AbbVie 10-Q 2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35565

AbbVie Inc.

(Exact name of registrant as specified in its charter)
Delaware						32-0375147
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification number)

1 North Waukegan Road

North Chicago, Illinois 60064-6400

Telephone: (847) 932-7900

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer			☒			Accelerated Filer			☐
Non-Accelerated Filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol(s)						Name of each exchange on which registered
Common Stock, par value $0.01 per share						ABBV						New York Stock Exchange
												Chicago Stock Exchange
1.500% Senior Notes due 2023						ABBV23B						New York Stock Exchange
1.375% Senior Notes due 2024						ABBV24						New York Stock Exchange
1.250% Senior Notes due 2024						ABBV24B						New York Stock Exchange
0.750% Senior Notes due 2027						ABBV27						New York Stock Exchange
2.125% Senior Notes due 2028						ABBV28						New York Stock Exchange
2.625% Senior Notes due 2028						ABBV28B						New York Stock Exchange
2.125% Senior Notes due 2029						ABBV29						New York Stock Exchange
1.250% Senior Notes due 2031						ABBV31						New York Stock Exchange

As of April 25, 2023, AbbVie Inc. had 1,764,289,680 shares of common stock at $0.01 par value outstanding.

AbbVie Inc. and Subsidiaries

Table of Contents

PART I.			FINANCIAL INFORMATION
						Page
Item 1.			FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			1
Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			24
Item 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			32
Item 4.			CONTROLS AND PROCEDURES			32
PART II.			OTHER INFORMATION
Item 1.			LEGAL PROCEEDINGS			33
Item 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			33
Item 6.			EXHIBITS			34

PART I. FINANCIAL INFORMATION

AbbVie Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (unaudited)

												Three months ended March 31,
(in millions, except per share data)																		2023						2022
Net revenues																		$	12,225					$	13,538
Cost of products sold																		3,986						4,052
Selling, general and administrative																		3,039						3,127
Research and development																		2,292						1,497
Acquired IPR&D and milestones																		150						145
Other operating income																		(10)						—
Total operating costs and expenses																		9,457						8,821
Operating earnings																		2,768						4,717
Interest expense, net																		454						539
Net foreign exchange loss																		35						25
Other expense (income), net																		1,804						(776)
Earnings before income tax expense																		475						4,929
Income tax expense																		234						436
Net earnings																		241						4,493
Net earnings attributable to noncontrolling interest																		2						3
Net earnings attributable to AbbVie Inc.																		$	239					$	4,490
Per share data
Basic earnings per share attributable to AbbVie Inc.																		$	0.13					$	2.52
Diluted earnings per share attributable to AbbVie Inc.																		$	0.13					$	2.51
Weighted-average basic shares outstanding																		1,770						1,771
Weighted-average diluted shares outstanding																		1,776						1,778

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

2023 Form 10-Q |			1

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

									Three months ended March 31,
(in millions)															2023						2022
Net earnings															$	241					$	4,493
Foreign currency translation adjustments, net of tax expense (benefit) of $12 for the three months ended March 31, 2023 and $(7) for the three months ended March 31, 2022															194						(231)
Net investment hedging activities, net of tax expense (benefit) of $(60) for the three months ended March 31, 2023 and $37 for the three months ended March 31, 2022															(224)						130
Pension and post-employment benefits, net of tax expense (benefit) of $14 for the three months ended March 31, 2023 and $10 for the three months ended March 31, 2022															38						28
Cash flow hedging activities, net of tax expense (benefit) of $(4) for the three months ended March 31, 2023 and $(2) for the three months ended March 31, 2022															(41)						(12)
Other comprehensive loss															(33)						(85)
Comprehensive income															208						4,408
Comprehensive income attributable to noncontrolling interest															2						3
Comprehensive income attributable to AbbVie Inc.															$	206					$	4,405

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

2023 Form 10-Q |			2

AbbVie Inc. and Subsidiaries Condensed Consolidated Balance Sheets

(in millions, except share data)			March 31, 2023						December 31, 2022
			(unaudited)
Assets
Current assets
Cash and equivalents			$	6,711					$	9,201
Short-term investments			11						28
Accounts receivable, net			11,473						11,254
Inventories			3,833						3,579
Prepaid expenses and other			4,460						4,401
Total current assets			26,488						28,463
Investments			257						241
Property and equipment, net			4,931						4,935
Intangible assets, net			64,848						67,439
Goodwill			32,220						32,156
Other assets			5,800						5,571
Total assets			$	134,544					$	138,805
Liabilities and Equity
Current liabilities
Short-term borrowings			$	1					$	1
Current portion of long-term debt and finance lease obligations			2,800						4,135
Accounts payable and accrued liabilities			24,789

