AbbVie
1 North Waukegan Road
North Chicago, IL 60064 U.S.A.
abbvie.com
2015 ANNUAL REPORT
ON FORM 10-K
2016 NOTICE OF
ANNUAL MEETING AND
PROXY STATEMENT
Copyright© 2016 AbbVie. All rights reserved.
PEOPLE. PASSION. POSSIBILITIES.
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about abbvie
AbbVie is a global, research-based
biopharmaceutical company formed
in 2013 following separation from
Abbott Laboratories. The company’s
mission is to use 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. Together
with its wholly-owned subsidiary,
Pharmacyclics, AbbVie employs more
than 28,000 people worldwide and markets
medicines in more than 170 countries.
For further information on the company
and its people, portfolio, and commitments,
please visit www.abbvie.com.
stockholder information
AbbVie Inc. Corporate Headquarters
1 North Waukegan Road
North Chicago, IL 60064
847.932.7900
www.abbvie.com
Investor Relations
Dept. ZZ05, AP34
Corporate Secretary
Dept. V364, AP34
Stock Listing
The ticker for AbbVie’s common stock
is ABBV. The principal market for AbbVie
common stock is the NYSE. AbbVie
common stock is also listed on the Chicago
Stock Exchange, the NYSE Euronext Paris,
and the SIX Swiss Exchange.
Annual Meeting
The Annual Meeting will be held on
Friday, May 6, 2016, at 9 AM at
the Fairmont Chicago, Millennium Park,
200 North Columbus Drive,
Chicago, IL 60601.
Dividend Reinvestment Plan
The AbbVie Dividend Reinvestment
Plan offers registered stockholders
an opportunity to purchase additional
shares, commission-free, through
automatic dividend reinvestment
and/or optional cash investments.
Interested persons may contact the
transfer agent.
Transfer Agent
Computershare Trust Co. NA
P.O. Box 43078
Providence, RI 02940-3078
877.881.5970 (toll free)
732.645.4123
www.computershare.com
Printed on recycled paper
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Dear AbbVie Shareholder:
2015 was another outstanding year for AbbVie, with considerable growth of our business and
improved efficiencies across the organization. AbbVie’s revenues increased more than 22%, to
$22.8 billion in 2015, and our full-year adjusted earnings per share was up more than 29% to
$4.29. Both of these increases place AbbVie second in our peer group for 2015 growth. We also
expanded our operating margin to 42% of sales—up 610 basis points—and improved gross margin
to 83% of sales—up 280 basis points since 2014.
In just three years, AbbVie has become a leading biopharmaceutical company with top-tier
business performance, financial results and return to shareholders, with compound annual growth
in revenues of more than 10% and EPS growth of approximately 17% since inception. AbbVie’s
total shareholder return of 92% over this period is also in the top of our peer group.
We have continued to drive significant growth from our leading product Humira, with 2015 net
sales of $14 billion, an increase of 19% operationally compared to 2014. We also expanded our
flagship therapies to include our HCV franchise and oncology product Imbruvica, a first-in-class BTK
inhibitor, which positions AbbVie as an oncology leader in this rapidly growing market segment.
Additionally, we announced FDA approval of Duopa for patients with Parkinson’s diseases in the
U.S.
The outstanding performance of these and other products in our portfolio have allowed AbbVie
to reinvest in our pipeline and build on our platform for the future. AbbVie has a record number
of programs in mid- and late-stage development, and we continue to make significant pipeline
advancements. AbbVie submitted regulatory submissions for Venetoclax for relapsed/refractory
chronic lymphocytic leukemia (CLL); Imbruvica for first-line CLL; Zynbryta for multiple sclerosis; and
Humira for uveitis. We also successfully transitioned several mid-stage pipeline assets into late-
stage development, including our JAK-1 inhibitor, ABT-494, in rheumatoid arthritis; a pan-genotypic,
next-generation HCV combination therapy; elagolix for uterine fibroids; and ABT-414, an antibody
drug conjugate for glioblastoma multiforme. Our exciting pipeline will bring much-needed therapies
to patients around the world in the coming years.
AbbVie is delivering on our initial promise to shareholders—to be an innovation-driven, patient-
focused specialty biopharmaceutical company that delivers top-tier financial performance and
brings a stream of innovative therapies to the market. Our performance and ability to execute, as
demonstrated in our first three years as an independent company, gives us great confidence in our
future, and we look forward to sharing our success with you.
Sincerely,
4DEC201212233206
Richard A. Gonzalez
Chairman and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
Commission file number 001-35565
13NOV201221343408
AbbVie Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1 North Waukegan Road
North Chicago, Illinois 60064-6400
(Address of principal executive offices) (Zip Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
32-0375147
(I.R.S. employer
identification number)
(847) 932-7900
(Telephone number)
Name of Each Exchange on Which Registered
New York Stock Exchange
Chicago Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes (cid:2)
No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes (cid:3)
No (cid:2)
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 (cid:2)
No (cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes (cid:2)
No (cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or
a smaller reporting company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer (cid:2)
Accelerated Filer (cid:3)
Smaller Reporting Company (cid:3)
Non-accelerated Filer (cid:3)
(Do not check if a
smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes (cid:3)
No (cid:2)
The aggregate market value of the 1,637,027,201 shares of voting stock held by non-affiliates of the registrant,
computed by reference to the closing price as reported on the New York Stock Exchange, as of the last business day of
AbbVie Inc.’s most recently completed second fiscal quarter (June 30, 2015), was $109,991,857,664. AbbVie has no non-voting
common equity.
Number of common shares outstanding as of January 31, 2016: 1,611,238,226
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2016 AbbVie Inc. Proxy Statement are incorporated by reference into Part III. The Definitive Proxy
Statement will be filed on or about March 21, 2016.
PART I
ITEM 1. BUSINESS
.....................................................................................................................................................................................................................................................................................................................................................
Separation from Abbott Laboratories
AbbVie(1) was incorporated in Delaware on April 10, 2012. On January 1, 2013, AbbVie became an
independent company as a result of the distribution by Abbott Laboratories (Abbott) of 100 percent of the
outstanding common stock of AbbVie to Abbott’s shareholders. AbbVie’s common stock began trading
‘‘regular-way’’ under the ticker symbol ‘‘ABBV’’ on the New York Stock Exchange on January 2, 2013.
Overview
AbbVie is a global, research-based biopharmaceutical company. AbbVie develops and markets advanced
therapies that address some of the world’s most complex and serious diseases. AbbVie’s products are
focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and
dermatology; oncology, including blood cancers; virology, including hepatitis C (HCV) and human
immunodeficiency virus (HIV); neurological disorders, such as Parkinson’s disease; metabolic diseases,
including thyroid disease and complications associated with cystic fibrosis; as well as other serious health
conditions. AbbVie also has a pipeline of promising new medicines, including more than 50 compounds or
indications in clinical development across such important medical specialties as immunology, virology/liver
disease, oncology, neurological diseases and women’s health.
On May 26, 2015, AbbVie completed its acquisition of Pharmacyclics, Inc., a biopharmaceutical
company that develops and commercializes novel therapies for people impacted by cancer, and its flagship
asset IMBRUVICA, a highly effective treatment for hematologic malignancies, for approximately $20.8 billion,
consisting of cash consideration of $12.4 billion and equity consideration of $8.4 billion.
Segments
AbbVie operates in one business segment—pharmaceutical products. Incorporated herein by reference
is Note 15 entitled ‘‘Segment and Geographic Area Information’’ of the Notes to Consolidated Financial
Statements included under Item 8, ‘‘Financial Statements and Supplementary Data’’ and the sales
information related to HUMIRA included under Item 7, ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Results of Operations.’’
Products
AbbVie’s portfolio of products includes a broad line of therapies that address some of the world’s most
complex and serious diseases.
(1) As used throughout the text of this report on Form 10-K, the term ‘‘AbbVie’’ refers to AbbVie Inc., a
Delaware corporation, or AbbVie Inc. and its consolidated subsidiaries, as the context requires.
2015 Form 10-K
13NOV201221352027
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HUMIRA. HUMIRA (adalimumab) is a biologic therapy administered as a subcutaneous injection. It is
approved to treat the following autoimmune diseases in the United States, Canada, and Mexico (collectively,
North America), and in the European Union:
Condition
Rheumatoid arthritis (moderate to severe)
Psoriatic arthritis
Ankylosing spondylitis
Crohn’s disease (moderate to severe)
Plaque psoriasis (moderate to severe)
Juvenile idiopathic arthritis
Ulcerative colitis (moderate to severe)
Axial spondyloarthropathy
Pediatric Crohn’s disease (severe)
Hidradenitis Suppurativa
Pediatric enthesitis-related arthritis
Principal Markets
North America, European Union
North America, European Union
North America, European Union
North America, European Union
North America, European Union
North America, European Union
United States, European Union
United States, European Union
United States, European Union
United States, European Union
European Union
HUMIRA is also approved in over 60 other markets, including Japan, China, Brazil, and Australia.
HUMIRA was introduced to the market in January 2003. HUMIRA is AbbVie’s largest product and accounted
for approximately 61 percent of AbbVie’s total net revenues in 2015. The United States composition of
matter (that is, compound) patent covering adalimumab (which is sold under the trademark HUMIRA) is
expected to expire in December 2016, and the equivalent European Union patent is expected to expire in
the majority of European Union countries in October 2018. In addition, in the United States,
non-composition of matter patents covering adalimumab expire no earlier than 2022.
AbbVie continues to dedicate substantial research and development efforts to expanding indications for
HUMIRA, including in the fields of rheumatology, gastroenterology (pediatric ulcerative colitis), and
ophthalmology (uveitis). A regulatory application for uveitis has been filed in the United States. AbbVie
continues to work on HUMIRA formulation and delivery enhancements to improve convenience and the
overall patient experience.
IMBRUVICA.
IMBRUVICA (ibrutinib) is a first-in-class, oral, once-daily therapy that inhibits a protein
called Bruton’s tyrosine kinase (BTK). IMBRUVICA is currently approved for the treatment of patients with
chronic lymphocytic leukemia (CLL) who have received at least one prior therapy, CLL patients who have del
17p and patients with Waldenstr¨om’s macroglobulinemia. IMBRUVICA is also approved for the treatment of
patients with mantle cell lymphoma (MCL) who have received at least one prior therapy. Accelerated
approval was granted for the MCL indication based on overall response rate. Continued approval for this
indication may be contingent upon verification of clinical benefit in confirmatory trials. IMBRUVICA was one
of the first medicines to receive a U.S. Food and Drug Administration (FDA) approval after being granted a
Breakthrough Therapy Designation and IMBRUVICA is one of the few therapies to receive three separate
designations.
HCV products. VIEKIRA PAK (ombitsavir, paritaprevir, and ritonavir tablets; dasabuvir tablets) is an
all-oral, short-course, interferon-free therapy, with or without ribavirin, for the treatment of adult patients
with genotype 1 chronic HCV, including those with compensated cirrhosis. VIEKIRA PAK was approved by
the FDA in December 2014. In Europe, AbbVie’s HCV treatment is marketed as VIEKIRAX + EXVIERA and is
approved for use in patients with genotype 1 and genotype 4 HCV. The European Commission granted
marketing authorization for this treatment in January 2015. In July 2015, the FDA approved AbbVie’s
TECHNIVIE (ombitasvir, paritaprevir and ritonavir) for use in combination with ribavirin for the treatment of
adults with genotype 4 HCV infection in the United States.
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Additional Virology products. AbbVie’s additional virology products include KALETRA and Norvir for
the treatment of HIV infection and Synagis for the prevention of respiratory syncytial virus (RSV) infection in
high risk infants.
KALETRA. KALETRA (lopinavir/ritonavir), which is also marketed as Aluvia in emerging markets, is
a prescription anti-HIV-1 medicine that contains two protease inhibitors: lopinavir and ritonavir. Kaletra
is used with other anti-HIV-1 medications as a treatment that maintains viral suppression in people
with HIV-1.
Norvir. Norvir (ritonavir) is a protease inhibitor that is indicated in combination with other
antiretroviral agents for the treatment of HIV-1 infection.
Synagis.
Synagis (palivizumab) is a product marketed by AbbVie outside of the United States that
protects at-risk infants from severe respiratory disease caused by RSV.
Metabolics/Hormones products. Metabolic and hormone products target a number of conditions,
including testosterone deficiency, exocrine pancreatic insufficiency and hypothyroidism. These products
include:
AndroGel. AndroGel (testosterone gel) is a testosterone replacement therapy for males diagnosed
with symptomatic low testosterone that is available in two strengths: 1 percent and 1.62 percent.
Creon. Creon (pancrelipase) is a pancreatic enzyme therapy for exocrine pancreatic insufficiency,
a condition that occurs in patients with cystic fibrosis, chronic pancreatitis, and several other
conditions.
Synthroid.
hypothyroidism.
Synthroid (levothyroxine sodium tablets, USP) is used in the treatment of
AbbVie has the rights to sell AndroGel, Creon and Synthroid only in the United States.
Endocrinology products.
Lupron (levprolide acetate), which is also marketed as Lucrin and Lupron
Depot, is a product for the palliative treatment of advanced prostate cancer, treatment of endometriosis
and central precocious puberty, and for the preoperative treatment of patients with anemia caused by
uterine fibroids. Lupron is approved for daily subcutaneous injection and one-month, three-month,
four-month and six-month intramuscular injection.
Other products. AbbVie’s other products include the following:
Duopa and Duodopa (carbidopa and levodopa). AbbVie’s levodopa-carbidopa intestinal gel for
the treatment of advanced Parkinson’s disease is marketed as Duopa in the United States and as
Duodopa outside of the United States.
Anesthesia products.
Sevoflurane (sold under the trademarks Ultane and Sevorane) is an
anesthesia product that AbbVie sells worldwide for human use.
Dyslipidemia products. AbbVie’s dyslipidemia products (TriCor (fenofibrate), Trilipix (fenofibric
acid), and Niaspan (niacin extended-release)) address the range of metabolic conditions characterized
by high cholesterol and/or high triglycerides.
Zemplar.
Zemplar (paricalcitol) is a product sold worldwide for the treatment of secondary
hyperparathyroidism associated with Stage 3, 4, and 5 chronic kidney disease (CKD).
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Research and Development Activities
AbbVie has numerous compounds in clinical development, including potential treatments for complex,
life-threatening diseases. AbbVie’s ability to discover and develop new compounds is enhanced by the
company’s use of integrated discovery and development project teams, which include chemists, biologists,
physicians, and pharmacologists who work on the same compounds as a team.
The research and development process generally begins with discovery research which focuses on the
identification of a molecule that has a desired effect against a given disease. If preclinical testing of an
identified compound proves successful, the compound moves into clinical development which generally
includes the following phases:
• Phase 1—involves the first human tests in a small number of healthy volunteers or patients to
assess safety, tolerability and potential dosing.
• Phase 2—tests the drug’s efficacy against the disease in a relatively small group of patients.
• Phase 3—tests a drug that demonstrates favorable results in the earlier phases in a significantly
larger patient population to further demonstrate efficacy and safety based on regulatory criteria.
The clinical trials from all of the development phases provide the data required to prepare and submit
a New Drug Application (NDA), a Biological License Application (BLA) or other submission for regulatory
approval to the FDA or similar government agencies outside the United States. The specific requirements
(e.g., scope of clinical trials) for obtaining regulatory approval vary across different countries and geographic
regions.
The research and development process from discovery through a new drug launch typically takes 8 to
12 years and can be even longer. The research and development of new pharmaceutical products has a
significant amount of inherent uncertainty. There is no guarantee when, or if, a molecule will receive the
regulatory approval required to launch a new drug or indication.
In addition to the development of new products and new formulations, research and development
projects also may include Phase 4 trials, sometimes called post-marketing studies. For such projects, clinical
trials are designed and conducted to collect additional data regarding, among other parameters, the
benefits and risks of an approved drug.
AbbVie spent approximately $4.3 billion in 2015, $3.3 billion in 2014, and $2.9 billion in 2013 on
research to discover and develop new products, indications and processes and to improve existing products
and processes. These expenses consisted primarily of salaries and related expenses for personnel, license
fees, consulting payments, contract research, clinical drug supply manufacturing, the costs of laboratory
equipment and facilities, clinical trial costs, and collaboration fees and expenses.
Intellectual Property Protection and Regulatory Exclusivity
Generally, upon approval, products may be entitled to certain kinds of exclusivity under applicable
intellectual property and regulatory regimes. AbbVie seeks patent protection, where available, in all
significant markets and/or countries for each product in development. In the United States, the expiration
date for patents filed on or after June 8, 1995 is 20 years after the filing date. Given that patents relating
to pharmaceutical products are often obtained early in the development process, and given the amount of
time needed to complete clinical trials and other development activities required for regulatory approval,
the length of time between product launch and patent expiration is significantly less than 20 years. The
Drug Price Competition and Patent Term Restoration Act of 1984 (commonly known as the Hatch-Waxman
Act) permits a patent holder to seek a patent extension, commonly called a ‘‘patent term restoration,’’ for
patents on products (or processes for making the product) regulated by the Federal Food, Drug, and
Cosmetic Act. The length of the patent extension is roughly based on 50 percent of the period of time
from the filing of an Investigational New Drug Application for a compound to the submission of the NDA
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for such compound, plus 100 percent of the time period from NDA submission to regulatory approval. The
extension, however, cannot exceed five years and the patent term remaining after regulatory approval
cannot exceed 14 years.
Pharmaceutical products may be entitled to other forms of legal or regulatory exclusivity upon
approval. The scope, length, and requirements for each of these exclusivities vary both in the United States
and in other jurisdictions. In the United States, if the FDA approves a drug product that contains an active
ingredient not previously approved, the product is typically entitled to five years of non-patent regulatory
exclusivity. Other products may be entitled to three years of exclusivity if approval was based on the FDA’s
reliance on new clinical studies essential to approval submitted by the NDA applicant. If the NDA applicant
studies the product for use by children, the FDA may grant pediatric exclusivity, which extends by 180 days
the longest existing exclusivity (patent or regulatory) related to the product. For products that are either
used to treat conditions that afflict a relatively small population or for which there is not a reasonable
expectation that the research and development costs will be recovered, the FDA may designate the
pharmaceutical as an orphan drug and grant it seven years of market exclusivity.
Applicable laws and regulations dictate the scope of any exclusivity to which a product is entitled upon
its approval in any particular country. In certain instances, regulatory exclusivity may protect a product
where patent protection is no longer available or for a period of time in excess of patent protection. It is
not possible to estimate for each product in development the total period and scope of exclusivity to which
it may become entitled until regulatory approval is obtained. However, given the length of time required to
complete clinical development of a pharmaceutical product, the minimum and maximum periods of
exclusivity that might be achieved in any individual case would not be expected to exceed three and
14 years, respectively. These estimates do not consider other factors, such as the difficulty of recreating the
manufacturing process for a particular product or other proprietary knowledge that may delay the
introduction of a generic or other follow-on product after the expiration of applicable patent and other
regulatory exclusivity periods.
Biologics may be entitled to exclusivity under the Biologics Price Competition and Innovation Act,
which was passed on March 23, 2010 as Title VII to the Patient Protection and Affordable Care Act. The
law provides a pathway for approval of biosimilars following the expiration of 12 years of exclusivity for the
innovator biologic and a potential additional 180 day-extension term for conducting pediatric studies.
Biologics are also eligible for orphan drug exclusivity, as discussed above. The law also includes an extensive
process for the innovator biologic and biosimilar manufacturer to litigate patent infringement, validity, and
enforceability prior to the approval of the biosimilar. The European Union has also created a pathway for
approval of biosimilars and has published guidelines for approval of certain biosimilar products. The more
complex nature of biologics and biosimilar products has led to greater regulatory scrutiny and more
rigorous requirements for approval of follow-on biosimilar products than for small molecule generic
pharmaceutical products, and in the European Union, it has also reduced the effect of biosimilars on sales
of the innovator biologic as compared to the sales erosion caused by generic versions of small molecule
pharmaceutical products.
AbbVie owns or has licensed rights to a substantial number of patents and patent applications. AbbVie
licenses or owns a patent portfolio of thousands of patent families, each of which includes United States
patent applications and/or issued patents, and may also contain the non-United States counterparts to
these patents and applications.
These patents and applications, including various patents that expire during the period 2016 to the late
2030s, in aggregate are believed to be of material importance in the operation of AbbVie’s business.
However, AbbVie believes that no single patent, license, trademark (or related group of patents, licenses, or
trademarks), except for those related to adalimumab (which is sold under the trademark HUMIRA), are
material in relation to the company’s business as a whole. The United States composition of matter (that is,
compound) patent covering adalimumab is expected to expire in December 2016, and the equivalent
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European Union patent is expected to expire in the majority of European Union countries in October 2018.
In the United States, non-composition of matter patents covering adalimumab expire no earlier than 2022.
In addition, the following patents, licenses, and trademarks are significant: those related to ibrutinib
(which is sold under the trademark IMBRUVICA), those related to ombitasvir/paritaprevir/ritonavir and
dasabuvir (which are sold under the trademarks VIEKIRA PAK, VIEKIRAX, EXVIERA, and HOLKIRA PAK), and
those related to testosterone (which is sold under the trademark AndroGel). The United States composition
of matter patent covering ibrutinib is expected to expire in 2027. The United States composition of matter
patents covering ombitasvir, paritaprevir and dasabuvir are expected to expire in 2032, 2031 and 2029,
respectively.
AbbVie may rely, in some circumstances, on trade secrets to protect its technology. However, trade
secrets are difficult to protect. AbbVie seeks to protect its technology and product candidates, in part, by
confidentiality agreements with its employees, consultants, advisors, contractors, and collaborators. These
agreements may be breached and AbbVie may not have adequate remedies for any breach. In addition,
AbbVie’s trade secrets may otherwise become known or be independently discovered by competitors. To
the extent that AbbVie’s employees, consultants, advisors, contractors, and collaborators use intellectual
property owned by others in their work for the company, disputes may arise as to the rights in related or
resulting know-how and inventions.
Marketing, Sales, and Distribution Capabilities
AbbVie utilizes a combination of dedicated commercial resources, regional commercial resources and
distributorships to market, sell, and distribute its products worldwide.
AbbVie directs its primary marketing efforts toward securing the prescription, or recommendation, of
its brand of products by physicians, key opinion leaders, and other health care providers. Managed care
providers (for example, health maintenance organizations and pharmacy benefit managers), hospitals, and
state and federal government agencies (for example, the United States Department of Veterans Affairs and
the United States Department of Defense) are also important customers. AbbVie also markets directly to
consumers themselves, although in the United States all of the company’s products must be sold pursuant
to a prescription. Outside of the United States, AbbVie focuses its marketing efforts on key opinion leaders,
payors, physicians, and country regulatory bodies. AbbVie also provides patient support programs closely
related to its products.
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. Although AbbVie’s business does not have significant
seasonality, AbbVie’s product revenues may be affected by end customer and retail buying patterns,
fluctuations in wholesaler inventory levels, and other factors.
In the United States, AbbVie distributes pharmaceutical products principally through independent
wholesale distributors, with some sales directly to pharmacies and patients. In 2015, three wholesale
distributors (McKesson Corporation, Cardinal Health, Inc., and AmerisourceBergen Corporation) accounted
for substantially all of AbbVie’s sales in the United States. No individual wholesaler accounted for greater
than 43 percent of AbbVie’s 2015 gross revenues in the United States. Outside the United States, sales are
made either directly to customers or through distributors, depending on the market served. These
wholesalers purchase product from AbbVie under standard terms and conditions of sale.
Certain products are co-marketed or co-promoted with other companies. AbbVie has no single
customer that, if the customer were lost, would have a material adverse effect on the company’s business.
No material portion of AbbVie’s business is subject to renegotiation of profits or termination of
contracts at the election of the government.
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Orders are generally filled on a current basis, and order backlog is not material to AbbVie’s business.
Third Party Agreements
AbbVie has agreements with third parties for process development, analytical services, and
manufacturing of certain products. AbbVie procures certain products and services from a limited number of
suppliers and, in some cases, a single supply source. For example, the filling and packaging of HUMIRA
syringes to be sold outside of the United States and Puerto Rico is performed by a single supplier at its two
different facilities. AbbVie does not currently believe that this agreement is material because AbbVie’s
business is not substantially at risk without access to these facilities. AbbVie maintains significant inventory
of HUMIRA syringes to reduce the risk of any supply disruption and its own syringe-filling and packaging
facility in the United States is approved to supply syringes to primary markets outside of the United States
and Puerto Rico. In addition, AbbVie has agreements with third parties for active pharmaceutical ingredient
and product manufacturing, formulation and development services, fill, finish, and packaging services,
transportation, and distribution and logistics services for certain products. AbbVie does not believe that
these manufacturing related agreements are material because AbbVie’s business is not substantially
dependent on any individual agreement. In most cases, AbbVie maintains alternate supply relationships that
it can utilize without undue disruption of its manufacturing processes if a third party fails to perform its
contractual obligations. AbbVie also maintains sufficient inventory of product to minimize the impact of any
supply disruption.
AbbVie is also party to certain collaborations and other arrangements, as discussed in Note 5,
‘‘Licensing, Acquisitions and Other Arrangements—Other Licensing & Acquisitions Activity,’’ of the Notes to
Consolidated Financial Statements included under Item 8, ‘‘Financial Statements and Supplementary Data,’’
and has certain agreements with Abbott as discussed in Item 7, ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Transition from Abbott and Cost to Operate as an
Independent Company.’’
Sources and Availability of Raw Materials
AbbVie purchases, in the ordinary course of business, raw materials and supplies essential to its
operations from numerous suppliers around the world. In addition, certain medical devices and components
necessary for the manufacture of AbbVie products are provided by unaffiliated third party suppliers. AbbVie
has not experienced any recent significant availability problems or supply shortages for forecasted sales.
Environmental Matters
AbbVie believes that its operations comply in all material respects with applicable laws and regulations
concerning environmental protection. Regulations under federal and state environmental laws impose
stringent limitations on emissions and discharges to the environment from various manufacturing
operations. AbbVie’s capital and operating expenditures for pollution control in 2015 were approximately
$5 million and $23 million, respectively. Capital and operating expenditures for pollution control in 2016 are
estimated to be approximately $2 million and $25 million, respectively.
Abbott was identified as one of many potentially responsible parties in investigations and/or
remediations at several locations in the United States, including Puerto Rico, under the Comprehensive
Environmental Response, Compensation, and Liability Act, commonly known as Superfund. Some of these
locations were transferred to AbbVie in connection with the separation and distribution, and AbbVie has
become a party to these investigations and remediations. Abbott was also engaged in remediation at
several other sites, some of which have been transferred to AbbVie in connection with the separation and
distribution, in cooperation with the Environmental Protection Agency or similar agencies. While it is not
feasible to predict with certainty the final costs related to those investigations and remediation activities,
AbbVie believes that such costs, together with other expenditures to maintain compliance with applicable
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laws and regulations concerning environmental protection, should not have a material adverse effect on the
company’s financial position, cash flows, or results of operations.
Competition
The markets for AbbVie’s products are highly competitive. AbbVie competes with other research-based
pharmaceuticals and biotechnology companies that discover, manufacture, market, and sell proprietary
pharmaceutical products and biologics. For example, HUMIRA competes with a number of anti-TNF and
other products that are approved for a number of disease states and AbbVie’s virology products compete
with protease inhibitors and other anti-HIV treatments. The search for technological innovations in
pharmaceutical products is a significant aspect of competition. The introduction of new products by
competitors and changes in medical practices and procedures can result in product obsolescence. Price is
also a competitive factor. In addition, the substitution of generic pharmaceutical products for branded
pharmaceutical products creates competitive pressures on AbbVie’s products that do not have patent
protection.
Biosimilars. Competition for AbbVie’s biologic products is affected by the approval of follow-on
biologics, also known as ‘‘biosimilars.’’ Biologics have added major therapeutic options for the treatment of
many diseases, including some for which therapies were unavailable or inadequate. The advent of biologics
has also raised complex regulatory issues and significant pharmacoeconomic concerns because the cost of
developing and producing biologic therapies is typically dramatically higher than for conventional (small
molecule) medications, and because many expensive biologic medications are used for ongoing treatment
of chronic diseases, such as rheumatoid arthritis or inflammatory bowel disease, or for the treatment of
previously untreatable cancer. Significant investments in biologics infrastructure and manufacturing are
necessary to produce biologic products, as are significant investments in marketing, distribution, and sales
organization activities, which may limit the number of biosimilar competitors.
In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic Act, the
Public Health Service Act, and implementing regulations. The enactment of federal health care reform
legislation in March 2010 provided a pathway for approval of biosimilars under the Public Health Service
Act, but the approval process for, and science behind, biosimilars is more complex than the approval
process for, and science behind, generic or other follow-on versions of small molecule products. This added
complexity is due to steps needed to ensure that the safety and efficacy of biosimilars is highly similar to
that of an original biologic, such as HUMIRA. Ultimate approval by the FDA is dependent upon many
factors, including a showing that the biosimilar is ‘‘highly similar’’ to the original product and has no
clinically meaningful differences from the original product in terms of safety, purity, potency, and in vitro
characterization. The types of data that could ordinarily be required in an application to show similarity
may include analytical data and studies to demonstrate chemical similarity, animal studies (including toxicity
studies), and clinical studies. The law also requires that the biosimilar must be for a condition of use
approved for the original biologic and that the manufacturing facility meets the standards necessary to
assure that the biosimilar is safe, pure, and potent.
Furthermore, the law provides that only a biosimilar product that is determined to be
‘‘interchangeable’’ will be considered substitutable for the original biologic product without the intervention
of the health care provider who prescribed the original biologic product. To prove that a biosimilar product
is interchangeable, the applicant must demonstrate that the product can be expected to produce the same
clinical results as the original biologic product in any given patient, and if the product is administered more
than once in a patient, that safety risks and potential for diminished efficacy of alternating or switching
between the use of the interchangeable biosimilar biologic product and the original biologic product is no
greater than the risk of using the original biologic product without switching. The law is only beginning to
be interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning
will likely be subject to substantial uncertainty for years to come.
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In the European Union, while a pathway for the approval of biosimilars has existed since 2005, the
products that have come to market to date have had a mixed impact on the market share of incumbent
products, with significant variation by product.
Other Competitive Products. Although a number of competitive biologic branded products have been
approved since HUMIRA was first introduced in 2003, most have gained only a modest share of the
worldwide market. AbbVie will continue to face competitive pressure from these biologics and from orally
administered products.
Regulation—Discovery and Clinical Development
United States.
Securing approval to market a new pharmaceutical product in the United States
requires substantial effort and financial resources and takes several years to complete. The applicant must
complete preclinical tests and submit protocols to the FDA before commencing clinical trials. Clinical trials
are intended to establish the safety and efficacy of the pharmaceutical product and typically are conducted
in three sequential phases, although the phases may overlap or be combined. If the required clinical testing
is successful, the results are submitted to the FDA in the form of an NDA or BLA requesting approval to
market the product for one or more indications. The FDA reviews an NDA or BLA to determine whether a
product is safe and effective for its intended use and whether its manufacturing is compliant with current
Good Manufacturing Practices (cGMP).
Even if an NDA or a BLA receives approval, the applicant must comply with post-approval
requirements. For example, holders of an approval must report adverse reactions, provide updated safety
and efficacy information, and comply with requirements concerning advertising and promotional materials
and activities. Also, quality control and manufacturing procedures must continue to conform to cGMP after
approval, and certain changes to the manufacturing procedures and finished product must be included in
the NDA or BLA, and approved by the FDA. The FDA periodically inspects manufacturing facilities to assess
compliance with cGMP, which imposes extensive procedural and record keeping requirements. In addition,
as a condition of approval, the FDA may require post-marketing testing and surveillance to further assess
and monitor the product’s safety or efficacy after commercialization, which may require additional clinical
trials or patient registries, or additional work on chemistry, manufacturing and controls. Any post-approval
regulatory obligations, and the cost of complying with such obligations, could expand in the future.
Outside the United States. AbbVie is subject to similar regulatory requirements outside the United
States. AbbVie must obtain approval of a clinical trial application or product from the applicable regulatory
authorities before it can commence clinical trials or marketing of the product. The approval requirements
and process for each country can vary, and the time required to obtain approval may be longer or shorter
than that required for FDA approval in the United States. For example, AbbVie may submit marketing
authorizations in the European Union under either a centralized or decentralized procedure. The centralized
procedure is mandatory for the approval of biotechnology products and many pharmaceutical products and
provides for a single marketing authorization that is valid for all European Union member states. Under the
centralized procedure, a single marketing authorization application is submitted to the European Medicines
Agency. After the agency evaluates the application, it makes a recommendation to the European
Commission, which then makes the final determination on whether to approve the application. The
decentralized procedure provides for mutual recognition of individual national approval decisions and is
available for products that are not subject to the centralized procedure.
In Japan, applications for approval of a new product are made through the Pharmaceutical and
Medical Devices Agency (PMDA). Bridging studies to demonstrate that the non-Japanese clinical data applies
to Japanese patients may be required. After completing a comprehensive review, the PMDA reports to the
Ministry of Health, Labour and Welfare, which then approves or denies the application.
The regulatory process in many emerging markets continues to evolve. Many emerging markets,
including those in Asia, generally require regulatory approval to have been obtained in a large developed
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market (such as the United States or Europe) before the country will begin or complete its regulatory
review process. Some countries also require that local clinical studies be conducted in order to obtain
regulatory approval in the country.
The requirements governing the conduct of clinical trials and product licensing also vary. In addition,
post-approval regulatory obligations such as adverse event reporting and cGMP compliance generally apply
and may vary by country. For example, after a marketing authorization has been granted in the European
Union, periodic safety reports must be submitted and other pharmacovigilance measures may be required
(such as Risk Management Plans).
Regulation—Commercialization, Distribution, and Manufacturing
The manufacture, marketing, sale, promotion, and distribution of AbbVie’s products are subject to
comprehensive government regulation. Government regulation by various national, regional, federal, state,
and local agencies, both in the United States and other countries, addresses (among other matters)
inspection of, and controls over, research and laboratory procedures, clinical investigations, product
approvals and manufacturing, labeling, packaging, marketing and promotion, pricing and reimbursement,
sampling, distribution, quality control, post-marketing surveillance, record keeping, storage, and disposal
practices. AbbVie’s operations are also affected by trade regulations in many countries that limit the import
of raw materials and finished products and by laws and regulations that seek to prevent corruption and
bribery in the marketplace (including the United States Foreign Corrupt Practices Act and the United
Kingdom Bribery Act, which provide guidance on corporate interactions with government officials) and
require safeguards for the protection of personal data. In addition, AbbVie is subject to laws and
regulations pertaining to health care fraud and abuse, including state and federal anti-kickback and false
claims laws in the United States. Prescription drug manufacturers such as AbbVie are also subject to taxes,
as well as application, product, user, establishment, and other fees.
Compliance with these laws and regulations is costly and materially affects AbbVie’s business. Among
other effects, health care regulations substantially increase the time, difficulty, and costs incurred in
obtaining and maintaining approval to market newly developed and existing products. AbbVie expects
compliance with these regulations to continue to require significant technical expertise and capital
investment to ensure compliance. Failure to comply can delay the release of a new product or result in
regulatory and enforcement actions, the seizure or recall of a product, the suspension or revocation of the
authority necessary for a product’s production and sale, and other civil or criminal sanctions, including fines
and penalties.
In addition to regulatory initiatives, AbbVie’s business can be affected by ongoing studies of the
utilization, safety, efficacy, and outcomes of health care products and their components that are regularly
conducted by industry participants, government agencies, and others. These studies can call into question
the utilization, safety, and efficacy of previously marketed products. In some cases, these studies have
resulted, and may in the future result, in the discontinuance of, or limitations on, marketing of such
products domestically or worldwide, and may give rise to claims for damages from persons who believe
they have been injured as a result of their use.
Access to human health care products continues to be a subject of investigation and action by
governmental agencies, legislative bodies, and private organizations in the United States and other
countries. A major focus is cost containment. Efforts to reduce health care costs are also being made in the
private sector, notably by health care payors and providers, which have instituted various cost reduction
and containment measures. AbbVie expects insurers and providers to continue attempts to reduce the cost
of health care products. Outside the United States, many countries control the price of health care products
directly or indirectly, through reimbursement, payment, pricing, coverage limitations, or compulsory
licensing. Budgetary pressures in the United States and in other countries may also heighten the scope and
severity of pricing pressures on AbbVie’s products for the foreseeable future.
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United States.
Specifically, U.S. federal laws require pharmaceutical manufacturers to pay certain
statutorily-prescribed rebates to state Medicaid programs on prescription drugs reimbursed under state
Medicaid plans, and the efforts by states to seek additional rebates affect AbbVie’s business. Similarly, the
Veterans Health Care Act of 1992, as a prerequisite to participation in Medicaid and other federal health
care programs, requires that manufacturers extend additional discounts on pharmaceutical products to
various federal agencies, including the United States Department of Veterans Affairs, Department of
Defense, and Public Health Service entities and institutions. In addition, recent legislative changes would
require similarly discounted prices to be offered to TRICARE program beneficiaries. The Veterans Health
Care Act of 1992 also established the 340B drug discount program, which requires pharmaceutical
manufacturers to provide products at reduced prices to various designated health care entities and facilities.
In the United States, most states also have generic substitution legislation requiring or permitting a
dispensing pharmacist to substitute a different manufacturer’s generic version of a pharmaceutical product
for the one prescribed. In addition, the federal government follows a diagnosis-related group (DRG)
payment system for certain institutional services provided under Medicare or Medicaid and has
implemented a prospective payment system (PPS) for services delivered in hospital outpatient, nursing
home, and home health settings. DRG and PPS entitle a health care facility to a fixed reimbursement based
on the diagnosis and/or procedure rather than actual costs incurred in patient treatment, thereby
increasing the incentive for the facility to limit or control expenditures for many health care products.
Medicare reimburses Part B drugs based on average sales price plus a certain percentage to account for
physician administration costs, which have recently been reduced in the hospital outpatient setting.
Medicare enters into contracts with private plans to negotiate prices for most patient-administered
medicine delivered under Part D.
In March 2010, Congress enacted the Patient Protection and Affordable Care Act and the Health Care
and Education Reconciliation Act (together, the Affordable Care Act). Under the Affordable Care Act, AbbVie
pays a fee related to its pharmaceuticals sales to government programs. Also in 2011, AbbVie began
providing a discount of 50 percent for branded prescription drugs sold to patients who fall into the
Medicare Part D coverage gap, or ‘‘donut hole.’’
The Affordable Care Act also includes provisions known as the Physician Payments Sunshine Act, which
require manufacturers of drugs and biologics covered under Medicare and Medicaid starting in 2012 to
record any transfers of value to physicians and teaching hospitals and to report this data beginning in 2013
to the Centers for Medicare and Medicaid Services for subsequent public disclosure. Similar reporting
requirements have also been enacted on the state level in the United States, and an increasing number of
countries worldwide either have adopted or are considering similar laws requiring disclosure of interactions
with health care professionals. Failure to report appropriate data may result in civil or criminal fines and/or
penalties.
AbbVie expects debate to continue during 2016 at all government levels worldwide over the
marketing, availability, method of delivery, and payment for health care products and services. AbbVie
believes that future legislation and regulation in the markets it serves could affect access to health care
products and services, increase rebates, reduce prices or the rate of price increases for health care
products and services, change health care delivery systems, create new fees and obligations for the
pharmaceuticals industry, or require additional reporting and disclosure. It is not possible to predict the
extent to which AbbVie or the health care industry in general might be affected by the matters discussed
above.
AbbVie is subject to a Corporate Integrity Agreement (CIA) entered into by Abbott on May 7, 2012
that requires enhancements to AbbVie’s compliance program and contains reporting obligations, including
disclosure of financial payments to doctors. If AbbVie fails to comply with the CIA, the Office of Inspector
General for the United States Department of Health and Human Services may impose monetary penalties
or exclude AbbVie from federal health care programs, including Medicare and Medicaid.
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European Union.
The European Union has adopted directives and other legislation governing labeling,
advertising, distribution, supply, pharmacovigilance, and marketing of pharmaceutical products. Such
legislation provides mandatory standards throughout the European Union and permits member states to
supplement these standards with additional regulations. European governments also regulate
pharmaceutical product prices through their control of national health care systems that fund a large part
of the cost of such products to consumers. As a result, patients are unlikely to use a pharmaceutical
product that is not reimbursed by the government. In many European countries, the government either
regulates the pricing of a new product at launch or subsequent to launch through direct price controls or
reference pricing. In recent years, many countries have also imposed new or additional cost containment
measures on pharmaceutical products. Differences between national pricing regimes create price
differentials within the European Union that can lead to significant parallel trade in pharmaceutical
products.
Most governments also promote generic substitution by mandating or permitting a pharmacist to
substitute a different manufacturer’s generic version of a pharmaceutical product for the one prescribed
and by permitting or mandating that health care professionals prescribe generic versions in certain
circumstances. In addition, governments use reimbursement lists to limit the pharmaceutical products that
are eligible for reimbursement by national health care systems.
Japan.
In Japan, the National Health Insurance system maintains a Drug Price List specifying which
pharmaceutical products are eligible for reimbursement, and the Ministry of Health, Labour and Welfare
sets the prices of the products on this list. The government generally introduces price cut rounds every
other year and also mandates price decreases for specific products. New products judged innovative or
useful, that are indicated for pediatric use, or that target orphan or small population diseases, however,
may be eligible for a pricing premium. The government has also promoted the use of generics, where
available.
Emerging Markets. Many emerging markets take steps to reduce pharmaceutical product prices, in
some cases through direct price controls and in others through the promotion of generic alternatives to
branded pharmaceuticals.
Since AbbVie markets its products worldwide, certain products of a local nature and variations of
product lines must also meet other local regulatory requirements. Certain additional risks are inherent in
conducting business outside the United States, including price and currency exchange controls, changes in
currency exchange rates, limitations on participation in local enterprises, expropriation, nationalization, and
other governmental action.
Employees
AbbVie employed approximately 28,000 persons as of January 31, 2016. Outside the United States,
some of AbbVie’s employees are represented by unions or works councils. AbbVie believes that it has good
relations with its employees.
Internet Information
Copies of AbbVie’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available free of charge through AbbVie’s investor relations website
(www.abbvieinvestor.com) as soon as reasonably practicable after AbbVie electronically files the material
with, or furnishes it to, the Securities and Exchange Commission (SEC).
AbbVie’s corporate governance guidelines, outline of directorship qualifications, code of business
conduct and the charters of AbbVie’s audit committee, compensation committee, nominations and
governance committee, and public policy committee are all available on AbbVie’s investor relations website
(www.abbvieinvestor.com).
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ITEM 1A. RISK FACTORS
.....................................................................................................................................................................................................................................................................................................................................................
You should carefully consider the following risks and other information in this Form 10-K in evaluating
AbbVie and AbbVie’s common stock. Any of the following risks could materially and adversely affect
AbbVie’s results of operations, financial condition or cash flows. The risk factors generally have been
separated into three groups: risks related to AbbVie’s business, risks related to AbbVie’s separation from
Abbott, and risks related to AbbVie’s common stock. Based on the information currently known to it, AbbVie
believes that the following information identifies the most significant risk factors affecting it in each of
these categories of risks. However, the risks and uncertainties AbbVie faces are not limited to those set forth
in the risk factors described below and may not be in order of importance or probability of occurrence.
Additional risks and uncertainties not presently known to AbbVie or that AbbVie currently believes to be
immaterial may also adversely affect its business. In addition, past financial performance may not be a
reliable indicator of future performance, and historical trends should not be used to anticipate results or
trends in future periods.
If any of the following risks and uncertainties develops into actual events, these events could have a
material adverse effect on AbbVie’s business, results of operations, financial condition or cash flows. In such
case, the trading price of AbbVie’s common stock could decline.
Risks Related to AbbVie’s Business
The expiration or loss of patent protection and licenses may adversely affect AbbVie’s future
revenues and operating earnings.
AbbVie relies on patent, trademark and other intellectual property protection in the discovery,
development, manufacturing, and sale of its products. In particular, patent protection is, in the aggregate,
important in AbbVie’s marketing of pharmaceutical products in the United States and most major markets
outside of the United States. Patents covering AbbVie products normally provide market exclusivity, which is
important for the profitability of many of AbbVie’s products.
As patents for certain of its products expire, AbbVie will or could face competition from lower priced
generic products. The expiration or loss of patent protection for a product typically is followed promptly by
substitutes that may significantly reduce sales for that product in a short amount of time. If AbbVie’s
competitive position is compromised because of generics or otherwise, it could have a material adverse
effect on AbbVie’s business and results of operations. In addition, proposals emerge from time to time for
legislation to further encourage the early and rapid approval of generic drugs. Any such proposals that are
enacted into law could increase the impact of generic competition.
AbbVie’s principal patents and trademarks are described in greater detail in Item 1, ‘‘Business—
Intellectual Property Protection and Regulatory Exclusivity’’ and Item 7, ‘‘Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Results of Operations,’’ and litigation regarding
these patents is described in Item 3, ‘‘Legal Proceedings.’’ The United States composition of matter patent
for HUMIRA, which is AbbVie’s largest product and had worldwide net revenues of approximately
$14.0 billion in 2015, is expected to expire in December 2016, and the equivalent European Union patent is
expected to expire in the majority of European Union countries in October 2018. Because HUMIRA is a
biologic and biologics cannot be readily substituted, it is uncertain what impact the loss of patent
protection would have on the sales of HUMIRA.
AbbVie’s major products could lose patent protection earlier than expected, which could adversely
affect AbbVie’s future revenues and operating earnings.
Third parties or government authorities may challenge or seek to invalidate or circumvent AbbVie’s
patents and patent applications. For example, manufacturers of generic pharmaceutical products file, and
may continue to file, Abbreviated New Drug Applications with the FDA seeking to market generic forms of
AbbVie’s products prior to the expiration of relevant patents owned or licensed by AbbVie by asserting that
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the patents are invalid, unenforceable and/or not infringed. In addition, petitioners have filed, and may
continue to file, challenges to the validity of AbbVie patents under the 2011 Leahy-Smith America Invents
Act, which created inter partes review and post grant review procedures for challenging patent validity in
administrative proceedings at the United States Patent and Trademark Office.
Although most of the challenges to AbbVie’s intellectual property have come from other businesses,
governments may also challenge intellectual property rights. For example, court decisions and potential
legislation relating to patents, such as legislation regarding biosimilars, and other regulatory initiatives may
result in further erosion of intellectual property protection. In addition, certain governments outside the
United States have indicated that compulsory licenses to patents may be sought to further their domestic
policies or on the basis of national emergencies, such as HIV/AIDS. If triggered, compulsory licenses could
diminish or eliminate sales and profits from those jurisdictions and negatively affect AbbVie’s results of
operations.
AbbVie normally responds to challenges by vigorously defending its patents, including by filing patent
infringement lawsuits. Patent litigation, administrative proceedings and other challenges to AbbVie’s patents
are costly and unpredictable and may deprive AbbVie of market exclusivity for a patented product. To the
extent AbbVie’s intellectual property is successfully challenged or circumvented or to the extent such
intellectual property does not allow AbbVie to compete effectively, AbbVie’s business will suffer. To the
extent that countries do not enforce AbbVie’s intellectual property rights or require compulsory licensing of
AbbVie’s intellectual property, AbbVie’s future revenues and operating earnings will be reduced.
A third party’s intellectual property may prevent AbbVie from selling its products or have a material
adverse effect on AbbVie’s future profitability and financial condition.
Third parties may claim that an AbbVie product infringes upon their intellectual property. Resolving an
intellectual property infringement claim can be costly and time consuming and may require AbbVie to enter
into license agreements. AbbVie cannot guarantee that it would be able to obtain license agreements on
commercially reasonable terms. A successful claim of patent or other intellectual property infringement
could subject AbbVie to significant damages or an injunction preventing the manufacture, sale, or use of
the affected AbbVie product or products. Any of these events could have a material adverse effect on
AbbVie’s profitability and financial condition.
Any significant event that adversely affects HUMIRA revenues could have a material and negative
impact on AbbVie’s results of operations and cash flows.
HUMIRA accounted for approximately 61 percent of AbbVie’s total net revenues in 2015. Any
significant event that adversely affects HUMIRA’s revenues could have a material adverse impact on
AbbVie’s results of operations and cash flows. These events could include loss of patent protection for
HUMIRA, the approval of biosimilars of HUMIRA, the discovery of previously unknown side effects or
impaired efficacy, increased competition from the introduction of new, more effective or less expensive
treatments, and discontinuation or removal from the market of HUMIRA for any reason.
AbbVie’s research and development efforts may not succeed in developing and marketing
commercially successful products and technologies, which may cause its revenues and profitability to
decline.
To remain competitive, AbbVie must continue to launch new products and new indications and/or
brand extensions for existing products, and such launches must generate revenue sufficient both to cover
its substantial research and development costs and to replace revenues of profitable products that are lost
to or displaced by competing products or therapies. Failure to do so would have a material adverse effect
on AbbVie’s revenue and profitability. Accordingly, AbbVie commits substantial effort, funds, and other
resources to research and development and must make ongoing substantial expenditures without any
assurance that its efforts will be commercially successful. A high rate of failure in the biopharmaceutical
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industry is inherent in the research and development of new products, and failure can occur at any point in
the research and development process, including after significant funds have been invested. Products that
appear promising in development may fail to reach the market for numerous reasons, including failure to
demonstrate effectiveness, safety concerns, superior safety or efficacy of competing therapies, failure to
achieve positive clinical or pre-clinical outcomes beyond the current standards of care, inability to obtain
necessary regulatory approvals or delays in the approval of new products and new indications, limited
scope of approved uses, excessive costs to manufacture, the failure to obtain or maintain intellectual
property rights, or infringement of the intellectual property rights of others.
Decisions about research studies made early in the development process of a pharmaceutical product
candidate can affect the marketing strategy once such candidate receives approval. More detailed studies
may demonstrate additional benefits that can help in the marketing, but they also consume time and
resources and may delay submitting the pharmaceutical product candidate for approval. AbbVie cannot
guarantee that a proper balance of speed and testing will be made with respect to each pharmaceutical
product candidate or that decisions in this area would not adversely affect AbbVie’s future results of
operations.
Even if AbbVie successfully develops and markets new products or enhancements to its existing
products, they may be quickly rendered obsolete by changing clinical preferences, changing industry
standards, or competitors’ innovations. AbbVie’s innovations may not be accepted quickly in the
marketplace because of existing clinical practices or uncertainty over third-party reimbursement. AbbVie
cannot state with certainty when or whether any of its products under development will be launched,
whether it will be able to develop, license, or otherwise acquire compounds or products, or whether any
products will be commercially successful. Failure to launch successful new products or new indications for
existing products may cause AbbVie’s products to become obsolete, causing AbbVie’s revenues and
operating results to suffer.
A portion of AbbVie’s near-term pharmaceutical pipeline relies on collaborations with third parties,
which may adversely affect the development and sale of its products.
AbbVie depends on alliances with pharmaceutical and biotechnology companies for a portion of the
products in its near-term pharmaceutical pipeline. For example, AbbVie is collaborating with Biogen to
develop a treatment for the relapsing remitting form of multiple sclerosis. It is also collaborating with
Roche Holding AG to discover, develop, and commercialize a next-generation Bcl-2 inhibitor, ABT-199
(venetoclax), for patients with relapsed/refractory chronic lymphocytic leukemia.
Failures by these parties to meet their contractual, regulatory, or other obligations to AbbVie, or any
disruption in the relationships between AbbVie and these third parties, could have an adverse effect on
AbbVie’s pharmaceutical pipeline and business. In addition, AbbVie’s collaborative relationships for research
and development extend for many years and may give rise to disputes regarding the relative rights,
obligations and revenues of AbbVie and its collaboration partners, including the ownership of intellectual
property and associated rights and obligations. This could result in the loss of intellectual property rights or
protection, delay the development and sale of potential pharmaceutical products, and lead to lengthy and
expensive litigation, administrative proceedings or arbitration.
Biologics carry unique risks and uncertainties, which could have a negative impact on future results
of operations.
The successful discovery, development, manufacturing and sale of biologics is a long, expensive and
uncertain process. There are unique risks and uncertainties with biologics. For example, access to and
supply of necessary biological materials, such as cell lines, may be limited, and governmental regulations
restrict access to and regulate the transport and use of such materials. In addition, the development,
manufacturing, and sale of biologics is subject to regulations that are often more complex and extensive
than the regulations applicable to other pharmaceutical products. Manufacturing biologics, especially in
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large quantities, is often complex and may require the use of innovative technologies. Such manufacturing
also requires facilities specifically designed and validated for this purpose and sophisticated quality
assurance and quality control procedures. Biologics are also frequently costly to manufacture because
production inputs are derived from living animal or plant material, and some biologics cannot be made
synthetically. Failure to successfully discover, develop, manufacture and sell biologics—including HUMIRA—
could adversely impact AbbVie’s business and results of operations.
AbbVie’s biologic products may become subject to competition from biosimilars.
The Biologics Price Competition and Innovation Act was passed on March 23, 2010 as Title VII to the
Patient Protection and Affordable Care Act. The law created a framework for the approval of biosimilars in
the United States and could allow competitors to reference data from biologic products already approved.
In Europe, the European Commission has granted marketing authorizations for several biosimilars pursuant
to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few
years. In addition, companies are developing biosimilars in other countries that could compete with
AbbVie’s biologic products. For example, Amgen has submitted a marketing authorization application to the
European Medicines Agency for a biosimilar of HUMIRA and the United States FDA has accepted for review
Amgen’s application for a HUMIRA biosimilar. If competitors are able to obtain marketing approval for
biosimilars referencing AbbVie’s biologic products, AbbVie’s products may become subject to competition
from such biosimilars, with the attendant competitive pressure and consequences. Expiration or successful
challenge of AbbVie’s applicable patent rights could also trigger competition from other products, assuming
any relevant exclusivity period has expired. As a result, AbbVie could face more litigation and administrative
proceedings with respect to the validity and/or scope of patents relating to its biologic products.
New products and technological advances by AbbVie’s competitors may negatively affect AbbVie’s
results of operations.
AbbVie competes with other research-based pharmaceutical and biotechnology companies that
discover, manufacture, market, and sell proprietary pharmaceutical products and biologics. For example,
HUMIRA competes with a number of anti-TNF products that are approved for a number of disease states
and AbbVie’s virology products compete with protease inhibitors and other anti-HIV treatments. These
competitors may introduce new products or develop technological advances that compete with AbbVie’s
products in therapeutic areas such as immunology, virology/liver disease, oncology, dyslipidemia, and
neuroscience. AbbVie cannot predict with certainty the timing or impact of the introduction by competitors
of new products or technological advances. Such competing products may be safer, more effective, more
effectively marketed or sold, or have lower prices or superior performance features than AbbVie’s products,
and this could negatively impact AbbVie’s business and results of operations.
