shareholders | | $ | 1,623 |
| | $ | 1,590 |
| | $ | 5,231 |
| | $ | 4,539 |
|
Weighted-average basic shares outstanding | | 1,597 |
| | 1,632 |
| | 1,596 |
| | 1,624 |
|
Basic earnings per share | | $ | 1.02 |
| | $ | 0.97 |
| | $ | 3.28 |
| | $ | 2.79 |
|
| | | | | | | | |
Diluted EPS | | | | | | | | |
Net earnings | | $ | 1,631 |
| | $ | 1,598 |
| | $ | 5,257 |
| | $ | 4,562 |
|
Earnings allocated to participating securities | | 8 |
| | 8 |
| | 26 |
| | 23 |
|
Earnings available to common shareholders | | $ | 1,623 |
| | $ | 1,590 |
| | $ | 5,231 |
| | $ | 4,539 |
|
Weighted-average shares of common stock outstanding | | 1,597 |
| | 1,632 |
| | 1,596 |
| | 1,624 |
|
Effect of dilutive securities | | 6 |
| | 8 |
| | 6 |
| | 9 |
|
Weighted-average diluted shares outstanding | | 1,603 |
| | 1,640 |
| | 1,602 |
| | 1,633 |
|
Diluted earnings per share | | $ | 1.01 |
| | $ | 0.97 |
| | $ | 3.27 |
| | $ | 2.78 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(in millions, except per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
Basic EPS | | | | | | | | |
Net earnings attributable to AbbVie Inc. | | $ | 2,024 | | | $ | 924 | | | $ | 2,263 | | | $ | 5,414 | |
Earnings allocated to participating securities | | 11 | | | 11 | | | 22 | | | 26 | |
Earnings available to common shareholders | | $ | 2,013 | | | $ | 913 | | | $ | 2,241 | | | $ | 5,388 | |
Weighted-average basic shares outstanding | | 1,767 | | | 1,770 | | | 1,768 | | | 1,770 | |
Basic earnings per share attributable to AbbVie Inc. | | $ | 1.14 | | | $ | 0.52 | | | $ | 1.27 | | | $ | 3.04 | |
| | | | | | | | |
Diluted EPS | | | | | | | | |
Net earnings attributable to AbbVie Inc. | | $ | 2,024 | | | $ | 924 | | | $ | 2,263 | | | $ | 5,414 | |
Earnings allocated to participating securities | | 11 | | | 11 | | | 22 | | | 26 | |
Earnings available to common shareholders | | $ | 2,013 | | | $ | 913 | | | $ | 2,241 | | | $ | 5,388 | |
Weighted-average shares of common stock outstanding | | 1,767 | | | 1,770 | | | 1,768 | | | 1,770 | |
Effect of dilutive securities | | 4 | | | 6 | | | 5 | | | 7 | |
Weighted-average diluted shares outstanding | | 1,771 | | | 1,776 | | | 1,773 | | | 1,777 | |
Diluted earnings per share attributable to AbbVie Inc. | | $ | 1.14 | | | $ | 0.51 | | | $ | 1.26 | | | $ | 3.03 | |
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 werewas insignificant for all periods presented.
Note 4Licensing, Acquisitions and Other Arrangements
Other Licensing & Acquisitions Activity
Acquisition of Stemcentrx
On June 1, 2016, AbbVie acquired all of the outstanding equity interests in Stemcentrx, a privately-held biotechnology company. The transaction expanded AbbVie’s oncology pipeline by adding the late-stage asset rovalpituzumab tesirine (Rova-T), four additional early-stage clinical compounds in solid tumor indicationsCash outflows related to acquisitions and a significant portfolio of pre-clinical assets. Rova-T is currently in registrational trials for small cell lung cancer.
The acquisition of Stemcentrx was accounted for as a business combination using the acquisition method of accounting. The aggregate upfront considerationinvestments totaled $513 million for the acquisition of Stemcentrx consisted of approximately 62.4six months ended June 30, 2023 and $394 million shares offor the six months ended June 30, 2022. AbbVie common stock, issued from common stock held in treasury, and cash. AbbVie may make certain contingent payments upon the achievement of defined development and regulatory milestones. As of the acquisition date, the maximum aggregate amount payable for development and regulatory milestones was $4.0 billion. The acquisition-date fair value of these milestones was $620 million and was estimated using a combination of probability-weighted discounted cash flow models and Monte Carlo simulation models. The estimate was determined based on significant inputs that are not observable in the market, referred to as Level 3 inputs, as described in more detail in Note 8.
|
| |
2017 Form 10-Q | | 9 |
The following table summarizes total consideration:
|
| | | |
(in millions) | |
Cash | $ | 1,883 |
|
Fair value of AbbVie common stock | 3,923 |
|
Contingent consideration | 620 |
|
Total consideration | $ | 6,426 |
|
The following table summarizes fair values of assets acquired and liabilities assumed as of the June 1, 2016 acquisition date:
|
| | | |
(in millions) | |
Assets acquired and liabilities assumed | |
Accounts receivable | $ | 1 |
|
Prepaid expenses and other | 7 |
|
Property and equipment | 17 |
|
Intangible assets - Indefinite-lived research and development | 6,100 |
|
Accounts payable and accrued liabilities | (31 | ) |
Deferred income taxes | (1,933 | ) |
Other long-term liabilities | (7 | ) |
Total identifiable net assets | 4,154 |
|
Goodwill | 2,272 |
|
Total assets acquired and liabilities assumed | $ | 6,426 |
|
Intangible assets were related to acquired in-process research and development (IPR&D) for Rova-T, four additional early-stage clinical compounds in solid tumor indications and several additional pre-clinical compounds. The estimated fair value of therecorded acquired IPR&D was determined using the multi-period excess earnings modeland milestones expense of 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 those asset valuations include the estimated annual cash flows for each asset or product (including net revenues, cost of sales, research and development (R&D) costs, selling and marketing costs and working capital/contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the regulatory approval probabilities, commercial success risks, competitive landscape as well as other factors.
The goodwill recognized represents expected synergies, including the ability to: (i) leverage the respective strengths of each business; (ii) expand the combined company’s product portfolio; (iii) accelerate AbbVie's clinical and commercial presence in oncology; and (iv) establish a strong leadership position in oncology. Goodwill was also impacted by the establishment of a deferred tax liability for the acquired identifiable intangible assets which have no tax basis. The goodwill is not deductible for tax purposes.
Pro Forma Financial Information
The following table presents the unaudited pro forma combined results of operations of AbbVie and Stemcentrx$280 million for the three months and nine$430 million for the six months ended SeptemberJune 30, 2016 as if2023 and $269 million for the acquisitionthree months and $414 million for the six months ended June 30, 2022.
Syndesi Therapeutics SA
In February 2022, AbbVie acquired Syndesi Therapeutics SA and its portfolio of Stemcentrx had occurred on January 1, 2015:
|
| | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(in millions, except per share information) | | 2016 | | 2016 |
Net revenues | | $ | 6,432 |
| | $ | 18,845 |
|
Net earnings | | 1,579 |
| | 4,515 |
|
Basic earnings per share | | $ | 0.97 |
| | $ | 2.72 |
|
Diluted earnings per share | | $ | 0.96 |
| | $ | 2.71 |
|
The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of AbbVie and Stemcentrx. In order to reflect the occurrencenovel modulators of the acquisition on January 1, 2015 as
|
| |
2017 Form 10-Q | | 10 |
required, the unaudited pro forma financial information includes adjustments to reflect the additional interest expense associated with the issuance of debt to finance the acquisition and the reclassification of acquisition, integration and financing-related costs incurred during 2016 to the three and nine months ended September 30, 2015. The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisition been completed on January 1, 2015. In addition, the unaudited pro forma financial information is not a projection of the future results of operations of the combined company nor does it reflect the expected realization of any cost savings or synergies associated with the acquisition.
Acquisition of BI 655066 and BI 655064 from Boehringer Ingelheim
On April 1, 2016, AbbVie acquired all rights to risankizumab (BI 655066), an anti-IL-23 monoclonal biologic antibody in Phase 3 development for psoriasis, from Boehringer Ingelheim (BI) pursuant to a global collaboration agreement. AbbVie is also evaluating the potential of this biologic therapy in Crohn’s disease, psoriatic arthritis and asthma. In addition to risankizumab, AbbVie also gained rights to an anti-CD40 antibody, BI 655064, currently in Phase 1 development. BI will retain responsibility for further development of BI 655064, and AbbVie may elect to advance the program after completion of certain clinical achievements. The acquired assets include all patents, data, know-how, third-party agreements, regulatory filings and manufacturing technology related to BI 655066 and BI 655064.
The company concluded that the acquired assets met the definition of a businesssynaptic vesicle protein 2A, including its lead molecule ABBV-552, previously named SDI-118, and accounted for the transaction as an asset acquisition. ABBV-552 is a business combination using the acquisition method of accounting.small molecule, which is being evaluated to target nerve terminals to enhance synaptic efficiency. Under the terms of the agreement, AbbVie made an upfront payment of $595 million. Additionally, $18$130 million which was recorded to acquired IPR&D and milestones expense in the condensed consolidated statement of earnings in the first quarter of 2022. The agreement also includes additional future payments of up to BI, pursuant to a contractual obligation to reimburse BI for certain development costs it incurred prior to the acquisition date, were initially deferred. AbbVie may make certain contingent payments$870 million upon the achievement of definedcertain development, regulatory and commercial milestones,milestones.
Juvise Pharmaceuticals
In June 2022, AbbVie and Laboratories Juvise Pharmaceuticals (Juvise) entered into an asset purchase agreement where Juvise acquired worldwide commercial rights of a mature brand Pylera, which is used for the treatment of peptic ulcers with an infection by the bacterium Helicobacter pylori. The transaction was accounted for as well as royalty payments based on net revenuesthe sale of licensed products. Asan asset. Upon completion of the acquisition date, the maximum aggregate amount payable for development and regulatory milestones was approximately $1.6 billion. The acquisition-date fair value of these milestones was $606 million. The acquisition-date fair value of contingent royalty payments was $2.8 billion. The potential contingent consideration payments were estimated by applying a probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for contingent royalty payments, which were then discounted to present value. The fair value measurements were based on Level 3 inputs.transaction,
The following table summarizes total consideration:
|
| | | |
(in millions) | |
Cash | $ | 595 |
|
Deferred consideration payable | 18 |
|
Contingent consideration | 3,365 |
|
Total consideration | $ | 3,978 |
|
The following table summarizes fair values of assets acquired as of the April 1, 2016 acquisition date: |
| | | |
(in millions) | |
Assets acquired | |
Identifiable intangible assets - Indefinite-lived research and development | $ | 3,890 |
|
Goodwill | 88 |
|
Total assets acquired | $ | 3,978 |
|
The estimated fair value of the acquired IPR&D was determined using the multi-period excess earnings model of the “income approach.” The goodwill recognized represents expected synergies, including an expansion of the company’s immunology product portfolio.
Pro forma results of operations for this acquisition have not been presented because this acquisition is insignificant to AbbVie’s consolidated results of operations.
|
| | | | |
20172023 Form 10-Q | | 117 |
AbbVie received net cash proceeds of $215 million and recognized a pre-tax gain of $172 million which was recorded in other operating income in the condensed consolidated statement of earnings in the second quarter of 2022.
Other Licensing & Acquisitions ActivityArrangements
Excluding the acquisitions above, cash outflowsAbbVie entered into several other arrangements resulting in charges related to other acquisitions and investments totaled $180 million for the nine months ended September 30, 2017 and $172 million for the nine months ended September 30, 2016. AbbVie recorded no IPR&D charges for the three months ended September 30, 2017 and recorded IPR&D chargesupfront payments of $15 million for the nine months ended September 30, 2017. AbbVie recorded IPR&D charges of $80$220 million for the three months and $160$352 million for the ninesix months ended SeptemberJune 30, 2016.
In October 2017, AbbVie entered into a global strategic collaboration with Alector, Inc. (Alector) to develop2023 and commercialize medicines to treat Alzheimer’s disease$222 million for the three and other neurodegenerative disorders. AbbVie and Alector have agreed to research a portfolio of antibody targets and AbbVie has an option to global development and commercial rights to two targets. AbbVie will make an initial upfront payment of $205 million, which will be expensed tosix months ended June 30, 2022. Acquired IPR&D inand milestones expense also included development milestones of $60 million for the fourth quarter of 2017. Alector will conduct exploratory research, drug discoverythree months and development$78 million for lead programs up to the conclusion ofsix months ended June 30, 2023 and $47 million for the proof of concept studies. Ifthree months and $62 million for the option is exercised, AbbVie will lead development and commercialization activities and could make additional payments to Alector of up to $986 million upon achievement of certain development and regulatory milestones. Alector and AbbVie will co-fund development and commercialization and will share global profits equally.six months ended June 30, 2022.
Note 5CollaborationsThe company has ongoing transactions with other entities through collaboration agreements. The following represent the significant collaboration agreements impacting the periods ended June 30, 2023 and 2022. 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,Imbruvica, a novel, orally active, selective covalent inhibitor of Bruton'sBruton’s tyrosine kinase (BTK) and certain compounds structurally related to IMBRUVICA,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 IMBRUVICAImbruvica 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 customerend-customer product sales. AbbVie and Janssen share pre-tax profits and losses equally from the commercialization of products. Sales of IMBRUVICAImbruvica 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.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 June 30, | | Six months ended June 30, |
(in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
United States - Janssen's share of profits (included in cost of products sold) | | $ | 312 | | | $ | 404 | | | $ | 609 | | | $ | 812 | |
International - AbbVie's share of profits (included in net revenues) | | 241 | | | 283 | | | 481 | | | 582 | |
Global - AbbVie's share of other costs (included in respective line items) | | 57 | | | 69 | | | 112 | | | 133 | |
AbbVie’s receivable from Janssen, included in accounts receivable, net, was $268 million at June 30, 2023 and $295 million at December 31, 2022. AbbVie’s payable to Janssen, included in accounts payable and accrued liabilities, was $295 million at June 30, 2023 and $379 million at December 31, 2022.
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
|
| | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
United States - Janssen's share of profits (included in cost of products sold) | | $ | 268 |
| | $ | 211 |
| | $ | 727 |
| | $ | 540 |
|
International - AbbVie's share of profits (included in net revenues) | | 114 |
| | 64 |
| | 306 |
| | 175 |
|
Global - AbbVie's share of other costs (included in respective line items) | | 75 |
| | 70 |
| | 209 |
| | 195 |
|
|
| | | | |
20172023 Form 10-Q | | 128 |
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 selling, general and administrative (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.
The following table shows the profit and cost sharing relationship between Genentech and AbbVie: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Genentech's share of profits, including royalties (included in cost of products sold) | | $ | 214 | | | $ | 196 | | | $ | 416 | | | $ | 374 | |
AbbVie's share of sales and marketing costs from U.S. collaboration (included in SG&A) | | 8 | | | 5 | | | 19 | | | 17 | |
AbbVie's share of development costs (included in R&D) | | 30 | | | 31 | | | 58 | | | 58 | |
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, 2016 | $ | 15,416 |
|
Foreign currency translation adjustments | 332 |
|
Balance as of September 30, 2017 | $ | 15,748 |
|
| | | | | |
(in millions) | |
Balance as of December 31, 2022 | $ | 32,156 | |
Foreign currency translation adjustments | 68 | |
Balance as of June 30, 2023 | $ | 32,224 | |
The latestcompany performs its annual goodwill impairment assessment of goodwill was completed in the third quarter of 2017. As of September 30, 2017, there were no accumulated goodwill impairment losses. Future impairment tests for goodwill will be performed annually in the third quarter, or earlier if impairment indicators exist.
As of June 30, 2023, there were no accumulated goodwill impairment losses.
Intangible Assets, Net
The following table summarizes intangible assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
(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 | $ | 87,702 | | | $ | (28,400) | | | $ | 59,302 | | | $ | 87,698 | | | $ | (25,003) | | | $ | 62,695 | |
License agreements | 8,474 | | | (5,207) | | | 3,267 | | | 8,474 | | | (4,642) | | | 3,832 | |
Total definite-lived intangible assets | 96,176 | | | (33,607) | | | 62,569 | | | 96,172 | | | (29,645) | | | 66,527 | |
Indefinite-lived intangible assets | 293 | | | — | | | 293 | | | 912 | | | — | | | 912 | |
Total intangible assets, net | $ | 96,469 | | | $ | (33,607) | | | $ | 62,862 | | | $ | 97,084 | | | $ | (29,645) | | | $ | 67,439 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
(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 | $ | 16,456 |
| | $ | (4,805 | ) | | $ | 11,651 |
| | $ | 16,464 |
| | $ | (4,256 | ) | | $ | 12,208 |
|
License agreements | 7,869 |
| | (1,343 | ) | | 6,526 |
| | 7,809 |
| | (1,110 | ) | | 6,699 |
|
Total definite-lived intangible assets | 24,325 |
| | (6,148 | ) | | 18,177 |
| | 24,273 |
| | (5,366 | ) | | 18,907 |
|
Indefinite-lived research and development | 9,990 |
| | — |
| | 9,990 |
| | 9,990 |
| | — |
| | 9,990 |
|
Total intangible assets, net | $ | 34,315 |
| | $ | (6,148 | ) | | $ | 28,167 |
| | $ | 34,263 |
| | $ | (5,366 | ) | | $ | 28,897 |
|
Definite-Lived Intangible Assets
Amortization expense was $268 million$2.1 billion for the three months and $808 million$4.0 billion for the ninesix months ended SeptemberJune 30, 20172023 and $208 million$1.8 billion for the three months and $554 million$3.7 billion for the ninesix months ended SeptemberJune 30, 2016.2022. Amortization expense was included in cost of products sold in the condensed consolidated statements of earnings.
For the nine months ended September 30, 2017, noThe company monitors intangible assets for impairment charges were recorded toon a quarterly basis. The definite-lived intangible assets. For the nine months ended September 30, 2016, an impairment charge of $39 million was recordedasset related to certain developed product rightsImbruvica in the United States duehas a carrying value of $4.3 billion as of June 30, 2023. Estimated future cash flows are not significantly higher than the intangible asset’s carrying value, reflecting the company’s current expectations of the impact of the Inflation Reduction Act
| | | | | |
2023 Form 10-Q | | 9 |
of 2022. Future changes to a decline in the market forcompany’s estimates of the product. The fair value was determined based on a discounted cash flow analysisimpact of the Inflation Reduction Act and the charge was includedpotential of government selection for price negotiations as well as regulatory, market and competitive developments could unfavorably impact the company’s ability to recover the carrying value of the related intangible asset. It is reasonably possible that an intangible asset impairment may occur in costfuture periods, which may have a material effect on AbbVie’s results of products sold in the condensed consolidated statement of earnings.operations.
