Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of the financial condition of AbbVie Inc. (AbbVie or the company) as of September 30, 2021 and December 31, 2020 and the results of operations for the three and nine months ended September 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 50,000 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 nine months ended September 30, 2021 included delivering worldwide net revenues of $41.3 billion, operating earnings of $12.9 billion, diluted earnings per share of $4.19 and cash flows from operations of $17.7 billion. Worldwide net revenues grew by 29% on a reported basis and 28% on a constant currency basis, which included $13.0 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 $4.19 for the nine months ended September 30, 2021 and included the following after-tax costs: (i) $4.9 billion related to the amortization of intangible assets; (ii) $2.4 billion for the change in fair value of contingent consideration liabilities; (iii) $543 million for acquired in-process research and development (IPR&D); (iv) $500 million as a result of a collaboration agreement extension with Calico Life Sciences LLC; (v) $427 million of Allergan acquisition and integration expenses; (vi) $307 million for milestones and other research and development (R&D) expenses; and (vii) $86 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.

2021 Form 10-Q |			26

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 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 focus on ensuring the safety of employees. Throughout the pandemic, AbbVie has followed health and safety guidance from state and local health authorities and implemented safety measures for those employees who are returning to the workplace.

AbbVie also 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 pandemic.

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 80 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, approximately 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.

2021 Form 10-Q |			27

• 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.

• In September 2021, AbbVie submitted an sNDA to the FDA for Skyrizi for the treatment of patients 16 years and older with moderate to severe Crohn’s Disease.

• In October 2021, AbbVie announced that the Committee for Medicinal Products for Human Use (CHMP) of the EMA granted a positive opinion for Skyrizi alone or in combination with methotrexate for the treatment of active PsA in adults who have had an inadequate response or who have been intolerant to one or more disease-modifying antirheumatic drugs.

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 the results from its Phase 3 maintenance study of Rinvoq in patients with UC met the primary and all secondary endpoints.

• In August 2021, AbbVie announced that the EC approved Rinvoq for the treatment of moderate to severe AD in adults and adolescents 12 years and older who are candidates for systemic therapy.

• In September 2021, the FDA issued a Drug Safety Communication stating its intention to require revisions to the Boxed Warning for janus kinase (JAK) inhibitors for the treatment of arthritis and other inflammatory conditions, including Rinvoq, to include information about the risks of serious heart-related events, cancer, blood clots and death. The FDA also stated its intention to limit approved uses to certain patients who have not responded to or cannot tolerate one or more tumor necrosis factor (TNF) blockers. This communication was based on the FDA’s review of a post-marketing study evaluating the safety of another JAK inhibitor (tofacitinib) in patients with rheumatoid arthritis.

• In September 2021, AbbVie submitted an sNDA to the FDA and an MAA to the EMA for Rinvoq for the treatment of adults with moderately to severely active UC.

• In October 2021, AbbVie announced the results from Study 1 of the Phase 3 SELECT-AXIS 2 clinical trial for Rinvoq in patients with active AS and inadequate response to biologic disease-modifying antirheumatic drugs met the primary and all ranked secondary endpoints.

*•*In October 2021, AbbVie announced the results from Study 2 of the Phase 3 SELECT-AXIS 2 clinical trial for Rinvoq in adults with non-radiographic axial spondyloarthritis met the primary and 12 of 14 ranked secondary endpoints.

2021 Form 10-Q |			28

Oncology

Venclexta

• 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.

Qulipta

• In September 2021, AbbVie announced that the FDA approved Qulipta (atogepant) for the preventive treatment of episodic migraine in adults.

Vraylar

• In October 2021, AbbVie announced top-line results from two Phase 3 clinical trials, Study 3111-301-001 and Study 3111-302-001, evaluating the efficacy and safety of cariprazine (Vraylar) as an adjunctive treatment for patients with major depressive disorder (MDD). In Study 3111-301-001, Vraylar met its primary endpoint demonstrating statistically significant change from baseline to week six in the Montgomery-Åsberg Depression Rating Scale (MADRS) total score compared with placebo in patients with MDD. In Study 3111-302-001, Vraylar demonstrated numerical improvement in depressive symptoms from baseline to week six in MADRS total score compared with placebo but did not achieve statistical significance. Safety data were consistent with the established safety profile of Vraylar across indications with no new safety signals identified.

