Item 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AbbVie Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (unaudited)


	Three months ended September 30,				Nine months ended September 30,
(in millions, except per share data)	2021		2020		2021		2020
Net revenues	$	14,342	$	12,902	$	41,311	$	31,946

Cost of products sold	4,390		5,050		13,126		10,703
Selling, general and administrative	3,083		2,846		9,089		8,068
Research and development	1,673		1,706		5,257		4,667
Acquired in-process research and development	390		45		557		898
Other operating expense, net	500		—		432		—
Total operating costs and expenses	10,036		9,647		28,461		24,336
Operating earnings	4,306		3,255		12,850		7,610

Interest expense, net	585		620		1,813		1,662
Net foreign exchange loss	12		20		35		54
Other expense, net	21		115		2,284		989
Earnings before income tax expense	3,688		2,500		8,718		4,905
Income tax expense	508		187		1,214		321
Net earnings	3,180		2,313		7,504		4,584
Net earnings attributable to noncontrolling interest	1		5		6		4
Net earnings attributable to AbbVie Inc.	$	3,179	$	2,308	$	7,498	$	4,580

Per share data
Basic earnings per share attributable to AbbVie Inc.	$	1.78	$	1.30	$	4.21	$	2.78
Diluted earnings per share attributable to AbbVie Inc.	$	1.78	$	1.29	$	4.19	$	2.77

Weighted-average basic shares outstanding	1,770		1,769		1,769		1,633
Weighted-average diluted shares outstanding	1,777		1,774		1,776		1,637

The accompanying notes are an integral part of these condensed consolidated financial statements.


2021 Form 10-Q \|			1

AbbVie Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (unaudited)


	Three months ended September 30,				Nine months ended September 30,
(in millions)	2021		2020		2021		2020
Net earnings	$	3,180	$	2,313	$	7,504	$	4,584

Foreign currency translation adjustments, net of tax expense (benefit) of $(8) for the three months and $(32) for the nine months ended September 30, 2021 and $15 for the three months and $11 for the nine months ended September 30, 2020	(361)		512		(794)		726
Net investment hedging activities, net of tax expense (benefit) of $51 for the three months and $123 for the nine months ended September 30, 2021 and $(85) for the three months and $(125) for the nine months ended September 30, 2020	184		(314)		444		(455)
Pension and post-employment benefits, net of tax expense (benefit) of $17 for the three months and $50 for the nine months ended September 30, 2021 and $10 for the three months and $37 for nine months ended September 30, 2020	67		35		196		134

Cash flow hedging activities, net of tax expense (benefit) of $13 for the three months and $16 for the nine months ended September 30, 2021 and $(9) for the three months and $(13) for the nine months ended September 30, 2020	57		(57)		115		(68)
Other comprehensive income (loss)	(53)		176		(39)		337
Comprehensive income	3,127		2,489		7,465		4,921
Comprehensive income attributable to noncontrolling interest	1		5		6		4
Comprehensive income attributable to AbbVie Inc.	$	3,126	$	2,484	$	7,459	$	4,917

The accompanying notes are an integral part of these condensed consolidated financial statements.


2021 Form 10-Q \|			2

AbbVie Inc. and Subsidiaries Condensed Consolidated Balance Sheets


(in millions, except share data)	September 30, 2021		December 31, 2020
	(unaudited)
Assets
Current assets
Cash and equivalents	$	12,182	$	8,449
Short-term investments	67		30
Accounts receivable, net	9,281		8,822
Inventories	3,094		3,310
Prepaid expenses and other	4,333		3,562
Total current assets	28,957		24,173

Investments	272		293
Property and equipment, net	5,130		5,248
Intangible assets, net	77,456		82,876
Goodwill	32,296		33,124
Other assets	4,747		4,851
Total assets	$	148,858	$	150,565

Liabilities and Equity
Current liabilities
Short-term borrowings	$	16	$	34
Current portion of long-term debt and finance lease obligations	6,656		8,468
Accounts payable and accrued liabilities	21,861		20,159
Total current liabilities	28,533		28,661

Long-term debt and finance lease obligations	74,049		77,554
Deferred income taxes	3,602		3,646
Other long-term liabilities	29,097		27,607

Commitments and contingencies

Stockholders' equity
Common stock, $0.01 par value, 4,000,000,000 shares authorized, 1,801,781,004 shares issued as of September 30, 2021 and 1,792,140,764 as of December 31, 2020	18		18
Common stock held in treasury, at cost, 33,974,112 shares as of September 30, 2021 and 27,007,945 as of December 31, 2020	(3,020)		(2,264)
Additional paid-in capital	18,108		17,384
Retained earnings	1,600		1,055
Accumulated other comprehensive loss	(3,156)		(3,117)
Total stockholders' equity	13,550		13,076
Noncontrolling interest	27		21
Total equity	13,577		13,097

Total liabilities and equity	$	148,858	$	150,565

The accompanying notes are an integral part of these condensed consolidated financial statements.


2021 Form 10-Q \|			3

AbbVie Inc. and Subsidiaries Condensed Consolidated Statements of Equity (unaudited)


(in millions)	Common shares outstanding	Common stock		Treasury stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Noncontrolling interest		Total
Balance at June 30, 2020	1,764	$	18	$	(1,958)	$	16,953	$	3,130	$	(3,435)	$	24	$	14,732

Net earnings attributable to AbbVie Inc.	—	—		—		—		2,308		—		—		2,308
Other comprehensive income, net of tax	—	—		—		—		—		176		—		176
Dividends declared	—	—		—		—		(2,103)		—		—		(2,103)

Purchases of treasury stock	—	—		(20)		—		—		—		—		(20)
Stock-based compensation plans and other	1	—		6		195		—		—		—		201
Change in noncontrolling interest	—	—		—		—		—		—		(5)		(5)
Balance at September 30, 2020	1,765	$	18	$	(1,972)	$	17,148	$	3,335	$	(3,259)	$	19	$	15,289

Balance at June 30, 2021	1,767	$	18	$	(3,022)	$	17,936	$	740	$	(3,103)	$	25	$	12,594

Net earnings attributable to AbbVie Inc.	—	—		—		—		3,179		—		—		3,179
Other comprehensive loss, net of tax	—	—		—		—		—		(53)		—		(53)
Dividends declared	—	—		—		—		(2,319)		—		—		(2,319)

Purchases of treasury stock	—	—		(6)		—		—		—		—		(6)
Stock-based compensation plans and other	1	—		8		172		—		—		—		180
Change in noncontrolling interest	—	—		—		—		—		—		2		2
Balance at September 30, 2021	1,768	$	18	$	(3,020)	$	18,108	$	1,600	$	(3,156)	$	27	$	13,577

Balance at December 31, 2019	1,479	$	18	$	(24,504)	$	15,193	$	4,717	$	(3,596)	$	—	$	(8,172)

Net earnings attributable to AbbVie Inc.	—	—		—		—		4,580		—		—		4,580
Other comprehensive income, net of tax	—	—		—		—		—		337		—		337
Dividends declared	—	—		—		—		(5,962)		—		—		(5,962)
Common shares and equity awards issued for acquisition of Allergan plc	286	—		23,166		1,243		—		—		—		24,409
Purchases of treasury stock	(7)	—		(682)		—		—		—		—		(682)
Stock-based compensation plans and other	7	—		48		712		—		—		—		760
Change in noncontrolling interest	—	—		—		—		—		—		19		19
Balance at September 30, 2020	1,765	$	18	$	(1,972)	$	17,148	$	3,335	$	(3,259)	$	19	$	15,289

Balance at December 31, 2020	1,765	$	18	$	(2,264)	$	17,384	$	1,055	$	(3,117)	$	21	$	13,097
Net earnings attributable to AbbVie Inc.	—	—		—		—		7,498		—		—		7,498
Other comprehensive loss, net of tax	—	—		—		—		—		(39)		—		(39)
Dividends declared	—	—		—		—		(6,953)		—		—		(6,953)

Purchases of treasury stock	(7)	—		(803)		—		—		—		—		(803)
Stock-based compensation plans and other	10	—		47		724		—		—		—		771
Change in noncontrolling interest	—	—		—		—		—		—		6		6
Balance at September 30, 2021	1,768	$	18	$	(3,020)	$	18,108	$	1,600	$	(3,156)	$	27	$	13,577

The accompanying notes are an integral part of these condensed consolidated financial statements.