Indefinite-Lived Intangible Assets
The indefinite-livedIndefinite-lived intangible assets represent acquired IPR&D associated with products that have not yet received regulatory approval. The indefinite-lived intangible assets as of September 30, 2017 and December 31, 2016 primarily related to the acquisitions of Stemcentrx and BI compounds. See Note 4 for additional information. The latestcompany performs its annual impairment assessment of indefinite-lived intangible assets was completed in the third quarter of 2017. No impairment charges were recorded for the nine months ended September 30, 2017 and 2016. Future impairment tests for indefinite-lived intangible assets will be performed annually in the third quarter, or earlier if impairment indicators exist.
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 statement of earnings for the first quarter of 2023.
Note 7 Integration and Restructuring Plans 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 $2.4 billion through June 30, 2023. These costs consist 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 expenses.
The following table summarizes the charges (benefits) associated with the Allergan acquisition integration plan: | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(in millions) | | 2023 | 2022 | | 2023 | | 2022 |
Cost of products sold | | $ | 32 | | $ | 26 | | | $ | 46 | | | $ | 57 | |
Research and development | | 1 | | 1 | | | 1 | | | 10 | |
Selling, general and administrative | | 51 | | 76 | | | 95 | | | 146 | |
Total charges | | $ | 84 | | $ | 103 | | | $ | 142 | | | $ | 213 | |
The following table summarizes the cash activity in the recorded liability associated with the Allergan integration plan for the six months ended June 30, 2023: | | | | | |
(in millions) | |
Accrued balance as of December 31, 2022 | $ | 107 | |
Charges | 135 | |
Payments and other adjustments | (195) | |
Accrued balance as of June 30, 2023 | $ | 47 | |
|
| | | | |
20172023 Form 10-Q | | 1310 |
Note 7Other Restructuring Plans
AbbVie recorded restructuring charges of $7$18 million for the three months and $34$45 million for the ninesix months ended SeptemberJune 30, 20172023 and $5$36 million for the three months and $35$93 million for the ninesix months ended SeptemberJune 30, 2016.2022.
The following table summarizes the cash activity in the restructuring reserve for the ninesix months ended SeptemberJune 30, 2017:2023: | | | | | |
(in millions) | |
Accrued balance as of December 31, 2022 | $ | 176 | |
Restructuring charges | 24 | |
Payments and other adjustments | (51) | |
Accrued balance as of June 30, 2023 | $ | 149 | |
|
| | | |
(in millions) | |
Accrued balance as of December 31, 2016 | $ | 87 |
|
Restructuring charges | 34 |
|
Payments and other adjustments | (65 | ) |
Accrued balance as of September 30, 2017 | $ | 56 |
|
Note 8 Financial Instruments and Fair Value Measures
Risk Management Policy
See Note 1011 to the company'scompany’s Annual Report on Form 10-K for the year ended December 31, 20162022 for a summary of AbbVie'sAbbVie’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 $3.0$2.2 billion at SeptemberJune 30, 20172023 and $2.2$1.7 billion at December 31, 2016,2022, are designated as cash flow hedges and are recorded at fair value. The durations of these forward exchange contracts were generally less than eighteen18 months. Accumulated gains and losses as of SeptemberJune 30, 2017 will be2023 are reclassified from accumulated other comprehensive lossincome (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 included in AOCI. This gain is reclassified to interest expense, net over the term of the related debt.
The company was a party to interest rate swap contracts designated as cash flow hedges that matured in November 2022. The effect of the hedge contracts was to change a floating-rate interest obligation to a fixed rate for that portion of the floating-rate debt. Realized and unrealized gains or losses were included in AOCI and reclassified to interest expense, net over the lives of the floating-rate debt.
In June 2023, the company entered into a cross-currency swap contract 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 are included in AOCI and are 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 $7.4$10.7 billion at SeptemberJune 30, 20172023 and $6.6$6.5 billion at December 31, 2016.
2022.
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. In the fourth quarter of 2016, theThe company issued €3.6 billionhad an aggregate principal amount of senior Euro notes designated as net investment hedges of €5.4 billion at June 30, 2023 and €5.9 billion at December 31, 2022. In addition, the company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling €4.2 billion, SEK1.4 billion, CAD750 million and CHF50 million at June 30, 2023 and €4.3 billion, SEK2.0 billion, CAD750 million and CHF90 million at December 31, 2022. The company uses the principal amountsspot method of this foreign denominated debtassessing hedge effectiveness for derivative instruments designated as net investment hedges. Realized and unrealized gains and losses from these hedges are included in AOCI.AOCI and the
AbbVie | | | | | |
2023 Form 10-Q | | 11 |
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 hedgeswap contracts designated as fair value hedges with notional amounts totaling $11.8$5.0 billion at SeptemberJune 30, 20172023 and $4.5 billion at December 31, 2016.2022. 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.
|
| |
2017 Form 10-Q | | 14 |
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, 2017 | December 31, 2016 | | Balance sheet caption | September 30, 2017 | December 31, 2016 |
Foreign currency forward exchange contracts | | | | | | | |
Designated as cash flow hedges | Prepaid expenses and other | $ | 1 |
| $ | 170 |
| | Accounts payable and accrued liabilities | $ | 150 |
| $ | 5 |
|
Designated as cash flow hedges | Other assets | — |
| — |
| | Other long-term liabilities | 6 |
| — |
|
Not designated as hedges | Prepaid expenses and other | 52 |
| 55 |
| | Accounts payable and accrued liabilities | 47 |
| 33 |
|
Interest rate swaps designated as fair value hedges | Other assets | — |
| — |
| | Other long-term liabilities | 295 |
| 338 |
|
Total derivatives | | $ | 53 |
| $ | 225 |
| | | $ | 498 |
| $ | 376 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair value – Derivatives in asset position | | Fair value – Derivatives in liability position |
(in millions) | Balance sheet caption | June 30, 2023 | December 31, 2022 | | Balance sheet caption | June 30, 2023 | December 31, 2022 |
Foreign currency forward exchange contracts | | | | | | | |
Designated as cash flow hedges | Prepaid expenses and other | $ | 32 | | $ | 49 | | | Accounts payable and accrued liabilities | $ | 9 | | $ | 8 | |
Designated as cash flow hedges | Other assets | 1 | | 1 | | | Other long-term liabilities | 1 | | — | |
Designated as net investment hedges | Prepaid expenses and other | 3 | | 6 | | | Accounts payable and accrued liabilities | 80 | | 36 | |
Designated as net investment hedges | Other assets | 23 | | 74 | | | Other long-term liabilities | 33 | | 47 | |
Not designated as hedges | Prepaid expenses and other | 44 | | 33 | | | Accounts payable and accrued liabilities | 41 | | 41 | |
Cross-currency swap contracts | | | | | | | |
Designated as cash flow hedges | Prepaid expenses and other | 9 | | — | | | Accounts payable and accrued liabilities | — | | — | |
Interest rate swap contracts | | | | | | | |
Designated as fair value hedges | Prepaid expenses and other | — | | — | | | Accounts payable and accrued liabilities | 1 | | 17 | |
Designated as fair value hedges | Other assets | — | | — | | | Other long-term liabilities | 377 | | 375 | |
Total derivatives | | $ | 112 | | $ | 163 | | | | $ | 542 | | $ | 524 | |
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.
| | | | | |
2023 Form 10-Q | | 12 |
The following table presents the pre-tax amounts of gains (losses) from derivative instruments recognized in other comprehensive income/(loss):loss: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Foreign currency forward exchange contracts | | | | | | | | |
Designated as cash flow hedges | | $ | 14 | | | $ | 53 | | | $ | 5 | | | $ | 47 | |
Designated as net investment hedges | | 6 | | | 304 | | | (88) | | | 386 | |
Cross-currency swap contracts designated as cash flow hedges | | 9 | | | — | | | 9 | | | — | |
Interest rate swap contracts designated as cash flow hedges | | — | | | 2 | | | — | | | 6 | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Foreign currency forward exchange contracts | | $ | (114 | ) | | $ | (5 | ) | | $ | (253 | ) | | $ | 7 |
|
The amount of hedge ineffectiveness was insignificant for all periods presented. Assuming market rates remain constant through contract maturities, the company expects to transferreclassify pre-tax unrealized lossesgains of $117$29 million into cost of products sold for foreign currency cash flow hedges, pre-tax gains of $1 million into net foreign exchange loss for cross-currency swap cash flow hedges and pre-tax gains of $24 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 a pre-tax loss in other comprehensive income (loss)loss pre-tax gains of $142$36 million for the three months and $481pre-tax losses of $126 million for the ninesix months ended SeptemberJune 30, 2017.2023 and pre-tax gains of $402 million for the three months and pre-tax gains of $501 million for the six months ended June 30, 2022.
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 effective portions of 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 | | 2017 | | 2016 | | 2017 | | 2016 |
Foreign currency forward exchange contracts | | | | | | | | | |
Designated as cash flow hedges | Cost of products sold | | $ | 38 |
| | $ | 4 |
| | $ | 101 |
| | $ | 23 |
|
Not designated as hedges | Net foreign exchange loss | | (17 | ) | | (15 | ) | | (88 | ) | | (122 | ) |
Non-designated treasury rate lock agreements | Other expense, net | | — |
| | — |
| | — |
| | (12 | ) |
Interest rate swaps designated as fair value hedges | Interest expense, net | | 11 |
| | (49 | ) | | 43 |
| | 321 |
|
Total | | | $ | 32 |
| | $ | (60 | ) | | $ | 56 |
| | $ | 210 |
|
The gain (loss) related to outstanding interest rate swaps designated as fair value hedges is recognized in interest expense, net and directly offsets the (loss) gain on the underlying hedged item, the fixed-rate debt, resulting in no net impact to interest expense, net for all periods presented.
|
| |
2017 Form 10-Q | | 15 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended June 30, | | Six months ended June 30, |
(in millions) | Statement of earnings caption | | 2023 | | 2022 | | 2023 | | 2022 |
Foreign currency forward exchange contracts | | | | | | | | | |
Designated as cash flow hedges | Cost of products sold | | $ | 26 | | | $ | 18 | | | $ | 56 | | | $ | 26 | |
Designated as net investment hedges | Interest expense, net | | 29 | | | 24 | | | 57 | | | 38 | |
Not designated as hedges | Net foreign exchange loss | | 4 | | | (123) | | | 34 | | | (164) | |
Treasury rate lock agreements designated as cash flow hedges | Interest expense, net | | 6 | | | 6 | | | 12 | | | 12 | |
Cross-currency swap contracts designated as cash flow hedges | Net foreign exchange loss | | 8 | | | — | | | 8 | | | — | |
Interest rate swap contracts | | | | | | | | | |
Designated as cash flow hedges | Interest expense, net | | — | | | (1) | | | — | | | (3) | |
Designated as fair value hedges | Interest expense, net | | (21) | | | (99) | | | 14 | | | (283) | |
Debt designated as hedged item in fair value hedges | Interest expense, net | | 21 | | | 99 | | | (14) | | | 283 | |
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.
| | | | | |
2023 Form 10-Q | | 13 |
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 SeptemberJune 30, 2017:2023: | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 | $ | 8,759 | | | $ | 4,697 | | | $ | 4,062 | | | $ | — | |
Money market funds and time deposits | 10 | | | — | | | 10 | | | — | |
Debt securities | 30 | | | — | | | 30 | | | — | |
Equity securities | 131 | | | 107 | | | 24 | | | — | |
| | | | | | | |
Cross-currency swap contracts | 9 | | | — | | | 9 | | | — | |
Foreign currency contracts | 103 | | | — | | | 103 | | | — | |
| | | | | | | |
Total assets | $ | 9,042 | | | $ | 4,804 | | | $ | 4,238 | | | $ | — | |
Liabilities | | | | | | | |
Interest rate swap contracts | $ | 378 | | | $ | — | | | $ | 378 | | | $ | — | |
| | | | | | | |
Foreign currency contracts | 164 | | | — | | | 164 | | | — | |
Contingent consideration | 19,151 | | | — | | | — | | | 19,151 | |
Total liabilities | $ | 19,693 | | | $ | — | | | $ | 542 | | | $ | 19,151 | |
|
| | | | | | | | | | | | | | | |
| | | 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 | $ | 8,446 |
| | $ | 669 |
| | $ | 7,777 |
| | $ | — |
|
Time deposits | 500 |
| | — |
| | 500 |
| | — |
|
Debt securities | 2,475 |
| | — |
| | 2,475 |
| | — |
|
Equity securities | 57 |
| | 57 |
| | — |
| | — |
|
Foreign currency contracts | 53 |
| | — |
| | 53 |
| | — |
|
Total assets | $ | 11,531 |
| | $ | 726 |
| | $ | 10,805 |
| | $ | — |
|
Liabilities | | | | | | | |
Interest rate hedges | $ | 295 |
| | $ | — |
| | $ | 295 |
| | $ | — |
|
Foreign currency contracts | 203 |
| | — |
| | 203 |
| | — |
|
Contingent consideration | 4,455 |
| | — |
| | — |
| | 4,455 |
|
Total liabilities | $ | 4,953 |
| | $ | — |
| | $ | 498 |
| | $ | 4,455 |
|
|
| |
2017 Form 10-Q | | 16 |
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, 2016:2022: | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 | $ | 9,201 | | | $ | 4,201 | | | $ | 5,000 | | | $ | — | |
Money market funds and time deposits | 21 | | | — | | | 21 | | | — | |
Debt securities | 28 | | | — | | | 28 | | | — | |
Equity securities | 91 | | | 59 | | | 32 | | | — | |
Foreign currency contracts | 163 | | | — | | | 163 | | | — | |
Total assets | $ | 9,504 | | | $ | 4,260 | | | $ | 5,244 | | | $ | — | |
Liabilities | | | | | | | |
Interest rate swap contracts | $ | 392 | | | $ | — | | | $ | 392 | | | $ | — | |
Foreign currency contracts | 132 | | | — | | | 132 | | | — | |
Contingent consideration | 16,384 | | | — | | | — | | | 16,384 | |
Total liabilities | $ | 16,908 | | | $ | — | | | $ | 524 | | | $ | 16,384 | |
|
| | | | | | | | | | | | | | | |
| | | 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 | $ | 5,100 |
| | $ | 1,191 |
| | $ | 3,909 |
| | $ | — |
|
Time deposits | 1,014 |
| | — |
| | 1,014 |
| | — |
|
Debt securities | 1,974 |
| | — |
| | 1,974 |
| | — |
|
Equity securities | 76 |
| | 76 |
| | — |
| | — |
|
Foreign currency contracts | 225 |
| | — |
| | 225 |
| | — |
|
Total assets | $ | 8,389 |
| | $ | 1,267 |
| | $ | 7,122 |
| | $ | — |
|
Liabilities | | | | | | | |
Interest rate hedges | $ | 338 |
| | $ | — |
| | $ | 338 |
| | $ | — |
|
Foreign currency contracts | 38 |
| | — |
| | 38 |
| | — |
|
Contingent consideration | 4,213 |
| | — |
| | — |
| | 4,213 |
|
Total liabilities | $ | 4,589 |
| | $ | — |
| | $ | 376 |
| | $ | 4,213 |
|
The fair values ofMoney market funds and time deposits approximate their amortized cost due to the short maturities of these instruments. The fair values of available-for-sale debtare valued using relevant observable market inputs including quoted prices for similar assets and interest rate curves. Equity securities were determined based on prices obtained from commercial pricing services. Available-for-sale equity securities consistsprimarily consist of investments for which the fair values were determined by using the published market priceprices per unit multiplied by the number of units held, without consideration of transaction costs. The derivatives entered into by the company were valued using publicized spot curves forobservable market inputs including published interest rate hedgescurves and publicizedboth forward curvesand spot prices for foreign currency contracts. currencies.
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 still in development.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
| | | | | |
2023 Form 10-Q | | 14 |
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. At September 30, 2017, a 50 basis point increase/decrease in
The fair value of the assumed discount rate would have decreased/increasedcompany's contingent consideration liabilities was calculated using the following significant unobservable inputs: | | | | | | | | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
(in millions) | Range | Weighted average(a) | | Range | Weighted average(a) |
Discount rate | 4.8% - 5.8% | 4.9% | | 4.7%- 5.1% | 4.8% |
Probability of payment for unachieved milestones | 100% - 100% | 100% | | 100% - 100% | 100% |
Probability of payment for royalties by indication(b) | 89% - 100% | 99% | | 56% - 100% | 99% |
| | | | | |
Projected year of payments | 2023 - 2034 | 2028 | | 2023 - 2034 | 2028 |
(a) Unobservable inputs were weighted by the relative fair value of the contingent consideration liabilities by approximately $160 million. Additionally, at September 30, 2017, a five percentage point increase/decrease inliabilities.
(b) Excluding approved indications, the assumedestimated probability of success across all potential indications would have increased/decreased the value of the contingent consideration liabilities by approximately $340 million.payment was 89% at June 30, 2023 and 56% at December 31, 2022.