The manufacture of many of AbbVie’s products is a highly exacting and complex process, and if
AbbVie or one of its suppliers encounters problems manufacturing AbbVie’s products, AbbVie’s business
could suffer.
The manufacture of many of AbbVie’s products is a highly exacting and complex process, due in part
to strict regulatory requirements. Problems may arise during manufacturing for a variety of reasons,
including equipment malfunction, failure to follow specific protocols and procedures, problems with raw
materials, delays related to the construction of new facilities or the expansion of existing facilities, including
those intended to support future demand for AbbVie’s products, changes in manufacturing production sites
and limits to manufacturing capacity due to regulatory requirements, changes in the types of products
produced, physical limitations that could inhibit continuous supply, man-made or natural disasters, and
environmental factors. If problems arise during the production of a batch of product, that batch of product
may have to be discarded and AbbVie may experience product shortages or incur added expenses. This
could, among other things, lead to increased costs, lost revenue, damage to customer relations, time and
expense spent investigating the cause and, depending on the cause, similar losses with respect to other
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batches or products. If problems are not discovered before the product is released to the market, recall
and product liability costs may also be incurred.
AbbVie uses a number of products in its pharmaceutical and biologic manufacturing processes that
are sourced from single suppliers, and an interruption in the supply of those products could adversely
affect AbbVie’s business and results of operations.
AbbVie uses a number of products in its pharmaceutical and biologic manufacturing processes that are
sourced from single suppliers. The failure of these single-source suppliers to fulfill their contractual
obligations in a timely manner or as a result of regulatory noncompliance or physical disruption at a
manufacturing site may impair AbbVie’s ability to deliver its products to customers on a timely and
competitive basis, which could adversely affect AbbVie’s business and results of operations. Finding an
alternative supplier could take a significant amount of time and involve significant expense due to the
nature of the products and the need to obtain regulatory approvals. AbbVie cannot guarantee that it will
be able to reach agreement with alternative providers or that regulatory authorities would approve
AbbVie’s use of such alternatives. AbbVie does, however, carry business interruption insurance, which
provides a degree of protection in the case of a failure by a single-source supplier.
Significant safety or efficacy issues could arise for AbbVie’s products, which could have a material
adverse effect on AbbVie’s revenues and financial condition.
Pharmaceutical products receive regulatory approval based on data obtained in controlled clinical trials
of limited duration. Following regulatory approval, these products will be used over longer periods of time
in many patients. Investigators may also conduct additional, and perhaps more extensive, studies. If new
safety or efficacy issues are reported or if new scientific information becomes available (including results of
post-marketing Phase 4 trials), or if governments change standards regarding safety, efficacy or labeling,
AbbVie may be required to amend the conditions of use for a product. For example, AbbVie may
voluntarily provide or be required to provide updated information on a product’s label or narrow its
approved indication, either of which could reduce the product’s market acceptance. If safety or efficacy
issues with an AbbVie product arise, sales of the product could be halted by AbbVie or by regulatory
authorities. Safety or efficacy issues affecting suppliers’ or competitors’ products also may reduce the
market acceptance of AbbVie’s products.
New data about AbbVie’s products, or products similar to its products, could negatively impact demand
for AbbVie’s products due to real or perceived safety issues or uncertainty regarding efficacy and, in some
cases, could result in product withdrawal. Furthermore, new data and information, including information
about product misuse, may lead government agencies, professional societies, practice management groups
or organizations involved with various diseases to publish guidelines or recommendations related to the use
of AbbVie’s products or the use of related therapies or place restrictions on sales. Such guidelines or
recommendations may lead to lower sales of AbbVie’s products.
AbbVie is subject to product liability claims and lawsuits that may adversely affect its business and
results of operations.
In the ordinary course of business, AbbVie is the subject of product liability claims and lawsuits
alleging that AbbVie’s products or the products of other companies that it promotes have resulted or could
result in an unsafe condition for or injury to patients. Product liability claims and lawsuits and safety alerts
or product recalls, regardless of their ultimate outcome, may have a material adverse effect on AbbVie’s
business, results of operations, and reputation and on its ability to attract and retain customers.
Consequences may also include additional costs, a decrease in market share for the product in question,
lower income and exposure to other claims. Product liability losses are self-insured.
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17
AbbVie is subject to cost-containment efforts and pricing pressures that could cause a reduction in
future revenues and operating earnings, and changes in the terms of rebate and chargeback programs,
which are common in the pharmaceuticals industry, could have a material adverse effect on AbbVie’s
operations.
Cost-containment efforts by governments and private organizations are described in greater detail in
Item 1, ‘‘Business—Regulation—Commercialization, Distribution, and Manufacturing.’’ To the extent these
cost containment efforts are not offset by greater demand, increased patient access to health care, or other
factors, AbbVie’s future revenues and operating earnings will be reduced. In the United States, the
European Union and other countries, AbbVie’s business has experienced downward pressure on product
pricing, and this pressure could increase in the future.
In the United States, practices of managed care groups, and institutional and governmental purchasers,
and United States federal laws and regulations related to Medicare and Medicaid, including the Medicare
Prescription Drug Improvement and Modernization Act of 2003 and the Patient Protection and Affordable
Care Act, contribute to pricing pressures. The potential for continuing changes to the health care system in
the United States and the increased purchasing power of entities that negotiate on behalf of Medicare,
Medicaid, and private sector beneficiaries could result in additional pricing pressures.
In numerous major markets worldwide, the government plays a significant role in funding health care
services and determining the pricing and reimbursement of pharmaceutical products. Consequently, in those
markets, AbbVie is subject to government decision-making and budgetary actions with respect to its
products. In particular, many European countries have ongoing government-mandated price reductions for
many pharmaceutical products, and AbbVie anticipates continuing pricing pressures in Europe. Differences
between countries in pricing regulations could lead to third-party cross-border trading in AbbVie’s products
that results in a reduction in future revenues and operating earnings.
Rebates related to government programs, such as fee-for-service Medicaid or Medicaid managed care
programs, arise from laws and regulations. AbbVie cannot predict if additional government initiatives to
contain health care costs or other factors could lead to new or modified regulatory requirements that
include higher or incremental rebates or discounts. Other rebate and discount programs arise from
contractual agreements with private payers. Various factors, including market factors and the ability of
private payers to control patient access to products, may provide payers the leverage to negotiate higher or
additional rebates or discounts that could have a material adverse effect on AbbVie’s operations.
AbbVie is subject to numerous governmental regulations, and it can be costly to comply with these
regulations and to develop compliant products and processes.
AbbVie’s products are subject to rigorous regulation by numerous international, supranational, federal,
and state authorities, as described in Item 1, ‘‘Business—Regulation—Discovery and Clinical Development.’’
The process of obtaining regulatory approvals to market a pharmaceutical product can be costly and time
consuming, and approvals might not be granted for future products, or additional indications or uses of
existing products, on a timely basis, if at all. Delays in the receipt of, or failure to obtain approvals for,
future products, or new indications and uses, could result in delayed realization of product revenues,
reduction in revenues, and substantial additional costs.
In addition, AbbVie cannot guarantee that it will remain compliant with applicable regulatory
requirements once approval has been obtained for a product. These requirements include, among other
things, regulations regarding manufacturing practices, product labeling, and advertising and post-marketing
reporting, including adverse event reports and field alerts due to manufacturing quality concerns. AbbVie
must incur expense and spend time and effort to ensure compliance with these complex regulations.
Possible regulatory actions could result in substantial modifications to AbbVie’s business practices and
operations; refunds, recalls, or seizures of AbbVie’s products; a total or partial shutdown of production in
one or more of AbbVie’s or its suppliers’ facilities while AbbVie or its supplier remedies the alleged
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violation; the inability to obtain future approvals; and withdrawals or suspensions of current products from
the market. Any of these events could disrupt AbbVie’s business and have a material adverse effect on its
business and results of operations.
Laws and regulations affecting government benefit programs could impose new obligations on
AbbVie, require it to change its business practices, and restrict its operations in the future.
The health care industry is subject to various federal, state, and international laws and regulations
pertaining to government benefit programs reimbursement, rebates, price reporting and regulation, and
health care fraud and abuse. In the United States, these laws include anti-kickback and false claims laws,
the Medicaid Rebate Statute, the Veterans Health Care Act, and individual state laws relating to pricing and
sales and marketing practices. Violations of these laws may be punishable by criminal and/or civil sanctions,
including, in some instances, substantial fines, imprisonment, and exclusion from participation in federal and
state health care programs, including Medicare, Medicaid, and Veterans Administration health programs.
These laws and regulations are broad in scope and they are subject to change and evolving interpretations,
which could require AbbVie to incur substantial costs associated with compliance or to alter one or more of
its sales or marketing practices. In addition, violations of these laws, or allegations of such violations, could
disrupt AbbVie’s business and result in a material adverse effect on its business and results of operations.
AbbVie could be subject to increased monetary penalties and/or other sanctions, including exclusion
from federal health care programs, if it fails to comply with the terms of the May 7, 2012 resolution of
the Department of Justice’s investigation into sales and marketing activities for Depakote.
On May 7, 2012, Abbott settled United States federal and 49 state investigations into its sales and
marketing activities for Depakote by pleading guilty to a misdemeanor violation of the Food, Drug, and
Cosmetic Act, agreeing to pay approximately $700 million in criminal fines and forfeitures and
approximately $900 million to resolve civil claims, and submitting to a term of probation. The term of
probation ended January 1, 2016 upon AbbVie satisfying all of the probation conditions. However, if AbbVie
violates any remaining terms of the plea agreement, it may face additional monetary sanctions and other
such remedies as the court deems appropriate.
In addition, Abbott entered into a five-year CIA with the Office of Inspector General for the United
States Department of Health and Human Services (OIG). The effective date of the CIA is October 11, 2012.
The obligations of the CIA have transferred to and become fully binding on AbbVie. The CIA requires
enhancements to AbbVie’s compliance program, fulfillment of reporting and monitoring obligations,
management certifications, and resolutions from AbbVie’s board of directors, among other requirements.
Compliance with the requirements of the settlement will impose additional costs and burdens on AbbVie,
including in the form of employee training, third party reviews, compliance monitoring, reporting
obligations, and management attention. If AbbVie fails to comply with the CIA, the OIG may impose
monetary penalties or exclude AbbVie from federal health care programs, including Medicare and Medicaid.
AbbVie and Abbott may be subject to third party claims and shareholder lawsuits in connection with the
settlement, and AbbVie may be required to indemnify all or a portion of Abbott’s costs.
The international nature of AbbVie’s business subjects it to additional business risks that may cause
its revenue and profitability to decline.
AbbVie’s business is subject to risks associated with doing business internationally, including in
emerging markets. Net revenues outside of the United States make up approximately 41 percent of
AbbVie’s total net revenues in 2015. The risks associated with AbbVie’s operations outside the United States
include:
• fluctuations in currency exchange rates;
• changes in medical reimbursement policies and programs;
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• multiple legal and regulatory requirements that are subject to change and that could restrict
AbbVie’s ability to manufacture, market, and sell its products;
• differing local product preferences and product requirements;
• trade protection measures and import or export licensing requirements;
• difficulty in establishing, staffing, and managing operations;
• differing labor regulations;
• potentially negative consequences from changes in or interpretations of tax laws;
• political and economic instability, including sovereign debt issues;
• price and currency exchange controls, limitations on participation in local enterprises, expropriation,
nationalization, and other governmental action;
• inflation, recession and fluctuations in interest rates;
• potential deterioration in the economic position and credit quality of certain non-U.S. countries,
including in Europe and Latin America; and
• potential penalties or other adverse consequences for violations of anti-corruption, anti-bribery and
other similar laws and regulations, including the United States Foreign Corrupt Practices Act and the
United Kingdom Bribery Act.
Events contemplated by these risks may, individually or in the aggregate, have a material adverse effect
on AbbVie’s revenues and profitability.
AbbVie’s ability to realize the anticipated benefits of its merger with Pharmacyclics will depend on
its ability to effectively and profitably commercialize IMBRUVICA(cid:2) (ibrutinib).
The anticipated benefits of AbbVie’s merger with Pharmacyclics will depend on AbbVie’s ability to:
effectively and profitably commercialize IMBRUVICA, including AbbVie’s ability to create and meet continued
market demand, achieve market acceptance and generate product sales; ensure that the active
pharmaceutical ingredient for IMBRUVICA and the finished product are manufactured in sufficient quantities
and in compliance with requirements of the FDA and similar foreign regulatory agencies and with
acceptable quality and pricing to meet commercial demand; and ensure that the entire supply chain
efficiently and consistently delivers IMBRUVICA to AbbVie’s customers. The commercialization of IMBRUVICA
may not be successful due to, among other things, unexpected challenges from competitors, new safety
issues or concerns being reported that may impact or narrow the approved indications, the relative price of
IMBRUVICA as compared to alternative treatment options, and changes to the label for IMBRUVICA that
further restrict its marketing. If the commercialization of IMBRUVICA is unsuccessful, AbbVie’s ability to
generate revenue from product sales and realize the anticipated benefits of the merger will be adversely
affected.
AbbVie may acquire other businesses, license rights to technologies or products, form alliances, or
dispose of assets, which could cause it to incur significant expenses and could negatively affect
profitability.
AbbVie may pursue acquisitions, technology licensing arrangements, and strategic alliances, or dispose
of some of its assets, as part of its business strategy. AbbVie may not complete these transactions in a
timely manner, on a cost-effective basis, or at all, and may not realize the expected benefits. If AbbVie is
successful in making an acquisition, the products and technologies that are acquired may not be successful
or may require significantly greater resources and investments than originally anticipated. AbbVie may not
be able to integrate acquisitions successfully into its existing business and could incur or assume significant
debt and unknown or contingent liabilities. AbbVie could also experience negative effects on its reported
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2015 Form 10-K
results of operations from acquisition or disposition-related charges, amortization of expenses related to
intangibles and charges for impairment of long-term assets. These effects could cause a deterioration of
AbbVie’s credit rating and result in increased borrowing costs and interest expense.
Additionally, changes in AbbVie’s structure, operations, revenues, costs, or efficiency resulting from
major transactions such as acquisitions, divestitures, mergers, alliances, restructurings or other strategic
initiatives, may result in greater than expected costs, may take longer than expected to complete or
encounter other difficulties, including the need for regulatory approval where appropriate.
AbbVie is dependent on wholesale distributors for distribution of its products in the United States
and, accordingly, its results of operations could be adversely affected if they encounter financial
difficulties.
In 2015, three wholesale distributors—AmerisourceBergen Corporation, Cardinal Health, Inc. and
McKesson Corporation—accounted for substantially all of AbbVie’s net revenues in the United States. If one
of its significant wholesale distributors encounters financial or other difficulties, such distributor may
decrease the amount of business that it does with AbbVie, and AbbVie may be unable to collect all the
amounts that the distributor owes it on a timely basis or at all, which could negatively impact AbbVie’s
business and results of operations.
AbbVie has debt obligations that could adversely affect its business and its ability to meet its
obligations.
The amount of debt that AbbVie has incurred and intends to incur could have important consequences
to AbbVie and its investors. These consequences include, among other things, requiring a portion of
AbbVie’s cash flow from operations to make interest payments on this debt and reducing the cash flow
available to fund capital expenditures and other corporate purposes and to grow AbbVie’s business. To the
extent AbbVie incurs additional indebtedness, these risks could increase. In addition, AbbVie’s cash flow
from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and AbbVie
may not be able to borrow money, sell assets, or otherwise raise funds on acceptable terms, or at all, to
refinance its debt.
AbbVie may need additional financing in the future to meet its capital needs or to make
opportunistic acquisitions, and such financing may not be available on favorable terms, if at all.
AbbVie may need to seek additional financing for its general corporate purposes. For example, it may
need to increase its investment in research and development activities or need funds to make acquisitions.
AbbVie may be unable to obtain any desired additional financing on terms favorable to it, if at all. If
AbbVie loses its investment grade credit rating or adequate funds are not available on acceptable terms,
AbbVie may be unable to fund its expansion, successfully develop or enhance products, or respond to
competitive pressures, any of which could negatively affect AbbVie’s business. If AbbVie raises additional
funds by issuing debt or entering into credit facilities, it may be subject to limitations on its operations due
to restrictive covenants. Failure to comply with these covenants could adversely affect AbbVie’s business.
AbbVie depends on information technology and a failure of those systems could adversely affect
AbbVie’s business.
AbbVie relies on sophisticated information technology systems to operate its business. These systems
are potentially vulnerable to malicious intrusion, random attack, loss of data privacy, or breakdown.
Although AbbVie has invested in the protection of its data and information technology and also monitors its
systems on an ongoing basis, there can be no assurance that these efforts will prevent breakdowns or
breaches in AbbVie’s information technology systems that could adversely affect AbbVie’s business.
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Other factors can have a material adverse effect on AbbVie’s profitability and financial condition.
Many other factors can affect AbbVie’s results of operations, cash flows and financial condition,
including:
• changes in or interpretations of laws and regulations, including changes in accounting standards,
taxation requirements, product marketing application standards, and environmental laws;
• differences between the fair value measurement of assets and liabilities and their actual value,
particularly for pension and post-employment benefits, stock-based compensation, intangibles, and
goodwill; and for contingent liabilities such as litigation, the absence of a recorded amount, or an
amount recorded at the minimum, compared to the actual amount;
• changes in the rate of inflation (including the cost of raw materials, commodities, and supplies),
interest rates, market value of AbbVie’s equity investments, and the performance of investments
held by it or its employee benefit trusts;
• changes in the creditworthiness of counterparties that transact business with or provide services to
AbbVie or its employee benefit trusts;
• changes in the ability of third parties that provide information technology, accounting, human
resources, payroll, and other outsourced services to AbbVie to meet their contractual obligations to
AbbVie; and
• changes in business, economic, and political conditions, including: war, political instability, terrorist
attacks, the threat of future terrorist activity and related military action; natural disasters; the cost
and availability of insurance due to any of the foregoing events; labor disputes, strikes, slow-downs,
or other forms of labor or union activity; and pressure from third-party interest groups.
Risks Related to AbbVie’s Common Stock
AbbVie cannot guarantee the timing, amount, or payment of dividends on its common stock.
Although AbbVie expects to pay regular cash dividends, the timing, declaration, amount and payment
of future dividends to stockholders will fall within the discretion of AbbVie’s board of directors. The board’s
decisions regarding the payment of dividends will depend on many factors, such as AbbVie’s financial
condition, earnings, capital requirements, debt service obligations, industry practice, legal requirements,
regulatory constraints, and other factors that the board deems relevant. For more information, see Item 5,
‘‘Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.’’ AbbVie’s ability to pay dividends will depend on its ongoing ability to generate cash from
operations and access capital markets. AbbVie cannot guarantee that it will continue to pay a dividend in
the future.
An AbbVie stockholder’s percentage of ownership in AbbVie may be diluted in the future.
In the future, a stockholder’s percentage ownership in AbbVie may be diluted because of equity
issuances for capital market transactions, equity awards that AbbVie will be granting to AbbVie’s directors,
officers and employees, acquisitions, or other purposes. AbbVie’s employees have options to purchase
shares of its common stock as a result of conversion of their Abbott stock options (in whole or in part) to
AbbVie stock options. AbbVie anticipates its compensation committee will grant additional stock options or
other stock-based awards to its employees. Such awards will have a dilutive effect on AbbVie’s earnings per
share, which could adversely affect the market price of AbbVie’s common stock. From time to time, AbbVie
will issue additional options or other stock-based awards to its employees under AbbVie’s employee
benefits plans.
In addition, AbbVie’s amended and restated certificate of incorporation authorizes AbbVie to issue,
without the approval of AbbVie’s stockholders, one or more classes or series of preferred stock having such
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designation, powers, preferences and relative, participating, optional and other special rights, including
preferences over AbbVie’s common stock respecting dividends and distributions, as AbbVie’s board of
directors generally may determine. The terms of one or more classes or series of preferred stock could
dilute the voting power or reduce the value of AbbVie’s common stock. For example, AbbVie could grant
the holders of preferred stock the right to elect some number of AbbVie’s directors in all events or on the
happening of specified events or the right to veto specified transactions. Similarly, the repurchase or
redemption rights or liquidation preferences AbbVie could assign to holders of preferred stock could affect
the residual value of the common stock.
Certain provisions in AbbVie’s amended and restated certificate of incorporation and amended and
restated by-laws, and of Delaware law, may prevent or delay an acquisition of AbbVie, which could
decrease the trading price of AbbVie’s common stock.
AbbVie’s amended and restated certificate of incorporation and amended and restated by-laws contain,
and Delaware law contains, provisions that are intended to deter coercive takeover practices and
inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to
encourage prospective acquirors to negotiate with AbbVie’s board of directors rather than to attempt a
hostile takeover. These provisions include, among others:
• the inability of AbbVie’s stockholders to call a special meeting;
• the division of AbbVie’s board of directors into three classes of directors, with each class serving a
staggered three-year term;
• a provision that stockholders may only remove directors for cause;
• the ability of AbbVie’s directors, and not stockholders, to fill vacancies on AbbVie’s board of
directors; and
• the requirement that the affirmative vote of stockholders holding at least 80 percent of AbbVie’s
voting stock is required to amend certain provisions in AbbVie’s amended and restated certificate of
incorporation and AbbVie’s amended and restated by-laws relating to the number, term and election
of AbbVie’s directors, the filling of board vacancies, the calling of special meetings of stockholders
and director and officer indemnification provisions.
In addition, Section 203 of the Delaware General Corporation Law provides that, subject to limited
exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15 percent of the
outstanding voting stock of a Delaware corporation shall not engage in any business combination with that
corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period
following the date on which that person or its affiliates becomes the holder of more than 15 percent of
the corporation’s outstanding voting stock.
AbbVie believes these provisions protect its stockholders from coercive or otherwise unfair takeover
tactics by requiring potential acquirors to negotiate with AbbVie’s board of directors and by providing
AbbVie’s board of directors with more time to assess any acquisition proposal. These provisions are not
intended to make the company immune from takeovers. However, these provisions apply even if the offer
may be considered beneficial by some stockholders and could delay or prevent an acquisition that AbbVie’s
board of directors determines is not in the best interests of AbbVie and AbbVie’s stockholders. These
provisions may also prevent or discourage attempts to remove and replace incumbent directors.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain forward looking statements regarding business
strategies, market potential, future financial performance and other matters. The words ‘‘believe,’’ ‘‘expect,’’
‘‘anticipate,’’ ‘‘project’’ and similar expressions, among others, generally identify ‘‘forward looking
statements,’’ which speak only as of the date the statements were made. The matters discussed in these
forward looking statements are subject to risks, uncertainties and other factors that could cause actual
results to differ materially from those projected, anticipated or implied in the forward looking statements.
In particular, information included under Item 1, ‘‘Business,’’ Item 1A, ‘‘Risk Factors,’’ and Item 7,
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ contain forward
looking statements. Where, in any forward looking statement, an expectation or belief as to future results
or events is expressed, such expectation or belief is based on the current plans and expectations of AbbVie
management and expressed in good faith and believed to have a reasonable basis, but there can be no
assurance that the expectation or belief will result or be achieved or accomplished. Factors that could cause
actual results or events to differ materially from those anticipated include the matters described under
Item 1A, ‘‘Risk Factors’’ and Item 7, ‘‘Management’s Discussion and Analysis of Financial Condition and
Results of Operations.’’ AbbVie does not undertake any obligation to update the forward-looking statements
included in this Annual Report on Form 10-K to reflect events or circumstances after the date hereof,
unless AbbVie is required by applicable securities law to do so.
ITEM 1B. UNRESOLVED STAFF COMMENTS
.....................................................................................................................................................................................................................................................................................................................................................
None.
ITEM 2. PROPERTIES
.....................................................................................................................................................................................................................................................................................................................................................
AbbVie’s corporate offices are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400.
AbbVie’s principal manufacturing plants are in the following locations:
United States
Abbott Park, Illinois*
Barceloneta, Puerto Rico
Jayuya, Puerto Rico
North Chicago, Illinois
Worcester, Massachusetts
*
Leased property.
Outside the United States
Campoverde di Aprilia, Italy
Cork, Ireland
Ludwigshafen, Germany
Sligo, Ireland
In addition to the above, AbbVie has other manufacturing facilities in the United States and worldwide.
AbbVie believes its facilities are suitable and provide adequate production capacity.
In the United States, including Puerto Rico, AbbVie has one distribution center. AbbVie also has four
research and development facilities in the United States located at: Abbott Park, Illinois; North Chicago,
Illinois; Redwood City, California; and Worcester, Massachusetts. Outside the United States, AbbVie’s
principal research and development facilities are located in Ludwigshafen, Germany.
Except as noted, the principal plants in the United States listed above are owned by AbbVie or
subsidiaries of AbbVie. The remaining manufacturing plants and all other facilities are owned or leased by
AbbVie or subsidiaries of AbbVie.
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ITEM 3. LEGAL PROCEEDINGS
.....................................................................................................................................................................................................................................................................................................................................................
Information pertaining to legal proceedings is provided in Note 14 entitled ‘‘Legal Proceedings and
Contingencies’’ of the Notes to Consolidated Financial Statements included under Item 8, ‘‘Financial
Statements and Supplementary Data,’’ and is incorporated by reference herein.
ITEM 4. MINE SAFETY DISCLOSURES
.....................................................................................................................................................................................................................................................................................................................................................
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists AbbVie’s executive officers, each of whom was first appointed as an AbbVie
corporate officer in December 2012, except as otherwise indicated:
Name
Age
Position
Richard A. Gonzalez
Carlos Alban
William J. Chase
Henry O. Gosebruch*
Laura J. Schumacher
62
53
48
43
52
Chairman of the Board and Chief Executive Officer
Executive Vice President, Commercial Operations
Executive Vice President, Chief Financial Officer
Executive Vice President and Chief Strategy Officer
Executive Vice President, External Affairs, General Counsel and
Corporate Secretary
Michael E. Severino, M.D.**
50
Executive Vice President, Research and Development, Chief
Timothy J. Richmond
Azita Saleki-Gerhardt, Ph.D.
Thomas A. Hurwich
49
52
55
Senior Vice President, Human Resources
Senior Vice President, Operations
Vice President, Controller
Scientific Officer
*
**
First appointed as a corporate officer in December 2015.
First appointed as a corporate officer in June 2014.
Mr. Gonzalez is AbbVie’s Chairman of the Board and Chief Executive Officer. He served as Abbott’s
Executive Vice President, Pharmaceutical Products Group from 2010 to 2012, and was responsible for
Abbott’s worldwide pharmaceutical business, including commercial operations, research and development,
and manufacturing. He has also served as President, Abbott Ventures Inc., Abbott’s medical technology
investment arm, from 2009 to 2011. Mr. Gonzalez joined Abbott in 1977 and held various management
positions before briefly retiring in 2007, including Abbott’s President and Chief Operating Officer, President,
Chief Operating Officer of Abbott’s Medical Products Group, Senior Vice President and President of Abbott’s
former Hospital Products Division (now Hospira, Inc.), Vice President and President of Abbott’s Health
Systems Division, and Divisional Vice President and General Manager for Abbott’s Diagnostics Operations in
the United States and Canada.
Mr. Alban is AbbVie’s Executive Vice President, Commercial Operations. He served as Abbott’s Senior
Vice President, Proprietary Pharmaceutical Products, Global Commercial Operations from 2011 to 2012, as
Senior Vice President, International Pharmaceuticals from 2009 to 2011, as Vice President, Western Europe
and Canada from 2007 to 2009, and as Vice President, European Operations from 2006 to 2007. Mr. Alban
joined Abbott in 1986.
Mr. Chase is AbbVie’s Executive Vice President, Chief Financial Officer. He served as Abbott’s Vice
President, Licensing and Acquisitions from 2010 to 2012, as Vice President, Treasurer from 2007 to 2010,
and as Divisional Vice President, Controller of Abbott International from 2004 to 2007. Mr. Chase joined
Abbott in 1989.
Mr. Gosebruch is AbbVie’s Executive Vice President and Chief Strategy Officer. He worked for more
than 20 years in the Mergers & Acquisitions Group at J.P. Morgan Securities LLC, serving as Managing
Director since 2007 and as Co-Head of M&A North America during 2015. Mr. Gosebruch joined AbbVie in
2015.
Ms. Schumacher is AbbVie’s Executive Vice President, External Affairs, General Counsel and Corporate
Secretary, responsible for AbbVie’s externally-facing functions of Health Economics Outcomes Research,
Government Affairs, Corporate Responsibility, Brand and Communications. She also leads all legal functions
and biotherapeutics strategy. Prior to AbbVie’s separation from Abbott, Ms. Schumacher served as Executive
Vice President, General Counsel, and Corporate Secretary from 2007 to 2012, and as Senior Vice President,
Corporate Secretary, and General Counsel from 2005 to 2007. Both at Abbott and AbbVie, Ms. Schumacher
26
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2015 Form 10-K
also led Licensing and Acquisition and Ventures and Early Stage Collaborations. At Abbott, Ms. Schumacher
was also responsible for its Office of Ethics and Compliance. Ms. Schumacher joined Abbott in 1990. She
serves on the board of General Dynamics Corporation.
Dr. Severino is AbbVie’s Executive Vice President, Research and Development, Chief Scientific Officer.
Dr. Severino served at Amgen Inc. as Senior Vice President, Global Development and Corporate Chief
Medical Officer from 2012 to 2014, as Vice President, Global Development from 2010 to 2012 and as Vice
President, Therapeutic Area Head, General Medicine and Inflammation Global Clinical Development from
2007 to 2012. He joined AbbVie in 2014.
Mr. Richmond is AbbVie’s Senior Vice President, Human Resources. He served as Abbott’s Divisional
Vice President of Compensation & Benefits from 2008 to 2012, as Group Vice President of Talent and
Rewards from 2007 to 2008, and as Divisional Vice President of Talent Acquisition from 2006 to 2007.
Mr. Richmond joined Abbott in 2006.
Dr. Saleki-Gerhardt is AbbVie’s Senior Vice President, Operations. She served as Abbott’s Vice President,
Pharmaceuticals Manufacturing and Supply from 2011 to 2012, and as Divisional Vice President, Quality
Assurance, Global Pharmaceutical Operations from 2008 to 2011. Dr. Saleki-Gerhardt joined Abbott in 1993.
Mr. Hurwich is AbbVie’s Vice President, Controller. He served as Abbott’s Vice President, Internal Audit
from 2009 to 2012, and as Divisional Vice President, Controller, Abbott Diagnostics Division from 2003 to
2009. Mr. Hurwich joined Abbott in 1983.
The executive officers of AbbVie are elected annually by the board of directors. All other officers are
elected by the board or appointed by the Chairman of the Board. All officers are either elected at the first
meeting of the board of directors held after the annual stockholder meeting or appointed by the Chairman
of the Board after that board meeting. Each officer holds office until a successor has been duly elected or
appointed and qualified or until the officer’s death, resignation, or removal. There are no family
relationships between any of the executive officers listed above.
2015 Form 10-K
13NOV201221352027
27
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
.....................................................................................................................................................................................................................................................................................................................................................
Principal Market
The principal market for AbbVie’s common stock is the New York Stock Exchange (NYSE). AbbVie’s
common stock is also listed on the Chicago Stock Exchange and traded on various regional and electronic
exchanges. Outside the United States, AbbVie’s common stock is listed on NYSE Euronext Paris and the SIX
Swiss Exchange.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Stockholders
Market Price Per Share
2015
2014
high
low
high
low
$68.29
$70.75
$71.60
$64.30
$54.78
$56.33
$51.88
$45.45
$54.73
$56.90
$60.02
$70.76
$46.42
$45.50
$51.37
$52.06
There were 53,653 stockholders of record of AbbVie common stock as of January 31, 2016.
Dividends
Four quarterly dividends were paid on common stock in 2015 and 2014. The first quarter 2015 cash
dividend of $0.49 per share was payable February 13, 2015 and the second, third and fourth quarter 2015
dividends of $0.51 per share were payable May 15, 2015, August 14, 2015 and November 16, 2015,
respectively. The first quarter 2014 cash dividend of $0.40 per share was payable February 14, 2014 and
the second, third and fourth quarter 2014 dividends of $0.42 per share were payable May 15, 2014,
August 15, 2014 and November 17, 2014, respectively.
On October 30, 2015, AbbVie’s board of directors declared an increase in the quarterly cash dividend
from $0.51 per share to $0.57 per share, payable on February 16, 2016 to stockholders of record as of
January 15, 2016. 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. Moreover, if AbbVie determines to pay any dividend in the future, there can be no assurance that
it will continue to pay such dividends or the amount of such dividends.
Performance Graph
The following graph compares the cumulative total returns of AbbVie, the S&P 500 Index and the NYSE
Arca Pharmaceuticals Index. This graph covers the period from January 2, 2013 (the first day AbbVie’s
common stock began ‘‘regular-way’’ trading on the NYSE) through December 31, 2015. This graph assumes
$100 was invested in AbbVie common stock and each index on January 2, 2013 and also assumes the
reinvestment of dividends. The stock price performance on the following graph is not necessarily indicative
of future stock price performance.
28
13NOV201221352027
2015 Form 10-K
$225
$200
$175
$150
$125
$100
1/2/2013
COMPARISON OF CUMULATIVE TOTAL RETURN
12/31/2013
12/31/2014
12/31/2015
AbbVie Inc.
S&P 500 Index
NYSE Arca Pharmaceutical Index
13FEB201609355489
This performance graph is furnished and shall not be deemed ‘‘filed’’ with the SEC or subject to
Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any
of our filings under the Securities Act of 1933, as amended.
Issuer Purchases of Equity Securities
Period
October 1, 2015 - October 31, 2015
November 1, 2015 - November 30, 2015
December 1, 2015 - December 31, 2015
Total
(a) Total
Number
of Shares
(or Units)
Purchased
(b)
Average
Price Paid
per Share
(or Unit)
1,949(1) $38.02
10,423,835(1) $61.75
15,129,432(1) $58.26
25,555,216(1) $59.68
(c) Total
Number of
Shares (or Units)
Purchased as Part
of Publicly
Announced
Plans or
Programs
—
10,418,732
15,088,646
25,507,378
(d) Maximum Number (or
Approximate Dollar Value) of
Shares (or Units) that May
Yet Be Purchased Under the
Plans or Programs
$3,450,133,355(2)
$2,806,648,800(2)
$1,927,160,135(2)
$1,927,160,135(2)
1.
In addition to AbbVie shares repurchased on the open market under a publicly announced program,
these shares include the following:
(i)
the shares deemed surrendered to AbbVie to pay the exercise price in connection with the
exercise of employee stock options—1,949 in October; 5,103 in November; and 18,615 in
December; and
(ii)
the shares purchased on the open market for the benefit of participants in the AbbVie Employee
Stock Purchase Plan—0 in October; 0 in November; and 22,171 in December.
2.
These shares do not include the shares surrendered to AbbVie to satisfy minimum tax withholding
obligations in connection with the vesting of restricted stock or restricted stock units. On October 20,
2014, AbbVie announced that its board of directors authorized the purchase of up to $5.0 billion of its
common stock. Purchases of AbbVie shares under this program may be made from time to time at
management’s discretion. The program has no time limit and can be discontinued at any time.
2015 Form 10-K
13NOV201221352027
29
ITEM 6. SELECTED FINANCIAL DATA
.....................................................................................................................................................................................................................................................................................................................................................
The following table sets forth AbbVie’s selected financial information derived from its (i) audited
consolidated financial statements as of and for the years ended December 31, 2015, 2014 and 2013; and
(ii) audited combined financial statements as of and for the years ended December 31, 2012 and 2011. The
historical financial statements for periods prior to January 1, 2013 were prepared on a stand-alone basis
and were derived from Abbott’s consolidated financial statements and accounting records as if the former
research-based pharmaceutical business of Abbott had been part of AbbVie for all periods presented.
Accordingly, AbbVie’s financial statements for periods prior to January 1, 2013 are presented on a combined
basis and reflect AbbVie’s financial position, results of operations and cash flows as its business was
operated as part of Abbott prior to the separation, in conformity with generally accepted accounting
principles (GAAP) in the United States.
The selected financial information should be read in conjunction with the financial statements and
accompanying notes included under Item 8, ‘‘Financial Statements and Supplementary Data’’ and Item 7,
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’
as of and for the years ended December 31
(in millions, except per share data)
Statement of earnings data
Net revenues
Net earnings(a)(b)
Basic earnings per share(a)(b)
Diluted earnings per share(a)(b)
Cash dividends declared per share
Weighted-average basic shares outstanding(d)
Weighted-average diluted shares outstanding(d)
Balance sheet data
Total assets(e)
Long-term debt and lease obligations(e)(f)
n/a—Not applicable.
2015
2014
2013
2012
2011
$22,859
$ 5,144
$ 3.15
$ 3.13
$ 2.10
1,625
1,637
$19,960
$ 1,774
$ 1.11
$ 1.10
$ 1.75
1,595
1,610
$18,790
$ 4,128
$ 2.58
$ 2.56
$ 2.00(c)
1,589
1,604
$18,380
$ 5,275
$ 3.35
$ 3.35
n/a
1,577
1,577
$17,444
$ 3,433
$ 2.18
$ 2.18
n/a
1,577
1,577
$53,050
$31,265
$27,513
$14,552
$29,241
$14,353
$27,058
$14,702
$19,521
48
$
(a) AbbVie’s historical financial statements for periods prior to January 1, 2013 reflected an allocation of
expenses related to certain Abbott corporate functions, including senior management, legal, human
resources, finance, information technology, and quality assurance. These expenses were allocated to
AbbVie based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata
basis of revenues, headcount, square footage, number of transactions or other measures. AbbVie
considers the expense allocation methodology and results to be reasonable. However, the allocations
may not be indicative of the actual expenses that would have been incurred had AbbVie operated as
an independent, stand-alone, publicly-traded company for the periods presented. Accordingly, the
historical financial information presented for periods prior to January 1, 2013 may not be indicative of
the results of operations or financial position that would have been achieved if AbbVie had been an
independent, stand-alone, publicly-traded company during the periods shown or of AbbVie’s
performance for periods subsequent to December 31, 2012.
(b) Results for 2015, 2014 and 2013 included higher expenses associated with operating as an
independent, stand-alone, publicly-traded company than the historically derived financial statements for
periods prior to January 1, 2013. The increases include the impact of interest expense on debt issued
in November 2012, a higher tax rate and other incremental costs of operating as an independent
company. Refer to ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Results of Operations’’ for a discussion of other items that affected the comparability of
financial results for 2015, 2014 and 2013.
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2015 Form 10-K
(c) AbbVie declared regular quarterly cash dividends in 2013 aggregating $1.60 per share of common
stock. In addition, a cash dividend of $0.40 per share of common stock was declared from
pre-separation earnings on January 4, 2013 and was recorded as a reduction of additional paid-in
capital.
(d) On January 1, 2013, Abbott distributed 1,577 million shares of AbbVie common stock to shareholders
of Abbott common stock. For periods prior to the separation, the weighted-average basic and diluted
shares outstanding were based on the number of shares of AbbVie common stock outstanding on the
distribution date. Refer to Note 4 to the audited consolidated financial statements included under
Item 8, ‘‘Financial Statements and Supplementary Data’’ for information regarding the calculation of
basic and diluted earnings per common share for 2015, 2014 and 2013.
(e) On May 26, 2015, AbbVie acquired Pharmacyclics, Inc. for approximately $20.8 billion, including cash
consideration of $12.4 billion and equity consideration of approximately 128 million shares of AbbVie
common stock valued at $8.4 billion. In connection with the acquisition, AbbVie issued $16.7 billion
aggregate principal amount of unsecured senior notes, of which approximately $11.5 billion were used
to finance the acquisition of Pharmacyclics Inc. and approximately $5.0 billion were used to finance an
accelerated share repurchase agreement. Refer to Notes 5, 9 and 12 to the audited consolidated
financial statements included under Item 8, ‘‘Financial Statements and Supplementary Data’’ for
information regarding the acquisition of Pharmacyclics, Inc., the senior notes and the accelerated share
repurchase program, respectively.
(f) Also includes current portion of long-term debt and lease obligations.
2015 Form 10-K
13NOV201221352027
31
ITEM 7. 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 December 31, 2015 and 2014 and results of operations for each of the three years in the
period ended December 31, 2015. This commentary should be read in conjunction with the consolidated
financial statements and accompanying notes appearing in Item 8, ‘‘Financial Statements and
Supplementary Data.’’
EXECUTIVE OVERVIEW
Company Overview
AbbVie is a global, research-based biopharmaceutical company formed in 2013 following separation
from Abbott Laboratories (Abbott). AbbVie’s mission is to use its expertise, dedicated people and unique
approach to innovation to develop and market advanced therapies that address some of the world’s most
complex and serious diseases. AbbVie’s products are focused on treating conditions such as chronic
autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood
cancers; virology, including hepatitis C (HCV) and human immunodeficiency virus (HIV); neurological
disorders, such as Parkinson’s disease; metabolic diseases, including thyroid disease and complications
associated with cystic fibrosis; as well as other serious health conditions. AbbVie also has a pipeline of
promising new medicines across such important medical specialties as immunology, virology/liver disease,
oncology, neurology, cystic fibrosis and women’s health.
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. 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, sales are made either directly to customers or through distributors,
depending on the market served. Certain products are co-marketed or co-promoted with other companies.
AbbVie has approximately 28,000 employees. AbbVie operates in one business segment—pharmaceutical
products.
On May 26, 2015, AbbVie completed its acquisition of Pharmacyclics, Inc. (Pharmacyclics), a
biopharmaceutical company that develops and commercializes novel therapies for people impacted by
cancer, and its flagship asset IMBRUVICA(cid:2) (ibrutinib), a novel, orally active, selective covalent inhibitor of
Bruton’s Tyrosine Kinase (BTK). As part of a worldwide collaboration and license agreement with Janssen
Biotech, Inc., one of the Janssen Pharmaceutical companies of Johnson & Johnson (Janssen), IMBRUVICA is
approved for use in the United States, Canada, and the European Union (EU) as well as in other countries
worldwide. In the United States, AbbVie co-markets IMBRUVICA for four indications approved by the U.S.
Food and Drug Administration (FDA) prior to the acquisition date: (i) for the treatment of patients with
mantle cell lymphoma (MCL) who have received at least one prior therapy; (ii) for the treatment of patients
with chronic lymphocytic leukemia (CLL) who have received at least one prior therapy; (iii) for the
treatment of CLL patients with deletion of the short arm chromosome 17 (del 17p CLL); and (iv) for the
treatment of patients with Waldenstrom’s macroglobulinemia. In the EU, Janssen markets IMBRUVICA. At
the date of the acquisition, IMBRUVICA was indicated in the EU for the treatment of adult patients with
relapsed or refractory MCL, or adult patients with CLL who have received at least one prior therapy, or in
first-line in the presence of 17p deletion or TP53 mutation in patients unsuitable for chemoimmunotherapy.
The acquisition will accelerate AbbVie’s clinical and commercial presence in oncology, strengthen its
pipeline, and establish a leadership position in hematological oncology. The acquisition will also accelerate
AbbVie’s revenue and earnings growth and further diversify its revenue base. AbbVie expects the
acquisition to be accretive to earnings beginning in 2017. Refer to Note 5 entitled ‘‘Licensing, Acquisitions
and Other Arrangements’’ of the Notes to Condensed Consolidated Financial Statements included under
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13NOV201221352027
2015 Form 10-K
Part II, Item 8, ‘‘Financial Statements and Supplementary Data’’ for further information regarding the
acquisition of Pharmacyclics.
2015 Financial Results
AbbVie’s strategy has focused on delivering strong financial results, advancing and investing in its
pipeline, and returning value to shareholders while ensuring a strong, sustainable growth business over the
long term. In 2015, AbbVie’s worldwide net revenues grew by 15 percent to $22.9 billion, driven primarily
by the continued strength of HUMIRA, both in the United States and internationally, the global launch of
AbbVie’s interferon-free HCV treatment, revenue growth in other key products including Creon and
Duodopa, and post-acquisition revenues related to IMBRUVICA. These increases were partially offset by a
decline in net revenues of AndroGel, principally due to continued market declines and the entry of generic
competition for the AndroGel 1% formulation, as well as the continued decline of the company’s lipid
franchise, and the unfavorable impact of foreign exchange.
The company’s financial performance in 2015 included delivering fully diluted earnings per share of
$3.13, including after-tax costs totaling $410 million incurred in connection with the acquisition and
integration of Pharmacyclics, a $350 million after-tax charge for the purchase of a rare pediatric disease
priority review voucher (PRV) from United Therapeutics Corporation, a $100 million after-tax charge as a
result of entering into an exclusive worldwide license agreement with C2N Diagnostics (C2N), after-tax
foreign exchange losses of $170 million as a result of the liquidation in 2015 of remaining foreign currency
positions related to the terminated proposed combination with Shire plc (Shire) in 2014, after-tax charges
of $129 million to increase the company’s litigation reserves, and an $83 million after-tax charge due to the
achievement of a development milestone under the global collaboration with Infinity Pharmaceuticals, Inc.
(Infinity). Refer to Note 5 for further information regarding these items. AbbVie’s financial performance in
2015 also reflected an improvement in gross margin to 80 percent of net revenues, primarily due to
favorable product mix across the product portfolio, operating efficiencies, and the impact of foreign
exchange rates. Financial results for 2015 also reflected continued funding in support of AbbVie’s emerging
mid-and late-stage pipeline assets, continued investment in AbbVie’s growth brands, and the global launch
of AbbVie’s interferon-free HCV treatment, VIEKIRA PAK.
In 2015, the company generated cash flows from operations of $7.5 billion. These cash flows enabled
the company to pay cash dividends to shareholders of $3.3 billion, repurchase approximately 46 million
shares for $2.8 billion in the open market (excluding the shares repurchased under an accelerated
repurchase agreement), and continue to enhance its pipeline through licensing and collaboration activities
including a $500 million payment to Calico Life Sciences LLC (Calico) as a result of the satisfaction of certain
conditions under the research and development (R&D) collaboration with Calico for which a charge to
acquired in-process research and development (IPR&D) was recorded in 2014. In addition, AbbVie issued
$16.7 billion aggregate principal amount of senior notes the proceeds of which were used to finance the
acquisition of Pharmacyclics and a $5.0 billion accelerated share repurchase agreement (ASR) pursuant to
which AbbVie paid $5.0 billion for an aggregate 73 million shares of AbbVie’s common stock. In October
2015, AbbVie’s board of directors declared a quarterly cash dividend of $0.57 per share of common stock
payable in February 2016. This reflects an increase of approximately 12 percent over the previous quarterly
rate of $0.51 per share of common stock.
2016 Strategic Objectives
AbbVie’s mission is to be an innovation-driven, patient-focused specialty biopharmaceutical company
capable of achieving top-tier financial performance through outstanding execution and a consistent stream
of innovative new medicines. AbbVie intends to continue to advance its mission in a number of ways,
including (i) growing revenues through continued strong performance from its existing portfolio of
on-market products, including its flagship brands, HUMIRA, IMBRUVICA and VIEKIRA PAK, as well as growth
from pipeline products; (ii) expanding gross and operating margins; (iii) continued investment in its pipeline
2015 Form 10-K
13NOV201221352027
33
in support of opportunities in immunology, oncology, and virology, as well as continued investment in key
on-market products; (iv) augmentation of its pipeline through concerted focus on strategic licensing,
acquisition and partnering activity with a focus on identifying compelling programs that fit AbbVie’s
strategic criteria; and (v) returning cash to shareholders via dividends and share repurchases. In addition,
AbbVie anticipates several regulatory submissions and key data readouts from key clinical trials in 2016.
AbbVie expects to achieve its revenue growth objectives as follows:
• HUMIRA sales growth by driving biologic penetration across disease categories, increasing market
leadership, strong commercial execution and expansion to new indications for hidradenitis
suppurativa (regulatory approval in the United States and EU achieved in 2015) and uveitis
(regulatory submissions in the United States and the EU are under review with approval expected in
2016).
• IMBRUVICA revenue growth driven by increasing market share within its four currently approved
indications as well as indication expansion of IMBRUVICA as a first-line therapy for CLL (currently
under priority review by the FDA). Revenues for 2016 will also benefit from a full year of
IMBRUVICA revenue.
• VIEKIRA PAK revenue growth driven by continued uptake across geographies, including Japan, the
second largest HCV market globally, as well as indication expansion for a once-daily, fixed-dosed
formulation of VIEKIRA PAK to treat genotype 1 (GT1) HCV (currently under review).
• The favorable impact of pipeline products approved in 2015 or currently under regulatory review
where approval is expected in 2016 including venetoclax, Empliciti (elotuzumab), and ZINBRYTA
(daclizumab). These pipeline products are described in greater detail in the section labeled
‘‘Research and Development’’ included as part of this Item 7.
In 2016, AbbVie remains committed to driving continued expansion of gross and operating margins and
expects to achieve this objective through productivity initiatives in supply chain, ongoing efficiency
programs to optimize manufacturing, commercial infrastructure, administrative costs and general corporate
expenses, and continued leverage from revenue growth. AbbVie also remains committed to returning cash
to shareholders via dividends and share repurchases.
Research and Development
Research and innovation are the cornerstones of AbbVie’s business as a global biopharmaceutical
company. AbbVie’s long-term success depends to a great extent on its ability to continue to discover and
develop innovative pharmaceutical products and acquire or collaborate on compounds currently in
development at other biotechnology or pharmaceutical companies.
AbbVie’s pipeline currently includes more than 50 compounds or indications in clinical development
individually or under collaboration or license agreements and is focused on such important medical
specialties as immunology, oncology, virology/liver disease, and neurology along with targeted investments
in renal disease, cystic fibrosis, and women’s health. Of these programs, more than 30 are in mid- and
late-stage development.
The following sections summarize transitions of significant programs from Phase 2 development to
Phase 3 development as well as developments in significant Phase 3 and registration programs. AbbVie
expects multiple Phase 2 programs to transition into Phase 3 programs during 2016.
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13NOV201221352027
2015 Form 10-K
Significant Clinical Programs Approved or Submitted
AbbVie submitted for review or received approval for the following significant late-stage development
programs:
Immunology
• The FDA granted HUMIRA orphan drug designation for the treatment of moderate-to-severe
hidradenitis suppurativa (HS), a painful, chronic inflammatory skin disease. AbbVie’s supplemental
Biological License Application (BLA) in the United States and its marketing authorization in the EU
were approved by the FDA and the European Medicines Agency (EMA) in 2015, respectively.
Approval for this indication represents the thirteenth indication for HUMIRA in major geographies
around the world.
• In April 2015 AbbVie announced that the European Commission (EC) granted marketing authorization
for HUMIRA for the treatment of severe chronic plaque psoriasis in children and adolescence from
four years of age who have had an inadequate response to or are inappropriate candidates for
topical therapy and phototherapies. With the EC decision, HUMIRA is now approved for use in this
indication in all member states of the EU.
• AbbVie submitted regulatory applications in the United States and the EU for the use of HUMIRA in
the treatment of uveitis. AbbVie expects to receive regulatory approval in 2016.
Oncology
• In July 2015, AbbVie announced that the EC granted marketing authorization for IMBRUVICA as the
first treatment option specifically approved for treatment of adult patients with Waldenstrom’s
macroglobulinemia, a rare, slow growing blood cancer. Pharmacyclics received FDA approval for
IMBRUVICA for patients with Waldenstrom’s macroglobulinemia in January 2015. The EC approval
triggered a $20 million milestone payment from Janssen.
• In September 2015, AbbVie announced that it submitted a Supplemental New Drug Application
(sNDA) to the FDA for IMBRUVICA for treatment-na¨ıve CLL patients. The sNDA is based on results
from the Phase 3 RESONATE(cid:3)-2 study, which evaluated efficacy and safety of IMBRUVICA versus
traditional chemotherapy, chlorambucil, in treatment-na¨ıve CLL patients aged 65 years or older. The
application has received a priority review.
• In November 2015, AbbVie submitted a sNDA to the FDA for labeling considerations based on safety
and efficacy results from the Phase 3 HELIOS trial investigating the use of IMBRUVICA,
bendamustine, and rituximab, versus placebo plus bendamustine and rituximab, in patients with
relapsed/refractory CLL or small lymphocytic lymphoma.
• In February 2016, the FDA granted IMBRUVICA orphan drug designation for the treatment of
patients with extranodal marginal zone lymphoma.
• AbbVie submitted regulatory applications in the United States and the EU for venetoclax (ABT-199),
an inhibitor of the B-cell lymphoma-2 (Bcl-2) protein developed in collaboration with Genentech and
Roche Holding AG. Priority review status was granted by the FDA and validation provided by the
EMA for these submissions. Venetoclax is also in Phase 3 development for patients with relapsed/
refractory CLL. In addition, venetoclax was granted three Breakthrough Therapy Designations by the
FDA: (i) for the treatment of CLL in previously treated (relapsed/refractory) patients with the 17p
deletion mutation; (ii) in combination with rituximab for the treatment of patients with relapsed/
refractory CLL, including patients with chromosome 17p deletion; and (iii) in combination with
hypomethylating agents for the treatment of patients with untreated (treatment-na¨ıve) acute
2015 Form 10-K
13NOV201221352027
35
myeloid leukemia who are ineligible to receive standard induction therapy (high-dose
chemotherapy).
• Registration submissions were submitted to the FDA and the EC for Empliciti (elotuzumab), a
Signaling Lymphocyte Activation Molecule (SLAM7)-directed immunostimulatory antibody developed
in partnership with Bristol-Myers Squibb (BMS) for first-line and relapsed/refractory multiple
myeloma (MM). Subsequently, the EMA validated for review the marketing authorization application
for Empliciti (elotuzumab) for the treatment of MM as combination therapy in adult patients who
have received one or more prior therapies. The application was granted accelerated assessment by
the EMA’s Committee for Medicinal Products for Human Use (CHMP). In addition, the FDA approved
Empliciti (elotuzumab) for the treatment of MM as a combination therapy in patients who have
received one to three prior therapies. This is the first FDA approval for an immune-stimulatory
antibody for MM in this indication. Empliciti will be marketed by BMS.
Virology/Liver Disease
• On January 16, 2015, AbbVie announced that the EC granted marketing authorizations for its all-oral,
short-course, interferon-free treatment VIEKIRAX (ombitasvir/paritaprevir/ritonavir tablets) + EXVIERA
(dasabuvir tablets). The treatment was approved with or without ribavirin (RBV) for patients with
GT1 chronic HCV infection, including those with compensated liver cirrhosis, HIV-1 co-infection,
patients on opioid substitution therapy and liver transplant recipients. Additionally, VIEKIRAX/
EXVIERA was approved for use with RBV in genotype 4 (GT4) chronic HCV patients.