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The following is a discussion and analysis of the financial condition of AbbVie Inc. (AbbVie or the company) as of March 31, 2023 and December 31, 2022 and the results of operations for the three months ended March 31, 2023 and 2022. This commentary should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes appearing in Item 1, “Financial Statements and Supplementary Data.”

EXECUTIVE OVERVIEW

Company Overview

AbbVie is a global, diversified research-based biopharmaceutical company positioned for success with a comprehensive product portfolio that has leadership positions across immunology, oncology, aesthetics, neuroscience and eye care. AbbVie uses its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases.

AbbVie's products are generally sold worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned distribution centers and public warehouses. Certain products (including aesthetic products and devices) are also sold directly to physicians and other licensed healthcare providers. In the United States, AbbVie distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to retailers, pharmacies, patients or other customers. Outside the United States, AbbVie sells products primarily to wholesalers or through distributors, and depending on the market works through largely centralized national payers system to agree on reimbursement terms. Certain products are co-marketed or co-promoted with other companies. AbbVie operates as a single global business segment and has approximately 50,000 employees.

2023 Strategic Objectives

AbbVie's mission is to discover and develop innovative medicines and products that solve serious health issues today and address the medical challenges of tomorrow while achieving top-tier financial performance through outstanding execution. AbbVie intends to execute its strategy and advance its mission in a number of ways, including: (i) maximizing the benefits of a diversified revenue base with multiple long-term growth drivers; (ii) leveraging AbbVie's commercial strength and international infrastructure across therapeutic areas and ensuring strong commercial execution of new product launches; (iii) continuing to invest in and expand its pipeline in support of opportunities in immunology, oncology, aesthetics, neuroscience and eye care as well as continued investment in key on-market products; (iv) generating substantial operating cash flows to support investment in innovative research and development, and return cash to shareholders via a strong and growing dividend while also reducing debt. In addition, AbbVie anticipates several regulatory submissions and data readouts from key clinical trials in the next 12 months.

Financial Results

The company's financial performance for the three months ended March 31, 2023 included delivering worldwide net revenues of $12.2 billion, operating earnings of $2.8 billion, diluted earnings per share of $0.13 and cash flows from operations of $4.2 billion. Worldwide net revenues decreased 10% on a reported basis and 8% on a constant currency basis.

Diluted earnings per share was $0.13 for the three months ended March 31, 2023 and included the following after-tax costs: (i) $1.8 billion for the change in fair value of contingent consideration liabilities; (ii) $1.6 billion related to the amortization of intangible assets; (iii) $629 million related to intangible asset impairment; and (iv) $55 million of acquisition and integration expenses. Additionally, financial results reflected continued funding to support all stages of AbbVie’s pipeline assets and continued investment in AbbVie’s on-market brands.

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 over 90 compounds, devices or indications in development individually or under collaboration or license agreements and is focused on such important specialties as immunology, oncology, aesthetics, neuroscience and eye care. Of these programs, over 50 are in mid- and late-stage development.

2023 Form 10-Q |			24

The following sections summarize transitions of significant programs from mid-stage development to late-stage development as well as developments in significant late-stage and registration programs. AbbVie expects multiple mid-stage programs to transition into late-stage programs in the next 12 months.

Significant Programs and Developments

Immunology

Rinvoq

• In March 2023, the European Commission (EC) issued their final decision on the European Medicines Agency’s review of the benefit-risk of medicines in the JAK inhibitor class for the treatment of inflammatory diseases, including Rinvoq. Confirming the Committee for Medicinal Products for Human Use opinion, the previously approved Rinvoq indication statements were not changed and the dosage and special warnings for all JAK inhibitors were updated to include additional information about the risks associated with JAK inhibitors.

• In April 2023, AbbVie announced that the EC approved Rinvoq for the treatment of adults with moderately to severely active Crohn’s disease who have had an inadequate response, lost response or were intolerant to either conventional therapy or a biologic agent.