There have been no transfers of assets or liabilities betweeninto or out of Level 3 of the fair value measurement levels.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) | | 2017 | | 2016 |
Beginning balance | | $ | 4,213 |
| | $ | — |
|
Additions (see Note 4) | | — |
| | 3,985 |
|
Change in fair value recognized in net earnings | | 547 |
| | 143 |
|
Milestone payments | | (305 | ) | | — |
|
Ending balance | | $ | 4,455 |
| | $ | 4,128 |
|
| | | | | | | | | | | | | | |
| | Six months ended June 30, |
(in millions) | | 2023 | | 2022 |
Beginning balance | | $ | 16,384 | | | $ | 14,887 | |
Change in fair value recognized in net earnings | | 3,424 | | | 861 | |
Payments | | (657) | | | (570) | |
Ending balance | | $ | 19,151 | | | $ | 15,178 | |
The change in fair value recognized in net earnings wasis recorded in other expense, net in the condensed consolidated statements of earnings for both the three and nine months ended September 30, 2017 and 2016.earnings.
|
| |
2017 Form 10-Q | | 17 |
In addition to the financial instruments that the company carries at fair value on the condensed consolidated balance sheets, certainCertain 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 SeptemberJune 30, 20172023 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 | $ | 5,203 | | $ | 5,096 | | | $ | 4,816 | | | $ | 280 | | | $ | — | |
Long-term debt and finance lease obligations, excluding fair value hedges | 56,153 | | 51,394 | | | 50,869 | | | 525 | | | — | |
Total liabilities | $ | 61,356 | | $ | 56,490 | | | $ | 55,685 | | | $ | 805 | | | $ | — | |
|
| | | | | | | | | | | | | | | | | | |
| | | | 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) |
Assets | | | | | | | | |
Investments | $ | 47 |
| $ | 47 |
| | $ | — |
| | $ | 2 |
| | $ | 45 |
|
Total assets | $ | 47 |
| $ | 47 |
| | $ | — |
| | $ | 2 |
| | $ | 45 |
|
Liabilities | | | | | | | | |
Short-term borrowings | $ | 800 |
| $ | 800 |
| | $ | — |
| | $ | 800 |
| | $ | — |
|
Current portion of long-term debt and lease obligations | 3,021 |
| 3,027 |
| | 3,004 |
| | 23 |
| | — |
|
Long-term debt and lease obligations, excluding fair value hedges | 34,269 |
| 35,647 |
| | 33,575 |
| | 2,072 |
| | — |
|
Total liabilities | $ | 38,090 |
| $ | 39,474 |
| | $ | 36,579 |
| | $ | 2,895 |
| | $ | — |
|
| | | | | |
2023 Form 10-Q | | 15 |
The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 20162022 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 | | | | | | | | |
Short-term borrowings | $ | 1 | | $ | 1 | | | $ | — | | | $ | 1 | | | $ | — | |
Current portion of long-term debt and finance lease obligations, excluding fair value hedges | 4,152 | | 4,121 | | | 3,930 | | | 191 | | | — | |
Long-term debt and finance lease obligations, excluding fair value hedges | 59,463 | | 54,073 | | | 53,365 | | | 708 | | | — | |
Total liabilities | $ | 63,616 | | $ | 58,195 | | | $ | 57,295 | | | $ | 900 | | | $ | — | |
|
| | | | | | | | | | | | | | | | | | |
| | | | 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) |
Assets | | | | | | | | |
Investments | $ | 42 |
| $ | 42 |
| | $ | — |
| | $ | 5 |
| | $ | 37 |
|
Total assets | $ | 42 |
| $ | 42 |
| | $ | — |
| | $ | 5 |
| | $ | 37 |
|
Liabilities | | | | | | | | |
Short-term borrowings | $ | 377 |
| $ | 377 |
| | $ | — |
| | $ | 377 |
| | $ | — |
|
Current portion of long-term debt and lease obligations | 25 |
| 25 |
| | — |
| | 25 |
| | — |
|
Long-term debt and lease obligations, excluding fair value hedges | 36,778 |
| 36,664 |
| | 34,589 |
| | 2,075 |
| | — |
|
Total liabilities | $ | 37,180 |
| $ | 37,066 |
| | $ | 34,589 |
| | $ | 2,477 |
| | $ | — |
|
Investments primarily consist ofAbbVie also holds investments in equity securities that do not have readily determinable fair values. The company records these investments at cost method investments, for which the company takes into consideration recent transactions and financial information of the investee, which represents a Level 3 basis ofremeasures them to fair value measurement.based on certain observable price changes or impairment events as they occur. The fair values of short-term borrowings approximate the carrying values due to the short maturitiesamount of these instruments.
The fair values of long-term debt, excluding fair value hedges and the term loans, were determined by using the published market price for the debt instruments, without consideration of transaction costs, which represents a Level 1 basis of fair value measurement. The fair values of the term loans were determined based on a discounted cash flow analysis using quoted market rates, which represents a Level 2 basis of fair value measurement. The counterparties to financial instruments consist of select major international financial institutions.
|
| |
2017 Form 10-Q | | 18 |
Available-for-sale Securities
Substantially all of the company’s investments in debt and equity securities were classified as available-for-sale. Debt securities classified as short-term were $549was $124 million as of SeptemberJune 30, 20172023 and $309$129 million as of December 31, 2016. Long-term debt securities mature primarily within five years. Estimated fair values of available-for-sale securities were generally determined based on prices obtained from commercial pricing services.
The following table is a summary of available-for-sale securities by type2022. No significant cumulative upward or downward adjustments have been recorded for these investments as of SeptemberJune 30, 2017:
|
| | | | | | | | | | | | | | | |
| Amortized Cost | | Gross unrealized | | Fair Value |
(in millions) | | Gains | | Losses | |
Asset backed securities | $ | 904 |
| | $ | 1 |
| | $ | (2 | ) | | $ | 903 |
|
Corporate debt securities | 1,424 |
| | 4 |
| | (1 | ) | | 1,427 |
|
Other debt securities | 145 |
| | — |
| | — |
| | 145 |
|
Equity securities | 18 |
| | 41 |
| | (2 | ) | | 57 |
|
Total | $ | 2,491 |
| | $ | 46 |
| | $ | (5 | ) | | $ | 2,532 |
|
The following table is a summary of available-for-sale securities by type as of December 31, 2016:
|
| | | | | | | | | | | | | | | |
| Amortized Cost | | Gross unrealized | | Fair Value |
(in millions) | | Gains | | Losses | |
Asset backed securities | $ | 891 |
| | $ | 1 |
| | $ | (4 | ) | | $ | 888 |
|
Corporate debt securities | 961 |
| | 1 |
| | (2 | ) | | 960 |
|
Other debt securities | 127 |
| | — |
| | (1 | ) | | 126 |
|
Equity securities | 18 |
| | 60 |
| | (2 | ) | | 76 |
|
Total | $ | 1,997 |
| | $ | 62 |
| | $ | (9 | ) | | $ | 2,050 |
|
AbbVie had no other-than-temporary impairments as of September 30, 2017. Net realized gains were $39 million for the three months and $49 million for the nine months ended September 30, 2017. Net realized gains for the three and nine months ended September 30, 2016 were insignificant.
2023.
Concentrations of Risk
The functional currency of the company’s Venezuela operations is the U.S. dollar due to the hyperinflationary status of the Venezuelan economy. During the first quarter of 2016, in consideration of declining economic conditions in Venezuela and a decline in transactions settled at the official rate, AbbVie determined that its net monetary assets denominated in the Venezuelan bolivar (VEF) were no longer expected to be settled at the official rate of 10 VEF per U.S. dollar, but rather at the Divisa Complementaria (DICOM) rate. Therefore, during the first quarter of 2016, AbbVie recorded a charge of $298 million to net foreign exchange loss to revalue its bolivar-denominated net monetary assets using the DICOM rate then in effect of approximately 270 VEF per U.S. dollar. As of September 30, 2017 and December 31, 2016, AbbVie’s net monetary assets in Venezuela were insignificant.
AbbVie continues to do business with foreign governments in certain countries, including Greece, Portugal, Italy and Spain, which have historically experienced challenges in credit and economic conditions. Substantially all of AbbVie’s trade receivables in Greece, Portugal, Italy and Spain are with government health systems. Outstanding governmental receivables in these countries, net of allowances for doubtful accounts, totaled $246 million as of September 30, 2017 and $244 million as of December 31, 2016. The company also continues to do business with foreign governments in certain oil-exporting countries that have recently experienced a deterioration in economic conditions, including Saudi Arabia and Russia, which may result in delays in the collection of receivables. Outstanding governmental receivables related to Saudi Arabia, net of allowances for doubtful accounts, were $141 million as of September 30, 2017 and $122 million as of December 31, 2016. Outstanding governmental receivables related to Russia, net of allowances for doubtful accounts, were $142 million as of September 30, 2017 and $110 million as of December 31, 2016. Global economic conditions and customer-specific factors may require the company to periodically re-evaluate the collectability of its receivables and the company could potentially incur credit losses.
|
| |
2017 Form 10-Q | | 19 |
Of total net accounts receivable, three U.S. wholesalers accounted for 56%75% as of SeptemberJune 30, 20172023 and 51%82% as of December 31, 2016,2022, and substantially all of AbbVie’s pharmaceutical product net revenues in the United States were to these three wholesalers.
HUMIRAHumira (adalimumab) is AbbVie’s single largest product and accounted for approximately 66%29% of AbbVie’s total net revenues for the ninesix months ended SeptemberJune 30, 20172023 and 63%36% for the ninesix months ended SeptemberJune 30, 2016.2022.
Debt and Credit Facilities
Long-Term Debt
Short-term borrowings included commercial paperIn 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 $800 million2.80% senior notes at maturity.
In May 2023, the company repaid $1.0 billion aggregate principal amount of 2.85% senior notes at maturity.
In January 2022, the company repaid $2.9 billion aggregate principal amount of 3.45% senior notes that were scheduled to mature in March 2022. This repayment was made by exercising, under the terms of the notes, 60-day early redemption at 100% of the principal amount.
In February 2022, the company refinanced its $2.0 billion floating rate five-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 at a lower floating rate. All other significant terms of the loan, including the maturity date, remained unchanged after the refinancing.
Short-Term Borrowings
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 June 30, 2023, the company was in compliance with all covenants, and commitment fees under the credit facility were insignificant. No amounts were outstanding under the company's credit facilities as of SeptemberJune 30, 20172023 and $377 million as of December 31, 2016. The weighted-average interest rate on commercial paper borrowings was 1.2% for the nine months ended September 30, 2017 and 0.6% for the nine months ended September 30, 2016.
Note 9 Post-Employment Benefits2022.
| | | | | |
2023 Form 10-Q | | 16 |
Note 9Post-Employment Benefits
The following is a summary oftable summarizes net periodic benefit costscost relating to the company’s defined benefit and other post-employment plans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Defined benefit plans | | Other post- employment plans |
| Three months ended June 30, | | Six months ended June 30, | | Three months ended June 30, | | Six months ended June 30, |
(in millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
Service cost | $ | 67 | | | $ | 113 | | | $ | 135 | | | $ | 229 | | | $ | 10 | | | $ | 13 | | | $ | 18 | | | $ | 25 | |
Interest cost | 109 | | | 75 | | | 216 | | | 149 | | | 10 | | | 6 | | | 19 | | | 12 | |
Expected return on plan assets | (182) | | | (179) | | | (362) | | | (359) | | | — | | | — | | | — | | | — | |
Amortization of prior service cost (credit) | 1 | | | — | | | 1 | | | 1 | | | (9) | | | (9) | | | (18) | | | (19) | |
Amortization of actuarial loss | 4 | | | 59 | | | 8 | | | 116 | | | 3 | | | 6 | | | 6 | | | 13 | |
Net periodic benefit cost (credit) | $ | (1) | | | $ | 68 | | | $ | (2) | | | $ | 136 | | | $ | 14 | | | $ | 16 | | | $ | 25 | | | $ | 31 | |
The components of net periodic benefit cost other than service cost are included in other expense, net in the condensed consolidated statements of earnings.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
Service cost | $ | 59 |
| | $ | 52 |
| | $ | 176 |
| | $ | 158 |
| | $ | 6 |
| | $ | 6 |
| | $ | 19 |
| | $ | 19 |
|
Interest cost | 52 |
| | 50 |
| | 153 |
| | 151 |
| | 6 |
| | 6 |
| | 18 |
| | 18 |
|
Expected return on plan assets | (96 | ) | | (88 | ) | | (286 | ) | | (266 | ) | | — |
| | — |
| | — |
| | — |
|
Amortization of actuarial losses and prior service costs | 27 |
| | 22 |
| | 80 |
| | 64 |
| | 1 |
| | — |
| | 1 |
| | — |
|
Net periodic benefit cost | $ | 42 |
| | $ | 36 |
| | $ | 123 |
| | $ | 107 |
| | $ | 13 |
| | $ | 12 |
| | $ | 38 |
| | $ | 37 |
|
AbbVie's principal domestic defined benefit plan is the AbbVie Pension Plan. AbbVie made voluntary contributions to this plan of $150 million in both the nine months ended September 30, 2017 and 2016.
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) | | 2017 | | 2016 | | 2017 | | 2016 |
Cost of products sold | | $ | 7 |
| | $ | 6 |
| | $ | 20 |
| | $ | 19 |
|
Research and development | | 30 |
| | 6 |
| | 127 |
| | 161 |
|
Selling, general and administrative | | 34 |
| | 35 |
| | 141 |
| | 141 |
|
Pre-tax compensation expense | | 71 |
| | 47 |
| | 288 |
| | 321 |
|
Tax benefit | | 20 |
| | 13 |
| | 85 |
| | 83 |
|
After-tax compensation expense | | $ | 51 |
| | $ | 34 |
| | $ | 203 |
| | $ | 238 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Cost of products sold | | $ | 9 | | | $ | 6 | | | $ | 29 | | | $ | 25 | |
Research and development | | 57 | | | 40 | | | 174 | | | 147 | |
Selling, general and administrative | | 113 | | | 61 | | | 289 | | | 241 | |
Pre-tax compensation expense | | 179 | | | 107 | | | 492 | | | 413 | |
Tax benefit | | (30) | | | (21) | | | (85) | | | (77) | |
After-tax compensation expense | | $ | 149 | | | $ | 86 | | | $ | 407 | | | $ | 336 | |
Stock Options
During the ninesix months ended SeptemberJune 30, 2017,2023, primarily in connection with the company's annual grant, AbbVie granted 1.20.6 million stock options with a weighted-average grant-date fair value of $9.80.$29.89. As of SeptemberJune 30, 2017, $202023, $9 million of unrecognized compensation cost related to stock options is expected to be recognized as expense over approximately the next two years.
|
| |
2017 Form 10-Q | | 20 |
RSAs, RSUs and Performance Shares
During the ninesix months ended SeptemberJune 30, 2017,2023, primarily in connection with the company's annual grant, AbbVie granted 6.15.8 million RSUs and performance shares with a weighted-average grant-date fair value of $61.68.$149.86. As of SeptemberJune 30, 2017, $2922023, $802 million of unrecognized compensation cost related to RSAs, RSUs and performance shares is expected to be recognized as expense over approximately the next two years.
| | | | | |
2023 Form 10-Q | | 17 |
Cash Dividends
The following table summarizes quarterly cash dividends declared during 20172023 and 2016:
|
| | | | | | | | | | | | | | |
2017 | | 2016 |
Date Declared | | Payment Date | | Dividend Per Share | | Date Declared | | Payment Date | | Dividend Per Share |
10/27/17 | | 02/15/18 | | $ | 0.71 |
| | 10/28/16 | | 02/15/17 | | $ | 0.64 |
|
09/08/17 | | 11/15/17 | | $ | 0.64 |
| | 09/09/16 | | 11/15/16 | | $ | 0.57 |
|
06/22/17 | | 08/15/17 | | $ | 0.64 |
| | 06/16/16 | | 08/15/16 | | $ | 0.57 |
|
02/16/17 | | 05/15/17 | | $ | 0.64 |
| | 02/18/16 | | 05/16/16 | | $ | 0.57 |
|
2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | 2022 |
Date Declared | | Payment Date | | Dividend Per Share | | Date Declared | | Payment Date | | Dividend Per Share |
06/22/23 | | 08/15/23 | | $ | 1.48 | | | 10/28/22 | | 02/15/23 | | $ | 1.48 | |
02/16/23 | | 05/15/23 | | $ | 1.48 | | | 09/09/22 | | 11/15/22 | | $ | 1.41 | |
| | | | | | 06/23/22 | | 08/15/22 | | $ | 1.41 | |
| | | | | | 02/17/22 | | 05/16/22 | | $ | 1.41 | |
Stock Repurchase Program
On February 16, 2017, AbbVie's board of directors authorized a $5.0 billion increase to AbbVie's existing 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 direction depending on the company's cash flows, net debt level and market conditions.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 approximately 7.810 million shares in the open market for $500 million$1.6 billion during the ninesix months ended SeptemberJune 30, 2017. During2023 and 8 million shares for $1.1 billion during the ninesix months ended SeptemberJune 30, 2017, AbbVie cash-settled $285 million of its open market purchases made at the end of 2016.2022. AbbVie's remaining stock repurchase authorization was $4.5approximately $4.8 billion as of SeptemberJune 30, 2017.
2023.
