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    ABBV   US00287Y1091

ABBVIE INC.

(ABBV)
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ABBVIE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/02/2021 | 01:30pm EDT
The following is a discussion and analysis of the financial condition of AbbVie
Inc. (AbbVie or the company) as of June 30, 2021 and December 31, 2020 and the
results of operations for the three and six months ended June 30, 2021 and 2020.
This commentary should be read in conjunction with the Condensed Consolidated
Financial Statements and accompanying notes appearing in Item 1, "Financial
Statements and Supplementary Data."
EXECUTIVE OVERVIEW
Company Overview
AbbVie is a global, research-based biopharmaceutical company. AbbVie uses its
expertise, dedicated people and unique approach to innovation to develop and
market advanced therapies that address some of the world's most complex and
serious diseases.
On May 8, 2020, AbbVie completed the acquisition of Allergan plc (Allergan). The
acquisition of Allergan created a diversified biopharmaceutical company
positioned for success with a comprehensive product portfolio that has
leadership positions in key therapeutic areas of immunology, hematologic
oncology, aesthetics, neuroscience, eye care and women's health. AbbVie's
existing product portfolio and pipeline was enhanced with numerous Allergan
assets and Allergan's product portfolio benefits from AbbVie's commercial
strength, expertise and international infrastructure. See Note 4 to the
Condensed Consolidated Financial Statements for additional information on the
acquisition. Subsequent to the acquisition date, AbbVie's consolidated financial
statements include the assets, liabilities, operating results and cash flows of
Allergan.
AbbVie's products are generally sold worldwide directly to wholesalers,
distributors, government agencies, health care facilities, specialty pharmacies
and independent retailers from AbbVie-owned distribution centers and public
warehouses. Certain 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 pharmacies and patients. Outside the
United States, AbbVie sells products primarily to customers or through
distributors, depending on the market served. Certain products are co-marketed
or co-promoted with other companies. AbbVie has approximately 48,000 employees.
AbbVie operates as a single global business segment.
2021 Strategic Objectives
AbbVie's mission is to discover and develop innovative medicines and products
that solve serious health issues today and address the medical challenges of
tomorrow while achieving top-tier financial performance through outstanding
execution. AbbVie intends to continue to advance its mission in a number of
ways, including: (i) maximizing the benefits of the Allergan acquisition to
create a more diversified revenue base with multiple long-term growth drivers;
(ii) growing revenues by leveraging AbbVie's commercial strength and
international infrastructure across Allergan's therapeutic areas and ensuring
strong commercial execution of new product launches; (iii) continuing to invest
in and expand its pipeline in support of opportunities in immunology, oncology,
aesthetics, neuroscience, eye care and women's health as well as continued
investment in key on-market products; (iv) expanding operating margins; and (v)
returning cash to shareholders via a strong and growing dividend while also
reducing debt. In addition, AbbVie anticipates several regulatory submissions
and key data readouts from key clinical trials in the next 12 months.
Financial Results
The company's financial performance for the six months ended June 30, 2021
included delivering worldwide net revenues of $27.0 billion, operating earnings
of $8.5 billion, diluted earnings per share of $2.41 and cash flows from
operations of $9.8 billion. Worldwide net revenues grew by 42% on a reported
basis and 40% on a constant currency basis, which included $8.6 billion of
contributed revenues from the Allergan acquisition, growth in the immunology
portfolio from Skyrizi, Rinvoq and the continued strength of Humira in the U.S.
as well as revenue growth from Venclexta and Imbruvica.
Diluted earnings per share was $2.41 for the six months ended June 30, 2021 and
included the following after-tax costs: (i) $3.3 billion related to the
amortization of intangible assets; (ii) $2.3 billion for the change in fair
value of contingent consideration liabilities; (iii) $295 million for milestones
and other research and development (R&D) expenses; (iv) $261 million of Allergan
acquisition and integration expenses; (v) $159 million for acquired in-process
research and development (IPR&D); and (vi) $93 million for charges related to
litigation matters. Additionally, financial results reflected continued funding
to support all stages of AbbVie's pipeline assets and continued investment in
AbbVie's on-market brands.
Following the closing of the Allergan acquisition, AbbVie implemented an
integration plan designed to reduce costs, integrate and optimize the combined
organization. The integration plan is expected to realize more than $2 billion
of annual cost synergies over a