2021 Form 10-Q \|			4

AbbVie Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited)


	Nine months ended September 30,
(in millions) (brackets denote cash outflows)	2021		2020
Cash flows from operating activities
Net earnings	$	7,504	$	4,584
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation	630		439
Amortization of intangible assets	5,912		3,967
Deferred income taxes	(153)		(498)
Change in fair value of contingent consideration liabilities	2,447		1,078
Stock-based compensation	563		617
Upfront costs and milestones related to collaborations	1,219		1,028
Gain on divestitures	(68)		—


Other, net	(114)		491
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(572)		(574)
Inventories	(30)		(193)
Prepaid expenses and other assets	(462)		190
Accounts payable and other liabilities	1,454		1,903
Income tax assets and liabilities, net	(628)		(298)
Cash flows from operating activities	17,702		12,734

Cash flows from investing activities
Acquisition of businesses, net of cash acquired	—		(38,138)
Other acquisitions and investments	(837)		(1,072)
Acquisitions of property and equipment	(600)		(519)
Purchases of investment securities	(73)		(47)
Sales and maturities of investment securities	88		1,464

Other, net	223		1,382
Cash flows from investing activities	(1,199)		(36,930)

Cash flows from financing activities



Proceeds from issuance of long-term debt	1,000		3,000
Repayments of long-term debt and finance lease obligations	(5,662)		(4,414)
Debt issuance costs	—		(20)
Dividends paid	(6,947)		(5,615)
Purchases of treasury stock	(803)		(682)
Proceeds from the exercise of stock options	169		109
Payments of contingent consideration liabilities	(480)		(212)
Other, net	22		28
Cash flows from financing activities	(12,701)		(7,806)
Effect of exchange rate changes on cash and equivalents	(69)		(32)
Net change in cash and equivalents	3,733		(32,034)
Cash and equivalents, beginning of period	8,449		39,924

Cash and equivalents, end of period	$	12,182	$	7,890

Supplemental schedule of non-cash investing and financing activities
Issuance of common shares associated with acquisitions of businesses	$	—	$	23,979

The accompanying notes are an integral part of these condensed consolidated financial statements.


2021 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, 2020.

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 reclassifications were made to conform the prior period interim condensed consolidated financial statements to the current period presentation.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

ASU No. 2019-12

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740). The standard includes simplifications related to accounting for income taxes including removing certain exceptions related to the approach for intraperiod tax allocation and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. AbbVie adopted the standard in the first quarter of 2021. The adoption did not have a material impact on its consolidated financial statements.

Note 2 Supplemental Financial Information

Interest Expense, Net


	Three months ended September 30,				Nine months ended September 30,
(in millions)	2021		2020		2021		2020
Interest expense	$	596	$	630	$	1,843	$	1,825
Interest income	(11)		(10)		(30)		(163)
Interest expense, net	$	585	$	620	$	1,813	$	1,662

Inventories


(in millions)	September 30, 2021		December 31, 2020
Finished goods	$	877	$	1,318
Work-in-process	1,328		1,201
Raw materials	889		791
Inventories	$	3,094	$	3,310


2021 Form 10-Q \|			6

Property and Equipment, Net


(in millions)	September 30, 2021		December 31, 2020
Property and equipment, gross	$	10,803	$	10,859
Accumulated depreciation	(5,673)		(5,611)
Property and equipment, net	$	5,130	$	5,248

Depreciation expense was $223 million for the three months and $630 million for the nine months ended September 30, 2021 and $175 million for the three months and $439 million for the nine months ended September 30, 2020.

Note 3 Earnings Per Share

AbbVie grants certain restricted stock units (RSUs) that are considered to be participating securities. Due to the presence of participating securities, AbbVie calculates earnings per share (EPS) using the more dilutive of the treasury stock or the two-class method. For all periods presented, the two-class method was more dilutive.

The following table summarizes the impact of the two-class method:


	Three months ended September 30,				Nine months ended September 30,
(in millions, except per share data)	2021		2020		2021		2020
Basic EPS
Net earnings attributable to AbbVie Inc.	$	3,179	$	2,308	$	7,498	$	4,580
Earnings allocated to participating securities	21		17		53		44
Earnings available to common shareholders	$	3,158	$	2,291	$	7,445	$	4,536
Weighted-average basic shares outstanding	1,770		1,769		1,769		1,633
Basic earnings per share attributable to AbbVie Inc.	$	1.78	$	1.30	$	4.21	$	2.78

Diluted EPS
Net earnings attributable to AbbVie Inc.	$	3,179	$	2,308	$	7,498	$	4,580
Earnings allocated to participating securities	21		17		53		44
Earnings available to common shareholders	$	3,158	$	2,291	$	7,445	$	4,536
Weighted-average shares of common stock outstanding	1,770		1,769		1,769		1,633
Effect of dilutive securities	7		5		7		4
Weighted-average diluted shares outstanding	1,777		1,774		1,776		1,637
Diluted earnings per share attributable to AbbVie Inc.	$	1.78	$	1.29	$	4.19	$	2.77

Certain shares issuable under stock-based compensation plans were excluded from the computation of EPS because the effect would have been antidilutive. The number of common shares excluded was insignificant for all periods presented.

Note 4 Licensing, Acquisitions and Other Arrangements

Acquisition of Allergan

On May 8, 2020, AbbVie completed its acquisition of Allergan plc (Allergan). The combination created a diverse entity with leadership positions across immunology, hematologic oncology, aesthetics, neuroscience, eye care and women's health. AbbVie's existing product portfolio and pipeline were enhanced with numerous Allergan assets and Allergan's product portfolio benefits from AbbVie's commercial strength, expertise and international infrastructure.


2021 Form 10-Q \|			7

The acquisition of Allergan was accounted for as a business combination using the acquisition method of accounting. The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The valuation of assets acquired and liabilities assumed was finalized during the three months ended June 30, 2021. Measurement period adjustments to the preliminary purchase price allocation during the six months ended June 30, 2021 included: (i) an increase to intangible assets of $710 million; (ii) an increase to deferred income tax liabilities of $148 million; (iii) other individually insignificant adjustments for a net increase to identifiable net assets of $2 million; and (iv) a corresponding decrease to goodwill of $564 million. The measurement period adjustments primarily resulted from the completion of the valuation of certain license agreement intangible assets based on facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date. These adjustments did not have a significant impact on AbbVie's results of operations for the nine months ended September 30, 2021 and would not have had a significant impact on prior period results if these adjustments had been made as of the acquisition date.

Other Licensing & Acquisitions Activity

Cash outflows related to other acquisitions and investments totaled $837 million for the nine months ended September 30, 2021 and $1.1 billion for the nine months ended September 30, 2020. AbbVie recorded acquired in-process research and development (IPR&D) charges of $390 million for the three months and $557 million for the nine months ended September 30, 2021 and recorded acquired IPR&D charges of $45 million for the three months and $898 million for the nine months ended September 30, 2020.

Soliton, Inc.

In May 2021, AbbVie announced that it entered into a definitive agreement with Soliton, Inc. (Soliton) to acquire Soliton and RESONIC, its Rapid Acoustic Pulse device which recently received U.S. Food and Drug Administration (FDA) 510(k) clearance and is a non-invasive treatment for the short-term improvement in the appearance of cellulite. Under the terms of the transaction agreement, AbbVie will pay $22.60 per share in cash for each outstanding share of Soliton for an enterprise value of approximately $550 million. Closing of the transaction is subject to regulatory approval.