Accumulated Other Comprehensive Loss
The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the ninesix months ended SeptemberJune 30, 2017:
|
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Foreign currency translation adjustments | | Net investment hedging activities | | Pension and post- employment benefits | | Marketable security activities | | Cash flow hedging activities | | Total |
Balance as of December 31, 2016 | $ | (1,435 | ) | | $ | 140 |
| | $ | (1,513 | ) | | $ | 46 |
| | $ | 176 |
| | $ | (2,586 | ) |
Other comprehensive income (loss) before reclassifications | 602 |
| | (307 | ) | | (37 | ) | | 31 |
| | (229 | ) | | 60 |
|
Net losses (gains) reclassified from accumulated other comprehensive loss | — |
| | — |
| | 58 |
| | (49 | ) | | (96 | ) | | (87 | ) |
Net current-period other comprehensive income (loss) | 602 |
| | (307 | ) | | 21 |
| | (18 | ) | | (325 | ) | | (27 | ) |
Balance as of September 30, 2017 | $ | (833 | ) | | $ | (167 | ) | | $ | (1,492 | ) | | $ | 28 |
| | $ | (149 | ) | | $ | (2,613 | ) |
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 | 178 | | | (168) | | | 39 | | | | | 8 | | | 57 | |
Net gains reclassified from accumulated other comprehensive loss | — | | | (45) | | | (3) | | | | | (62) | | | (110) | |
Net current-period other comprehensive income (loss) | 178 | | | (213) | | | 36 | | | | | (54) | | | (53) | |
Balance as of June 30, 2023 | $ | (1,335) | | | $ | 251 | | | $ | (1,422) | | | | | $ | 254 | | | $ | (2,252) | |
Other comprehensive incomeloss for the ninesix months ended SeptemberJune 30, 20172023 included foreign currency translation adjustments totaling a gain of $602$178 million which was principally due to the impact of the improvement instrengthening of the Euro in the nine months ended September 30, 2017 on the translation of the company’s Euro-denominated assets denominated inand the Euro.offsetting impact of net investment hedging activities totaling a loss of $213 million.
|
| |
2017 Form 10-Q | | 21 |
The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the ninesix months ended SeptemberJune 30, 2016:
|
| | | | | | | | | | | | | | | | | | | |
(in millions) | Foreign currency translation adjustments | | Pension and post- employment benefits | | Marketable security activities | | Cash flow hedging activities | | Total |
Balance as of December 31, 2015 | $ | (1,270 | ) | | $ | (1,378 | ) | | $ | 47 |
| | $ | 40 |
| | $ | (2,561 | ) |
Other comprehensive income before reclassifications | 164 |
| | 7 |
| | 23 |
| | 13 |
| | 207 |
|
Net losses (gains) reclassified from accumulated other comprehensive loss | — |
| | 41 |
| | (4 | ) | | (23 | ) | | 14 |
|
Net current-period other comprehensive income (loss) | 164 |
| | 48 |
| | 19 |
| | (10 | ) | | 221 |
|
Balance as of September 30, 2016 | $ | (1,106 | ) | | $ | (1,330 | ) | | $ | 66 |
| | $ | 30 |
| | $ | (2,340 | ) |
2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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, 2021 | $ | (570) | | | $ | (91) | | | $ | (2,546) | | | | | $ | 308 | | | $ | (2,899) | |
Other comprehensive income (loss) before reclassifications | (1,054) | | | 696 | | | (11) | | | | | 45 | | | (324) | |
Net losses (gains) reclassified from accumulated other comprehensive loss | — | | | (30) | | | 87 | | | | | (30) | | | 27 | |
Net current-period other comprehensive income (loss) | (1,054) | | | 666 | | | 76 | | | | | 15 | | | (297) | |
Balance as of June 30, 2022 | $ | (1,624) | | | $ | 575 | | | $ | (2,470) | | | | | $ | 323 | | | $ | (3,196) | |
Other comprehensive incomeloss for the ninesix months ended SeptemberJune 30, 20162022 included foreign currency translation adjustments totaling a gainloss of $164 million, which was$1.1 billion principally due to the impact of the improvement inweakening of the Euro and Japanese yen in the nine months ended September 30, 2016 on the translation of the company’s Euro-denominated assets denominated inand the Euro and Japanese yen.offsetting impact of net investment hedging activities totaling a gain of $666 million.
| | | | | |
2023 Form 10-Q | | 18 |
The following table below presents the impact on AbbVie’s condensed consolidated statements of earnings for significant amounts reclassified out of each component of AOCI:
|
| | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(in millions) (brackets denote gains) | | 2017 | | 2016 | | 2017 | | 2016 |
Pension and post-employment benefits | | | | | | | | |
Amortization of actuarial losses and other(a) | | $ | 28 |
| | $ | 22 |
| | $ | 81 |
| | $ | 64 |
|
Tax benefit | | (8 | ) | | (8 | ) | | (23 | ) | | (23 | ) |
Total reclassifications, net of tax | | $ | 20 |
| | $ | 14 |
| | $ | 58 |
| | $ | 41 |
|
Cash flow hedging activities | | | | | | | | |
Gains on designated cash flow hedges(b) | | $ | (38 | ) | | $ | (2 | ) | | $ | (101 | ) | | $ | (21 | ) |
Tax expense (benefit) | | — |
| | (2 | ) | | 5 |
| | (2 | ) |
Total reclassifications, net of tax | | $ | (38 | ) | | $ | (4 | ) | | $ | (96 | ) | | $ | (23 | ) |
accumulated other comprehensive loss: | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
(in millions) (brackets denote gains) | 2023 | | 2022 | | 2023 | | 2022 |
Net investment hedging activities | | | | | | | |
Gains on derivative amount excluded from effectiveness testing(a) | $ | (29) | | | $ | (24) | | | $ | (57) | | | $ | (38) | |
Tax expense | 6 | | | 6 | | | 12 | | | 8 | |
Total reclassifications, net of tax | $ | (23) | | | $ | (18) | | | $ | (45) | | | $ | (30) | |
Pension and post-employment benefits | | | | | | | |
Amortization of actuarial losses and other(b) | $ | (1) | | | $ | 56 | | | $ | (3) | | | $ | 111 | |
Tax benefit | — | | | (12) | | | — | | | (24) | |
Total reclassifications, net of tax | $ | (1) | | | $ | 44 | | | $ | (3) | | | $ | 87 | |
Cash flow hedging activities | | | | | | | |
Gains on foreign currency forward exchange contracts(c) | $ | (26) | | | $ | (18) | | | $ | (56) | | | $ | (26) | |
Gains on treasury rate lock agreements(a) | (6) | | | (6) | | | (12) | | | (12) | |
Gains on cross-currency swap contracts(d) | (8) | | | — | | | (8) | | | — | |
Losses on interest rate swap contracts(a) | — | | | 1 | | | — | | | 3 | |
Tax expense | 9 | | | 4 | | | 14 | | | 5 | |
Total reclassifications, net of tax | $ | (31) | | | $ | (19) | | | $ | (62) | | | $ | (30) | |
(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).
(b)(c) Amounts are included in cost of products sold (see Note 8).
(d) Amounts are included in net foreign exchange loss (see Note 8). Note 11 Income Taxes
The effective tax rate was 22% for the three months and 20%26% for the ninesix months ended SeptemberJune 30, 2017 and 21%2023 compared to 22% for the three months and 22%11% for the ninesix months ended SeptemberJune 30, 2016.2022. The effective tax rate in each period differed from the U.S. statutory tax rate of 21% principally due to the benefit fromimpact of foreign operations which reflects the impact of lower income tax rates in locations outside the United States, tax exemptions and incentiveschanges in Puerto Rico and other foreign tax jurisdictionsfair value of contingent consideration and business development activities together with the cost of repatriation decisions.activities. The changeincrease in the effective tax rate for the three and ninesix months ended SeptemberJune 30, 20172023 over the prior year was principallyprimarily due to changes in the jurisdictional mixfair value of earnings, as well ascontingent consideration, tax law changes in Puerto Rico and impairment of certain discrete factors and events, including collaborations, the impact of the prior year non-deductible devaluation loss related to Venezuela and the impact of the adoption of ASU No. 2016-09, which changed the accounting treatment for excess tax benefits associated with stock-based awards. See Note 1 for additional information related to the adoption of this accounting pronouncement.
intangible assets.
Due to the potential for resolution of federal, state and foreign examinations and the expiration of various statutes of limitations, it is reasonably possible that the company’s gross unrecognized tax benefits balance may change within the next twelve12 months by up to $246$603 million. At the time of separation, AbbVie and Abbott Laboratories (Abbott) entered into a tax sharing agreement which provides that Abbott is liable for and has indemnified AbbVie against all income tax liabilities for periods prior to the separation.
|
| | | | |
20172023 Form 10-Q | | 2219 |
Accordingly, Abbott will indemnify and hold AbbVie harmless if the tax positions are settled for amounts in excess of recorded liabilities, and AbbVie will not benefit if prior tax positions are resolved more favorably than recorded amounts.
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. The most significant matters are described below. 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 balanceFor litigation matters discussed below for litigation was approximately $215 million aswhich a loss is probable or reasonably possible, the company is unable to estimate the possible loss or range of September 30, 2017 and $225 million as of December 31, 2016.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.
Several pending lawsuits filed against Unimed Pharmaceuticals, Inc., Solvay Pharmaceuticals, Inc. (a company Abbott acquired in February 2010 and now known as AbbVie Products LLC) and others are consolidated for pre-trial purposes in the United States District Court for the Northern District of Georgia under the Multi-District Litigation (MDL) Rules as In re: AndroGel Antitrust Litigation, MDL No. 2084. These cases, brought by private plaintiffs and the Federal Trade Commission (FTC), generally allege Solvay's patent litigation involving AndroGel was sham litigation and the 2006 patent litigation settlement agreements and related agreements with three generic companies violate federal antitrust laws. Plaintiffs generally seek monetary damages and/or injunctive relief and attorneys' fees. These cases include: (a) four individual plaintiff lawsuits; (b) three purported class actions; and (c) Federal Trade Commission v. Actavis, Inc. et al. Following the district court's dismissal of all plaintiffs' claims, appellate proceedings led to the reinstatement of the claims regarding the patent litigation settlements, which are proceeding in the district court.
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 violatesviolated 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 four individual plaintiff lawsuits and two consolidated purported class actions: one brought by three namedNiaspan direct purchasers of Niaspan and the otherone brought by ten named end-payor purchasers of Niaspan.Niaspan end-payors. The cases are consolidated for pre-trial proceedingspending in the United States District Court for the Eastern District of Pennsylvania for coordinated or consolidated pre-trial proceedings under the MDL Rules as In re: Niaspan Antitrust Litigation, MDL No. 2460. In August 2019, the court certified a class of direct purchasers of Niaspan. In June 2020 and August 2021, the court denied the end-payors' motion to certify a class, which was affirmed on appeal by the United States Court of Appeals for the Third Circuit in April 2023. In October 2016, the Orange County, California District Attorney’s Office filed a lawsuit on behalf of the State of California filed a lawsuit 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 September 2014, the FTCAugust 2019, direct purchasers of AndroGel filed suita 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, against AbbVie and others, alleging that the2006 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. Plaintiffs generally seek monetary damages and/or injunctive relief and attorneys’ fees. 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 settlement with one of thosethe generic companies violatescompanies.
Lawsuits were filed against Forest Laboratories, LLC and others generally alleging that 2012 and 2013 patent litigation settlements involving Bystolic with six generic manufacturers violated federal and state antitrust laws and state unfair and deceptive trade practices and unjust enrichment laws. The FTC's complaint seeksPlaintiffs generally seek monetary damages and/or injunctive relief and injunctive relief. attorneys’ fees. The lawsuits, purported class actions filed on behalf of direct and indirect purchasers of Bystolic, were consolidated as In May 2015, the court dismissed the FTC's claim regarding the patent litigation settlement.
In March 2015, the State of Louisiana filed a lawsuit, State of Louisiana v. Fournier Industrie et Sante, et al., against AbbVie, Abbott and affiliated Abbott entities in Louisiana state court. Plaintiff alleges that patent applications and patent litigation filed and other alleged conduct from the early 2000's and before related to the drug TriCor violated Louisiana State antitrust and unfair trade practices laws. The lawsuit seeks monetary damages and attorneys' fees. In August 2015, the court dismissed the case as time-barred. In December 2016, the appellate court for the state’s appeal remanded for the trial court to determine whether the state is a proper party in interest. On remand, the trial court denied AbbVie’s motion to dismiss.
In August 2013, a putative class action lawsuit, Sidney Hillman Health Center of Rochester, et al. v. AbbVie Inc., et al., was filed against AbbViere: Bystolic Antitrust Litigation in the United States District Court for the NorthernSouthern District of Illinois by three healthcare benefit providersNew York. In February 2023, the court granted Forest Laboratories’ motion to dismiss the cases, dismissing them with prejudice. Plaintiffs are appealing the court’s motion to dismiss ruling.
Government Proceedings
Lawsuits are pending against Allergan and several other manufacturers generally alleging violations
|
| |
2017 Form 10-Q | | 23 |
of Federal Racketeer Influencedthat they improperly promoted and Corrupt Organizations (RICO) statutessold prescription opioid products. Approximately 2,860 matters are pending against Allergan in federal and state deceptive business practice and unjust enrichment laws in connection with reimbursements for certain uses of Depakote from 1998 to 2012. Plaintiffs seek monetary damages and/or equitable relief and attorneys' fees. In February 2017, the court dismissed this lawsuit with prejudice and in October 2017, the United States Court of Appeals for the Seventh Circuit affirmed the dismissal.
In November 2014, a putative class action lawsuit, Medical Mutual of Ohio v. AbbVie Inc., et al., was filed against several manufacturers of testosterone replacement therapies (TRTs), including AbbVie, in the United States District Court for the Northern District of Illinois on behalf of all insurance companies, health benefit providers, and other third party payors who paid for TRTs, including AndroGel. The claims asserted include violationscourts. Most of the federal RICO Act and state consumer fraud and deceptive trade practices laws. The complaint seeks monetary damages and injunctive relief. A similar lawsuit, Allied Services Division Welfare Fund v. AbbVie Inc., et al., filed in the same court in October 2015 on behalf of the same putative class members and a putative class of consumers, was voluntarily dismissed in September 2017.
Product liability cases are pending in which plaintiffs generally allege that AbbVie and other manufacturers of TRTs did not adequately warn about risks of certain injuries, primarily heart attacks, strokes and blood clots. Approximately 4,300 claims are consolidated for pre-trial purposes in the United States District Court for the Northern District of IllinoisOhio under the MDL Rulesrules as In re: Testosterone Replacement Therapy Products LiabilityNational Prescription Opiate Litigation,, MDL No. 2545.2804. Approximately 210 claims250 matters are pending in various state courts. PlaintiffsThe plaintiffs in these cases, 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 2,860 lawsuits, approximately 2,420 of them are brought by states, counties, cities, and other municipal entities. Over 98% of these state, city, and other municipal entity plaintiffs have reached settlement agreements with Allergan and their lawsuits are in the process of being dismissed with prejudice. Approximately 20 other lawsuits are brought by approximately 180 Native American Tribes. Over 98% of these Native American Tribes have reached settlement agreements with
| | | | | |
2023 Form 10-Q | | 20 |
Allergan and their lawsuits are in the process of being dismissed with prejudice. AbbVie recorded a charge of $2.1 billion to selling, general and administrative expense in the consolidated statement of earnings in the second quarter of 2022 related to these settlements.
In July 2017,March 2023, AbbVie Inc. filed a jurypetition 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.
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 reachedagainst 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 verdictclass.
Lawsuits were filed against Allergan and certain of its former officers alleging they made misrepresentations and omissions regarding Allergan's textured breast implants. The lawsuits, which were filed by Allergan shareholders, have been consolidated in the first caseUnited States District Court for the Southern District of New York as In re: Allergan plc Securities Litigation. The plaintiffs generally seek compensatory damages and attorneys’ fees. In September 2019, the court partially granted Allergan's motion to be tried. The jury founddismiss. In September 2021, the court granted plaintiffs' motion to certify a class. In December 2022, the court granted Allergan's motion for AbbViesummary judgment on the plaintiff's strict liabilityremaining claims, dismissing them with prejudice. Plaintiffs are appealing the court's motion to dismiss and negligence claimssummary judgment rulings.
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 plaintiffNorthern 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 plaintiff's fraud claim, but awarded no compensatory damages. The jury's award of $150 million in punitive damages without an underlying compensatory damage award will be subject to post-trial briefing.Food and Drug Administration’s approval and labeling for AbbVie’s Rinvoq.
Product Liability and General Litigation
In April 2023, a putative class action lawsuit, Camargo v. AbbVie expects the punitive damage award will not stand. In August 2017, a jury in the Circuit Court of Cook County, Illinois, reached a verdict for AbbVie on all claims. In October 2017, a juryInc., was filed in the United States District Court for the Northern District of Illinois reached a verdict for AbbVie on strict liability but for the plaintiff on remaining claims and awarded $140,000 in compensatory damages and $140 million in punitive damages, which will be the subject of post-trial proceedings.
Product liability cases are pending in which plaintiffs generally allege that AbbVie did not adequately warn about risk of certain injuries, primarily various birth defects, arising from use of Depakote. Over ninety percent of the approximately 625 claims are pending in the United States District Court for the Southern District of Illinois, and the rest are pending in various other federal and state courts. Plaintiffs generally seek compensatory and punitive damages.
In November 2014, five individuals filed a putative class action lawsuit, Rubinstein, et al. v Gonzalez, et al.,on behalf of purchasers and sellers of certain Shire plc (Shire) securities between June 20 and October 14, 2014, against AbbVie andHumira patients who paid for Humira based on its chief executive officer in the United States District Court for the Northern District of Illinoislist price or who, after losing insurance coverage, discontinued Humira because they could not pay based on its list price, alleging that the defendants made and/or are responsible for material misstatementsHumira’s list price is excessive in violation of federal securities laws in connection with AbbVie's proposed transaction with Shire.multiple states’ unfair and deceptive trade practices statutes. The plaintiff generally seeks monetary damages, injunctive relief, and attorneys’ fees.
In June 2016,2018, a qui tam lawsuit, Elliott Associates, L.P.U.S. ex rel. Silbersher v. Allergan Inc., et al. v. AbbVie Inc., was filed by five investment funds against AbbVie in the Cook County, Illinois Circuit Court alleging that AbbVie made misrepresentations and omissions in connection with its proposed transaction with Shire. Similar lawsuits were filed between July and September 2017 against AbbVie and in some instances its chief executive officer in the same court by twelve additional investment funds. Plaintiffs seek compensatory and punitive damages.
In May 2017, a shareholder derivative lawsuit, Ellis v. Gonzalez, et al., was filed in Delaware Chancery Court, alleging that AbbVie's directors breached their fiduciary duties in connection with statements made regarding the Shire transaction. The lawsuit seeks unspecified compensatory damages for AbbVie, among other relief.
Beginning in May 2016, the Patent Trial & Appeal Board of the U.S. Patent & Trademark Office (PTO) instituted five inter partes review proceedings brought by Coherus Biosciences and Boehringer Ingelheim related to three AbbVie patents covering methods of treatment of rheumatoid arthritis using adalimumab. In these proceedings, the PTO reviewed the validity of the patents and issued decisions of invalidity in May, June and July of 2017. AbbVie’s appeal of the decisions is pending in the Court of Appeals for the Federal Circuit.
AbbVie is seeking to enforce certain patent rights related to adalimumab (a drug AbbVie sells under the trademark HUMIRA®). In a case filed in United States District Court for the District of Delaware in August 2016, AbbVie alleged that Amgen Inc.’s and Amgen Manufacturing, Limited’s proposed biosimilar adalimumab product infringed certain AbbVie patents. AbbVie sought declaratory and injunctive relief. In September 2017, the parties settled this case and it was dismissed without prejudice.
|
| |
2017 Form 10-Q | | 24 |
In March 2017, AbbVie filed a lawsuit, AbbVie Inc. v. Novartis Vaccines and Diagnostics, Inc. and Grifols Worldwide Operations Ltd., in the United States District Court for the Northern District of California against Novartis Vaccinesseveral Allergan entities and Grifols Worldwide seeking a declaratory judgmentothers, alleging that eleven HCV-related patents licensedtheir conduct before the U.S. Patent Office resulted in false claims for payment being made to AbbViefederal 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 2002 are invalid.the lawsuit. In March 2023, the court granted Allergan’s motion to dismiss, dismissing plaintiff-realtor’s federal law claims with prejudice and state law claims without prejudice. The plaintiff-realtor is appealing the court’s motion to dismiss ruling.