2021 Form 10-Q | [[Image Removed: abbv-20210630_g2.gif]] 26

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three-year period, with approximately 50% realized in R&D, 40% in selling,
general and administrative (SG&A) and 10% in cost of products sold.
To achieve these integration objectives, AbbVie expects to incur total charges
of approximately $2 billion through 2022. These costs will 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.
Impact of the Coronavirus Disease 2019 (COVID-19)
In response to the ongoing public health crisis posed by COVID-19, AbbVie
continues to partner with global authorities to support the experimental use of
multiple AbbVie assets to determine their efficacy in the treatment of COVID-19.
AbbVie has also committed to supporting vaccine efforts in local communities
around its headquarters, including launching a temporary vaccination clinic for
seniors over 65 years old and supporting employee volunteers at vaccination
sites. AbbVie continues to closely manage manufacturing and supply chain
resources around the world to help ensure that patients continue to receive an
uninterrupted supply of their medicines. Clinical trial sites are being
monitored locally to protect the safety of study participants, staff and
employees. While the impact of COVID-19 on AbbVie's operations to date has not
been material, AbbVie continues to experience lower new patient starts in
certain products and markets. AbbVie expects this matter could continue to
negatively impact its results of operations throughout the duration of the
outbreak. The extent to which COVID-19 may impact AbbVie's financial condition
and results of operations remains uncertain and is dependent on numerous
evolving factors, including the measures being taken by authorities to mitigate
against the spread of COVID-19, the emergence of new variants and the
availability and successful administration of effective vaccines.
Research and Development
Research and innovation are the cornerstones of AbbVie's business as a global
biopharmaceutical company. AbbVie's long-term success depends to a great extent
on its ability to continue to discover and develop innovative products and
acquire or collaborate on compounds currently in development by other
biotechnology or pharmaceutical companies.
AbbVie's pipeline currently includes more than 90 compounds, devices or
indications in development individually or under collaboration or license
agreements and is focused on such important specialties as immunology, oncology,
aesthetics, neuroscience, eye care and women's health along with targeted
investments in cystic fibrosis. Of these programs, more than 50 are in mid- and
late-stage development.
The following sections summarize transitions of significant programs from
mid-stage development to late-stage development as well as developments in
significant late-stage and registration programs. AbbVie expects multiple
mid-stage programs to transition into late-stage programs in the next 12 months.
Significant Programs and Developments
Immunology
Skyrizi
•In January 2021, AbbVie announced top-line results from its Phase 3 KEEPsAKE-1
and KEEPsAKE-2 clinical trials of Skyrizi in adults with active psoriatic
arthritis (PsA) met the primary and ranked secondary endpoints.
•In January 2021, AbbVie announced top-line results from its Phase 3 ADVANCE and
MOTIVATE induction studies of Skyrizi in patients with Crohn's Disease met the
primary and key secondary endpoints.
•In April 2021, AbbVie submitted a supplemental New Drug Application (sNDA) to
the U.S. Food and Drug Administration (FDA) and a marketing authorization
application (MAA) to the European Medicines Agency (EMA) for the treatment of
adults with active PsA.
•In April 2021, AbbVie received FDA approval of Skyrizi in a single dose
pre-filled syringe and pre-filled pen. This approval will reduce the number of
injections administered per treatment.
•In June 2021, AbbVie announced top-line results from its Phase 3 FORTIFY study
for Skyrizi in patients with moderate to severe Crohn's Disease met the
co-primary endpoints.

2021 Form 10-Q | [[Image Removed: abbv-20210630_g2.gif]] 27

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Rinvoq

•In January 2021, AbbVie announced that the European Commission (EC) approved
Rinvoq for the treatment of adults with active PsA and ankylosing spondylitis
(AS).
•In February 2021, AbbVie announced its Phase 3 U-ACCOMPLISH induction study of
Rinvoq for the treatment of adult patients with moderate to severe ulcerative
colitis (UC) met the primary and all ranked secondary endpoints.
•In March 2021, AbbVie announced the FDA extended the review period for the sNDA
of Rinvoq for the treatment of adult patients with active PsA by three months to
late second quarter 2021.
•In April 2021, AbbVie announced the FDA extended the review period for the sNDA
of Rinvoq for the treatment of moderate to severe atopic dermatitis (AD) by
three months to early third quarter 2021.
•In June and July 2021, AbbVie announced the FDA will not meet the Prescription
Drug User Fee Act (PDUFA) action dates for the sNDAs of Rinvoq for the treatment
of adults with active PsA and adults with active AS as well as adults and
adolescents with moderate to severe AD. No formal regulatory action has been
taken on the sNDAs for Rinvoq in PsA, AS or AD.
•In June 2021, AbbVie announced that the Committee for Medicinal Products for
Human Use (CHMP) of the EMA granted a positive opinion for Rinvoq for the
expanded use in patients 12 years and older with moderate to severe AD who are
candidates for systemic therapy.
•In June 2021, AbbVie announced the results from its Phase 3 maintenance study
of Rinvoq in patients with UC met the primary and all secondary endpoints.
Oncology
Venclexta
•In April 2021, AbbVie announced that the CHMP of the EMA granted a positive
opinion for Venclyxto in combination with hypomethylating agents for patients
with newly diagnosed acute myeloid leukemia (AML) who are ineligible for
intensive chemotherapy.
•In May 2021, AbbVie received European Commission approval for Venclyxto in
combination with a hypomethylating agent for patients with newly diagnosed AML
who are ineligible for intensive chemotherapy.
•In July 2021, AbbVie announced that the FDA granted a Breakthrough Therapy
Designation to Venclexta in combination with azacitidine for the potential
treatment of adult patients with previously untreated intermediate-, high- and
very high-risk myelodysplastic syndromes.
Imbruvica
•In June 2021, AbbVie announced results from its Phase 3 GLOW study comparing
the efficacy and safety of Imbruvica in combination with Venclexta versus
chlorambucil plus obinutuzumab for first-line treatment in patients with chronic
lymphocytic leukemia (CLL) or small lymphocytic lymphoma (SLL) met its primary
endpoint.
Neuroscience
Botox Therapeutic
•In February 2021, AbbVie received FDA approval of Botox for the treatment of
detrusor overactivity associated with a neurological condition in certain
pediatric patients 5 years of age and older.
Atogepant
•In March 2021, AbbVie announced that the FDA accepted the New Drug Application
(NDA) for atogepant for the preventive treatment of migraine in adults who meet
criteria for episodic migraine.