• AbbVie’s regulatory application in Japan for the company’s all-oral, RBV and interferon-free, 12-week,
two direct-acting antiviral treatment of ombitasvir/paritaprevir/ritonavir (OBV/PTV/r), dosed once
daily, was approved in September 2015 for the treatment of patients with GT1 chronic HCV
infection.
• In July 2015, the FDA approved AbbVie’s regulatory application for TECHNIVIE (OBV/PTV/r tablets) in
combination with RBV for the treatment of adults with GT4 chronic HCV infection who do not have
cirrhosis. TECHNIVIE is the first and only all-oral, interferon-free, direct-acting antiviral treatment
approved in the United States for adult patients with GT4 chronic HCV infection.
• AbbVie submitted a regulatory application in the United States for a once-daily, fixed-dosed
formulation of VIEKIRA PAK to treat GT1 HCV. The proposed dosing for the fixed-dose formulation is
three oral tablets, taken once daily with a meal, with or without RBV. AbbVie anticipates regulatory
action on the new formulation in 2016.
• The FDA accepted AbbVie’s sNDA and granted priority review for VIEKIRA PAK without RBV in
patients with genotype 1b (GT1b) chronic HCV infection and compensated cirrhosis (Child-Pugh A).
Neurology
• On January 12, 2015, AbbVie announced that the FDA approved Duopa (carbidopa and levodopa), an
enteral suspension for the treatment of motor fluctuations for people with advanced Parkinson’s
disease. Duopa is administered using a small, portable infusion pump that delivers carbidopa and
levodopa directly into the small intestine for 16 continuous hours via a procedurally-placed tube.
This product is sold under the name Duodopa outside the United States.
• AbbVie is collaborating with Biogen to develop ZINBRYTA (daclizumab), an anti-CD25 monoclonal
antibody, for the treatment of the relapsing/remitting form of multiple sclerosis (MS). In February
2015, the registration submission for ZINBRYTA was made in the United States followed by the EU
submission in March 2015. In March, AbbVie and Biogen announced that the EMA had validated the
companies’ marketing authorization application for ZINBRYTA for the treatment of relapsing forms of
MS in the EU. Validation confirms that the submission is complete and signifies the initiation of the
36
13NOV201221352027
2015 Form 10-K
review process by the CHMP. In April 2015, AbbVie and Biogen announced that the FDA accepted
for review the registration submission in the United States.
Other Significant Developments
Transitions of significant programs from Phase 2 to Phase 3 development, as well as other significant
developments, included the following:
Immunology
• In January 2016, AbbVie announced the commencement of a Phase 3 clinical trial program to study
the use of AbbVie’s once-daily formulation of ABT-494, its internally developed investigational
selective Janus Kinase 1 (JAK-1) inhibitor, for the treatment of rheumatoid arthritis. A Phase 2 trial
of ABT-494 for the treatment of Crohn’s disease is also ongoing.
• In 2015, AbbVie received a decision by the EC regarding compliance with its pediatric investigation
plan for HUMIRA, which ensures that necessary data are obtained through studies in children. As a
result of this positive decision, the company is seeking an extension from each EU member state
where a supplementary protection certificate is held. Once approved, this will extend the HUMIRA
composition of matter patent in the EU by six months from April 2018 to October 2018.
Oncology
• In July 2015, AbbVie initiated a Phase 3 study for the use of Veliparib (ABT-888), a PARP-inhibitor, for
the treatment of ovarian cancer in combination with chemotherapy. Veliparib is also in Phase 3
development for various forms of breast and lung cancer.
• AbbVie recently initiated its first Phase 3 clinical trial for IMBRUVICA in solid tumors. The trial will
evaluate the safety and efficacy of IMBRUVICA in combination with gemcitabine and nab-paclitaxel
for first-line treatment of patients with metastatic pancreatic adenocarcinoma.
Virology/Liver Disease
• In October 2015, in consultation with the FDA, the product inserts in the United States for VIEKIRA
PAK and TECHNIVIE were updated from ‘‘not recommended in Child-Pugh B patients’’ to a
contraindication in patients with Child-Pugh B cirrhosis. Patients classified as Child-Pugh C remained
contraindicated as they have been since approval.
• In January 2016, AbbVie initiated a Phase 3 clinical trial program evaluating the safety and efficacy
of its next-generation, all-oral, once-daily, pan-genotypic, RBV-free investigational HCV regimen,
which includes ABT-493, a NS3/4A protease inhibitor, and ABT-530, an NS5A inhibitor.
Other
• AbbVie is developing a novel oral gonadotropin-releasing hormone (GnRH) antagonist, Elagolix, under
a collaboration with Neurocrine Biosciences (Neurocrine) for the treatment of endometriosis-related
pain and uterine fibroids. In January 2016, AbbVie announced the initiation of the first of two
planned Phase 3 studies evaluating the safety and efficacy of Elagolix in the treatment of patients
with uterine fibroids. AbbVie will make a milestone payment of $15 million to Neurocrine upon
enrollment of the first patient. Elagolix is in late-stage development for endometriosis.
• In 2012, AbbVie entered into a collaboration with Galapagos NV (Galapagos) to develop filgotinib, an
oral JAK1 inhibitor. In 2015, following a thorough review of available data, AbbVie announced that it
will not exercise its right to in-license filgotinib from Galapagos. Pursuant to the terms of the global
collaboration agreement with Galapagos, all rights to filgotinib reverted solely to Galapagos.
2015 Form 10-K
13NOV201221352027
37
In 2015, AbbVie also augmented its pipeline through strategic licensing and partnering activities
including in-licensing an anti-tau antibody (ABBV-8E12) for the treatment of Alzheimer’s disease and other
neurological disorders from C2N, a privately held protein diagnostic and therapeutic discovery company.
Refer to Note 5 of the Notes to Consolidated Financial Statements included under Item 8, ‘‘Financial
Statements and Supplementary Data’’ for further information regarding the license agreement with C2N.
RESULTS OF OPERATIONS
Net Revenues
The comparisons presented at constant currency rates reflect comparative local currency net revenues
at the prior year’s foreign exchange rates. This measure provides information on the change in net
revenues assuming that foreign currency exchange rates had not changed between the prior and the
current period. 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.
for the years ended (in millions)
2015
2014
2013
2015
2014
2015
2014
United States
International
Net revenues
$13,561
9,298
$10,845
9,115
$10,181
8,609
25% 7% 25% 7%
2% 6% 18% 9%
$22,859
$19,960
$18,790
15% 6% 22% 8%
Percent change
At actual
currency
rates
At constant
currency
rates
38
13NOV201221352027
2015 Form 10-K
The following table details AbbVie’s worldwide net revenues:
years ended December 31 (in millions)
2015
2014
2013
2015
2014
2015
2014
Percent change
At actual
currency
rates
At constant
currency
rates
HUMIRA
United States
International
Total
IMBRUVICA
United States
Collaboration revenues
Total
VIEKIRA
United States
International
Total
Creon
United States
Synagis
International
Lupron
United States
International
Total
Synthroid
United States
Kaletra
United States
International
Total
AndroGel
United States
Sevoflurane
United States
International
Total
Duodopa
United States
International
Total
Dyslipidemia products
United States
All other
Total net revenues
n/m—Not meaningful.
n/a—Not applicable.
$ 8,405
5,607
$14,012
$ 6,524
6,019
$12,543
$ 5,236
5,423
$10,659
29% 25% 29% 25%
9% 13%
(7)% 11%
12% 18% 19% 19%
$
$
$
659
95
754
804
835
$ 1,639
$
$
$
$
$
$
$
$
$
$
$
$
$
632
740
653
173
826
755
163
537
700
694
81
393
474
12
219
231
179
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
— $
—
— $
— n/a
— n/a
— n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
48
—
48
516
835
580
198
778
709
213
657
870
$
$
$
$
$
$
$
$
$
— n/m 100% n/m 100%
— n/a
n/a
n/a
n/a
— n/m 100% n/m 100%
412
22% 25% 22% 25%
827
(11)% 1%
1%
9%
566
219
785
13%
3%
3% 13%
(13)% (10)% —% (5)%
6% (1)% 9% —%
622
6% 14%
6% 14%
244
718
962
(24)% (13)% (24)% (13)%
(18)% (9)% (5)% (5)%
(20)% (10)% (10)% (7)%
934
$ 1,035
(26)% (10)% (26)% (10)%
83
467
550
$
$
77
491
568
(3)% 7% (3)% 7%
(16)% (5)% (4)% (1)%
(14)% (3)% (4)% —%
— $
— n/m n/a
n/m n/a
220
220
$
178
178
(1)% 24% 18% 25%
5% 24% 23% 25%
328
$ 1,076
(45)% (70)% (45)% (70)%
$ 1,223
$ 1,629
$ 1,666
(25)% (2)% (21)% (1)%
$22,859
$19,960
$18,790
15%
6% 22%
8%
2015 Form 10-K
13NOV201221352027
39
The following discussion and analysis of AbbVie’s net revenues by product is presented on a constant
currency basis.
Global HUMIRA sales increased 19 percent in both 2015 and 2014, primarily as a result of market
growth across therapeutic categories and geographies, higher market share, approval of new indications,
and favorable pricing in certain geographies. In the United States, HUMIRA revenues increased 29 percent
in 2015 and 25 percent in 2014, driven by prescription volume, favorable pricing, and market growth across
all indications. Internationally, HUMIRA revenues increased 9 percent in 2015 and 13 percent in 2014,
driven primarily by growth across indications in certain geographies. AbbVie continues to pursue several
new indications to help further differentiate HUMIRA from competing products and add to the sustainability
and future growth of HUMIRA.
Net revenues for IMBRUVICA represent product revenues in the United States as well as collaboration
revenues related to AbbVie’s 50 percent share of IMBRUVICA profit outside of the United States following
the completion of the acquisition of Pharmacyclics on May 26, 2015. AbbVie expects IMBRUVICA will be a
significant contributor to revenue growth in 2016.
AbbVie launched its HCV regimen, VIEKIRA PAK, in the United States following FDA approval in
mid-December 2014 and launched VIEKIRAX/EXVIERA in the EU in January 2015. In addition to growth in
approved markets, international revenues continued to increase during 2015 as the product was approved
in additional geographies. Net revenues of VIEKIRA PAK in 2014 reflect the shipment of launch quantities
into the market to support full commercial launch in 2015.
Net revenues for Creon increased 22 percent in 2015 and 25 percent in 2014, driven primarily by
continued market growth and higher market share. Creon maintains market leadership in the pancreatic
enzyme market.
Synagis is a seasonal product with the majority of sales occurring in the first and fourth quarters. Net
revenues increased 1 percent in 2015 and 9 percent in 2014. Revenues in 2015 reflected changes in
demand in certain markets, as well as an unfavorable comparison to 2014 driven by a less severe
respiratory syncytial virus season.
Global Lupron net revenues increased 9 percent in 2015 primarily due to increased demand and
favorable pricing in the United States. Lupron continues to hold a leadership position and maintains
significant share of the market.
Global Kaletra net revenues declined 10 percent in 2015 and 7 percent in 2014 primarily due to lower
market share resulting from the impact of increasing competition in the HIV marketplace.
AndroGel net revenues declined 26 percent in 2015 and 10 percent in 2014, primarily due to a
continued decline in the overall U.S. testosterone replacement market and the entry of generic competition
for the AndroGel 1% formulation in January 2015. The company expects the U.S. testosterone replacement
market will continue to decline in 2016.
Net revenues for Duodopa, AbbVie’s therapy for advanced Parkinson’s disease approved in Europe and
other international markets, grew 23 percent in 2015. AbbVie’s regulatory submission for Duopa in the
United States was approved by the FDA in January 2015. AbbVie expects net revenues for Duopa in the
United States will continue to gradually increase during 2016 as the product gains acceptance in the
marketplace.
Net revenues for AbbVie’s consolidated lipid franchise, which included TriCor, Trilipix, Niaspan, Simcor
and Advicor, declined 45 percent in 2015 and 70 percent in 2014 due to the introduction of generic
versions of these products in the U.S. market. Generic competition began in November 2012 for TriCor, July
2013 for Trilipix, and September 2013 for Niaspan. AbbVie has voluntarily withdrawn Simcor and Advicor
from the market and discontinued distribution as of December 31, 2015.
40
13NOV201221352027
2015 Form 10-K
All other net revenues declined 21 percent in 2015 primarily due to reduced demand driven by market
and share declines and a reduction in price for several of AbbVie’s mature on-market products.
Gross Margin
Percent
change
years ended December 31 (in millions)
2015
2014
2013
2015
2014
Gross margin
as a percent of net revenues
$18,359
$15,534
$14,209
18%
9%
80%
78%
76%
The gross margin for 2015, 2014 and 2013 reflected the favorable impact of product mix across the
product portfolio, including HUMIRA, operational efficiencies, and price increases, partially offset by the
effect of unfavorable foreign exchange rates and the loss of exclusivity for the lipid franchise. Gross margin
in 2015 also includes milestone revenue of $40 million from a collaboration partner related the company’s
oncology program. Gross margin in 2014 also includes royalty income of $81 million relating to prior
periods as a result of the settlement of a licensing arrangement and lower amortization expense for
intangible assets, partially offset by a $37 million impairment charge for an intangible asset.
Selling, General and Administrative
years ended December 31 (in millions)
Selling, general and administrative
as a percent of net revenues
Percent
change
2015
2014
2013
2015
2014
$6,387
$7,724
$5,352
(17)% 44%
28%
39%
28%
Selling, general and administrative (SG&A) expenses declined in 2015 compared to 2014, principally
due to the absence of transaction-related costs totaling $1.7 billion incurred in 2014 in connection with the
termination of the proposed combination with Shire, as further discussed in Note 5 of the Notes to
Consolidated Financial Statements. SG&A expenses in 2014 also included a $129 million charge related to
the Branded Prescription Drug Fee due to the issuance of final rules which resulted in an additional year of
expense in 2014. Refer to Note 13 for further information.
Excluding these items, SG&A expenses increased in both 2015 and 2014, reflecting increased selling
and marketing support for new products, including the global launch of VIEKIRA, as well as spending
relating to new indications and geographic expansion for HUMIRA and other growth brands. SG&A expenses
in 2015 also included Pharmacyclics acquisition and integration costs of $294 million, charges aggregating
$165 million to increase the company’s litigation reserves and restructuring charges of $39 million. These
increased costs were partially offset by the impact of favorable foreign exchange rates in 2015.
Research and Development and Acquired In-Process Research and Development
years ended December 31 (in millions)
2015
2014
2013
2015
2014
Research and development
as a percent of net revenues
Acquired in-process research and development
$4,285
$3,297
$2,855
30%
15%
19%
17%
15%
$ 150
$ 352
$ 338
(57)%
4%
R&D expenses for 2015 included Pharmacyclics acquisition and integration costs of $152 million, a
$350 million charge related to the purchase of a priority review voucher from a third party, a $130 million
Percent
change
2015 Form 10-K
13NOV201221352027
41
charge recorded due to the achievement of a development milestone under the collaboration with Infinity,
the post-acquisition R&D expenses of Pharmacyclics, and restructuring charges of $32 million. R&D
expenses in 2014 and 2013 included regulatory milestone payments of $40 million made to a collaboration
partner for regulatory milestones related to the company’s HCV program and restructuring charges of
$15 million, respectively.
R&D expenses in 2015 and 2014 otherwise reflected added funding to support the company’s
emerging mid- and late-stage pipeline assets and the continued pursuit of additional HUMIRA indications.
These increases were partially offset by the impact of favorable foreign exchange rates in 2015 and 2014.
IPR&D expenses in 2015 included a charge of $100 million as a result of entering into an exclusive
worldwide license agreement with C2N to develop and commercialize anti-tau antibodies for the treatment
of Alzheimer’s disease and other neurological disorders. IPR&D expenses in 2014 included a charge of
$275 million as a result of entering into a global collaboration with Infinity to develop and commercialize
duvelisib, a treatment for patients with cancer. IPR&D expense in 2013 included a charge of $175 million as
a result of entering into a global license agreement with Ablynx NV to develop and commercialize
ALX-0061, a charge of $70 million as a result of entering into a global collaboration with Alvine
Pharmaceuticals, Inc. to develop ALV003, a charge of $45 million as a result of entering into a global
collaboration with Galapagos for cystic fibrosis therapies, and charges totaling $48 million as a result of
entering into several other arrangements. Refer to Note 5 of the Notes to Consolidated Financial
Statements for additional information related to the company’s collaborations and other arrangements.
Other Operating Expenses
Other operating expenses in 2014 included a $750 million charge related to an R&D collaboration
agreement entered into in September 2014 with Calico to discover, develop and commercialize new
therapies for patients with age-related diseases.
Other Non-Operating Expenses
Interest expense, net was $686 million in 2015, $391 million in 2014, and $278 million in 2013 and
was comprised primarily of interest expense on outstanding debt. Interest expense, net in 2015 increased
due to the May 2015 issuance of $16.7 billion aggregate principal amount of senior notes, which were
issued primarily to finance the acquisition of Pharmacyclics and an accelerated share repurchase program.
Interest expense, net in 2015 also included $86 million of bridge financing related fees incurred in
connection with the acquisition of Pharmacyclics. Interest expense, net in 2014 included $141 million of
financing related fees incurred in connection with the terminated proposed combination with Shire.
In 2014, AbbVie entered into certain undesignated forward contracts to hedge the then anticipated
foreign currency cash outflows associated with the then proposed combination with Shire. Net foreign
exchange loss for 2014 included losses of $666 million associated with the Shire-related forward contracts.
Net foreign exchange loss for 2015 included losses totaling $170 million to reflect the completed liquidation
of the company’s remaining foreign currency positions related to the terminated proposed combination
with Shire.
Other non-operating expense, net for 2015 included impairment charges totaling $36 million related to
certain of the company’s equity investment securities. Other non-operating income, net, in 2014 primarily
consisted of income of $34 million from the resolution of a contractual agreement.
Income Tax Expense
The effective income tax rate was 23 percent in 2015, 25 percent in 2014, and 23 percent in 2013.
The effective tax rate fluctuates from year to year due to the allocation of the company’s taxable earnings
among jurisdictions, as well as certain discrete factors and events in each year, including acquisitions and
42
13NOV201221352027
2015 Form 10-K
collaborations. The effective income tax rate in 2015 included a tax benefit of $103 million from a
reduction of state valuation allowances. The effective income tax rate in 2014 included state valuation
allowances of $129 million and additional expenses of $129 million related to the Branded Prescription
Drug Fee, which is non-deductible.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
years ended December 31 (in millions)
Cash flows provided by/(used in):
Operating activities
Investing activities
Financing activities
2015
2014
2013
$ 3,549
$ 7,535
$(12,936) $ (926) $
$ 5,752
$ 6,267
879
$(3,293) $(3,442)
Cash flows provided by operations in 2015 was $7.5 billion compared to $3.5 billion in 2014. The
increase was primarily due to improved results of operations due to revenue growth and an improvement
in operating margin as well as the absence of after-tax transaction and financing-related and other costs of
$1.8 billion incurred in connection with the termination of the proposed combination with Shire, including
net foreign exchange losses related to the settlement of undesignated forward contracts used to hedge
anticipated foreign currency cash flows and the exit of certain foreign currency positions.
Cash provided by operating activities also reflected AbbVie’s voluntary contributions to its main
domestic defined benefit plan of $150 million and $370 million in 2015 and 2014, respectively. AbbVie also
made a voluntary contribution of $150 million to this plan subsequent to December 31, 2015. AbbVie also
paid $350 million to purchase a priority review voucher from United Therapeutics Corporation in 2015.
Realized excess tax benefits associated with stock-based compensation in 2015, 2014 and 2013 totaled
$61 million, $56 million, and $38 million, respectively, and were presented in the consolidated statements
of cash flows as an outflow within the operating section and an inflow within the financing section.
Investing activities in 2015 primarily included the $11.5 billion cash consideration paid to acquire
Pharmacyclics in May 2015, net of cash acquired of $877 million. Investing activities in 2015 also included
cash outflows related to other acquisitions and investments of $964 million, including a $500 million
payment to Calico that was accrued in 2014 due to the satisfaction of certain conditions under the R&D
collaboration, $100 million related to an exclusive worldwide license agreement with C2N to develop and
commercialize anti-tau antibodies for the treatment of Alzheimer’s disease and other neurological disorders,
and $130 million paid to Infinity due to the achievement of a development milestone under the
collaboration agreement. In 2014, cash outflows related to other acquisitions and investments totaled
$622 million, including $275 million paid to Infinity related to a global collaboration to develop duvelisib
(IPI-145), and $250 million to fund a novel R&D collaboration with Calico. Cash flows from investing
activities in 2015 and 2014 also reflected capital expenditures and net sales (purchases) of short-term
investments. Capital expenditures in 2014 included the purchase of a small molecule active pharmaceutical
ingredient manufacturing facility in Singapore. AbbVie incurred additional expenditures in 2015 to build a
new biologics facility on the site to produce bulk drug substance for HUMIRA as well as to support AbbVie’s
biologic pipeline.
In 2015 and 2014, the company issued and redeemed commercial paper. The balance of commercial
paper outstanding was $400 million and $416 million at December 31, 2015 and 2014, respectively. AbbVie
may issue additional commercial paper or retire commercial paper to meet liquidity requirements as
needed. In May 2015, the company issued $16.7 billion aggregate principal amount of senior notes with
various maturities between 2018 and 2045. Approximately $11.5 billion of the net proceeds were used to
finance the acquisition of Pharmacyclics and $5.0 billion of the net proceeds were used to finance the
accelerated share repurchase program described below. In September 2015, AbbVie entered into a
three-year $2 billion term loan credit facility and a 364-day $2 billion term loan credit facility. In November
2015 Form 10-K
13NOV201221352027
43
2015, AbbVie drew on these term facilities and used the proceeds to refinance its $4 billion of senior notes
that matured in 2015. During 2015 in connection with the acquisition of Pharmacyclics, the company paid
$86 million of costs relating to an $18 billion, 364-Day Bridge Term Loan Credit Agreement as well as
$93 million of costs relating to the issuance of senior notes.
Cash dividend payments totaled $3.3 billion in 2015 and $2.7 billion in 2014. On October 30, 2015,
AbbVie announced that its board of directors declared an increase in the company’s quarterly cash dividend
from $0.51 per share to $0.57 per share beginning with the dividend payable on February 16, 2016 to
stockholders of record as of January 15, 2016. The timing, declaration, amount of, and payment of any
dividends 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.
In October 2014, AbbVie’s board of directors authorized a $5.0 billion stock repurchase program. In
March 2015, the board of directors authorized a $5.0 billion increase to the existing stock repurchase
program in anticipation of executing an accelerated share repurchase agreement with a financial institution
in connection with the acquisition of Pharmacyclics. On May 26, 2015, AbbVie entered into and executed a
$5.0 billion ASR with Morgan Stanley & Co. LLC (Morgan Stanley). Pursuant to the terms of the ASR,
Morgan Stanley made an initial delivery of approximately 68 million shares of AbbVie’s common stock on
May 27, 2015, which represented approximately 90 percent of the total shares expected to be delivered
under the ASR. Subsequently in 2015, Morgan Stanley delivered an additional 5 million shares of AbbVie’s
common stock to AbbVie in final settlement of the ASR. AbbVie recorded the aggregate $5.0 billion
purchase price as a reduction to stockholders’ equity.
In addition to the ASR, the company repurchased approximately 46 million shares for $2.8 billion in
the open market in 2015 and approximately 9 million shares for $550 million in the open market in 2014.
AbbVie settled $300 million of its 2015 open market purchases in 2016. Purchases of AbbVie shares under
this program may be made from time to time at management’s discretion. The program has no time limit
and can be discontinued at any time. AbbVie’s remaining stock repurchase authorization was $1.9 billion as
of December 31, 2015. Refer to Note 12 for additional information related to the ASR.
Cash and equivalents in 2015 and 2014 were also negatively impacted by net unfavorable exchange
rate changes totaling $300 million and $577 million, respectively, principally due to the weakening of the
Euro and other foreign currencies on the translation of the company’s Euro-denominated assets and cash
denominated in foreign currencies. In 2014, AbbVie had an increased concentration of cash denominated in
foreign currencies accumulated in anticipation of the terminated proposed combination with Shire. While a
significant portion of cash and equivalents at December 31, 2015 are considered reinvested indefinitely in
foreign subsidiaries, AbbVie does not expect such reinvestment to affect its liquidity and capital resources.
If these funds were needed for operations in the United States, AbbVie would be required to accrue and
pay U.S. income taxes to repatriate these funds. AbbVie believes that it has sufficient sources of liquidity to
support its assumption that the disclosed amount of undistributed earnings at December 31, 2015 has been
reinvested indefinitely.
Credit Risk
AbbVie monitors economic conditions, the creditworthiness of customers, and government regulations
and funding, both domestically and abroad. AbbVie regularly communicates with its customers regarding
the status of receivable balances, including their payment plans and obtains positive confirmation of the
validity of the receivables. AbbVie establishes an allowance against accounts receivable when it is probable
they will not be collected. AbbVie also monitors the potential for and periodically has utilized factoring
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2015 Form 10-K
arrangements to mitigate credit risk although the receivables included in such arrangements have
historically not been a material amount of total outstanding receivables.
AbbVie continues to do business with foreign governments in certain countries, including Greece,
Portugal, Italy, and Spain, that have experienced a deterioration in credit and economic conditions.
Substantially all of AbbVie’s trade receivables in Greece, Portugal, Italy, and Spain are with governmental
health systems. AbbVie continues to monitor the economic health of the economy in Southern Europe, as
heightened economic concerns still exist. Outstanding net governmental receivables in these countries at
December 31, 2015 and 2014 were as follows:
(in millions)
Greece
Portugal
Italy
Spain
Total
Net receivables
Net
receivables
over one year
past due
2015
$ 53
27
211
234
$525
2014
2015
2014
$ 30
27
176
213
$446
$—
3
4
—
$ 7
$ —
7
16
10
$33
The company also continues to do business with foreign governments in certain oil-exporting countries,
which have experienced a deterioration in economic conditions, including Venezuela and Saudi Arabia.
Outstanding net governmental receivables related to Saudi Arabia were $108 million as of December 31,
2015. Refer to Item 7A, ‘‘Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency
Risk’’ for additional disclosures related to Venezuela. Due to the decline in the price of oil, liquidity issues
in certain countries may result in delays in the collection of receivables. Global economic conditions and
customer-specific factors may require the company to re-evaluate the collectability of its receivables and
the company could potentially incur credit losses.
Currently, AbbVie does not believe the economic conditions in Southern Europe and oil-exporting
countries will have a material impact on the company’s liquidity, cash flow or financial flexibility. However, if
government funding were to become unavailable in these countries or if significant adverse changes in their
reimbursement practices were to occur, AbbVie may not be able to collect the entire balance outstanding
as of December 31, 2015.
Credit Facility, Access to Capital and Credit Ratings
Credit Facility
AbbVie currently has a $3.0 billion five-year revolving credit facility, which matures in October 2019.
The revolving credit facility enables the company to borrow funds on an unsecured basis at variable interest
rates and contains various covenants. At December 31, 2015, the company was in compliance with all its
credit facility covenants. Commitment fees under the credit facility were not material. There were no
amounts outstanding under the credit facility as of December 31, 2015 and 2014.
Access to Capital
The company intends to fund short-term and long-term financial obligations as they mature through
cash on hand, future cash flows from operations, or by issuing 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
2015 Form 10-K
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45
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
On April 7, 2015, following the announcement of the then proposed combination with Pharmacyclics,
Moody’s Investor Service confirmed its Baa1 senior unsecured long-term rating and Prime-2 short-term
rating and revised its ratings outlook to ‘‘negative’’ from ‘‘stable’’. On March 5, 2015, Standard & Poor’s
Rating Services (S&P) affirmed AbbVie’s ‘‘A’’ corporate credit rating and senior unsecured debt rating and its
‘‘A-1’’ commercial paper rating and revised its ratings outlook to ‘‘negative’’ from ‘‘stable’’. There were no
additional changes in the company’s credit ratings in 2015.
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.
Contractual Obligations
The following table summarizes AbbVie’s estimated contractual obligations as of December 31, 2015:
(in millions)
Short-term borrowings
Long-term debt and capital lease obligations,
including current portion
Interest on long-term debt(a)
Future minimum non-cancelable operating lease
commitments
Purchase obligations and other(b)
Other long-term liabilities(c)
Total
(a)
Total
Less than
one year
One to
three years
Three to More than
five years
five years
$
406
$ 406
$
— $ — $
—
31,539
12,423
1,010
1,423
880
2,025
866
119
1,293
240
10,049
1,810
3,778
1,574
15,687
8,173
208
86
171
164
24
77
519
20
392
$47,681
$4,949
$12,324
$5,617
$24,791
Includes estimated future interest payments on long-term debt securities and capital lease obligations.
Interest payments on debt are calculated for future periods using interest rates in effect at the end of
2015. Projected interest payments include the related effects of interest rate swap agreements. Certain
of these projected interest payments may differ in the future based on changes in floating interest
rates or other factors or events. The projected interest payments only pertain to obligations and
agreements outstanding at December 31, 2015. Refer to Notes 9 and 10 for further discussion
regarding the company’s debt instruments and related interest rate agreements outstanding at
December 31, 2015. Annual interest on capital lease obligations is not material.
(b)
Includes the company’s significant unconditional purchase obligations. These commitments do not
exceed the company’s projected requirements and are made in the normal course of business.
(c) Amounts less than one year includes a voluntary contribution of $150 million AbbVie made to its main
domestic defined benefit plan subsequent to December 31, 2015. Amounts otherwise exclude pension
and other post-employment benefits and related deferred compensation cash outflows. Timing of
funding is uncertain and dependent on future movements in interest rates and investment returns,
changes in laws and regulations, and other variables. Also included in this amount are components of
other long-term liabilities including restructuring. Refer to Notes 8 and 11 for further information.
AbbVie enters into R&D collaboration arrangements with third parties that may require future
milestone payments to third parties contingent upon the achievement of certain development, regulatory,
or commercial milestones. Individually, these arrangements are not material in any one annual reporting
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2015 Form 10-K
period. However, if milestones for multiple products covered by these arrangements would happen to be
reached in the same reporting period, the aggregate charge to expense could be material to the results of
operations in that period. From a business perspective, the payments are viewed as positive because they
signify that the product is successfully moving through development and is now generating or is more likely
to generate cash flows from product sales. It is not possible to predict with reasonable certainty whether
these milestones will be achieved or the timing for achievement. As a result, these potential payments are
not included in the table of contractual obligations. Refer to Note 5 to the consolidated financial statements
for further discussion of these collaboration arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with generally accepted accounting principles in
the United States requires the use of estimates and assumptions that affect the reported amounts of assets
and liabilities and the reported amounts of revenue and expenses. A summary of the company’s significant
accounting policies is included in Note 2 to the consolidated financial statements. Certain of these policies
are considered critical as these most significantly impact the company’s financial condition and results of
operations and require the most difficult, subjective, or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain. Actual results may vary from
these estimates.
Revenue Recognition
AbbVie recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred,
the sales price is fixed or determinable, and collectability of the sales price is reasonably assured. Revenue
from product sales is recognized when title and risk of loss have passed to the customer.
Rebates
AbbVie provides rebates to pharmacy benefit managers, state government Medicaid programs,
insurance companies that administer Medicare drug plans, wholesalers, group purchasing organizations, and
other government agencies and private entities.
Rebate and chargeback accruals are recorded as a reduction to revenue in the period the related
product is sold. Rebates and chargebacks totaled $8.6 billion, $5.9 billion and $4.9 billion in 2015, 2014 and
2013, respectively. Rebate amounts are typically based upon the volume of purchases using contractual or
statutory prices, which may vary by product and by payer. For each type of rebate, the factors used in the
calculations of the accrual for that rebate include the identification of the products subject to the rebate,
the applicable price terms, and the estimated lag time between sale and payment of the rebate, which can
be significant.
In order to establish its rebate and chargeback accruals, the company uses both internal and external
data to estimate the level of inventory in the distribution channel and the rebate claims processing lag time
for each type of rebate. To estimate the rebate percentage or net price, the company tracks sales by
product and by customer or payer. The company evaluates inventory data reported by wholesalers, available
prescription volume information, product pricing, historical experience and other factors in order to
determine the adequacy of its reserves. AbbVie regularly monitors its reserves and records adjustments
when rebate trends, rebate programs and contract terms, legislative changes, or other significant events
indicate that a change in the reserve is appropriate. Historically, adjustments to rebate accruals have not
been material to net earnings.
The following table is an analysis of the three largest rebate accruals and chargeback allowances,
which comprise approximately 90 percent of the total consolidated rebate and chargebacks charged against
2015 Form 10-K
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47
revenues in 2015. Remaining rebate provisions charged against gross revenues are not significant in the
determination of operating earnings.
(in millions)
Balance at December 31, 2012
Provisions
Payments
Balance at December 31, 2013
Provisions
Payments
Balance at December 31, 2014
Provisions
Payments
Balance at December 31, 2015
Cash Discounts and Product Returns
Medicaid
and
Medicare
Rebates
$
807
1,028
(1,168)
667
1,015
(970)
712
1,716
(1,396)
Managed
Care
Rebates
$
496
846
(883)
459
970
(953)
476
2,215
(1,771)
Wholesaler
Chargebacks
$
224
2,362
(2,374)
212
2,825
(2,784)
253
3,866
(3,756)
$ 1,032
$
920
$
363
Allowances for cash discounts and product returns, which totaled $898 million, $610 million and
$748 million in 2015, 2014 and 2013, respectively, are recorded as a reduction to revenue in the same
period the related product is sold. The reserve for cash discounts is readily determinable because the
company’s experience of payment history is fairly consistent. Product returns can be reliably estimated
based on the company’s historical return experience.
Pension and Other Post-Employment Benefits
AbbVie engages outside actuaries to assist in the determination of the obligations and costs under the
plans that are direct obligations of AbbVie. The valuation of the funded status and the net periodic benefit
cost for these plans are calculated using actuarial assumptions. The significant assumptions, which are
reviewed annually, include the discount rate, the expected long-term rate of return on plan assets, and the
health care cost trend rates. The significant assumptions used in determining these calculations are
disclosed in Note 11 to the consolidated financial statements.
The discount rate is selected based on current market rates on high-quality, fixed-income investments
at December 31 each year. AbbVie employs a yield-curve approach for countries where a robust bond
market exists. The yield curve is developed using high-quality bonds. The yield curve approach reflects the
plans’ specific cash flows (i.e., duration) in calculating the benefit obligations by applying the specific spot
rates along the yield curve. Beginning in 2016, AbbVie will also reflect the plans’ specific cash flows and
apply them to the specific spot rates along the yield curve in calculating the service cost and interest cost
portions of expense. For other countries, AbbVie reviews various indices such as corporate bond and
government bond benchmarks to estimate the discount rate. AbbVie’s assumed discount rate has a
significant effect on the amounts reported for defined benefit pension and other post-employment plans as
of December 31, 2015, and will be used in the calculation of net periodic benefit cost in 2016. A 50 basis
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2015 Form 10-K
point change in the assumed discount rate would have had the following effects on AbbVie’s calculation of
net periodic benefit costs in 2016 and projected benefit obligations as of December 31, 2015:
(in millions) (brackets denote a reduction)
Defined benefit plans
Service cost and interest cost
Projected benefit obligation
Other post-employment plans
Service cost and interest cost
Projected benefit obligation
50 basis point
Increase
Decrease
$ (45)
$(409)
$
(5)
$ (46)
$ 51
$461
$
6
$ 52
Effective December 31, 2015, AbbVie elected to change the method it uses to estimate the service and
interest cost components of net periodic benefit costs for the AbbVie Pension Plan and its primary other
post-employment benefit plan in the United States as well as certain international defined benefit plans and
other post-employment benefit plans. Based on current economic conditions, this change is expected to
reduce AbbVie’s net periodic benefit cost by approximately $41 million in 2016 as a result of this change.
Refer to Note 11 for further information regarding this change.
The expected long-term rate of return is based on the asset allocation, historical performance, and the
current view of expected future returns. AbbVie considers these inputs with a long-term focus to avoid
short-term market influences. The current long-term rate of return on plan assets is supported by the
historical performance of the trust’s actual and target asset allocation. AbbVie’s assumed expected
long-term rate of return has a significant effect on the amounts reported for defined benefit pension plans
as of December 31, 2015 and will be used in the calculation of net periodic benefit cost in 2016. A
1 percentage point change in assumed expected long-term rate of return on plan assets would have
increased or decreased the net period benefit cost of these plans in 2016 by $45 million.
The health care cost trend rate is selected by reviewing historical trends and current views on
projected future health care cost increases. The current health care cost trend rate is supported by the
historical trend experience of the plan. Assumed health care cost trend rates have a significant effect on
the amounts reported for health care plans as of December 31, 2015 and will be used in the calculation of
net periodic benefit cost in 2016. A 1 percentage point change in assumed health care cost trend rates
would have the following effects on AbbVie’s calculation of net periodic benefit costs in 2016 and the
projected benefit obligation as of December 31, 2015:
(in millions) (brackets denote a reduction)
Service cost and interest cost
Projected benefit obligation
Income Taxes
One percentage
point
Increase
Decrease
$ 20
$114
$(15)
$(90)
AbbVie accounts for income taxes under the asset and liability method. Provisions for federal, state,
and foreign income taxes are calculated on reported pretax earnings based on current tax laws. Deferred
taxes are provided using enacted tax rates on the future tax consequences of temporary differences, which
are the differences between the financial statement carrying amount of assets and liabilities and their
respective tax bases and the tax benefits of carryforwards. A valuation allowance is established or
maintained when, based on currently available information, it is more likely than not that all or a portion
of a deferred tax asset will not be realized.
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49
Litigation
The company 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. Refer to Note 14 for further information. 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. Accordingly, AbbVie is
often initially unable to develop a best estimate of loss, and therefore the minimum amount, which could
be zero, is recorded. As information becomes known, either the minimum loss amount is increased,
resulting in additional loss provisions, or a best estimate can be made, also resulting in additional loss
provisions. Occasionally, a best estimate amount is changed to a lower amount when events result in an
expectation of a more favorable outcome than previously expected.
Valuation of Goodwill and Intangible Assets
AbbVie has acquired and may continue to acquire significant intangible assets in connection with
business combinations that AbbVie records at fair value. Transactions involving the purchase or sale of
intangible assets occur with some frequency between companies in the pharmaceuticals industry, and
valuations are usually based on a discounted cash flow analysis incorporating the stage of completion. The
discounted cash flow model requires assumptions about the timing and amount of future net cash flows,
risk, cost of capital, terminal values, and market participants. Each of these factors can significantly affect
the value of the intangible asset. IPR&D acquired in a business combination is capitalized as an indefinite-
lived intangible asset until regulatory approval is obtained, at which time it is accounted for as a definite-
lived asset and amortized over its estimated useful life. IPR&D acquired in transactions that are not
business combinations is expensed immediately, unless deemed to have an alternative future use. Payments
made to third parties subsequent to regulatory approval are capitalized and amortized over the remaining
useful life.
AbbVie reviews the recoverability of definite-lived intangible assets whenever events or changes in
circumstances indicate the carrying value of an asset may not be recoverable. Goodwill and indefinite-lived
intangible assets, which relate to IPR&D, are reviewed for impairment annually or when an event occurs
that could result in an impairment. Refer to Note 2 to the consolidated financial statements for further
information.
Annually, the company tests its goodwill for impairment by first assessing qualitative factors to
determine whether it is more likely than not that the fair value is less than its carrying amount. Some of
the factors considered in the assessment include general macro-economic conditions, conditions specific to
the industry and market, cost factors, which could have a significant effect on earnings or cash flows, the
overall financial performance, and whether there have been sustained declines in the company’s share
price. If the company concludes it is more likely than not that the fair value of reporting unit is less than
its carrying amount, a quantitative impairment test is performed. AbbVie tests indefinite-lived intangible
assets using a quantitative impairment test.
For its quantitative impairment tests, the company uses an estimated future cash flow approach that
requires significant judgment with respect to future volume, revenue and expense growth rates, changes in
working capital use, foreign currency exchange rates, the selection of an appropriate discount rate, asset
groupings, and other assumptions and estimates. The estimates and assumptions used are consistent with
the company’s business plans and a market participant’s views of a company and similar companies. The
use of alternative estimates and assumptions could increase or decrease the estimated fair value of the
assets, and potentially result in different impacts to the company’s results of operations. Actual results may
differ from the company’s estimates.
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2015 Form 10-K
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2014-09, Summary and Amendments That Create Revenue from Contracts with Customers (Topic
606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40). The amendments
in ASU 2014-09 supersede most current revenue recognition requirements. The core principal of the new
guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. AbbVie can apply the amendments using one of the following two
methods: (i) retrospectively to each prior reporting period presented, or (ii) modified retrospectively with
the cumulative effect of initially applying the amendments recognized at the date of initial application. In
July 2015, the FASB issued ASU No. 2015-4, Revenue from Contracts with Customers (Topic 606): Deferral of
the Effective Date, which deferred the effective date of ASU 2014-09 by one year for all entities.
Accordingly, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period. Early application is permitted only for annual
reporting periods beginning after December 15, 2016, including interim periods within that reporting
period. AbbVie is currently assessing the timing of its adoption and the impact of adopting this guidance on
its consolidated financial statements and the implementation approach to be used.
In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 require that debt
issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction
from the carrying amount of that debt liability, consistent with debt discounts. This standard is effective for
annual and interim periods beginning after December 15, 2015, with early adoption permitted on a
retrospective basis. AbbVie elected to early adopt this new standard, effective in the three months ended
June 30, 2015. As a result, AbbVie reclassified approximately $7 million and $27 million of net deferred
financing costs as of December 31, 2014 that were previously classified as prepaid expenses and other
current assets and other long-term assets, respectively, to long-term debt and lease obligations (current and
non-current). Total debt issuance costs classified as a reduction of long-term debt and lease obligations
(current and non-current) were $117 million as of December 31, 2015.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying
the Accounting for Measurement-Period Adjustments. This standard requires that an acquirer recognize
adjustments to provisional amounts that are identified during the measurement period in the reporting
period in which the adjustment amounts are determined. Entities are currently required to retrospectively
apply adjustments made to provisional amounts recognized in a business combination. This standard is
effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal
years. The guidance is to be applied prospectively to measurement period adjustments that occur after the
effective date of the guidance with earlier application permitted for financial statements that have not been
issued. AbbVie elected to early adopt the standard, effective in the year ended December 31, 2015. The
impact of this adoption was not material.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet
Classification of Deferred Taxes. The standard requires that deferred tax liabilities and assets be classified as
noncurrent in a classified statement of financial position. Entities are currently required to separate
deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of
financial position. The amendments, which require non-current presentation only (by jurisdiction), are
effective for financial statements issued for annual periods beginning after December 15, 2016 with earlier
application permitted as of the beginning of an interim or annual reporting period. The guidance is to be
applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods
presented. AbbVie elected to early adopt this standard on a prospective basis, effective as of December 31,
2015 in order to simplify the presentation of deferred tax assets and liabilities. Prior periods were not
retrospectively adjusted.
2015 Form 10-K
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51
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires several
targeted changes including that equity investments (except those accounted for under the equity method of
accounting, or those that result in consolidation of the investee) be measured at fair value with changes in
fair value recognized in net income. The new guidance also changes certain disclosure requirements and
other aspects of current US GAAP. Amendments are to be applied as a cumulative-effect adjustment to the
balance sheet as of the beginning of the fiscal year of adoption. This standard is effective for fiscal years
starting after December 15, 2017, including interim periods within those fiscal years. The standard does not
permit early adoption with the exception of certain targeted provisions. AbbVie is currently assessing the
impact and timing of adopting this guidance on its consolidated financial statements.
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2015 Form 10-K
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
.....................................................................................................................................................................................................................................................................................................................................................
The company is exposed to risk that its earnings, cash flows, and equity could be adversely impacted
by changes in foreign exchange rates and interest rates. Certain derivative instruments are used when
available on a cost-effective basis to hedge the company’s underlying economic exposures. Refer to Note 10
entitled ‘‘Financial Instruments and Fair Value Measures’’ of the Notes to Consolidated Financial Statements
included under Item 8, ‘‘Financial Statements and Supplementary Data’’ for further information regarding
the company’s financial instruments and hedging strategies.
Foreign Currency Risk
AbbVie’s primary net foreign currency exposures are the Euro, Japanese yen and British pound. Various
AbbVie foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to
changes in foreign exchange rates for anticipated transactions denominated in a currency other than the
functional currency of the local entity. These contracts are designated as cash flow hedges of the variability
of the cash flows due to changes in foreign currency exchange rates, and are marked-to-market with the
resulting gains or losses reflected in accumulated other comprehensive income (loss) in AbbVie’s
consolidated balance sheets. Deferred gains or losses on these contracts are included in cost of products
sold at the time the products are sold to a third party, generally not exceeding twelve months. At
December 31, 2015 and 2014, AbbVie held $1.5 billion and $1.4 billion, respectively, in notional amounts of
such contracts.
AbbVie enters into foreign currency forward exchange contracts to manage its exposure to foreign
currency denominated trade payables and receivables and intercompany loans. The contracts, which are not
designated as hedges, are marked-to-market, and resulting gains or losses are reflected in net foreign
exchange on AbbVie’s consolidated statements of earnings and are generally offset by losses or gains on
the foreign currency exposure being managed. At December 31, 2015 and 2014, AbbVie held notional
amounts of $6.8 billion and $6.8 billion, respectively, of such foreign currency forward exchange contracts.
The following table reflects the total foreign currency forward contracts outstanding at December 31,
2015 and 2014:
(in millions)
Receive primarily U.S. dollars in exchange for
the following currencies:
Euro
Japanese yen
British pound
All other currencies
Total
2015
Weighted
average
exchange
rate
Fair and
carrying
value
receivable/
(payable)
1.103
120.9
1.496
N/A
$34
(2)
1
8
$41
Contract
amount
$5,880
853
163
1,387
$8,283
Contract
amount
$6,342
333
563
930
$8,168
2014
Weighted
average
exchange
rate
Fair and
carrying
value
receivable/
(payable)
1.263
116.9
1.618
N/A
$114
6
21
7
$148
The company estimates that a 10 percent appreciation in the underlying currencies being hedged from
their levels against the U.S. dollar, with all other variables held constant, would decrease the fair value of
foreign exchange forward contracts by $822 million at December 31, 2015. If realized, this appreciation
would negatively affect earnings over the remaining life of the contracts, which would be offset by gains on
the underlying hedged items. A 10 percent appreciation is believed to be a reasonably possible near-term
change in foreign currencies. Gains and losses on the hedging instruments offset losses and gains on the
hedged transactions and reduce the earnings and stockholders’ equity volatility relating to foreign exchange.
2015 Form 10-K
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53
The functional currency of the company’s Venezuela operations is the U.S. dollar due to the
hyperinflationary status of the Venezuelan economy. Currency restrictions enacted in Venezuela require
approval from the Venezuelan government to exchange Venezuelan bolivars (VEF) for U.S. dollars and
require such exchange to be made at the official exchange rate established by the government. In the first
quarter of 2014, the Venezuelan government expanded the number of exchange mechanisms to three rates
of exchange. As of December 31, 2015, these were the official rate of 6.3; the Supplementary System for
the Administration of Foreign Currency (SICAD) rate of approximately 13.5; and the Foreign Exchange
Marginal System (SIMADI) rate of approximately 200. In the consolidated financial statements as of and for
the year ended December 31, 2015, the company used the official rate of 6.3 VEF per U.S. dollar, and
reported $317 million of net monetary assets and $210 million of net revenues denominated in the
Venezuelan bolivar.
On February 17, 2016, the Venezuelan government announced that it plans to devalue the official rate
of 6.3 to 10 VEF to U.S. dollars, and eliminate the SICAD rate of 13.5 VEF to U.S. dollars. The devaluation of
the Venezuelan bolivar will result in a charge to AbbVie’s results of operations in the first quarter of 2016.
If AbbVie’s net monetary assets denominated in the Venezuelan bolivar had been converted at a rate of 10
VEF to U.S. dollars at December 31, 2015, the company would have reported a devaluation loss of
$117 million in 2015. If AbbVie’s net monetary assets denominated in the Venezuelan bolivar had been
converted at the SIMADI rate of 200 at December 31, 2015, the company would have reported a
devaluation loss of $307 million in 2015.
The company cannot predict whether there will be further devaluations of the Venezuelan currency or
whether the use of the official rate will continue to be supported by evolving facts and circumstances,
which could result in a significant charge to AbbVie’s results of operations at that time.
Interest Rate Risk
Interest rate swaps are used to manage the company’s exposure of changes in interest rates on the
fair value of fixed-rate debt. The effect of these hedges is to change the fixed interest rate to a variable
rate. At December 31, 2015 and 2014, AbbVie had interest rate hedge contracts totaling $11.0 billion and
$8.0 billion, respectively. The company estimates that an increase in the interest rates of 100-basis points
would decrease the fair value of our interest rate swap contracts by approximately $464 million at
December 31, 2015. If realized, the fair value reduction would affect earnings over the remaining life of the
contracts. The company estimates that an increase of 100-basis points in long-term interest rates would
decrease the fair value of long-term debt by $1.9 billion at December 31, 2015. A 100-basis point change is
believed to be a reasonably possible near-term change in interest rates.
Market Price Sensitive Investments
AbbVie holds equity securities in other pharmaceutical and biotechnology companies that are traded
on public stock exchanges. The fair value of these investments was approximately $111 million and
$82 million as of December 31, 2015 and 2014, respectively. AbbVie monitors these investments for other
than temporary declines in market value, and charges impairment losses to net earnings when an other
than temporary decline in value occurs. A hypothetical 20 percent decrease in the share prices of these
investments would decrease the fair value of these investments by $22 million at December 31, 2015. A
20 percent decrease is believed to be a reasonably possible near-term change in share prices.
Non-Publicly Traded Equity Securities
AbbVie holds equity securities in other pharmaceutical and biotechnology companies that are not
traded on public stock exchanges. The carrying value of these investments was approximately $33 million
and $63 million as of December 31, 2015 and 2014, respectively. AbbVie monitors these investments for
other than temporary declines in market value, and charges impairment losses to net earnings when an
other than temporary decline in estimated value occurs. In 2015, AbbVie recorded impairment charges
totaling $36 million related to certain of the company’s investments in non-publicly traded equity securities.
54
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2015 Form 10-K
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
.....................................................................................................................................................................................................................................................................................................................................................
Consolidated Financial Statements
Consolidated Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
56
57
58
59
60
61
103
2015 Form 10-K
13NOV201221352027
55
AbbVie Inc. and Subsidiaries
Consolidated Statements of Earnings
years ended December 31 (in millions, except per share data)
2015
2014
2013
Net revenues
Cost of products sold
Selling, general and administrative
Research and development
Acquired in-process research and development
Other expense
Total operating costs and expenses
Operating earnings
Interest expense, net
Net foreign exchange loss
Other expense (income), net
Earnings before income tax expense
Income tax expense
Net earnings
Per share data
Basic earnings per share
Diluted earnings per share
Cash dividends declared per common share
Weighted-average basic shares outstanding
Weighted-average diluted shares outstanding
$22,859
$19,960
$18,790
4,500
6,387
4,285
150
—
4,426
7,724
3,297
352
750
4,581
5,352
2,855
338
—
15,322
16,549
13,126
7,537
3,411
5,664
686
193
13
6,645
1,501
391
678
(27)
2,369
595
278
55
(1)
5,332
1,204
$ 5,144
$ 1,774
$ 4,128
$ 3.15
$ 3.13
$ 2.10
$ 1.11
$ 1.10
$ 1.75
$ 2.58
$ 2.56
$ 2.00(a)
1,625
1,637
1,595
1,610
1,589
1,604
(a) On January 4, 2013, a cash dividend of $0.40 per share of common stock was declared from
pre-separation earnings and was recorded as a reduction of additional paid-in capital.
The accompanying notes are an integral part of these consolidated financial statements.
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2015 Form 10-K
AbbVie Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
years ended December 31 (in millions)
Net earnings
2015
2014
2013
$5,144
$ 1,774
$4,128
Foreign currency translation adjustments, net of tax (benefit) expense of
($139) in 2015, ($158) in 2014, and $71 in 2013
(667)
(1,073)
48
Pension and post-employment benefits, net of tax expense (benefit) of $96 in
2015, ($351) in 2014, and $309 in 2013
Unrealized gains on marketable equity securities, net of tax expense of $22 in
2015, $1 in 2014, and $— in 2013
Hedging activities, net of tax (benefit) expense of ($6) in 2015, $8 in 2014,
and $— in 2013
Other comprehensive (loss) income
Comprehensive income
230
(781)
598
44
1
1
(137)
(530)
264
(1,589)
(77)
570
$4,614
$
185
$4,698
The accompanying notes are an integral part of these consolidated financial statements.
2015 Form 10-K
13NOV201221352027
57
AbbVie Inc. and Subsidiaries
Consolidated Balance Sheets
as of December 31 (in millions, except share data)
2015
2014
Assets
Current assets
Cash and equivalents
Short-term investments
Accounts and other receivables, net
Inventories, net
Deferred income taxes
Prepaid expenses and other
Total current assets
Investments
Property and equipment, net
Intangible assets, net of accumulated amortization
Goodwill
Other assets
Total assets
Liabilities and Equity
Current liabilities
Short-term borrowings
Current portion of long-term debt and lease obligations
Accounts payable and accrued liabilities
Total current liabilities
Long-term debt and lease obligations
Deferred income taxes
Other long-term liabilities
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, authorized 4,000,000,000 shares, issued
1,749,027,140 and 1,609,519,046 shares as of December 31, 2015 and 2014,
respectively
Common stock held in treasury, at cost, 139,134,205 and 18,129,715 shares as of
December 31, 2015 and 2014, respectively
Additional paid-in-capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and equity
$ 8,399
8
4,730
1,719
—
1,458
$ 8,348
26
3,735
1,124
896
1,952
16,314
16,081
145
2,565
19,709
13,168
1,149
92
2,485
1,513
5,862
1,480
$53,050
$27,513
$
406
2,025
8,463
$
425
4,014
6,954
10,894
11,393
29,240
5,276
3,695
10,538
159
3,681
—
—
17
16
(8,839)
13,080
2,248
(2,561)
(972)
4,194
535
(2,031)
3,945
1,742
$53,050
$27,513
The accompanying notes are an integral part of these consolidated financial statements.