Intellectual Property Litigation
AbbVie Inc. is seeking to enforce certain patent rights relatedrelating to adalimumabvenetoclax (a drug AbbVie sellssold under the trademark HUMIRA®)Venclexta). In a caseLitigation was filed in the United States District Court for the District of Delaware in August 2017,July 2020 against Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc.: and Alembic Pharmaceuticals Ltd., Alembic Pharmaceuticals, Inc., and Alembic Global Holdings SA. AbbVie alleges that Boehringer Ingelheim International GmbH’s, Boehringer Ingelheim Pharmaceutical, Inc.’s,defendants’ proposed generic venetoclax products infringe certain patents and Boehringer Ingelheim Fremont, Inc.’s proposed biosimilar adalimumab product infringes certain AbbVie patents. AbbVie 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.
| | | | | |
2023 Form 10-Q | | 21 |
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 oneorder 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—pharmaceutical products. 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 June 30, | | Six months ended June 30, |
| | |
(in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Immunology | | | | | | | |
Humira | United States | $ | 3,452 | | | $ | 4,664 | | | $ | 6,400 | | | $ | 8,657 | |
| International | 560 | | | 699 | | | 1,153 | | | 1,442 | |
| Total | $ | 4,012 | | | $ | 5,363 | | | $ | 7,553 | | | $ | 10,099 | |
Skyrizi | United States | $ | 1,634 | | | $ | 1,079 | | | $ | 2,773 | | | $ | 1,860 | |
| International | 249 | | | 173 | | | 470 | | | 332 | |
| Total | $ | 1,883 | | | $ | 1,252 | | | $ | 3,243 | | | $ | 2,192 | |
Rinvoq | United States | $ | 645 | | | $ | 412 | | | $ | 1,094 | | | $ | 723 | |
| International | 273 | | | 180 | | | 510 | | | 334 | |
| Total | $ | 918 | | | $ | 592 | | | $ | 1,604 | | | $ | 1,057 | |
Hematologic Oncology | | | | | | | |
Imbruvica | United States | $ | 666 | | | $ | 862 | | | $ | 1,304 | | | $ | 1,736 | |
| Collaboration revenues | 241 | | | 283 | | | 481 | | | 582 | |
| Total | $ | 907 | | | $ | 1,145 | | | $ | 1,785 | | | $ | 2,318 | |
Venclexta | United States | $ | 265 | | | $ | 253 | | | $ | 530 | | | $ | 481 | |
| International | 306 | | | 252 | | | 579 | | | 497 | |
| Total | $ | 571 | | | $ | 505 | | | $ | 1,109 | | | $ | 978 | |
Aesthetics | | | | | | | |
Botox Cosmetic | United States | $ | 420 | | | $ | 449 | | | $ | 829 | | | $ | 862 | |
| International | 265 | | | 246 | | | 515 | | | 474 | |
| Total | $ | 685 | | | $ | 695 | | | $ | 1,344 | | | $ | 1,336 | |
Juvederm Collection | United States | $ | 125 | | | $ | 147 | | | $ | 247 | | | $ | 295 | |
| International | 243 | | | 197 | | | 476 | | | 459 | |
| Total | $ | 368 | | | $ | 344 | | | $ | 723 | | | $ | 754 | |
Other Aesthetics | United States | $ | 284 | | | $ | 287 | | | $ | 530 | | | $ | 572 | |
| International | 47 | | | 45 | | | 87 | | | 83 | |
| Total | $ | 331 | | | $ | 332 | | | $ | 617 | | | $ | 655 | |
Neuroscience | | | | | | | |
Botox Therapeutic | United States | $ | 614 | | | $ | 557 | | | $ | 1,201 | | | $ | 1,057 | |
| International | 134 | | | 121 | | | 266 | | | 235 | |
| Total | $ | 748 | | | $ | 678 | | | $ | 1,467 | | | $ | 1,292 | |
Vraylar | United States | $ | 657 | | | $ | 492 | | | $ | 1,217 | | | $ | 919 | |
| International | 1 | | | — | | | 2 | | | — | |
| Total | $ | 658 | | | $ | 492 | | | $ | 1,219 | | | $ | 919 | |
Duodopa | United States | $ | 24 | | | $ | 26 | | | $ | 49 | | | $ | 50 | |
| International | 93 | | | 94 | | | 186 | | | 191 | |
| Total | $ | 117 | | | $ | 120 | | | $ | 235 | | | $ | 241 | |
Ubrelvy | United States | $ | 194 | | | $ | 185 | | | $ | 344 | | | $ | 323 | |
| International | 2 | | | — | | | 4 | | | — | |
| Total | $ | 196 | | | $ | 185 | | | $ | 348 | | | $ | 323 | |
|
| | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
HUMIRA | | $ | 4,701 |
| | $ | 4,060 |
| | $ | 13,535 |
| | $ | 11,786 |
|
IMBRUVICA | | 688 |
| | 501 |
| | 1,865 |
| | 1,321 |
|
HCV | | 276 |
| | 378 |
| | 764 |
| | 1,211 |
|
Lupron | | 201 |
| | 193 |
| | 605 |
| | 602 |
|
Creon | | 215 |
| | 187 |
| | 596 |
| | 517 |
|
Synagis | | 116 |
| | 96 |
| | 456 |
| | 460 |
|
Synthroid | | 191 |
| | 188 |
| | 576 |
| | 558 |
|
AndroGel | | 147 |
| | 174 |
| | 437 |
| | 501 |
|
Kaletra | | 85 |
| | 137 |
| | 310 |
| | 416 |
|
Sevoflurane | | 100 |
| | 102 |
| | 311 |
| | 327 |
|
Duodopa | | 94 |
| | 74 |
| | 255 |
| | 215 |
|
All other | | 181 |
| | 342 |
| | 767 |
| | 928 |
|
Total net revenues | | $ | 6,995 |
| | $ | 6,432 |
| | $ | 20,477 |
| | $ | 18,842 |
|
|
| | | | |
20172023 Form 10-Q | | 2522 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
| | |
(in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Qulipta | United States | $ | 95 | | | $ | 33 | | | $ | 161 | | | $ | 44 | |
| International | 1 | | | — | | | 1 | | | — | |
| Total | $ | 96 | | | $ | 33 | | | $ | 162 | | | $ | 44 | |
Other Neuroscience | United States | $ | 65 | | | $ | 145 | | | $ | 140 | | | $ | 318 | |
| International | 5 | | | 5 | | | 9 | | | 9 | |
| Total | $ | 70 | | | $ | 150 | | | $ | 149 | | | $ | 327 | |
Eye Care | | | | | | | |
Ozurdex | United States | $ | 34 | | | $ | 36 | | | $ | 73 | | | $ | 69 | |
| International | 85 | | | 74 | | | 161 | | | 148 | |
| Total | $ | 119 | | | $ | 110 | | | $ | 234 | | | $ | 217 | |
Lumigan/Ganfort | United States | $ | 51 | | | $ | 60 | | | $ | 114 | | | $ | 127 | |
| International | 68 | | | 70 | | | 135 | | | 143 | |
| Total | $ | 119 | | | $ | 130 | | | $ | 249 | | | $ | 270 | |
Alphagan/Combigan | United States | $ | 32 | | | $ | 54 | | | $ | 60 | | | $ | 124 | |
| International | 33 | | | 38 | | | 76 | | | 75 | |
| Total | $ | 65 | | | $ | 92 | | | $ | 136 | | | $ | 199 | |
Restasis | United States | $ | 82 | | | $ | 151 | | | $ | 161 | | | $ | 386 | |
| International | 17 | | | 17 | | | 30 | | | 28 | |
| Total | $ | 99 | | | $ | 168 | | | $ | 191 | | | $ | 414 | |
Other Eye Care | United States | $ | 110 | | | $ | 106 | | | $ | 220 | | | $ | 197 | |
| International | 105 | | | 111 | | | 195 | | | 191 | |
| Total | $ | 215 | | | $ | 217 | | | $ | 415 | | | $ | 388 | |
Other Key Products | | | | | | | |
Mavyret | United States | $ | 193 | | | $ | 203 | | | $ | 364 | | | $ | 372 | |
| International | 194 | | | 195 | | | 387 | | | 406 | |
| Total | $ | 387 | | | $ | 398 | | | $ | 751 | | | $ | 778 | |
Creon | United States | $ | 282 | | | $ | 318 | | | $ | 587 | | | $ | 605 | |
Linzess/Constella | United States | $ | 269 | | | $ | 247 | | | $ | 520 | | | $ | 480 | |
| International | 9 | | | 8 | | | 17 | | | 15 | |
| Total | $ | 278 | | | $ | 255 | | | $ | 537 | | | $ | 495 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
All other | | $ | 741 | | | $ | 1,009 | | | $ | 1,432 | | | $ | 2,220 | |
Total net revenues | $ | 13,865 | | | $ | 14,583 | | | $ | 26,090 | | | $ | 28,121 | |
| | | | | |
2023 Form 10-Q | | 23 |
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 SeptemberJune 30, 20172023 and December 31, 20162022 and the results of operations for the three and ninesix months ended SeptemberJune 30, 20172023 and 2016.2022. This commentary should be read in conjunction with the condensed consolidated financial statementsCondensed 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 formed in 2013 following separation from Abbott Laboratories (Abbott). AbbVie’s mission is to usepositioned for success with a comprehensive product portfolio that has leadership positions across immunology, oncology, aesthetics, neuroscience 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. AbbVie’s products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C (HCV) and human immunodeficiency virus (HIV); neurological disorders, such as Parkinson’s disease and multiple sclerosis; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; as well as other serious health conditions. AbbVie also has a pipeline of promising new medicines across such important medical specialties as immunology, virology, oncology and neurology, with additional targeted investment in cystic fibrosis and women’s health.
AbbVie’sAbbVie'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, and patients.patients or other customers. Outside the United States, sales are made either directlyAbbVie sells products primarily to customerswholesalers or through distributors, and depending on the market served.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 29,00050,000 employees. AbbVie operates in one business segment—pharmaceutical products.
20172023 Strategic Objectives
AbbVie’sAbbVie's mission is to be an innovation-driven, patient-focused specialty biopharmaceutical company capablediscover 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 and a consistent stream of innovative new medicines.execution. AbbVie intends to continue toexecute its strategy and advance its mission in a number of ways, including: (i) growing revenues through continuedmaximizing 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 performance from its existing portfoliocommercial execution of on-market products, including its flagship brands, HUMIRAnew product launches; (iii) continuing to invest in and IMBRUVICA as well as growth from pipeline products; (ii) expanding operating margins; (iii) continued investment inexpand its pipeline in support of opportunities in immunology, oncology, virologyaesthetics, neuroscience and neurologyeye care as well as continued investment in key on-market products; (iv) augmentation of its pipeline through concerted focus on strategic licensing, acquisitiongenerating substantial operating cash flows to support investment in innovative research and partnering activity with a focus on identifying compelling programs that fit AbbVie’s strategic criteria;development, and (v) returningreturn cash to shareholders via dividendsa strong and share repurchases.growing dividend while also reducing debt. In addition, AbbVie anticipates several regulatory submissions and key data readouts from key clinical trials in the next twelve12 months.
Financial Results
The company's financial performance for the ninesix months ended SeptemberJune 30, 20172023 included delivering worldwide net revenues of $20.5$26.1 billion, operating earnings of $7.8$7.3 billion, and diluted earnings per share of $3.27.$1.26 and cash flows from operations of $10.5 billion. Worldwide net revenues grew by 9%decreased 7% on a reported basis and 6% on a constant currency basis, driven primarily by the continued strength of HUMIRA, revenue growth related to IMBRUVICA and revenue growth from other key products including Creon and Duodopa. These increases were partially offset by a decline in net revenues of HCV product VIEKIRA.basis.
Diluted earnings per share was $3.27$1.26 for the ninesix months ended SeptemberJune 30, 20172023 and included the following after-tax costs: (i) $606 million$3.4 billion related to the amortization of intangible assets; (ii) $546 million$3.3 billion for the change in fair value of contingent consideration liabilities; and (iii) milestone payments of $68 million; (iv) litigation reserve charges of $65 million; (v) acquisition$629 million related costs of $49 million; and (vi) $15 million for acquired in-process research and development (IPR&D). to intangible asset impairment.Additionally, financial results for the nine months ended September 30, 2017 reflected continued added funding to support all stages of AbbVie’s emerging mid- and late-stage pipeline assets and continued investment in AbbVie’s growthon-market brands.
|
| |
2017 Form 10-Q | | 26 |
The company generated cash flows from operations of $7.4 billion for the nine months ended September 30, 2017, which AbbVie utilized to continue to enhance its pipeline through licensing and collaboration activities, pay cash dividends to stockholders of $3.1 billion and repurchase approximately 7.8 million shares for $500 million in the open market. In September 2017, AbbVie’s board of directors declared a quarterly cash dividend of $0.64 per share of common stock payable in November 2017. In October 2017, the company announced that its board of directors declared an increase in the company's quarterly cash dividend from $0.64 per share to $0.71 per share beginning with the dividend payable in February 2018. This reflects an increase of approximately 11% over the previous quarterly rate.
In addition to these financial results, AbbVie continued to advance and augment its pipeline as further described below under the heading “Research and Development.”
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 pharmaceutical products and acquire or collaborate on compounds currently in development by other biotechnology or pharmaceutical companies.
AbbVie’s pipeline currently includes more than 60approximately 90 compounds, devices or indications in clinical development individually or under collaboration or license agreements and is focused on such important medical specialties as immunology, oncology, virologyaesthetics, neuroscience and neurology along with targeted investments in cystic fibrosis and women’s health.eye care. Of these programs, more than 30over 50 are in mid- and late-stage development.
| | | | | |
2023 Form 10-Q | | 24 |
The following sections summarize transitions of significant programs from Phase 2mid-stage development to Phase 3late-stage development as well as developments in significant Phase 3late-stage and registration programs. AbbVie expects multiple Phase 2mid-stage programs to transition into Phase 3late-stage programs in the next twelve12 months.
Significant Programs and Developments
Immunology
Rinvoq
Upadacitinib•In March 2023, the European Commission (EC) issued their final decision on the European Medicines Agency’s (EMA) review of the benefit-risk of medicines in the JAK inhibitor class for the treatment of inflammatory diseases, including Rinvoq. Confirming the Committee for Medicinal Products for Human Use (CHMP) opinion, the previously approved Rinvoq indication statements were not changed and the dosage and special warnings for all JAK inhibitors were updated to include additional information about the risks associated with JAK inhibitors.
•In June 2017,April 2023, AbbVie announced that top-line results from the Phase 3 SELECT-NEXT clinical trial evaluating upadacitinib (ABT-494),EC approved Rinvoq for the company’s selective JAK1 inhibitor currently in late-stage development for rheumatoid arthritis (RA), met all primary and ranked secondary endpoints in patientstreatment of adults with moderatemoderately to severe RAseverely active Crohn’s disease who did not adequately respond to treatment with conventional synthetic disease modifying anti-rheumatic drugs (DMARDs). The safety profile of upadacitinib was consistent with previously reported Phase 2 trials and no new safety signals were detected.
In September 2017, AbbVie announced that top-line results from the Phase 3 SELECT-BEYOND clinical trial evaluating upadacitinib met all primary and ranked secondary endpoints in patients with moderate to severe RA who did not adequately respondhave had an inadequate response, lost response or were intolerant to treatment witheither conventional therapy or a biologic DMARDs. The safety profile of upadacitinib was consistent with previously reported Phase 2 trials and the Phase 3 SELECT-NEXT clinical trial, with no new safety signals detected.agent.
Risankizumab
•In October 2017, AbbVie announced that top-line results from three Phase 3 clinical trials evaluating risankizumab, an investigational interleukin-23 (IL-23) inhibitor, with 12-week dosing compared to ustekinumab and adalimumab met all co-primary and ranked secondary endpoints for the treatment of patients with moderate to severe chronic plaque psoriasis. The safety profile was consistent with all previously reported studies, and there were no new safety signals detected across the three studies.
|
| |
2017 Form 10-Q | | 27 |
Oncology
IMBRUVICA
In January 2017,May 2023, AbbVie announced that the U.S. Food and Drug Administration (FDA) approved IMBRUVICARinvoq for the treatment of adults with moderately to severely active Crohn’s disease who have had an inadequate response or intolerance to one or more tumor necrosis factor (TNF) blockers.
•In July 2023, AbbVie initiated its Phase 3 Step-Up HS study to evaluate efficacy and safety of Rinvoq in adults and adolescents with moderate to severe hidradenitis suppurativa (HS) who have failed anti-TNF therapy and/or one approved non-anti-TNF inhibitor therapy for HS.
Skyrizi
•In March 2023, AbbVie announced positive top-line results from its Phase 3 induction study, INSPIRE, for Skyrizi in patients with relapsed/moderately to severely active ulcerative colitis met the primary and all secondary endpoints.
•In June 2023, AbbVie announced positive top-line results from its Phase 3 maintenance study, COMMAND, for Skyrizi in patients with moderately to severely active ulcerative colitis met the primary and key secondary endpoints.
•In July 2023, AbbVie announced results from the head-to-head Phase 4 IMMpulse study that evaluated the efficacy and safety of Skyrizi compared to Otezla among adult patients with moderate plaque psoriasis (PsO) eligible for systemic therapy. In the study, significantly more patients achieved co-primary endpoints with Skyrizi versus Otezla. Skyrizi was well-tolerated with no new safety signals identified.
Oncology
Epkinly
•In March 2023, AbbVie initiated a Phase 3 clinical trial to evaluate epcoritamab in combination with R-CHOP compared to R-CHOP in patients with newly diagnosed diffuse large B-cell lymphoma (DLBCL).
•In May 2023, AbbVie announced that the FDA approved Epkinly (epcoritamab) as the first and only bispecific antibody to treat adult patients with relapsed or refractory (R/R) DLBCL.
•In July 2023, AbbVie announced that the CHMP of the EMA has adopted a positive opinion recommending the granting of conditional marketing authorization for epcoritamab as a monotherapy for the treatment of adult patients with R/R DLBCL after two or more lines of systemic therapy.
Imbruvica
•In May 2023, AbbVie voluntarily withdrew, in the U.S., accelerated Imbruvica approvals for patients with mantle cell lymphoma (MCL) who have received at least one prior therapy and with marginal zone lymphoma (MZL) who require systemic therapy and have received at least one prior anti-CD20-based therapy. This indicationvoluntary action is approved underdue to requirements related to the accelerated approval basedstatus granted by the FDA for MCL and MZL. Other approved indications for Imbruvica in the U.S. are not affected.
| | | | | |
2023 Form 10-Q | | 25 |
Navitoclax
•In July 2023, AbbVie announced top-line results from the Phase 3 TRANSFORM-1 clinical trial evaluating the safety and efficacy of navitoclax, a BCL-XL/BCL-2 inhibitor, in combination with ruxolitinib in adult patients with primary or secondary myelofibrosis (MF). The combination of navitoclax and ruxolitinib met the study’s primary endpoint, demonstrating statistically significant improvement in the number of patients who achieved Spleen Volume Reduction of at least 35 percent at week 24 compared to treatment with ruxolitinib and a placebo. The study did not meet the first ranked secondary endpoint of improvement in patients’ Total Symptom Score from baseline to week 24. The company plans to wait for additional follow up data on overall response rate (ORR)the primary, secondary and continued approval may be contingent upon verification and descriptionother endpoints, expected in the fourth quarter of clinical benefit in a confirmatory trial. MZL is a slow-growing form of non-Hodgkin's lymphoma.this year, before engaging with regulatory agencies regarding potential next steps.