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Eye Care
AGN-190584
•In February 2021, AbbVie submitted an NDA to the FDA for investigational
AGN-190584 for the treatment of presbyopia.
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, 2020.
RESULTS OF OPERATIONS
Net Revenues
The comparisons presented at constant currency rates reflect comparative local
currency net revenues at the prior year's foreign exchange rates. This measure
provides information on the change in net revenues assuming that foreign
currency exchange rates had not changed between the prior and current periods.
AbbVie believes that the non-GAAP measure of change in net revenues at constant
currency rates, when used in conjunction with the GAAP measure of change in net
revenues at actual currency rates, may provide a more complete understanding of
the company's operations and can facilitate analysis of the company's results of
operations, particularly in evaluating performance from one period to another.
                                            Three months ended                                Percent change                                Six months ended                                Percent change
                                                 June 30,                         At actual                   At constant                       June 30,                        At actual                   At constant
(dollars in millions)                     2021               2020               currency rates               currency rates              2021              2020               currency rates               currency rates
United States$   10,804$  8,147                         32.6  %                      32.6  %       $ 20,554$ 14,305                         43.7  %                      43.7  %
International                              3,155             2,278                         38.4  %                      30.1  %          6,415             4,739                         35.3  %                      28.5  %
Net revenues                          $   13,959$ 10,425                         33.9  %                      32.1  %       $ 26,969$ 19,044                         41.6  %                      39.9  %

2021 Form 10-Q | [[Image Removed: abbv-20210630_g2.gif]] 29

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The following table details AbbVie's worldwide net revenues:

                                                                       Three months ended                                 Percent change                               Six months ended                                Percent change
                                                                            June 30,                          At actual                  At constant                       June 30,                        At actual                  At constant
(dollars in millions)                                                 2021                2020             currency rates               currency rates               2021              2020             currency rates               currency rates
Immunology
Humira                    United States$    4,257$ 3,974                         7.1  %                       7.1  %       $   8,164$ 7,630                         7.0  %                       7.0  %
                          International                                811                 863                        (6.0) %                     (12.6) %           1,771            1,910                        (7.3) %                     (12.6) %
                          Total                                 $    5,068$ 4,837                         4.8  %                       3.6  %       $   9,935$ 9,540                         4.1  %                       3.0  %
Skyrizi                   United States$      565$   289                        95.7  %                      95.7  %       $   1,046$   555                        88.5  %                      88.5  %
                          International                                109                  41                       >100.0 %                     >100.0 %             202               75                       >100.0 %                     >100.0 %
                          Total                                 $      674$   330                       >100.0 %                     >100.0 %       $   1,248$   630                        98.0  %                      95.7  %
Rinvoq                    United States$      296$   136                       >100.0 %                     >100.0 %       $     541$   218                       >100.0 %                     >100.0 %
                          International                                 82                  13                       >100.0 %                     >100.0 %             140               17                       >100.0 %                     >100.0 %
                          Total                                 $      378$   149                       >100.0 %                     >100.0 %       $     681$   235                       >100.0 %                     >100.0 %
Hematologic Oncology
Imbruvica                 United States$    1,099$ 1,055                         4.3  %                       4.3  %       $   2,098$ 2,021                         3.8  %                       3.8  %
                          Collaboration revenues                       282                 233                        20.6  %                      20.6  %             551              499                        10.4  %                      10.4  %
                          Total                                 $    1,381$ 1,288                         7.2  %                       7.2  %       $   2,649$ 2,520                         5.1  %                       5.1  %
Venclexta                 United States$      223$   191                        16.3  %                      16.3  %       $     448$   392                        14.2  %                      14.2  %
                          International                                212                 112                        89.3  %                      75.9  %             392              228                        71.8  %                      60.5  %
                          Total                                 $      435$   303                        43.2  %                      38.3  %       $     840$   620                        35.4  %                      31.2  %
Aesthetics
Botox Cosmetic (a)        United States$      366$   147                       >100.0 %                     >100.0 %       $     671$   147                       >100.0 %                     >100.0 %
                          International                                218                  79                       >100.0 %                     >100.0 %             390               79                       >100.0 %                     >100.0 %
                          Total                                 $      584$   226                       >100.0 %                     >100.0 %       $   1,061$   226                       >100.0 %                     >100.0 %
Juvederm Collection (a)   United States$      196$    56                       >100.0 %                     >100.0 %       $     319$    56                       >100.0 %                     >100.0 %
                          International                                232                  57                       >100.0 %                     >100.0 %             430               57                       >100.0 %                     >100.0 %
                          Total                                 $      428$   113                       >100.0 %                     >100.0 %       $     749$   113                       >100.0 %                     >100.0 %
Other Aesthetics (a)      United States$      363$   127                       >100.0 %                     >100.0 %       $     663$   127                       >100.0 %                     >100.0 %
                          International                                 59                  15                       >100.0 %                     >100.0 %             102               15                       >100.0 %                     >100.0 %
                          Total                                 $      422$   142                       >100.0 %                     >100.0 %       $     765$   142                       >100.0 %                     >100.0 %
Neuroscience
Botox Therapeutic (a)     United States$      488$   254                        92.4  %                      92.4  %       $     917$   254                       >100.0 %                     >100.0 %
                          International                                115                  43                       >100.0 %                     >100.0 %             218               43                       >100.0 %                     >100.0 %
                          Total                                 $      603$   297                       >100.0 %                      99.4  %       $   1,135$   297                       >100.0 %                     >100.0 %
Vraylar (a)               United States$      432$   192                       >100.0 %                     >100.0 %       $     778$   192                       >100.0 %                     >100.0 %

Duodopa                   United States$       25$    25                        (1.3) %                      (1.3) %       $      50$    50                        (0.3) %                      (0.3) %
                          International                                102                  93                        10.3  %                       1.1  %             206              192                         7.4  %                      (1.8) %
                          Total                                 $      127$   118                         7.8  %                       0.5  %       $     256$   242                         5.8  %                      (1.5) %
Ubrelvy (a)               United States$      126$    22                       >100.0 %                     >100.0 %       $     207$    22                       >100.0 %                     >100.0 %

Other Neuroscience (a)    United States$      167$   103                        61.0  %                      61.0  %       $     323$   103                       >100.0 %                     >100.0 %
                          International                                  4                   2                       >100.0 %                     >100.0 %               8                2                       >100.0 %                     >100.0 %
                          Total                                 $      171$   105                        62.9  %                      62.4  %       $     331$   105                       >100.0 %                     >100.0 %