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2015 Form 10-K
AbbVie Inc. and Subsidiaries
Consolidated Statements of Equity
years ended December 31 (in millions)
Balance at December 31, 2012
Separation-related adjustments
Reclassification of parent company net
investment in connection with
separation
Issuance of common shares at
separation
Net earnings
Other comprehensive income, net of
tax
Dividends declared
Share repurchases
Stock-based compensation plans and
other
Balance at December 31, 2013
Net earnings
Other comprehensive loss, net of tax
Dividends declared
Share repurchases
Stock-based compensation plans and
other
Balance at December 31, 2014
Net earnings
Other comprehensive loss, net of tax
Dividends declared
Common shares issued to
Pharrmacyclics Inc. stockholders
Share repurchases
Stock-based compensation plans and
other
Balance at December 31, 2015
—
—
—
1,577
—
—
—
(4)
14
1,587
—
—
—
(9)
13
1,591
—
—
—
128
(119)
10
1,610
Common
shares
outstanding
Common Treasury
stock
stock
Additional
paid-in
capital
Accumulated
other
Retained comprehensive
earnings
loss
Net parent
company
investment
Total
$ —
—
$ — $
—
— $ —
—
(1,316)
$ (350)
(662)
$ 3,713
707
$ 3,363
(1,271)
—
16
—
—
—
—
—
16
—
—
—
—
—
16
—
—
—
1
—
—
—
—
—
—
—
(223)
(97)
(320)
—
—
—
(550)
(102)
(972)
—
—
—
—
(7,774)
4,420
—
(16)
—
—
4,128
—
—
—
583
3,671
—
—
—
—
523
4,194
—
—
—
8,404
—
—
(2,561)
—
—
1,567
1,774
—
(2,806)
—
—
535
5,144
—
(3,431)
—
—
—
—
—
—
570
—
—
—
(442)
—
(1,589)
—
—
—
(2,031)
—
(530)
—
—
—
—
(4,420)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,128
570
(2,561)
(223)
486
4,492
1,774
(1,589)
(2,806)
(550)
421
1,742
5,144
(530)
(3,431)
8,405
(7,774)
389
(93)
482
$17
$(8,839)
$13,080
$ 2,248
$(2,561)
$ — $ 3,945
The accompanying notes are an integral part of these consolidated financial statements.
2015 Form 10-K
13NOV201221352027
59
AbbVie Inc. and Subsidiaries
Consolidated Statements of Cash Flows
years ended December 31 (in millions) (brackets denote cash outflows)
2015
2014
2013
Cash flows from operating activities
Net earnings
Adjustments to reconcile net earnings to net cash from operating activities:
$ 5,144
$ 1,774
$ 4,128
Depreciation
Amortization of intangible assets
Stock-based compensation
Upfront costs and milestones related to collaborations
Other, net
Changes in operating assets and liabilities, net of acquisitions:
Accounts and other receivables
Inventories
Prepaid expenses and other assets
Accounts payable and other liabilities
Cash flows from operating activities
Cash flows from investing activities
Acquisition of Pharmacyclics, Inc., net of cash acquired
Other acquisitions and investments
Acquisitions of property and equipment
Purchases of investment securities
Sales and maturities of investment securities
Other
Cash flows from investing activities
Cash flows from financing activities
Net change in short-term borrowings
Proceeds from issuance of long-term debt
Repayments of long-term debt and capital leases
Debt issuance cost
Dividends paid
Purchases of treasury stock
Proceeds from the exercise of stock options
Net transactions with Abbott Laboratories, excluding non-cash items
Other, net
Cash flows from financing activities
Effect of exchange rate changes on cash and equivalents
Net increase (decrease) in cash and equivalents
Cash and equivalents, beginning of year
Cash and equivalents, end of year
417
419
282
280
489
(1,076)
(434)
511
1,503
7,535
(11,488)
(964)
(532)
(851)
880
19
(12,936)
(19)
20,660
(4,018)
(182)
(3,294)
(7,567)
142
—
30
383
403
241
1,102
434
(172)
(203)
(220)
(193)
3,549(a)
—
(622)
(612)
(1,169)
1,477
—
(926)
12
—
(17)
(141)
(2,661)
(652)
225
—
(59)
388
509
212
338
34
681
(56)
459
(426)
6,267
—
(405)
(491)
(930)
2,705
—
879
(601)
—
—
—
(2,555)
(320)
347
(247)
(66)
5,752
(3,293)
(3,442)
(300)
(577)
(10)
51
8,348
(1,247)
9,595
3,694
5,901
$ 8,399
$ 8,348
$ 9,595
Other supplemental information
Interest paid, net of portion capitalized
Income taxes paid
Supplemental schedule of non-cash investing and financing activities
Issuance of common shares associated with the acquisition of Pharmacyclics, Inc.
$
536
$ 1,108
$
$
419
498
$
283
$ 1,305
$ 8,405
$ — $ —
(a) Cash flows from operating activities included the impact of transaction and financing-related and other costs
incurred in connection with the terminated proposed combination with Shire plc. Refer to Note 5 for
additional information.
The accompanying notes are an integral part of these consolidated financial statements.
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2015 Form 10-K
AbbVie Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 Background and Basis of Presentation
.....................................................................................................................................................................................................................................................................................................................................................
Background
The principal business of AbbVie Inc. (AbbVie or the company) is the discovery, development,
manufacture and sale of a broad line of pharmaceutical products. 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.
Substantially all of AbbVie’s net revenues in the United States are to three wholesalers. Outside the United
States, products are sold primarily to customers or through distributors, depending on the market served.
AbbVie was incorporated in Delaware on April 10, 2012. On January 1, 2013, AbbVie became an
independent, publicly-traded company as a result of the distribution by Abbott Laboratories (Abbott) of
100 percent of the outstanding common stock of AbbVie to Abbott’s shareholders. AbbVie’s common stock
began trading ‘‘regular-way’’ under the ticker symbol ‘‘ABBV’’ on the New York Stock Exchange on
January 2, 2013.
During 2013, separation-related adjustments totaling $1.3 billion were recorded in stockholders’ equity.
Separation-related adjustments to additional paid-in capital principally reflected dividends to AbbVie
shareholders that were declared from pre-separation earnings during the first quarter of 2013 and the
transfer of certain pension plan liabilities and assets from Abbott to AbbVie upon the legal split of those
plans in 2013. In addition, because AbbVie’s historical financial statements prior to January 1, 2013 were
derived from Abbott’s records, separation-related adjustments also included an adjustment to accumulated
other comprehensive loss to reflect the appropriate opening balances associated with currency translation
adjustments related to AbbVie’s legal entities at the separation date. Refer to Note 11 for further
information regarding the separation of the pension plans.
In connection with the separation, AbbVie and Abbott entered into transition services agreements
covering certain corporate support and back office services that AbbVie historically received from Abbott.
Such services included information technology, accounts payable, payroll, receivables collection, treasury
and other financial functions, as well as order entry, warehousing, engineering support, quality assurance
support and other administrative services. These agreements facilitated the separation by allowing AbbVie
to operate independently prior to establishing stand-alone back office functions across its organization. The
transition services agreements had original terms of up to 24 months, with an option for a one-year
extension. The majority of these transaction service agreements expired without extension at December 31,
2014. With certain limited exceptions, the remaining transition services agreements terminated on or prior
to December 31, 2015.
During the years ended December 31, 2015, 2014, and 2013, AbbVie incurred $270 million,
$445 million, and $254 million, respectively, of separation-related expenses, which were principally classified
in selling, general and administrative expenses (SG&A) in the consolidated statements of earnings. These
charges principally related to information technology, legal and regulatory fees.
Basis of Historical Presentation
For a certain portion of AbbVie’s operations, the legal transfer of AbbVie’s assets (net of liabilities) did
not occur with the separation of AbbVie on January 1, 2013 due to the time required to transfer marketing
authorizations and satisfy other regulatory requirements in certain countries. Under the terms of the
separation agreement with Abbott, AbbVie is responsible for the business activities conducted by Abbott on
its behalf, and is subject to the risks and entitled to the benefits generated by these operations and assets.
2015 Form 10-K
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61
As a result, the related assets and liabilities and results of operations have been reported in AbbVie’s
consolidated financial statements as of and for the years ended December 31, 2015, 2014, and 2013. Net
revenues related to these operations for 2015, 2014, and 2013 totaled approximately $213 million,
$282 million, and $738 million, respectively. With the exception of Venezuela, all of these operations have
been transferred to AbbVie as of December 31, 2015.
Note 2 Summary of Significant Accounting Policies
.....................................................................................................................................................................................................................................................................................................................................................
Use of Estimates
The financial statements have been prepared in accordance with U.S. GAAP and necessarily include
amounts based on estimates and assumptions by management. Actual results could differ from those
amounts. Significant estimates include amounts for rebates, pension and post-employment benefits, income
taxes, litigation, valuation of intangible assets and goodwill, financial instruments, and inventory and
accounts receivable exposures.
Basis of Consolidation
The consolidated financial statements as of and for the years ended December 31, 2015 and 2014
include the accounts of AbbVie and all of its subsidiaries in which a controlling interest is maintained.
Controlling interest is determined by majority ownership interest and the absence of substantive third-party
participating rights or, in the case of variable interest entities, where AbbVie is determined to be the
primary beneficiary. Investments in companies over which AbbVie has a significant influence but not a
controlling interest are accounted for using the equity method with AbbVie’s share of earnings or losses
reported in other expense (income), net in the consolidated statements of earnings. All other investments
are generally accounted for using the cost method. Intercompany balances and transactions are eliminated.
Certain reclassifications have been made to conform the prior period consolidated financial statements
to the current period presentation.
Revenue Recognition
AbbVie recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred,
the sales price is fixed or determinable and collectability of the sales price is reasonably assured. Revenue
from product sales is recognized when title and risk of loss have passed to the customer. Provisions for
discounts, rebates and sales incentives to customers and returns and other adjustments are provided for in
the period the related revenues are recorded. Rebate amounts are typically based upon the volume of
purchases using contractual or statutory prices, which may vary by product and by payer. For each type of
rebate, the factors used in the calculations of the accrual for that rebate include the identification of the
products subject to the rebate, the applicable price terms, and the estimated lag time between sale and
payment of the rebate, which can be significant. Sales incentives to customers are not material. Historical
data is readily available and reliable, and is used for estimating the amount of the reduction in gross
revenues. Revenue from the launch of a new product, from an improved version of an existing product, or
for shipments in excess of a customer’s normal requirements are recorded when the conditions noted
above are met. In those situations, management records a returns reserve for such revenue, if necessary.
Sales of product rights for marketable products are recorded as revenue upon disposition of the rights.
Research and Development Expenses
Internal research and development (R&D) expenses are expensed as incurred. Clinical trial costs
incurred by third parties are expensed as the contracted work is performed. Where contingent milestone
payments are due to third parties under research and development collaborations for pre-commercialization
milestones, the milestone payment obligations are expensed when the milestone results are achieved.
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2015 Form 10-K
Payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and
amortized to cost of products sold over the remaining useful life of the related product.
Collaborations and Other Arrangements
The company enters into collaborative agreements with third parties to develop and commercialize
drug candidates. Collaborative activities may include joint research and development and commercialization
of new products. AbbVie generally receives certain licensing rights under these arrangements. These
collaborations often require upfront payments and may include additional milestone, research and
development cost sharing, royalty or profit share payments, contingent upon the occurrence of certain
future events linked to the success of the asset in development and commercialization. Upfront payments
associated with collaborative arrangements during the development stage are expensed to acquired
in-process research and development (IPR&D) expenses in the consolidated statements of earnings.
Subsequent payments made to the partner for the achievement of milestones during the development
stage are expensed to R&D expenses in the consolidated statements of earnings when the milestone is
achieved. Milestone payments made to the partner subsequent to regulatory approval are capitalized as
intangible assets and amortized to cost of products sold over the estimated useful life of the related asset.
Royalties are expensed to cost of products sold in the consolidated statements of earnings when incurred.
Advertising
Costs associated with advertising are expensed as incurred and are included in SG&A expenses in the
consolidated statements of earnings. Advertising expenses were $704 million, $665 million, and $626 million
in 2015, 2014, and 2013, respectively.
Pension and Other Post-Employment Benefits
AbbVie records annual expenses relating to its defined benefit pension and other post-employment
plans based on calculations which include various actuarial assumptions, including discount rates, assumed
asset rates of return, compensation increases, turnover rates and health care cost trend rates. AbbVie
reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on
current rates and trends. Actuarial losses and gains are amortized over the remaining service attribution
periods of the employees under the corridor method, in accordance with the rules for accounting for
post-employment benefits. Differences between the expected long-term return on plan assets and the
actual annual return are amortized to net periodic benefit cost over a five-year period.
Income Taxes
Income taxes are accounted for under the asset and liability method. Provisions for federal, state and
foreign income taxes are calculated on reported pretax earnings based on current tax laws. Deferred taxes
are provided using enacted tax rates on the future tax consequences of temporary differences, which are
the differences between the financial statement carrying amount of assets and liabilities and their
respective tax bases and the tax benefits of carryforwards. A valuation allowance is established or
maintained when, based on currently available information, it is more likely than not that all or a portion
of a deferred tax asset will not be realized.
Cash and Equivalents
Cash and equivalents include time deposits and money market funds with original maturities at the
time of purchase of three months or less.
2015 Form 10-K
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63
Investments
Short-term investments consist primarily of time deposits and held-to-maturity debt securities.
Investments in marketable equity securities are classified as available-for-sale and are recorded at fair value
with any unrealized holding gains or losses, net of tax, included in accumulated other comprehensive loss
(AOCI) in AbbVie’s consolidated balance sheets. Investments in equity securities that are not traded on
public stock exchanges and held-to-maturity debt securities are recorded at cost.
AbbVie reviews the carrying value of investments each quarter to determine whether an other than
temporary decline in fair value exists. AbbVie considers factors affecting the investee, factors affecting the
industry the investee operates in and general equity market trends. The company considers the length of
time an investment’s fair value has been below cost and the near-term prospects for recovery. When
AbbVie determines that an other than temporary decline has occurred, a cost basis investment is written
down with a charge to other expense (income), net in the consolidated statements of earnings and an
available-for-sale investment’s unrealized loss is reclassified from AOCI to other expense (income), net in the
consolidated statements of earnings.
Accounts Receivable
Accounts receivable are stated at their net realizable value. The allowance against gross accounts
receivable reflects the best estimate of probable losses inherent in the receivables portfolio determined on
the basis of historical experience, specific allowances for known troubled accounts and other currently
available information. Accounts receivable are written off after all reasonable means to collect the full
amount (including litigation, where appropriate) have been exhausted. The allowance was $78 million and
$74 million at December 31, 2015 and 2014, respectively.
Inventories
Inventories are valued at the lower of cost (first-in, first-out basis) or market. Cost includes material
and conversion costs. Inventories, net, consist of the following:
as of December 31 (in millions)
Finished goods
Work-in-process
Raw materials
Inventories, net
2015
2014
$ 469
1,081
169
$ 341
629
154
$1,719
$1,124
Inventories, net as of December 31, 2015 included $356 million acquired through the acquisition of
Pharmacyclics, Inc. (Pharmacyclics) on May 26, 2015. Refer to Note 5 for additional information.
Property and Equipment
as of December 31 (in millions)
Land
Buildings
Equipment
Construction in progress
Property and equipment, gross
Less accumulated depreciation
Property and equipment, net
64
13NOV201221352027
2015 Form 10-K
2015
2014
$
46
1,284
5,656
348
$
48
1,228
5,324
505
7,334
(4,769)
7,105
(4,620)
$ 2,565
$ 2,485
Depreciation for property and equipment is recorded on a straight-line basis over the estimated useful
lives of the assets. The estimated useful life for buildings ranges from 10 to 50 years and five to 20 years
for equipment. Leasehold improvements are amortized over the life of the related facility lease (including
any renewal periods, if appropriate) or the asset, whichever is shorter. Depreciation expense was
$417 million, $383 million, and $388 million in 2015, 2014, and 2013, respectively. Equipment includes
certain computer software and software development costs incurred in connection with developing or
obtaining software for internal use and is amortized over three to 10 years. Assets under capital leases
included in property and equipment in the consolidated balance sheets are not material.
Litigation and Contingencies
Loss contingency provisions are recorded when it is probable that a liability has been incurred and the
amount of the liability can be reasonably estimated based on existing information. When a best estimate
cannot be made, the minimum loss contingency amount in a probable range is recorded. Legal fees are
expensed as incurred.
AbbVie accrues for product liability claims, on an undiscounted basis, when it is probable that a
liability has been incurred and the amount of the liability can be reasonably estimated based on existing
information. The liabilities are evaluated quarterly and adjusted if necessary as additional information
becomes available. Receivables for insurance recoveries, if any, for product liability claims are recorded as
assets, on an undiscounted basis, when it is probable that a recovery will be realized.
Business Combinations
Results of operations of acquired companies are included in AbbVie’s results of operations beginning
on the respective acquisition dates. Assets acquired and liabilities assumed are recognized at the date of
acquisition at their respective fair values. Any excess of the fair value consideration transferred over the
estimated fair values of the net assets acquired is recognized as goodwill. Contingent consideration is
recognized at the estimated fair value on the acquisition date, which is determined by utilizing a probability
weighted discounted cash flow model. Subsequent changes to the fair value of contingent payments are
recognized in other expense (income), net in the consolidated statements of earnings. The fair value of
assets acquired and liabilities assumed in certain cases may be subject to revision based on the final
determination of fair value. Legal costs, due diligence costs, business valuation costs and all other business
acquisition costs are expensed when incurred.
Goodwill and Intangible Assets
Intangible assets acquired in a business combination are recorded at fair value using a discounted cash
flow model. The discounted cash flow model requires assumptions about the timing and amount of future
net cash flows, risk, the cost of capital, and terminal values of market participants. Definite-lived intangibles
are amortized over their estimated useful lives. AbbVie reviews the recoverability of definite-lived intangible
assets whenever events or changes in circumstances indicate the carrying value of an asset may not be
recoverable. AbbVie first compares the projected undiscounted cash flows to be generated by the asset to
its carrying value. If the undiscounted cash flows of an intangible asset are less than the carrying value of
an intangible asset, the intangible asset is written down to its fair value, which is usually the discounted
cash flow amount, and a loss is recorded equal to the excess of the asset’s net carrying value over its fair
value. Where cash flows cannot be identified for an individual asset, the review is applied at the lowest
level for which cash flows are largely independent of the cash flows of other assets and liabilities.
Goodwill and indefinite-lived assets are not amortized but are subject to an impairment review
annually and more frequently when indicators of impairment exist. An impairment of goodwill would occur
if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. Indefinite-lived
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intangible assets, which consist of capitalized IPR&D, would occur if the fair value of the IPR&D intangible
asset is less than the carrying amount.
The company tests its goodwill for impairment by first assessing qualitative factors to determine
whether it is more likely than not that the fair value is less than its carrying amount. If the company
concludes it is more likely than not that the fair value of reporting unit is less than its carrying amount, a
quantitative impairment test is performed. AbbVie tests indefinite-lived intangible assets using a
quantitative impairment test. For its quantitative impairment test, the company uses an estimated future
cash flow approach that requires significant judgment with respect to future volume, revenue and expense
growth rates, changes in working capital use, foreign currency exchange rates, the selection of an
appropriate discount rate, asset groupings and other assumptions and estimates. The estimates and
assumptions used are consistent with the company’s business plans and a market participant’s views of a
company and similar companies. The use of alternative estimates and assumptions could increase or
decrease the estimated fair value of the assets, and potentially result in different impacts to the company’s
results of operations. Actual results may differ from the company’s estimates.
Based upon the company’s most recent annual impairment test performed in the third quarter of
2015, the company concluded goodwill was not impaired. In 2015 and 2013, no intangible impairment
charges were recorded. In 2014, AbbVie recorded an impairment charge of $37 million related to certain
on-market product rights in Japan due to increased generic competition. The charge was included in cost of
products sold in the consolidated statements of earnings.
Acquired In-Process Research and Development
The initial costs of rights to IPR&D projects acquired in an asset acquisition are expensed as IPR&D in
the consolidated statements of earnings unless the project has an alternative future use. These costs
include initial payments incurred prior to regulatory approval in connection with research and development
collaboration agreements that provide rights to develop, manufacture, market and/or sell pharmaceutical
products. The fair value of IPR&D projects acquired in a business combination are capitalized and accounted
for as indefinite-lived intangible assets until the underlying project receives regulatory approval, at which
point the intangible asset will be accounted for as a definite-lived intangible asset, or discontinuation, at
which point the intangible asset will be written off. Development costs incurred after the acquisition are
expensed as incurred. Indefinite- and definite-lived assets are subject to impairment reviews as discussed
previously.
Foreign Currency Translation
Foreign subsidiary earnings are translated into U.S. dollars using average exchange rates. The net assets
of foreign subsidiaries are translated into U.S. dollars using period end exchange rates. The U.S. dollar
effects that arise from translating the net assets of these subsidiaries at changing rates are recognized in
other comprehensive (loss) income (OCI) in the consolidated statements of comprehensive income. The net
assets of subsidiaries in highly inflationary economies are remeasured as if the functional currency were the
reporting currency. The remeasurement is recognized in net foreign exchange loss in the consolidated
statements of earnings and is immaterial for all years presented.
Derivatives
All derivative instruments are recognized as either assets or liabilities at fair value in AbbVie’s
consolidated balance sheets and are classified as current or long-term based on the scheduled maturity of
the instrument. The accounting for changes in the fair value of a derivative instrument depends on whether
it has been formally designated and qualifies as part of a hedging relationship under the applicable
accounting standards and, further, on the type of hedging relationship.
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For derivatives formally designated as hedges, the company assesses at inception and quarterly
thereafter, whether the hedging derivatives are highly effective in offsetting changes in the fair value or
cash flows of the hedged item. The changes in fair value of a derivative designated as a fair value hedge
and of the hedged item attributable to the hedge risk are recognized in earnings immediately. Fair value
hedges are used to hedge the interest rate risk associated with certain of the company’s fixed-rate debt.
The effective portions of changes in the fair value of a derivative designated as a cash flow hedge are
reported in AOCI and are subsequently recognized in earnings consistent with the underlying hedged item.
Cash flow hedges are used to manage exposures from changes in foreign currency exchange rates.
The derivatives that are not designated and do not qualify as hedges are adjusted to fair value through
current earnings. If it is determined that a derivative is no longer highly effective as a hedge, the company
discontinues hedge accounting prospectively. Gains or losses are immediately reclassified from AOCI to
earnings relating to hedged forecasted transactions that are no longer probable of occurring. Gains or
losses relating to terminations of effective cash flow hedges in which the forecasted transactions are still
probable of occurring are deferred and recognized consistent with the income or loss recognition of the
underlying hedged items. Terminations of fair value hedges result in fair value adjustments to the hedged
items until the date of termination with the new bases being accreted to par value on the date of maturity.
Derivatives, including those that are not designated as a hedge, are principally classified in the
operating section of the consolidated statements of cash flows, consistent with the underlying hedged item.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2014-09, Summary and Amendments That Create Revenue from Contracts with Customers (Topic
606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40). The amendments
in this standard supersede most current revenue recognition requirements. The core principal of the new
guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. AbbVie can apply the amendments using one of the following two
methods: (i) retrospectively to each prior reporting period presented, or (ii) modified retrospectively with
the cumulative effect of initially applying the amendments recognized at the date of initial application. In
July 2015, the FASB issued ASU No. 2015-4, Revenue from Contracts with Customers (Topic 606): Deferral of
the Effective Date, which deferred the effective date of ASU 2014-09 by one year for all entities.
Accordingly, this standard is effective for annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period. Early application is permitted only for annual
reporting periods beginning after December 15, 2016, including interim periods within that reporting
period. AbbVie is currently assessing the timing of its adoption and the impact of adopting this guidance on
its consolidated financial statements and the implementation approach to be used.
In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 require that debt
issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction
from the carrying amount of that debt liability, consistent with debt discounts. The standard is effective for
annual and interim periods beginning after December 15, 2015, with early adoption permitted on a
retrospective basis. AbbVie elected to early adopt this new standard, effective in the three months ended
June 30, 2015. As a result, AbbVie reclassified approximately $7 million and $27 million of net deferred
financing costs as of December 31, 2014 that were previously classified as prepaid expenses and other
current assets and other long-term assets, respectively, to long-term debt and lease obligations (current and
non-current). Total debt issuance costs classified as a reduction of long-term debt and lease obligations
(current and non-current) were $117 million as of December 31, 2015.
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In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying
the Accounting for Measurement-Period Adjustments. This standard requires that an acquirer recognize
adjustments to provisional amounts that are identified during the measurement period in the reporting
period in which the adjustment amounts are determined. Entities are currently required to retrospectively
apply adjustments made to provisional amounts recognized in a business combination. This standard is
effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal
years. The guidance is to be applied prospectively to measurement period adjustments that occur after the
effective date of the guidance with earlier application permitted for financial statements that have not been
issued. AbbVie elected to early adopt the standard, effective in the year ended December 31, 2015. The
impact of this adoption was not material.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet
Classification of Deferred Taxes. ASU 2015-17 requires that deferred tax liabilities and assets be classified as
noncurrent in a classified statement of financial position. Entities are currently required to separate
deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of
financial position. The amendments, which require non-current presentation only (by jurisdiction), are
effective for financial statements issued for annual periods beginning after December 15, 2016 with earlier
application permitted as of the beginning of an interim or annual reporting period. The guidance is to be
applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods
presented. AbbVie elected to early adopt this standard on a prospective basis, effective as of December 31,
2015 in order to simplify the presentation of deferred tax assets and liabilities. Prior periods were not
retrospectively adjusted.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires several
targeted changes including that equity investments (except those accounted for under the equity method of
accounting, or those that result in consolidation of the investee) be measured at fair value with changes in
fair value recognized in net income. The new guidance also changes certain disclosure requirements and
other aspects of current US GAAP. Amendments are to be applied as a cumulative-effect adjustment to the
balance sheet as of the beginning of the fiscal year of adoption. This standard is effective for fiscal years
starting after December 15, 2017, including interim periods within those fiscal years. The standard does not
permit early adoption with the exception of certain targeted provisions. AbbVie is currently assessing the
impact and timing of adopting this guidance on its consolidated financial statements.
Note 3 Supplemental Financial Information
.....................................................................................................................................................................................................................................................................................................................................................
Interest Expense, Net
years ended December 31 (in millions)
Interest expense
Interest income
Interest expense, net
2015
2014
2013
$719
(33)
$429
(38)
$299
(21)
$686
$391
$278
Interest expense, net in 2015 included $86 million of bridge financing-related costs incurred in
connection with the acquisition of Pharmacyclics. Refer to Note 5 for additional information. Interest
expense, net in 2014 included $141 million of financing related fees incurred in connection with the
terminated proposed combination with Shire plc, a company incorporated in Jersey (Shire).
Other Expense (Income), Net
Other expense (income), net, includes income or expense from the resolution of certain contractual
agreements, impairments of equity securities, and gains and losses on the sale of equity securities. Other
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expense, net in 2015 primarily consisted of impairments of certain equity securities. Other income, net in
2014 primarily consisted of income of $34 million from the resolution of a contractual agreement.
Accounts Payable and Accrued Liabilities
as of December 31 (in millions)
Sales rebates
Accounts payable
Dividends payable
Salaries, wages and commissions
Royalty and license arrangements
Other
Accounts payable and accrued liabilities
Other Long-Term Liabilities
as of December 31 (in millions)
Pension and other post-employment benefits
Liabilities for unrecognized tax benefits
Other
Other long-term liabilities
2015
2014
$2,355
1,597
924
632
411
2,544
$1,384
1,401
791
623
821
1,934
$8,463
$6,954
2015
2014
$1,949
902
844
$2,220
471
990
$3,695
$3,681
Note 4 Earnings Per Share
.....................................................................................................................................................................................................................................................................................................................................................
AbbVie calculates earnings per share (EPS) using the more dilutive of the treasury stock or the
two-class method. The two-class method is an earnings allocation formula that determines earnings per
share for common stock and participating securities according to dividends declared and participation rights
in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to
common shares and participating securities based on their respective rights to receive dividends. In
addition, participating securities may include certain performance-based awards that may otherwise be
excluded from the calculation of EPS under the treasury-stock method. AbbVie’s forfeitable restricted stock
units (RSUs) and restricted stock awards (RSAs), including most performance-based awards, participate in
dividends on the same basis as common shares and such dividends are nonforfeitable to the holder once
declared. As a result, these forfeitable RSUs and RSAs meet the definition of a participating security.
For all periods presented, the two-class method was more dilutive. As such, the dilutive effect of
unvested RSUs and RSAs of approximately 4 million, 4 million, and 5 million shares for 2015, 2014 and
2013, respectively, were excluded from the denominator for the calculation of diluted EPS. These awards
otherwise would have been included in the calculation of EPS under the treasury stock method.
Additionally, all earnings (distributed and undistributed) allocable to participating securities, including
performance-based awards not otherwise included in the calculation of EPS under the treasury stock
method, were excluded from the numerator for the calculation of basic and diluted earnings per share
under the two-class method. Earnings allocable to participating securities for 2015, 2014, and 2013 were
$26 million, $9 million, and $26 million, respectively.
As further described in Note 12, AbbVie entered into and executed a $5.0 billion accelerated share
repurchase agreement (ASR) with Morgan Stanley & Co. LLC (Morgan Stanley) on May 26, 2015, pursuant
to which AbbVie paid $5.0 billion for an initial delivery of 68 million shares of AbbVie’s common stock. The
initial delivery of shares represented approximately 90 percent of the total shares expected to be delivered
under the ASR. Morgan Stanley subsequently delivered an additional 5 million shares of AbbVie’s common
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stock to AbbVie in final settlement of the ASR in August 2015. For purposes of calculating EPS, AbbVie
reflected the ASR as a repurchase of AbbVie common stock.
The number of common shares issuable under stock-based compensation plans that were excluded
from the computation of earnings per common share because the effect would have been antidilutive were
not material for all periods presented.
Note 5 Licensing, Acquisitions and Other Arrangements
.....................................................................................................................................................................................................................................................................................................................................................
Acquisition of Pharmacyclics
On May 26, 2015, AbbVie acquired Pharmacyclics through a tender offer for approximately
$20.8 billion, including cash consideration of $12.4 billion and equity consideration of $8.4 billion.
Pharmacyclics is a biopharmaceutical company that develops and commercializes novel therapies for people
impacted by cancer. Pharmacyclics markets IMBRUVICA(cid:2) (ibrutinib), a Bruton’s tyrosine kinase (BTK)
inhibitor, targeting B-cell malignancies. Each outstanding Pharmacyclics share was exchanged for (i) $152.25
in cash and $109.00 in fair market value of AbbVie common stock, (ii) $261.25 in cash, or (iii) $261.25 in
fair market value of AbbVie common stock, at the election of each holder, subject to the election and
proration of the consideration at 58 percent cash and 42 percent AbbVie common stock.
The total consideration for the acquisition of Pharmacyclics was approximately $20.8 billion, consisting
of cash and approximately 128 million shares of AbbVie common stock, and is summarized as follows:
(in millions)
Fair value of AbbVie common stock issued to Pharmacyclics stockholders
Cash consideration paid to Pharmacyclics stockholders
Cash consideration paid to Pharmacyclics equity award holders
Total consideration
$ 8,405
11,749
616
$20,770
The acquisition of Pharmacyclics was accounted for as a business combination using the acquisition
method of accounting. This method requires, among other things, that assets acquired and liabilities
assumed be recognized at fair value as of the acquisition date. The valuation of assets acquired and
liabilities assumed in the acquisition has not yet been finalized as of December 31, 2015. As a result,
AbbVie recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the
acquisition date. The completion of the valuation will occur no later than one year from the acquisition
date and may result in significant changes to the recognized assets and liabilities.
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The following table summarizes preliminary fair values of assets acquired and liabilities assumed as of
the May 26, 2015 acquisition date:
(in millions)
Assets acquired and liabilities assumed
Cash and equivalents
Short-term investments
Accounts and other receivables
Inventories
Other assets
Intangible assets
Definite-lived developed product rights
Definite-lived license agreements
Indefinite-lived research and development
Accounts payable and accrued liabilities
Deferred income taxes
Other long-term liabilities
Total identifiable net assets
Goodwill
Total assets acquired and liabilities assumed
$
877
11
106
492
212
4,590
6,780
7,180
(381)
(6,453)
(254)
13,160
7,610
$20,770
The fair market value step-up adjustment to inventories of $445 million is being amortized to cost of
products sold when the inventory is sold to customers, which is expected to be a period of approximately
18 months from the acquisition date.
Intangible assets relate to the IMBRUVICA developed product rights, IPR&D in the United States related
to additional indications for IMBRUVICA, and the contractual rights to IMBRUVICA profits and losses outside
the United States as a result of the collaboration agreement with Janssen Biotech, Inc. and its affiliates
(Janssen), one of the Janssen Pharmaceutical companies of Johnson & Johnson. Refer to Note 6 for
additional information regarding the collaboration with Janssen. The acquired definite-lived intangible assets
are being amortized over a weighted-average estimated useful life of 12 years using the estimated pattern
of economic benefit. The estimated fair value of the IPR&D and identifiable intangible assets was
determined using the ‘‘income approach,’’ which is a valuation technique that provides an estimate of the
fair value of an asset based on market participant expectations of the cash flows an asset would generate
over its remaining useful life. Some of the more significant assumptions inherent in the development of
those asset valuations include the estimated net cash flows for each year for each asset or product
(including net revenues, cost of sales, R&D costs, selling and marketing costs, and working capital/
contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in
each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and
commercial success risks, competitive trends impacting the asset and each cash flow stream, as well as
other factors.
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and
represents the future economic benefits arising from the other assets acquired that could not be
individually identified and separately recognized. Specifically, the goodwill recognized from the acquisition of
Pharmacyclics includes expected synergies, including the ability to leverage the respective strengths of each
business, expanding the combined company’s product portfolio, acceleration of clinical and commercial
presence in oncology and establishment of a strong leadership position in hematological oncology. The
goodwill is not deductible for tax purposes.
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From the acquisition date through December 31, 2015, AbbVie’s consolidated statement of earnings for
2015 included net revenues of $774 million and a pre-tax operating loss of $519 million associated with the
acquisition. The operating loss included $346 million of acquisition-related compensation expense,
$261 million of inventory step-up and intangible asset amortization, and $100 million of transaction and
integration costs. Of these costs, $294 million was recorded within SG&A expenses, $152 million within
R&D expenses, and $261 million within cost of products sold in the consolidated statement of earnings for
2015.
Pro Forma Financial Information
The following table presents the unaudited pro forma combined results of operations of AbbVie and
Pharmacyclics for 2015 and 2014 as if the acquisition of Pharmacyclics had occurred on January 1, 2014:
years ended December 31 (in millions, except per share data)
Net revenues
Net earnings
Basic earnings per share
Diluted earnings per share
2015
2014
$23,215
$ 5,345
$ 3.18
$ 3.16
$20,690
$
812
$ 0.47
$ 0.47
The unaudited pro forma financial information was prepared using the acquisition method of
accounting and was based on the historical financial information of AbbVie and Pharmacyclics. In order to
reflect the occurrence of the acquisition on January 1, 2014 as required, the unaudited pro forma financial
information includes adjustments to reflect the incremental amortization expense to be incurred based on
the current preliminary fair values of the identifiable intangible assets acquired; the incremental cost of
products sold related to the fair value adjustments associated with acquisition-date inventory; the additional
interest expense associated with the issuance of debt to finance the acquisition; and the reclassification of
acquisition, integration and financing-related costs incurred during the year ended December 31, 2015 to
the year ended December 31, 2014. The unaudited pro forma financial information is not necessarily
indicative of what the consolidated results of operations would have been had the acquisition been
completed on January 1, 2014. In addition, the unaudited pro forma financial information is not a
projection of the future results of operations of the combined company nor does it reflect the expected
realization of any cost savings or synergies associated with the acquisition.
Other Licensing & Acquisitions Activity
Excluding the acquisition of Pharmacyclics, cash outflows related to other acquisitions and investments
totaled $964 million, $622 million, and $405 million in 2015, 2014, and 2013, respectively. AbbVie recorded
IPR&D charges of $150 million, $352 million, and $338 million in 2015, 2014, and 2013, respectively. In
2014, AbbVie also recorded other operating expenses of $750 million related to the collaboration with
Calico Life Sciences LLC (Calico). Significant arrangements impacting 2015, 2014, and 2013, some of which
require contingent milestone payments, are summarized below.
In addition to the significant arrangements described below, AbbVie entered into several other
arrangements resulting in charges to IPR&D of $50 million in 2015, $77 million in 2014, and $48 million in
2013. In connection with the other individually insignificant arrangements entered into in 2015, AbbVie
could make additional payments of up to $1.2 billion upon the achievement of certain development,
regulatory and commercial milestones.
C2N Diagnostics
In March 2015, AbbVie entered into an exclusive worldwide license agreement with C2N Diagnostics
(C2N) to develop and commercialize anti-tau antibodies for the treatment of Alzheimer’s disease and other
neurological disorders. As part of the agreement, AbbVie made an initial upfront payment of $100 million,
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which was expensed to IPR&D in 2015. Upon the achievement of certain development, regulatory, and
commercial milestones, AbbVie could make additional payments of up to $685 million, as well as royalties
on net sales.
Calico Life Sciences LLC
In September 2014, AbbVie and Calico entered into a novel R&D collaboration agreement to discover,
develop and commercialize new therapies for patients with age-related diseases, including
neurodegeneration and cancer. In 2014, AbbVie recorded $750 million in other operating expense in the
consolidated statement of earnings related to its commitments under the agreement of which $250 million
was paid in 2014 and $500 million was paid in early 2015. Calico is responsible for research and early
development during the first five years and will continue to advance collaboration projects through
Phase 2a for a ten year period. AbbVie will have the option to exclusively license collaboration compounds
after completion of Phase 2a. AbbVie will support Calico in its early R&D efforts and, upon option exercise,
would be responsible for all late-stage development and commercial activities. Collaboration costs and
profits will be shared equally by both companies post option exercise.
Infinity Pharmaceuticals, Inc.
In September 2014, AbbVie entered into a global collaboration agreement with Infinity
Pharmaceuticals, Inc. (Infinity) to develop and commercialize duvelisib (IPI-145) for the treatment of
patients with cancer. As part of the agreement, AbbVie made an initial upfront payment of $275 million,
which was expensed to IPR&D in the third quarter of 2014. In 2015, AbbVie made an additional payment
of $130 million, which was recorded in R&D expense in the consolidated statement of earnings, due to the
achievement of a development milestone under the collaboration agreement. Upon the achievement of
certain development, regulatory and commercial milestones, AbbVie could make additional payments of up
to $400 million. In the United States, the companies will jointly commercialize duvelisib and will share
equally in any potential profits. Outside the United States, AbbVie will be responsible for the
commercialization of duvelisib, and Infinity is eligible to receive tiered double-digit royalties on net product
sales.
Ablynx NV
In September 2013, AbbVie entered into a global collaboration agreement with Ablynx NV to develop
and commercialize the anti-IL-6R Nanobody, ALX-0061, for the treatment of inflammatory diseases including
rheumatoid arthritis and systemic lupus erythematosus, resulting in a charge to IPR&D of $175 million.
Upon the achievement of certain development, regulatory and commercial milestones, AbbVie could make
additional payments of up to $665 million, as well as royalties on net sales.
Galapagos NV
In September 2013, AbbVie recorded a charge to IPR&D of $45 million as a result of entering into a
global collaboration with Galapagos NV (Galapagos) to discover, develop and commercialize cystic fibrosis
therapies. Upon the achievement of certain development, regulatory and commercial milestones, AbbVie
could make additional payments of up to $360 million, as well as royalties on net sales.
Alvine Pharmaceuticals, Inc.
In May 2013, AbbVie entered into a global collaboration with Alvine Pharmaceuticals, Inc. to develop
ALV003, a novel oral treatment for patients with celiac disease. As part of the agreement, AbbVie made an
initial upfront payment of $70 million, which was expensed to IPR&D in the second quarter of 2013. As of
December 31, 2015, AbbVie will not make any additional payments pursuant to this arrangement.
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Other Activity
United Therapeutics Corporation
In August 2015, AbbVie entered into an agreement to purchase a rare pediatric disease priority review
voucher (PRV) from United Therapeutics Corporation. The PRV entitles AbbVie to receive an FDA priority
review of a single New Drug Application or Biologics License Application, which reduces the target review
time and could lead to an expedited approval. In exchange for the PRV, AbbVie made a payment of
$350 million, which was recorded in R&D expenses in the consolidated statement of earnings and as an
operating cash outflow in the consolidated statement of cash flows for 2015. AbbVie intends to use the
PRV for an existing R&D project.
Termination of Proposed Combination with Shire
On October 15, 2014, AbbVie’s board of directors withdrew its previous recommendation to AbbVie
stockholders in favor of a proposed combination with Shire, and recommended stockholders vote against
the proposed combination. On October 20, 2014, AbbVie and Shire mutually agreed to terminate the
proposed combination. In 2014, the company incurred transaction and financing-related costs totaling
$1.8 billion, of which $1.7 billion was recorded in SG&A expenses and $141 million was recorded in interest
expense, net in the consolidated statement of earnings. Included in SG&A expenses was a break fee of
$1.6 billion, which was tax deductible, paid by AbbVie to Shire in October 2014 as a result of the
termination of the proposed combination. In addition, the company recorded $666 million of net foreign
exchange losses primarily due to undesignated forward contracts that were entered into to hedge
anticipated foreign currency cash outflows associated with the terminated proposed combination with Shire
and the exit of certain foreign currency positions. The forward contracts were settled in 2014. In the first
quarter of 2015, AbbVie recorded additional foreign exchange losses of $170 million to reflect the
completed liquidation of its remaining foreign currency positions. Refer to Note 10 for further information
regarding these forward contracts entered into in anticipation of the proposed combination with Shire.
Note 6 Collaboration with Janssen Biotech, Inc.
.....................................................................................................................................................................................................................................................................................................................................................
In December 2011, Pharmacyclics entered into a worldwide collaboration and license agreement with
Janssen for the joint development and commercialization of IMBRUVICA, a novel, orally active, selective
covalent inhibitor of 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 includes a cost sharing arrangement for associated collaboration activities. Except in
certain cases, in general, Janssen is responsible for approximately 60 percent of collaboration development
costs and AbbVie is responsible for the remaining 40 percent of collaboration development costs. AbbVie
and Janssen share pre-tax profits and losses equally from the commercialization of products. Janssen is
responsible for and has exclusive rights to commercialize IMBRUVICA outside the United States. While both
parties have co-exclusive rights to commercialize the products in the United States, AbbVie is the principal
in the end customer product sales. Operating expenses for costs incurred under the collaboration are
reported in their respective expense line items, net of any payments due or reimbursements due from
Janssen. Revenues and profit share costs related to sales of IMBRUVICA in the United States are included in
net revenues and cost of products sold, respectively. Amounts payable to AbbVie by Janssen for IMBRUVICA
sales outside the United States are included in net revenues.
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Janssen’s share of the pre-tax profits in the United States under the collaboration was $306 million for
2015 and was recorded within cost of products sold in the consolidated statement of earnings. For 2015,
AbbVie’s share of pre-tax profits outside the United States and cost sharing expenses under the
collaboration were $95 million and $159 million, respectively.
At December 31, 2015, AbbVie’s receivable from Janssen was $45 million and AbbVie’s payable to
Janssen was $134 million, which were classified in accounts and other receivables, net and accounts
payable and accrued liabilities, respectively, in AbbVie’s consolidated balance sheet.
Note 7 Goodwill and Intangible Assets
.....................................................................................................................................................................................................................................................................................................................................................
Goodwill
The following table summarizes the changes in the carrying amount of AbbVie’s goodwill:
(in millions)
Balance as of December 31, 2013
Additions
Foreign currency translation and other adjustments
Balance as of December 31, 2014
Additions
Foreign currency translation and other adjustments
Balance as of December 31, 2015
$ 6,277
—
(415)
5,862
7,610
(304)
$13,168
Goodwill additions in 2015 related to the acquisition of Pharmacyclics. Refer to Note 5 for additional
information regarding this acquisition. The latest impairment assessment of goodwill was completed in the
third quarter of 2015. As of December 31, 2015, there were no accumulated goodwill impairment losses.
Future impairment tests for goodwill will be performed annually in the third quarter, or earlier if indicators
of impairment exist.
Intangible Assets, Net
The following table summarizes AbbVie’s intangible assets:
as of December 31 (in millions)
Definite-lived intangible assets
Developed product rights
License agreements
Total definite-lived intangible assets
Indefinite-lived research and development
2015
2014
Gross
carrying Accumulated
amortization
amount
Net
carrying
amount
Gross
Net
carrying Accumulated carrying
amount amortization amount
$ 9,103
8,000
17,103
7,573
$(3,944) $ 5,159 $4,546
1,097
(1,023)
6,977
$(3,706) $ 840
228
(869)
(4,967)
—
12,136
7,573
5,643
445
(4,575)
—
1,068
445
Total intangible assets, net
$24,676
$(4,967) $19,709 $6,088
$(4,575) $1,513
Intangible assets with finite useful lives are amortized over their estimated useful lives, which range
between 3 to 16 years with an average of 12 years and 11 years for developed product rights and license
agreements, respectively. Additions in 2015 were primarily due to the acquisition of Pharmacyclics and
those amounts will be amortized using the estimated pattern of economic benefit. Refer to Note 5 for
additional information regarding this acquisition. Additions in 2014 are primarily related to the acquisition
of $80 million of amortizable intangible assets under license agreements for on-market product rights in the
United States with an average amortization period of 10 years.
2015 Form 10-K
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75
Amortization expense for 2015, 2014, and 2013 was $419 million, $403 million, and $509 million,
respectively, and is included in cost of products sold in the consolidated statements of earnings. The
anticipated annual amortization expense for definite lived intangible assets recorded as of December 31,
2015 is $655 million in 2016, $740 million in 2017, $894 million in 2018, $1.0 billion in 2019 and
$1.1 billion in 2020. In the third quarter of 2014, an impairment charge of $37 million was recorded related
to certain on-market product rights in Japan due to increased generic competition. The charge was based
on a discounted cash flow analysis and was included in cost of products sold in the consolidated statement
of earnings.
The indefinite-lived intangible assets represent acquired IPR&D associated with products that have not
yet received regulatory approval. The indefinite-lived intangible assets as of December 31, 2014 relate to
IPR&D acquired in a business combination. The increase in 2015 was primarily due to the acquisition of
Pharmacyclics. The latest impairment assessment of intangible assets not subject to amortization was
completed in the third quarter of 2015. No impairment charges were recorded in 2015. Impairment charges
recorded in 2014 related to indefinite-lived intangible assets were not material. Future impairment tests for
indefinite-lived intangible assets will be performed annually in the third quarter, or earlier if indicators of
impairment exist.
Note 8 Restructuring Plans
.....................................................................................................................................................................................................................................................................................................................................................
AbbVie continuously evaluates its operations to identify opportunities to optimize its manufacturing
and R&D operations, commercial infrastructure, and administrative costs and to respond to changes in its
business environment, for example, in conjunction with the loss and expected loss of exclusivity of certain
products. As a result, AbbVie management periodically approves individual restructuring plans to achieve
these objectives. In 2015, 2014 and 2013, no such plans were individually material. Restructuring charges
recorded in 2015, 2014 and 2013 were $138 million, $23 million, $83 million, respectively, and were
primarily related to employee severance and contractual obligations. These charges were recorded in cost
of products sold, R&D expenses, and SG&A expenses in the consolidated statements of earnings based on
classification of the affected employees or operations.
The following summarizes the cash activity in the restructuring reserve for 2015, 2014 and 2013:
(in millions)
Accrued balance at December 31, 2012
2013 restructuring charges
Payments and other adjustments
Accrued balance at December 31, 2013
2014 restructuring charges
Payments and other adjustments
Accrued balance at December 31, 2014
2015 restructuring charges
Payments and other adjustments
Accrued balance at December 31, 2015
$ 233
76
(118)
191
16
(85)
122
126
(100)
$ 148
Payments and other adjustments for 2013 included a $23 million reversal of a previously recorded
restructuring reserve due to the company’s re-evaluation of a prior year decision to exit a manufacturing
facility.
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Note 9 Debt, Credit Facilities, and Commitments and Contingencies
.....................................................................................................................................................................................................................................................................................................................................................
The following is a summary of AbbVie’s long-term debt:
as of December 31 (in millions)
Senior notes issued in 2012:
Floating rate notes due 2015
1.2% notes due 2015
1.75% notes due 2017
2.0% notes due 2018
2.9% notes due 2022
4.4% notes due 2042
Senior notes issued in 2015:
1.8% notes due 2018
2.5% notes due 2020
3.2% notes due 2022
3.6% notes due 2025
4.5% notes due 2035
4.7% notes due 2045
Term loan facilities:
Floating rate notes due 2016
Floating rate notes due 2018
Other
Fair value hedges
Unamortized bond discounts
Unamortized deferred financing costs
Total long-term debt and lease obligations
Current portion
Noncurrent portion
Effective
interest rate
in 2015(a)
2015
Effective
interest rate
in 2014(a)
1.09%
1.31%
1.86%
2.15%
2.97%
4.46%
—
—
—
—
—
—
—
—
—
—
—
—
1.13%
1.29%
1.86%
2.15%
2.97%
4.46%
1.92%
2.65%
3.28%
3.66%
4.58%
4.73%
1.23%
1.38%
—
—
—
—
$
—
—
4,000
1,000
3,100
2,600
3,000
3,750
1,000
3,750
2,500
2,700
2,000
2,000
139
(72)
(85)
(117)
31,265
2,025
$29,240
$
2014
500
3,500
4,000
1,000
3,100
2,600
—
—
—
—
—
—
—
—
115
(180)
(49)
(34)
14,552
4,014
$10,538
(a) Excludes the effect of any related interest rate swaps.
On September 25, 2015, AbbVie entered into a $2 billion three-year term loan credit agreement and a
$2 billion 364-day term loan credit agreement (collectively, the term loan facilities). In November 2015,
AbbVie drew on these term loan facilities and used the proceeds to refinance its $4 billion of senior notes
that matured in November 2015. The borrowings under the term loan facilities bear interest at variable
rates which will adjust based on AbbVie’s public debt ratings. The term loan facilities may be prepaid
without penalty upon prior notice and contain customary covenants, all of which the company was in
compliance with as of December 31, 2015.
In May 2015, the company issued $16.7 billion aggregate principal amount of unsecured senior notes.
The senior notes rank equally with all other unsecured and unsubordinated indebtedness of the company.
AbbVie may redeem the senior notes prior to maturity at a redemption price equal to the principal amount
of the senior notes redeemed plus a make-whole premium and, except for the 1.8% notes due 2018,
AbbVie may redeem the senior notes at par between one and six months prior to maturity. Debt issuance
costs incurred in connection with the offering totaled $93 million and are being amortized over the
respective terms of the senior notes to interest expense, net in the consolidated statements of earnings.
The senior notes contain customary covenants, all of which the company was in compliance with as of
December 31, 2015.
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77
Approximately $11.5 billion of the net proceeds from the issuance of the senior notes were used to
finance the acquisition of Pharmacyclics and approximately $5.0 billion of the net proceeds were used to
finance the ASR with Morgan Stanley. Refer to Notes 5 and 12 for additional information related to the
acquisition of Pharmacyclics and the ASR, respectively.
In March 2015, AbbVie entered into an $18 billion, 364-Day Bridge Term Loan Credit Agreement (the
bridge loan) in support of the then planned acquisition of Pharmacyclics. No amounts were drawn under
the bridge loan, which was terminated as a result of the company’s May 2015 issuance of the senior notes.
Interest expense, net in 2015 include $86 million of costs related to the bridge loan.
AbbVie has outstanding $10.7 billion aggregate principal amount of unsecured senior notes which were
issued in 2012. AbbVie may redeem all of the senior notes of each series, at any time, and some of the
senior notes of each series, from time to time, at a redemption price equal to the principal amount of the
senior notes redeemed plus a make-whole premium. At December 31, 2015, the company was in
compliance with its senior note covenants.
Short-Term Borrowings
At December 31, 2015 and 2014, short-term borrowings included $400 million and $416 million,
respectively, of commercial paper borrowings. The weighted-average interest rate on short-term borrowings
was 0.3 percent and 0.2 percent for 2015 and 2014, respectively.
In October 2014, AbbVie entered into a $3.0 billion five-year revolving credit facility, which matures in
October 2019 and replaced a $2.0 billion five-year revolving credit facility. The revolving credit facility
enables the company to borrow funds on an unsecured basis at variable interest rates and contains various
covenants. At December 31, 2015, the company was in compliance with all its credit facility covenants.
Commitment fees under AbbVie’s revolving credit facilities were not material in 2015, 2014 and 2013. No
amounts were outstanding under the credit facility as of December 31, 2015 and December 31, 2014.
Maturities of Long-Term Debt and Capital Lease Obligations
The following table summarizes AbbVie’s future minimum lease payments under non-cancelable
operating leases and debt maturities and future minimum lease payments for capital lease obligations as of
December 31, 2015:
as of and for the years ended December 31 (in millions)
2016
2017
2018
2019
2020
Thereafter
Total obligations and commitments
Fair value hedges and unamortized bond discounts and deferred financing costs
Total debt and lease obligations
Operating
leases
Debt maturities
and capital leases
$ 119
111
97
86
78
519
1,010
—
$1,010
$ 2,025
4,024
6,025
18
3,760
15,687
31,539
(274)
$31,265
Lease expense was $146 million in 2015, $115 million in 2014, and $107 million in 2013. AbbVie’s
operating leases generally include renewal options and provide for the company to pay taxes, maintenance,
insurance and other operating costs of the leased property. As of December 31, 2015, annual future
minimum lease payments for capital lease obligations are not material.
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Debt maturities and capital leases in 2016 include the $2.0 billion floating rate notes due in 2016
drawn under the 364-day term loan credit agreement.
Contingencies and Guarantees
In connection with the separation, AbbVie has indemnified Abbott for all liabilities resulting from the
operation of AbbVie’s business other than income tax liabilities with respect to periods prior to the
distribution date and other liabilities as agreed to by AbbVie and Abbott. AbbVie has no material exposures
to off-balance sheet arrangements, no special-purpose entities and no activities that included non-exchange-
traded contracts accounted for at fair value. In the ordinary course of business, AbbVie has periodically
entered into third-party agreements, such as the assignment of product rights, which have resulted in
AbbVie becoming secondarily liable for obligations for which AbbVie had previously been primarily liable.
Based upon past experience, the likelihood of payments under these agreements is remote. AbbVie
periodically acquires a business or product rights in which AbbVie agrees to pay contingent consideration
based on attaining certain thresholds or based on the occurrence of certain future events.
Note 10 Financial Instruments and Fair Value Measures
.....................................................................................................................................................................................................................................................................................................................................................
Risk Management Policy
The company is exposed to foreign currency exchange rate and interest rate risks related to its
business operations. The company’s hedging policy attempts to manage these risks to an acceptable level
based on the company’s judgment of the appropriate trade-off between risk, opportunity and costs. The
company uses derivative instruments to reduce its exposure to foreign currency exchange rates. The
company is also exposed to the risk that its earnings and cash flows could be adversely impacted by
fluctuations in interest rates. The company periodically enters into interest rate swaps, based on judgment,
to manage interest costs in which the company agrees to exchange, at specified intervals, the difference
between fixed and floating interest amounts calculated by reference to an agreed-upon notional amount.