Aesthetics
Juvederm Collection
•In August 2017,May 2023, AbbVie announced that the FDA approved IMBRUVICA forSkinvive by Juvederm to improve skin smoothness of the treatmentcheeks in adults over the age of adult patients with chronic graft-versus-host-disease (cGVHD) after failure of one or more lines of systemic therapy. IMBRUVICA is the first therapy specifically approved for adults with cGVHD, a severe and potentially life-threatening consequence of stem cell or bone marrow transplant. This marks the sixth U.S. disease indication for IMBRUVICA since the medication's initial approval in 2013 and the first approved indication outside of cancer.21.
Neuroscience
VenetoclaxABBV-951
•In February 2017, AbbVie initiated a Phase 3 clinical trial to study the safety and efficacy of venetoclax in combination with azacitidine in untreated (treatment-naïve) elderly subjects with acute myeloid leukemia (AML) who are ineligible for standard induction therapy (high-dose chemotherapy).
In May 2017, AbbVie initiated a Phase 3 clinical trial to evaluate if venetoclax when co-administered with low dose cytarabine (LDAC) improves overall survival (OS) versus LDAC and placebo, in treatment naïve subjects with AML.
In September 2017, AbbVie announced that top-line results from the Phase 3 MURANO clinical trial evaluating venetoclax tablets in combination with Rituxan (rituximab) met the primary endpoint of prolonged progression-free survival compared with bendamustine in combination with Rituxan in patients with relapsed/refractory chronic lymphocytic leukemia.
Rova-T
In February 2017, AbbVie initiated a Phase 3 clinical trial to evaluate the efficacy of Rova-T as maintenance therapy following first-line platinum based chemotherapy in participants with extensive stage small cell lung cancer (SCLC).
In April 2017, AbbVie initiated a Phase 3 clinical trial to evaluate Rova-T compared with topotecan for subjects with advanced or metastatic SCLC with high levels of delta-like protein 3 who have first disease progression during or following front-line platinum-based chemotherapy.
Veliparib
In April 2017, AbbVie announced that two Phase 3 studies evaluating veliparib, an investigational, oral poly (adenosine diphosphate-ribose) polymerase (PARP) inhibitor in combination with chemotherapy did not meet their primary endpoints. The studies evaluated veliparib in combination with carboplatin and paclitaxel in patients with squamous non-small cell lung cancer (NSCLC) and triple negative breast cancer (TNBC). Ongoing Phase 3 studies include non-squamous non-small cell lung cancer, BRCA1/2 breast cancer and ovarian cancer.
Virology/Liver Disease
In February 2017, AbbVie announced that the European Committee for Medicinal Products for Human Use (CHMP) granted a positive opinion for a shorter, eight-week treatment of VIEKIRAX (ombitasvir/paritaprevir/ritonavir tablets) + EXVIERA (dasabuvir tablets) as an option for previously untreated adult patients with genotype 1b chronic HCV and minimal to moderate fibrosis.
In July 2017, AbbVie announced that the European Commission granted marketing authorization for MAVIRET (glecaprevir/pibrentasvir), a once-daily, ribavirin-free treatment for adults with HCV infection across all major genotypes (GT1-6). MAVIRET is also indicated for patients with specific treatment challenges, including those with compensated
|
| |
2017 Form 10-Q | | 28 |
cirrhosis across all major genotypes, and those who previously had limited treatment options, such as patients with severe chronic kidney disease (CKD) or those with genotype 3 chronic HCV infection.
In August 2017,March 2023, AbbVie announced that the FDA approved MAVYRET (glecaprevir/pibrentasvir)issued a Complete Response Letter (CRL) for the New Drug Application (NDA) for ABBV-951 (foscarbidopa/foslevodopa) for the treatment of patientsmotor fluctuations in adults with chronic HCV genotype 1-6 infection without cirrhosisadvanced Parkinson’s disease. In its letter, the FDA requested additional information about the device (pump) as part of the NDA review. The CRL did not request that AbbVie conduct additional efficacy and with compensated cirrhosis (Child-Pugh A). MAVYRET is also indicatedsafety trials related to the drug.
Qulipta
•In April 2023, AbbVie announced that the FDA approved Qulipta for the preventive treatment of adult patients with HCV genotype 1 infection, who previously have been treated with a regimen containing an HCV NS5A inhibitor or an NS3/4A protease inhibitor, but not both. MAVYRET/MAVIRET is a new 8-week, pan-genotypic treatment for patients without cirrhosis and who are new to treatment.chronic migraine in adults.
Other
•In September 2017,June 2023, AbbVie announced that it had submittedthe CHMP of the EMA has adopted a New Drug Application topositive opinion recommending the FDA for elagolix, an investigational, orally administered gonadotropin-releasing hormone (GnRH) antagonist, being evaluatedapproval of Qulipta for the managementprophylaxis of endometriosis with associated pain. In October, AbbVie was granted priority review for elagolix by the FDA.
migraine in adults who have four or more migraine days per month.
For a more comprehensive discussion of AbbVie’s products and pipeline, see the company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022.
| | | | | |
2023 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 the 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) | | 2023 | | 2022 | | | 2023 | | 2022 | |
United States | | $ | 10,720 | | | $ | 11,410 | | | (6.0) | % | | (6.0) | % | | $ | 19,921 | | | $ | 21,758 | | | (8.4) | % | | (8.4) | % |
International | | 3,145 | | | 3,173 | | | (0.9) | % | | 2.6 | % | | 6,169 | | | 6,363 | | | (3.0) | % | | 1.8 | % |
Net revenues | | $ | 13,865 | | | $ | 14,583 | | | (4.9) | % | | (4.2) | % | | $ | 26,090 | | | $ | 28,121 | | | (7.2) | % | | (6.1) | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Percent change | | Nine months ended September 30, | | Percent change |
| | | At actual currency rates | | At constant currency rates | | | At actual currency rates | | At constant currency rates |
(dollars in millions) | | 2017 | | 2016 | | | 2017 |
| 2016 | |
United States | | $ | 4,586 |
| | $ | 4,081 |
| | 12.4 | % | | 12.4 | % | | $ | 13,284 |
| | $ | 11,695 |
| | 13.6 | % | | 13.6 | % |
International | | 2,409 |
| | 2,351 |
| | 2.4 | % | | 0.3 | % | | 7,193 |
| | 7,147 |
| | 0.6 | % | | 1.0 | % |
Net revenues | | $ | 6,995 |
| | $ | 6,432 |
| | 8.8 | % | | 8.1 | % | | $ | 20,477 |
| | $ | 18,842 |
| | 8.7 | % | | 8.8 | % |
|
| | | | |
20172023 Form 10-Q | | 2927 |
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) | | 2023 | | 2022 | | | 2023 | | 2022 | |
Immunology | | | | | | | | | | | | | | | | |
Humira | United States | | $ | 3,452 | | | $ | 4,664 | | | (26.0) | % | | (26.0) | % | | $ | 6,400 | | | $ | 8,657 | | | (26.1) | % | | (26.1) | % |
| International | | 560 | | | 699 | | | (19.8) | % | | (17.0) | % | | 1,153 | | | 1,442 | | | (20.1) | % | | (15.9) | % |
| Total | | $ | 4,012 | | | $ | 5,363 | | | (25.2) | % | | (24.8) | % | | $ | 7,553 | | | $ | 10,099 | | | (25.2) | % | | (24.6) | % |
Skyrizi | United States | | $ | 1,634 | | | $ | 1,079 | | | 51.4 | % | | 51.4 | % | | $ | 2,773 | | | $ | 1,860 | | | 49.1 | % | | 49.1 | % |
| International | | 249 | | | 173 | | | 44.2 | % | | 48.6 | % | | 470 | | | 332 | | | 41.5 | % | | 48.2 | % |
| Total | | $ | 1,883 | | | $ | 1,252 | | | 50.4 | % | | 51.0 | % | | $ | 3,243 | | | $ | 2,192 | | | 48.0 | % | | 49.0 | % |
Rinvoq | United States | | $ | 645 | | | $ | 412 | | | 56.4 | % | | 56.4 | % | | $ | 1,094 | | | $ | 723 | | | 51.2 | % | | 51.2 | % |
| International | | 273 | | | 180 | | | 52.2 | % | | 57.5 | % | | 510 | | | 334 | | | 52.9 | % | | 61.0 | % |
| Total | | $ | 918 | | | $ | 592 | | | 55.1 | % | | 56.7 | % | | $ | 1,604 | | | $ | 1,057 | | | 51.7 | % | | 54.2 | % |
Hematologic Oncology | | | | | | | | | | | | | | | | |
Imbruvica | United States | | $ | 666 | | | $ | 862 | | | (22.8) | % | | (22.8) | % | | $ | 1,304 | | | $ | 1,736 | | | (24.9) | % | | (24.9) | % |
| Collaboration revenues | | 241 | | | 283 | | | (14.7) | % | | (14.7) | % | | 481 | | | 582 | | | (17.3) | % | | (17.3) | % |
| Total | | $ | 907 | | | $ | 1,145 | | | (20.8) | % | | (20.8) | % | | $ | 1,785 | | | $ | 2,318 | | | (23.0) | % | | (23.0) | % |
Venclexta | United States | | $ | 265 | | | $ | 253 | | | 5.2 | % | | 5.2 | % | | $ | 530 | | | $ | 481 | | | 10.2 | % | | 10.2 | % |
| International | | 306 | | | 252 | | | 21.0 | % | | 24.9 | % | | 579 | | | 497 | | | 16.5 | % | | 22.1 | % |
| Total | | $ | 571 | | | $ | 505 | | | 13.1 | % | | 15.0 | % | | $ | 1,109 | | | $ | 978 | | | 13.4 | % | | 16.2 | % |
Aesthetics | | | | | | | | | | | | | | | | |
Botox Cosmetic | United States | | $ | 420 | | | $ | 449 | | | (6.5) | % | | (6.5) | % | | $ | 829 | | | $ | 862 | | | (3.8) | % | | (3.8) | % |
| International | | 265 | | | 246 | | | 7.9 | % | | 13.8 | % | | 515 | | | 474 | | | 8.7 | % | | 15.7 | % |
| Total | | $ | 685 | | | $ | 695 | | | (1.4) | % | | 0.7 | % | | $ | 1,344 | | | $ | 1,336 | | | 0.6 | % | | 3.1 | % |
Juvederm Collection | United States | | $ | 125 | | | $ | 147 | | | (14.5) | % | | (14.5) | % | | $ | 247 | | | $ | 295 | | | (16.2) | % | | (16.2) | % |
| International | | 243 | | | 197 | | | 22.8 | % | | 27.6 | % | | 476 | | | 459 | | | 3.6 | % | | 11.1 | % |
| Total | | $ | 368 | | | $ | 344 | | | 6.9 | % | | 9.7 | % | | $ | 723 | | | $ | 754 | | | (4.1) | % | | 0.4 | % |
Other Aesthetics | United States | | $ | 284 | | | $ | 287 | | | (1.3) | % | | (1.3) | % | | $ | 530 | | | $ | 572 | | | (7.4) | % | | (7.4) | % |
| International | | 47 | | | 45 | | | 6.8 | % | | 12.0 | % | | 87 | | | 83 | | | 5.3 | % | | 12.3 | % |
| Total | | $ | 331 | | | $ | 332 | | | (0.2) | % | | 0.5 | % | | $ | 617 | | | $ | 655 | | | (5.8) | % | | (4.9) | % |
Neuroscience | | | | | | | | | | | | | | | | |
Botox Therapeutic | United States | | $ | 614 | | | $ | 557 | | | 10.1 | % | | 10.1 | % | | $ | 1,201 | | | $ | 1,057 | | | 13.6 | % | | 13.6 | % |
| International | | 134 | | | 121 | | | 10.7 | % | | 17.0 | % | | 266 | | | 235 | | | 13.0 | % | | 20.4 | % |
| Total | | $ | 748 | | | $ | 678 | | | 10.2 | % | | 11.3 | % | | $ | 1,467 | | | $ | 1,292 | | | 13.5 | % | | 14.9 | % |
Vraylar | United States | | $ | 657 | | | $ | 492 | | | 33.7 | % | | 33.7 | % | | $ | 1,217 | | | $ | 919 | | | 32.5 | % | | 32.5 | % |
| International | | 1 | | | — | | | >100.0 % | | >100.0 % | | 2 | | | — | | | >100.0 % | | >100.0 % |
| Total | | $ | 658 | | | $ | 492 | | | 33.9 | % | | 33.9 | % | | $ | 1,219 | | | $ | 919 | | | 32.7 | % | | 32.7 | % |
Duodopa | United States | | $ | 24 | | | $ | 26 | | | (7.6) | % | | (7.6) | % | | $ | 49 | | | $ | 50 | | | (0.8) | % | | (0.8) | % |
| International | | 93 | | | 94 | | | (1.6) | % | | (0.5) | % | | 186 | | | 191 | | | (3.0) | % | | 0.6 | % |
| Total | | $ | 117 | | | $ | 120 | | | (2.9) | % | | (2.0) | % | | $ | 235 | | | $ | 241 | | | (2.5) | % | | 0.3 | % |
Ubrelvy | United States | | $ | 194 | | | $ | 185 | | | 4.5 | % | | 4.5 | % | | $ | 344 | | | $ | 323 | | | 6.4 | % | | 6.4 | % |
| International | | 2 | | | — | | | n/m | | n/m | | 4 | | | — | | | n/m | | n/m |
| Total | | $ | 196 | | | $ | 185 | | | 5.9 | % | | 6.0 | % | | $ | 348 | | | $ | 323 | | | 7.7 | % | | 7.7 | % |
Qulipta | United States | | $ | 95 | | | $ | 33 | | | >100.0 % | | >100.0 % | | $ | 161 | | | $ | 44 | | | >100.0 % | | >100.0 % |
| International | | 1 | | | — | | | n/m | | n/m | | 1 | | | — | | | n/m | | n/m |
| Total | | $ | 96 | | | $ | 33 | | | >100.0 % | | >100.0 % | | $ | 162 | | | $ | 44 | | | >100.0 % | | >100.0 % |
Other Neuroscience | United States | | $ | 65 | | | $ | 145 | | | (55.9) | % | | (55.9) | % | | $ | 140 | | | $ | 318 | | | (56.3) | % | | (56.3) | % |
| International | | 5 | | | 5 | | | 4.7 | % | | 11.4 | % | | 9 | | | 9 | | | 5.7 | % | | 12.0 | % |
| Total | | $ | 70 | | | $ | 150 | | | (53.8) | % | | (53.6) | % | | $ | 149 | | | $ | 327 | | | (54.6) | % | | (54.4) | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Percent change | | Nine months ended September 30, | | Percent change |
| | | At actual currency rates | | At constant currency rates | | | At actual currency rates | | At constant currency rates |
(dollars in millions) | | 2017 | | 2016 | | | 2017 | | 2016 | |
HUMIRA | | | | | | | | | | | | | | | | |
United States | | $ | 3,151 |
| | $ | 2,647 |
| | 19.1 | % | | 19.1 | % | | $ | 9,048 |
| | $ | 7,554 |
| | 19.8 | % | | 19.8 | % |
International | | 1,550 |
| | 1,413 |
| | 9.7 | % | | 6.8 | % | | 4,487 |
| | 4,232 |
| | 6.0 | % | | 6.8 | % |
Total | | $ | 4,701 |
| | $ | 4,060 |
| | 15.8 | % | | 14.8 | % | | $ | 13,535 |
| | $ | 11,786 |
| | 14.8 | % | | 15.1 | % |
IMBRUVICA | | | | | | | | | | | | | | | | |
United States | | $ | 574 |
| | $ | 437 |
| | 31.0 | % | | 31.0 | % | | $ | 1,559 |
| | $ | 1,146 |
| | 36.0 | % | | 36.0 | % |
Collaboration revenues | | 114 |
| | 64 |
| | 80.7 | % | | 80.7 | % | | 306 |
| | 175 |
| | 75.4 | % | | 75.4 | % |
Total | | $ | 688 |
| | $ | 501 |
| | 37.3 | % | | 37.3 | % | | $ | 1,865 |
| | $ | 1,321 |
| | 41.2 | % | | 41.2 | % |
HCV | | | | | | | | | | | | | | | | |
United States | | $ | 60 |
| | $ | 76 |
| | (19.5 | )% | | (19.5 | )% | | $ | 124 |
| | $ | 288 |
| | (56.6 | )% | | (56.6 | )% |
International | | 216 |
| | 302 |
| | (28.7 | )% | | (29.8 | )% | | 640 |
| | 923 |
| | (30.7 | )% | | (30.5 | )% |
Total | | $ | 276 |
| | $ | 378 |
| | (26.8 | )% | | (27.7 | )% | | $ | 764 |
| | $ | 1,211 |
| | (36.9 | )% | | (36.7 | )% |
Lupron | | | | | | | | | | | | | | | | |
United States | | $ | 161 |
| | $ | 155 |
| | 4.1 | % | | 4.1 | % | | $ | 488 |
| | $ | 485 |
| | 0.6 | % | | 0.6 | % |
International | | 40 |
| | 38 |
| | 3.5 | % | | 1.6 | % | | 117 |
| | 117 |
| | (0.1 | )% | | (0.5 | )% |
Total | | $ | 201 |
| | $ | 193 |
| | 4.0 | % | | 3.6 | % | | $ | 605 |
| | $ | 602 |
| | 0.5 | % | | 0.4 | % |
Creon | | | | | | | | | | | | | | | | |
United States | | $ | 215 |
| | $ | 187 |
| | 14.8 | % | | 14.8 | % | | $ | 596 |
| | $ | 517 |
| | 15.3 | % | | 15.3 | % |
Synagis | | | | | | | | | | | | | | | | |
International | | $ | 116 |
| | $ | 96 |
| | 21.0 | % | | 23.5 | % | | $ | 456 |
| | $ | 460 |
| | (0.8 | )% | | (1.7 | )% |
Synthroid | | | | | | | | | | | | | | | | |
United States | | $ | 191 |
| | $ | 188 |
| | 1.5 | % | | 1.5 | % | | $ | 576 |
| | $ | 558 |
| | 3.1 | % | | 3.1 | % |
AndroGel | | | | | | | | | | | | | | | | |
United States | | $ | 147 |
| | $ | 174 |
| | (14.9 | )% | | (14.9 | )% | | $ | 437 |
| | $ | 501 |
| | (12.7 | )% | | (12.7 | )% |
Kaletra | | | | | | | | | | | | | | | | |
United States | | $ | 16 |
| | $ | 27 |
| | (39.2 | )% | | (39.2 | )% | | $ | 54 |
| | $ | 90 |
| | (39.9 | )% | | (39.9 | )% |
International | | 69 |
| | 110 |
| | (38.2 | )% | | (40.4 | )% | | 256 |
| | 326 |
| | (21.7 | )% | | (24.3 | )% |
Total | | $ | 85 |
| | $ | 137 |
| | (38.4 | )% | | (40.2 | )% | | $ | 310 |
| | $ | 416 |
| | (25.7 | )% | | (27.7 | )% |
Sevoflurane | | | | | | | | | | | | | | | | |
United States | | $ | 19 |
| | $ | 19 |
| | 0.5 | % | | 0.5 | % | | $ | 56 |
| | $ | 58 |
| | (2.4 | )% | | (2.4 | )% |
International | | 81 |
| | 83 |
| | (3.4 | )% | | (3.3 | )% | | 255 |
| | 269 |
| | (5.5 | )% | | (3.8 | )% |
Total | | $ | 100 |
| | $ | 102 |
| | (2.7 | )% | | (2.6 | )% | | $ | 311 |
| | $ | 327 |
| | (4.9 | )% | | (3.5 | )% |
Duodopa | | | | | | | | | | | | | | | | |
United States | | $ | 16 |
| | $ | 10 |
| | 56.4 | % | | 56.4 | % | | $ | 44 |
| | $ | 26 |
| | 70.8 | % | | 70.8 | % |
International | | 78 |
| | 64 |
| | 21.5 | % | | 16.6 | % | | 211 |
| | 189 |
| | 11.7 | % | | 12.3 | % |
Total | | $ | 94 |
| | $ | 74 |
| | 26.3 | % | | 22.0 | % | | $ | 255 |
| | $ | 215 |
| | 18.7 | % | | 19.2 | % |
All other | | $ | 181 |
| | $ | 342 |
| | (46.9 | )% | | (47.4 | )% | | $ | 767 |
| | $ | 928 |