2021 Form 10-Q | [[Image Removed: abbv-20210630_g2.gif]] 30

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                                                                          Three months ended                                 Percent change                                Six months ended                                 Percent change
                                                                               June 30,                         At actual                    At constant                       June 30,                        At actual                    At constant
(dollars in millions)                                                   2021               2020               currency rates               currency rates               2021              2020               currency rates               currency rates
Eye Care
Lumigan/Ganfort (a)               United States$       72$     35                        >100.0 %                      >100.0 %       $    138$     35                        >100.0 %                      >100.0 %
                                  International                             77                41                         86.2  %                       70.9  %            154                41                        >100.0 %                      >100.0 %
                                  Total                             $      149$     76                         94.6  %                       86.3  %       $    292$     76                        >100.0 %                      >100.0 %
Alphagan/Combigan(a)              United States$      102$     47                        >100.0 %                      >100.0 %       $    182$     47                        >100.0 %                      >100.0 %
                                  International                             40                22                         76.0  %                       68.8  %             78                22                        >100.0 %                      >100.0 %
                                  Total                             $      142$     69                        >100.0 %                      >100.0 %       $    260$     69                        >100.0 %                      >100.0 %
Restasis (a)                      United States$      312$    138                        >100.0 %                      >100.0 %       $    579$    138                        >100.0 %                      >100.0 %
                                  International                             15                 6                        >100.0 %                      >100.0 %             28                 6                        >100.0 %                      >100.0 %
                                  Total                             $      327$    144                        >100.0 %                      >100.0 %       $    607$    144                        >100.0 %                      >100.0 %
Other Eye Care (a)                United States$      130$     54                        >100.0 %                      >100.0 %       $    247$     54                        >100.0 %                      >100.0 %
                                  International                            171                74                        >100.0 %                      >100.0 %            330                74                        >100.0 %                      >100.0 %
                                  Total                             $      301$    128                        >100.0 %                      >100.0 %       $    577$    128                        >100.0 %                      >100.0 %
Women's Health
Lo Loestrin (a)                   United States$       93$     78                         19.8  %                       19.8  %       $    195$     78                        >100.0 %                      >100.0 %
                                  International                              5                 2                        >100.0 %                       94.1  %              7                 2                        >100.0 %                      >100.0 %
                                  Total                             $       98$     80                         21.9  %                       21.4  %       $    202$     80                        >100.0 %                      >100.0 %
Orilissa/Oriahnn                  United States$       36$     30                         21.3  %                       21.3  %       $     65$     60                          8.2  %                        8.2  %
                                  International                              2                 1                         87.4  %                       67.6  %              3                 2                         72.9  %                       60.2  %
                                  Total                             $       38$     31                         23.0  %                       22.5  %       $     68$     62                         10.0  %                        9.7  %
Other Women's Health (a)          United States$       50$     34                         47.8  %                       47.8  %       $     96$     34                        >100.0 %                      >100.0 %
                                  International                              5                 2                        >100.0 %                      >100.0 %              5                 2                        >100.0 %                       90.7  %
                                  Total                             $       55$     36                         53.7  %                       52.7  %       $    101$     36                        >100.0 %                      >100.0 %
Other Key Products
Mavyret                           United States$      204$    146                         37.6  %                       37.6  %       $    374$    380                         (1.9) %                       (1.9) %
                                  International                            238               230                          4.1  %                       (1.4) %            483               555                        (12.9) %                      (17.9) %
                                  Total                             $      442$    376                         17.2  %                       13.9  %       $    857$    935                         (8.4) %                      (11.4) %
Creon                             United States$      280$    252                         11.0  %                       11.0  %       $    554$    528                          4.8  %                        4.8  %
Lupron                            United States$      151$    167                        (10.2) %                      (10.2) %       $    322$    362                        (11.2) %                      (11.2) %
                                  International                             47                38                         23.9  %                       16.6  %             89                76                         17.3  %                       12.8  %
                                  Total                             $      198$    205                         (4.0) %                       (5.3) %       $    411$    438                         (6.3) %                       (7.1) %
Linzess/Constella (a)             United States$      260$    130                        >100.0 %                      >100.0 %       $    475$    130                        >100.0 %                      >100.0 %
                                  International                              8                 3                        >100.0 %                      >100.0 %             15                 3                        >100.0 %                      >100.0 %
                                  Total                             $      268$    133                        >100.0 %                      >100.0 %       $    490$    133                        >100.0 %                      >100.0 %
Synthroid                         United States$      192$    183                          5.0  %                        5.0  %       $    383$    388                         (1.2) %                       (1.2) %

All other (a)                                                       $      640$    590                          9.1  %                        6.9  %       $  1,532$  1,143                         34.4  %                       31.9  %
Total net revenues                                                  $   13,959$ 10,425                         33.9  %                       32.1  %       $ 26,969$ 19,044                         41.6  %                       39.9  %


(a) Net revenues include Allergan product revenues after the acquisition closing
date of May 8, 2020.
The following discussion and analysis of AbbVie's net revenues by product is
presented on a constant currency basis.
Global Humira sales increased by 4% for the three months and 3% for the six
months ended June 30, 2021 primarily driven by market growth across therapeutic
categories, partially offset by direct biosimilar competition in certain
international markets. In the United States, Humira sales increased by 7% for
the three and six months ended June 30, 2021 primarily driven by market growth
across all indications. This increase was partially offset by slightly lower
market share following corresponding market share gains of Skyrizi and Rinvoq.
Internationally, Humira revenues decreased by 13% for the three and six months
ended June 30, 2021 primarily driven by direct biosimilar competition in certain
international markets.
Net revenues for Skyrizi increased more than 100% for the three months and 96%
for the six months ended June 30, 2021 primarily driven by continued strong
volume and market share uptake since launch in 2019 as a treatment for plaque
psoriasis as well as market growth over the prior year.