ABBV-951

• In October 2021, AbbVie announced that results from its pivotal Phase 3 M15-736 study of ABBV-951 (foslevodopa/foscarbidopa) in patients with advanced Parkinson’s disease met its primary endpoint in a 12-week study.

Eye Care

Vuity

• In October 2021, AbbVie announced that the FDA approved Vuity (pilocarpine HCl ophthalmic solution) 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.

2021 Form 10-Q |			29

RESULTS OF OPERATIONS

Net Revenues

The comparisons presented at constant currency rates reflect comparative local currency net revenues at the prior year’s foreign exchange rates. This measure provides information on the change in net revenues assuming that foreign currency exchange rates had not changed between the prior and current periods. AbbVie believes that the non-GAAP measure of change in net revenues at constant currency rates, when used in conjunction with the GAAP measure of change in net revenues at actual currency rates, may provide a more complete understanding of the company’s operations and can facilitate analysis of the company’s results of operations, particularly in evaluating performance from one period to another.

						Three months ended September 30,												Percent change												Nine months ended September 30,												Percent change
									At actual currency rates						At constant currency rates									At actual currency rates						At constant currency rates
(dollars in millions)						2021						2020									2021						2020
United States						$	11,279					$	9,909					13.8		%				13.8		%				$	31,833					$	24,214					31.5		%				31.5		%
International						3,063						2,993						2.4		%				0.1		%				9,478						7,732						22.6		%				17.6		%
Net revenues						$	14,342					$	12,902					11.2		%				10.7		%				$	41,311					$	31,946					29.3		%				28.1		%

2021 Form 10-Q |			30

The following table details AbbVie’s worldwide net revenues:

									Three months ended September 30,												Percent change												Nine months ended September 30,												Percent change
												At actual currency rates						At constant currency rates									At actual currency rates						At constant currency rates
(dollars in millions)									2021						2020									2021						2020
Immunology
Humira			United States						$	4,613					$	4,189					10.1		%				10.1		%				$	12,777					$	11,819					8.1		%				8.1		%
			International						812						951						(14.6)		%				(16.7)		%				2,583						2,861						(9.7)		%				(13.9)		%
			Total						$	5,425					$	5,140					5.6		%				5.2		%				$	15,360					$	14,680					4.6		%				3.8		%
Skyrizi			United States						$	679					$	379					79.6		%				79.6		%				$	1,725					$	934					84.9		%				84.9		%
			International						117						56						>100.0 %						>100.0 %						319						131						>100.0 %						>100.0 %
			Total						$	796					$	435					83.3		%				82.8		%				$	2,044					$	1,065					92.0		%				90.4		%
Rinvoq			United States						$	348					$	191					82.5		%				82.5		%				$	889					$	409					>100.0 %						>100.0 %
			International						105						24						>100.0 %						>100.0 %						245						41						>100.0 %						>100.0 %
			Total						$	453					$	215					>100.0 %						>100.0 %						$	1,134					$	450					>100.0 %						>100.0 %
Hematologic Oncology
Imbruvica			United States						$	1,109					$	1,119					(0.9)		%				(0.9)		%				$	3,207					$	3,140					2.1		%				2.1		%
			Collaboration revenues						265						251						5.7		%				5.7		%				816						750						8.8		%				8.8		%
			Total						$	1,374					$	1,370					0.3		%				0.3		%				$	4,023					$	3,890					3.4		%				3.4		%
Venclexta			United States						$	237					$	204					16.3		%				16.3		%				$	685					$	596					14.9		%				14.9		%
			International						255						148						73.0		%				69.5		%				647						376						72.3		%				64.1		%
			Total						$	492					$	352					40.1		%				38.7		%				$	1,332					$	972					37.1		%				33.9		%
Aesthetics
Botox Cosmetic(a)			United States						$	356					$	237					49.6		%				49.6		%				$	1,027					$	384					>100.0 %						>100.0 %
			International						189						156						21.6		%				17.5		%				579						235						>100.0 %						>100.0 %
			Total						$	545					$	393					38.5		%				36.9		%				$	1,606					$	619					>100.0 %						>100.0 %
Juvederm Collection(a)			United States						$	159					$	115					37.6		%				37.6		%				$	478					$	171					>100.0 %						>100.0 %
			International						195						159						22.9		%				18.6		%				625						216						>100.0 %						>100.0 %
			Total						$	354					$	274					29.1		%				26.6		%				$	1,103					$	387					>100.0 %						>100.0 %
Other Aesthetics(a)			United States						$	305					$	265					15.4		%				15.4		%				$	968					$	392					>100.0 %						>100.0 %
			International						47						35						31.5		%				26.5		%				149						50						>100.0 %						>100.0 %
			Total						$	352					$	300					17.3		%				16.7		%				$	1,117					$	442					>100.0 %						>100.0 %
Neuroscience
Botox Therapeutic(a)			United States						$	534					$	429					24.4		%				24.4		%				$	1,451					$	683					>100.0 %						>100.0 %
			International						111						94						18.6		%				13.8		%				329						137						>100.0 %						>100.0 %
			Total						$	645					$	523					23.4		%				22.5		%				$	1,780					$	820					>100.0 %						>100.0 %
Vraylar(a)			United States						$	461					$	358					29.0		%				29.0		%				$	1,239					$	550					>100.0 %						>100.0 %
Duodopa			United States						$	23					$	25					(3.9)		%				(3.9)		%				$	73					$	75					(1.5)		%				(1.5)		%
			International						104						98						6.0		%				3.9		%				310						290						6.9		%				0.1		%
			Total						$	127					$	123					3.9		%				2.2		%				$	383					$	365					5.2		%				(0.2)		%
Ubrelvy(a)			United States						$	162					$	38					>100.0 %						>100.0 %						$	369					$	60					>100.0 %						>100.0 %
Other Neuroscience(a)			United States						$	166					$	203					(17.8)		%				(17.8)		%				$	489					$	306					59.7		%				59.7		%
			International						5						4						(12.1)		%				(18.5)		%				13						6						97.2		%				81.8		%
			Total						$	171					$	207					(17.7)		%				(17.8)		%				$	502					$	312					60.5		%				60.2		%