| | (17.4 | )% | | (17.1 | )% |
Total net revenues | | $ | 6,995 |
| | $ | 6,432 |
| | 8.8 | % | | 8.1 | % | | $ | 20,477 |
| | $ | 18,842 |
| | 8.7 | % | | 8.8 | % |
| | | | | |
2023 Form 10-Q | | 28 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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) | | 2023 | | 2022 | | | 2023 | | 2022 | |
Eye Care | | | | | | | | | | | | | | | | |
Ozurdex | United States | | $ | 34 | | | $ | 36 | | | (3.3) | % | | (3.3) | % | | $ | 73 | | | $ | 69 | | | 6.3 | % | | 6.3 | % |
| International | | 85 | | | 74 | | | 14.2 | % | | 16.6 | % | | 161 | | | 148 | | | 8.7 | % | | 13.4 | % |
| Total | | $ | 119 | | | $ | 110 | | | 8.6 | % | | 10.2 | % | | $ | 234 | | | $ | 217 | | | 8.0 | % | | 11.2 | % |
Lumigan/Ganfort | United States | | $ | 51 | | | $ | 60 | | | (13.1) | % | | (13.1) | % | | $ | 114 | | | $ | 127 | | | (9.7) | % | | (9.7) | % |
| International | | 68 | | | 70 | | | (3.9) | % | | (1.1) | % | | 135 | | | 143 | | | (5.6) | % | | (1.9) | % |
| Total | | $ | 119 | | | $ | 130 | | | (8.1) | % | | (6.6) | % | | $ | 249 | | | $ | 270 | | | (7.5) | % | | (5.5) | % |
Alphagan/Combigan | United States | | $ | 32 | | | $ | 54 | | | (41.7) | % | | (41.7) | % | | $ | 60 | | | $ | 124 | | | (51.8) | % | | (51.8) | % |
| International | | 33 | | | 38 | | | (13.3) | % | | (8.6) | % | | 76 | | | 75 | | | 1.4 | % | | 7.4 | % |
| Total | | $ | 65 | | | $ | 92 | | | (29.7) | % | | (27.7) | % | | $ | 136 | | | $ | 199 | | | (31.7) | % | | (29.4) | % |
Restasis | United States | | $ | 82 | | | $ | 151 | | | (45.8) | % | | (45.8) | % | | $ | 161 | | | $ | 386 | | | (58.4) | % | | (58.4) | % |
| International | | 17 | | | 17 | | | (0.7) | % | | 5.2 | % | | 30 | | | 28 | | | 7.3 | % | | 12.8 | % |
| Total | | $ | 99 | | | $ | 168 | | | (41.1) | % | | (40.5) | % | | $ | 191 | | | $ | 414 | | | (54.0) | % | | (53.6) | % |
Other Eye Care | United States | | $ | 110 | | | $ | 106 | | | 1.9 | % | | 1.9 | % | | $ | 220 | | | $ | 197 | | | 11.3 | % | | 11.3 | % |
| International | | 105 | | | 111 | | | (4.1) | % | | — | % | | 195 | | | 191 | | | 2.1 | % | | 7.0 | % |
| Total | | $ | 215 | | | $ | 217 | | | (1.1) | % | | 1.0 | % | | $ | 415 | | | $ | 388 | | | 6.8 | % | | 9.2 | % |
Other Key Products | | | | | | | | | | | | | | | | |
Mavyret | United States | | $ | 193 | | | $ | 203 | | | (5.0) | % | | (5.0) | % | | $ | 364 | | | $ | 372 | | | (2.2) | % | | (2.2) | % |
| International | | 194 | | | 195 | | | (0.9) | % | | 1.9 | % | | 387 | | | 406 | | | (4.7) | % | | (0.1) | % |
| Total | | $ | 387 | | | $ | 398 | | | (3.0) | % | | (1.6) | % | | $ | 751 | | | $ | 778 | | | (3.5) | % | | (1.1) | % |
Creon | United States | | $ | 282 | | | $ | 318 | | | (11.4) | % | | (11.4) | % | | $ | 587 | | | $ | 605 | | | (3.0) | % | | (3.0) | % |
Linzess/Constella | United States | | $ | 269 | | | $ | 247 | | | 8.6 | % | | 8.6 | % | | $ | 520 | | | $ | 480 | | | 8.1 | % | | 8.1 | % |
| International | | 9 | | | 8 | | | 26.7 | % | | 31.1 | % | | 17 | | | 15 | | | 19.1 | % | | 24.3 | % |
| Total | | $ | 278 | | | $ | 255 | | | 9.1 | % | | 9.2 | % | | $ | 537 | | | $ | 495 | | | 8.5 | % | | 8.7 | % |
All other | | | $ | 741 | | | $ | 1,009 | | | (26.4) | % | | (25.3) | % | | $ | 1,432 | | | $ | 2,220 | | | (35.5) | % | | (34.5) | % |
Total net revenues | | $ | 13,865 | | | $ | 14,583 | | | (4.9) | % | | (4.2) | % | | $ | 26,090 | | | $ | 28,121 | | | (7.2) | % | | (6.1) | % |
n/m – Not meaningful
The following discussion and analysis of AbbVie’s net revenues by product is presented on a constant currency basis.
Global HUMIRAHumira sales increased 15%decreased 25% for both the three and ninesix months ended SeptemberJune 30, 2017 primarily as a result of market growth across therapeutic categories and geographies as well as favorable pricing in certain geographies.2023. In the United States, HUMIRAHumira sales increased 19%decreased by 26% for the three and six months ended June 30, 2023 primarily driven by direct biosimilar competition following the loss of exclusivity on January 31, 2023. Internationally, Humira revenues decreased 17% for the three months and 20%16% for the ninesix months ended SeptemberJune 30, 20172023 primarily driven by the continued impact of direct biosimilar competition. AbbVie continues to pursue strategies to maintain broad formulary access of Humira and manage the impact of biosimilar erosion.
Net revenues for Skyrizi increased 51% for the three months and 49% for the six months ended June 30, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, and favorablepartially offset by unfavorable pricing. Internationally, HUMIRA sales increased 7% for both the three and nine months ended September 30, 2017 driven primarily by market growth. AbbVie continues to pursue strategies intended to further differentiate HUMIRA from competing products and add to the sustainability and future growth of HUMIRA.
|
| |
2017 Form 10-Q | | 30 |
Net revenues for IMBRUVICARinvoq increased 57% for the three months and 54% for the six months ended June 30, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing.
Net revenues for Imbruvica represent product revenues in the United States and collaboration revenues outside of the United States related to AbbVie’s 50% share of IMBRUVICAImbruvica profit. Global IMBRUVICA sales increased 37%AbbVie's global Imbruvica revenues decreased 21% for the three months and 41%23% for the ninesix months ended SeptemberJune 30, 20172023 primarily driven by decreased demand and lower market share in the United States as a result of continued penetration of IMBRUVICAwell as a first-line treatmentdecreased collaboration revenues.
Net revenues for patients with chronic lymphocytic leukemia (CLL)Venclexta increased 15% for the three months and 16% for the six months ended June 30, 2023 primarily driven by market growth across all indications as well as favorable pricing. Internationally, net revenues for the three and six months ended June 30, 2023 were also favorably impacted by continued volume and market share uptake.
Net revenues for Botox Cosmetic increased 1% for the three months and 3% for the six months ended June 30, 2023. Internationally, Botox Cosmetic net revenues increased 14% for the three months and 16% for the six months ended June 30, 2023 primarily driven
| | | | | |
2023 Form 10-Q | | 29 |
by increased investment in key markets, including Asia and Latin America, and recovery from COVID-19 in China. In the United States, Botox Cosmetic net revenues decreased 7% for the three months and 4% for the six months ended June 30, 2023 primarily driven by decreased consumer demand and unfavorable pricing due to economic pressures impacting consumer discretionary spending.
Net revenues for Juvederm Collection increased 10% for the three months ended June 30, 2023 and remained flat for the six months ended June 30, 2023. Internationally, Juvederm Collection net revenues increased 28% for the three months and 37%11% for the ninesix months ended SeptemberJune 30, 2017 as a result of market contraction, lower market share2023 primarily driven by increased investment in key markets, including Asia and price erosion of VIEKIRA. These factors were partially offsetLatin America, and recovery from COVID-19 in China. In the United States, Juvederm Collection net revenues decreased 15% for the three months and 16% for the six months ended June 30, 2023 primarily driven by the launch of MAVYRET in certain geographies during the third quarter of 2017.
decreased consumer demand due to economic pressures impacting consumer discretionary spending.
Net revenues for CreonBotox Therapeutic increased 11% for the three months and 15% for boththe six months ended June 30, 2023 primarily driven by market growth as well as market share uptake. Net revenues for the six months ended June 30, 2023 were also favorably impacted by the timing of shipments.
Net revenues for Vraylar increased 34% for the three months and 33% for the six months ended June 30, 2023 primarily driven by continued volume and market share uptake as well as market growth. Net revenues for the three and ninesix months ended SeptemberJune 30, 20172023 were also favorably impacted by the recent regulatory approval of Vraylar as an adjunctive therapy to antidepressants for the treatment of major depressive disorder in adults.
Net revenues for Ubrelvy increased 6% for the three months and 8% for the six months ended June 30, 2023 primarily driven primarily by continued volume and market growthshare uptake as well as market growth.
Net revenues for Qulipta increased greater than 100% for the three and highersix months ended June 30, 2023 primarily driven by continued strong volume and market share. Creon maintainsshare uptake as well as market leadership in the pancreatic enzyme market.
Synagis is a seasonal product with the majority of sales occurring in the first and fourth quarters. Synagisgrowth. Net revenues increased 23% for the three months ended SeptemberJune 30, 2017 primarily due to seasonal acceleration in certain geographies and tender timing. Synagis revenues2023 were also favorably impacted by the recent regulatory approval of Qulipta for the nine months ended September 30, 2017 decreased 2%.preventative treatment of chronic migraine in adults.
Net revenues for Duodopa increased 22% for the three months and 19% for the nine months ended September 30, 2017 primarily as a result of market penetration and geographic expansion.
Gross Margin
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(dollars in millions) | | 2017 | | 2016 | | % change | | 2017 | | 2016 | | % change |
Gross margin | | $ | 5,379 |
| | $ | 4,928 |
| | 9 | % | | $ | 15,717 |
| | $ | 14,564 |
| | 8 | % |
as a % of net revenues | | 77 | % | | 77 | % | | | | 77 | % | | 77 | % | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(dollars in millions) | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Gross margin | | $ | 9,625 | | $ | 10,413 | | (8) | % | | $ | 17,864 | | $ | 19,899 | | (10) | % |
as a % of net revenues | | 69 | % | | 71 | % | | | | 68 | % | | 71 | % | | |
Gross margin as a percentage of net revenues was flatdecreased for both the three and ninesix months ended SeptemberJune 30, 20172023 compared to the prior year. Gross margin percentage for both the three and ninesix months ended SeptemberJune 30, 20172023 was favorablyunfavorably impacted by higher amortization of intangibles and changes in product mix, and operational efficiencies,partially offset by the unfavorablefavorable impact of higher intangible asset amortization and the IMBRUVICA profit sharing arrangement.tax law changes in Puerto Rico.
Selling, General and Administrative
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, |
| Nine months ended September 30, |
(dollars in millions) | | 2017 | | 2016 | | % change |
| 2017 |
| 2016 |
| % change |
Selling, general and administrative | | $ | 1,452 |
| | $ | 1,381 |
| | 5 | % | | $ | 4,324 |
| | $ | 4,202 |
| | 3 | % |
as a % of net revenues | | 21 | % | | 21 | % | | | | 21 | % | | 22 | % | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(dollars in millions) | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Selling, general and administrative | | $ | 3,268 | | $ | 5,412 | | (40) | % | | $ | 6,307 | | $ | 8,539 | | (26) | % |
as a % of net revenues | | 24 | % | | 37 | % | | | | 24 | % | | 30 | % | | |
SG&A expenses as a percentage of net revenues was flatdecreased for the three months and decreased for the ninesix months ended SeptemberJune 30, 20172023 compared to the prior year. SG&A expense percentage for both the three and nine months ended September 30, 2017 was favorably impacted by continued leverage from revenue growth, partially offset by new product launch expenses.lower litigation reserve charges for the three and six months ended June 30, 2023 as compared to the prior year. Litigation reserve charges were $2.2 billion for the three months and $2.4 billion for the six months ended June 30, 2022. The decrease in SG&A expense percentage for the ninethree and six months ended SeptemberJune 30, 20172023 was partially offset by the unfavorable impact of lower net revenues primarily driven by the Humira loss of exclusivity in the United States.
| | | | | |
2023 Form 10-Q | | 30 |
Research and Development | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(dollars in millions) | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Research and development | | $ | 1,733 | | | $ | 1,609 | | | 8 | % | | $ | 4,025 | | $ | 3,106 | | 30 | % |
as a % of net revenues | | 12 | % | | 11 | % | | | | 15 | % | | 11 | % | | |
| | | | | | | | | | | | |
Research and development (R&D) expenses as a percentage of net revenues increased for the three and six months ended June 30, 2023 compared to the prior year. R&D expense percentage for the three and six months ended June 30, 2023 was unfavorably impacted by increased funding to support all stages of the company’s pipeline assets and lower net revenues primarily driven by the Humira loss of exclusivity in the United States. R&D expense percentage for the six months ended June 30, 2023 was also unfavorably impacted by litigation reserve chargesan intangible asset impairment charge of $97$630 million.
Acquired IPR&D and Milestones
|
| |
2017 Form 10-Q | | 31 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(dollars in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Upfront charges | | $ | 220 | | | $ | 222 | | | $ | 352 | | | $ | 352 | |
Development milestones | | 60 | | | 47 | | | 78 | | | 62 | |
Acquired IPR&D and milestones | | $ | 280 | | | $ | 269 | | | $ | 430 | | | $ | 414 | |
ResearchAcquired IPR&D and Development and Acquired In-Process Research and Development
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(dollars in millions) | | 2017 | | 2016 | | % change | | 2017 | | 2016 | | % change |
Research and development | | $ | 1,222 |
| | $ | 1,106 |
| | 11 | % | | $ | 3,580 |
| | $ | 3,176 |
| | 13 | % |
as a % of net revenues | | 17 | % | | 17 | % | | | | 17 | % | | 17 | % | | |
Acquired in-process research and development | | $ | — |
| | $ | 80 |
| | (100 | )% | | $ | 15 |
| | $ | 160 |
| | (91 | )% |
Research and Development(R&D) expensesmilestones expense for both the three and ninesix months ended SeptemberJune 30, 2017 increased compared to the prior year principally due to increased funding to support the company’s emerging mid- and late-stage pipeline assets and the impact of the post-acquisition R&D expenses of Stemcentrx and Boehringer Ingelheim (BI) compounds. These increases were partially offset by lower acquisition related costs, which decreased by $54 million for the three months and $130 million for the nine months ended September 30, 2017 compared to the prior year.
Acquired in-process research and development (IPR&D) expenses reflect upfront payments related to various collaborations. There were no individually significant transactions or cash flows during the three and nine months ended September 30, 2017 and 2016.
Other Non-Operating Expenses
|
| | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Interest expense | | $ | 293 |
| | $ | 271 |
| | $ | 851 |
| | $ | 731 |
|
Interest income | | (41 | ) | | (21 | ) | | (99 | ) | | (56 | ) |
Interest expense, net | | $ | 252 |
| | $ | 250 |
| | $ | 752 |
| | $ | 675 |
|
| | | | | | | | |
Net foreign exchange loss (gain) | | $ | 9 |
| | $ | (4 | ) | | $ | 28 |
| | $ | 313 |
|
Other expense, net | | 349 |
| | 101 |
| | 484 |
| | 152 |
|
Interest expense, net was flat for the three months ended September 30, 2017 compared to the prior year. The increase for the nine months ended September 30, 2017 compared to the prior year was primarily due to the May 2016 issuance of $7.8 billion aggregate principal amount of senior notes, which were issued to finance the acquisition of Stemcentrx and to repay an outstanding term loan.