Derivative instruments are not used for trading purposes or to manage exposure to changes in interest
rates for investment securities, and none of the company’s outstanding derivative instruments contain credit
risk related contingent features; collateral is generally not required.
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 and $1.4 billion at December 31, 2015 and December 31, 2014, respectively, are
designated as cash flow hedges and are recorded at fair value. Resulting gains or losses are reflected in
OCI. Accumulated gains and losses as of December 31, 2015 will be reclassified from AOCI and included in
cost of products sold at the time the products are sold, generally not exceeding twelve months.
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 loss in the consolidated statements of earnings and are generally offset by losses or gains
on the foreign currency exposure being managed. At December 31, 2015 and December 31, 2014, AbbVie
held notional amounts of $6.8 billion and $6.8 billion, respectively, of such undesignated foreign currency
forward exchange contracts.
In 2014, the company entered into undesignated forward exchange contracts with a total notional
amount of $16.9 billion to hedge anticipated foreign currency cash outflows associated with the terminated
proposed combination with Shire. A large portion of these contracts were originally due to mature in the
2015 Form 10-K
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79
first quarter of 2015 but were net settled in the fourth quarter of 2014. In 2014, the company realized
$490 million in net foreign exchange losses associated with the Shire-related forward exchange contracts.
AbbVie is a party to interest rate hedge contracts, designated as fair value hedges, totaling
$11.0 billion and $8.0 billion at December 31, 2015 and December 31, 2014, respectively. The effect of the
hedge is to change a fixed-rate interest obligation to a floating rate for that portion of the debt. AbbVie
recorded the contracts at fair value and adjusted the carrying amount of the fixed-rate debt by an
offsetting amount.
The following table summarizes the amounts and location of AbbVie’s derivative instruments in the
consolidated balance sheets:
as of December 31 (in millions)
2015 2014
Balance sheet caption
2015 2014
Balance sheet caption
Fair value—Derivatives in asset position
Fair value—Derivatives in liability
position
Foreign currency forward exchange
contracts—
Hedging instruments
$33 $141 Prepaid expenses and other $ — $ —
Others not designated as hedges
28
70 Prepaid expenses and other
21
63
Interest rate swaps designated as fair
value hedges
9
— Prepaid expenses and other
81
180
Total derivatives
$70 $211
$102 $243
Accounts payable
and accrued liabilities
Accounts payable
and accrued liabilities
Other long-term
liabilities
While certain derivatives are subject to netting arrangements with the company’s counterparties, the
company does not offset derivative assets and liabilities within the consolidated balance sheets.
The unrealized gains/(losses) for the effective portions of the derivative instruments designated as cash
flow hedges recognized in OCI were $122 million, $193 million and ($77) million for 2015, 2014, and 2013,
respectively. The amount of hedge ineffectiveness was not significant for any of the years presented.
The following table summarizes the pre-tax amounts and location in the consolidated statements of
earnings of net gains/(losses) recognized in the consolidated statements of earnings for derivative
instruments, including the effective portions of the net gains/(losses) reclassified out of AOCI into net
earnings for 2015, 2014, and 2013, respectively. See Note 12 for the amount of net gains/(losses)
reclassified out of AOCI.
years ended December 31 (in millions)
2015
2014
2013
Statement of earnings caption
Foreign currency forward exchange contracts—
Designated as cash flow hedges
Not designated as hedges
Interest rate swaps designated as fair value hedges
$ 265
(155)
108
$ (79) $ —
Cost of products sold
81 Net foreign exchange loss
Interest expense, net
(351)
(523)
252
Total
$ 218
$(350) $(270)
The gain/(loss) related to fair value hedges is recognized in interest expense, net in the consolidated
statements of earnings and directly offsets the (loss)/gain on the underlying hedged item, the fixed-rate
debt, resulting in no net impact to interest expense, net for all periods presented.
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Fair Value Measures
The fair value hierarchy under the accounting standard for fair value measurements 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.
The following table summarizes the bases used to measure certain assets and liabilities that are
carried at fair value on a recurring basis in the consolidated balance sheet as of December 31, 2015:
(in millions)
Assets
Cash and equivalents
Time deposits
Equity securities
Interest rate hedges
Foreign currency contracts
Total assets
Liabilities
Interest rate hedges
Foreign currency contracts
Total liabilities
Basis of fair value measurement
Quoted prices in
active markets for
identical assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
Inputs
(Level 3)
$798
—
111
—
—
$909
$ —
—
$ —
$7,601
8
—
9
61
$7,679
$
81
21
$ 102
$—
—
—
—
—
$—
$—
—
$—
Total
$8,399
8
111
9
61
$8,588
$
81
21
$ 102
2015 Form 10-K
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81
The following table summarizes the bases used to measure certain assets and liabilities that are
carried at fair value on a recurring basis in the consolidated balance sheet as of December 31, 2014:
(in millions)
Assets
Cash and equivalents
Time deposits
Equity securities
Foreign currency contracts
Total assets
Liabilities
Interest rate hedges
Foreign currency contracts
Total liabilities
Basis of fair value measurement
Quoted prices in
active markets for
identical assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
Inputs
(Level 3)
$1,214
—
13
—
$1,227
$ —
—
$ —
$7,134
9
—
211
$7,354
$ 180
63
$ 243
$—
—
—
—
$—
$—
—
$—
Total
$8,348
9
13
211
$8,581
$ 180
63
$ 243
The fair values for time deposits included in cash and equivalents and short-term investments are
determined based on a discounted cash flow analysis reflecting quoted market rates for the same or similar
instruments. The fair values of time deposits approximate their amortized cost due to the short maturities
of these instruments. Available-for-sale equity securities consists of investments for which the fair values
are 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 are valued using
publicized spot curves for interest rate hedges and publicized forward curves for foreign currency contracts.
Cumulative net unrealized holding gains on available-for-sale equity securities totaled $47 million and
$3 million at December 31, 2015 and December 31, 2014, respectively.
There have been no transfers of assets or liabilities between the fair value measurement levels.
In addition to the financial instruments that the company is required to recognize at fair value on the
consolidated balance sheets, the company has certain financial instruments that are recognized at historical
cost or some basis other than fair value. The carrying values and fair values of certain financial instruments
are summarized in the table below:
as of December 31 (in millions)
Book values
Approximate
fair values
2015
2014
2015
2014
Assets
Investments
Liabilities
Short-term borrowings
Current portion of long-term debt and lease obligations
Long-term debt and lease obligations, excluding fair value hedges
$
34
$
95
$
37
$
145
$
406
$ 2,025
$29,312
$
425
$ 4,014
$10,718
$
406
$ 2,016
$29,143
$
425
$ 4,026
$10,803
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2015 Form 10-K
The following table summarizes the bases used to measure the approximate fair values of the financial
instruments as of December 31, 2015:
Basis of fair value measurement
Quoted prices in
active markets for
identical assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
Inputs
(Level 3)
(in millions)
Assets
Investments
Total assets
Liabilities
Short-term borrowings
Current portion of long-term debt and lease obligations
Long-term debt and lease obligations, excluding fair
Total
$
$
$
37
37
406
2,016
$
$
$
—
—
—
—
value hedges
Total liabilities
29,143
$31,565
27,061
$27,061
$ —
$ —
$ 406
2,016
2,082
$4,504
$37
$37
$ —
—
—
$ —
The following table summarizes the bases used to measure the approximate fair values of the financial
instruments as of December 31, 2014:
Basis of fair value measurement
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
Inputs
(Level 3)
(in millions)
Assets
Investments
Total assets
Liabilities
Short-term borrowings
Current portion of long-term debt and lease obligations
Long-term debt and lease obligations, excluding fair value
Total
$
$
$
145
145
425
4,026
$
$
$
68
68
—
4,005
hedges
Total liabilities
10,803
10,710
$15,254
$14,715
$ 13
$ 13
$425
21
93
$539
$64
$64
$ —
—
—
$ —
Investments consist of cost method investments and held-to-maturity debt securities. To determine the
fair values of other cost method investments, the company takes into consideration recent transactions, as
well as the financial information of the investee, which represents a Level 3 basis of fair value
measurement. The fair value of held-to-maturity debt securities was estimated based upon the quoted
market prices for the same or similar debt instruments. The fair values of short-term and current
borrowings approximate the carrying values due to the short maturities of these instruments.
The fair values of long-term debt, excluding fair value hedges and the term loans, were determined by
using the published market price for the debt instruments, without consideration of transaction costs,
which represents a Level 1 basis of fair value measurement. The fair values of the term loans were
determined based on a discounted cash flow analysis using quoted market rates, which represents a Level 2
basis of fair value measurement. The counterparties to financial instruments consist of select major
international financial institutions.
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Concentrations of Risk
The company invests excess cash in time deposits and money market funds and diversifies the
concentration of cash among different financial institutions. The company monitors concentrations of credit
risk associated with deposits with financial institutions. Credit exposure limits have been established to limit
a concentration with any single issuer or institution.
The functional currency of the company’s Venezuela operations is the U.S. dollar due to the
hyperinflationary status of the Venezuelan economy. Currency restrictions enacted in Venezuela require
approval from the Venezuelan government to exchange Venezuelan bolivars (VEF) for U.S. dollars and
require such exchange to be made at the official exchange rate established by the government. In the first
quarter of 2014, the Venezuelan government expanded the number of exchange mechanisms to three rates
of exchange. As of December 31, 2015, these were the official rate of 6.3; the Supplementary System for
the Administration of Foreign Currency (SICAD) rate of approximately 13.5; and the Foreign Exchange
Marginal System (SIMADI) rate of approximately 200. In the consolidated financial statements as of and for
the year ended December 31, 2015, the company used the official rate of 6.3 VEF per U.S. dollar, and
reported $317 million of net monetary assets and $210 million of net revenues denominated in the
Venezuelan bolivar.
On February 17, 2016, the Venezuelan government announced that it plans to devalue the official rate
of 6.3 to 10 VEF to U.S. dollars, and eliminate the SICAD rate of 13.5 VEF to U.S. dollars. The devaluation of
the Venezuelan bolivar will result in a charge to AbbVie’s results of operations in the first quarter of 2016.
If AbbVie’s net monetary assets denominated in the Venezuelan bolivar had been converted at a rate of
10 VEF to U.S. dollars at December 31, 2015, the company would have reported a devaluation loss of
$117 million in 2015. If AbbVie’s net monetary assets denominated in the Venezuelan bolivar had been
converted at the SIMADI rate of 200 at December 31, 2015, the company would have reported a
devaluation loss of $307 million in 2015.
The company cannot predict whether there will be further devaluations of the Venezuelan currency or
whether the use of the official rate will continue to be supported by evolving facts and circumstances,
which could result in a significant charge to AbbVie’s results of operations at that time.
The company also continues to do business with foreign governments in certain oil-exporting countries,
including Venezuela and Saudi Arabia, which have experienced a deterioration in economic conditions. Due
to the decline in the price of oil, liquidity issues in certain countries may result in delays in the collection
of receivables.
Three U.S. wholesalers accounted for 51 percent and 49 percent of total net accounts receivable as of
December 31, 2015 and December 31, 2014, respectively, and substantially all of AbbVie’s net revenues in
the United States are to these three wholesalers. In addition, net governmental receivables outstanding in
Greece, Portugal, Italy and Spain totaled $525 million at December 31, 2015 and $446 million at
December 31, 2014.
HUMIRA (adalimumab) is AbbVie’s single largest product and accounted for approximately 61 percent,
63 percent, and 57 percent of AbbVie’s total net revenues in 2015, 2014, and 2013, respectively.
Note 11 Post-Employment Benefits
.....................................................................................................................................................................................................................................................................................................................................................
AbbVie sponsors various pension and other post-employment benefit plans, including defined benefit,
defined contribution and termination indemnity plans, which cover most employees worldwide. In addition,
AbbVie provides medical benefits, primarily to eligible retirees in the United States and Puerto Rico,
through other post-retirement benefit plans. Net obligations for these plans have been reflected in the
consolidated balance sheets as of December 31, 2015 and 2014.
AbbVie’s principal domestic defined benefit plan is the AbbVie Pension Plan. AbbVie employees who
were eligible to participate in the Abbott pension plan on December 31, 2012 automatically became eligible
for the AbbVie Pension Plan. During the first quarter of 2013, the AbbVie Pension Plan assumed the
obligations and related assets for AbbVie employees from Abbott. AbbVie made voluntary contributions of
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13NOV201221352027
2015 Form 10-K
$150 million, $370 million, and $145 million in 2015, 2014, and 2013 respectively, to this plan. AbbVie also
made a voluntary contribution of $150 million to this plan subsequent to December 31, 2015.
The benefit plan information in the table below pertains to the global AbbVie-sponsored defined
benefit and other post-employment plans:
as of and for the years ended December 31 (in millions)
2015
2014
2015
2014
Defined
benefit plans
Other
post-employment
plans
Projected benefit obligations
Beginning of period
Service cost
Interest cost
Employee contributions
Plan amendments
Actuarial (gain) loss
Benefits paid
Other, primarily foreign currency translation adjustments
End of period
Fair value of plan assets
Beginning of period
Actual (loss) return on plan assets
Company contributions
Employee contributions
Benefits paid
Other, primarily foreign currency translation adjustments
End of period
Funded status end of period
Amounts recognized in the consolidated balance sheets
Other non-current assets
Accounts payable and accrued liabilities
Other long-term liabilities
Net obligation
Actuarial losses, net
Prior service cost
$ 5,681
227
219
2
—
(467)
(158)
(117)
$ 4,484
173
217
1
1
1,108
(163)
(140)
$ 538
25
23
—
—
(17)
(11)
(1)
$ 403
22
22
—
(13)
111
(8)
1
5,387
5,681
557
538
4,173
(25)
217
2
(158)
(35)
4,174
3,666
282
430
1
(163)
(43)
4,173
—
—
11
—
(11)
—
—
—
—
8
—
(8)
—
—
$(1,213) $(1,508)
$(557)
$(538)
$
214
(24)
(1,403)
$
210
(26)
(1,692)
$ —
(11)
(546)
$ —
(10)
(528)
$(1,213) $(1,508)
$(557)
$(538)
$ 1,939
16
$ 2,216
19
$ 154
(45)
$ 181
(53)
Accumulated other comprehensive loss at December 31
$ 1,955
$ 2,235
$ 109
$ 128
The projected benefit obligations (PBO) in the table above included $1.5 billion and $1.4 billion at
December 31, 2015 and 2014, respectively, related to international defined benefit plans, a number of
which generally are not funded as permitted by local regulations. Benefit payments under those plans are
funded from company assets. AbbVie considered the release of the new mortality tables and projection
scales by the Society of Actuaries in 2014 and determined they were an improvement of the estimate of
future mortality and opted to change to the new tables in determining the funded status as of
December 31, 2014. In 2015, the Society of Actuaries released an improvement scale that adjusted the
previously issued 2014 scale which AbbVie determined was appropriate to utilize in determining the funded
status as of December 31, 2015.
For plans reflected in the table above, the accumulated benefit obligations (ABO) were $4.8 billion and
$5.0 billion at December 31, 2015 and 2014, respectively. For those plans reflected in the table above in
which the ABO exceeded plan assets at December 31, 2015, the ABO, PBO and aggregate plan assets were
$3.1 billion, $3.6 billion and $2.2 billion, respectively.
2015 Form 10-K
13NOV201221352027
85
Amounts Recognized in Accumulated Other Comprehensive Loss and Other Comprehensive (Loss) Income
The defined benefit and other post-employment plans’ actuarial (gains) or losses and prior service
costs or (credits) not yet recognized in net periodic benefit cost are included in AOCI, net of tax, and will
be amortized to net periodic benefit cost in future periods. The following table summarizes the pre-tax
gains and losses included in other comprehensive (loss) income:
years ended December 31 (in millions)
2015
2014
2013
Defined benefit plans
Actuarial (gain) loss
Prior service cost
Amortization of actuarial losses and prior service costs
Foreign exchange (gain) loss
$(117) $1,127
1
(68)
(41)
—
(127)
(37)
$(715)
15
(114)
2
Total pre-tax (gain) loss recognized in other comprehensive (income) loss
$(281) $1,019
$(812)
Other post-employment plans
Actuarial (gain) loss
Prior service cost
Amortization of actuarial losses and prior service costs
$ (17) $ 111
(13)
3
—
(2)
$ (42)
(53)
—
Total pre-tax (gain) loss recognized in other comprehensive (income) loss
$ (19) $ 101
$ (95)
The pre-tax amount of actuarial loss and prior service cost included in AOCI at December 31, 2015
that is expected to be recognized in net periodic benefit cost in 2016 is $87 million for defined benefit
plans and $1 million for other post-employment plans.
Net Periodic Benefit Cost
years ended December 31 (in millions)
Defined benefit plans
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses and prior service costs
Net periodic benefit cost
Other post-employment plans
Service cost
Interest cost
Amortization of actuarial (gain) loss and prior service costs
Net periodic benefit cost
2015
2014
2013
$ 227
219
(325)
127
$ 173
217
(302)
68
$ 184
196
(259)
114
$ 248
$ 156
$ 235
$ 25
23
2
$ 22
22
(2)
$ 23
19
(1)
$ 50
$ 42
$ 41
Weighted-Average Assumptions Used in Determining Benefit Obligations at the Measurement Date
as of December 31
Defined benefit plans
Discount rate
Rate of compensation increases
Other post-employment plans
Discount rate
2015
2014
4.4%
4.4%
3.9%
4.4%
4.9%
4.5%
The assumptions used in calculating the December 31, 2015 measurement date benefit obligations will
be used in the calculation of net periodic benefit cost in 2016.
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2015 Form 10-K
Weighted-Average Assumptions Used in Determining Net Periodic Benefit Cost
years ended December 31
Defined benefit plans
Discount rate
Expected long-term rate of return on plan assets
Expected rate of change in compensation
Other post-employment plans
Discount rate
2015
2014
2013
3.9%
7.8%
4.4%
4.9%
7.9%
5.0%
4.3%
8.2%
5.0%
4.5%
5.3%
4.5%
Effective December 31, 2015, AbbVie elected to change the method it uses to estimate the service and
interest cost components of net periodic benefit costs for the AbbVie Pension Plan and its primary other
post-employment benefit plan in the United States as well as certain international defined benefit plans and
other post-employment benefit plans. Historically, AbbVie estimated these service and interest cost
components of this expense utilizing a single weighted-average discount rate derived from the yield curve
used to measure the benefit obligation at the beginning of the period. In late 2015, AbbVie elected to
utilize a full yield curve approach in the estimation of these components by applying the specific spot rates
along the yield curve used in the determination of the benefit obligation to the relevant projected cash
flows. AbbVie elected to make this change to provide a more precise measurement of service and interest
costs by improving the correlation between projected benefit cash flows to the corresponding spot yield
curve rates. AbbVie has accounted for this change prospectively as a change in accounting estimate that is
inseparable from a change in accounting principle. Based on current economic conditions, this change is
expected to reduce AbbVie’s net periodic benefit cost by approximately $41 million in 2016. This change
had no effect on the 2015 expense and will not affect the measurement of AbbVie’s total benefit
obligations as the change in service cost and interest cost will be completely offset in the actuarial (gain)
loss reported.
For 2015, for purposes of measuring post-retirement health care obligations as of the measurement
date, the company assumed a 7.3 percent pre-65 (8.3 percent post-65) annual rate of increase in the per
capita cost of covered health care benefits. The rate was assumed to decrease gradually to 4.5 percent in
2064 and remain at that level thereafter. For purposes of measuring post-retirement health care costs, the
company assumed a 7.5 percent pre-65 (7.3 percent post-65) annual rate of increase in the per capita cost
of covered health care benefits. The rate was assumed to decrease gradually to 4.5 percent for 2064 and
remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported for health care
plans. As of December 31, 2015, a 1 percentage point change in assumed health care cost trend rates
would have the following effects:
year ended December 31, 2015 (in millions) (brackets denote a reduction)
Service cost and interest cost
Projected benefit obligation
One percentage
point
Increase
Decrease
$ 12
$116
$ (9)
$(90)
2015 Form 10-K
13NOV201221352027
87
Defined Benefit Pension Plan Assets
as of December 31 (in millions)
Equities
U.S. large cap(a)
U.S. mid cap(b)
International(c)
Fixed income securities
U.S. government securities(d)
Corporate debt instruments(d)
Non-U.S. government securities(d)
Other(d)
Absolute return funds(e)
Real assets
Other(f)
Fair value of plan assets
as of December 31 (in millions)
Equities
U.S. large cap(a)
U.S. mid cap(b)
International(c)
Fixed income securities
U.S. government securities(d)
Corporate debt instruments(d)
Non-U.S. government securities(d)
Other(d)
Absolute return funds(e)
Real assets
Other(f)
Fair value of plan assets
Basis of fair value measurement
Quoted prices in
active markets for
identical assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$ 542
35
100
15
124
33
122
2
8
93
$ 499
225
588
163
297
149
34
498
7
—
$ —
—
—
—
19
—
—
597
24
—
2015
$1,041
260
688
178
440
182
156
1,097
39
93
$4,174
$1,074
$2,460
$640
Basis of fair value measurement
Quoted prices in
active markets for
identical assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$ 588
67
137
—
101
201
29
3
7
79
$ 726
200
471
216
225
224
8
371
46
—
$ —
—
—
—
—
—
—
474
—
—
2014
$1,314
267
608
216
326
425
37
848
53
79
$4,173
$1,212
$2,487
$474
(a) A mix of pooled index funds and actively managed equity accounts that are benchmarked to various
large cap indices.
(b) A mix of pooled index funds and actively managed equity accounts that are benchmarked to various
mid cap indices.
(c) A mix of pooled index funds and actively managed equity accounts that are benchmarked to various
non-US equity indices in both developed and emerging markets.
(d) Securities held by actively managed accounts, pooled index funds, and mutual funds.
(e) Funds having global mandates with the flexibility to allocate capital broadly across a wide range of
asset classes and strategies, including but not limited to equities, fixed income, commodities, financial
futures, currencies, and other securities, with objectives to outperform agreed upon benchmarks of
specific return and volatility targets.
(f)
Investments in cash and cash equivalents.
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2015 Form 10-K
Equities that are valued using quoted prices are valued at the published market prices. Equities in a
common collective trust or a registered investment company that are valued using significant other
observable inputs are valued at the net asset value (NAV) provided by the fund administrator. The NAV is
based on the value of the underlying assets owned by the fund minus its liabilities. Fixed income securities
that are valued using significant other observable inputs are valued at prices obtained from independent
financial service industry-recognized vendors. Absolute return funds and commodities are valued at the NAV
provided by the fund administrator.
The following table summarizes the change in the value of plan assets that are measured using
significant unobservable inputs (Level 3):
as of and for the years ended December 31 (in millions)
Beginning of period
Actual return on plan assets on hand at end of period
Purchases, sales and settlements, net
End of period
2015
2014
$474
5
161
$411
21
42
$640
$474
The investment mix of equity securities, fixed income and other asset allocation strategies is based
upon achieving a desired return, balancing higher return, more volatile equity securities, and lower return,
less volatile fixed income securities. Investment allocations are established for each plan and are generally
made across a range of markets, industry sectors, capitalization sizes, and in the case of fixed income
securities, maturities and credit quality. The target investment allocations for the AbbVie Pension Plan is
35 percent in equity securities, 20 percent in fixed income securities and 45 percent in asset allocation
strategies and other holdings. There are no known significant concentrations of risk in the plan assets of
the AbbVie Pension Plan or any other plans’ assets.
The plans’ expected return on plan assets assumption, as shown above, is based on management’s
expectations of long-term average rates of return to be achieved by the underlying investment portfolios. In
establishing this assumption, management considers historical and expected returns for the asset classes in
which the plans are invested, as well as current economic and capital market conditions.
Expected Defined Benefit and Other Post-Employment Plan Payments
years ended December 31 (in millions)
2016
2017
2018
2019
2020
2021 to 2025
Defined
benefit plans
Other
post-employment
plans
$ 168
$ 177
$ 188
$ 199
$ 212
$1,295
$ 11
$ 14
$ 17
$ 20
$ 19
$133
The above table reflects total benefit payments expected to be paid to participants, which includes
payments funded from company assets as well as paid from the plans.
Other
AbbVie’s principal defined contribution plan is the AbbVie Savings Plan. AbbVie recorded expense of
$73 million in 2015, $67 million in 2014, and $62 million in 2013 related to this plan. AbbVie provides
certain other post-employment benefits, primarily salary continuation arrangements, to qualifying
employees and accrues for the related cost over the service lives of the employees.
2015 Form 10-K
13NOV201221352027
89
Note 12 Equity
.....................................................................................................................................................................................................................................................................................................................................................
Stock-Based Compensation
Stock-based compensation expense was $282 million, $241 million, and $212 million in 2015, 2014,
and 2013, respectively, and is principally classified in SG&A for all periods presented, with the remainder
classified in R&D expenses and cost of products sold. The related tax benefit recognized in 2015, 2014, and
2013 was $89 million, $73 million, and $68 million, respectively.
Compensation expense for stock-based awards is measured based on the fair value of the awards, as
of the date the stock-based awards are granted and adjusted to the estimated number of awards that are
expected to vest. Forfeitures are estimated based on historical experience at the time of grant and revised
in subsequent periods if actual forfeitures differ from those estimates. Compensation cost for stock-based
awards is amortized over their service period, which could be shorter than the vesting period if an
employee is retirement eligible, with a charge to compensation expense. For stock-based awards granted to
retirement-eligible employees, compensation expense is recognized immediately at the grant date because
the employee is able to retain the award without continuing to provide service. Retirement eligible
employees are generally those that are age 55 and have at least ten years of service.
Prior to separation, AbbVie employees participated in Abbott’s incentive stock program. The AbbVie
2013 Incentive Stock Program, adopted at the time of separation, facilitated the assumption of certain
awards granted under Abbott’s incentive stock program and authorizes the post-separation grant of several
different forms of benefits, including nonqualified stock options, RSAs, RSUs, and performance-based RSAs
and RSUs. Under the AbbVie 2013 Incentive Stock Program, 100 million shares of common stock were
reserved for issuance with respect to post-separation awards for participants.
In connection with the separation, outstanding Abbott employee stock options, RSAs and RSUs
previously issued under Abbott’s incentive stock program were adjusted and converted into new Abbott and
AbbVie stock-based awards using a formula designed to preserve the intrinsic value and fair value of the
awards immediately prior to the separation. Upon the separation on January 1, 2013, holders of Abbott
stock options, RSAs and RSUs generally received one AbbVie stock-based award for each Abbott stock-based
award outstanding. These adjusted awards retained the vesting schedule and expiration date of the original
awards. No AbbVie awards have been granted to Abbott employees other than in connection with the
separation.
In 2015, 2014, and 2013, realized excess tax benefits associated with stock-based compensation and
recorded in additional paid-in capital totaled $61 million, $56 million, and $38 million, respectively, and
were presented in the consolidated statements of cash flows as an outflow in operating activities and an
inflow in financing activities.
Stock Options
The exercise price for options granted is at least equal to 100 percent of the fair value on the date of
grant. Stock options typically have a contractual term of 10 years and generally vest in one-third increments
over a three-year period.
90
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2015 Form 10-K
The fair value of stock options is determined using the Black-Scholes model. The weighted-average
grant-date fair values of stock options granted were $9.96, $9.83, and $6.87 in 2015, 2014, and 2013,
respectively. Stock-based compensation expense attributable to options during each of the years presented
was not material.
The following table summarizes AbbVie stock option activity in 2015:
year ended December 31
(options in thousands, aggregate intrinsic value in millions)
Outstanding at beginning of period
Granted
Exercised
Lapsed
Outstanding at end of period
Exercisable at end of period
Weighted-
average
exercise price
Weighted-
average
remaining
life (in years)
Aggregate
intrinsic value
$28.53
58.83
26.31
27.50
$30.64
$28.16
3.3
$1,044
3.0
2.4
$ 674
$ 656
Options
28,280
1,207
(5,871)
(47)
23,569
21,091
The aggregate intrinsic value in the table above represents the difference between the exercise price
and the company’s closing share price on the last day of trading in 2015. The total intrinsic value of
options exercised in 2015, 2014 and 2013 was $216 million, $253 million, and $229 million respectively. The
total fair value of options vested during 2015 was $10 million.
RSAs & RSUs
RSAs and RSUs generally vest in one-third increments over three years. Upon vesting, the recipient
receives one share of common stock for each vested award. AbbVie grants performance-based RSAs and
RSUs to selected executives and other key employees with vesting primarily contingent upon AbbVie
achieving a minimum return on equity. The fair value of RSAs and RSUs (including performance-based
awards) is determined based on the number of shares granted and the quoted price of AbbVie’s common
stock on the date of grant. For purposes of determining compensation expense, AbbVie periodically
evaluates whether the performance goals will be achieved. If such goals are not met, no compensation
expense is recognized and any previously recognized compensation expense is reversed.
The following table summarizes AbbVie RSA and RSU activity (including performance-based awards) for
both AbbVie and Abbott employees for 2015:
year ended December 31 (share units in thousands)
Outstanding at beginning of period
Granted
Vested
Lapsed
Outstanding at end of period
Share units
Weighted-average
grant date fair value
12,815
6,052
(5,702)
(675)
12,490
$40.98
60.85
37.46
51.11
$51.66
The fair market value of RSAs and RSUs vested in 2015, 2014 and 2013 was $335 million, $338 million
and $285 million, respectively.
As of December 31, 2015, $239 million of unrecognized compensation cost related to RSAs and RSUs is
expected to be recognized as expense over approximately the next two years.
2015 Form 10-K
13NOV201221352027
91
Cash Dividends
On February 13, May 15, August 14 and November 16, 2015, AbbVie paid quarterly cash dividends of
$0.49, $0.51, $0.51 and $0.51 per share of common stock, respectively, which were declared by the board
of directors on October 20, 2014 and February 19, June 18, and September 11, 2015 respectively. The
dividends declared on October 20, 2014 and February 19, 2015, represented an increase of nearly
17 percent and approximately 4 percent, respectively, over the previous quarterly rates of $0.42 per share
and $0.49 per share, respectively. On October 30, 2015, the company announced that its board of directors
declared an increase in the company’s quarterly cash dividend from $0.51 per share to $0.57 per share
beginning with the dividend payable on February 16, 2016 to stockholders of record as of January 15, 2016.
This reflects an increase of approximately 12 percent over the previous quarterly rate.
On February 14, May 15, August 15, and November 17, 2014, AbbVie paid quarterly cash dividends of
$0.40, $0.42, $0.42 and $0.42 per share of common stock, respectively, which were declared by the board
of directors on December 12, 2013 and February 20, June 19, and September 19, 2014, respectively.
Stock Repurchase Program
On February 15, 2013, AbbVie’s board of directors authorized a $1.5 billion stock repurchase program.
On October 20, 2014, AbbVie’s board of directors authorized a new $5.0 billion stock repurchase program,
which was effective immediately and superseded the previous authorization. The current stock repurchase
authorization permits purchases of AbbVie shares from time to time in open market or private transactions
at management’s discretion depending on the company’s cash flows, net debt level and market conditions.
The program has no time limit and can be discontinued at any time.
In March 2015, the board of directors authorized a $5.0 billion increase to the existing stock
repurchase program in anticipation of executing an accelerated share repurchase agreement in connection
with the acquisition of Pharmacyclics. On May 26, 2015, AbbVie entered into and executed the $5.0 billion
ASR with Morgan Stanley. Pursuant to the terms of ASR, Morgan Stanley made an initial delivery of
approximately 68 million shares of AbbVie’s common stock on May 27, 2015, which represented
approximately 90 percent of the total shares expected to be delivered under the ASR. Morgan Stanley
subsequently delivered an additional 5 million shares of AbbVie’s common stock to AbbVie in final
settlement of the ASR in 2015. AbbVie recorded the aggregate $5.0 billion purchase price as a reduction to
common stock held in treasury in the consolidated balance sheet as of December 31, 2015.
In addition to the ASR, AbbVie repurchased approximately 46 million shares, 9 million shares, and
4 million shares for $2.8 billion, $550 million, and $223 million in 2015, 2014 and 2013, respectively, in the
open market. AbbVie settled $300 million of its 2015 open market purchases in 2016. Shares repurchased
under these programs are recorded at acquisition cost, including related expenses, and are available for
general corporate purposes. AbbVie’s remaining share repurchase authorization was $1.9 billion as of
December 31, 2015.
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2015 Form 10-K
Accumulated Other Comprehensive Loss
The following table summarizes the changes in each component of AOCI, net of tax, for 2015, 2014
and 2013:
(in millions) (brackets denote losses)
Balance as of December 31, 2012
Other comprehensive income (loss) before
reclassifications
Net losses reclassified from accumulated other
comprehensive loss
Net current-period other comprehensive income
(loss)
Separation-related adjustments
Balance as of December 31, 2013
Other comprehensive (loss) income before
reclassifications
Net losses reclassified from accumulated other
comprehensive loss
Net current-period other comprehensive (loss)
income
Balance as of December 31, 2014
Other comprehensive income before
reclassifications
Net losses (gains) reclassified from accumulated
other comprehensive loss
Net current-period other comprehensive (loss)
income
Foreign
currency
translation
adjustments
Pension
and post-
employment
benefits
Unrealized
gains
(losses) on
marketable
equity
securities
Hedging
activities
Total
$
181
$ (511)
$ 1
$
(21) $ (350)
48
—
48
241
470
519
79
598
(914)
(827)
(1,073)
(827)
—
46
(1,073)
(603)
(781)
(1,608)
(667)
—
(667)
147
83
230
1
—
1
—
2
1
—
1
3
(77)
491
—
79
(77)
11
(87)
570
(662)
(442)
187
(1,712)
77
123
264
177
(1,589)
(2,031)
48
(4)
44
$47
122
(350)
(259)
(180)
(137)
(530)
$
40
$(2,561)
Balance as of December 31, 2015
$(1,270)
$(1,378)
Other comprehensive loss in 2014 includes foreign currency translation adjustments totaling a loss of
$1.1 billion, which was principally driven by (i) the impact of the substantial weakening of the Euro in 2014
on the translation of the company’s Euro-denominated assets, and (ii) the weakening of foreign currencies
in combination with an increased concentration of cash denominated in foreign currencies accumulated in
anticipation of the terminated proposed combination with Shire plc. Other comprehensive loss in 2015
includes foreign currency translation adjustments totaling a loss of $667 million, which was principally
driven by the impact of the continued weakening of the Euro on the translation of the company’s Euro-
denominated assets.
2015 Form 10-K
13NOV201221352027
93
The table below presents the impact on AbbVie’s consolidated statements of earnings for significant
amounts reclassified out of each component of accumulated other comprehensive loss:
years ended December 31 (in millions) (brackets denote gains)
2015
2014
2013
Pension and post-employment benefits
Amortization of actuarial losses and other(a)
Less tax benefit
Total reclassifications, net of tax
Hedging activities
(Gains) losses on designated cash flow hedges(b)
Less tax expense (benefit)
Total reclassifications, net of tax
$ 129
(46)
$ 66
(20)
$114
(35)
$ 83
$ 46
$ 79
$(265) $ 79
(2)
6
$ —
—
$(259) $ 77
$ —
(a) Amounts are included in the computation of net periodic benefit cost (see Note 11).
(b) Amounts are included in cost of products sold (see Note 10).
Other
In addition to common stock, AbbVie’s authorized capital includes 200 million shares of preferred
stock, par value $0.01. As of December 31, 2015, no shares of preferred stock were issued or outstanding.
Note 13 Income Taxes
.....................................................................................................................................................................................................................................................................................................................................................
Earnings Before Income Tax Expense
years ended December 31 (in millions)
Domestic
Foreign
Total earnings before income tax expense
2015
2014
2013
$(1,038) $(3,245) $ (581)
5,913
5,614
7,683
$ 6,645
$ 2,369
$5,332
The domestic loss before income taxes in 2014 was driven by transaction and financing-related costs
associated with the terminated proposed combination with Shire. Refer to Note 5 for further information.
Income Tax Expense
years ended December 31 (in millions)
2015
2014
2013
Current
Domestic
Foreign
Total current taxes
Deferred
Domestic
Foreign
Total deferred taxes
Total income tax expense
94
13NOV201221352027
2015 Form 10-K
$1,036
313
$ 634
341
$ 226
354
$1,349
$ 975
$ 580
$ 141
11
$(301) $ 678
(54)
(79)
$ 152
$(380) $ 624
$1,501
$ 595
$1,204
Effective Tax Rate Reconciliation
years ended December 31
Statutory tax rate
State taxes, net of federal benefit
Effect of foreign operations
U.S. tax credits
Branded prescription drug fee
Valuation allowances
All other, net
Effective tax rate
2015
2014
2013
35.0% 35.0% 35.0%
—
(11.3)
(8.9)
3.7
3.6
3.0
0.3
(11.5)
(2.7)
0.4
0.1
1.0
0.1
(9.4)
(4.5)
0.7
(1.6)
2.3
22.6% 25.1% 22.6%
The effective tax rate fluctuates year to year due to the allocation of the company’s taxable earnings
among jurisdictions, as well as certain discrete factors and events in each year, including acquisitions and
collaborations. The effective tax rates in 2015, 2014 and 2013 differed from the statutory tax rate
principally due to the benefit from foreign operations which reflects the impact of lower income tax rates
in locations outside the United States, tax exemptions and incentives in Puerto Rico and other foreign tax
jurisdictions, and business development activities together with the cost of repatriation decisions. The
effective tax rates for these periods also reflected the benefit from U.S. tax credits principally related to
research and development credits, the orphan drug tax credit and Puerto Rico excise tax credits. The
research and development credits for 2015 and 2014 were due to legislation enacted in the fourth quarter
of each year that retroactively extended the credit. The Puerto Rico excise tax credits relate to legislation
enacted by Puerto Rico that assesses an excise tax beginning in 2011 on certain products manufactured in
Puerto Rico. The tax is levied on gross inventory purchases from entities in Puerto Rico and is included in
cost of products sold in the consolidated statements of earnings. The majority of the tax is creditable for
U.S. income tax purposes. The effective income tax rate in 2015 included a tax benefit of $103 million from
a reduction of state valuation allowances.
The effective tax rate in 2014 included additional expenses of $129 million related to the Branded
Prescription Drug Fee, which is non-deductible, and state valuation allowances of $129 million. On July 28,
2014, the Internal Revenue Service issued final rules and regulations for the Branded Prescription Drug Fee,
an annual non-tax-deductible fee payable to the federal government under the Affordable Care Act based
on an allocation of a company’s market share for branded prescription drugs sold to certain government
programs in the prior year. The final rules accelerated the expense recognition criteria for the fee obligation
from the year in which the fee is paid, to the year in which the market share used to allocate the fee is
determined. This change required AbbVie and other industry participants to recognize an additional year of
expense in 2014.
The effective income tax rate in 2015, 2014 and 2013 reflects income tax expenses relating to current
earnings outside the United States that are not deemed indefinitely reinvested.
2015 Form 10-K
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95
Deferred Tax Assets and Liabilities
as of December 31 (in millions)
Deferred tax assets
Compensation and employee benefits
Accruals and reserves
Chargebacks and rebates
Deferred revenue
Depreciation
Net operating losses and other credit carryforwards
Other
Total deferred tax assets
Valuation allowances
Total net deferred tax assets
Deferred tax liabilities
Excess of book basis over tax basis of intangible assets
Excess of book basis over tax basis in investments
Total deferred tax liabilities
Net deferred tax (liabilities) assets
2015
2014
$
584
368
472
372
45
282
316
$ 627
376
297
382
53
125
292
2,439
(70)
2,152
(172)
2,369
1,980
(4,459)
(2,958)
(7,417)
(331)
(326)
(657)
$(5,048) $1,323
The increases in the deferred tax liabilities are primarily due to the acquisition of Pharmacyclics in
which AbbVie recorded the excess of book basis over tax basis of intangible assets and investments.
Gross federal net operating loss and tax credit carryforwards as of December 31, 2015 were
$293 million and $147 million, respectively, and are available for use through 2035. Gross state net
operating loss and tax credit carryforwards as of December 31, 2015 were $1.3 billion and $152 million,
respectively. The state tax carryforwards expire between 2017 and 2035. As of December 31, 2015, foreign
net operating loss carryforwards were $232 million. Foreign net operating loss carryforwards of $177 million
expire between 2018 and 2023, and the remaining do not have an expiration period.
As of December 31, 2015 and 2014, the company had valuation allowances of $70 million and
$172 million, respectively, principally related to state net operating losses and credit carryforwards that are
not expected to be realized.
Deferred income taxes have not been provided on approximately $25 billion of the undistributed
earnings of foreign subsidiaries as these earnings have been indefinitely reinvested for continued use in
foreign operations. Due to the complexities in tax laws and assumptions that would have to be made, it is
not practicable to estimate the amount of income taxes that would be due if these earnings were
distributed.
Unrecognized Tax Benefits
years ended December 31 (in millions)
Balance as of January 1
Increase due to current year tax positions
Increase due to prior year tax positions
Decrease due to prior year tax positions
Lapse of statutes of limitations
Separation-related adjustments
Balance as of December 31
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2015
2014
2013
$421
187
369
(15)
(8)
—
$ 1,140
$247
195
115
—
67
—
(6)
(2)
—
— (1,088)
$954
$421
$
247
AbbVie and Abbott entered into a tax sharing agreement, effective on the date of separation, which
provides that Abbott is liable for and has indemnified AbbVie against all income tax liabilities for periods
prior to the separation. AbbVie will be responsible for unrecognized tax benefits and related interest and
penalties for periods after separation or in instances where an existing entity was transferred to AbbVie
upon separation.
The table above reflects the 2013 reduction of $1.1 billion relating to tax periods prior to the
separation for which Abbott is the primary obligor. However, under U.S. Treasury Regulations, each member
of a consolidated group is severally liable for the U.S. federal income tax liability of each other member of
the consolidated group. Accordingly, with respect to periods in which AbbVie was included in Abbott’s
consolidated group, AbbVie could be liable to the U.S. government for any U.S. federal income tax liability
incurred by the consolidated group, to the extent not discharged by any other member. However, if any
such liability were imposed, AbbVie would be entitled to be indemnified by Abbott pursuant to the tax
sharing agreement.
If recognized, the net amount of potential tax benefits that would impact the company’s effective tax
rate is $901 million and $389 million in 2015 and 2014, respectively. Of the unrecognized tax benefits
recorded in the table above as of December 31, 2015, AbbVie would be indemnified for approximately
$107 million. The ‘‘Increase due to prior year tax positions’’ in the table above includes amounts relating to
federal, state, and international items as well as prior positions acquired through business development
activities during the year. Uncertain tax positions are generally included as a long-term liability on the
consolidated balance sheets.
AbbVie recognizes interest and penalties related to income tax matters in income tax expense. In 2015,
2014, and 2013, AbbVie recognized gross income tax expense of $13 million, $10 million, and $3 million,
respectively, for interest and penalties related to income tax matters. At December 31, 2015, 2014, and
2013, AbbVie had $83 million, $25 million, and $15 million accrued for the payment of gross interest and
penalties.
The company is routinely audited by the tax authorities in significant jurisdictions, and a number of
audits are currently underway. It is reasonably possible during the next twelve months that uncertain tax
positions may be settled, which could result in a decrease in the gross amount of unrecognized tax
benefits. Due to the potential for resolution of federal, state, and foreign examinations, and the expiration
of various statutes of limitation, the company’s gross unrecognized tax benefits balance may change within
the next twelve months up to $15 million. All significant federal, state, local, and international matters have
been concluded for years through 2005. The company believes adequate provision has been made for all
income tax uncertainties.
Note 14 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. Loss contingency provisions are recorded for probable losses at management’s
best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount
within a probable range is recorded. The recorded accrual balance for litigation at December 31, 2015 was
$166 million and at December 31, 2014 was not significant. 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 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
2015 Form 10-K
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97
of its business but were discontinued prior to the distribution, as well as assumed or retained liabilities,
and will indemnify Abbott for any liability arising out of or resulting from such assumed legal matters.
Several pending lawsuits filed against Unimed Pharmaceuticals, Inc., Solvay Pharmaceuticals, Inc. (a
company Abbott acquired in February 2010 and now known as AbbVie Products LLC) and others are
consolidated for pre-trial purposes in the United States District Court for the Northern District of Georgia
under the Multi-District Litigation (MDL) Rules as In re: AndroGel Antitrust Litigation, MDL No. 2084. These
cases, brought by private plaintiffs and the Federal Trade Commission (FTC), generally allege Solvay’s 2006
patent litigation involving AndroGel was sham litigation and the patent litigation settlement agreement and
related agreements with three generic companies violate federal and state antitrust laws and state
consumer protection and unjust enrichment laws. Plaintiffs generally seek monetary damages and/or
injunctive relief and attorneys’ fees. MDL No. 2084 includes: (a) four individual plaintiff lawsuits; (b) six
purported class actions; and (c) Federal Trade Commission v. Watson Pharmaceuticals, Inc. et al. Following
the district court’s dismissal of all plaintiffs’ claims, appellate proceedings led to the reinstatement of the
claims regarding the patent litigation settlement, which are proceeding in discovery in the district court.
The Attorney General of the State of Alaska has served AbbVie with a Civil Investigative Demand, primarily
seeking documents that AbbVie produced in these lawsuits.
In November 2007, GlaxoSmithKline plc (GSK) filed a lawsuit against Abbott in the United States
District Court for the Northern District of California alleging that Abbott violated federal antitrust and
various state laws in connection with the 2003 Norvir re-pricing. In March 2011, a jury found that Abbott
did not violate antitrust laws, but breached its license agreement with GSK. In January 2014, the United
States Court of Appeals for the Ninth Circuit reversed this verdict and remanded the case for a new trial
due to the alleged improper exclusion of a potential juror. The case was returned to the district court in
California, but after GSK dismissed its federal antitrust claims, the case was transferred in April 2015 to the
United States District Court for the Middle District of North Carolina, where pre-trial proceedings are
pending. AbbVie assumed the liability for and control of this proceeding in connection with its separation
from Abbott.
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 consist of three individual
plaintiff lawsuits and two consolidated purported class actions: one brought by three named direct
purchasers of Niaspan and the other brought by ten named end-payor purchasers of Niaspan. The cases are
consolidated for pre-trial proceedings in the United States District Court for the Eastern District of
Pennsylvania under the MDL Rules as In re: Niaspan Antitrust Litigation, MDL No. 2460. The office of the
Attorney General of the State of Alaska has served AbbVie with a Civil Investigative Demand, primarily
seeking documents that AbbVie produced in this lawsuit.
In September 2014, the FTC filed suit in the United States District Court for the Eastern District of
Pennsylvania against AbbVie and others, alleging that the 2011 patent litigation with two generic companies
regarding AndroGel was sham litigation and the patent litigation settlement with one of those generic
companies violates federal antitrust laws. The FTC’s complaint seeks monetary damages and injunctive
relief. In May 2015, the court dismissed the FTC’s claim regarding the patent litigation settlement. The
office of the Attorney General of the State of Alaska has served AbbVie with a Civil Investigative Demand,
primarily seeking documents that AbbVie produced in this lawsuit.
In March 2015, the State of Louisiana filed a lawsuit, State of Louisiana v. Fournier Industrie et Sante,
et al., against AbbVie, Abbott and affiliated Abbott entities in Louisiana state court. Plaintiff alleges that
patent applications and patent litigation filed and other alleged conduct from the early 2000’s and before
related to the drug TriCor violated Louisiana state antitrust and unfair trade practices laws. The lawsuit
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seeks monetary damages and attorneys’ fees. In August 2015, the court dismissed the case as time-barred.
The state’s appeal of that dismissal is pending.
In August 2013, a putative class action lawsuit, Sidney Hillman Health Center of Rochester, et al. v.
AbbVie Inc., et al., was filed against AbbVie in the United States District Court for the Northern District of
Illinois by three healthcare benefit providers alleging violations of Federal Racketeer Influenced and Corrupt
Organizations (RICO) statutes and state deceptive business practice and unjust enrichment laws in
connection with reimbursements for certain uses of Depakote from 1998 to 2012. Plaintiffs seek monetary
damages and/or equitable relief and attorneys’ fees.
In November 2014, a putative class action lawsuit, Medical Mutual of Ohio v. AbbVie Inc., et al., was
filed against several manufacturers of testosterone replacement therapies (TRTs), including AbbVie, in the
United States District Court for the Northern District of Illinois on behalf of all insurance companies, health
benefit providers, and other third party payors who paid for TRTs, including AndroGel. The claims asserted
include violations of the federal RICO Act and state consumer fraud and deceptive trade practices laws. The
complaint seeks monetary damages and injunctive relief. A similar lawsuit, Allied Services Division Welfare
Fund v. AbbVie Inc., et al., was filed in the same court in October 2015 on behalf of the same putative
class members and a putative class of consumers.
Product liability cases are pending in which plaintiffs generally allege that AbbVie and other
manufacturers of TRTs did not adequately warn about risks of certain injuries, primarily heart attacks,
strokes and blood clots. Approximately 2,500 claims are consolidated for pre-trial purposes in the United
States District Court for the Northern District of Illinois under the MDL Rules as In re: Testosterone
Replacement Therapy Products Liability Litigation, MDL No. 2545. Approximately 170 claims are pending in
various state courts. Plaintiffs seek compensatory and punitive damages.
Product liability cases are pending in which plaintiffs generally allege that AbbVie did not adequately
warn about risk of certain injuries, primarily various birth defects, arising from use of Depakote. Over
ninety percent of the approximately 715 claims are pending in the United States District Court for the
Southern District of Illinois, and the rest are pending in various other federal and state courts. Plaintiffs
seek compensatory and punitive damages.
In November 2014, five individuals filed a putative class action lawsuit on behalf of purchasers and
sellers of certain Shire securities between June 20 and October 14, 2014, against AbbVie and its chief
executive officer in the United States District Court for the Northern District of Illinois alleging that the
defendants made and/or are responsible for material misstatements in violation of federal securities laws in
connection with AbbVie’s proposed transaction with Shire. The complaint seeks monetary damages and
injunctive relief.
In December 2014, a shareholder derivative lawsuit, Plumbers & Steamfitters Local 60 Pension Plans v.
J.P. Morgan Securities LLC, et al., was filed in Delaware Chancery Court, alleging that AbbVie’s directors
breached their fiduciary duties in connection with the approval and termination of AbbVie’s proposed
transaction with Shire. The lawsuit seeks monetary damages for AbbVie, among other relief.
2015 Form 10-K
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99
Note 15 Segment and Geographic Area Information
.....................................................................................................................................................................................................................................................................................................................................................
AbbVie operates in one business segment—pharmaceutical products. Substantially all of AbbVie’s net
revenues in the United States are to three wholesalers. Outside the United States, products are sold
primarily to health care providers or through distributors, depending on the market served. The following
tables detail AbbVie’s worldwide net revenues:
years ended December 31 (in millions)
2015
2014
2013
HUMIRA
IMBRUVICA
VIEKIRA
Creon
Synagis
Lupron
Synthroid
Kaletra
AndroGel
Sevoflurane
Duodopa
Dyslipidemia products
All other
Total net revenues
$14,012
754
1,639
632
740
826
755
700
694
474
231
179
1,223
$12,543
—
48
516
835
778
709
870
934
550
220
328
1,629
$10,659
—
—
412
827
785
622
962
1,035
568
178
1,076
1,666
$22,859
$19,960
$18,790
Net revenues to external customers by geographic area, based on product shipment destination, were
as follows:
years ended December 31 (in millions)
United States
Germany
United Kingdom
Spain
Japan
France
Canada
Italy
Brazil
The Netherlands
All other countries
Total net revenues
2015
2014
2013
$13,561
1,082
688
618
599
597
551
452
376
334
4,001
$10,845
1,035
722
534
581
584
551
432
435
345
3,896
$10,181
911
606
543
625
540
538
404
439
332
3,671
$22,859
$19,960
$18,790
Long-lived assets include net property and equipment of $2.6 billion and $2.5 billion as of
December 31, 2015 and 2014, of which $1.9 billion and $1.8 billion, respectively, was located in the United
States and Puerto Rico and $513 million and $551 million, respectively, was located in Europe.
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2015 Form 10-K
Note 16 Quarterly Financial Data (unaudited)
.....................................................................................................................................................................................................................................................................................................................................................
(in millions except per share data)
First Quarter
Net revenues
Gross margin
Net earnings(a)
Basic earnings per share
Diluted earnings per share
Cash dividends declared per common share
Second Quarter
Net revenues
Gross margin
Net earnings(b)
Basic earnings per share
Diluted earnings per share
Cash dividends declared per common share
Third Quarter
Net revenues
Gross margin
Net earnings(c)
Basic earnings per share
Diluted earnings per share
Cash dividends declared per common share
Fourth Quarter
Net revenues(d)
Gross margin(d)
Net earnings (loss)(e)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Cash dividends declared per common share
2015
2014
$5,040
$4,098
$1,022
$ 0.64
$ 0.63
$ 0.51
$5,475
$4,559
$1,366
$ 0.84
$ 0.83
$ 0.51
$5,944
$4,777
$1,239
$ 0.75
$ 0.74
$ 0.51
$6,400
$4,925
$1,517
$ 0.93
$ 0.92
$ 0.57
$4,563
$3,463
$ 980
$ 0.61
$ 0.61
$ 0.42
$4,926
$3,813
$1,098
$ 0.69
$ 0.68
$ 0.42
$5,019
$3,925
$ 506
$ 0.32
$ 0.31
$ 0.42
$5,452
$4,333
$ (810)
$ (0.51)(f)
$ (0.51)(f)
$ 0.49
(a) Results for the first quarter of 2015 included after-tax foreign exchange losses of $170 million related
to the liquidation in 2015 of remaining foreign currency positions related to the terminated proposed
combination with Shire in 2014, a $100 million after-tax charge as a result of entering into an exclusive
worldwide license agreement with C2N and after-tax costs of $41 million incurred in connection with
the with the acquisition of Pharmacyclics.
(b) Second quarter results for 2015 included after-tax costs totaling $215 million incurred in connection
with the acquisition and integration of Pharmacyclics. In 2014, second quarter results included an
after-tax charge of $40 million related to a regulatory milestone made to a collaboration partner for
regulatory milestones related to the company’s HCV program.