Skyrizi

• In March 2023, AbbVie announced positive top-line results from its Phase 3 induction study, INSPIRE, for Skyrizi in patients with moderately to severely active ulcerative colitis met the primary and all secondary endpoints.

Oncology

Epcoritamab

• In March 2023, AbbVie initiated a Phase 3 clinical trial to evaluate epcoritamab in combination with R-CHOP compared to R-CHOP in patients with newly diagnosed diffuse large B-cell lymphoma.

Imbruvica

• In April 2023, AbbVie announced the intent to voluntarily withdraw, in the U.S., accelerated Imbruvica approvals for patients with mantle cell lymphoma (MCL) who have received at least one prior therapy and with marginal zone lymphoma (MZL) who require systemic therapy and have received at least one prior anti-CD20-based therapy. This voluntary action is due to requirements related to the accelerated approval status granted by the U.S. Food and Drug Administration (FDA) for MCL and MZL. Other approved indications for Imbruvica in the U.S. are not affected.

Neuroscience

ABBV-951

• In March 2023, AbbVie announced that the FDA issued a Complete Response Letter (CRL) for the New Drug Application (NDA) for ABBV-951 (foscarbidopa/foslevodopa) for the treatment of motor fluctuations in adults with advanced Parkinson’s disease. In its letter, the FDA requested additional information about the device (pump) as part of the NDA review. The CRL did not request that AbbVie conduct additional efficacy and safety trials related to the drug.

Qulipta

• In April 2023, AbbVie announced that the FDA approved Qulipta for the preventive treatment of chronic migraine in adults.

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, 2022.

2023 Form 10-Q |			25

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 March 31,												Percent change
																								At actual currency rates						At constant currency rates
(dollars in millions)																					2023						2022
United States																														$	9,201					$	10,348					(11.1)		%				(11.1)		%
International																														3,024						3,190						(5.2)		%				0.9		%
Net revenues																														$	12,225					$	13,538					(9.7)		%				(8.3)		%

2023 Form 10-Q |			26

The following table details AbbVie’s worldwide net revenues:

																					Three months ended March 31,												Percent change
																											At actual currency rates						At constant currency rates
(dollars in millions)																								2023						2022
Immunology
Humira			United States																														$	2,948					$	3,993					(26.1)		%				(26.1)		%
			International																														593						743						(20.3)		%				(14.8)		%
			Total																														$	3,541					$	4,736					(25.2)		%				(24.3)		%
Skyrizi			United States																														$	1,139					$	781					45.9		%				45.9		%
			International																														221						159						38.5		%				47.7		%
			Total																														$	1,360					$	940					44.7		%				46.3		%
Rinvoq			United States																														$	449					$	311					44.4		%				44.4		%
			International																														237						154						53.7		%				64.9		%
			Total																														$	686					$	465					47.5		%				51.2		%
Hematologic Oncology
Imbruvica			United States																														$	638					$	874					(27.0)		%				(27.0)		%
			Collaboration revenues																														240						299						(19.7)		%				(19.7)		%
			Total																														$	878					$	1,173					(25.2)		%				(25.2)		%
Venclexta			United States																														$	265					$	228					15.7		%				15.7		%
			International																														273						245						11.8		%				19.2		%
			Total																														$	538					$	473					13.7		%				17.5		%
Aesthetics
Botox Cosmetic			United States																														$	409					$	413					(0.7)		%				(0.7)		%
			International																														250						228						9.4		%				17.5		%
			Total																														$	659					$	641					2.9		%				5.8		%
Juvederm Collection			United States																														$	122					$	148					(17.9)		%				(17.9)		%
			International																														233						262						(10.9)		%				(1.4)		%
			Total																														$	355					$	410					(13.4)		%				(7.4)		%
Other Aesthetics			United States																														$	246					$	285					(13.6)		%				(13.6)		%
			International																														40						38						3.6		%				12.7		%
			Total																														$	286					$	323					(11.5)		%				(10.4)		%
Neuroscience
Botox Therapeutic			United States																														$	587					$	500					17.5		%				17.5		%
			International																														132						114						15.5		%				24.2		%
			Total																														$	719					$	614					17.1		%				18.7		%
Vraylar			United States																														$	560					$	427					31.2		%				31.2		%
			International																														1						—						n/m						n/m
			Total																														$	561					$	427					31.3		%				31.3		%
Duodopa			United States																														$	25					$	24					6.5		%				6.5		%
			International																														93						97						(4.3)		%				1.7		%
			Total																														$	118					$	121					(2.2)		%				2.6		%
Ubrelvy			United States																														$	150					$	138					9.0		%				9.0		%
			International																														2						—						n/m						n/m
			Total																														$	152					$	138					10.0		%				10.0		%
Qulipta			United States																														$	66					$	11					>100.0 %						>100.0 %
Other Neuroscience			United States																														$	75					$	173					(56.7)		%				(56.7)		%
			International																														4						4						6.9		%				12.6		%
			Total																														$	79					$	177					(55.2)		%				(55.1)		%