Net foreign exchange loss for the nine months ended September 30, 20162022 included losses totaling $298 milliona charge related to the devaluationupfront payment of AbbVie’s net monetary assets denominated in the Venezuelan bolivar. $130 million to acquire Syndesi Therapeutics SA. See Note 84 to the Condensed Consolidated Financial Statements for additional information regardinginformation.
Other Operating Income
Other operating income for the Venezuelan devaluation.three and six months ended June 30, 2023 included a one-time gain of $169 million related to the termination of a development liability associated with a previously divested product. Other operating income for the three and six months ended June 30, 2022 included $172 million of income related to the sale of worldwide commercial rights of a mature brand Pylera, which is used for the treatment of peptic ulcers with an infection by the bacterium Helicobactor pylori. 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) | | 2023 | | 2022 | | 2023 | | 2022 |
Interest expense | | $ | 552 | | | $ | 556 | | | $ | 1,105 | | | $ | 1,104 | |
Interest income | | (98) | | | (24) | | | (197) | | | (33) | |
Interest expense, net | | $ | 454 | | | $ | 532 | | | $ | 908 | | | $ | 1,071 | |
| | | | | | | | |
Net foreign exchange loss | | $ | 37 | | | $ | 47 | | | $ | 72 | | | $ | 72 | |
Other expense, net | | 1,412 | | | 1,533 | | | 3,216 | | | 757 | |
Interest expense remained flat for the three and six months ended June 30, 2023 compared to the prior year primarily driven by the impact of higher interest rates, offset by lower average debt balances as a result of deleveraging.
Interest income increased for the three and six months ended June 30, 2023 compared to the prior year primarily due to the impact of higher interest rates.
Other expense, net included charges related to changes in fair value of the BI and Stemcentrx contingent consideration liabilities which totaled $401 millionof $1.6 billion for the three months and $547 million$3.4 billion for the ninesix months ended SeptemberJune 30, 2017 compared to $104 million2023 and $1.6 billion for the three months and $145$861 million for the ninesix months ended SeptemberJune 30, 2016 following the initial recognition of these liabilities in the second quarter of 2016.2022. The fair value of contingent consideration liabilities is impacted by the passage of time and multiple other inputs, including the probability of success of achieving regulatory/commercial milestones, discount rates, the estimated amount of future sales of the acquired products and other market-based factors. For the three and ninesix months ended SeptemberJune 30, 2017,2023, the change in fair value reflected higher estimated Skyrizi sales driven by stronger market share uptake and the passage of time. The change in fair value for the three months ended June 30, 2023 is also partially offset by higher discount rates. For the three and six
| | | | | |
2023 Form 10-Q | | 31 |
months ended June 30, 2022 the change in fair value represented mainly higher probabilities of success and the passage of time. See Note 4 to the Condensed Consolidated Financial Statements for additional information regarding the acquisitions of Stemcentrx and BI compounds. Other expense, net also included realized gains on available-for-sale investment securities of $39 million for the three months and $49 million for the nine months ended September 30, 2017.estimated Skyrizi sales driven by stronger market share uptake, partially offset by higher discount rates.
|
| |
2017 Form 10-Q | | 32 |
Income Tax Expense
The effective tax rate was 22% for the three months and 20%26% for the ninesix months ended SeptemberJune 30, 2017 and 21%2023 compared to 22% for the three months and 22%11% for the ninesix months ended SeptemberJune 30, 2016.2022. The effective tax rate in each period differed from the U.S. statutory tax rate of 21% principally due to the benefit fromimpact of foreign operations which reflects the impact of lower income tax rates in locations outside the United States, tax exemptions and incentiveschanges in Puerto Rico and other foreign tax jurisdictionsfair value of contingent consideration and business development activities together with the cost of repatriation decisions.activities. The changeincrease in the effective tax rate for both the three and ninesix months ended SeptemberJune 30, 20172023 over the prior year was principallyprimarily due to changes in the jurisdictional mixfair value of earnings, as well ascontingent consideration, tax law changes in Puerto Rico and impairment of certain discrete factors and events, including collaborations, the impact of the prior year non-deductible devaluation loss related to Venezuela and the impact of the adoption of ASU No. 2016-09, which changed the accounting treatment for excess tax benefits associated with stock-based awards. See Note 1 to the Condensed Consolidated Financial Statements for additional information related to the adoption of this accounting pronouncement.intangible assets.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
|
| | | | | | | |
| Nine months ended September 30, |
(in millions) | 2017 | | 2016 |
Cash flows provided by (used in): | | | |
Operating activities | $ | 7,376 |
| | $ | 5,500 |
|
Investing activities | (475 | ) | | (5,955 | ) |
Financing activities | (3,584 | ) | | (1,426 | ) |
| | | | | | | | | | | |
| Six months ended June 30, |
(in millions) | 2023 | | 2022 |
Cash flows provided by (used in): | | | |
Operating activities | $ | 10,512 | | | $ | 9,913 | |
Investing activities | (840) | | | (1,461) | |
Financing activities | (10,112) | | | (9,651) | |
Operating cash flows for the ninesix months ended SeptemberJune 30, 2017 reflected improved results of operations resulting from revenue growth and an improvement in operating earnings as well as favorability from the timing of income tax payments2023 increased compared to the prior year. Cash provided by operating activities reflected AbbVie’s voluntary contributions to its principal domestic defined benefit plan of $150 million for both the nine months ended September 30, 2017 and 2016. Realized excess tax benefits associated with stock-based compensation totaled $53 million for the nine months ended September 30, 2017 and were presented within cash flows from operating activities as a result of the adoption of a new accounting pronouncement. In the nine months ended September 30, 2016, prioryear due to the adoptiontiming of the new accounting pronouncement, realized excess tax benefitsworking capital partially offset by decreased results of $47 million were presented within cash flows from financing activities. See Note 1 to the Condensed Consolidated Financial Statementsoperations primarily driven by lower net revenues as well as higher payments for additional information regarding the adoption of this new accounting pronouncement.
income taxes.
Investing cash flows for the ninesix months ended SeptemberJune 30, 20172023 included net salespayments made for acquisitions and maturitiesinvestments of investment securities totaling $52$513 million and capital expenditures of $353 million. ForInvesting cash flows for the ninesix months ended SeptemberJune 30, 2016, investing activities primarily2022 included $1.9 billion of cash consideration paid to acquire Stemcentrx in June 2016, a $595 million upfront payment to acquire certain BI compounds in April 2016 andpayments made for net purchases of investment securities totaling $2.9 billion. Cash flows from investing activities for the nine months ended September 30, 2017$1.4 billion, acquisitions and 2016 also reflectedinvestments of $394 million and capital expenditures and other acquisitions and investments.
of $305 million.
Financing cash flows for the six months ended June 30, 2023 included repayments of $1.0 billion floating rate term loan, $1.0 billion aggregate principal amount of 2.85% senior notes and $350 million aggregate principal amount of the company’s 2.80% senior notes. Financing cash flows for the six months ended June 30, 2022 included a repayment of $2.9 billion aggregate principal amount of the company’s 3.45% senior notes. Additionally, financing cash flows for the six months ended June 30, 2022 included a repayment of $2.0 billion floating rate term loan due May 2025 and issuance of a new $2.0 billion floating rate term loan as part of the term loan refinancing in February 2022.
Financing cash flows also included cash dividend payments of $3.1$5.3 billion for the ninesix months ended SeptemberJune 30, 20172023 and $2.8$5.0 billion for the ninesix months ended SeptemberJune 30, 2016.2022. The increase in cash dividend payments was primarily driven by anthe increase in the quarterly dividend rate from $0.57 per share to $0.64 per share beginning withrate.
On June 22, 2023, the dividendcompany announced that was paid in February 2017. On September 8, 2017, theits board of directors declared a quarterly cash dividend of $0.641.48 per share for stockholders of record at the close of business on October 13, 2017,July 14, 2023, payable on NovemberAugust 15, 2017. On October 27, 2017, the company announced that its board of directors declared an increase in the company's quarterly cash dividend from $0.64 per share to $0.71 per share beginning with the dividend payable on February 15, 2018 to stockholders of record as of January 12, 2018. This reflects an increase of approximately 11% over the previous quarterly rate.2023. 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.
On February 16, 2017, AbbVie's board of directors authorized a $5.0 billion increase to AbbVie's existing stock repurchase program. Under this program, the company repurchased approximately 7.8 million shares for $500 million in the open market in the nine months ended September 30, 2017. Additionally, during the nine months ended September 30, 2017, AbbVie cash-settled $285 million of its open market purchases made at the end of 2016. The company's stock repurchase authorization permits purchases of AbbVie
|
| |
2017 Form 10-Q | | 33 |
shares from time to time in open-market or private transactions at management's direction depending on the company's cash flows, net debt level and market conditions.discretion. The program has no time limit and can be discontinued at any time.
During On February 16, 2023, AbbVie’s board of directors authorized a $5.0 billion increase to the nineexisting stock repurchase authorization. AbbVie repurchased 10 million shares for $1.6 billion during the six months ended SeptemberJune 30, 20172023 and 2016,8 million shares for $1.1 billion during the company issued and redeemed commercial paper. The balance of commercial paper outstanding was $800 million as of September 30, 2017 and $377 million as of December 31, 2016. AbbVie may issue additional commercial paper or retire commercial paper to meet liquidity requirements as needed.
In May 2016, the company issued $7.8 billion aggregate principal amount of senior notes. Approximately $2.0 billion of the net proceeds were used to repay an outstanding term loan that was due to mature in November 2016, approximately $1.9 billion of the net proceeds were used to finance the acquisition of Stemcentrx and approximately $3.8 billion of the net proceeds were used to finance an accelerated share repurchase agreement.
In the third quarter of 2017, AbbVie paid $305 million of contingent consideration to BI related to a Phase 3 enrollment milestone. $268 million of this milestone was included in financing cash flows and $37 million was included in operating cash flows for the ninesix months ended SeptemberJune 30, 2017.2022.
Cash and equivalents were impacted by net favorable exchange rate changes totaling $29 million for the nine months ended September 30, 2017 and net unfavorable exchange rate changes totaling $300 million for the nine months ended September 30, 2016. The unfavorable exchange rate changes in 2016 were primarily due to the devaluation of AbbVie’s net monetary assets denominated in the Venezuelan bolivar. While a significant portion of cash and equivalents as of September 30, 2017 were considered reinvested indefinitely in foreign subsidiaries, AbbVie does not expect such reinvestment to affect its liquidity and capital resources. If these funds were needed for operations in the United States, AbbVie would be required to accrue and pay U.S. income taxes to repatriate these funds. AbbVie believes that it has sufficient sources of liquidity to support its assumption that the amount of undistributed earnings as of September 30, 2017 has been reinvested indefinitely.
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 againstfor credit
| | | | | |
2023 Form 10-Q | | 32 |
losses equal to the estimate of future losses over the contractual life of outstanding accounts receivable when it is probable they will not be collected.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.
AbbVie continues to do business with foreign governments in certain countries, including Greece, Portugal, Italy and Spain, which have historically experienced challenges in credit and economic conditions. Substantially all of AbbVie’s trade receivables in Greece, Portugal, Italy and Spain are with government health systems. Outstanding governmental receivables in these countries, net of allowances for doubtful accounts, totaled $246 million as of September 30, 2017 and $244 million as of December 31, 2016. The company also continues to do business with foreign governments in certain oil-exporting countries that have recently experienced a deterioration in economic conditions, including Saudi Arabia and Russia, which may result in delays in the collection of receivables. Outstanding governmental receivables related to Saudi Arabia, net of allowances for doubtful accounts, were $141 million as of September 30, 2017 and $122 million as of December 31, 2016. Outstanding governmental receivables related to Russia, net of allowances for doubtful accounts, were $142 million as of September 30, 2017 and $110 million as of December 31, 2016. Global economic conditions and customer-specific factors may require the company to periodically re-evaluate the collectability of its receivables and the company could potentially incur credit losses.
Currently, AbbVie does not believe the economic conditions in oil-exporting countries will have a significant impact on the company’s liquidity, cash flow or financial flexibility. However, if government funding were to become unavailable in these countries or if significant adverse changes in their reimbursement practices were to occur, AbbVie may not be able to collect the entire balance outstanding as of September 30, 2017.
|
| |
2017 Form 10-Q | | 34 |
Credit Facility, Access to Capital and Credit Ratings
Credit Facility
In March 2023, AbbVie currently has a $3.0 billionentered into an amended and restated five-year revolving credit facility. The amendment increased the unsecured revolving credit facility which matures in October 2019. The revolvingcommitments from $4.0 billion to $5.0 billion and extended the maturity date of the facility from August 2023 to March 2028. This credit facility enables the company to borrow funds on an unsecured basis at variable interest rates and contains various covenants. At SeptemberJune 30, 2017,2023, the company was in compliance with all its credit facility covenants. Commitmentcovenants, and commitment fees under the credit facility were insignificant. ThereNo amounts were no amounts outstanding under the company's credit facility as of SeptemberJune 30, 20172023 and December 31, 2016.
2022.
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 by issuinghas 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 ninesix months ended SeptemberJune 30, 2017.2023. 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, entitled “Summary of Significant Accounting Policies” to the company’sin AbbVie's Annual Report on Form 10-K for the year ended December 31, 2016.2022. There have been no significant changes in the company’s application of its critical accounting policies during the ninesix months ended SeptemberJune 30, 2017.
2023.
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 among others,and use 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 indicatedexpressed 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, and changes to laws and regulations applicable to our industry. 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, 2016,2022, 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, 2016.
2022.
|
| | | | |
20172023 Form 10-Q | | 3533 |
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. The Chief Executive Officer, Richard A. Gonzalez, and the Chief Financial Officer, William J. Chase,Scott T. Reents, evaluated the effectiveness of AbbVie’sAbbVie's disclosure controls and procedures as of the end of the period covered by this report, and concluded that AbbVie’sAbbVie's disclosure controls and procedures were effective to ensure that information AbbVie is required to disclose in the reports that it files or submits with the Securities and Exchange Commission under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’sCommission's rules and forms, and to ensure that information required to be disclosed by AbbVie in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to AbbVie’sAbbVie's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Changes in internal control over financial reporting. There were no changes in AbbVie’sAbbVie's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act)Act of 1934) that have materially affected, or are reasonably likely to materially affect, AbbVie’sAbbVie's internal control over financial reporting during the quarter ended SeptemberJune 30, 2017.2023.
Inherent Limitations on Effectiveness of Controls. AbbVie’s management, including its Chief Executive Officer and its Chief Financial Officer, do not expect that AbbVie’s disclosure controls or internal control over financial reporting will prevent or detect all errorerrors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
|
| | | | |
20172023 Form 10-Q | | 3634 |
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information pertaining to legal proceedings is provided in Note 12 to the Condensed Consolidated Financial Statements and is incorporated by reference herein.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Issuer Purchases of Equity Securities
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | (a) Total Number of Shares (or Units) Purchased | | (b) Average Price Paid per Share (or Unit) | | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | |
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | |
April 1, 2023 - April 30, 2023 | 1,006 | | (1) | $161.23 | (1) | — | | | $4,808,991,028 | |
May 1, 2023 - May 31, 2023 | 1,105 | | (1) | $147.29 | (1) | — | | | $4,808,991,028 | |
June 1, 2023 - June 30, 2023 | 1,194 | | (1) | $136.06 | (1) | — | | | $4,808,991,028 | |
Total | 3,305 | | (1) | $147.48 | (1) | — | | | $4,808,991,028 | (2) |
|
| | | | | | | | | |
Period | (a) Total Number of Shares (or Units) Purchased | | (b) Average Price Paid per Share (or Unit) | | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | |
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
July 1, 2017 – July 31, 2017 | 24,680 |
| (1) | $72.78 | (1) | — |
| | $4,536,288,945 |
August 1, 2017 – August 31, 2017 | 2,731 |
| (1) | $70.45 | (1) | — |
| | $4,536,288,945 |
September 1, 2017 – September 30, 2017 | 4,266 |
| (1) | $83.29 | (1) | — |
| | $4,536,288,945 |
Total | 31,677 |
| (1) | $74.00 | (1) | — |
| | $4,536,288,945 |
| |
1. | 1.In addition to AbbVie shares repurchased on the open market under a publicly announced program, if any, these shares included the shares deemed surrendered to AbbVie to pay the exercise price in connection with the exercise of employee stock options – 3,738 in July; 1,293 in August; and 2,974 in September, with average exercise prices of $72.84 in July; $69.87 in August; and $86.51 in September. |
These shares also included the shares purchased on the open market for the benefit of participants in the AbbVie Employee Stock Purchase Plan - 20,942– 1,006 in July; 1,438April; 1,105 in August;May; and 1,2921,194 in September.June.
2.On February 16, 2023, AbbVie’s board of directors authorized a $5.0 billion increase to the existing stock repurchase authorization.
These shares do not include the shares surrendered to AbbVie to satisfy minimum tax withholding obligations in connection with the vesting or exercise of stock-based awards.
ITEM 6. EXHIBITS5. OTHER ITEMS (c) Director and Officer Trading Arrangements
During the three months ended June 30, 2023, no director or officer of the company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
| | | | | |
2023 Form 10-Q | | 35 |
Incorporated by referenceExhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be “filed” under the Exhibit Index included herewith.Securities Exchange Act of 1934.
| | | | | | | | | | | |
Exhibit No. | | Exhibit Description | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
101 | | The following financial statements and notes from the AbbVie Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed on August 7, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Earnings; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements. | |
| | | |
104 | | Cover Page Interactive Data File (the cover page from the AbbVie Inc. Quarterly Report on Form 10-Q formatted as Inline XBRL and contained in Exhibit 101). | |
| | | | | |
2023 Form 10-Q | | 3736 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| | ABBVIE INC. |
| | |
| | |
| | ABBVIE INC. |
| | |
| | |
| By: | /s/ William J. Chase |
| | William J. Chase |
| | Executive Vice President, |
| | Chief Financial Officer |
Date: November 7, 2017
Scott T. Reents |
| | Scott T. Reents |
2017 Form 10-Q | | 38 | Executive Vice President, |
| | Chief Financial Officer (Principal Financial Officer) |
Date: August 7, 2023
EXHIBIT INDEX
Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be “filed” under the Securities Exchange Act of 1934.
|
| | | | |
Exhibit No. | | Exhibit Description |
| | |
31.12023 Form 10-Q | | | |
| | |
| | |
�� | | |
| | |
| | |
| | |
| | |
101 | | The following financial statements and notes from the AbbVie Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed on November 7, 2017, formatted in XBRL: (i) Condensed Consolidated Statements of Earnings; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements.37 |