2021 Form 10-Q |			31

									Three months ended September 30,												Percent change												Nine months ended September 30,												Percent change
												At actual currency rates						At constant currency rates									At actual currency rates						At constant currency rates
(dollars in millions)									2021						2020									2021						2020
Eye Care
Lumigan/Ganfort(a)			United States						$	63					$	62					(0.1)		%				(0.1)		%				$	201					$	97					>100.0 %						>100.0 %
			International						75						87						(12.9)		%				(15.8)		%				229						128						79.4		%				69.3		%
			Total						$	138					$	149					(7.5)		%				(9.2)		%				$	430					$	225					90.7		%				85.0		%
Alphagan/Combigan(a)			United States						$	89					$	84					6.2		%				6.2		%				$	271					$	131					>100.0 %						>100.0 %
			International						39						39						1.2		%				(0.9)		%				117						61						90.5		%				87.0		%
			Total						$	128					$	123					4.6		%				3.9		%				$	388					$	192					>100.0 %						>100.0 %
Restasis(a)			United States						$	305					$	284					7.5		%				7.5		%				$	884					$	422					>100.0 %						>100.0 %
			International						14						15						(7.4)		%				(6.5)		%				42						21						>100.0 %						>100.0 %
			Total						$	319					$	299					6.7		%				6.7		%				$	926					$	443					>100.0 %						>100.0 %
Other Eye Care(a)			United States						$	128					$	119					8.1		%				8.1		%				$	375					$	173					>100.0 %						>100.0 %
			International						158						150						5.1		%				2.4		%				488						224						>100.0 %						>100.0 %
			Total						$	286					$	269					6.4		%				4.9		%				$	863					$	397					>100.0 %						>100.0 %
Women's Health
Lo Loestrin(a)			United States						$	105					$	129					(20.3)		%				(20.3)		%				$	300					$	207					43.7		%				43.7		%
			International						2						5						(27.2)		%				(32.4)		%				9						7						55.6		%				43.4		%
			Total						$	107					$	134					(20.6)		%				(20.8)		%				$	309					$	214					44.1		%				43.7		%
Orilissa/Oriahnn			United States						$	37					$	24					50.5		%				50.5		%				$	102					$	84					20.5		%				20.5		%
			International						1						1						47.5		%				38.4		%				4						3						63.2		%				51.9		%
			Total						$	38					$	25					50.4		%				50.0		%				$	106					$	87					21.8		%				21.5		%
Other Women's Health(a)			United States						$	57					$	74					(20.9)		%				(20.9)		%				$	153					$	108					44.0		%				44.0		%
			International						—						6						(100.0)		%				(100.0)		%				5						8						(51.3)		%				(56.8)		%
			Total						$	57					$	80					(28.4)		%				(28.4)		%				$	158					$	116					36.8		%				36.4		%
Other Key Products
Mavyret			United States						$	183					$	185					0.2		%				0.2		%				$	557					$	565					(1.3)		%				(1.3)		%
			International						243						229						5.7		%				4.9		%				726						784						(7.4)		%				(11.2)		%
			Total						$	426					$	414					3.3		%				2.9		%				$	1,283					$	1,349					(4.8)		%				(7.0)		%
Creon			United States						$	310					$	282					10.0		%				10.0		%				$	864					$	810					6.6		%				6.6		%
Lupron			United States						$	134					$	99					35.7		%				35.7		%				$	456					$	461					(1.2)		%				(1.2)		%
			International						46						34						34.7		%				31.4		%				135						110						22.8		%				18.7		%
			Total						$	180					$	133					35.4		%				34.5		%				$	591					$	571					3.4		%				2.6		%
Linzess/Constella(a)			United States						$	253					$	240					4.8		%				4.8		%				$	728					$	370					96.4		%				96.4		%
			International						8						8						10.7		%				4.5		%				23						11						>100.0 %						99.6		%
			Total						$	261					$	248					5.0		%				4.8		%				$	751					$	381					96.9		%				96.4		%
Synthroid			United States						$	188					$	189					(0.8)		%				(0.8)		%				$	571					$	577					(1.1)		%				(1.1)		%
All other(a)									$	547					$	829					(34.6)		%				(35.4)		%				$	2,079					$	1,972					5.4		%				3.7		%
Total net revenues									$	14,342					$	12,902					11.2		%				10.7		%				$	41,311					$	31,946					29.3		%				28.1		%

(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 5% for the three months and 4% for the nine months ended September 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 10% for the three months and 8% for the nine months ended September 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 17% for the three months and 14% for the nine months ended September 30, 2021 primarily driven by direct biosimilar competition in certain international markets.

Net revenues for Skyrizi increased by 83% for the three months and 90% for the nine months ended September 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.

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Net revenues for Rinvoq increased more than 100% for the three and nine months ended September 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 the three months ended September 30, 2021 were also favorably impacted by recent regulatory approvals and expansion of Rinvoq for the treatment of psoriatic arthritis, atopic dermatitis and ankylosing spondylitis in certain international markets.

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 remained relatively flat for the three months ended September 30, 2021 and increased by 3% for the nine months ended September 30, 2021 primarily due to favorable pricing, 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 39% for the three months and 34% for the nine months ended September 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 by 37% for the three months and more than 100% for the nine months ended September 30, 2021 due to increased brand investment and strong recovery from the COVID-19 pandemic. Net revenues for the nine months ended September 30, 2021 were also favorably impacted by a full period of Allergan results in 2021 compared to the prior year.