2023 Form 10-Q |			27

																					Three months ended March 31,												Percent change
																											At actual currency rates						At constant currency rates
(dollars in millions)																								2023						2022
Eye Care
Ozurdex			United States																														$	39					$	33					16.1		%				16.1		%
			International																														76						74						3.2		%				10.3		%
			Total																														$	115					$	107					7.3		%				12.2		%
Lumigan/Ganfort			United States																														$	63					$	67					(6.8)		%				(6.8)		%
			International																														67						73						(7.2)		%				(2.7)		%
			Total																														$	130					$	140					(7.0)		%				(4.7)		%
Alphagan/Combigan			United States																														$	28					$	70					(59.4)		%				(59.4)		%
			International																														43						37						16.9		%				24.2		%
			Total																														$	71					$	107					(33.3)		%				(30.8)		%
Restasis			United States																														$	79					$	235					(66.5)		%				(66.5)		%
			International																														13						11						20.4		%				25.1		%
			Total																														$	92					$	246					(62.8)		%				(62.6)		%
Other Eye Care			United States																														$	110					$	91					22.9		%				22.9		%
			International																														90						80						10.3		%				16.3		%
			Total																														$	200					$	171					16.9		%				19.8		%
Other Key Products
Mavyret			United States																														$	171					$	169					1.2		%				1.2		%
			International																														193						211						(8.1)		%				(1.8)		%
			Total																														$	364					$	380					(4.0)		%				(0.5)		%
Creon			United States																														$	305					$	287					6.3		%				6.3		%
Linzess/Constella			United States																														$	251					$	233					7.7		%				7.7		%
			International																														8						7						11.9		%				17.8		%
			Total																														$	259					$	240					7.8		%				8.0		%
All other																																	$	691					$	1,211					(43.1)		%				(42.2)		%
Total net revenues																																	$	12,225					$	13,538					(9.7)		%				(8.3)		%

n/m – Not meaningful

The following discussion and analysis of AbbVie’s net revenues by product is presented on a constant currency basis.

Global Humira sales decreased 24% for the three months ended March 31, 2023. In the United States, Humira sales decreased by 26% for the three months ended March 31, 2023 primarily driven by direct biosimilar competition following the loss of exclusivity on January 31, 2023. Internationally, Humira revenues decreased 15% for the three months ended March 31, 2023 primarily driven by the continued impact of direct biosimilar competition. AbbVie continues to pursue strategies to maintain broad formulary access of Humira and manage the impact of biosimilar erosion.

Net revenues for Skyrizi increased 46% for the three months ended March 31, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing and the timing of retail inventory destocking.

Net revenues for Rinvoq increased 51% for the three months ended March 31, 2023 primarily driven by continued strong volume and market share uptake as well as market growth across all indications, partially offset by unfavorable pricing and the timing of retail inventory destocking.

Net revenues for Imbruvica represent product revenues in the United States and collaboration revenues outside of the United States related to AbbVie’s 50% share of Imbruvica profit. AbbVie's global Imbruvica revenues decreased 25% for the three months ended March 31, 2023 primarily driven by decreased demand and lower market share in the United States as well as decreased collaboration revenues.

Net revenues for Venclexta increased 18% for the three months ended March 31, 2023 primarily driven by continued volume and market share uptake across all indications as well as favorable pricing.

Net revenues for Botox Cosmetic increased 6% for the three months ended March 31, 2023 primarily driven by increased market penetration in key international markets, partially offset by decreased consumer demand in the Unites States due to economic pressures impacting consumer discretionary spending.

2023 Form 10-Q |			28

Net revenues for Juvederm Collection decreased 7% for the three months ended March 31, 2023 primarily driven by decreased consumer demand in the United States due to economic pressures impacting consumer discretionary spending.