Calico Life Sciences LLC

In July 2021, AbbVie and Calico Life Sciences LLC (Calico) entered into an extension of their collaboration to discover, develop and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer. This is the second collaboration extension and builds on the partnership established in 2014 and extended in 2018. Under the terms of the agreement, AbbVie and Calico will each contribute an additional $500 million and the term is extended for an additional three years. AbbVie’s contribution is payable in two equal installments beginning in 2023. Calico will be responsible for research and early development until 2025 and will advance collaboration projects into Phase 2a through 2030. Following completion of the Phase 2a studies, AbbVie will have the option to exclusively license the collaboration compounds. Upon exercise, AbbVie would be responsible for late-stage development and commercial activities. Collaboration costs and profits will be shared equally by both parties post option exercise. During the three months ended September 30, 2021, AbbVie recorded $500 million as other operating expense in the condensed consolidated statement of earnings related to its commitments under the agreement.

TeneoOne and TNB-383B

In September 2021, AbbVie acquired TeneoOne, an affiliate of Teneobio, Inc., and TNB-383B, a BCMA-targeting immunotherapeutic for the potential treatment of relapsed or refractory multiple myeloma (R/R MM). In February 2019, AbbVie and TeneoOne entered a strategic transaction to develop and commercialize TNB-383B, a bispecific antibody that simultaneously targets BCMA and CD3 and is designed to direct the body's own immune system to target and kill BCMA-expressing tumor cells. AbbVie exercised its exclusive right to acquire TeneoOne and TNB-383B based on an interim analysis of an ongoing Phase 1 study and accounted for the transaction as an asset acquisition. Under the terms of the agreement, AbbVie made an exercise payment of $400 million which was recorded to IPR&D in the condensed consolidated statement of earnings for the three months ended September 30, 2021. The agreement also included additional payments of up to $250 million upon the achievement of certain development, regulatory and commercial milestones.

REGENXBIO Inc.

In September 2021, AbbVie and REGENXBIO Inc. (REGENXBIO) entered into a partnership to develop and commercialize RGX-314, an investigational gene therapy for wet age-related macular degeneration, diabetic retinopathy and other chronic retinal diseases. Under the collaboration, REGENXBIO will be responsible for completion of the ongoing trials of RGX-314. AbbVie and REGENXBIO will collaborate and share costs on additional trials of RGX-314. AbbVie will lead the clinical development and commercialization of RGX-314 globally. REGENXBIO and AbbVie will share equally in pre-tax profits from net revenues of RGX-314 in the U.S. AbbVie will pay REGENXBIO tiered royalties on net revenues outside the U.S. Upon closing, AbbVie will make an upfront payment of $370 million


2021 Form 10-Q \|			8

which will be recorded to IPR&D in the consolidated statement of earnings. Closing of the transaction is subject to regulatory approval. The agreement also included additional payments of up to $1.4 billion upon the achievement of certain development, regulatory and commercial milestones.

Genmab A/S

In June 2020, AbbVie and Genmab A/S (Genmab) entered into a collaboration agreement to jointly develop and commercialize three of Genmab's early-stage investigational bispecific antibody therapeutics and entered into a discovery research collaboration for future differentiated antibody therapeutics for the treatment of cancer. Under the terms of the agreement, Genmab granted to AbbVie an exclusive license to its epcoritamab (DuoBody-CD3xCD20), DuoHexaBody-CD37 and DuoBody-CD3x5T4 programs. For epcoritamab, the companies will share commercial responsibilities in the U.S. and Japan, with AbbVie responsible for further global commercialization. Genmab will record net revenues in the U.S. and Japan, and the parties will share equally in pre-tax profits from these sales. Genmab will receive tiered royalties on remaining global sales. For the discovery research partnership, Genmab will conduct Phase 1 studies for these programs and AbbVie retains the right to opt-in to program development. AbbVie made an upfront payment of $750 million, which was recorded to IPR&D in the condensed consolidated statement of earnings for the three months ended June 30, 2020. The agreement also included additional payments of up to $3.2 billion upon the achievement of certain development, regulatory and commercial milestones for all programs.

Note 5 Collaborations

The company has ongoing transactions with other entities through collaboration agreements. The following represent the significant collaboration agreements impacting the periods ended September 30, 2021 and 2020.

Collaboration with Janssen Biotech, Inc.

In December 2011, Pharmacyclics, a wholly-owned subsidiary of AbbVie, entered into a worldwide collaboration and license agreement with Janssen Biotech, Inc. and its affiliates (Janssen), one of the Janssen Pharmaceutical companies of Johnson & Johnson, for the joint development and commercialization of Imbruvica, a novel, orally active, selective covalent inhibitor of Bruton’s tyrosine kinase (BTK) and certain compounds structurally related to Imbruvica, for oncology and other indications, excluding all immune and inflammatory mediated diseases or conditions and all psychiatric or psychological diseases or conditions, in the United States and outside the United States.

The collaboration provides Janssen with an exclusive license to commercialize Imbruvica outside of the United States and co-exclusively with AbbVie in the United States. Both parties are responsible for the development, manufacturing and marketing of any products generated as a result of the collaboration. The collaboration has no set duration or specific expiration date and provides for potential future development, regulatory and approval milestone payments of up to $200 million to AbbVie. The collaboration also includes a cost sharing arrangement for associated collaboration activities. Except in certain cases, Janssen is responsible for approximately 60% of collaboration development costs and AbbVie is responsible for the remaining 40% of collaboration development costs.

In the United States, both parties have co-exclusive rights to commercialize the products; however, AbbVie is the principal in the end-customer product sales. AbbVie and Janssen share pre-tax profits and losses equally from the commercialization of products. Sales of Imbruvica are included in AbbVie's net revenues. Janssen's share of profits is included in AbbVie's cost of products sold. Other costs incurred under the collaboration are reported in their respective expense line items, net of Janssen's share.

Outside the United States, Janssen is responsible for and has exclusive rights to commercialize Imbruvica. AbbVie and Janssen share pre-tax profits and losses equally from the commercialization of products. AbbVie's share of profits is included in AbbVie's net revenues. Other costs incurred under the collaboration are reported in their respective expense line items, net of Janssen's share.


2021 Form 10-Q \|			9

The following table shows the profit and cost sharing relationship between Janssen and AbbVie:


	Three months ended September 30,				Nine months ended September 30,
(in millions)	2021		2020		2021		2020
United States - Janssen's share of profits (included in cost of products sold)	$	518	$	524	$	1,497	$	1,467
International - AbbVie's share of profits (included in net revenues)	265		251		816		750
Global - AbbVie's share of other costs (included in respective line items)	76		74		220		211

AbbVie’s receivable from Janssen, included in accounts receivable, net, was $298 million at September 30, 2021 and $283 million at December 31, 2020. AbbVie’s payable to Janssen, included in accounts payable and accrued liabilities, was $471 million at September 30, 2021 and $562 million at December 31, 2020.

Collaboration with Genentech, Inc.

AbbVie and Genentech, Inc. (Genentech), a member of the Roche Group, are parties to a collaboration and license agreement executed in 2007 to jointly research, develop and commercialize human therapeutic products containing BCL-2 inhibitors and certain other compound inhibitors which includes Venclexta, a BCL-2 inhibitor used to treat certain hematological malignancies. AbbVie shares equally with Genentech all pre-tax profits and losses from the development and commercialization of Venclexta in the United States. AbbVie pays royalties on Venclexta net revenues outside the United States.