(c) Results for the third quarter of 2015 included a $350 million after-tax charge related to the purchase
of a rare pediatric disease PRV from United Therapeutics Corporation, after after-tax costs totaling
$85 million incurred in connection with the acquisition and integration of Pharmacyclics, and an
$83 million after-tax charge due to the achievement of a development milestone under the global
collaboration with Infinity. In 2014, third quarter results included a $173 million after-tax charge as a
result of entering into a global collaboration with Infinity, a $250 million after-tax charge related to a
research and development collaboration agreement with Calico, and transaction and financing-related
2015 Form 10-K
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101
and other costs aggregating $172 million after-tax that were incurred in connection with the
terminated proposed combination with Shire. Refer to Note 5 for further information relating to the
termination of the proposed combination with Shire and the collaborations with Calico and Infinity.
(d) Net revenues and gross margin in 2015 included milestone revenue of $40 million from a collaboration
partner related the company’s oncology program. Net revenues and gross margin in 2014 include
royalty income of $81 million relating to prior periods as a result of the settlement of a licensing
arrangement.
(e) Fourth quarter results for 2015 included after-tax costs totaling $68 million incurred in connection with
the acquisition and integration of Pharmacyclics and after-tax charges of $101 million to increase the
company’s litigation reserves. For 2014, results for the fourth quarter included after-tax transaction and
financing-related and other costs incurred in connection with the terminated proposed combination
with Shire aggregating $1.6 billion and a $500 million after-tax charge related to the research and
development collaboration agreement with Calico.
(f) Basic loss per share for the fourth quarter of 2014 was calculated under the treasury-stock method as
it was more dilutive. Approximately 36 million common shares were excluded from the computation of
diluted (loss) per share assuming dilution because the effect would have been anti-dilutive.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of AbbVie Inc.
We have audited the accompanying consolidated balance sheets of AbbVie Inc. and subsidiaries as of
December 31, 2015 and 2014, and the related consolidated statements of earnings, comprehensive income,
equity and cash flows for each of the three years in the period ended December 31, 2015. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of AbbVie Inc. and subsidiaries at December 31, 2015 and 2014, and the
consolidated results of their operations and their cash flows for each of the three years in the period
ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), AbbVie Inc. and subsidiaries’ internal control over financial reporting as of
December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report
dated February 19, 2016 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Chicago, Illinois
February 19, 2016
2015 Form 10-K
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103
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
.....................................................................................................................................................................................................................................................................................................................................................
None.
ITEM 9A. CONTROLS AND PROCEDURES
.....................................................................................................................................................................................................................................................................................................................................................
Disclosure Controls and Procedures
Evaluation of disclosure controls and procedures.
The Chief Executive Officer, Richard A. Gonzalez,
and the Chief Financial Officer, William J. Chase, evaluated the effectiveness of AbbVie’s disclosure controls
and procedures as of the end of the period covered by this report, and concluded that AbbVie’s disclosure
controls and procedures were effective to ensure that information AbbVie is required to disclose in the
reports that it files or submits with the Securities and Exchange Commission under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the
Commission’s rules and forms, and to ensure that information required to be disclosed by AbbVie in the
reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and
communicated to AbbVie’s management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
Management’s annual report on internal control over financial reporting. Management’s report on
internal control over financial reporting is included on page 105 hereof. The report of AbbVie’s independent
registered public accounting firm related to its assessment of the effectiveness of internal control over
financial reporting is included on page 106 hereof.
Changes in internal control over financial reporting. As part of its separation from Abbott, in 2014
AbbVie began a phased global implementation of a new enterprise resource planning system, related
technology infrastructure and transaction processing services to replace the information technology
infrastructure and transactional services provided to AbbVie by Abbott under various transition services
agreements. These initiatives, which were completed in 2015, included modifications to the design and
operation of controls over financial reporting. AbbVie reviewed these controls for design effectiveness prior
to the implementation of each phase.
There were no other changes in AbbVie’s internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably
likely to materially affect, AbbVie’s internal control over financial reporting during the quarter ended
December 31, 2015.
Inherent Limitations on Effectiveness of Controls. AbbVie’s management, including its Chief Executive
Officer and its Chief Financial Officer, do not expect that AbbVie’s disclosure controls or internal control
over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any,
have been detected. These inherent limitations include the realities that judgments in decision-making can
be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be
circumvented by the individual acts of some persons, by collusion of two or more people, or by
management override of the controls.
The design of any system of controls is based in part on certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Projections of any evaluation of controls effectiveness to future
periods are subject to risks. Over time, controls may become inadequate because of changes in conditions
or deterioration in the degree of compliance with policies or procedures.
ITEM 9B. OTHER INFORMATION
.....................................................................................................................................................................................................................................................................................................................................................
None.
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Management’s Report on Internal Control Over Financial Reporting
Management of AbbVie is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.
AbbVie’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the United States. However, all internal control
systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and
reporting.
Management assessed the effectiveness of AbbVie’s internal control over financial reporting as of
December 31, 2015. In making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework
(2013 framework). Based on that assessment, management concluded that AbbVie maintained effective
internal control over financial reporting as of December 31, 2015, based on the COSO criteria.
On May 26, 2015, AbbVie acquired Pharmacyclics, Inc. (Pharmacyclics), which represents a material
change in the internal control over financial reporting since management’s last assessment of effectiveness.
Management has excluded Pharmacyclics from its assessment of and conclusion on the effectiveness of
internal control over financial reporting as of December 31, 2015. AbbVie’s consolidated balance sheet as of
December 31, 2015 included $1 billion of total assets (excluding goodwill and other intangible assets which
were included in management’s assessment of internal controls over financial reporting) related to
Pharmacyclics. In addition, AbbVie’s consolidated statement of net earnings for 2015 included $774 million
of net revenues and reflected a net loss of $331 million related to Pharmacyclics.
The effectiveness of AbbVie’s internal control over financial reporting as of December 31, 2015 has
been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their
attestation report appearing on page 106 hereof, which expresses an unqualified opinion on the
effectiveness of AbbVie’s internal control over financial reporting as of December 31, 2015.
2015 Form 10-K
13NOV201221352027
105
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of AbbVie Inc.
We have audited AbbVie Inc. and subsidiaries’ internal control over financial reporting as of
December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
AbbVie Inc. and subsidiaries’ management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the company’s internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting
did not include internal controls of Pharmacyclics, Inc., which was acquired on May 26, 2015 and is
included in the 2015 consolidated financial statements of AbbVie Inc. and subsidiaries and constituted
$1 billion of total assets (excluding goodwill and other intangible assets which were included in
management’s assessment of and conclusions on the effectiveness of internal control over financial
reporting) as of December 31, 2015 and $774 million and $331 million of revenues and net loss,
respectively, for the year then ended. Our audit of internal control over financial reporting of AbbVie Inc.
and subsidiaries also did not include an evaluation of the internal control over financial reporting of
Pharmacyclics, Inc.
In our opinion, AbbVie Inc. and subsidiaries’ maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets as of December 31, 2015 and 2014, and the related
consolidated statements of earnings, comprehensive income, equity and cash flows for each of the three
years in the period ended December 31, 2015 of AbbVie Inc. and subsidiaries and our report dated
February 19, 2016 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Chicago, Illinois
February 19, 2016
106
13NOV201221352027
2015 Form 10-K
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
.....................................................................................................................................................................................................................................................................................................................................................
Incorporated herein by reference are ‘‘Information Concerning Director Nominees,’’ ‘‘The Board of
Directors and its Committees—Committees of the Board of Directors,’’ ‘‘Section 16(a) Beneficial Ownership
Reporting Compliance,’’ and ‘‘Procedure for Recommendation and Nomination of Directors and Transaction
of Business at Annual Meeting’’ to be included in the 2016 AbbVie Inc. Proxy Statement. The 2016
Definitive Proxy Statement will be filed on or about March 21, 2016. Also incorporated herein by reference
is the text found under the caption, ‘‘Executive Officers of the Registrant’’ on pages 26 and 27 hereof.
AbbVie’s code of business conduct requires all its business activities to be conducted in compliance
with all applicable laws, regulations, and ethical principles and values. All directors, officers, and employees
of AbbVie are required to read, understand, and abide by the requirements of the code of business
conduct applicable to them. AbbVie’s code of business conduct is available in the corporate governance
section of AbbVie’s investor relations website at www.abbvieinvestor.com.
Any waiver of the code of business conduct for directors or executive officers may be made only by
AbbVie’s audit committee. AbbVie will disclose any amendment to, or waiver from, a provision of the code
of conduct for the principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, on its website within four business days following the
date of the amendment or waiver. In addition, AbbVie will disclose any waiver from the code of business
conduct for the other executive officers and for directors on the website.
AbbVie has a chief ethics and compliance officer who reports to the chief executive officer and to the
public policy committee. The chief ethics and compliance officer is responsible for overseeing,
administering, and monitoring AbbVie’s compliance program.
ITEM 11. EXECUTIVE COMPENSATION
.....................................................................................................................................................................................................................................................................................................................................................
The material to be included in the 2016 Proxy Statement under the headings ‘‘Director Compensation,’’
‘‘Executive Compensation,’’ and ‘‘Compensation Committee Report’’ is incorporated herein by reference. The
2016 Definitive Proxy Statement will be filed on or about March 21, 2016.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
.....................................................................................................................................................................................................................................................................................................................................................
(a) Equity Compensation Plan Information.
The following table presents information as of December 31, 2015 about AbbVie’s equity compensation
plans under which AbbVie common stock has been authorized for issuance:
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
(a)
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights(1)
34,485,674
—
34,485,674
(b)
Weighted-
average exercise
price of
outstanding
options,
warrants and
rights(2)
$30.64
—
$30.64
(c)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))
86,286,146
—
86,286,146
2015 Form 10-K
13NOV201221352027
107
(1)
Includes 20,061,746 shares issuable under AbbVie’s Incentive Stock Program pursuant to awards
granted by Abbott and adjusted into AbbVie awards in connection with AbbVie’s separation from
Abbott.
(2) The weighted-average exercise price does not include outstanding restricted stock units and
restricted stock awards that have no exercise price.
(b)
Information Concerning Security Ownership.
Incorporated herein by reference is the material under
the heading ‘‘Securities Ownership—Securities Ownership of Executive Officers and Directors’’ in the
2016 Proxy Statement. The 2016 Definitive Proxy Statement will be filed on or about March 21, 2016.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
.....................................................................................................................................................................................................................................................................................................................................................
INDEPENDENCE
The material to be included in the 2016 Proxy Statement under the headings ‘‘The Board of Directors
and its Committees,’’ ‘‘Corporate Governance Materials,’’ and ‘‘Procedures for Approval of Related Person
Transactions’’ is incorporated herein by reference. The 2016 Definitive Proxy Statement will be filed on or
about March 21, 2016.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
.....................................................................................................................................................................................................................................................................................................................................................
The material to be included in the 2016 Proxy Statement under the headings ‘‘Audit Fees and
Non-Audit Fees’’ and ‘‘Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
of the Independent Registered Public Accounting Firm’’ is incorporated herein by reference. The 2016
Definitive Proxy Statement will be filed on or about March 21, 2016.
108
13NOV201221352027
2015 Form 10-K
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
.....................................................................................................................................................................................................................................................................................................................................................
(a) Documents filed as part of this Form 10-K.
(1) Financial Statements:
See Item 8, ‘‘Financial Statements and Supplementary Data,’’ on page 47
hereof, for a list of financial statements.
(2) Financial Statement Schedules: All schedules omitted are inapplicable or the information required
is shown in the consolidated financial statements or notes thereto.
(3) Exhibits Required by Item 601 of Regulation S-K:
The information called for by this paragraph is
incorporated herein by reference to the Exhibit Index on pages 111 through 113 of this
Form 10-K.
(b) Exhibits filed:
See Exhibit Index on pages 111 through 113.
(c)
Financial Statement Schedules: None applicable.
2015 Form 10-K
13NOV201221352027
109
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
AbbVie Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURES
AbbVie Inc.
By: /s/ RICHARD A. GONZALEZ
Name: Richard A. Gonzalez
Title:
Chairman of the Board and
Chief Executive Officer
Date: February 19, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of AbbVie Inc. on February 19, 2016 in the capacities indicated
below.
/s/ WILLIAM J. CHASE
William J. Chase
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
/s/ ROXANNE S. AUSTIN
Roxanne S. Austin
Director of AbbVie Inc.
/s/ EDWARD M. LIDDY
Edward M. Liddy
Director of AbbVie Inc.
/s/ ROY S. ROBERTS
Roy S. Roberts
Director of AbbVie Inc.
/s/ FREDERICK H. WADDELL
Frederick H. Waddell
Director of AbbVie Inc.
/s/ RICHARD A. GONZALEZ
Richard A. Gonzalez
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ THOMAS A. HURWICH
Thomas A. Hurwich
Vice President, Controller
(Principal Accounting Officer)
/s/ ROBERT J. ALPERN, M.D.
Robert J. Alpern, M.D.
Director of AbbVie Inc.
/s/ WILLIAM H.L. BURNSIDE
William H.L. Burnside
Director of AbbVie Inc.
/s/ EDWARD J. RAPP
Edward J. Rapp
Director of AbbVie Inc.
/s/ GLENN F. TILTON
Glenn F. Tilton
Director of AbbVie Inc.
110
13NOV201221352027
2015 Form 10-K
EXHIBIT INDEX
ABBVIE INC.
ANNUAL REPORT
FORM 10-K
2015
Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be ‘‘filed’’ under the
Securities Exchange Act of 1934.
Exhibit
Number
2.1
2.2
3.1
3.2
4.1
4.2
4.3
4.4
10.1
10.2
10.3
10.4
10.5
10.6
Exhibit Description
*Agreement and Plan of Reorganization by and among AbbVie Inc., Oxford Amherst Corporation,
Oxford Amherst LLC and Pharmacyclics, Inc. dated as of March 4, 2015 (incorporated by reference
to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on March 6, 2015).
*Amendment No. 1 to Agreement and Plan of Reorganization by and among AbbVie Inc., Oxford
Amherst Corporation, Oxford Amherst LLC and Pharmacyclics, Inc. dated as of March 22, 2015
(incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on
March 23, 2015).
*Amended and Restated Certificate of Incorporation of AbbVie Inc. (incorporated by reference to
Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on January 2, 2013).
*Amended and Restated By-Laws of AbbVie Inc. (incorporated by reference to Exhibit 3.2 of the
Company’s Current Report on Form 8-K filed on January 2, 2013).
*Indenture dated as of November 8, 2012 between AbbVie Inc. and U.S. Bank National Association
(incorporated by reference to Exhibit 4.1 of Amendment No. 5 to the Company’s Registration
Statement on Form 10 filed on November 16, 2012).
*Supplemental Indenture No. 1 dated as of November 8, 2012 among AbbVie Inc. and U.S. Bank
National Association, including forms of notes (incorporated by reference to Exhibit 4.2 of
Amendment No. 5 to the Company’s Registration Statement on Form 10 filed on November 16,
2012).
*Supplemental Indenture No. 2 dated May 14, 2015, between AbbVie Inc. and U.S. Bank National
Association, as trustee, including forms of notes (incorporated by reference to Exhibit 4.1 of the
Company’s Current Report on Form 8-K filed on May 14, 2015).
*Support Agreement by and among AbbVie Inc., Oxford Amherst Corporation and Robert W.
Duggan dated as of March 4, 2015 (incorporated by reference to Exhibit 4.1 of the Company’s
Current Report on Form 8-K filed on March 6, 2015).
*Form of Agreement Regarding Change in Control by and between AbbVie Inc. and its named
executive officers (incorporated by reference to Exhibit 10.13 of Amendment No. 5 to the
Company’s Registration Statement on Form 10 filed on November 16, 2012).**
*AbbVie 2013 Incentive Stock Program (incorporated by reference to Exhibit A to the AbbVie Inc.
Definitive Proxy Statement on Schedule 14A dated March 15, 2013).**
*AbbVie 2013 Management Incentive Plan (incorporated by reference to Exhibit 10.14 of the
Company’s Annual Report on Form 10-K filed on March 15, 2013).**
AbbVie Performance Incentive Plan, as amended and restated.**
AbbVie Deferred Compensation Plan, as amended and restated.**
AbbVie Non-Employee Directors’ Fee Plan, as amended and restated.**
2015 Form 10-K
13NOV201221352027
111
Exhibit
Number
10.7
*AbbVie Supplemental Pension Plan (incorporated by reference to Exhibit 10.18 of the Company’s
Annual Report on Form 10-K filed on March 15, 2013).**
Exhibit Description
10.8
AbbVie Supplemental Savings Plan, as amended and restated. **
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
*Form of AbbVie Inc. Non-Employee Director Non-Qualified Stock Option Agreement (incorporated
by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2013).**
*Form of AbbVie Inc. Performance Restricted Stock Agreement (CEO/Chairman) (incorporated by
reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2013).**
*Form of AbbVie Inc. Performance Restricted Stock Agreement (Annual) (incorporated by reference
to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2013).**
*Form of AbbVie Inc. Performance Restricted Stock Agreement (Interim) (incorporated by
reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2013).**
*Form of AbbVie Inc. Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2013).**
*Pharmacyclics, Inc. 2014 Equity Incentive Award Plan (incorporated by reference to Exhibit 4.1 of
the Company’s Registration Statement on Form S-8 filed on May 27, 2015).**
*Revolving Credit Agreement, dated as of August 18, 2014, among AbbVie Inc., AbbVie Private
Limited, AbbVie Holdings Private Limited, JPMorgan Chase Bank, N.A. and the lenders and other
parties party thereto (incorporated by reference to Exhibit 10.2 of the Company’s Current Report
on Form 8-K filed on August 21, 2014).
*Amendment No. 1 to Revolving Credit Agreement, dated as of March 16, 2015, by and among
AbbVie Inc., JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto
(incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on
March 20, 2015).
*Three-Year Term Loan Agreement, dated as of September 25, 2015, among AbbVie, Bank of
America, N.A. and the lenders and other parties party thereto (incorporated by reference to
Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 29, 2015).
*364-Day Term Loan Credit Agreement, dated as of September 25, 2015, among AbbVie, Bank of
America, N.A. and the lenders and other parties party thereto (incorporated by reference to
Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on September 29, 2015).
*364-Day Bridge Term Loan Credit Agreement, dated as of March 27, 2015, among the Company,
as borrower, the various financial institutions party thereto, as lenders, and Morgan Stanley Senior
Funding, Inc., as administrative agent (incorporated by reference to Exhibit 10.1 of the Company’s
Current Report on Form 8-K filed on March 30, 2015).
*Underwriting Agreement, dated as of May 5, 2015, by and among AbbVie Inc., and Morgan
Stanley & Co. LLC, Barclays Capital Inc., Deutsche Bank Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, as representatives of the several other underwriters named therein
(incorporated by reference to Exhibit 1.1 of the Company’s Current Report on Form 8-K filed on
May 7, 2015).
112
13NOV201221352027
2015 Form 10-K
Exhibit
Number
12
21
23
31.1
31.2
32.1
32.2
101
Exhibit Description
Ratio of Earnings to Fixed Charges
Subsidiaries of AbbVie Inc.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)).
Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)).
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
The following financial statements and notes from the AbbVie Inc. Annual Report on Form 10-K
for the year ended December 31, 2015 filed on February 19, 2016, formatted in XBRL:
(i) Consolidated Statements of Earnings; (ii) Consolidated Statements of Comprehensive Income;
(iii) Consolidated Balance Sheets; (iv) Consolidated Statements of Equity; (v) Consolidated
Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements.
The AbbVie Inc. 2016 Definitive Proxy Statement will be filed with the Securities and Exchange
Commission under separate cover on or about March 21, 2016.
Incorporated herein by reference. Commission file number 001-35565.
*
** Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit
hereto.
AbbVie will furnish copies of any of the above exhibits to a stockholder upon written request to the
Secretary, AbbVie Inc., 1 North Waukegan Road, North Chicago, Illinois 60064.
2015 Form 10-K
13NOV201221352027
113
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13NOV201221352027
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
1MAR201604004663
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 6, 2016
The Annual Meeting of the Stockholders of AbbVie Inc. will be held at the Fairmont Chicago, Millennium Park,
200 North Columbus Drive, Chicago, Illinois 60601, on Friday, May 6, 2016, at 9:00 a.m. CT for the following purposes:
•
•
•
•
•
•
To elect 3 directors to hold office until the next Annual Meeting or until their successors are elected
(Item 1),
To ratify the appointment of Ernst & Young LLP as AbbVie’s independent registered public accounting firm
for 2016 (Item 2),
To vote on an advisory vote on the approval of executive compensation (Item 3),
To vote on a management proposal regarding the annual election of directors (Item 4),
To approve the material terms of the performance goals under the AbbVie Performance Incentive Plan
(Item 5), and
To transact such other business as may properly come before the meeting, including consideration of two
stockholder proposals, if presented at the meeting (Items 6 and 7).
Your Vote Is Important
Please promptly vote your shares by telephone, using the Internet, or by signing and returning your proxy in
the enclosed envelope if you received a printed version of the proxy card.
The board of directors recommends that you vote FOR Items 1, 2, 3, 4 and 5 on the proxy card.
The board of directors recommends that you vote AGAINST Items 6 and 7 on the proxy card.
The close of business on March 9, 2016, has been fixed as the record date for determining the stockholders
entitled to receive notice of and to vote at the Annual Meeting.
AbbVie’s 2016 Proxy Statement and 2015 Annual Report on Form 10-K are available at
www.abbvieinvestor.com. If you are a registered stockholder, you may access your proxy card by either:
•
•
Going to the following website: www.proxyvote.com, entering the information requested on your computer
screen and following the simple instructions, or
Calling (in the United States, U.S. territories, and Canada) toll free 1-800-690-6903 on a touch-tone
telephone and following the simple instructions provided by the recorded message.
Admission to the meeting will be by admission card only. If you plan to attend, please complete and return the
reservation form in the back of these materials and an admission card will be sent to you. Due to space limitations,
reservation forms must be received before April 29, 2016. Each admission card, along with photo identification, admits
one person. A stockholder may request two admission cards, but a guest must be accompanied by a stockholder.
By order of the board of directors.
Laura J. Schumacher
Secretary
March 21, 2016
13NOV201221352027
PROXY STATEMENT
1MAR201604005383
Table of Contents
Proxy Statement Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information about the Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who Can Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notice and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting by Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revoking a Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discretionary Voting Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quorum and Vote Required to Approve Each Item on the Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Broker Non-Votes and Abstentions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inspectors of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of Soliciting Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AbbVie Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information Concerning Director Nominees (Item 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Board of Directors and its Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communicating with the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 Compensation Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 Grants of Plan-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 Outstanding Equity Awards at Fiscal Year End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 Option Exercises and Stock Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Payments upon Termination or Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratification of Ernst & Young LLP as AbbVie’s Independent Registered Public Accounting Firm (Item 2) . . . . . . . . .
Audit Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Fees and Non-Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent
Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Say on Pay—Advisory Vote on the Approval of Executive Compensation (Item 3)
Management Proposal Regarding Annual Election of Directors (Item 4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approval of Material Terms of the Performance Goals under the AbbVie Performance Incentive Plan (Item 5) . . . .
Stockholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Proposal on Drug Disposal Report (Item 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Proposal on Lobbying Report (Item 7)
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
7
7
7
7
7
7
8
8
8
8
8
9
13
17
18
20
22
22
40
40
42
42
45
46
48
48
52
52
55
56
56
56
57
58
59
60
62
62
63
67
13NOV201221352027
PROXY STATEMENT SUMMARY
1MAR201604005513
The accompanying proxy is solicited on behalf of the board of directors for use at the Annual Meeting of
Stockholders. The meeting will be held on May 6, 2016, at the Fairmont Chicago, Millennium Park, 200 North Columbus
Drive, Chicago, Illinois 60601. This summary highlights selected information in the Proxy Statement. Please review the
entire Proxy Statement and the AbbVie 2015 Annual Report before voting.
2016 Annual Meeting of Stockholders
.................................................................................................................................................................................................................................................................................................................................
Date and Time: May 6, 2016 9:00 a.m. CT
Location: Fairmont Chicago, Millennium Park, 200 North Columbus Drive, Chicago, Illinois 60601
Record Date: March 9, 2016
How to Vote: Stockholders as of the record date are entitled to vote via Internet at www.proxyvote.com; by telephone at
1-800-690-6903; by returning a completed proxy card; or in person at the Annual Meeting of Stockholders.
Voting Items and Board Recommendations
.................................................................................................................................................................................................................................................................................................................................
Election of Directors
Ratification of Independent Auditor
Say on Pay—Advisory Vote on the Approval of Executive Compensation
Item 1
Item 2
Item 3
Item 4 Management Proposal Regarding the Annual Election of Directors
Item 5
Approval of the Material Terms of the Performance Goals under the AbbVie
Performance Incentive Plan
Stockholder Proposal on Drug Disposal Report
Stockholder Proposal on Lobbying Report
Item 6
Item 7
Board Recommendations
FOR All Nominees
FOR
FOR
FOR
FOR
AGAINST
AGAINST
Business Overview and Performance Highlights
.................................................................................................................................................................................................................................................................................................................................
Business Overview
AbbVie was created in 2013 following separation from Abbott Laboratories. AbbVie’s mission is to be an
innovation-driven, patient-focused specialty biopharmaceutical company capable of achieving top-tier financial
performance through outstanding execution and a consistent stream of innovative new medicines. AbbVie intends to
continue to advance its mission in a number of ways, including: (i) growing revenues through continued strong
performance from its existing portfolio of on-market products, including its flagship brands, Humira, Imbruvica and
Viekira Pak, as well as growth from pipeline products; (ii) continuing to enhance efficiency by expanding gross and
operating margins; (iii) continued investment in its pipeline in support of opportunities in immunology, oncology, and
virology, as well as continued investment in key on-market products; (iv) augmentation of its pipeline through concerted
focus on strategic licensing, acquisition and partnering activity with a focus on identifying compelling programs that fit
AbbVie’s strategic criteria; and (v) returning cash to stockholders via dividends and share repurchases.
1MAR201607422023
2016 Proxy Statement
13NOV201221352027
1
PROXY STATEMENT SUMMARY
AbbVie’s products support the treatment of conditions such as chronic autoimmune diseases in rheumatology,
gastroenterology and dermatology; oncology, including a leadership position in the treatment of blood cancers; virology,
including hepatitis C virus (HCV) and human immunodeficiency virus (HIV); neurological disorders, such as Parkinson’s
disease; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; as well as other
serious health conditions. Our pipeline includes more than 50 compounds or indications in development across important
medical specialties such as immunology, oncology, virology/liver disease, neurological diseases and women’s health.
Business Performance Highlights
AbbVie has Delivered Robust Financial Results since Separation
Performance from 2013 Inception to 2015 Year End
10.2%
Net revenues – compound annual growth rate*
16.9%
Earnings per share – compound annual growth rate*
+600
basis points
Operating margin expansion*
Committed to driving an adjusted operating margin profile of greater than 50 percent by 2020
92.4%
3-year total stockholder return
$41BN
Increase in market cap
Added significant stockholder value
42%
50+
Increase in quarterly dividend
Raised quarterly dividend to $0.57 per share from $0.40 per share at separation
Active clinical development programs
More than 20 new products or indications in late-stage development or under regulatory review
1MAR201604005806
The measures set forth above were calculated as of December 31, 2015.
*Net revenues, earnings per share and operating margin are adjusted to exclude certain
specified items, which are reconciled in our Form 8-K dated January 29, 2016.
AbbVie has delivered a three-year compound annual growth rate (CAGR) of 10.2% in net revenues and 16.9% in
earnings per share (EPS). This performance places AbbVie in the top quartile of its Health Care Peer Group. Additionally,
AbbVie has been committed to a robust return of capital to stockholders with an increase of 42% in its dividend since
2013 as part of a balanced and disciplined capital allocation program. AbbVie’s total stockholder return (TSR) since
inception of 92.4% also places AbbVie among the top of its Health Care Peer Group, and nearly 40 percentage points
above the Standard & Poor’s 500 Index and more than 33 percentage points above the NYSE Arca Pharmaceuticals Index
over the same time period.
1MAR201607422023
2
13NOV201221352027
2016 Proxy Statement
AbbVie has significantly grown revenue, operating margin and EPS since 2013.
Net Revenues
Operating Margin
CAGR = 10.2%
22.82
18.79
19.88
)
N
B
$
(
42.3%
$3.14
$3.32
36.3% 36.2%
PROXY STATEMENT SUMMARY
EPS
CAGR = 16.9%
$4.29
2013
2014
2015
2013
2014
2015
2013
2014
2015
7MAR201617145940
Note: Net revenues, operating margin and earnings per share are adjusted for specified items and exclude the
impact of amortization.
AbbVie also Delivered Strong Business Performance in 2015
AbbVie has built a strong foundation for its business and 2015 was an exceptional year, as evidenced by a
number of 2015 business highlights:
• Net Revenues: AbbVie reported full-year adjusted net revenues of $22.8 billion, an increase of 22.1% over
2014, excluding foreign exchange. This reflects top-tier growth, second in AbbVie’s peer group.
• Operating Margins: In 2015, AbbVie expanded its adjusted operating margin to 42.3% of net revenues—up
610 basis points—and improved gross margin to 82.9% of net revenues—up 280 basis points—since 2014.
•
•
•
•
•
Earnings Per Share: AbbVie reported full-year adjusted EPS of $4.29, up 29.2%. This reflects top-tier growth,
second in AbbVie’s Health Care Peer Group. AbbVie’s 2016 adjusted EPS guidance range of $4.82 to $5.02
reflects growth of nearly 15% at the midpoint.
Humira Sales: AbbVie delivered global Humira sales of $14 billion, an increase of 19% excluding the impact
of exchange rate fluctuations, compared to 2014. Humira’s performance was driven by market penetration
across therapeutic categories and geographies, approval of new indications and market share gains.
Pharmacyclics Acquisition: AbbVie made a significant investment in the rapidly-growing hematologic
oncology space with its acquisition of Pharmacyclics, Inc. and its first in class BTK inhibitor Imbruvica, which
positions AbbVie as an oncology leader in this rapidly growing market segment.
Regulatory Milestones: AbbVie also achieved a number of regulatory milestones in markets worldwide for
several key products, including U.S. Food and Drug Administration (FDA) and European Medicines Agency
(EMA) approvals for new indications of Humira and Imbruvica, as well as new regulatory approvals for
AbbVie’s HCV program Viekira, Viekirax in Japan and Technivie in the U.S. AbbVie also announced FDA
approval of Duopa for patients with advanced Parkinson’s disease.
Pipeline Development: With a record number of programs in mid- and late-stage development, AbbVie
made significant pipeline advancements in 2015, such as regulatory application submissions for Venetoclax
for relapsed/refractory chronic lymphocytic leukemia (CLL); Imbruvica for first-line CLL; Zinbryta for multiple
sclerosis; and Humira for uveitis. AbbVie also successfully transitioned several mid-stage pipeline assets into
late-stage development, including its selective JAK-1 inhibitor, ABT-494, in rheumatoid arthritis; a
pan-genotypic next-generation HCV combination; elagolix for uterine fibroids; and ABT-414, an antibody drug
conjugate for glioblastoma multiforme.
1MAR201607422023
2016 Proxy Statement
13NOV201221352027
3
PROXY STATEMENT SUMMARY
Corporate Governance Highlights
.................................................................................................................................................................................................................................................................................................................................
Our board of directors is committed to strong corporate governance tailored to meet the needs of AbbVie and
its stockholders to enhance stockholder value. In connection with our ongoing, proactive engagement with stockholders
during 2015 (as described in greater detail on page 29), AbbVie’s board of directors has approved:
•
•
a proxy access by-law provision to permit a stockholder, or a group of up to 20 stockholders, owning at
least 3% of the company’s outstanding common stock continuously for at least 3 years to nominate and
include in the company’s proxy materials director nominees constituting up to 25% of the board of
directors, as further detailed in the company’s By-Laws; and
a declassification management proposal in this proxy statement (Item 4) to seek stockholder approval to
amend the company’s Amended and Restated Certificate of Incorporation to declassify the board of
directors and to allow for the annual election of directors, as described in Item 4.
Highlights of our governance practices include:
Governance Practice
For more information
Independent lead director with robust responsibilities is selected
by the Board
Eight of AbbVie’s nine directors are independent and regularly
meet in executive session
All members of the audit, compensation, nominations and
governance and public policy committees are independent
Adopted a Proxy Access By-Law provision for 3%/3 years
Policy prohibiting hedging and pledging
Robust stock ownership guidelines
Disclosure of our corporate political contributions and our trade
association dues and oversight process
Clawback authority in the event of financial restatement to
recover incentive plan awards
Related person transaction policy to ensure appropriate oversight
We do not have a stockholder rights plan or ‘‘poison pill’’
Our directors are elected by a majority vote of our stockholders
for uncontested elections and we have a resignation policy if the
director fails to receive a majority of the votes cast
We hold an annual say-on-pay advisory vote on executive
compensation
Our governance guidelines restrict the number of boards our
directors may serve on to prevent overboarding
Annual board and committee self-assessments and annual
succession planning
We are guided by strong ethics programs and supplier guidelines
For inclusion on the board, the nominations and governance
committee considers diversity of ethnicity, gender, and geography
p. 13
p. 13
p. 15
p. 69
p. 40
p. 39
http://www.abbvie.com/responsibility/
transparency-policies/corporate-political-
participation.html
p. 40
p. 67
Certificate of Incorporation and By-Laws
p. 9
p. 58
Corporate Governance Guidelines
Corporate Governance Guidelines
http://www.abbvie.com/responsibility/
home.html
p. 14
4
13NOV201221352027
2016 Proxy Statement
1MAR201607422023
PROXY STATEMENT SUMMARY
Executive Compensation Highlights
.................................................................................................................................................................................................................................................................................................................................
At AbbVie, the board of directors believes a well-designed compensation program should align executive
interests with the drivers of stockholder returns and profitable growth, support achievement of the company’s primary
business goals, and attract and retain world-class executives whose talents and contributions sustain the growth in
long-term stockholder value. Consequently, the compensation committee of the board has designed and implemented an
executive compensation program in which a substantial majority of named executive officer (NEO) compensation at
AbbVie is performance-based.
When determining NEO compensation, the committee first considers the median of the competitive marketplace
(as derived primarily from the Health Care Peer Group approved by the committee) as an initial benchmark for assessing
compensation. The committee then takes into account the company’s overall performance against the financial, operating
and strategic objectives that were established at the start of the performance period. Finally, specific pay determinations
are made for each NEO based on his or her individual performance against goals and contributions to the short- and
long-term performance of the company.
Three primary components make up AbbVie’s executive pay program: base salary, short-term incentives and
long-term incentives. The structure of each component is tailored to serve a specific function and purpose. The following
is a summary of the key components of our 2015 compensation program and changes made for 2016.
Base Salary
Designed to be competitive with market and industry norms, and to reflect individual performance
Individual salaries are established relative to market median based on each NEO’s individual
performance, skills, experience, and internal equity, as well as the company’s annual operating budget
Short-Term
Incentives
Plan utilizes non-GAAP financial goals
as well as an assessment of individual
performance against strategic objectives:
— Diluted EPS
— Net revenues
— Income before taxes
— Return on assets
— Strategic and leadership goals
Long-Term
Incentives
Long-term incentive awards are granted
in the form of:
— Performance-vested restricted
stock (75% of NEO’s LTI award)
— Non-qualified stock options (25%
of NEO’s LTI award)
Level of awards NEOs receive varies
according to plan design and individual
performance as reviewed by our
compensation committee
Targets are based on expected business,
market and regulatory conditions, including
expectations for our pipeline
Compensation committee establishes
maximum award allocations for plan
participants each year as a percentage of
consolidated net earnings
Final individual award outcomes are
guided by the use of a payout matrix
based on financial performance and
capped at 200% of target
Awards are based on LTI program goals
and company business performance, as
well as individual factors
Committee determines grants for each
NEO based on its assessment of
performance and progress against
strategic milestones
Significant redesign for 2016 awards,
which incorporates multi-year
performance periods and multiple
performance metrics, including relative
total stockholder return (see below for
additional details)
4MAR201620051208
1MAR201607422023
2016 Proxy Statement
13NOV201221352027
5
PROXY STATEMENT SUMMARY
Element of Pay
Long-Term Incentive Program
Changes Made for 2016
(cid:4) Completed redesign of our long-term incentive program:
— Added multiple performance metrics, including relative ROE, EPS and
relative TSR as criteria for vesting.
— Removed provision that allowed performance awards to vest if
thresholds were met in any 3 of 5 years, creating more risk of
forfeiture.
— Added multi-year performance periods.
— Changed dividend payment schedule so dividends are paid only at
vesting and only on vested shares.
— Increased use of performance-vested awards from 75% to 80% which,
in combination with stock options, ties 100% of our LTI program to
performance metrics and stock price appreciation.
— Refined process for referencing the market median for long-term
incentive award decisions.
(cid:4) Added disclosure of our maximum incentive cap of 200% of target.
(cid:4) Reduced the CEO’s target annual incentive to 150% of base salary.
(cid:4) Established a formal payout matrix based on net revenues and operating
margin to guide NEO annual incentive awards, beginning with awards for
the 2015 performance year.
(cid:4) Simplified the peer group used for compensation benchmarking, the
AbbVie Health Care Peer Group.
Performance Incentive Plan
Peer Comparisons
6
13NOV201221352027
2016 Proxy Statement
1MAR201607422023
INFORMATION ABOUT THE ANNUAL MEETING
1MAR201604003392
Who Can Vote
Stockholders of record at the close of business on March 9, 2016 will be entitled to notice of and to vote at the
Annual Meeting. As of March 9, 2016, AbbVie had 1,617,735,289 outstanding shares of common stock, which are
AbbVie’s only outstanding voting securities. Each stockholder has one vote per share. Stockholders do not have the right
to vote cumulatively in electing directors.
Notice and Access
In accordance with the Securities and Exchange Commission (SEC) e-proxy rules, AbbVie mailed a Notice of
Internet Availability of Proxy Materials (the ‘‘Notice’’) to stockholders in March 2016. The Notice describes the matters to
be considered at the Annual Meeting and how stockholders can access the proxy materials online. It also provides
instructions on how stockholders can vote their shares. If you received the Notice, you will not receive a printed version
of the proxy materials unless you request one. If you would like to receive a printed version of the proxy materials, free
of charge, please follow the instructions on the Notice.
Voting by Proxy
AbbVie’s stockholders may vote their shares by telephone, the Internet, or at the Annual Meeting. If you vote by
telephone or the Internet, you do not need to return your proxy card. The instructions for voting can be found on the
Notice, on the website listed in the Notice, and, if you received one, on your proxy card. If you requested a printed
version of the proxy card, you may also vote by mail.
Revoking a Proxy
You may revoke your proxy by voting in person at the Annual Meeting or, at any time prior to the meeting:
•
•
•
by delivering a written notice to the secretary of AbbVie,
by delivering an authorized proxy with a later date, or
by voting by telephone or the Internet after you have given your proxy.
Discretionary Voting Authority
Unless authority is withheld in accordance with the instructions on the proxy, the persons named in the proxy
will vote the shares of AbbVie common stock covered by proxies they receive to elect the 3 nominees named in Item 1
on the proxy card. If a nominee becomes unavailable to serve, the shares will be voted for a substitute designated by
the board of directors or for fewer than 3 nominees if, in the judgment of the proxy holders, such action is necessary or
desirable.
Where a stockholder has specified a choice for or against the proposals to be presented at the Annual Meeting
or if the stockholder has chosen to abstain, the shares of AbbVie common stock represented by the proxy will be voted
(or not voted) as specified. Where no choice has been specified, the proxy will be voted FOR the ratification of Ernst &
Young LLP as auditors, FOR the approval of executive compensation, FOR the management proposal regarding the annual
election of directors, FOR the approval of the material terms of the performance goals under the AbbVie Performance
Incentive Plan, and AGAINST each of the stockholder proposals.
The board of directors is not aware of any other issue which may properly be brought before the meeting. If
other matters are properly brought before the meeting, the accompanying proxy will be voted in accordance with the
judgment of the proxy holders.
2016 Proxy Statement
13NOV201221352027
7
INFORMATION ABOUT THE ANNUAL MEETING
Quorum and Vote Required to Approve Each Item on the Proxy
A majority of the outstanding shares entitled to vote generally in the election of directors, represented in person
or by proxy, constitutes a quorum. Directors are elected by stockholders in an uncontested election if a majority of the
votes cast are ‘‘for’’ a director’s re-election at the Annual Meeting, excluding abstentions and broker non-votes. For other
matters, the affirmative vote of a majority of the shares represented, in person or by proxy, at the meeting and entitled
to vote on a matter shall be the act of the stockholders with respect to that matter, except for the management
proposal regarding the annual election of directors which requires the affirmative vote of shares representing not less
than eighty percent (80%) of the outstanding shares of capital stock of AbbVie entitled to vote generally in the election
of directors pursuant to Article XI of AbbVie’s Amended and Restated Certificate of Incorporation.
Effect of Broker Non-Votes and Abstentions
A proxy submitted by an institution such as a broker or bank that holds shares for the account of a beneficial
owner may indicate that all or a portion of the shares represented by that proxy are not being voted with respect to a
particular matter. This could occur, for example, when the broker or bank is not permitted to vote those shares in the
absence of instructions from the beneficial owner of the stock. These ‘‘non-voted shares’’ will be considered shares not
present and, therefore, not entitled to vote on those matters, although these shares may be considered present and
entitled to vote for other purposes. Brokers and banks have discretionary authority to vote shares in the absence of
instructions on matters the New York Stock Exchange considers ‘‘routine,’’ such as the ratification of the appointment of
the auditors. They do not have discretionary authority to vote shares in absence of instructions on ‘‘non-routine’’
matters. The election of directors, the advisory vote on the approval of executive compensation, the management
proposal regarding the annual election of directors, the approval of the material terms of the performance goals under
the AbbVie Performance Incentive Plan, and the stockholder proposals are considered ‘‘non-routine’’ matters. Non-voted
shares will not affect the determination of the outcome of the vote on any matter to be decided at the meeting. Shares
represented by proxies that are present and entitled to vote on a matter but which have elected to abstain from voting
on that matter, other than the election of directors, will have the effect of votes against that matter.
Inspectors of Election
The inspectors of election and the tabulators of all proxies, ballots, and voting tabulations that identify
stockholders are independent and are not AbbVie employees.
Cost of Soliciting Proxies
AbbVie will bear the cost of making solicitations from its stockholders and will reimburse banks and brokerage
firms for out-of-pocket expenses incurred in connection with this solicitation. Proxies may be solicited by mail, telephone,
Internet, or in person by directors, officers, or employees of AbbVie and its subsidiaries.
AbbVie has retained Georgeson Inc. to aid in the solicitation of proxies, at an estimated cost of $19,500 plus
reimbursement for reasonable out-of-pocket expenses.
AbbVie Savings Plan
Participants in the AbbVie Savings Plan will receive voting instructions for their shares of AbbVie common stock
held in the AbbVie Savings Plan Trust. The Trust is administered by both a trustee and an investment committee. The
trustee is Mercer Trust Company. The members of the investment committee are Robert A. Michael, William H.S. Preece
and Michael J. Thomas, employees of AbbVie. The voting power with respect to the shares is held by and shared
between the investment committee and the participants. The investment committee must solicit voting instructions from
the participants and follow the voting instructions it receives. The investment committee may use its own discretion with
respect to those shares of AbbVie common stock for which no voting instructions are received.
8
13NOV201221352027
2016 Proxy Statement
INFORMATION CONCERNING DIRECTOR NOMINEES
(ITEM 1)
1MAR201604003529
The board of directors consists of three classes with each class currently comprised of three directors. Directors
of one class are elected each year for a term of three years. The Class I directors are presented for re-election to hold
office until the expiration of their term at the 2019 annual meeting of stockholders and until their successors are elected
and qualified or until their earlier death or resignation.
Directors are elected by stockholders if a majority of the votes cast are ‘‘for’’ a director’s re-election at the
Annual Meeting, excluding abstentions and broker non-votes. For more information on the director majority vote
standard, see AbbVie’s By-Laws as listed as an exhibit to AbbVie’s 2015 Annual Report on Form 10-K. All of the
nominees, except Mr. Hart, are currently serving as directors. Mr. Hart was recommended for election by the
nominations and governance committee. Mr. Roberts is retiring as a director following the Annual Meeting and is not
standing for reelection.
Class I—Directors Whose Terms Expire in 2016
.................................................................................................................................................................................................................................................................................................................................
6FEB201522131611
Committees:
Audit
Nominations &
Governance
Director since: 2013
Age: 64
8MAR201622161098
Director Nominee
Age: 46
William H.L. Burnside
Retired Senior Vice President and Director at The Boston Consulting Group
Mr. Burnside is a retired senior vice president and director at The Boston Consulting Group (BCG),
where he currently serves as an advisor. Prior to becoming managing partner of BCG’s Los Angeles
office in 1987, he worked in BCG’s London and Chicago offices, servicing clients in
telecommunications, media, defense, financial services, and manufacturing. Mr. Burnside is a
director at Audubon California.
Key Contributions to the Board: Through his experience with The Boston Consulting Group,
Mr. Burnside acquired knowledge and understanding of corporate finance and capital markets
matters, as well as global and domestic strategic advisory experience across a broad base of
industries.
Brett J. Hart
Executive Vice President and General Counsel, United Continental Holdings, Inc.
Mr. Hart is the executive vice president and general counsel of United Continental Holdings, Inc.
(UAL) and United Airlines, Inc. since February 2012. Mr. Hart also served as acting chief executive
officer of UAL and United Airlines, Inc. from October 2015 to March 2016. From December 2010
to February 2012, he served as senior vice president, general counsel and secretary of UAL,
United and Continental. From June 2009 to December 2010, Mr. Hart served as executive vice
president, general counsel and corporate secretary at Sara Lee Corporation.
Key Contributions to the Board: As an executive vice president and general counsel for two large
public companies with international operations and having served as an acting CEO, Mr. Hart
contributes operational and strategic acumen with expertise in risk management, legal strategic
matters, government and regulatory affairs, customer and external facing matters, corporate
governance, and compliance.
2016 Proxy Statement
13NOV201221352027
9
INFORMATION CONCERNING DIRECTOR NOMINEES
Edward J. Rapp
Retired Group President for Resource Industries of Caterpillar Inc.
Mr. Rapp served as the Caterpillar Inc. group president for resource industries from 2014 until his
retirement in early 2016. He previously served at Caterpillar as group president based in Singapore
in 2013 and 2014 and as the chief financial officer from 2010 to 2013, and he was named a group
president in 2007. Mr. Rapp is presently a board member for FM Global and Junior Achievement
USA. He is currently a member of the University of Missouri College of Business Strategic
Development Board.
Key Contributions to the Board: As a result of his tenure as group president and chief financial
officer at Caterpillar Inc., Mr. Rapp has acquired management, operational, and financial expertise
with extensive global experience and provides the board with an informed perspective on financial
and operational matters faced by a complex international company.
17JAN201314183678
Committees:
Audit
Public Policy
Director since: 2013
Age: 58
Class II—Directors Whose Terms Expire in 2017
.................................................................................................................................................................................................................................................................................................................................
Robert J. Alpern, M.D.
Ensign Professor of Medicine, Professor of Internal Medicine, and Dean of Yale School of Medicine
Dr. Alpern has served as the Ensign Professor of Medicine, Professor of Internal Medicine, and
Dean of Yale School of Medicine since June 2004. From July 1998 to June 2004, Dr. Alpern was
the Dean of The University of Texas Southwestern Medical Center. Dr. Alpern also serves as a
director of Abbott Laboratories and as a director on the Board of Yale—New Haven Hospital.
Key Contributions to the Board: As the Ensign Professor of Medicine, Professor of Internal
Medicine, and Dean of Yale School of Medicine, Dean of The University of Texas Southwestern
Medical Center, and as a director on the Board of Yale—New Haven Hospital, Dr. Alpern
contributes valuable insights to the board through his medical and scientific expertise and his
knowledge of the health care environment and the scientific nature of AbbVie’s key research and
development initiatives.
17JAN201314181230
Committees:
Nominations &
Governance
Public Policy
Director since: 2013
Age: 65
17JAN201314191789
Committees:
Compensation
Public Policy
Director since: 2013
Age: 70
Edward M. Liddy
Retired Chairman & CEO, The Allstate Corporation
Mr. Liddy served as a partner in the private equity investment firm Clayton, Dubilier & Rice, LLC
from January 2010 to December 2015. At the request of the Secretary of the U.S. Department of
the Treasury, Mr. Liddy served as interim chairman and chief executive officer of American
International Group, Inc. (AIG), a global insurance and financial services holding company, from
September 2008 to August 2009. From January 1999 to April 2008, Mr. Liddy served as chairman
of the board of The Allstate Corporation (insurance). He served as chief executive officer of
Allstate from January 1999 to December 2006, president from January 1995 to May 2005, and
chief operating officer from August 1994 to January 1999. Mr. Liddy currently serves on the board
of directors of Abbott Laboratories, 3M Company, and The Boeing Company.
Key Contributions to the Board: Mr. Liddy’s executive leadership at Allstate and AIG and his board
service at several Fortune 100 companies enable him to provide our board with valuable insights
on corporate strategy, risk management, corporate governance and other issues facing large,
global enterprises. Additionally, as a former chief financial officer, audit committee chair at
Goldman Sachs and 3M, and a private equity firm partner, Mr. Liddy provides our board with
significant knowledge and understanding of corporate finance, capital markets, financial reporting
and accounting matters.
10
13NOV201221352027
2016 Proxy Statement
INFORMATION CONCERNING DIRECTOR NOMINEES
Frederick H. Waddell
Chairman of the Board and Chief Executive Officer of Northern Trust Corporation and The Northern
Trust Company
Mr. Waddell has served as the chief executive officer of Northern Trust Corporation and The
Northern Trust Company since January 2008 and as chairman of the board since November 2009.
He served as president from February 2006 through September 2011, and as chief operating
officer from February 2006 to January 2008. Mr. Waddell served as a board member of Northern
Trust from February 2006 to November 2009 prior to becoming the chairman of the board.
Key Contributions to the Board: As chairman and chief executive officer of Northern Trust
Corporation and The Northern Trust Company, Mr. Waddell possesses broad financial services
experience with a strong record of leadership in a highly regulated industry.
17JAN201314192826
Committees:
Audit
Compensation
Director since: 2013
Age: 62
Class III—Directors Whose Terms Expire in 2018
.................................................................................................................................................................................................................................................................................................................................
Roxanne S. Austin
17JAN201314185859
Committees:
Audit
Compensation
Director since: 2013
Age: 55
President, Austin Investment Advisors
Ms. Austin is president of Austin Investment Advisors, a private investment and consulting firm, a
position she has held since 2004. From July 2009 through July 2010, Ms. Austin also served as the
president and chief executive officer of Move Networks, Inc., a provider of Internet television
services. Ms. Austin previously served as president and chief operating officer of DIRECTV, Inc.
Ms. Austin also previously served as executive vice president and chief financial officer of Hughes
Electronics Corporation and as a partner of Deloitte & Touche LLP. Ms. Austin is also a director of
Abbott Laboratories, Target Corporation, Teledyne Technologies, Inc. and Telefonaktiebolaget LM
Ericsson.
Key Contributions to the Board: Through her extensive management and operating roles, including
her financial roles, Ms. Austin contributes significant oversight and leadership experience, including
financial expertise and knowledge of financial statements, corporate finance and accounting
matters.
2016 Proxy Statement
13NOV201221352027
11
INFORMATION CONCERNING DIRECTOR NOMINEES
Richard A. Gonzalez
15MAR201411192791
Director since: 2013
Age: 62
17JAN201314185103
Committees:
Compensation
Nominations &
Governance
Director since: 2013
Age: 67
Chairman of the Board and Chief Executive Officer, AbbVie Inc.
Mr. Gonzalez is the chairman and chief executive officer of AbbVie. He served as Abbott’s
executive vice president of the pharmaceutical products group from July 2010 to December 2012,
and was responsible for Abbott’s worldwide pharmaceutical business, including commercial
operations, research and development, and manufacturing. He also served as president, Abbott
Ventures Inc., Abbott’s medical technology investment arm, from 2009 to 2011. Mr. Gonzalez
joined Abbott in 1977 and held various management positions before briefly retiring in 2007,
including: Abbott’s president and chief operating officer; president, chief operating officer of
Abbott’s Medical Products Group; senior vice president and president of Abbott’s former Hospital
Products Division; vice president and president of Abbott’s Health Systems Division; and divisional
vice president and general manager for Abbott’s Diagnostics Operations in the United States and
Canada.
Key Contributions to the Board: As a result of his service as Abbott’s executive vice president,
Pharmaceutical Products Group, his previous service as Abbott’s president and chief operating
officer and his more than 30-year career at Abbott, Mr. Gonzalez has developed valuable business,
management and leadership experience, as well as extensive knowledge of AbbVie and its global
operations. Mr. Gonzalez’s experience and knowledge enable him to contribute to AbbVie’s board
key insights into strategic, management, and operational matters.
Glenn F. Tilton
Retired Chairman and Chief Executive Officer of the UAL Corporation
Mr. Tilton was chairman of the Midwest for JPMorgan Chase & Co. from 2011 until his retirement
in 2014. From October 2010 to December 2012, Mr. Tilton also served as the non-executive
chairman of the board of United Continental Holdings, Inc. From September 2002 to October
2010, he served as chairman, president and chief executive officer of UAL Corporation, and
chairman and chief executive officer of United Air Lines, Inc., its wholly owned subsidiary. Prior to
becoming the vice chairman of Chevron Texaco following the merger of Texaco Inc. and Chevron
Corp., Mr. Tilton enjoyed a 30-year multi-disciplinary career with Texaco Inc., culminating in his
election as chairman and chief executive officer. Mr. Tilton is also a director of Abbott Laboratories
and Phillips 66. Mr. Tilton also served on the board of directors of Lincoln National Corporation
from 2002 to 2007, of TXU Corporation from 2005 to 2007, of Corning Incorporated from 2010 to
2012, and of United Continental Holdings, Inc. from 2010 to 2012.
Key Contributions to the Board: As chairman of the Midwest for JPMorgan Chase & Co. and
having previously served as non-executive chairman of the board of United Continental
Holdings, Inc., and chairman, president, and chief executive officer of UAL Corporation and United
Air Lines, vice chairman of Chevron Texaco and as interim chairman of Dynegy, Inc., Mr. Tilton
acquired strong management experience overseeing complex multinational businesses operating in
highly regulated industries, as well as expertise in finance and capital markets matters.
12
13NOV201221352027
2016 Proxy Statement
THE BOARD OF DIRECTORS AND ITS COMMITTEES
1MAR201604010692
The Board of Directors
.................................................................................................................................................................................................................................................................................................................................
The board of directors held ten meetings in 2015. The average attendance of all incumbent directors at board
and committee meetings in 2015 was ninety-five percent and each director attended at least seventy-five percent of the
total number of board meetings and meetings of the committees on which he or she served. AbbVie encourages its
board members to attend the annual stockholder meeting. All of AbbVie’s directors attended the 2015 annual
stockholder meeting.