Net revenues for Juvederm Collection (including Juvederm Ultra XC, Juvederm Voluma XC and other Juvederm products) used in facial aesthetics increased by 27% for the three months and more than 100% for the nine months ended September 30, 2021 due to increased brand investment and strong recovery from the COVID-19 pandemic. Net revenues for the nine months ended September 30, 2021 were also favorably impacted by a full period of Allergan results in 2021 compared to the prior year.

Net revenues for Botox Therapeutic used primarily in neuroscience and urology therapeutic areas increased by 23% for the three months and more than 100% for the nine months ended September 30, 2021 due to a strong recovery from the COVID-19 pandemic. Net revenues for the nine months ended September 30, 2021 were also favorably impacted by a full period of Allergan results in 2021 compared to the prior year.

Net revenues for Vraylar for the treatment of schizophrenia, bipolar I disorder and bipolar depression increased by 29% for the three months and more than 100% for the nine months ended September 30, 2021 due to higher market share and market growth. Net revenues for the nine months ended September 30, 2021 were also favorably impacted by a full period of Allergan results in 2021 compared to the prior year.

Net revenues for Ubrelvy for the acute treatment of migraine with or without aura in adults increased more than 100% for the three and nine months ended September 30, 2021 primarily due to increased market share uptake since launch in 2020.

Net revenues for Mavyret increased by 3% for the three months ended September 30, 2021 primarily driven by partial recovery of global hepatitis C virus (HCV) markets while net revenues decreased by 7% for the nine months ended September 30, 2021 driven by the continued disruption of global HCV markets due to the COVID-19 pandemic.

Net revenues for Lupron increased by 35% for the three months and 3% for the nine months ended September 30, 2021 due to efforts to maximize available inventory for patients as the company manages through an ongoing supply issue impacting availability of certain formulations.

Gross Margin

						Three months ended September 30,																		Nine months ended September 30,
(dollars in millions)						2021						2020						% change						2021						2020						% change
Gross margin						$	9,952					$	7,852					27		%				$	28,185					$	21,243					33		%
as a % of net revenues						69		%				61		%										68		%				66		%

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

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Selling, General and Administrative

						Three months ended September 30,																		Nine months ended September 30,
(dollars in millions)						2021						2020						% change						2021						2020						% change
Selling, general and administrative						$	3,083					$	2,846					8		%				$	9,089					$	8,068					13		%
as a % of net revenues						21		%				22		%										22		%				25		%

SG&A expenses as a percentage of net revenues decreased for the three and nine months ended September 30, 2021 compared to the prior year. SG&A expense percentage for the three months ended September 30, 2021 was favorably impacted by leverage from revenue growth and synergies realized for the period subsequent to completion of the Allergan acquisition. SG&A expense percentage for the nine months ended September 30, 2021 was favorably impacted by lower transaction and integration costs related to the acquisition of Allergan as well as leverage from revenue growth and synergies realized for the period subsequent to completion of the Allergan acquisition.

Research and Development and Acquired In-Process Research and Development

						Three months ended September 30,																		Nine months ended September 30,
(dollars in millions)						2021						2020						% change						2021						2020						% change
Research and development						$	1,673					$	1,706					(2)		%				$	5,257					$	4,667					13		%
as a % of net revenues						12		%				13		%										13		%				15		%
Acquired in-process research and development						$	390					$	45					>100%						$	557					$	898					(38)		%

R&D expenses as a percentage of net revenues decreased for the three and nine months ended September 30, 2021 compared to the prior year. R&D expense percentage was favorably impacted by the increased scale of the combined company and synergies realized for the period subsequent to completion of the Allergan acquisition as well as lower integration costs related to the acquisition of Allergan.

Acquired IPR&D expenses represent initial costs to acquire rights to in-process R&D projects through R&D collaborations, licensing arrangements or other asset acquisitions. Acquired IPR&D expense in the three and nine months ended September 30, 2021 included a charge of $400 million as a result of exercising the company’s exclusive right to acquire 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). Acquired IPR&D expense in the nine months ended September 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. There were no individually significant transactions during the three months ended September 30, 2020.