2021 Form 10-Q | [[Image Removed: abbv-20210630_g2.gif]] 31

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Net revenues for Rinvoq increased more than 100% for the three and six months
ended June 30, 2021 primarily driven by continued strong volume and market share
uptake since launch in 2019 for the treatment of moderate to severe rheumatoid
arthritis as well as market growth over the prior year.
Net revenues for Imbruvica represent product revenues in the United States and
collaboration revenues outside of the United States related to AbbVie's 50%
share of Imbruvica profit. AbbVie's global Imbruvica revenues increased by 7%
for the three months and 5% for the six months ended June 30, 2021 primarily due
to volume gains driven by market leadership, partially offset by lower new
patient starts due to the COVID-19 pandemic and modest share loss in the United
States.
Net revenues for Venclexta increased by 38% for the three months and 31% for the
six months ended June 30, 2021 primarily due to continued expansion of Venclexta
for the treatment of patients with first-line CLL, relapsed/refractory CLL and
first-line AML.
Net revenues for Botox Cosmetic used in facial aesthetics increased more than
100% for the three and six months ended June 30, 2021 due to increased brand
investment, strong recovery from the COVID-19 pandemic as well as a full period
of Allergan results in 2021.
Net revenues for Juvederm Collection (including Juvederm Ultra XC, Juvederm
Voluma XC and other Juvederm products) used in facial aesthetics increased more
than 100% for the three and six months ended June 30, 2021 due to increased
brand investment, strong recovery from the COVID-19 pandemic as well as a full
period of Allergan results in 2021.
Net revenues for Botox Therapeutic used primarily in neuroscience and urology
therapeutic areas increased by 99% for the three months and more than 100% for
the six months ended June 30, 2021 due to a full period of Allergan results in
2021 as well as strong recovery from the COVID-19 pandemic.
Net revenues for Vraylar for the treatment of schizophrenia, bipolar I disorder
and bipolar depression increased over 100% for the three and six months ended
June 30, 2021 due to a full period of Allergan results in 2021 as well as higher
market share and market growth.
Net revenues for Ubrelvy for the acute treatment of migraine with or without
aura in adults increased more than 100% for the three and six months ended June
30, 2021 primarily due to increased market share uptake since launch in 2020.
Global Mavyret sales increased by 14% for the three months ended June 30, 2021,
primarily driven by partial recovery of global hepatitis C virus (HCV) markets
while sales decreased by 11% for the six months ended June 30, 2021 driven by
disruption of global HCV markets due to the COVID-19 pandemic through the first
quarter of 2021.
Net revenues for Lupron decreased by 5% for the three months and 7% for the six
months ended June 30, 2021 as the company works to resolve a near-term supply
issue which has impacted product availability of certain formulations.
Gross Margin
                                                                 Three months ended                                          Six months ended
                                                                      June 30,                                                   June 30,
(dollars in millions)                                2021              2020             % change               2021              2020              % change
Gross margin                                     $      9,436$    6,714                 41  %       $     18,233$    13,391                 36  %
as a % of net revenues                                  68  %            64  %                                    68  %            70   %


Gross margin as a percentage of net revenues increased for the three months and
decreased for the six months ended June 30, 2021 compared to the prior year.
Gross margin percentage for the three months ended June 30, 2021 was favorably
impacted by lower amortization of inventory fair value step-up adjustment
associated with the Allergan acquisition, partially offset by higher
amortization of intangible assets associated with the Allergan acquisition.
Gross margin percentage for the six months ended June 30, 2021 was unfavorably
impacted by higher amortization of intangible assets associated with the
Allergan acquisition, partially offset by lower inventory fair value step-up
adjustment associated with the Allergan acquisition.

2021 Form 10-Q | [[Image Removed: abbv-20210630_g2.gif]] 32

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Selling, General and Administrative

                                                           Three months ended                                         Six months ended
                                                                June 30,                                                  June 30,
(dollars in millions)                          2021              2020             % change               2021              2020             % change

Selling, general and administrative $ 3,164$ 3,527

            (10) %       $      6,006$    5,222                 15  %
as a % of net revenues                            23  %            34  %                                    22  %            27  %


SG&A expenses as a percentage of net revenues decreased for the three and six
months ended June 30, 2021 compared to the prior year. SG&A expense percentage
for the three and six months ended June 30, 2021 was favorably impacted by lower
transaction and integration costs related to the acquisition of Allergan.
Research and Development and Acquired In-Process Research and Development
                                                          Three months ended                                        Six months ended
                                                               June 30,                                                 June 30,
(dollars in millions)                        2021              2020             % change               2021              2020             % change
Research and development                  $  1,802$ 1,582                    14  %       $      3,584$    2,961                 21  %
as a % of net revenues                          13  %            15  %                                    13  %            16  %
Acquired in-process research and
development                               $     97$   853                   (89) %       $        167$      853                (80) %