AbbVie manufactures and distributes Venclexta globally and is the principal in the end-customer product sales. Sales of Venclexta are included in AbbVie’s net revenues. Genentech’s share of United States profits is included in AbbVie’s cost of products sold. AbbVie records sales and marketing costs associated with the United States collaboration as part of 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 September 30,				Nine months ended September 30,
(in millions)	2021		2020		2021		2020
Genentech's share of profits, including royalties (included in cost of products sold)	$	187	$	139	$	514	$	390
AbbVie's share of sales and marketing costs from U.S. collaboration (included in SG&A)	10		9		29		34
AbbVie's share of development costs (included in R&D)	34		27		110		88

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, 2020	$	33,124

Measurement period adjustments(a)	(564)
Foreign currency translation adjustments and other	(264)
Balance as of September 30, 2021	$	32,296

(a) Measurement period adjustments relate to the acquisition of Allergan (see Note 4).

The company performs its annual goodwill impairment assessment in the third quarter, or earlier if impairment indicators exist. As of September 30, 2021, there were no accumulated goodwill impairment losses.


2021 Form 10-Q \|			10

Intangible Assets, Net

The following table summarizes intangible assets:


	September 30, 2021						December 31, 2020
(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	$	87,880	$	(16,859)	$	71,021	$	87,707	$	(11,620)	$	76,087
License agreements	8,486		(3,501)		4,985		7,828		(2,916)		4,912
Total definite-lived intangible assets	96,366		(20,360)		76,006		95,535		(14,536)		80,999
Indefinite-lived research and development	1,450		—		1,450		1,877		—		1,877
Total intangible assets, net	$	97,816	$	(20,360)	$	77,456	$	97,412	$	(14,536)	$	82,876

Definite-Lived Intangible Assets

The increase in the gross carrying amount of definite-lived intangible assets during the nine months ended September 30, 2021 was primarily due to the measurement period adjustments from the completion of the valuation of certain license agreements acquired in the Allergan acquisition. See Note 4 for additional information regarding these adjustments.

Amortization expense was $1.9 billion for the three months and $5.9 billion for the nine months ended September 30, 2021 and $2.1 billion for the three months and $4.0 billion for the nine months ended September 30, 2020. Amortization expense was included in cost of products sold in the condensed consolidated statements of earnings.

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets represents IPR&D associated with products that have not yet received regulatory approval. The company performs its annual impairment assessment of indefinite-lived intangible assets in the third quarter, or earlier if impairment indicators exist.

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. To achieve these integration objectives, AbbVie expects to incur total cumulative 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.

The following table summarizes the charges associated with the Allergan acquisition integration plan:


		Severance and employee benefits										Other integration
	Three months ended September 30,			Nine months ended September 30,						Three months ended September 30,	Nine months ended September 30,
(in millions)		2021		2020		2021		2020				2021		2020		2021		2020
Cost of products sold		$	2	$	10	$	8	$	43			$	44	$	12	$	84	$	13
Research and development		—		40		—		172				18		91		87		135
Selling, general and administrative		18		29		47		347				88		57		213		155
Total charges		$	20	$	79	$	55	$	562			$	150	$	160	$	384	$	303


2021 Form 10-Q \|			11

The following table summarizes the cash activity in the recorded liability associated with the integration plan for the nine months ended September 30, 2021:


(in millions)	Severance and employee benefits		Other integration
Accrued balance as of December 31, 2020	$	367	$	20
Charges	51		326


Payments and other adjustments	(192)		(341)
Accrued balance as of September 30, 2021	$	226	$	5

Other Restructuring

AbbVie recorded restructuring charges of $13 million for the three months and $56 million for the nine months ended September 30, 2021 and $11 million for the three months and $42 million for the nine months ended September 30, 2020.

The following table summarizes the cash activity in the restructuring reserve for the nine months ended September 30, 2021:


(in millions)
Accrued balance as of December 31, 2020	$	90
Restructuring charges	52
Payments and other adjustments	(89)
Accrued balance as of September 30, 2021	$	53

Note 8 Financial Instruments and Fair Value Measures

Risk Management Policy

See Note 11 to the company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a summary of AbbVie’s risk management policy and use of derivative instruments.

Financial Instruments

Various AbbVie foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany transactions denominated in a currency other than the functional currency of the local entity. These contracts, with notional amounts totaling $1.5 billion at September 30, 2021 and December 31, 2020, are designated as cash flow hedges and are recorded at fair value. The durations of these forward exchange contracts were generally less than 18 months. Accumulated gains and losses as of September 30, 2021 are reclassified from accumulated other comprehensive income (loss) (AOCI) and included in cost of products sold at the time the products are sold, generally not exceeding six months from the date of settlement.

In the third quarter of 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 November 2019 and the resulting net gain was recognized in other comprehensive income (loss). This gain is reclassified to interest expense, net over the term of the related debt.

The company is party to interest rate swap contracts designated as cash flow hedges with notional amounts totaling $1.5 billion at September 30, 2021 and $2.3 billion at December 31, 2020. The effect of the hedge contracts is 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 are included in AOCI and are reclassified to interest expense, net over the lives of the floating-rate 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 $8.1 billion at September 30, 2021 and $8.6 billion at December 31, 2020.


2021 Form 10-Q \|			12

The company also uses foreign currency forward exchange contracts or foreign currency denominated debt to hedge its net investments in certain foreign subsidiaries and affiliates. The company had foreign currency forward exchange contracts with notional amounts totaling €4.3 billion at September 30, 2021 and €971 million at December 31, 2020. The company also had an aggregate principal amount of senior Euro notes designated as net investment hedges of €5.9 billion at September 30, 2021 and €6.6 billion at December 31, 2020. The company uses the spot method of assessing hedge effectiveness for derivative instruments designated as net investment hedges. Realized and unrealized gains and losses from these hedges are included in AOCI and the initial fair value of hedge components excluded from the assessment of effectiveness is recognized in interest expense, net over the life of the hedging instrument.

The company is party to interest rate swap contracts designated as fair value hedges with notional amounts totaling $3.8 billion at September 30, 2021 and $4.8 billion December 31, 2020. 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.

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, 2021		December 31, 2020		Balance sheet caption	September 30, 2021		December 31, 2020
Foreign currency forward exchange contracts
Designated as cash flow hedges	Prepaid expenses and other	$	47	$	2	Accounts payable and accrued liabilities	$	—	$	82
Designated as cash flow hedges	Other assets	—		—		Other long-term liabilities	—		6
Designated as net investment hedges	Prepaid expenses and other	71		—		Accounts payable and accrued liabilities	—		11
Not designated as hedges	Prepaid expenses and other	22		49		Accounts payable and accrued liabilities	33		33
Interest rate swap contracts
Designated as cash flow hedges	Prepaid expenses and other	—		—		Accounts payable and accrued liabilities	1		14
Designated as cash flow hedges	Other assets	—		—		Other long-term liabilities	12		20
Designated as fair value hedges	Prepaid expenses and other	—		7		Accounts payable and accrued liabilities	—		—
Designated as fair value hedges	Other assets	68		131		Other long-term liabilities	3		—
Total derivatives		$	208	$	189		$	49	$	166

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.


2021 Form 10-Q \|			13

The following table presents the pre-tax amounts of gains (losses) from derivative instruments recognized in other comprehensive income (loss):


	Three months ended September 30,				Nine months ended September 30,
(in millions)	2021		2020		2021		2020
Foreign currency forward exchange contracts
Designated as cash flow hedges	$	43	$	(52)	$	67	$	(5)
Designated as net investment hedges	101		(56)		186		(32)
Interest rate swap contracts designated as cash flow hedges	(1)		(1)		—		(53)

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $11 million into cost of products sold for foreign currency cash flow hedges, pre-tax losses of $12 million into interest expense, net for interest rate 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 in other comprehensive income (loss) pre-tax gains of $141 million for the three months and pre-tax gains of $397 million for the nine months ended September 30, 2021 and pre-tax losses of $340 million for the three months and pre-tax losses of $532 million for the nine months ended September 30, 2020.

The following table summarizes the pre-tax amounts and location of derivative instrument net gains (losses) recognized in the condensed consolidated statements of earnings, including the net gains (losses) reclassified out of AOCI into net earnings. See Note 10 for the amount of net gains (losses) reclassified out of AOCI.