The board has determined that each of the following individuals is independent in accordance with the New
York Stock Exchange (NYSE) listing standards: Dr. Alpern, Ms. Austin, Mr. Burnside, Mr. Hart, Mr. Liddy, Mr. Rapp,
Mr. Tilton, and Mr. Waddell. In addition, the board also determined that Mr. Roberts, who served on the board during
the year, was independent under those standards. To determine independence, the board applied the AbbVie Inc.
director independence guidelines. The board also considered whether a director has any other material relationships with
AbbVie or its subsidiaries and concluded that none of these directors had a relationship that impaired the director’s
independence. This included consideration of the fact that some of the directors are officers or serve on boards of
companies or entities to which AbbVie sold products or made contributions or from which AbbVie purchased products
and services during the year. This also included consideration of the fact that some of the directors serve on the board
of Abbott Laboratories (Abbott), AbbVie’s former parent. In making its determination, the board relied on both
information provided by the directors and information developed internally by AbbVie.
The board has risk oversight responsibility for AbbVie and administers this responsibility both directly and with
assistance from its committees.
The board has determined that the current leadership structure, in which the offices of chairman of the board
and chief executive officer are held by one individual and the chair of the nominations and governance committee is
appointed to be the lead director, ensures the appropriate level of oversight, independence, and responsibility is applied
to all board decisions, including risk oversight, and is in the best interests of AbbVie and its stockholders. The lead
independent director is chosen by and from the independent members of the board of directors.
The lead independent director responsibilities include:
1.
2.
facilitates communication with the board and presides over regularly conducted executive sessions of the
independent directors or sessions where the chairman of the board is not present;
reviews and approves matters, such as agenda items, schedule sufficiency, and, where appropriate,
information provided to other board members;
3.
serves as the liaison between the chairman of the board and the independent directors;
4. has the authority to call meetings of the independent directors;
5.
if requested by major stockholders, ensures that he or she is available for consultation and direct
communication as needed; and
6. performs such other duties as the board may determine from time to time.
2016 Proxy Statement
13NOV201221352027
13
THE BOARD OF DIRECTORS AND ITS COMMITTEES
All directors are encouraged to, and in fact do, consult with the chairman on each of the above topics, as well.
The lead director, and each of the other directors, communicates regularly with the chairman of the board and chief
executive officer regarding appropriate agenda topics and other board related matters.
AbbVie directors have backgrounds that when combined provide a portfolio of experience and knowledge that
serve AbbVie’s governance and strategic needs. Director nominees are considered based on a range of criteria including
broad-based business knowledge and relationships, prominence and excellent reputations in their primary fields of
endeavor, as well as a global business perspective and commitment to good corporate citizenship, and ability to commit
sufficient time and attention to the activities of the board. They must have demonstrated experience and ability that is
relevant to the board’s oversight role with respect to AbbVie’s business and affairs. They must also be able and willing to
represent the stockholders’ economic interests and satisfy their fiduciary duties to stockholders without conflicts of
interest. For more details on director qualifications, please see Exhibit A to AbbVie’s Governance Guidelines.
In the process of identifying nominees to serve as a member of the board of directors, the nominations and
governance committee considers the board’s diversity of ethnicity, gender, and geography and assesses the effectiveness
of the process in achieving that diversity.
Each director’s biography includes the particular experience and qualifications that led the board to conclude
that the director should serve on the board. The directors’ biographies are in the section of this proxy statement
captioned ‘‘Information Concerning Director Nominees.’’
The following table highlights our directors’ skills and experience. The skills identified below are considered by
the Nominations & Governance Committee to be the most relevant to the Board’s oversight role with respect to AbbVie’s
business and affairs and to drive our culture of innovation and responsibility. The specific importance of each skill also is
noted.
Such skills include, among others:
•
•
•
•
•
•
Healthcare Industry—Relevant to an industry understanding and review of our business and strategy for
continued innovation.
Leadership—For a board that can successfully advise and oversee the company’s business performance and
represent stockholders interests.
Global Business and Strategy—For oversight of a complex global organization like AbbVie to successfully
advise and oversee the strategic development and direction of the company.
Corporate Governance and Public Company Board—Ensuring directors have background and knowledge to
perform oversight and governance roles.
Finance or Accounting—Enabling our directors to analyze our financial statements, oversee our capital
structure, and consider financial transactions.
Government Relations and Regulatory—For an understanding of the complex regulatory and governmental
environment in which our business operates.
14
13NOV201221352027
2016 Proxy Statement
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Director Skills, Knowledge and Experience Matrix
Healthcare
Industry
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
Leadership
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
Global
Business
and
Strategy
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
Corporate
Governance
and Public
Company
Board
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
Finance or
Accounting
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
Government
Relations and
Regulatory
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
Dr. Alpern
Ms. Austin
Mr. Gonzalez
Mr. Burnside
Mr. Hart
Mr. Liddy
Mr. Rapp
Mr. Tilton
Mr. Waddell
Committees of the Board of Directors
.................................................................................................................................................................................................................................................................................................................................
The board of directors has five committees established in AbbVie’s By-Laws: the audit committee, compensation
committee, nominations and governance committee, public policy committee, and executive committee. Each of the
members of the audit committee, compensation committee, nominations and governance committee, and public policy
committee is independent.
Audit
Committee
Compensation
Committee
Nominations and
Governance
Committee
Public Policy
Committee
1MAR201604004106
1MAR201604004106
R. Alpern
1MAR201604003122
R. Austin
W. Burnside
E. Liddy
E. Rapp
R. Roberts
1MAR201604003818
G. Tilton
F. Waddell
1MAR201604002034
1MAR201604004106
1MAR201604004106
1MAR201604004106
Number of meetings
6
1MAR201604004106
1MAR201604002034
1MAR201604004106
1MAR201604004106
4
1MAR201604004106
1MAR201604004106
1MAR201604002034
1MAR201604004106
1MAR201604004106
1MAR201604002034
5
4
1MAR201604003818
1MAR201604002034
1MAR201604004106
1MAR201604003122
Lead Director
Chairperson
Member
Financial Expert
Audit Committee
The audit committee is governed by a written charter. This committee assists the board of directors in fulfilling
its oversight responsibility with respect to AbbVie’s accounting and financial reporting practices and the audit process,
the quality and integrity of AbbVie’s financial statements, the independent auditors’ qualifications, independence, and
performance, the performance of AbbVie’s internal audit function and internal auditors, certain areas of legal and
regulatory compliance, and enterprise risk management. Each of the members of the audit committee is financially
2016 Proxy Statement
13NOV201221352027
15
THE BOARD OF DIRECTORS AND ITS COMMITTEES
literate, as required of audit committee members by the NYSE, and the independence requirements set forth in
Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). The board of directors has
determined that Ms. Austin, the committee’s chairperson, is an ‘‘audit committee financial expert.’’
Compensation Committee
The compensation committee is governed by a written charter. This committee assists the board of directors in
carrying out the board’s responsibilities relating to the compensation of AbbVie’s executive officers and directors. The
compensation committee annually reviews the compensation paid to the directors and gives its recommendations to the
full board regarding both the amount of director compensation that should be paid and the allocation of that
compensation between equity-based awards and cash. In recommending director compensation, the compensation
committee takes into account director fees paid by companies in AbbVie’s Health Care Peer Group and reviews any
arrangement that could be viewed as indirect director compensation. The processes and procedures used for the
consideration and determination of executive compensation are described in the ‘‘Compensation Discussion and Analysis’’
section of this proxy statement. The committee also reviews, approves, and administers the incentive compensation plans
in which the AbbVie executive officers participate and all of AbbVie’s equity-based plans. It may delegate the
responsibility to administer and make grants under these plans to management, except to the extent that such
delegation would be inconsistent with applicable law or regulations or with the listing rules of the New York Stock
Exchange. The compensation committee has the sole authority, under its charter, to select, retain and/or terminate
independent advisors who may assist the committee in carrying out its responsibilities. The compensation committee
reviews and discusses with management and its independent compensation advisor potential risks associated with
AbbVie’s compensation policies and practices as discussed in the ‘‘Compensation Risk Assessment’’ section of this proxy
statement. Each member of the committee qualifies as a ‘‘non-employee director’’ for purposes of Rule 16b-3 under the
Exchange Act and as an ‘‘outside director’’ for purposes of Internal Revenue Code Section 162(m).
The committee has engaged Compensation Advisory Partners (CAP) as its independent compensation consultant.
The independent compensation consultant provides counsel and advice to the committee on executive and non-employee
director compensation matters. CAP, and its principal, report directly to the chair of the committee. The principal meets
regularly, and as needed, with the committee in executive sessions, and has direct access to the chair during and
between meetings. The committee determines what variables it will instruct CAP to consider, including: peer groups
against which performance and pay should be examined, metrics to be used in incentive plans to assess AbbVie’s
performance, competitive short- and long-term incentive practices in the marketplace, and compensation levels relative
to market benchmarks. The committee negotiates and approves all fees paid to CAP for these services. AbbVie did not
engage CAP to perform any other services during 2015.
Based on an assessment of internally developed information and information provided by CAP, the committee
has determined that its independent compensation advisor does not have a conflict of interest. A copy of the
compensation committee report is included in the ‘‘Compensation Committee Report’’ section of this proxy statement.
Nominations and Governance Committee
The nominations and governance committee is governed by a written charter. This committee assists the board
of directors in identifying individuals qualified to become board members and recommends to the board the nominees
for election as directors at the next annual meeting of stockholders, recommends to the board the persons to be elected
as executive officers of AbbVie, recommends to the board the corporate governance guidelines applicable to AbbVie,
oversees the evaluation of the board and management, and serves in an advisory capacity to the board and the
chairman of the board on matters of organization, management succession plans, major changes in the organizational
structure of AbbVie, and the conduct of board activities. The process used by this committee to identify a nominee to
serve as a member of the board of directors depends on the qualities being sought, as described on pages 13-14. From
time to time, AbbVie engages an executive search firm to assist the committee in identifying individuals qualified to be
board members.
16
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2016 Proxy Statement
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Public Policy Committee
The public policy committee is governed by a written charter. This committee assists the board of directors in
fulfilling its oversight responsibility with respect to AbbVie’s public policy, certain areas of legal and regulatory
compliance, and governmental affairs and health care compliance matters that affect AbbVie by discharging the
responsibilities set forth in its charter.
Executive Committee
The executive committee members are Mr. Gonzalez, chair, Ms. Austin, Mr. Liddy, Mr. Roberts, and Mr. Tilton.
This committee may exercise all of the authority of the board in the management of AbbVie, except for matters
expressly reserved by law for board action.
Communicating with the Board of Directors
.................................................................................................................................................................................................................................................................................................................................
Stockholders and other interested parties may communicate with the board of directors by writing a letter to
the chairman of the board, to the lead director, or to the independent directors c/o AbbVie Inc., 1 North Waukegan
Road, AP34, North Chicago, Illinois 60064, Attention: corporate secretary. The corporate secretary regularly forwards to
the addressee all letters other than mass mailings, advertisements, and other materials not relevant to AbbVie’s business.
In addition, directors regularly receive a log of all correspondence received by the company that is addressed to a
member of the board and may request any correspondence on that log.
2016 Proxy Statement
13NOV201221352027
17
DIRECTOR COMPENSATION
1MAR201604002549
AbbVie employees are not compensated for serving on the board or board committees. AbbVie’s non-employee
directors are compensated for their service under the AbbVie Non-Employee Directors’ Fee Plan and the AbbVie 2013
Incentive Stock Program.
The following table sets forth the non-employee directors’ 2015 compensation.
Fees
Earned or
Paid in Cash
($)(1)
Restricted
Stock Unit
Awards
($)(2)
$126,000
$142,920
Option
Awards
($)(3)
$0
144,000
132,000
138,000
132,000
138,000
138,000
132,000
142,920
142,920
142,920
142,920
142,920
142,920
142,920
0
0
0
0
0
0
0
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
$9,109
0
0
0
0
0
0
0
All Other
Compensation
($)(5)
Total
($)
$0
0
$278,029
286,920
25,000
299,920
2,500
283,420
25,000
28,457
25,000
25,000
299,920
309,377
305,920
299,920
Name
R. Alpern
R. Austin
W. Burnside
E. Liddy
E. Rapp
R. Roberts
G. Tilton
F. Waddell
(1) Under the AbbVie Non-Employee Directors’ Fee Plan as in effect during 2015, non-employee directors earned
$10,500 for each month of service as a director and $1,000 for each month of service as a chair of a board
committee, other than the chair of the audit committee. The chair of the audit committee receives $1,500 for each
month of service as a chair of that committee and the other members of the audit committee receive $500 for
each month of service as a committee member.
Fees earned under the AbbVie Non-Employee Directors’ Fee Plan are, at the director’s election, paid in cash,
delivered in the form of vested non-qualified stock options (based on an independent appraisal of their fair value),
deferred until retirement (as an unfunded AbbVie obligation), or paid currently into an individual grantor trust
established by the director. The distribution of deferred fees and amounts held in a director’s grantor trust
generally commences at the later of when the director reaches age 65 or upon retirement from the board of
directors. Fees deposited in a trust may be credited to a stock equivalent account that earns the same return as if
the fees were invested in AbbVie stock or to a guaranteed interest account. If necessary, AbbVie contributes funds
to a director’s trust so that as of year-end the stock equivalent account balance (net of taxes) is not less than
seventy-five percent of the market value of the related AbbVie common stock at year end.
(2) The amounts in this column represent the aggregate grant date fair value of the restricted stock unit awards
granted during 2015, determined in accordance with Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) Topic 718. AbbVie determines the grant date fair value of the awards by multiplying
the number of units granted by the average of the high and low market prices of one share of AbbVie common
stock on the award grant date.
18
13NOV201221352027
2016 Proxy Statement
DIRECTOR COMPENSATION
In addition to the fees described in footnote (1), each non-employee director elected to or serving on the board of
directors at the 2015 annual stockholder meeting received under the AbbVie 2013 Incentive Stock Program vested
restricted stock units with a target grant date value of $143,000. In 2015, this equated to 2,187 restricted stock
units (after rounding the award down to the nearest whole unit), with a reportable value of $142,920. The
non-employee directors receive cash payments equal to the dividends paid on the shares covered by the units at
the same rate as other stockholders, but do not otherwise have access to the restricted stock units during their
board service. Upon termination or retirement from the board, death, or a change in control of the company, a
non-employee director will receive one common share for each restricted stock unit outstanding under the
Incentive Stock Program.
The following AbbVie restricted stock units were outstanding as of December 31, 2015: R. Alpern, 16,045; R. Austin,
23,708; W. Burnside, 7,486; E. Liddy, 11,472; E. Rapp, 7,486; R. Roberts, 7,486; G. Tilton, 19,692; F. Waddell, 7,486.
These numbers include, where applicable, AbbVie restricted stock units issued with respect to Abbott Laboratories
restricted stock units outstanding when AbbVie separated from Abbott on January 1, 2013.
(3) No AbbVie stock options were outstanding as of December 31, 2015.
(4) The totals in this column include reportable interest credited under the AbbVie Non-Employee Directors’ Fee Plan
during 2015.
(5) Charitable contributions made by AbbVie’s non-employee directors are eligible for a matching contribution (up to
$25,000 annually). For 2015 contributions, the AbbVie Foundation made charitable matching contributions on behalf
of the following AbbVie directors: W. Burnside, $25,000; E. Liddy, $2,500; E. Rapp, $25,000; R. Roberts, $25,000;
G. Tilton, $25,000; F. Waddell, $25,000. This column also includes reimbursement for certain taxes.
2016 Proxy Statement
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19
SECURITIES OWNERSHIP
1MAR201604010087
Securities Ownership of Executive Officers and Directors
.................................................................................................................................................................................................................................................................................................................................
The table below reflects the number of shares of AbbVie common stock beneficially owned as of January 31,
2016, by each director, the chief executive officer, the chief financial officer, and the three other most highly paid
executive officers (NEOs), and by all directors and executive officers of AbbVie as a group. It also reflects the number of
stock equivalent units and restricted stock units held by non-employee directors under the AbbVie Non-Employee
Directors’ Fee Plan.
Name
R. Gonzalez
R. Alpern
R. Austin
W. Burnside
B. Hart
E. Liddy
E. Rapp
R. Roberts
G. Tilton
F. Waddell
C. Alban
W. Chase
L. Schumacher
M. Severino
Shares
Beneficially
Owned(1)(2)(3)
Stock Options
Exercisable
within 60 days
of January 31, 2016
471,782
654,419
16,045
30,552
7,486
0
12,607
9,986
27,486
27,042
9,486
277,254
218,529
273,316
172,909
0
0
0
0
0
0
0
0
0
298,050
311,481
508,583
59,597
Stock
Equivalent
Units
0
4,549
0
0
0
14,698
7,853
0
23,067
0
0
0
0
0
All directors and executive officers as a group(4)
1,856,074
2,119,418
50,167
(1) The table includes shares held in the executive officers’ accounts in the AbbVie Savings Plan as follows: all executive
officers as a group, 1,884. Each executive officer has shared voting power and sole investment power with respect
to the shares held in his or her account.
(2) The table includes restricted stock units held by the non-employee directors. The directors’ units are payable in
stock as described in footnote (2) to the Director Compensation table.
(3) The table includes shared voting and/or investment power over shares as follows: R. Gonzalez, 5,050; G. Tilton,
350; C. Alban, 40,442; W. Chase, 501; and all directors and executive officers as a group, 48,086.
(4) The directors and executive officers as a group own less than one percent of the outstanding shares of AbbVie.
20
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2016 Proxy Statement
SECURITIES OWNERSHIP
Securities Ownership of Principal Stockholders
.................................................................................................................................................................................................................................................................................................................................
The table below reports the number of shares of AbbVie common stock beneficially owned as of December 31,
2015 by BlackRock, Inc. and The Vanguard Group (directly or through subsidiaries), respectively, the only persons known
to AbbVie to own beneficially more than 5% of AbbVie’s outstanding common stock. It is based on information contained
in Schedules 13G filed with the Securities and Exchange Commission by BlackRock, Inc. on February 10, 2016, and by The
Vanguard Group on February 10, 2016. BlackRock, Inc. reported that it had sole voting power with respect to 84,605,586
shares, shared voting power with respect to 20,990 shares, sole dispositive power with respect to 99,570,589 shares and
shared dispositive power with respect to 20,990 shares. The Vanguard Group reported that it had sole voting power with
respect to 3,059,030 shares, shared voting power with respect to 169,300 shares, sole dispositive power with respect to
96,367,531 shares and shared dispositive power with respect to 3,252,090 shares.
Name and Address of Beneficial Owner
Shares Beneficially Owned
Percent of Class
BlackRock, Inc.
40 East 52nd Street
New York, NY 10022
The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355
99,591,579
6.1%
99,619,621
6.09%
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EXECUTIVE COMPENSATION
1MAR201604002812
Compensation Discussion and Analysis
.................................................................................................................................................................................................................................................................................................................................
This Compensation Discussion and Analysis (CD&A) describes the pay philosophy established for AbbVie’s named
executive officers (NEOs), the design of our compensation programs, the process used to examine performance in the
context of executive pay decisions, and the performance goals and results for each NEO:
Richard A. Gonzalez
Chairman of the Board and Chief Executive Officer
William J. Chase
Executive Vice President, Chief Financial Officer
Laura J. Schumacher
Executive Vice President, External Affairs, General Counsel and Corporate Secretary
Carlos Alban
Executive Vice President, Commercial Operations
Michael E. Severino
Executive Vice President, Research & Development and Chief Scientific Officer
Although we describe our programs in the context of the NEOs, it is important to note that our programs
generally have broad eligibility and therefore in most cases apply to employee populations outside the NEO group as
well.
CD&A Table of Contents
The CD&A is organized as follows:
I. Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Performance Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Components of our Compensation Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 Performance Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Engagement
Executive Compensation Program Updates in 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Program Governance Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II. Executive Compensation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitment to Performance-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Committee Process for Setting Total Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Benchmarking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Role of the Compensation Consultant
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III. Compensation Plan Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-Term Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Incentives—2015 Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Incentives—2016 Redesign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excise Tax Gross-Ups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in Control Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV. Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Ownership Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clawback Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anti-Hedging and Anti-Pledging Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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2016 Proxy Statement
EXECUTIVE COMPENSATION
I.
Executive Summary
Compensation Philosophy
At AbbVie, the board of directors and management believe a well-designed compensation program should align
executive interests with the drivers of stockholder returns and profitable growth, support achievement of the company’s
primary business goals, and attract and retain world-class executives whose talents and contributions sustain the growth
in long-term stockholder value. The board believes it has implemented a compensation program that appropriately
balances short- and long-term strategic objectives and directly links compensation to stockholder value with more than
three-fourths of the total direct compensation paid to NEOs tied to performance.
Business Overview
AbbVie was created in 2013 following separation from Abbott Laboratories. Our products support the treatment
of conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology,
including a leadership position in the treatment of blood cancers; virology, including hepatitis C virus (HCV) and human
immunodeficiency virus (HIV); neurological disorders, such as Parkinson’s disease; metabolic diseases, including thyroid
disease and complications associated with cystic fibrosis; as well as other serious health conditions.
Our pipeline includes more than 50 compounds or indications in development across important medical
specialties such as immunology, oncology, virology/liver disease, neurological diseases and women’s health.
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EXECUTIVE COMPENSATION
Business Performance Highlights
AbbVie has Delivered Robust Financial Results since Separation
Performance from 2013 Inception to 2015 Year End
10.2%
Net revenues – compound annual growth rate*
16.9%
Earnings per share – compound annual growth rate*
+600
basis points
Operating margin expansion*
Committed to driving an adjusted operating margin profile of greater than 50 percent by 2020
92.4%
3-year total stockholder return
$41BN
Increase in market cap
Added significant stockholder value
42%
50+
Increase in quarterly dividend
Raised quarterly dividend to $0.57 per share from $0.40 per share at separation
Active clinical development programs
More than 20 new products or indications in late-stage development or under regulatory review
1MAR201604005806
The measures set forth above were calculated as of December 31, 2015.
* Net revenues, earnings per share and operating margin are adjusted to exclude certain
specified items, which are reconciled in our Form 8-K dated January 29, 2016.
AbbVie has delivered a three-year compound annual growth rate (CAGR) of 10.2% in revenues and 16.9% in EPS.
This performance places AbbVie in the top quartile of its Health Care Peer Group. Additionally, AbbVie has been
committed to a robust return of capital to stockholders with an increase of 42% in its dividend since 2013 as part of a
balanced and disciplined capital allocation program. AbbVie’s total stockholder return (TSR) since inception of 92.4% also
places AbbVie among the top of its Health Care Peer Group, and nearly 40 percentage points above the Standard &
Poor’s 500 Index and more than 33 percentage points above the NYSE Arca Pharmaceuticals Index over the same time
period.
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EXECUTIVE COMPENSATION
AbbVie also Delivered Strong Business Performance in 2015
AbbVie has built a strong foundation for its business and 2015 was an exceptional year, as evidenced by a
number of 2015 business highlights:
• Net Revenues: AbbVie reported full-year adjusted net revenues of $22.8 billion, an increase of 22.1% over
2014, excluding foreign exchange. This reflects top-tier growth, second in AbbVie’s Health Care Peer Group.
• Operating Margins: In 2015, AbbVie expanded its adjusted operating margin to 42.3% of net revenues—up
610 basis points—and improved gross margin to 82.9% of net revenues—up 280 basis points—since 2014.
Earnings Per Share: AbbVie reported full-year adjusted EPS of $4.29, up 29.2%. This reflects top-tier growth,
second in AbbVie’s Health Care Peer Group. AbbVie’s 2016 adjusted EPS guidance range of $4.82 to $5.02
reflects growth of nearly 15% at the midpoint.
Humira Sales: AbbVie delivered global Humira sales of $14 billion, an increase of 19% excluding the impact
of exchange rate fluctuations, compared to 2014. Humira’s performance was driven by market penetration
across therapeutic categories and geographies, approval of new indications and market share gains.
Pharmacyclics Acquisition: AbbVie made a significant investment in the rapidly-growing hematologic
oncology space with its acquisition of Pharmacyclics, Inc. and its first in class BTK inhibitor Imbruvica, which
positions AbbVie as an oncology leader in this rapidly growing market segment.
Regulatory Milestones: AbbVie also achieved a number of regulatory milestones in markets worldwide for
several key products, including U.S. Food and Drug Administration (FDA) and European Medicines Agency
(EMA) approvals for new indications of Humira and Imbruvica, as well as new regulatory approvals for
AbbVie’s HCV program Viekira, Viekirax in Japan and Technivie in the U.S. AbbVie also announced FDA
approval of Duopa for patients with advanced Parkinson’s disease.
Pipeline Development: With a record number of programs in mid- and late-stage development, AbbVie
made significant pipeline advancements in 2015, such as regulatory application submissions for Venetoclax
for relapsed/refractory chronic lymphocytic leukemia (CLL); Imbruvica for first-line CLL; Zinbryta for multiple
sclerosis; and Humira for uveitis. AbbVie also successfully transitioned several mid-stage pipeline assets into
late-stage development, including its selective JAK-1 inhibitor, ABT-494, in rheumatoid arthritis; a
pan-genotypic next-generation HCV combination; elagolix for uterine fibroids; and ABT-414, an antibody drug
conjugate for glioblastoma multiforme.
Net Revenues
Operating Margin
EPS
22.82
19.88
42.3%
$3.32
36.2%
$4.29
•
•
•
•
•
)
N
B
$
(
2014
2015
2014
2015
2014
2015
7MAR201617145780
Note: Net revenues, operating margin and earnings per share are adjusted for specified items and exclude the
impact of amortization.
2016 Proxy Statement
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25
EXECUTIVE COMPENSATION
AbbVie is in the Top Tier of its Peers on Several Financial Measures
The chart below outlines AbbVie’s performance relative to its Health Care Peer Group in 2015:
Metric
Net Revenue Growth
Operating Income Growth
Adjusted EPS Growth
Operating Cash Flow Growth
Return on Equity
AbbVie Percentile Rank
0th
25th
50th
75th
100th
91%
81%
91%
97%
100%
2MAR201602131384
Total Stockholder Return (TSR) Performance
Over the three years since AbbVie’s separation from Abbott, we have delivered a total stockholder return of
92.4%, which places us in the top quartile of our Health Care Peers and surpasses the cumulative total returns of the
Standard & Poor’s 500 Index and the NYSE Arca Pharmaceuticals Index, as shown in the graph below. The graph covers
the period from January 2, 2013 (the day AbbVie’s common stock began ‘‘regular-way’’ trading on the NYSE) through
December 31, 2015. The graph assumes $100 was invested in the stock or the index on January 2, 2013 and also
assumes the reinvestment of dividends. The stock price performance in the following graph is not necessarily indicative
of future stock price performance.
Comparison of Cumulative Total Return since AbbVie’s Launch
$225
$200
$175
$150
$125
$100
1/2/2013
12/31/2013
12/31/2014
12/31/2015
AbbVie Inc.
S&P 500 Index
NYSE Arca Pharmaceutical Index
1MAR201604003669
Despite AbbVie’s industry-leading three-year TSR, our 2015 TSR of -6.5% did not reflect the company’s top tier
operational and financial performance and was negatively impacted by both the macro-economic environment that
weighed down all stocks and by specific factors that are unique to the company, including uncertainty about the
regulatory process for biosimilar competition to Humira.
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2016 Proxy Statement
EXECUTIVE COMPENSATION
AbbVie is Positioned for Future Growth
AbbVie is well-positioned to deliver strong top- and bottom-line performance through 2020 and beyond. The
company has established growth platforms in some of the largest and most attractive market segments, including
immunology, oncology, virology and neurology, and has built a compelling pipeline in these areas which will contribute
significantly to future performance. AbbVie is committed to top-line growth and operating margin expansion. In October
2015, AbbVie outlined its long-term strategic and financial objectives through 2020, including an expectation to deliver
annual double-digit adjusted EPS growth on average, company net revenues of approximately $37 billion in 2020, and an
adjusted operating margin profile of greater than 50 percent in 2020.
Components of our Compensation Program
The compensation committee of the board oversees our executive compensation program, which includes
several compensation elements that have each been tailored to incentivize and reward specific aspects of company
performance the board believes are central to delivering long-term stockholder value. Key components of our 2015
compensation program are listed below.
Base Salary
Designed to be competitive with market and industry norms, and to reflect
individual performance
Individual salaries are established relative to market median based on each
NEO’s individual performance, skills, experience, and internal equity, as well as
the company’s annual operating budget
Short-Term
Incentives
Performance Incentive Plan (PIP)
Based on non-GAAP performance measures such as:
Diluted EPS
Net revenues
Income before taxes
Return on assets
Strategic and leadership goals
Long-Term
Incentives
75% Performance-vested restricted stock
Based on adjusted return on equity
25% Non-qualified stock options
4MAR201618515774
In response to stockholder feedback, we redesigned our long-term incentive (LTI) program for 2016,
emphasizing multiple, relative performance metrics and multi-year performance periods (see page 37 for a detailed
description of the 2016 redesign).
The committee is dedicated to ensuring that a substantial portion of executive compensation is ‘‘at-risk’’ and
variable. Generally, more than three-fourths of our NEOs’ total direct compensation is variable and directly affected by
both the company’s and the NEO’s performance.
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27
EXECUTIVE COMPENSATION
2015 Performance Results
The performance targets established under our annual and long-term incentive plans are rigorous and calibrated
to a range of potential outcomes, with above target payouts for strong performance and below target payouts (including
no payout) for below target performance. Targets are based on expected business, market and regulatory conditions,
including expectations for our pipeline. The financial goals shown in the following table were carried by all of the NEOs
as part of their 2015 performance goals. The specific weightings for each NEO, other than the CEO, are established at
the start of each performance year based on the NEO’s role and anticipated contributions to the company’s annual
objectives.
Financial Goals
Goal and Expected Result(1)
A. Non-GAAP Diluted EPS of $4.15
B. Non-GAAP Net Revenues of $24.1BN
C. Non-GAAP Income Before Taxes of $8.83BN
D. Non-GAAP Return on Assets of 20.1%
E. Non-GAAP Operating Margin of $9.49BN
F.
Humira Sales of $14.4BN
Result(2)
Outcome
A.
B.
C.
D.
E.
F.
$4.29
$24.1BN(3)
$9.04BN
23.2%
$9.68BN
$14.8BN(3)
Achieved Above Target
Achieved
Achieved Above Target
Achieved Above Target
Achieved Above Target
Achieved Above Target
(1) Expected results reflect the acquisition of Pharmacyclics, Inc.
(2) Results achieved reflect certain specified items, which are reconciled in our Form 8-K dated January 29, 2016.
(3) Net revenues and Humira sales are evaluated on a constant currency basis.
In addition to the financial goals set forth above, each of our NEOs also has individual performance goals that
the committee reviews and ensures are appropriately rigorous and in line with the long-term success of the company.
Each NEO achieved or exceeded his or her 2015 goals, which are listed below:
•
Richard A. Gonzalez: Drive exceptional business performance; execute key strategic initiatives to drive top
tier, sustainable long-term business performance; deliver strong value to our stockholders, building investor
confidence and credibility; successfully advance mid- and late-stage pipeline assets; continue to drive strong
employee engagement and motivation around AbbVie’s mission and future prospects; and advance our
transformation to a biopharmaceutical culture.
• William J. Chase: Achieve proprietary pharmaceutical pipeline enhancement objectives; and successfully
transition corporate services infrastructure to a standalone model.
•
•
Laura J. Schumacher: Successfully continue to develop and implement strategies to effectively resolve key
litigation matters; achieve proprietary pharmaceutical pipeline enhancement objectives; execute biologics
strategic development initiatives; and support research and development initiatives per company strategy.
Carlos Alban: Achieve key product milestones; and successfully adapt and execute market strategies relative
to external considerations.
• Michael E. Severino: Achieve key research and development milestones per company strategy; and achieve
proprietary pipeline enhancement objectives.
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2016 Proxy Statement
EXECUTIVE COMPENSATION
Stockholder Engagement
2015 Say on Pay Results
At our 2015 Annual Meeting, the say on pay proposal received support from 95% of our stockholders. The board
and compensation committee are encouraged by the continued, consistent stockholder support for our executive
compensation program. Our say on pay proposal received 96% support from stockholders in 2014 and 2013.
AbbVie is committed to regular, ongoing engagement with stockholders to ensure that we continue to
understand stockholder feedback about our compensation program and incorporate that feedback into the compensation
decision-making process. To that end, in 2015 AbbVie approached and engaged stockholders holding approximately 38%
of the company’s outstanding shares. In these discussions, the aggregate feedback was generally supportive of the
compensation program, consistent with the level of stockholder support for our say on pay proposals in the last two
years, and was not prescriptive about our compensation plan design. The feedback informs the compensation
committee’s continuous assessment of the program design and ongoing discussions with stockholders, which contribute
to the evolution of the program.
After considering stockholder feedback and suggestions, AbbVie’s compensation committee, in consultation with
management and the committee’s independent compensation consultant, has proactively reviewed our policies and
compensation program design. For annual awards beginning in 2016, our LTI program has been redesigned, as discussed
in greater detail in the following section.
Executive Compensation Program Updates in 2016
The compensation committee of the board has engaged in a continuous process of evaluation and enhancement
of the AbbVie executive compensation program. In the three years since the company’s launch, AbbVie has made
significant enhancements to its legacy compensation programs, the most recent of which are described in the following
paragraphs and on page 37.
The committee has considered the feedback from stockholders as to the design of its compensation program
and competitive benchmarking and, in 2015, undertook a comprehensive revision of the program. The new long-term
incentive program will be in effect for equity grants made in 2016. The program consists of equity awards that include
40% performance shares, 40% performance-vested restricted stock awards and 20% stock options. Vesting may occur
over a 3-year period based on relative return on equity (ROE) for the performance-vested restricted stock awards and
earnings per share (EPS) (with a relative 3-year total stockholder return (TSR) modifier) for the performance shares. The
2016 program eliminates vesting in any 3 of 5 years and provides that awards may vest only over 3 years based on the
achievement of the defined performance metrics. Additionally, dividends will not be paid unless the performance criteria
2016 Proxy Statement
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29
EXECUTIVE COMPENSATION
are met, and then will be paid only on shares that vest. AbbVie believes the new design further strengthens and aligns
the performance orientation of senior executive compensation. Highlights of the changes made for 2016 include:
Element of Pay
Long-Term Incentive Program
Changes Made for 2016
(cid:4) Completed redesign of our long-term incentive program:
— Added multiple performance metrics, including relative ROE, EPS and
relative TSR as criteria for vesting.
— Removed provision that allowed performance awards to vest if
thresholds were met in any 3 of 5 years, creating more risk of
forfeiture.
— Added multi-year performance periods.
— Changed dividend payment schedule so dividends are paid only at
vesting and only on vested shares.
— Increased use of performance-vested awards from 75% to 80% which,
in combination with stock options, ties 100% of our LTI program to
performance metrics and stock price appreciation.
— Refined process for referencing the market median for long-term
incentive award decisions.
(cid:4) Added disclosure of our maximum incentive cap of 200% of target.
(cid:4) Reduced the CEO’s target annual incentive to 150% of base salary.
(cid:4) Established a formal payout matrix based on net revenues and operating
margin to guide NEO annual incentive awards, beginning with awards for
the 2015 performance year.
(cid:4) Simplified the peer group used for compensation benchmarking, the
AbbVie Health Care Peer Group.
Performance Incentive Plan
Peer Comparisons
The new design is discussed in more detail in Section III.
2016 Compensation Decisions
The compensation committee’s typical practice is to make decisions related to NEO pay at its February meeting,
including adjustments to base salary, an annual incentive payment for the prior year’s performance, and establishment of
a long-term incentive award value. In making its decisions, the committee considers the performance achieved compared
to previously established goals as well as changes in industry practice reflected in compensation benchmarking data. The
committee made the following decisions about the compensation for Mr. Gonzalez at its February 2016 meeting: (i) his
base salary is unchanged compared to 2015; (ii) his annual incentive payment for 2015 performance was $2,976,000;
(iii) his 2016 target annual incentive was reset to 150% of base salary; and (iv) his 2016 long-term incentive award grant
value was $11,700,000, which was the projected median grant value of the Health Care Peer Group. The resulting
changes in target total direct compensation from 2015 to 2016 are shown in the following chart:
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13NOV201221352027
2016 Proxy Statement
Change in CEO Target Total Direct Compensation 2015 - 2016
Target Total Direct Compensation
$17,809,747
EXECUTIVE COMPENSATION
LTI Award Grant Value
$13,009,747
Annual Incentive Target
$3,200,000
Base Salary
$1,600,000
2015
Target Total Direct Compensation
$15,700,000
LTI Award Grant Value
$11,700,000
Annual Incentive Target
$2,400,000
Base Salary
$1,600,000
2016
2MAR201611471830
Compensation Program Governance Summary
In addition to strong alignment of pay with the performance of the company and our NEOs, we maintain and
are committed to good governance practices, including the following:
New
(cid:4) Long-term incentive design emphasizing multiple, relative performance metrics and multi-year performance
periods (see p. 37 for a detailed description of the 2016 redesign)
— Shifted program away from a single, absolute performance metric to a multi-factor model
— Incorporates relative total stockholder return
— Eliminates extra vesting opportunity that was a part of the prior LTI design
— Dividends on outstanding equity awards are paid at vesting and only on earned shares
(cid:4) Annual incentive payout matrix to guide decision-making based on financial performance
(cid:4) CEO target annual incentive reset at 150% of base salary
(cid:4) Robust stock ownership guideline of 5x annual fees for non-employee directors
Ongoing
(cid:4) Majority of NEO compensation tied to long-term performance
(cid:4) Short- and long-term incentive programs closely align pay with performance
(cid:4) Robust stock ownership guidelines of 6x salary for CEO and 3x salary for NEOs
(cid:4) NEOs must hold and not sell equity until the minimum stock ownership requirement is satisfied.
(cid:4) Double-trigger requirements for equity acceleration and other benefits in the event of a change in control
(cid:4) No tax gross-ups in executive compensation program
(cid:4) No duplication of performance metrics in short-and long-term incentives
(cid:4) No repricing of stock options without express stockholder approval
(cid:4) No employment contracts
(cid:4) No guaranteed short-term incentives or equity awards, and short-term incentives are capped at 200% of target
(cid:4) Anti-hedging and anti-pledging policies
(cid:4) Independent compensation consultant that performs no other work for the company
(cid:4) Committee has broad discretion to claw back incentive awards in the unlikely event of a restatement of earnings
(cid:4) Proactive stockholder engagement process
2016 Proxy Statement
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EXECUTIVE COMPENSATION
II.
Executive Compensation Process
Commitment to Performance-Based Awards
More than three-fourths of AbbVie’s NEO pay is performance-based. Specific goals and targets are the
foundation of our pay-for-performance process, and this section describes how they apply to each pay component.
Though quantitative metrics such as financial and operational results are a central part of our performance assessment,
some goals such as leadership and progress against strategic and long-term objectives are difficult to measure using
numeric or formulaic criteria. As such, the compensation committee also conducts a qualitative assessment of individual
performance to ensure the overall assessment of performance and pay decisions are aligned with the company’s true
performance over a period of time. A discussion of the decision-making criteria for each pay component follows.
Committee Process for Setting Total Compensation
Each February, the committee, with the assistance of its independent compensation consultant and AbbVie’s
management team, determines target pay levels for NEOs. The process starts with a consideration of compensation levels
and the mix of compensation for comparable executives at companies in AbbVie’s Health Care Peer Group, which are
listed below in the section captioned ‘‘Compensation Benchmarking.’’ After this benchmark review, the committee
establishes NEO compensation—base salary adjustments, annual incentive awards, and long-term incentive awards—
relative to the peer median in each instance. Awards can be differentiated from the peer group median based on each
NEO’s individual performance, leadership, and contributions to long-term strategic performance.
Compensation Benchmarking
To provide the appropriate context for executive pay decisions, the committee, in consultation with its
independent compensation consultant, assesses the compensation practices and pay levels of AbbVie’s Health Care Peer
Group. The committee chooses to focus on the Health Care Peer Group because its constituents share important
characteristics with AbbVie, particularly the global emphasis on research-based pharmaceuticals and biopharmaceutical
therapies and the regulatory environment within which they operate. Members of the Health Care Peer Group are
AbbVie’s primary competitors for executive talent and are companies the committee believes chiefly represent our
competitive market:
Health Care Peer Group
Amgen, Inc.
Bristol-Myers Squibb Company
Eli Lilly and Company
Gilead Sciences
GlaxoSmithKline plc
Johnson & Johnson
Merck & Company, Inc.
Novartis AG
Pfizer Inc.
The Health Care Peer Group is a core group of peers that has been consistently used since AbbVie’s separation from
Abbott in 2013. In 2015, the committee added Gilead Sciences to the Health Care Peer Group.
Prior to 2016, the committee also periodically considered benchmarking information from AbbVie’s
High-Performing Peer Group, which consisted of companies operating complex businesses with significant global reach
similar to AbbVie, regardless of industry. Generally, members of the High-Performing Peer Group had a five-year average
return on equity (ROE) of at least 18% and were similar to AbbVie in size, performance and/or scope of global
operations. In 2015 this group consisted of: 3M Company, Bristol-Myers Squibb Company, Caterpillar Inc., The Coca-Cola
Company, Colgate-Palmolive Company, General Mills, Inc., Kellogg Company, Kimberly-Clark, McDonald’s Corporation, and
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EXECUTIVE COMPENSATION
PepsiCo Inc. The committee periodically reviews the company’s peer groups to ensure the companies continue to be
appropriate peers for compensation benchmarking purposes. Considering the relevance and primary focus on health care
industry practices in making its pay determinations, the committee decided in 2015 to discontinue use of the
High-Performing Peer Group. Accordingly, the committee focused primarily on the Health Care Peer Group (described
above) in making its 2016 NEO compensation decisions.
Role of the Compensation Consultant
The compensation committee has engaged Compensation Advisory Partners as its independent compensation
consultant. The committee’s independent consultant reports directly to the chair of the committee. The consultant meets
regularly, and as needed, with the committee in executive sessions, has direct access to the chair during and between
meetings, and performs no other services for AbbVie or its senior executives. The committee determines what variables
it will instruct its consultant to consider, which include: peer groups against which performance and pay should be
examined, metrics to be used to assess AbbVie’s performance, competitive incentive practices in the marketplace, and
compensation levels relative to market benchmarks.
Compensation Risk Oversight
The company has established, and the compensation committee endorses, several controls to address and
mitigate compensation-related risk, such as employing a diverse set of performance metrics, maintaining robust stock
ownership guidelines for its executives and non-employee directors, and retaining broad discretion to recover incentive
awards in the unlikely event that incentive plan award decisions are based on earnings that are subsequently restated.
The committee identified no material risks in AbbVie’s compensation programs in 2015.
III. Compensation Plan Elements
Three primary components make up AbbVie’s executive pay program: (1) base salary, (2) short-term incentives
and (3) long-term incentives. The structure of each component is tailored to serve a specific function and purpose.
CEO Pay Mix
All Other NEO Average Pay Mix
9%
Base Salary
17%
Short-term
Incen(cid:2)ves
65%
Long-term
Incen(cid:2)ves
15%
Base Salary
20%
Short-term
Incen(cid:2)ves
1MAR201604001748
1MAR201604004388
74%
Long-term
Incen(cid:2)ves
Base Salary
The compensation committee sets appropriate levels of base salary to ensure that AbbVie can attract and retain
a leadership team that will continue to meet our commitments to customers and patients and sustain long-term
profitable growth for our stockholders. Generally, the committee considers the median of the Health Care Peer Group as
an initial benchmark, but also references additional information as needed. Specific pay rates are then established for
each NEO relative to his or her market benchmark based on the NEO’s performance, experience, unique skills, internal
equity with others at AbbVie, and the company’s operating budget.
2016 Proxy Statement
13NOV201221352027
33
EXECUTIVE COMPENSATION
Short-Term Incentives
Performance Incentive Plan
Annual cash incentives are paid to NEOs through AbbVie’s Performance Incentive Plan (PIP), which rewards
executives for achieving key financial and non-financial goals that are measured at the company and individual levels.
Annual cash incentives are calculated as follows:
Target Short-Term
Incen(cid:2)ve
Opportunity %
Established using:
• Market-based
peer group
benchmarks
Internal
•
calibra(cid:2)on
X
Base Salary
Determined by
reviewing:
Internal and
•
market-based
peer group
benchmarks
•
Individual
performance
Performance Against Annual Goals
(set based on internal and
market peer group expecta(cid:2)ons)
Non-GAAP diluted EPS
X
Financial metrics
(e.g., net revenues, income before taxes, opera(cid:2)ng
margin, ROA)
Opera(cid:2)onal / strategic goaIs
(e.g., innova(cid:2)on, pipeline, leadership-oriented goals)
=
Preliminary Incen(cid:2)ve
Award Amount
Incen(cid:2)ve Payout Matrix
Guides Final Decision-
Making by Commi(cid:3)ee
Final Incen(cid:2)ve
Award Amount
4MAR201618520189
While the compensation committee relies heavily on objective, quantitative metrics to determine PIP awards, the
performance review also includes a qualitative element to ensure the review is comprehensive and inclusive of all
individual, strategic, and leadership goals for which assessment is not solely dictated by numeric or formulaic
applications. Moreover, while each participant has predetermined goals, the committee also considers relative
achievements and/or developments in the company, the marketplace, and the global economy that could not have been
foreseen when individual goals were established.
The compensation committee may exercise negative discretion to adjust PIP awards below the cap set in
accordance with Internal Revenue Code Section 162(m), and is guided by an annual incentive payout matrix that
establishes a potential range of final incentive outcomes based on net revenues and operating margin performance. For
2015, net revenue performance was 100% compared to plan, while operating margin performance was 102% compared
to plan. As a result of this performance, the annual incentive payout matrix established the potential range of final
incentive outcomes at 100% to 150% of target, below the plan maximum of 200% of target and the Code Section 162(m)
cap.
Annual Metrics and Goal Assessment
AbbVie’s PIP structure is intended to align NEOs’ interests directly with AbbVie’s annual operating strategies,
financial goals, and leadership behaviors. In doing so, it provides a direct link between the NEOs’ short-term incentives
and the company’s and the NEOs’ annual performance results through measurable financial and operational performance
and qualitative assessments of clearly defined strategic progress and leadership behaviors. The compensation committee
approves pre-established goals at the beginning of each year. The qualitative assessment reflects NEOs’ overall leadership,
progress on strategic initiatives, advancement of the pipeline, and enhancement of AbbVie’s biopharmaceutical culture.
The financial and strategic/leadership goals and their respective weightings are summarized in the chart below.
The specific goals and weightings for each NEO, other than the CEO, are established at the start of each performance
year based on the NEO’s role and anticipated contributions to the company’s annual objectives. The CEO’s goals are
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13NOV201221352027
2016 Proxy Statement
similarly established at the start of each performance year; however, to reflect the CEO’s overall accountability for
company financial performance and strategic outcomes, the committee considers all financial and non-financial goals
holistically, without specific weightings, when evaluating CEO performance.
EXECUTIVE COMPENSATION
Annual Incentive Payout Matrix
Net Revenues
Operating Margin
Financial Goals
Earnings Per Share
Net Revenues, Income Before Taxes, Operating Margin, Humira Sales, and Return on Assets
Total Tied to Financial Goals
Strategic/Leadership Goals
R&D/Biosimilars
Business Development
Other (including strategic initiatives, etc.)
Total Tied to Strategic/Leadership Goals
Range
0% to 200% of target
0% to 200% of target
% Weighting
20%
20% to 60%
40% to 80%
% Weighting
0% to 50%
0% to 20%
0% to 30%
20% to 60%
Assessments of performance against financial results consider the effect of specified adjustments and/or unusual
or unpredictable events, and the appropriateness of these adjustments is reviewed annually by the committee. In 2015,
specified adjustments consisted of other revenue, intangible asset amortization, research and development, collaboration
and transaction costs, acquired in process research and development, separation costs, restructuring, legal reserves, and
other items, as described in Exhibit 99.1 to AbbVie’s Form 8-K filed on January 29, 2016.
The PIP is intended to comply with the requirements of Internal Revenue Code Section 162(m) for performance-
based compensation.
Long-Term Incentives—2015 Awards
Performance-Vested Restricted Stock
Performance-vested restricted stock was 75% of the total long-term incentive (LTI) value delivered to the NEOs in
2015. AbbVie’s performance-vested restricted stock awards (or restricted stock units where required outside the U.S.) are
subject to the following terms, including a performance metric that prevents awards from vesting if pre-established goals
are not met:
•
•
Term. Each award has a five-year term.
Return on Equity (ROE) Performance Metric. During the term of the award, one-third of the award vests in each
year that AbbVie’s prior year ROE meets or exceeds the performance goal. Unlike performance-based awards that
can increase or decrease relative to a target amount, these are performance-vested awards that cannot be released
to the NEO unless the ROE performance goal is achieved during the term of the award. If the thresholds are met in
three of the five years, 100% of the performance-vested shares vest. If the thresholds are missed in all five years,
100% of the performance-vested shares will be forfeited.
2016 Proxy Statement
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35
EXECUTIVE COMPENSATION
•
•
Setting the ROE Performance Target. The compensation committee considers the company’s operating plan, the
company’s historic performance, peer-group performance, the company’s pipeline, and anticipated business and
market conditions when setting the ROE target.
Dividends. These awards receive dividends (or dividend-equivalent payments in the case of restricted stock units)
during the vesting term.
Non-Qualified Stock Options
Stock options were 25% of the total LTI value delivered to the NEOs in 2015. AbbVie’s stock options are subject
to the following terms:
•
•
•
Term. Each option has a ten-year term.
Price. The option exercise price is set at or above fair market value on the date of grant. AbbVie has never granted
discounted stock options.
Vesting. One third of the award may vest each year after the date of the grant.
AbbVie’s policy with respect to its annual equity award for all eligible employees, including the NEOs, is to grant
the award and set the grant price at the compensation committee’s regularly scheduled February meeting each year.
These meeting dates generally are the third Thursday of February and are scheduled two years in advance. The grant
price is the average of the highest and lowest trading prices of a common share on the date of the grant (rounded up to
the next even penny). The grant price for the 2015 annual grant was $58.88. The high, low and closing prices of an
AbbVie common share on the grant date (February 19, 2015) were $59.08, $58.65, and $59.00, respectively. All LTI
awards are subject to a minimum vesting period of 12 months.
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2016 Proxy Statement
EXECUTIVE COMPENSATION
Long-Term Incentives—2016 Redesign
AbbVie redesigned its LTI program effective with the 2016 annual grant, based in part on feedback from
stockholders. The new design increases the alignment of AbbVie’s long-term incentive compensation with key operational
and financial initiatives, including sustained EPS growth and generation of superior investment returns relative to peers.
In 2016, NEOs received LTI awards with the following characteristics as compared to the 2015 LTI awards:
Evolution of Long-Term Incentive Program
2015
2016
Award Type
Metric
Performance
Period
Award Type
Metric
Performance
Period
e
v
i
t
n
e
c
n
I
m
r
e
T
-
g
n
o
L
75%
Performance-
Vested
Restricted
Stock
Absolute
Return on
Equity
3- to 5-year
performance
period in
which ROE
target must
be met in 3 out
of 5 years
25%
Non-Qualified
Stock Options
Stock Price
10-year term
40%
Performance
Shares
(cid:129) EPS
(cid:129) 3-Year
Relative
TSR
Modifier
3 Years
40%
Performance-
Vested
Restricted
Stock
20%
Non-Qualified
Stock Options
Relative
Return on
Equity
3 Years
Stock Price
10-year term
4MAR201618515920
•
•
Performance Shares (40% of total LTI award)—These awards have the potential to vest at 0% to 250% of
target after a three-year performance period and are earned based on company performance in earnings
per share (EPS) and relative total stockholder return (TSR). TSR performance is measured relative to a group
made up of companies that are constituents in either the S&P Pharmaceutical, Biotech, and Life Science
Index or the NYSE Arca Pharmaceutical Index. Dividends on performance shares accrue during the
performance period and are paid at vesting only to the extent that shares are earned.
Performance-Vested Restricted Stock (40% of total LTI award)—These awards have the potential to vest at
0% to 150% of target, in one-third increments during a three-year performance term based on AbbVie’s
return on equity articulated as pre-set goals and measured relative to a group made up of companies that
are constituents in either the S&P Pharmaceutical, Biotech, and Life Science Index or the NYSE Arca
Pharmaceutical Index. Dividends accrue during the performance period and are paid at vesting only to the
extent that shares are earned.
• Non-Qualified Stock Options (20% of total LTI award)—The structure of the 2016 stock option grants is the
same as described above for 2015.
Benefits
Benefits are an important part of retention and capital preservation for all employees, helping to protect against
the impact of unexpected catastrophic loss of health and/or earnings potential, as well as providing a means to save and
accumulate for retirement or other post-employment needs.
2016 Proxy Statement
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37
EXECUTIVE COMPENSATION
Each of the benefits described below supports the company’s objective of providing a market competitive total
rewards program. Individual benefits do not directly affect decisions regarding other benefits or pay components, except
to the extent that all benefits and pay components must, in aggregate, be competitive, as previously discussed.
Retirement Benefits
All eligible U.S. employees, including NEOs, participate in the AbbVie Pension Plan, the company’s principal
qualified defined benefit plan. NEOs and certain other employees also participate in the AbbVie Supplemental Pension
Plan. These plans are described in greater detail in the section of this proxy statement captioned ‘‘Pension Benefits.’’
The Supplemental Pension Plan is a non-qualified defined benefit plan that cannot be secured in a manner
similar to a qualified plan, for which assets are held in trust, so NEOs receive an annual cash payment equal to the
increase in the present value of their Supplemental Pension Plan benefit. NEOs have the option of depositing the annual
payment into an individually established grantor trust, net of tax withholdings. Deposited amounts may be credited with
the difference between the NEO’s actual annual trust earnings and the rate used to calculate trust funding (currently
8 percent). Amounts deposited in the individual trusts are not tax-deferred and the NEOs personally pay the taxes on
those amounts without gross-ups.
The manner in which the grantor trust assets are to be distributed to an NEO upon retirement from the
company generally follows the distribution method elected by the NEO under the AbbVie Pension Plan. If an NEO (or the
NEO’s spouse, depending on the pension distribution method elected by the NEO under the AbbVie Pension Plan) lives
beyond the actuarial life expectancy age used to determine the Supplemental Pension Plan benefit, and therefore
exhausts the trust balance, the Supplemental Pension Plan benefit will be paid to the NEO (or his or her spouse) by
AbbVie.