R&D expenses as a percentage of net revenues decreased for the three and six
months ended June 30, 2021 compared to the prior year. R&D expense percentage
was favorably impacted by the increased scale of the combined company for the
period subsequent to the completion of the Allergan acquisition.
Acquired IPR&D expenses reflect upfront payments related to various
collaborations. There were no individually significant transactions during the
three and six months ended June 30, 2021. Acquired IPR&D expense in the three
and six months ended June 30, 2020 included a charge of $750 million as a result
of entering a collaboration agreement with Genmab A/S to research, develop and
commercialize investigational bispecific antibody therapeutics for the treatment
of cancer.
Other Non-Operating Expenses
                                     Three months ended               Six months ended
                                          June 30,                        June 30,
(in millions)                          2021             2020         2021          2020
Interest expense               $      615$ 632$   1,247$ 1,195
Interest income                        (9)               (18)           (19)        (153)
Interest expense, net          $      606$ 614$   1,228$ 1,042

Net foreign exchange loss      $       14$  29$      23$    34
Other expense, net                  2,658                802          2,263          874


Interest expense decreased for the three months ended June 30, 2021 compared to
the prior year primarily due to lower debt issuance costs and the favorable
impact of lower interest rates on the company's debt obligations, partially
offset by a higher average debt balance associated with the incremental Allergan
debt acquired. Interest expense increased for the six months ended June 30, 2021
primarily due to a higher average debt balance associated with the incremental
Allergan debt acquired partially offset by lower debt issuance costs and the
favorable impact of lower interest rates on the company's floating rate debt
obligations.
Interest income decreased for the three and six months ended June 30, 2021
compared to the prior year primarily due to a lower average cash and cash
equivalents balance as a result of the cash paid for the Allergan acquisition
and the unfavorable impact of lower interest rates.
Other expense, net included charges related to changes in fair value of
contingent consideration liabilities of $2.7 billion for the three months and
$2.3 billion for the six months ended June 30, 2021 and $809 million for the
three months and $881 million for the six months ended June 30, 2020. 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
six months ended June 30, 2021, the change in fair value represented higher
estimated Skyrizi sales driven by stronger market share uptake, favorable
Skyrizi clinical

2021 Form 10-Q | [[Image Removed: abbv-20210630_g2.gif]] 33

--------------------------------------------------------------------------------


trial results and lower discount rates. For the three and six months ended June
30, 2020, the change in fair value represented lower discount rates and passage
of time.
Income Tax Expense
The effective tax rate was 34% on for the three months and 14% for the six
months ended June 30, 2021 compared to 7% for the three months ended June 30,
2020 and 6% for the six months ended June 30, 2020. The effective tax rate in
each period differed from the U.S. statutory tax rate of 21% principally due to
the benefit from foreign operations which reflects the impact of lower income
tax rates in locations outside the United States, tax incentives in Puerto Rico
and other foreign tax jurisdictions and business development activities. The
increase in the effective tax rate for the three and six months ended June 30,
2021 over the prior year was primarily due to accretion on contingent
consideration in 2021 as well as non-deductible Allergan acquisition related
expenses and a change in tax rate in a foreign jurisdiction in 2020.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
                                        Six months ended
                                            June 30,
(in millions)                          2021           2020
Cash flows provided by (used in):
Operating activities                $   9,767$  6,904
Investing activities                     (584)      (35,781)
Financing activities                   (9,058)       (4,992)