		Three months ended September 30,				Nine months ended September 30,
(in millions)	Statement of earnings caption	2021		2020		2021		2020
Foreign currency forward exchange contracts
Designated as cash flow hedges	Cost of products sold	$	(28)	$	15	$	(62)	$	15
Designated as net investment hedges	Interest expense, net	7		3		16		16
Not designated as hedges	Net foreign exchange loss	(25)		31		(53)		36
Treasury rate lock agreements designated as cash flow hedges	Interest expense, net	6		6		18		18
Interest rate swap contracts
Designated as cash flow hedges	Interest expense, net	(6)		(8)		(20)		(10)
Designated as fair value hedges	Interest expense, net	(5)		1		(73)		398
Debt designated as hedged item in fair value hedges	Interest expense, net	5		(1)		73		(398)

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.


2021 Form 10-Q \|			14

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the condensed consolidated balance sheet as of September 30, 2021:


			Basis of fair value measurement
(in millions)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash and equivalents	$	12,182	$	4,026	$	8,156	$	—
Money market funds and time deposits	10		—		10		—
Debt securities	64		—		64		—
Equity securities	133		117		16		—
Interest rate swap contracts	68		—		68		—
Foreign currency contracts	140		—		140		—

Total assets	$	12,597	$	4,143	$	8,454	$	—
Liabilities
Interest rate swap contracts	$	16	$	—	$	16	$	—
Foreign currency contracts	33		—		33		—

Contingent consideration	14,919		—		—		14,919
Total liabilities	$	14,968	$	—	$	49	$	14,919

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, 2020:


			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	$	8,449	$	2,758	$	5,691	$	—
Money market funds and time deposits	12		—		12		—
Debt securities	50		—		50		—
Equity securities	159		149		10		—
Interest rate swap contracts	138		—		138		—
Foreign currency contracts	51		—		51		—

Total assets	$	8,859	$	2,907	$	5,952	$	—
Liabilities
Interest rate swap contracts	$	34	$	—	$	34	$	—
Foreign currency contracts	132		—		132		—

Contingent consideration	12,997		—		—		12,997
Total liabilities	$	13,163	$	—	$	166	$	12,997

Equity securities consist of investments for which the fair values were determined by using the published market price per unit multiplied by the number of units held, without consideration of transaction costs. The derivatives entered into by the company were valued using observable market inputs including published interest rate curves and both forward and spot prices for foreign currencies.

The fair value measurements of the contingent consideration liabilities were determined based on significant unobservable inputs, including the discount rate, estimated probabilities and timing of achieving specified development, regulatory and commercial milestones and the estimated amount of future sales of the acquired products. The potential contingent consideration payments are estimated by applying a probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for contingent royalty payments, which are then discounted to present value. Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of inputs, including discount rates, the probabilities of achieving the milestones, the time required to achieve the milestones and estimated future sales. Significant judgment is


2021 Form 10-Q \|			15

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.

The fair value of the company's contingent consideration liabilities as of September 30, 2021 was calculated using the following significant unobservable inputs:


	Range	Weighted average(a)
Discount rate	0.1% - 2.6%	1.5	%
Probability of payment for unachieved milestones	56% - 92%	87	%
Probability of payment for royalties by indication(b)	56% - 100%	95	%

Projected year of payments	2021 - 2034	2027

(a) Unobservable inputs were weighted by the relative fair value of the contingent consideration liabilities.

(b) Excluding approved indications, the estimated probability of payment ranged from 56% to 89% at September 30, 2021.

There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy. The following table presents the changes in fair value of total contingent consideration liabilities which are measured using Level 3 inputs:


	Nine months ended September 30,
(in millions)	2021		2020
Beginning balance	$	12,997	$	7,340
Additions(a)	—		121
Change in fair value recognized in net earnings	2,447		1,078
Payments	(525)		(212)
Ending balance	$	14,919	$	8,327

(a) Represents contingent consideration liabilities assumed in the Allergan acquisition.

The change in fair value recognized in net earnings is recorded in other expense, net in the condensed consolidated statements of earnings.

Certain financial instruments are carried at historical cost or some basis other than fair value. The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of September 30, 2021 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	$	16	$	16	$	—	$	16	$	—
Current portion of long-term debt and finance lease obligations, excluding fair value hedges	6,656		6,672		6,410		262		—
Long-term debt and finance lease obligations, excluding fair value hedges	73,880		81,537		80,228		1,309		—
Total liabilities	$	80,552	$	88,225	$	86,638	$	1,587	$	—


2021 Form 10-Q \|			16

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 2020 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	$	34	$	34	$	—	$	34	$	—
Current portion of long-term debt and finance lease obligations, excluding fair value hedges	8,461		8,542		8,249		293		—
Long-term debt and finance lease obligations, excluding fair value hedges	77,283		87,761		86,137		1,624		—
Total liabilities	$	85,778	$	96,337	$	94,386	$	1,951	$	—

AbbVie also holds investments in equity securities that do not have readily determinable fair values. The company records these investments at cost and remeasures them to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $132 million as of September 30, 2021 and $102 million as of December 31, 2020. No significant cumulative upward or downward adjustments have been recorded for these investments as of September 30, 2021.

Concentrations of Risk

Of total net accounts receivable, three U.S. wholesalers accounted for 75% as of September 30, 2021 and 72% as of December 31, 2020, and substantially all of AbbVie’s net revenues in the United States were to these three wholesalers.

Humira (adalimumab) is AbbVie’s single largest product and accounted for approximately 37% of AbbVie’s total net revenues for the nine months ended September 30, 2021 and 46% for the nine months ended September 30, 2020.

Debt and Credit Facilities

In April 2021, the company repaid $1.8 billion aggregate principal amount of 2.3% senior notes that were scheduled to mature in May 2021. In May 2021, the company repaid €750 million aggregate principal amount of 0.5% senior euro notes that were scheduled to mature in June 2021. These repayments were made by exercising, under the terms of the notes, 30-day early redemptions at 100% of the principal amounts. The company also repaid $750 million aggregate principal amount of floating rate senior notes at maturity in May 2021.

In September 2021, the company refinanced its $1.0 billion floating rate three-year term loan. As part of the refinancing, the company repaid the existing $1.0 billion term loan due May 2023 and borrowed $1.0 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.

In September 2021, the company repaid $1.2 billion aggregate principal amount of 5.0% senior notes that were scheduled to mature in December 2021. This repayment was made by exercising, under the terms of the notes, 90-day early redemption at 100% of the principal amount.

In connection with the acquisition of Allergan, in May 2020, the company borrowed $3.0 billion under a $6.0 billion term loan credit agreement, consisting of a $1.0 billion floating rate three-year term loan tranche and a $2.0 billion floating rate five-year term loan tranche. Subsequent to these borrowings, AbbVie terminated the unused commitments of the lenders under the term loan.

In May 2020, AbbVie completed its previously announced offers to exchange any and all outstanding notes of certain series issued by Allergan for new notes to be issued by AbbVie and cash. Following the settlement of the exchange offers, AbbVie issued $14.0 billion and €3.1 billion of new notes in exchange for the Allergan notes tendered in the exchange offers. The aggregate principal amount of Allergan notes that remained outstanding following the settlement of the exchange offers was approximately $1.5 billion and €635 million. The exchange transaction was accounted for as a modification of the assumed debt instruments. In September 2020, the company repaid $650 million aggregate principal amount of 3.375% Allergan exchange notes at maturity.

In May 2020, the company also repaid $3.8 billion aggregate principal amount of 2.5% senior notes at maturity.


2021 Form 10-Q \|			17

Short-Term Borrowings

There were no commercial paper borrowings outstanding as of September 30, 2021 and December 31, 2020. There were no commercial paper borrowings issued during the nine months ended September 30, 2021. The weighted-average interest rate on commercial paper borrowings was 1.8% for the nine months ended September 30, 2020.