Other Operating Expense, Net

Other operating expense, net for the three and nine months ended September 30, 2021 included a $500 million charge related to the extension of the Calico collaboration to discover, develop and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer.

Other Non-Operating Expenses

						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
Net foreign exchange loss						$	12					$	20					$	35					$	54
Other expense, net						21						115						2,284						989

Interest expense decreased for the three months ended September 30, 2021 compared to the prior year primarily due to a lower average debt balance due to deleveraging and the favorable impact of lower interest rates on the company’s floating rate debt obligations. Interest expense increased for the nine months ended September 30, 2021 primarily due to a higher average debt balance associated with the incremental Allergan debt acquired partially offset by the favorable impact of lower interest rates on the company’s floating rate debt obligations and deleveraging.

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Interest income increased for the three months ended September 30, 2021 compared to the prior year primarily due to a higher average cash and cash equivalents balance, partially offset by the unfavorable impact of lower interest rates. Interest income decreased for nine months ended September 30, 2021 compared to 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 $98 million for the three months and $2.4 billion for the nine months ended September 30, 2021 and $197 million for the three months and $1.1 billion for the nine months ended September 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 months ended September 30, 2021, the change in fair value represented the passage of time partially offset by higher discount rates. For the nine months ended September 30, 2021, the change in fair value represented higher estimated Skyrizi sales driven by stronger market share uptake, favorable Skyrizi clinical results and the passage of time. For the three and nine months ended September 30, 2020, the change in fair value represented lower discount rates and the passage of time.

Income Tax Expense

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.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

			Nine months ended September 30,
(in millions)			2021						2020
Cash flows provided by (used in):
Operating activities			$	17,702					$	12,734
Investing activities			(1,199)						(36,930)
Financing activities			(12,701)						(7,806)

Operating cash flows for the nine months ended September 30, 2021 increased compared to the prior year. Operating cash flows for the nine months ended September 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 and higher income tax payments.

Investing cash flows for the nine months ended September 30, 2021 included payments made for other acquisitions and investments of $837 million, capital expenditures of $600 million and net sales and maturities of investment securities totaling $15 million. Investing cash flows for the nine months ended September 30, 2020 primarily included $39.7 billion cash consideration paid to acquire Allergan offset by cash acquired of $1.5 billion, net sales and maturities of investment securities totaling $1.4 billion, payments made for other acquisitions and investments of $1.1 billion and capital expenditures of $519 million.

Financing cash flows for the nine months ended September 30, 2021 included early repayments of $1.8 billion aggregate principal amount of the company’s 2.3% senior notes, $1.2 billion aggregate principal amount of the company’s 5.0% senior notes and €750 million aggregate principal amount of the company’s 0.5% senior euro notes. Financing cash flows also included repayment of a $1.0 billion floating rate term loan due May 2023 and issuance of a new $1.0 billion floating rate term loan as part of the term loan refinancing in September 2021. Additionally, financing cash flows included repayment of $750 million aggregate principal amount of floating rate senior notes at maturity in May 2021. Financing cash flows for the nine months ended September 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 and the September 2020 repayment of $650 million aggregate principal amount of 3.375% Allergan exchange notes at maturity.

Cash dividend payments totaled $6.9 billion for the nine months ended September 30, 2021 and $5.6 billion for the nine months ended September 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

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dividend rate. On September 10, 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 October 15, 2021, payable on November 15, 2021. On October 29, 2021, the company announced that its board of directors declared an increase in the company’s quarterly cash dividend from $1.30 per share to $1.41 per share beginning with the dividend payable on February 15, 2022 to stockholders of record as of January 14, 2022. This reflects an increase of approximately 8.5% over the previous quarterly rate. 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 nine months ended September 30, 2021 and 6 million shares for $500 million during the nine months ended September 30, 2020.

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 September 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 September 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 the nine months ended September 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 nine months ended September 30, 2021.

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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.