Operating cash flows for the six months ended June 30, 2021 increased compared
to the prior year. Operating cash flows for the six months ended June 30, 2021
were favorably impacted by higher net revenues of the combined company and lower
acquisition-related cash expenses, partially offset by the timing of working
capital cash flows, higher payments for income taxes and higher
integration-related cash expenses.
Investing cash flows for the six months ended June 30, 2021 included capital
expenditures of $383 million, payments made for other acquisitions and
investments of $345 million, and net sales and maturities of investment
securities totaling $9 million. Investing cash flows for the six months ended
June 30, 2020 primarily included $39.7 billion cash consideration paid to
acquire Allergan offset by cash acquired of $1.5 billion, capital expenditures
of $302 million, net sales and maturities of investment securities totaling
$1.4 billion and payments made for other acquisitions and investments of
$192 million.
Financing cash flows for the six months ended June 30, 2021 included repayment
of $1.8 billion aggregate principal amount of the company's 2.3% senior notes
and €750 million aggregate principal amount of the company's 0.5% senior euro
notes that were scheduled to mature during the second quarter of 2021 by
exercising, under the terms of the notes, 30-day early redemptions at 100% of
the principal amounts. It also included repayment of $750 million aggregate
principal amount of floating rate senior notes at maturity in May 2021.
Financing cash flows for the six months ended June 30, 2020 included the
issuance of term loans totaling $3.0 billion under the existing $6.0 billion
term loan credit agreement which were used to finance the acquisition of
Allergan. Subsequent to these borrowings, AbbVie terminated the unused
commitments of the lenders under the term loan. Additionally, financing cash
flows included the May 2020 repayment of $3.8 billion aggregate principal amount
of the company's 2.50% senior notes at maturity.
Cash dividend payments totaled $4.6 billion for the six months ended June 30,
2021 and $3.5 billion for the six months ended June 30, 2020. The increase in
cash dividend payments was primarily driven by higher outstanding shares
following the 286 million shares of AbbVie common stock issued to Allergan
shareholders in May 2020 as well as an increase in the quarterly dividend rate.
On June 17, 2021, the board of directors declared a quarterly cash dividend of
$1.30 per share for stockholders of record at the close of business on July 15,
2021, payable on August 16, 2021. The timing, declaration, amount of and payment
of any dividends by AbbVie in the future is within the discretion of its board
of directors and will depend upon many factors, including AbbVie's financial
condition, earnings, capital requirements of its operating subsidiaries,
covenants associated with certain of AbbVie's debt service obligations, legal
requirements, regulatory constraints, industry practice, ability to access
capital markets and other factors deemed relevant by its board of directors.
The company's stock repurchase authorization permits purchases of AbbVie shares
from time to time in open-market or private transactions at management's
discretion. The program has no time limit and can be discontinued at any time.
AbbVie repurchased 5 million shares for $550 million during the six months ended
June 30, 2021 and 6 million shares for $500 million during the six months ended
June 30, 2020.

2021 Form 10-Q | [[Image Removed: abbv-20210630_g2.gif]] 34

--------------------------------------------------------------------------------


Credit Risk
AbbVie monitors economic conditions, the creditworthiness of customers and
government regulations and funding, both domestically and abroad. AbbVie
regularly communicates with its customers regarding the status of receivable
balances, including their payment plans and obtains positive confirmation of the
validity of the receivables. AbbVie establishes an allowance for credit losses
equal to the estimate of future losses over the contractual life of outstanding
accounts receivable. AbbVie may also utilize factoring arrangements to mitigate
credit risk, although the receivables included in such arrangements have
historically not been a significant amount of total outstanding receivables.
Credit Facility, Access to Capital and Credit Ratings
Credit Facility
AbbVie currently has a $4.0 billion five-year revolving credit facility that
matures in August 2024. This credit facility enables the company to borrow funds
on an unsecured basis at variable interest rates and contains various covenants.
At June 30, 2021, the company was in compliance with all covenants, and
commitment fees under the credit facility were insignificant. No amounts were
outstanding under the company's credit facility as of June 30, 2021 and December
31, 2020.
Access to Capital
The company intends to fund short-term and long-term financial obligations as
they mature through cash on hand, future cash flows from operations or has the
ability to issue additional debt. The company's ability to generate cash flows
from operations, issue debt or enter into financing arrangements on acceptable
terms could be adversely affected if there is a material decline in the demand
for the company's products or in the solvency of its customers or suppliers,
deterioration in the company's key financial ratios or credit ratings or other
material unfavorable changes in business conditions. At the current time, the
company believes it has sufficient financial flexibility to issue debt, enter
into other financing arrangements and attract long-term capital on acceptable
terms to support the company's growth objectives.
Credit Ratings
There were no changes in the company's credit ratings during six months ended
June 30, 2021. Unfavorable changes to the ratings may have an adverse impact on
future financing arrangements; however, they would not affect the company's
ability to draw on its credit facility and would not result in an acceleration
of scheduled maturities of any of the company's outstanding debt.
CRITICAL ACCOUNTING POLICIES
A summary of the company's significant accounting policies is included in Note
2, "Summary of Significant Accounting Policies" in AbbVie's Annual Report on
Form 10-K for the year ended December 31, 2020. There have been no significant
changes in the company's application of its critical accounting policies during
the six months ended June 30, 2021.
FORWARD-LOOKING STATEMENTS
Some statements in this quarterly report on Form 10-Q may be 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, 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
indicated in the forward-looking statements. Such risks and uncertainties
include, but are not limited to, failure to realize the expected benefits from
AbbVie's acquisition of Allergan, failure to promptly and effectively integrate
Allergan's businesses, challenges to intellectual property, competition from
other products, difficulties inherent in the research and development process,
adverse litigation or government action, changes to laws and regulations
applicable to our industry and the impact of public health outbreaks, epidemics
or pandemics, such as COVID-19. 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, 2020, 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 to release publicly any revisions to
forward-looking statements as a result of subsequent events or developments,
except as required by law.

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