Note 9 Post-Employment Benefits

The following table summarizes net periodic benefit cost relating to the company’s defined benefit and other post-employment plans:


	Defined benefit plans								Other post- employment plans
	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
(in millions)	2021		2020		2021		2020		2021		2020		2021		2020
Service cost	$	110	$	93	$	331	$	277	$	12	$	10	$	36	$	31
Interest cost	59		68		177		196		5		8		14		25
Expected return on plan assets	(166)		(148)		(498)		(426)		—		—		—		—
Amortization of prior service cost (credit)	1		1		2		2		(10)		(1)		(29)		(3)
Amortization of actuarial loss	72		56		217		169		8		8		24		20
Net periodic benefit cost	$	76	$	70	$	229	$	218	$	15	$	25	$	45	$	73

The components of net periodic benefit cost other than service cost are included in other expense, net in the condensed consolidated statements of earnings.

Note 10 Equity

Stock-Based Compensation

In May 2021, stockholders of the company approved the AbbVie Amended and Restated 2013 Incentive Stock Program (the Amended Plan), which amends and restates the AbbVie 2013 Incentive Stock Program, including an increase in the number of shares available for issuance of 44 million shares and an extension of the program to May 2031. Stock-based compensation expense is principally related to awards issued pursuant to the AbbVie 2013 Incentive Stock Program and the Amended Plan and is summarized as follows:


	Three months ended September 30,				Nine months ended September 30,
(in millions)	2021		2020		2021		2020
Cost of products sold	$	9	$	11	$	39	$	37
Research and development	47		54		181		200
Selling, general and administrative	79		97		343		380
Pre-tax compensation expense	135		162		563		617
Tax benefit	27		32		101		109
After-tax compensation expense	$	108	$	130	$	462	$	508

Stock Options

During the nine months ended September 30, 2021, primarily in connection with the company's annual grant, AbbVie granted 1.1 million stock options with a weighted-average grant-date fair value of $16.28. As of September 30, 2021, $12 million of unrecognized compensation cost related to stock options is expected to be recognized as expense over approximately the next two years.


2021 Form 10-Q \|			18

RSUs and Performance Shares

During the nine months ended September 30, 2021, primarily in connection with the company's annual grant, AbbVie granted 7.4 million RSUs and performance shares with a weighted-average grant-date fair value of $105.39. As of September 30, 2021, $712 million of unrecognized compensation cost related to RSUs and performance shares is expected to be recognized as expense over approximately the next two years.

Cash Dividends

The following table summarizes quarterly cash dividends declared during 2021 and 2020:


2021				2020
Date Declared	Payment Date	Dividend Per Share		Date Declared	Payment Date	Dividend Per Share
10/29/21	02/15/22	$	1.41	10/30/20	02/16/21	$	1.30
09/10/21	11/15/21	$	1.30	09/11/20	11/16/20	$	1.18
06/17/21	08/16/21	$	1.30	06/17/20	08/14/20	$	1.18
02/18/21	05/14/21	$	1.30	02/20/20	05/15/20	$	1.18

Stock Repurchase Program

The company's stock repurchase authorization permits purchases of AbbVie shares from time to time in open-market or private transactions at management's discretion. The program has no time limit and can be discontinued at any time. Shares repurchased under this program are recorded at acquisition cost, including related expenses, and are available for general corporate purposes.

AbbVie repurchased 5 million shares for $550 million during the nine months ended September 30, 2021 and 6 million shares for $500 million during the nine months ended September 30, 2020. AbbVie's remaining stock repurchase authorization was approximately $2.6 billion as of September 30, 2021.

Accumulated Other Comprehensive Loss

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2021:


(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, 2020	$	583	$	(790)	$	(3,067)	$	157	$	(3,117)
Other comprehensive income (loss) before reclassifications	(794)		457		27		60		(250)
Net losses (gains) reclassified from accumulated other comprehensive loss	—		(13)		169		55		211
Net current-period other comprehensive income (loss)	(794)		444		196		115		(39)
Balance as of September 30, 2021	$	(211)	$	(346)	$	(2,871)	$	272	$	(3,156)

Other comprehensive loss for the nine months ended September 30, 2021 included foreign currency translation adjustments totaling a loss of $794 million and the offsetting impact of net investment hedging activities totaling a gain of $444 million, which were principally due to the impact of the weakening of the Euro on the translation of the company’s Euro-denominated assets.


2021 Form 10-Q \|			19

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2020:


(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, 2019	$	(928)	$	9	$	(2,965)	$	288	$	(3,596)
Other comprehensive income (loss) before reclassifications	726		(443)		(14)		(49)		220
Net losses (gains) reclassified from accumulated other comprehensive loss	—		(12)		148		(19)		117
Net current-period other comprehensive income (loss)	726		(455)		134		(68)		337
Balance as of September 30, 2020	$	(202)	$	(446)	$	(2,831)	$	220	$	(3,259)

Other comprehensive income for the nine months ended September 30, 2020 included foreign currency translation adjustments totaling a gain of $726 million and the offsetting impact of net investment hedging activities totaling a loss of $455 million, which were principally due to the impact of the strengthening of the Euro on the translation of the company’s Euro-denominated assets.

The following table presents the impact on AbbVie’s condensed consolidated statements of earnings for significant amounts reclassified out of each component of accumulated other comprehensive loss:


	Three months ended September 30,				Nine months ended September 30,
(in millions) (brackets denote gains)	2021		2020		2021		2020
Net investment hedging activities
Gains on derivative amount excluded from effectiveness testing(a)	$	(7)	$	(3)	$	(16)	$	(16)
Tax expense	1		1		3		4
Total reclassifications, net of tax	$	(6)	$	(2)	$	(13)	$	(12)
Pension and post-employment benefits
Amortization of actuarial losses and other(b)	$	71	$	63	$	214	$	188
Tax benefit	(15)		(13)		(45)		(40)
Total reclassifications, net of tax	$	56	$	50	$	169	$	148
Cash flow hedging activities
Losses (gains) on foreign currency forward exchange contracts(c)	$	28	$	(15)	$	62	$	(15)
Gains on treasury rate lock agreements(a)	(6)		(6)		(18)		(18)
Losses on interest rate swap contracts(a)	6		8		20		10
Tax expense (benefit)	(4)		3		(9)		4
Total reclassifications, net of tax	$	24	$	(10)	$	55	$	(19)

(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).

Note 11 Income Taxes

The effective tax rate was 14% for the three and nine months ended September 30, 2021 compared to 7% for the three and nine months ended September 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 collaborations. The increase in the effective tax rate for the three and nine months ended September 30, 2021 over the prior year was primarily due to the jurisdictional mix of earnings resulting from collaboration activities and accretion on contingent consideration in 2021.

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 12 months by up to $258 million.


2021 Form 10-Q \|			20

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. Initiation of new legal proceedings or a change in the status of existing proceedings may result in a change in the estimated loss accrued by AbbVie. While it is not feasible to predict the outcome of all proceedings and exposures with certainty, management believes that their ultimate disposition should not have a material adverse effect on AbbVie’s consolidated financial position, results of operations or cash flows.

Subject to certain exceptions specified in the separation agreement by and between Abbott Laboratories (Abbott) and AbbVie, AbbVie assumed the liability for, and control of, all pending and threatened legal matters related to its business, including liabilities for any claims or legal proceedings related to products that had been part of its business, but were discontinued prior to the distribution, as well as assumed or retained liabilities, and will indemnify Abbott for any liability arising out of or resulting from such assumed legal matters.