Net revenues for Botox Therapeutic increased 19% for the three months ended March 31, 2023 primarily driven by market growth and the timing of shipments.

Net revenues for Vraylar increased 31% for the three months ended March 31, 2023 primarily driven by continued volume and market share uptake as well as market growth.

Net revenues for Ubrelvy increased 10% for the three months ended March 31, 2023 primarily driven by continued volume and market share uptake as well as market growth.

Net revenues for Qulipta increased greater than 100% for the three months ended March 31, 2023 primarily driven by continued strong volume and market share uptake since launch for the preventative treatment of episodic migraine in adults.

Gross Margin

												Three months ended March 31,
(dollars in millions)																								2023						2022						% change
Gross margin																								$	8,239					$	9,486					(13)		%
as a % of net revenues																								67		%				70		%

Gross margin as a percentage of net revenues decreased for the three months ended March 31, 2023 compared to the prior year. Gross margin percentage for the three months ended March 31, 2023 was unfavorably impacted by higher amortization of intangible assets and changes in product mix.

Selling, General and Administrative

												Three months ended March 31,
(dollars in millions)																								2023						2022						% change
Selling, general and administrative																								$	3,039					$	3,127					(3)		%
as a % of net revenues																								25		%				23		%

Selling, general and administrative (SG&A) expenses decreased for the three months ended March 31, 2023 compared to the prior year primarily driven by lower litigation reserve charges. SG&A expenses as a percentage of net revenues increased for the three months ended March 31, 2023 compared to the prior year. SG&A expense percentage was unfavorably impacted by lower net revenues primarily driven by the Humira loss of exclusivity in the United States.

Research and Development and Acquired IPR&D and Milestones

												Three months ended March 31,
(dollars in millions)																								2023						2022						% change
Research and development																								$	2,292					$	1,497					53		%
as a % of net revenues																								19		%				11		%
Acquired IPR&D and milestones																								$	150					$	145					3		%

Research and development (R&D) expenses as a percentage of net revenues increased for the three months ended March 31, 2023 compared to the prior year. R&D expense percentage for the three months ended March 31, 2023 was unfavorably impacted by an intangible asset impairment charge of $630 million.

Acquired IPR&D and milestones expense in the three months ended March 31, 2023 included charges related to upfront payments of $132 million and development milestones of $18 million. Acquired IPR&D and milestones expense in the three months ended March 31, 2022 included a charge of $130 million related to acquiring Syndesi Therapeutics SA and development milestones of $15 million.

2023 Form 10-Q |			29

Other Non-Operating Expenses (Income)

												Three months ended March 31,
(in millions)																		2023						2022
Interest expense																		$	553					$	548
Interest income																		(99)						(9)
Interest expense, net																		$	454					$	539
Net foreign exchange loss																		$	35					$	25
Other expense (income), net																		1,804						(776)

Interest expense increased for the three months ended March 31, 2023 compared to the prior year primarily due to the impact of higher interest rates, partially offset by lower average debt balance as a result of deleveraging.

Interest income increased for the three months ended March 31, 2023 compared to the prior year primarily due to the impact of higher interest rates.

Other expense (income), net included a charge related to changes in fair value of contingent consideration liabilities of $1.9 billion for the three months ended March 31, 2023 and a benefit of $748 million for the three months ended March 31, 2022. The fair value of contingent consideration liabilities is impacted by the passage of time and multiple other inputs, including the probability of success of achieving regulatory/commercial milestones, discount rates, the estimated amount of future sales of the acquired products and other market-based factors. For the three months ended March 31, 2023, the change in fair value reflected higher estimated Skyrizi sales driven by stronger market share uptake, the passage of time, lower discount rates and favorable clinical trial results. For the three months ended March 31, 2022 the change in fair value was driven by higher discount rates partially offset by the passage of time.

Income Tax Expense

The effective tax rate was 49% for the three months ended March 31, 2023 compared to 9% for the three months ended March 31, 2022. The effective tax rate in each period differed from the U.S. statutory tax rate of 21% principally due to the impact of foreign operations which reflects the impact of lower income tax rates in locations outside the United States, changes in fair value of contingent consideration and business development activities. The increase in the effective tax rate for the three months ended March 31, 2023 over the prior year was primarily due to changes in fair value of contingent consideration, tax law changes in Puerto Rico and impairment of certain intangible assets.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

			Three months ended March 31,
(in millions)			2023						2022
Cash flows provided by (used in):
Operating activities			$	4,193					$	4,908
Investing activities			(499)						(1,591)
Financing activities			(6,192)						(6,972)

Operating cash flows for the three months ended March 31, 2023 decreased compared to the prior year primarily due to decreased results of operations primarily driven by lower net revenues, partially offset by the timing of working capital.