Antitrust Litigation

Lawsuits are pending against AbbVie and others generally alleging that the 2005 patent litigation settlement involving Niaspan entered into between Kos Pharmaceuticals, Inc. (a company acquired by Abbott in 2006 and presently a subsidiary of AbbVie) and a generic company violates 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 Niaspan direct purchasers and one brought by Niaspan end-payors. The cases are pending in the United States District Court for the Eastern District of Pennsylvania for coordinated or consolidated pre-trial proceedings under the 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' motions to certify a class. In October 2016, the Orange County, California District Attorney’s Office filed a lawsuit on behalf of the State of California regarding the Niaspan patent litigation settlement in Orange County Superior Court, asserting a claim under the unfair competition provision of the California Business and Professions Code seeking injunctive relief, restitution, civil penalties and attorneys’ fees.

In September 2014, the Federal Trade Commission (FTC) filed a lawsuit, FTC v. AbbVie Inc., et al., against AbbVie and others in the United States District Court for the Eastern District of Pennsylvania, alleging that 2011 patent litigation with two generic companies regarding AndroGel was sham litigation and the settlements of that litigation violated federal antitrust law. In May 2015, the court dismissed the FTC’s settlement-related claim. In June 2018, following a bench trial, the court found for the FTC on its sham litigation claim and ordered a disgorgement remedy of $448 million, plus prejudgment interest. The court denied the FTC’s request for injunctive relief. In September 2020, the United States Court of Appeals for the Third Circuit reversed the district court’s finding of sham litigation with respect to one generic company and affirmed with respect to the other but held the FTC lacked authority to obtain a disgorgement remedy and vacated the district court’s award. The Third Circuit also affirmed the district court’s denial of the FTC’s injunction request and reinstated the FTC’s settlement-related claim for further proceedings in the district court. In July 2021, the FTC voluntarily dismissed the remaining claims in its lawsuit with prejudice.

In August 2019, direct purchasers of AndroGel filed a lawsuit, King Drug Co. of Florence, Inc., et al. v. AbbVie Inc., et al., against AbbVie and others in the United States District Court for the Eastern District of Pennsylvania, alleging that 2006 patent litigation settlements and related agreements by Solvay Pharmaceuticals, Inc. (a company Abbott acquired in February 2010 and now known as AbbVie Products LLC) with three generic companies violated federal antitrust law, and also making allegations similar to those in FTC v. AbbVie Inc. (above). In May 2020, Perrigo Company and related entities filed a lawsuit against AbbVie and others in the United States District Court for the Eastern District of Pennsylvania, making sham litigation allegations similar to those in FTC v. AbbVie Inc. (above). In October 2020, the Perrigo lawsuit was transferred to the United States District Court for New Jersey. In September 2021, the New Jersey court granted AbbVie’s motion for judgment on the pleadings in the Perrigo lawsuit, dismissing it with prejudice.

Between March and May 2019, 12 putative class action lawsuits were filed in the United States District Court for the Northern District of Illinois by indirect Humira purchasers, alleging that AbbVie’s settlements with biosimilar manufacturers and AbbVie’s Humira patent portfolio violated state and federal antitrust laws. The court consolidated these lawsuits as In re: Humira (Adalimumab) Antitrust Litigation. In June 2020, the court dismissed the consolidated litigation with prejudice. The plaintiffs have appealed the dismissal.


2021 Form 10-Q \|			21

Lawsuits are pending against Forest Laboratories, LLC and others generally alleging that 2009 and 2010 patent litigation settlements involving Namenda entered into between Forest and generic companies and other conduct by Forest involving Namenda, violated state antitrust, unfair and deceptive trade practices, and unjust enrichment laws. Plaintiffs generally seek monetary damages, injunctive relief and attorneys’ fees. The lawsuits, purported class actions filed by indirect purchasers of Namenda, are consolidated as In re: Namenda Indirect Purchaser Antitrust Litigation in the United States District Court for the Southern District of New York.

Lawsuits are pending against Allergan Inc. generally alleging that Allergan’s petitioning to the U.S. Patent Office and Food and Drug Administration and other conduct by Allergan involving Restasis violated federal and state antitrust laws and state unfair and deceptive trade practices and unjust enrichment laws. Plaintiffs generally seek monetary damages, injunctive relief and attorneys’ fees. The lawsuits, certified as a class action filed on behalf of indirect purchasers of Restasis, are consolidated for pre-trial purposes in the United States District Court for the Eastern District of New York under the MDL Rules as In re: Restasis (Cyclosporine Ophthalmic Emulsion) Antitrust Litigation, MDL No. 2819. In May 2021, the parties reached an agreement to settle this matter that is subject to court approval.

Lawsuits are pending 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. Plaintiffs generally seek monetary damages, injunctive relief, and attorneys’ fees. The lawsuits, purported class actions filed on behalf of direct and indirect purchasers of Bystolic, are consolidated as In re: Bystolic Antitrust Litigation in the United States District Court for the Southern District of New York.

Government Proceedings

Lawsuits are pending against Allergan and other defendants generally alleging that they improperly marketed and/or distributed prescription opioid products. Approximately 3,200 matters are pending against Allergan. The federal court cases are consolidated for pre-trial purposes in the United States District Court for the Northern District of Ohio under the MDL rules as In re: National Prescription Opiate Litigation, MDL No. 2804. Approximately 300 of the claims are pending in various state courts. The 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.

In July 2019, the New Mexico Attorney General filed a lawsuit, State of New Mexico ex rel. Balderas v. AbbVie Inc., et al., in New Mexico District Court for Santa Fe County against AbbVie and other companies alleging their marketing of AndroGel violated New Mexico’s Unfair Practices Act. In October 2020, the state added a claim under the New Mexico False Advertising Act.

Shareholder and Securities Litigation

In June 2016, a lawsuit, Elliott Associates, L.P., 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 2017 and October 2019 against AbbVie and in some instances its chief executive officer in the same court by additional investment funds. The court granted motions dismissing the claims of three investment-fund plaintiffs, which they appealed. In March 2021, in the first of those appeals, the dismissal was affirmed. One of these plaintiffs refiled its lawsuit in New York state court in June 2020 while the appeal of its dismissal in Illinois is pending. In November 2020, the New York Supreme Court for the County of New York dismissed that lawsuit, which is being appealed. In September 2021, the Illinois court granted AbbVie’s motion for summary judgment against all remaining plaintiffs on all the remaining claims, dismissing them with prejudice. The plaintiffs have appealed the dismissals.

In October 2018, a federal securities purported class action lawsuit, Holwill v. AbbVie Inc., et al., was filed in the United States District Court for the Northern District of Illinois against AbbVie, its chief executive officer and former chief financial officer, alleging that reasons stated for Humira sales growth in financial filings between 2013 and 2017 were misleading because they omitted alleged misconduct in connection with Humira patient and reimbursement support services and other services and items of value that allegedly induced Humira prescriptions. In September 2021, the court granted plaintiffs’ motion to certify a class.

Lawsuits are pending against Allergan and certain of its current and 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 United 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 dismiss. In September 2020, the court denied plaintiffs’ class certification motion because it found the lead plaintiff to be an inadequate representative of the proposed class but allowed another putative class member to propose itself as a new lead plaintiff. In December 2020, the court appointed a new lead plaintiff. In September 2021, the court granted plaintiffs’ motion to certify a class.


2021 Form 10-Q \|			22

Lawsuits are pending against Allergan and certain of its current and former officers alleging they made misrepresentations and omissions regarding Allergan’s former Actavis generics unit and its alleged anticompetitive conduct with other generic drug companies. The lawsuits were filed by Allergan shareholders and consist of three purported class actions and one individual action seeking monetary damages and attorney’s fees that have been consolidated in the U.S. District Court for the District of New Jersey as In re: Allergan Generic Drug Pricing Securities Litigation. In July 2021, the parties reached an agreement to settle the class action lawsuits, which is pending court approval.

Product Liability and General Litigation

In 2018, a qui tam lawsuit, U.S. ex rel. Silbersher v. Allergan Inc., et al., was filed in the United States District Court for the Northern District of California against several Allergan entities and others, alleging that their conduct before the U.S. Patent Office resulted in false claims for payment being made to federal and state healthcare payors for Namenda XR and Namzaric. The plaintiff-relator seeks damages and attorneys' fees under the federal False Claims Act and state law analogues. The federal government and state governments declined to intervene in the lawsuit.

Intellectual Property Litigation

AbbVie Inc. and AbbVie Biotechnology Ltd are seeking to enforce their patent rights relating to adalimumab (a drug AbbVie sells under the trademark Humira). In April 2021 and May 2021, cases were filed in the United States District Court for the Northern District of Illinois against Alvotech hf. AbbVie alleges defendant’s proposed biosimilar adalimumab product infringes certain AbbVie patents and seeks declaratory and injunctive relief. In August 2021, the court denied Defendant’s motion to dismiss on jurisdictional grounds in the first case; a motion in the second case remains pending. The court has set a trial on a subset of patents for August 2022. The court order provides that Alvotech will stay off the market until that decision. Litigation on the remaining patents is stayed. In May 2021, Alvotech hf. and its U.S. subsidiary Alvotech USA, Inc. filed a declaratory judgment action in the United States Eastern District of Virginia seeking a declaration that the same patents at issue in AbbVie’s April 2021 Illinois case are invalid or not infringed. AbbVie has filed a motion to dismiss or transfer that case to the Northern District of Illinois.

Pharmacyclics LLC, a wholly owned subsidiary of AbbVie, is seeking to enforce its patent rights relating to ibrutinib tablets (a drug Pharmacyclics sells under the trademark Imbruvica). Cases were filed in the United States District Court for the District of Delaware in March 2019 against Alvogen Pine Brook LLC and Natco Pharma Ltd. In August 2021, the court issued a decision holding all asserted patents infringed and valid. The judgment precludes Defendants from obtaining regulatory approval and launching until the last patent expires in 2036. On August 30, 2021, Defendants appealed. Janssen Biotech, Inc. which is in a global collaboration with Pharmacyclics concerning the development and marketing of Imbruvica, is the co-plaintiff in these suits.

Allergan USA, Inc., Allergan Sales, LLC, and Forest Laboratories Holdings Limited, wholly owned subsidiaries of AbbVie, are seeking to enforce patent rights relating to cariprazine (a drug sold under the trademark Vraylar). Litigation was filed in the United States District Court for the District of Delaware in December 2019 against Sun Pharmaceutical Industries Limited and Sun Pharma Global FZE; Aurobindo Pharma Limited and Aurobindo Pharma USA, Inc.; and Zydus Pharmaceuticals (USA), Inc. and Cadila Healthcare Limited. Allergan alleges defendants' proposed generic cariprazine products infringe certain patents and seeks declaratory and injunctive relief. Gedeon Richter Plc, Inc. which is in a global collaboration with Allergan concerning the development and marketing of Vraylar, is the co-plaintiff in this suit.


2021 Form 10-Q \|			23

Note 13 Segment Information

AbbVie operates as a single global business segment dedicated to the research and development, manufacturing, commercialization and sale of innovative medicines and therapies. This operating structure enables the Chief Executive Officer, as chief operating decision maker (CODM), to allocate resources and assess business performance on a global basis in order to achieve established long-term strategic goals. Consistent with this structure, a global research and development and supply chain organization is responsible for the discovery, manufacturing and supply of products. Commercial efforts that coordinate the marketing, sales and distribution of these products are organized by geographic region or therapeutic area. All of these activities are supported by a global corporate administrative staff. The determination of a single business segment is consistent with the consolidated financial information regularly reviewed by the CODM for purposes of assessing performance, allocating resources and planning and forecasting future periods.

The following table details AbbVie’s worldwide net revenues:


		Three months ended September 30,				Nine months ended September 30,

(in millions)		2021		2020		2021		2020
Immunology
Humira	United States	$	4,613	$	4,189	$	12,777	$	11,819
	International	812		951		2,583		2,861
	Total	$	5,425	$	5,140	$	15,360	$	14,680
Skyrizi	United States	$	679	$	379	$	1,725	$	934
	International	117		56		319		131
	Total	$	796	$	435	$	2,044	$	1,065
Rinvoq	United States	$	348	$	191	$	889	$	409
	International	105		24		245		41
	Total	$	453	$	215	$	1,134	$	450
Hematologic Oncology
Imbruvica	United States	$	1,109	$	1,119	$	3,207	$	3,140
	Collaboration revenues	265		251		816		750
	Total	$	1,374	$	1,370	$	4,023	$	3,890
Venclexta	United States	$	237	$	204	$	685	$	596
	International	255		148		647		376
	Total	$	492	$	352	$	1,332	$	972
Aesthetics
Botox Cosmetic(a)	United States	$	356	$	237	$	1,027	$	384
	International	189		156		579		235
	Total	$	545	$	393	$	1,606	$	619
Juvederm Collection(a)	United States	$	159	$	115	$	478	$	171
	International	195		159		625		216
	Total	$	354	$	274	$	1,103	$	387
Other Aesthetics(a)	United States	$	305	$	265	$	968	$	392
	International	47		35		149		50
	Total	$	352	$	300	$	1,117	$	442
Neuroscience
Botox Therapeutic(a)	United States	$	534	$	429	$	1,451	$	683
	International	111		94		329		137
	Total	$	645	$	523	$	1,780	$	820
Vraylar (a)	United States	$	461	$	358	$	1,239	$	550


Duodopa	United States	$	23	$	25	$	73	$	75
	International	104		98		310		290
	Total	$	127	$	123	$	383	$	365
Ubrelvy(a)	United States	$	162	$	38	$	369	$	60


Other Neuroscience(a)	United States	$	166	$	203	$	489	$	306
	International	5		4		13		6
	Total	$	171	$	207	$	502	$	312


2021 Form 10-Q \|			24


		Three months ended September 30,				Nine months ended September 30,

(in millions)		2021		2020		2021		2020
Eye Care
Lumigan/Ganfort(a)	United States	$	63	$	62	$	201	$	97
	International	75		87		229		128
	Total	$	138	$	149	$	430	$	225
Alphagan/Combigan(a)	United States	$	89	$	84	$	271	$	131
	International	39		39		117		61
	Total	$	128	$	123	$	388	$	192
Restasis(a)	United States	$	305	$	284	$	884	$	422
	International	14		15		42		21
	Total	$	319	$	299	$	926	$	443
Other Eye Care(a)	United States	$	128	$	119	$	375	$	173
	International	158		150		488		224
	Total	$	286	$	269	$	863	$	397
Women's Health
Lo Loestrin(a)	United States	$	105	$	129	$	300	$	207
	International	2		5		9		7
	Total	$	107	$	134	$	309	$	214
Orilissa/Oriahnn	United States	$	37	$	24	$	102	$	84
	International	1		1		4		3
	Total	$	38	$	25	$	106	$	87
Other Women's Health(a)	United States	$	57	$	74	$	153	$	108
	International	—		6		5		8
	Total	$	57	$	80	$	158	$	116
Other Key Products
Mavyret	United States	$	183	$	185	$	557	$	565
	International	243		229		726		784
	Total	$	426	$	414	$	1,283	$	1,349
Creon	United States	$	310	$	282	$	864	$	810
Lupron	United States	$	134	$	99	$	456	$	461
	International	46		34		135		110
	Total	$	180	$	133	$	591	$	571
Linzess/Constella(a)	United States	$	253	$	240	$	728	$	370
	International	8		8		23		11
	Total	$	261	$	248	$	751	$	381
Synthroid	United States	$	188	$	189	$	571	$	577



All other(a)		$	547	$	829	$	2,079	$	1,972
Total net revenues		$	14,342	$	12,902	$	41,311	$	31,946

(a) Net revenues include Allergan product revenues after the acquisition closing date of May 8, 2020.


2021 Form 10-Q \|			25

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