Investing cash flows for the three months ended March 31, 2023 included payments made for acquisitions and investments of $353 million and capital expenditures of $175 million. Investing cash flows for the three months ended March 31, 2022 included payments made for net purchases of investment securities totaling $1.4 billion, acquisitions and investments of $185 million and capital expenditures of $162 million.

Financing cash flows for the three months ended March 31, 2023 included repayments of $1.0 billion floating rate term loan and $350 million aggregate principal amount of the company’s 2.80% senior notes. Financing cash flows for the three months ended March 31, 2022 included a repayment of $2.9 billion aggregate principal amount of the company’s 3.45% senior notes. Additionally, financing cash flows for the three months ended March 31, 2022 included a repayment of $2.0 billion floating rate term loan due May 2025 and issuance of a new $2.0 billion floating rate term loan as part of the term loan refinancing in February 2022.

2023 Form 10-Q |			30

Financing cash flows also included cash dividend payments of $2.7 billion for the three months ended March 31, 2023 and $2.5 billion for the three months ended March 31, 2022. The increase in cash dividend payments was primarily driven by the increase in the quarterly dividend rate.

On February 16, 2023, the company announced that its board of directors declared a quarterly cash dividend of $1.48 per share for stockholders of record at the close of business on April 14, 2023, payable on May 15, 2023. The timing, declaration, amount of and payment of any dividends by AbbVie in the future is within the discretion of its board of directors and will depend upon many factors, including AbbVie’s financial condition, earnings, capital requirements of its operating subsidiaries, covenants associated with certain of AbbVie’s debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by its board of directors.

The company's stock repurchase authorization permits purchases of AbbVie shares from time to time in open-market or private transactions at management's discretion. The program has no time limit and can be discontinued at any time. On February 16, 2023, AbbVie’s board of directors authorized a $5.0 billion increase to the existing stock repurchase authorization. AbbVie repurchased 10 million shares for $1.6 billion during the three months ended March 31, 2023 and 8 million shares for $1.1 billion during the three months ended March 31, 2022.

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

In March 2023, AbbVie entered into an amended and restated five-year revolving credit facility. The amendment increased the unsecured revolving credit facility commitments from $4.0 billion to $5.0 billion and extended the maturity date of the facility from August 2023 to March 2028. This credit facility enables the company to borrow funds on an unsecured basis at variable interest rates and contains various covenants. At March 31, 2023, the company was in compliance with all covenants, and commitment fees under the credit facility were insignificant. No amounts were outstanding under the company's credit facility as of March 31, 2023 and December 31, 2022.

Access to Capital

The company intends to fund short-term and long-term financial obligations as they mature through cash on hand, future cash flows from operations or 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 three months ended March 31, 2023. Unfavorable changes to the ratings may have an adverse impact on future financing arrangements; however, they would not affect the company’s ability to draw on its credit facility and would not result in an acceleration of scheduled maturities of any of the company’s outstanding debt.

CRITICAL ACCOUNTING POLICIES

A summary of the company’s significant accounting policies is included in Note 2, “Summary of Significant Accounting Policies” in AbbVie's Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes in the company’s application of its critical accounting policies during the three months ended March 31, 2023.

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FORWARD-LOOKING STATEMENTS

Some statements in this quarterly report on Form 10-Q are, or may be considered, forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “project,” and similar expressions and use of future or conditional verbs, generally identify forward-looking statements. AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Such risks and uncertainties include, but are not limited to challenges to intellectual property, competition from other products, difficulties inherent in the research and development process, adverse litigation or government action, and changes to laws and regulations applicable to our industry. Additional information about the economic, competitive, governmental, technological and other factors that may affect AbbVie’s operations is set forth in Item 1A, “Risk Factors,” in AbbVie’s Annual Report on Form 10-K for the year ended December 31, 2022, which has been filed with the Securities and Exchange Commission. AbbVie notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. AbbVie undertakes no obligation, and specifically declines, to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.