Savings Plans
All U.S. employees, including NEOs, are eligible to defer a portion of their annual base salary under the AbbVie
Savings Plan, the company’s principal qualified defined contribution plan, up to the IRS contribution limits. NEOs also are
eligible to defer up to 18 percent of their base salary, less contributions to the AbbVie Savings Plan, to the AbbVie
Supplemental Savings Plan, which is a non-qualified defined contribution plan. NEOs may defer these amounts to
unfunded book accounts or choose to have the amounts paid in cash on a current basis and deposited into individually
established grantor trusts, net of tax withholdings. These amounts are credited annually with earnings. Amounts
deposited in the individual trusts are not tax-deferred and the NEOs personally pay the taxes on those amounts without
gross-ups.
NEOs elect the manner in which the assets held in their grantor trusts will be distributed to them upon
retirement or other separation from the company. These arrangements are described in greater detail in this proxy
statement beginning with the section captioned ‘‘Summary Compensation Table.’’
Financial Planning
NEOs are eligible for a $10,000 annualized benefit associated with estate planning advice, tax preparation and
general financial planning fees. If an NEO chooses to utilize this benefit, fees for such services are paid by the company
and are treated as imputed income to the NEO, who then is responsible for payment of all taxes due on the fees paid by
the company without gross-ups.
Company-Provided Transportation
NEOs are eligible for transportation perquisites that are designed to improve the effectiveness and efficiency of
their work, including the use of a company-leased vehicle and access to company-provided air travel, as appropriate. In
some circumstances, these benefits may be used for personal travel, which would then be considered part of the NEO’s
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13NOV201221352027
2016 Proxy Statement
total compensation and treated as taxable income to them under applicable tax laws. The NEOs pay the taxes on such
income without gross-ups.
Disability Benefits
In addition to AbbVie’s standard disability benefits, NEOs are eligible for a monthly long-term disability benefit,
which is described on page 52 of this proxy statement.
EXECUTIVE COMPENSATION
Employment Agreements
AbbVie does not have employment agreements with any of its NEOs.
Excise Tax Gross-ups
AbbVie does not provide excise tax gross-ups on NEO compensation.
Change in Control Agreements
AbbVie has entered into change in control agreements with its NEOs to aid in retention and recruitment,
encourage continued attention and dedication to assigned duties during periods involving a possible change in control of
the company, and to protect the earned benefits of the NEOs against potential adverse changes resulting from a change
in control.
The change in control agreements contain a double-trigger feature, meaning that if the NEO’s employment is
terminated other than for cause or permanent disability, or if the NEO elects to terminate employment for good reason,
within two years following a change in control, he or she is entitled to receive certain pay and benefits as described in
the section of this proxy statement captioned ‘‘Potential Payments upon Termination or Change in Control.’’
IV. Other Matters
Stock Ownership Guidelines
AbbVie’s stock ownership guidelines are designed to further promote sustained stockholder return and to ensure
the company’s senior executives remain focused on both short- and long-term objectives. Each senior executive has five
years from the date of election or appointment to his or her position to achieve the ownership level associated with his
or her position. NEOs are not allowed to sell stock, except for tax withholding at vesting or exercise, if they do not
satisfy the minimum stock ownership requirement. The minimum stock ownership guidelines for the CEO and other NEOs
are as follows:
Executive
Richard A. Gonzalez
William J. Chase
Laura J. Schumacher
Carlos Alban
Michael E. Severino
Stock Ownership Requirement
Requirement Met?
6x Base Salary
3x Base Salary
3x Base Salary
3x Base Salary
3x Base Salary
Yes
Yes
Yes
Yes
Yes
In addition, AbbVie’s non-employee directors are required to own AbbVie stock valued at five times (5x) the
annual fee for service as a director under the AbbVie Non-Employee Directors’ Fee Plan within five years of joining the
Board or as soon as practicable thereafter.
2016 Proxy Statement
13NOV201221352027
39
EXECUTIVE COMPENSATION
Clawback Policy
While the committee does not anticipate there would ever be circumstances where a restatement of earnings
upon which any incentive plan award decisions were based would occur, the committee, in evaluating such
circumstances, has broad discretion to take all actions necessary to protect the interests of stockholders up to and
including actions to recover such incentive awards.
Anti-Hedging and Anti-Pledging Policies
AbbVie has a formal policy that prohibits directors and officers subject to Section 16 of the Exchange Act,
including all of the NEOs, from entering into or engaging in the purchase or sale of financial instruments that are
designed to hedge or offset any decrease in the market value of AbbVie equity securities they hold. AbbVie also has a
formal policy that prohibits directors and officers subject to Section 16 of the Exchange Act, including all of the NEOs,
from pledging AbbVie common stock as collateral for a loan.
In addition, the AbbVie Incentive Stock Program provides that no long-term incentive award may be assigned,
alienated, sold or transferred other than by will or by the laws of descent and distribution or as permitted by the
compensation committee for estate planning purposes, and no award and no right under any award may be pledged,
alienated, attached or otherwise encumbered. All members of senior management, including the company’s NEOs and
certain other employees, are required to clear any transaction involving company stock with the General Counsel prior to
entering into such transaction.
Compensation Committee Report
.................................................................................................................................................................................................................................................................................................................................
The compensation committee of the board of directors is primarily responsible for reviewing, approving and
overseeing AbbVie’s compensation plans and practices, and works with management and the committee’s independent
compensation consultant to establish AbbVie’s executive compensation philosophy and programs. The committee
reviewed and discussed the Compensation Discussion and Analysis with management and recommended to the board of
directors that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
E. Liddy, Chairman, R. Austin, G. Tilton, and F. Waddell
Compensation Risk Assessment
.................................................................................................................................................................................................................................................................................................................................
During 2015, in collaboration with the compensation committee’s independent compensation consultant, AbbVie
conducted an in-depth risk assessment of its compensation policies and practices, including those related to executive
compensation programs for NEOs. The risk assessment included a quantitative and qualitative analysis of AbbVie’s
executive compensation programs and broader employee incentive compensation plans. AbbVie also considered how
these programs compare, from a design perspective, to programs maintained by other companies. Based on this
assessment, it was determined that AbbVie’s executive compensation programs are balanced and appropriately incent
employees, and any risks arising from the compensation policies and practices are not reasonably likely to have a
material adverse effect on AbbVie. The following factors were among those considered in making this determination:
•
AbbVie’s compensation structure contributes to a corporate culture that encourages our NEOs to regard
AbbVie as a long-term employer. For example, equity awards vest over multi-year periods, which encourages
NEOs to consider the long-term impact of their decisions and align their interests with those of AbbVie’s
stockholders.
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13NOV201221352027
2016 Proxy Statement
EXECUTIVE COMPENSATION
•
•
•
•
•
•
•
•
AbbVie’s annual incentive program is based on multiple performance measures, balancing earnings
achievement with other factors. Since earnings are a key component of stock price performance, this aspect
of AbbVie’s compensation plan also promotes alignment with stockholder interests.
AbbVie does not include certain pay design features that may have the potential to encourage excessive
risk-taking, such as: over-weighting toward annual incentives, highly leveraged payout curves, unreasonable
thresholds or dramatic changes in payout opportunity at certain performance levels that may encourage
inappropriate short-term business decisions to meet payout thresholds. In addition, a limit of 200% of target
applies to any awards made under the NEO short-term incentive plan.
AbbVie’s long-term incentive program focuses NEOs on longer-term operating performance and stockholder
returns. In 2015, AbbVie’s NEOs received roughly two-thirds of their total direct compensation in the form
of long-term incentives (25% of which are stock options that vest over a multi-year period, and 75% of
which are performance-vested awards that vest over a period of up to five years with not more than
one-third of the award vesting in any one year). AbbVie’s new design for long-term incentives, beginning in
2016, enhances these objectives by creating longer performance timeframes and by incorporating multiple,
relative performance measures, including relative total stockholder return.
AbbVie makes equity awards and sets grant prices at the same time each year, at the compensation
committee’s regularly scheduled meeting in February. In addition, AbbVie does not award discounted stock
options or immediately vesting equity awards.
AbbVie has robust stock ownership guidelines for its senior executives, which promotes alignment with
stockholder interests, and other good governance equity practices such as anti-hedging and anti-pledging
policies.
AbbVie’s compensation committee has the ability to exercise downward discretion in determining annual
incentive plan payouts. In 2015, the compensation committee exercised its discretion to deliver annual
incentive plan awards below the maximum amounts allowable according to the plan formula.
AbbVie’s compensation committee has broad discretion to claw back incentive compensation that was
awarded based on financials that were later restated.
AbbVie requires mandatory training on its code of conduct and policies and procedures to educate its
employees on appropriate behaviors and the consequences of taking inappropriate actions.
The risk assessment results were presented to the compensation committee by its independent compensation
consultant.
2016 Proxy Statement
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41
EXECUTIVE COMPENSATION
2016 Compensation Decisions
.................................................................................................................................................................................................................................................................................................................................
The compensation committee’s typical practice is to make decisions related to NEO pay at its February meeting,
including adjustments to base salary, an annual incentive payment for the prior year’s performance, and establishment of
a long-term incentive award value. In making its decisions, the committee considers the performance achieved compared
to previously established goals as well as changes in industry practice reflected in compensation benchmarking data. The
committee made the following decisions about the compensation for Mr. Gonzalez at its February 2016 meeting: (i) his
base salary is unchanged compared to 2015; (ii) his annual incentive payment for 2015 performance was $2,976,000;
(iii) his 2016 target annual incentive was reset to 150% of base salary; and (iv) his 2016 long-term incentive award grant
value was $11,700,000, which was the projected median grant value of the Health Care Peer Group. Additional
information about the 2016 changes is provided beginning on page 29 of this proxy statement.
Summary Compensation Table
.................................................................................................................................................................................................................................................................................................................................
This section contains compensation information for AbbVie’s NEOs for the fiscal year ended December 31, 2015.
The following table summarizes compensation awarded to, earned by and/or paid to AbbVie’s NEOs in connection with
their service to AbbVie during 2015, 2014 and 2013. Dr. Severino joined AbbVie in 2014. The section of this proxy
statement captioned ‘‘Compensation Plan Elements’’ describes in greater detail the information reported in this table.
Name and Principal Position
Richard A. Gonzalez
Chairman of the Board and
Chief Executive Officer
William J. Chase
Executive Vice President,
Chief Financial Officer
Laura J. Schumacher
Executive Vice President,
External Affairs, General Counsel
and Corporate Secretary
Carlos Alban
Executive Vice President,
Commercial Operations
Michael E. Severino
Executive Vice President,
Research & Development and
Chief Scientific Officer
Salary
($)(1)
Bonus
($)
Stock
Awards
($)(2)
Option
Awards
($)(3)(4)
$1,588,461
1,595,961
1,500,000
$0
0
0
$9,747,455
8,379,403
9,246,994
$3,259,808
2,762,525
3,616,574
950,385
923,711
790,000
951,538
957,577
900,000
888,461
844,461
710,000
918,077
503,750
0
0
0
0
0
0
0
0
0
0
1,000,000(9)
3,298,795
2,764,853
2,034,396
3,073,930
2,807,018
2,555,732
3,036,257
2,430,109
2,034,396
3,111,604
7,710,065
1,103,269
911,634
795,752
1,028,071
925,396
1,035,626
1,015,522
801,145
795,752
1,040,621
734,916
Year
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
($)(6)(7)
Non-Equity
Incentive
Plan
Compensation
($)(5)
$2,976,000
3,500,000
3,300,000
1,358,300
1,490,000
1,100,000
1,358,300
1,490,000
1,290,000
1,200,000
1,300,000
1,030,000
1,238,700
1,200,000
$2,447,316
5,044,809
41,612
739,381
1,710,772
315,787
504,413
2,465,919
944,548
696,390
2,297,655
416,924
228,599
188,911
All Other
Compensation
($)(8)
Total
($)
$791,063
723,573
471,614
$20,810,103
22,006,271
18,176,794
163,664
121,925
76,788
390,089
402,095
270,392
213,009
1,589,491
148,097
7,613,794
7,922,895
5,112,723
7,306,341
9,048,005
6,996,298
7,049,639
9,262,861
5,135,169
66,204
205,104
6,603,805
11,542,746
(1) The year-over-year difference in base salary from 2014 to 2015 is a function of the number of pay periods in each
year. There were 27 pay periods in 2014 and 26 pay periods in 2015.
(2)
In accordance with Securities and Exchange Commission (SEC) rules, the amounts in this column represent the
aggregate grant date fair value of the awards determined in accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 718. AbbVie determines the grant date fair value of stock
awards by multiplying the number of shares granted by the average of the high and low market prices of one share
of AbbVie common stock on the award grant date.
(3)
In accordance with SEC rules, the amounts in this column represent the aggregate grant date fair value of the
awards determined in accordance with FASB ASC Topic 718.
(4) These amounts were determined as of the option grant date using a Black-Scholes stock option valuation model.
These amounts are being reported solely for the purpose of comparative disclosure in accordance with the SEC
rules. There is no certainty that the amount determined using a Black-Scholes stock option valuation model would
be the value at which employee stock options would be traded for cash. The weighted-average assumptions used to
42
13NOV201221352027
2016 Proxy Statement
estimate the grant date fair value of options granted in 2015, along with the weighted-average grant date fair
value, are shown below:
EXECUTIVE COMPENSATION
Assumption
Risk-free interest rate
Average life of options (years)
Volatility
Dividend yield
Fair value per stock option
All NEOs
1.76%
6.0
24.86%
3.27%
$9.96
(5) The compensation reported in this column for 2015 was earned as a performance-based incentive bonus pursuant
to the AbbVie Performance Incentive Plan. Additional information regarding the plan can be found in the section of
this proxy statement captioned ‘‘Compensation Plan Elements.’’
(6) Except as provided below, the plan amounts shown below are reported in this column.
The amounts shown beside each NEO’s name are for 2015, 2014, and 2013, respectively, as applicable. The
amounts shown for Dr. Severino are for 2015 and 2014. Negative amounts under the AbbVie Pension Plan and the
AbbVie Supplemental Pension Plan are excluded from this column in accordance with SEC rules.
AbbVie Pension Plan
R. Gonzalez: $45,413 / $142,324 / $3,002; W. Chase: $(20,261) / $148,641 / $(43,043); L. Schumacher: $(11,019) /
$166,274 / $33,119; C. Alban: $(10,940) / $189,552 / $(42,843); and M. Severino: $15,872 / $18,610.
AbbVie Supplemental Pension Plan
R. Gonzalez: $2,230,380 / $4,794,683 / $(717,929); W. Chase: $676,623 / $1,500,464 / $336,946; L. Schumacher:
$218,282 / $2,072,222 / $783,337; C. Alban: $541,349 / $1,992,235 / $401,517; and M. Severino: $196,191 /
$170,007.
The changes in pension value result primarily from the following factors: (i) the effect of changes in the actuarial
assumptions AbbVie uses to calculate plan liability for financial reporting purposes; (ii) additional pension benefit
accrual under the Pension Plan and the Supplemental Pension Plan; and (iii) the impact of the time value of money
on the pension value.
Non-Qualified Defined Contribution Plan Earnings
The totals in this column include reportable interest credited under the AbbVie Performance Incentive Plan and the
AbbVie Supplemental Savings Plan.
R. Gonzalez: $171,523 / $107,802 / $41,612; W. Chase: $83,019 / $61,667 / $21,884; L. Schumacher: $297,150 /
$227,423 / $128,092; C. Alban: $165,981 / $115,868 / $58,250; and M. Severino: $16,536 / $294.
(7) The amounts shown in this column include the change in pension value during the applicable year, which is
attributable to changes in actuarial assumptions (primarily discount rate and mortality tables) and other factors
based on plan design (primarily pay, service and age).
The present value of a pension benefit is determined, in part, by the discount rate used for accounting purposes.
The discount rate is determined by reference to the prevailing market rate of interest. In 2015, interest rates
increased and the discount rate used for the Pension Plan and the Supplemental Pension Plan was increased to
reflect that change. An increase in the discount rate decreases the present value of participants’ pension benefits
while actual payments to be made to participants are not changed. The discount rate used for 2015 was 4.93% for
the Pension Plan and 4.83% for the Supplemental Pension Plan, while the discount rates used for both the Pension
Plan and the Supplemental Pension Plan in 2014 and 2013 were 4.45% and 5.36%, respectively. The mortality
assumptions that apply for actuarial purposes also affect pension values. During 2014, the Society of Actuaries
released new mortality tables reflecting longer life expectancies, which are now in use for Pension Plan and
Supplemental Pension Plan accounting. This increase in assumed life expectancy resulted in an increase in the
present value of participants’ pension benefits in 2014. During 2015, the Society of Actuaries released an improved
scale that adjusted the previously released 2014 scale, which AbbVie determined was appropriate to use in
determining the funded status as of December 31, 2015.
In addition to the effect of the changes in actuarial assumptions, other factors built into the plans contributed to
the change in pension value. The change in pension value numbers reflect the application of the benefit formulas
2016 Proxy Statement
13NOV201221352027
43
EXECUTIVE COMPENSATION
under the Pension Plan and the Supplemental Pension Plan, which are described in the section of this proxy
statement captioned ‘‘Pension Benefits.’’ As participants’ pay changes, the formulas yield revised pension values.
Furthermore, as a participant ages and service credit accumulates year over year (before the participant is eligible
for unreduced pension benefits), the present value of his or her pension benefits increases, even without changes
in pay or actuarial assumptions.
(8) The amounts shown below are reported in this column. The amounts shown beside each NEO’s name are for 2015,
2014, and 2013, respectively, as applicable.
Earnings for Non-Qualified Defined Benefit and Non-Qualified Defined Contribution Plans
R. Gonzalez: $120,030 / $94,209 / $73,532; W. Chase: $75,830 / $50,968 / $22,474; L. Schumacher: $280,224 /
$302,097 / $188,374; C. Alban: $142,584 / $137,370 / $79,626; and M. Severino: $437 / $0.
Each of the NEOs’ awards under the AbbVie Performance Incentive Plan is paid in cash to the NEO on a current
basis and may be deposited into a grantor trust established by the NEO, net of maximum tax withholdings. Each of
the NEOs has also established grantor trusts in connection with the AbbVie Supplemental Pension Plan and the
AbbVie Supplemental Savings Plan. These amounts include the earnings (net of the reportable interest included in
footnote (6)).
Employer Contributions to Defined Contribution Plans
R. Gonzalez: $79,423 / $79,798 / $75,000; W. Chase: $47,519 / $46,186 / $39,500; L. Schumacher: $47,577 /
$47,879 / $45,000; C. Alban: $44,423 / $42,223 / $35,500; and M. Severino: $45,904 / $25,188.
These amounts include AbbVie contributions to the AbbVie Savings Plan and the AbbVie Supplemental Savings Plan.
The Supplemental Savings Plan permits the NEOs to contribute amounts in excess of the annual limit set by the
Internal Revenue Code for employee contributions to 401(k) plans up to the excess of (i) 18 percent of their base
salary over (ii) the amount contributed to AbbVie’s tax-qualified 401(k) plan. AbbVie matches participant
contributions at the rate of 250 percent of the first 2 percent of compensation contributed to the plan. The NEOs
have these amounts paid to them in cash on a current basis and deposited into a grantor trust established by the
NEO, net of maximum tax withholdings.
Other 2015 Compensation
The totals shown in the table include the cost of providing a corporate automobile less the amount reimbursed by
the NEO: R. Gonzalez: $17,303; W. Chase: $24,001; L. Schumacher: $23,620; C. Alban: $16,003; and M. Severino:
$18,265. AbbVie imputes income to the NEO for these costs and the NEO pays taxes on that income in accordance
with tax regulations without gross-ups.
The totals shown in the table include the following costs associated with financial planning services: R. Gonzalez:
$10,000; W. Chase: $10,000; L. Schumacher: $10,000; C. Alban: $9,999; and M. Severino: $0. AbbVie imputes
income to the NEO for these costs and the NEO pays taxes on that income in accordance with tax regulations
without gross-ups.
The totals shown in the table include the following costs for non-business-related air travel: R. Gonzalez: $491,188;
W. Chase: $6,314; and L. Schumacher: $28,668. AbbVie determines the incremental cost for flights based on the
direct cost to AbbVie, including fuel costs, parking, handling and landing fees, catering, travel fees, and other
miscellaneous direct costs. AbbVie imputes income to the NEO for these costs and the NEO pays taxes on that
income in accordance with tax regulations without gross-ups.
For Mr. Gonzalez, the total includes $73,119 for costs associated with security, determined based on AbbVie’s actual
costs for such services. The security was provided on the recommendation of an independent security study.
AbbVie imputes income to Mr. Gonzalez for a portion of these costs and he pays taxes on that income in
accordance with tax regulations without gross-ups.
For Dr. Severino, the total includes $1,598 for relocation costs.
The NEOs also are eligible to participate in an executive disability benefit which is described on page 52 of this
proxy statement.
(9) As part of Dr. Severino’s hiring package, this amount was paid to replace a prior employer incentive award.
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13NOV201221352027
2016 Proxy Statement
EXECUTIVE COMPENSATION
2015 Grants of Plan-Based Awards
.................................................................................................................................................................................................................................................................................................................................
The following table summarizes the equity awards granted under the AbbVie 2013 Incentive Stock Program to
the NEOs during 2015.
Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards(1)
Target Maximum
($)
($)
Estimated
Future
Payouts
Under Equity
Incentive
Plan Awards
Target
(#)(2)(3)
165,590
56,040
52,220
51,580
52,860
All Other
Option
Awards:
Numbers of
Securities
Underlying
Options (#)
Exercise
or Base
Price of
Option
Awards
($/Sh.)
Closing
Market
Price on
Grant
Date
327,290(5)
$58.88
$59.00
110,770(5)
58.88
59.00
103,220(5)
58.88
59.00
101,960(5)
58.88
59.00
104,480(5)
58.88
59.00
Grant Date
Fair Value
of Stock
and Option
Awards
$9,747,455(4)
3,259,808(6)
3,298,795(4)
1,103,269(6)
3,073,930(4)
1,028,071(6)
3,036,257(4)
1,015,522(6)
3,111,604(4)
1,040,621(6)
Name
R. Gonzalez
W. Chase
L. Schumacher
C. Alban
M. Severino
Grant
Date
02/19/15
02/19/15
02/19/15
02/19/15
02/19/15
02/19/15
02/19/15
02/19/15
02/19/15
02/19/15
(1) During 2015, each of the NEOs participated in the AbbVie Performance Incentive Plan. The annual cash incentive
award earned by the NEO in 2015 under the plan is shown in the Summary Compensation Table in the column
captioned ‘‘Non-Equity Incentive Plan Compensation.’’ No future pay-outs will be made with respect to the 2015
awards under the plan. The plan is described in greater detail in the section of this proxy statement captioned
‘‘Compensation Discussion and Analysis—Compensation Plan Elements—Short-Term Incentives.’’
(2) These are performance-vested restricted stock awards that have a five-year term and vest upon AbbVie achieving a
minimum return on equity target, with no more than one-third of the award vesting in any one year. In 2015,
AbbVie reached its minimum return on equity target and one-third of each of the awards granted on February 19,
2015 vested on February 29, 2016. The return on equity targets are described in the section of this proxy
statement captioned ‘‘Compensation Discussion and Analysis—Compensation Plan Elements—Long-Term Incentives.’’
(3) Shares of outstanding restricted stock receive dividends at the same rate as all other stockholders. In the event of a
grantee’s death or disability, these awards are deemed fully earned. Upon a change in control, the treatment of
these awards is determined as described in the section of this proxy statement captioned ‘‘Potential Payments upon
Termination or Change in Control—Equity Awards.’’
(4) The grant date fair value of stock awards is determined by multiplying the number of shares granted by the
average of the high and low market prices of one share of AbbVie common stock on the award grant date.
(5) One-third of the shares of common stock covered by these options are exercisable after one year, two-thirds after
two years, and all after three years. The options vest in the event of the grantee’s death or disability. Upon a
change in control, the treatment of these awards is determined as described in the section of this proxy statement
captioned ‘‘Potential Payments upon Termination or Change in Control—Equity Awards.’’ Under the AbbVie 2013
Incentive Stock Program, these options have an exercise price equal to the average of the high and low market
prices (rounded up to the next even penny) of one share of AbbVie common stock on the date of grant. These
options do not contain a replacement option feature.
(6) The grant date fair value of option awards is determined as of the option grant date using a Black-Scholes stock
option valuation model. The assumptions used to determine the grant date fair value are described in footnote (4)
to the Summary Compensation Table.
2016 Proxy Statement
13NOV201221352027
45
EXECUTIVE COMPENSATION
2015 Outstanding Equity Awards at Fiscal Year End
.................................................................................................................................................................................................................................................................................................................................
The following table summarizes the outstanding AbbVie equity awards held by the NEOs at year end.
Option Awards(1)(2)
Stock Awards(1)
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option
Exercise
Price ($)
Option
Expiration
Date
Number of
Shares of
Stock That
Have Not
Vested (#)
Market
Value of
Shares of
Stock That
Have Not
Vested ($)
Name
R. Gonzalez
W. Chase
L. Schumacher
C. Alban
M. Severino
18,366
53,650
110,476
93,677
6,600
25,500
12,800
13,400
19,000
19,600
77,220
30,914
66,300
38,940
42,533
38,333
79,800
97,007
31,380
45,800
48,100
77,220
27,167
24,770
24.2082
29.2265
35.8800
51.4200
58.8800
27.2940
28.8628
28.1251
28.3122
24.2082
29.2265
35.8800
51.4200
58.8800
28.8628
28.1251
28.3122
24.2082
29.2265
35.8800
51.4200
58.8800
24.2082
29.2265
35.8800
51.4200
58.8800
54.4400
58.8800
02/17/2021
02/16/2022
02/13/2023
02/19/2024
02/18/2025
02/15/2017
02/14/2018
02/19/2019
02/18/2020
02/17/2021
02/16/2022
02/13/2023
02/19/2024
02/18/2025
02/14/2018
02/19/2019
02/18/2020
02/17/2021
02/16/2022
02/13/2023
02/19/2024
02/18/2025
02/17/2021
02/16/2022
02/13/2023
02/19/2024
02/18/2025
06/01/2024
02/18/2025
175,477(3)
187,353(3)
327,290(3)
38,610(3)
61,826(3)
110,770(3)
48,503(3)
62,760(3)
103,220(3)
38,610(3)
54,333(3)
101,960(3)
49,539(3)
104,480(3)
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares
or Other
Rights That
Have Not
Vested (#)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares
or Other
Rights That
Have Not
Vested ($)
85,907(3)
108,640(3)
165,590(3)
$5,117,480
6,471,685
9,864,196
18,900(3)
35,846(3)
56,040(3)
1,125,873
2,135,346
3,338,303
44,401(3)
$2,644,968
59,202(3)
3,526,663
23,743(3)
36,393(3)
52,220(3)
1,414,371
2,167,931
3,110,745
35,521(3)
2,115,986
18,900(3)
31,506(3)
51,580(3)
94,416(3)
52,860(3)
1,125,873
1,876,812
3,072,621
5,624,361
3,148,870
(1) Four of AbbVie’s NEOs were employed by Abbott Laboratories (Abbott) prior to AbbVie’s separation from Abbott on
January 1, 2013 (the ‘‘Separation’’). When AbbVie separated from Abbott, outstanding Abbott equity awards
generally converted into adjusted awards based on Abbott common shares and AbbVie common stock (except to
the extent prohibited by local law or with respect to certain awards described below). Such awards are subject to
substantially the same terms, vesting conditions and other restrictions that applied to the original Abbott awards
immediately before the Separation. Abbott restricted stock awards granted on December 1, 2012 converted in full
into AbbVie restricted stock awards as of the Separation, as described in note (e) to footnote (3) below.
Each Abbott stock option was converted into an adjusted Abbott stock option and an AbbVie stock option, with
adjustments to the stock option exercise prices that were intended to preserve the value of the original Abbott
46
13NOV201221352027
2016 Proxy Statement
EXECUTIVE COMPENSATION
award as measured immediately before and immediately after the Separation. Each such adjusted Abbott stock
option and AbbVie stock option is subject to substantially the same terms, vesting conditions, post-termination
exercise rules and other restrictions that applied to the original Abbott stock option immediately before the
Separation.
As a result of the Separation, the NEOs held the following Abbott equity awards as of December 31, 2015:
• W. Chase: Vested options to purchase 6,533 Abbott common shares with an exercise price of $27.03 per share.
•
•
L. Schumacher: Vested options to purchase 265,906 Abbott common shares with exercise prices ranging from
$22.39 to $27.03 per share.
C. Alban: Vested options to purchase 16,033 Abbott common shares with an exercise price of $27.03 per share.
(2) Except as noted, the stock options are fully vested.
(3) The vesting dates of AbbVie unexercisable stock options and unvested restricted stock awards outstanding at
December 31, 2015 are as follows:
Number of
Unexercised
Shares
Remaining
from
Original
Grant
175,477
187,353
327,290
38,610
61,826
110,770
48,503
62,760
103,220
38,610
54,333
101,960
Option Awards
Number of
Option
Shares
Vesting—
Date
Vested 2016
175,477—2/14
93,676—2/20
109,097—2/19
38,610—2/14
30,913—2/20
36,924—2/19
48,503—2/14
31,380—2/20
34,407—2/19
38,610—2/14
27,166—2/20
33,987—2/19
Number of
Option
Shares
Vesting—
Date
Vested 2017
Number of
Option
Shares
Vesting—
Date
Vested 2018
93,677—2/20
109,096—2/19
109,097—2/19
30,913—2/20
36,923—2/19
36,923—2/19
31,380—2/20
34,406—2/19
34,407—2/19
27,167—2/20
33,986—2/19
33,987—2/19
Name
R. Gonzalez
W. Chase
L. Schumacher
C. Alban
M. Severino
49,539
104,480
24,769—6/02
34,827—2/19
24,770—6/02
34,826—2/19
34,827—2/19
Number of
Shares of
Restricted
Stock
85,907
108,640
165,590
18,900
35,846
56,040
44,401
23,743
36,393
52,220
59,202
18,900
31,506
51,580
35,521
94,416
52,860
Stock Awards
Number of
Shares of
Restricted
Stock
Vesting—
Date
Vested 2016
Number of
Shares of
Restricted
Stock
Vesting—
Date
Vested 2017
Number of
Shares of
Restricted
Stock
Vesting—
Date
Vested 2018
(a)
(b)
(c)
(a)
(b)
(c)
(e)
(a)
(b)
(c)
(e)
(a)
(b)
(c)
(e)
(d)
(c)
(a) These are the shares of performance-vested restricted stock that remained outstanding and unvested on
December 31, 2015, from an award made on February 14, 2013. The award has a 5-year term, with no more
than one-third of the original award vesting in any one year upon AbbVie achieving a minimum return on
equity target, measured at the end of the relevant year. In 2015, AbbVie reached its minimum return on
equity target and these shares vested on February 29, 2016.
(b) These are the shares of performance-vested restricted stock that remained outstanding and unvested on
December 31, 2015, from an award made on February 20, 2014. The award has a 5-year term, with no more
than one-third of the original award vesting in any one year upon AbbVie achieving a minimum return on
equity target, measured at the end of the relevant year. In 2015, AbbVie reached its minimum return on
equity target and one-half of the unvested shares vested on February 29, 2016.
(c) These are the shares of performance-vested restricted stock that remained outstanding and unvested on
December 31, 2015, from an award made on February 19, 2015. The award has a 5-year term, with no more
than one-third of the original award vesting in any one year upon AbbVie achieving a minimum return on
2016 Proxy Statement
13NOV201221352027
47
EXECUTIVE COMPENSATION
equity target, measured at the end of the relevant year. In 2015, AbbVie reached its minimum return on
equity target and one-third of the unvested shares vested on February 29, 2016.
(d) These are the shares of performance-vested restricted stock that remained outstanding and unvested on
December 31, 2015, from an award made on June 2, 2014. The award has a 5-year term, with no more than
one-third of the original award vesting in any one year upon AbbVie achieving a minimum return on equity
target, measured at the end of the relevant year. In 2015, AbbVie reached its minimum return on equity target
and one-third of the unvested shares vested on February 29, 2016.
(e) These are the shares of performance-vested restricted stock that remained outstanding and unvested on
December 31, 2015, from an award made on December 1, 2012. These shares vested in February 2016 when
the committee determined that AbbVie reached its minimum return on equity target for the period 2013
through 2015.
2015 Option Exercises and Stock Vested
.................................................................................................................................................................................................................................................................................................................................
The following table summarizes for each NEO the number of shares acquired on the exercise of AbbVie stock
options and the number of shares acquired on the vesting of AbbVie stock awards in 2015:
Name
R. Gonzalez
W. Chase
L. Schumacher
C. Alban
M. Severino
Option Awards
Stock Awards
Number of
Shares
Acquired On
Exercise (#)
Value
Number of
Shares
Realized On Acquired On
Vesting (#)
Exercise ($)
Value
Realized On
Vesting ($)
240,477
$7,359,976
160,026
$9,683,687
0
0
0
0
0
0
0
0
40,457
56,673
43,554
47,209
2,448,099
3,429,486
2,635,573
3,159,698
Pension Benefits
.................................................................................................................................................................................................................................................................................................................................
During 2015, the NEOs participated in two AbbVie-sponsored defined benefit pension plans: the AbbVie Pension
Plan, a tax-qualified pension plan; and the AbbVie Supplemental Pension Plan, a non-qualified supplemental pension
plan. The Supplemental Pension Plan also includes a benefit feature AbbVie uses to attract senior executives who are
mid-career hires, which provides an additional benefit to such participants that is less valuable to participants who have
spent most of their career at the company. Except as provided in AbbVie’s change in control agreements, AbbVie does
not have a policy granting extra years of credited service under the plans. The change in control agreements are
described in the section of this proxy statement captioned ‘‘Potential Payments upon Termination or Change in Control.’’
The compensation considered in determining the pensions payable to the NEOs is the compensation shown in
the ‘‘Salary’’ and ‘‘Non-Equity Incentive Plan Compensation’’ columns of the Summary Compensation Table.
Pension Plan
The Pension Plan is a broad-based plan that covers most AbbVie employees in the United States, age 21 or
older, and provides participants with a life annuity benefit at normal retirement equal to A plus the greater of B or C
below.
A.
1.10% of 5-year final average earnings multiplied by years of benefit service after 2003.
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13NOV201221352027
2016 Proxy Statement
EXECUTIVE COMPENSATION
B.
1.65% of 5-year final average earnings multiplied by years of benefit service prior to 2004 (up to 20); plus
1.50% of 5-year final average earnings multiplied by years of benefit service prior to 2004 in excess of 20
(but no more than 15 additional years); less 0.50% of the lesser of 3-year final average earnings (but not
more than the social security wage base in any year) or the social security covered compensation level
multiplied by years of benefit service.
C.
1.10% of 5-year final average earnings multiplied by years of benefit service prior to 2004.
The benefit for service prior to 2004 (B or C above) is reduced for the cost of preretirement surviving spouse
benefit protection. The reduction is calculated using formulas based on age and employment status during the period in
which coverage was in effect.
Final average earnings are the average of the employee’s 60 highest-paid consecutive calendar months of
compensation (salary and non-equity incentive plan compensation). The Pension Plan covers earnings up to the limit
imposed by Internal Revenue Code Section 401(a)(17) and provides for a maximum of 35 years of benefit service.
Participants become fully vested in their pension benefit upon the completion of five years of service. The
benefit is payable on an unreduced basis at age 65. Employees hired after 2003 who terminate employment prior to age
55 with at least 10 years of service may choose to commence their benefits on an actuarially reduced basis as early as
age 55. Employees hired before 2004 who terminate employment prior to age 50 with at least 10 years of service may
choose to commence their benefits on an actuarially reduced basis as early as age 50. Employees hired before 2004 who
terminate employment prior to age 50 with fewer than 10 years of service may choose to commence their benefits on
an actuarially reduced basis as early as age 55.
The Pension Plan offers several optional forms of payment, including certain and life annuities, joint and survivor
annuities, and level income annuities. The benefit paid under any of these options is actuarially equivalent to the life
annuity benefit produced by the formula described above.
Employees who retire from AbbVie prior to their normal retirement age may receive subsidized early retirement
benefits. Employees hired after 2003 are eligible for early retirement at age 55 with 10 years of service. Employees hired
before 2004 are eligible for early retirement at age 50 with 10 years of service or age 55 if the employee’s age plus
years of benefit service total 70 or more. Mr. Gonzalez, Ms. Schumacher and Mr. Alban are eligible for early retirement
benefits under the plan.
The subsidized early retirement reductions applied to the benefit payable for service after 2003 (A above)
depend upon the participant’s age at retirement. If the participant retires after reaching age 55, the benefit is reduced
5 percent per year for each year that payments are made before age 62. If the participant retires after reaching age 50
but prior to reaching age 55, the benefit is actuarially reduced from age 65.
The early retirement reductions applied to the benefit payable for service prior to 2004 (B and C above) depend
upon age and service at retirement:
•
•
In general, the 5-year final average earnings portions of the benefit are reduced 3 percent per year for each
year that payments are made before age 62 and the 3-year final average earnings portion of the benefit is
reduced 5 percent per year for each year that payments are made before age 62.
Employees who participated in the plan before age 36 may elect ‘‘Special Retirement’’ on the last day of
any month after reaching age 55 with age plus Seniority Service points of at least 94 or ‘‘Early Special
Retirement’’ on the last day of any month after reaching age 55, provided their age plus Seniority Service
points would reach at least 94 before age 65. Seniority Service includes periods of employment prior to
attaining the minimum age required to participate in the plan. If Special Retirement or Early Special
Retirement applies, Seniority Service is used in place of benefit service in the formulas. The 5-year final
average earnings portions of the benefit in B above are reduced 12⁄3 percent for each year between ages 59
and 62 plus 21⁄2 percent for each year between ages 55 and 59. The 3-year final average earnings portion of
2016 Proxy Statement
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EXECUTIVE COMPENSATION
the benefit is reduced 5 percent per year for each year that payments are made before age 62. Benefit C is
payable on an unreduced basis at Special Retirement and is reduced 3 percent per year for each year that
payments are made before age 62, if Early Special Retirement applies.
Supplemental Pension Plan
The provisions of the Supplemental Pension Plan (which covers AbbVie employees in the United States whose
compensation exceeds certain limits under the Internal Revenue Code) are substantially the same as those of the Pension
Plan, with the following exceptions:
•
•
•
•
•
Participants’ 5-year final average earnings are calculated using the average of the 5 highest years of base
earnings and the 5 highest years of payments under AbbVie’s non-equity incentive plans.
The Pension Plan does not include amounts deferred or payments received under the AbbVie Deferred
Compensation Plan in its calculation of a participant’s final average earnings. To preserve the pension
benefits of Deferred Compensation Plan participants, the Supplemental Pension Plan includes amounts
deferred by a participant under the Deferred Compensation Plan in its calculation of final average earnings.
In addition to the benefits outlined above for the Pension Plan, the NEOs are eligible for an additional
Supplemental Pension Plan benefit equal to 0.6% of 5-year final average earnings for each year of service
for each of the first 20 years of service occurring after the participant attains age 35. The benefit is further
limited by the maximum percentage allowed under the Pension Plan under that plan’s benefit formulas (A, B
and C above). The portion of this additional benefit attributable to service before 2004 is reduced 3 percent
per year for each year that payments are made before age 60. The portion attributable to service after
2003 is reduced 5 percent per year for each year that payments are made before age 60 if the participant
is at least age 55 at early retirement. If the participant is under age 55 at retirement, the portion
attributable to service after 2003 is actuarially reduced from age 65.
The Supplemental Pension Plan provides early retirement benefits similar to those provided under the
Pension Plan. The benefits provided to NEOs under the Supplemental Pension Plan are not, however,
reduced for the period between age 60 and age 62, unless the benefit is being actuarially reduced from age
65. Mr. Gonzalez, Ms. Schumacher and Mr. Alban are eligible for early retirement benefits under the plan.
Vested benefits accrued under the Supplemental Pension Plan may be funded through a grantor trust
established by the NEO. Consistent with the distribution requirements of Internal Revenue Code
Section 409A and its regulations, those NEOs who became officers prior to 2009 may have the entire
amount of their vested plan benefits funded through a grantor trust. Any NEO who became an officer after
2008 and before 2015 may have only the vested benefits that accrue following the calendar year in which
he or she is first elected as an officer funded through a grantor trust. Vested benefits accrued through
December 31, 2008, to the extent not previously funded, were distributed to the participants’ individual
trusts and included in the participants’ income.
Benefits payable under the Supplemental Pension Plan are offset by the benefits payable from the Pension Plan,
calculated as if benefits under the plans commenced at the same time. The amounts paid to an NEO’s Supplemental
Pension Plan grantor trust to fund plan benefits are actuarially determined. The plan is designed to result in AbbVie
paying the NEO’s Supplemental Pension Plan benefits to the extent assets held in his or her trust are insufficient.
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EXECUTIVE COMPENSATION
Pension Benefits Table
Name
R. Gonzalez
W. Chase
L. Schumacher
C. Alban
M. Severino
Plan Name
AbbVie Pension Plan
AbbVie Supplemental Pension Plan
AbbVie Pension Plan
AbbVie Supplemental Pension Plan
AbbVie Pension Plan
AbbVie Supplemental Pension Plan
AbbVie Pension Plan
AbbVie Supplemental Pension Plan
AbbVie Pension Plan
AbbVie Supplemental Pension Plan
Number of
Present
Value of
Years Accumulated
Benefit
($)(1)
Credited
Service (#)
Payments
During Last
Fiscal Year
($)
35
35
27
27
25
25
29
29
2
2
$501,654
12,666,122
$0
2,782,444(2)
452,580
3,471,108
0
399,791(2)
628,004
7,590,962
0
587,336(2)
728,028
6,018,755
0
871,300(2)
34,482
366,198
0
0
(1) AbbVie calculates these present values using: (i) a discount rate of 4.93% for the Pension Plan and a discount rate
of 4.83% for the Supplemental Pension Plan, the same discount rates it uses for Financial Accounting Standards
Board (FASB) ASC Topic 715 calculations for financial reporting purposes; and (ii) each plan’s unreduced retirement
age, which is age 62 under the AbbVie Pension Plan and age 60 under the AbbVie Supplemental Pension Plan for
those participants who are eligible for early retirement benefits and which is age 65 under both plans for other
participants. The present values shown in the table reflect postretirement mortality, based on the FASB ASC Topic
715 assumption (the RP2014 Healthy Annuitant table with MP2015 mortality improvement scale), but do not
include a factor for preretirement termination, mortality, or disability.
(2) During 2015, the amounts shown, less applicable tax withholdings, were distributed and deposited into the
individual grantor trusts established by the NEOs and included in the NEOs’ income. Consistent with the distribution
requirements of Internal Revenue Code Section 409A and its regulations, vested Supplemental Pension Plan
benefits, to the extent not previously funded, are distributed to the participants’ individual grantor trusts and
included in their income. Amounts held in an NEO’s individual trust are expected to offset AbbVie’s obligations to
him or her under the plan. Grantor trusts are described in greater detail in the section of this proxy statement
captioned ‘‘Compensation Plan Elements—Benefits—Retirement Benefits.’’
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EXECUTIVE COMPENSATION
Nonqualified Deferred Compensation
.................................................................................................................................................................................................................................................................................................................................
The following table summarizes Mr. Chase’s and Ms. Schumacher’s non-qualified deferred compensation under
the AbbVie Deferred Compensation Plan. No additional contributions have been made to their accounts under the plan
since such time as Mr. Chase and Ms. Schumacher, respectively, became officers and ceased to be eligible to contribute
to the plan. None of the other NEOs has any non-qualified deferred compensation under the plan.
Name
Plan Name
Executive
contributions
in last FY
($)
Registrant
contributions
in last FY
($)
Aggregate
Aggregate
earnings withdrawals/
distributions
in last FY
($)
($)(3)
W. Chase
L. Schumacher
Deferred Compensation Plan(1)(2)
Deferred Compensation Plan(1)(2)
$0
0
$0
0
$758
233
$0
0
Aggregate
balance at
last FYE
($)(4)
$71,939
383,843
(1) Mr. Chase’s and Ms. Schumacher’s contributions to the Deferred Compensation Plan ceased in 2007 and 2002,
respectively.
(2) The plan permits participants to defer up to 75% of their base salary and up to 75% of their annual cash incentives
and credits a participant’s account with an amount equal to the employer matching contributions that otherwise
would have been made for the participant under AbbVie’s tax-qualified defined contribution plan. Participants may
direct the investment of their deferral accounts into one or more of several funds chosen by the administrator, and
the deferral account is credited with investment returns based on the performance of the fund(s) selected. During
2015, the weighted average rate of return credited to the accounts was 1.1% for Mr. Chase and 0.1% for
Ms. Schumacher.
The plan provides for cash distributions in either a lump sum or installments after separation from service and
permits in-service withdrawals in accordance with specific procedures. Participants make distribution elections each
year that apply to the deferrals to be made in the following calendar year, in accordance with the requirements of
Internal Revenue Code Section 409A. Participants may request withdrawals due to financial hardship; if a hardship
withdrawal is approved, it is limited to the amount needed to address the hardship.
(3) The amounts reported in this column are not included in the Summary Compensation Table of this proxy
statement.
(4) The amounts reported in this column have not been previously reported as compensation in AbbVie’s Summary
Compensation Tables because they relate to contributions made before the applicable individual became an NEO.
Potential Payments upon Termination or Change in Control
.................................................................................................................................................................................................................................................................................................................................
Potential Payments upon Termination—Generally
AbbVie does not have employment agreements with its NEOs.
The following summarizes the payments that the NEOs would have received if their employment had terminated
on December 31, 2015. Earnings would have continued to be paid for the NEO’s Performance Incentive Plan and
Supplemental Savings Plan grantor trusts until the trust assets were fully distributed. The amount of these payments
would depend on the period over which the trust assets were distributed and the trust earnings and fees. If the trust
assets were distributed over a 10-year period and based on current earnings, the NEOs would receive the following
average annual payments over such 10-year period: Mr. Gonzalez, $942,637; Mr. Chase, $615,169; Ms. Schumacher,
$543,691; and Mr. Alban, $461,264. In addition, the following one-time deposits would have been made under the
AbbVie Supplemental Pension Plan for each of the following NEOs, respectively: Mr. Gonzalez, $1,442,189; Mr. Chase,
$556,373; Ms. Schumacher, $786,268; and Mr. Alban, $1,191,408. As of December 31, 2015, Mr. Gonzalez,
Ms. Schumacher and Mr. Alban were eligible to retire, and therefore were eligible to receive the pension benefits
described above.
If the termination of employment had been due to disability, then the NEOs also would have received, in
addition to AbbVie’s standard disability benefits, a monthly long-term disability benefit in the amount of $148,800 for
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EXECUTIVE COMPENSATION
Mr. Gonzalez; $67,915 for Mr. Chase; $67,915 for Ms. Schumacher; $60,000 for Mr. Alban; and $61,935 for Dr. Severino.
This long-term disability benefit would continue for up to 18 months following termination of employment. It ends if the
NEO retires, recovers, dies or ceases to meet eligibility criteria.
If the NEO’s employment had terminated due to death or disability, his or her unvested stock options and
restricted stock or unit awards would have vested on December 31, 2015 with values as set forth below in the
subsection of this proxy statement captioned ‘‘Equity Awards.’’
Potential Payments upon Change in Control
AbbVie has entered into change in control agreements with its NEOs. Each change in control agreement
continues in effect until December 31, 2016, and can be renewed for successive two-year terms upon notice prior to the
expiration date. If notice of non-renewal is given, the agreement will expire on the later of the scheduled expiration date
and the one-year anniversary of the date of such notice. If no notice is given, the agreement will expire on the one-year
anniversary of the scheduled expiration date. Each agreement also automatically extends for two years following any
change in control (see below) that occurs while the agreement is in effect.
The agreements provide that if the employee is terminated other than for cause or permanent disability or if
the employee elects to terminate employment for good reason (see below) within two years following a change in
control, he or she is entitled to receive a lump sum payment equal to three times his or her annual salary and annual
incentive (‘‘bonus’’) award (assuming for this purpose that all target performance goals have been achieved or, if higher,
based on the average bonus for the last three years), plus any unpaid bonus owing for any completed performance
period and the pro rata bonus for any current bonus period (based on the highest of the bonus assuming achievement
of target performance, the average bonus for the past three years or, in the case of the unpaid bonus for any completed
performance period, the actual bonus earned). If the employee is terminated other than for cause or permanent
disability or if the employee elects to terminate employment for good reason during a potential change in control (see
below), he or she is entitled to receive a lump sum payment of the annual salary and bonus payments described above,
except that the amount of the bonus to which the employee is entitled will be based on the actual achievement of the
applicable performance goals. If the potential change in control becomes a ‘‘change in control event’’ (within the
meaning of Internal Revenue Code Section 409A), the employee will be entitled to receive the difference between the
bonus amounts the officer received upon termination during the potential change in control and the bonus amounts that
would have been received had such amounts instead been based on the higher of the employee’s target bonus or the
average bonus paid to the employee in the preceding three years.
Bonus payments include payments made under the Performance Incentive Plan. The employee also will receive
up to two years of additional employee benefits (including welfare benefits, outplacement services and tax and financial
counseling) and the value of three more years of pension accruals. If change in control-related payments and benefits
become subject to the excise tax imposed under Internal Revenue Code Section 4999, payments under the agreement
will be reduced to prevent application of the excise tax if such a reduction would leave the employee in a better
after-tax position than if the payments were not reduced and the tax applied. The agreements also limit the conduct for
which awards under AbbVie’s incentive stock programs can be terminated and generally permit options to remain
exercisable for the remainder of their term. The compensation committee’s independent compensation consultant has
confirmed that the level of payments provided under the agreements is consistent with current market practice.
For purposes of the agreements, the term ‘‘change in control’’ includes the following events: any person
becoming the beneficial owner of AbbVie securities representing 20 percent or more of the outstanding voting power
(not including an acquisition directly from AbbVie and its affiliates); a change in the majority of the members of the
board of directors whose appointment was approved by a vote of at least two-thirds of the incumbent directors; and the
consummation of certain mergers or similar corporate transactions involving AbbVie. A ‘‘potential change in control’’
under the agreements includes, among other things, AbbVie’s entry into an agreement that would result in a change in
control. Finally, the term ‘‘good reason’’ includes: a significant adverse change in the employee’s position, duties, or
authority; the company’s failure to pay the employee’s compensation or a reduction in the employee’s base pay or
benefits; or the relocation of the company’s principal executive offices to a location that is more than 35 miles from the
location of the offices at the time of the change in control.
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EXECUTIVE COMPENSATION
If a change in control had occurred on December 31, 2015, immediately followed by one of the covered
circumstances described above, Mr. Gonzalez, Mr. Chase, Ms. Schumacher, Mr. Alban, and Dr. Severino would have been
entitled to receive the following payments and benefits under the change in control agreements:
• Mr. Gonzalez: cash termination payments—$14,100,000; additional Supplemental Pension Plan benefits—
$3,648,753; welfare and fringe benefits—$75,783.
• Mr. Chase: cash termination payments—$6,948,900; additional Supplemental Pension Plan benefits—
$783,375; welfare and fringe benefits—$76,518.
• Ms. Schumacher: cash termination payments—$6,948,900; additional Supplemental Pension Plan benefits—
$3,471,334; welfare and fringe benefits—$61,885.
• Mr. Alban: cash termination payments—$6,010,358; additional Supplemental Pension Plan benefits—
$3,726,232; welfare and fringe benefits—$76,323.
•
Dr. Severino: cash termination payments—$6,536,100; welfare and fringe benefits—$74,560.
The amounts shown for Mr. Alban’s cash termination payments and additional supplemental pension plan
benefits reflect reductions of $289,642 and $179,569, respectively, which would have applied under cutback provisions in
the agreement as described above.
Equity Awards
The AbbVie 2013 Incentive Stock Program was approved by AbbVie’s stockholders and covers approximately
7,000 participants, including a broad group of management and professional staff.
The AbbVie 2013 Incentive Stock Program provides that any unvested stock options and restricted stock or unit
awards granted in or after February 2013 may be assumed, converted or replaced on an equivalent basis by the surviving
company upon a change in control. If the surviving company does not do so, the vesting of the awards is accelerated. If
the surviving company does assume, convert or replace the awards on an equivalent basis, then accelerated vesting of
the awards is limited to circumstances in which, during the period from six months before through two years after a
change in control, the grantee’s employment is terminated without cause or the grantee resigns for good reason. The
terms ‘‘cause’’ and ‘‘good reason’’ have the same definitions as in the change in control agreements.
If a change in control had occurred on December 31, 2015 and the surviving company did not assume, convert
or replace any of the awards granted after January 2013, then the unvested equity awards of the NEOs would have
vested as follows:
• Mr. Gonzalez would have vested in (i) 690,120 unvested AbbVie stock options with a value of $5,682,068,
and (ii) 360,137 shares of AbbVie restricted stock with a value of $21,334,516.
• Mr. Chase would have vested in (i) 211,206 unvested AbbVie stock options with a value of $1,425,287, and
(ii) 155,187 shares of AbbVie restricted stock with a value of $9,193,278.
• Ms. Schumacher would have vested in (i) 214,483 unvested AbbVie stock options with a value of
$1,660,974, and (ii) 171,558 shares of AbbVie restricted stock with a value of $10,163,096.
• Mr. Alban would have vested in (i) 194,903 unvested AbbVie stock options with a value of $1,363,519, and
(ii) 137,508 shares of AbbVie restricted stock with a value of $8,145,974.
•
Dr. Severino would have vested in (i) 154,019 unvested AbbVie stock options with a value of $275,400, and
(ii) 147,276 shares of AbbVie restricted stock with a value of $8,724,630.
The value of stock options shown is based on the excess of the closing price of one share of common stock on
December 31, 2015 over the exercise price of such options, multiplied by the number of unvested stock options held by
the NEO. The value of restricted stock shown is determined by multiplying the number of restricted shares that would
vest as of December 31, 2015 and the closing price of one share of common stock on December 31, 2015.
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RATIFICATION OF ERNST & YOUNG LLP AS ABBVIE’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(ITEM 2)
1MAR201604005662
The audit committee of the board of directors is directly responsible for the appointment, compensation,
retention and oversight of the independent registered public accounting firm retained to audit the company’s financial
statements. On October 8, 2015, the audit committee appointed Ernst & Young LLP to perform independent audit
services for the fiscal year ending December 31, 2016. Ernst & Young LLP has served as our independent registered
public accounting firm since 2013. In conjunction with the periodic mandated rotation of the audit firm’s lead
engagement partner, the chair of the audit committee would be involved in the selection of a new lead engagement
partner. Further, the audit committee will periodically consider whether there should be a regular rotation of the
independent registered public accounting firm.
Although the audit committee has sole authority to appoint the independent registered public accounting firm, it
would like to know the opinion of the stockholders regarding its appointment of Ernst & Young LLP for 2016. For this
reason, stockholders are being asked to ratify this appointment. If the stockholders do not ratify the appointment of
Ernst & Young LLP for 2016, the audit committee will take that fact into consideration, but may, nevertheless, continue
to retain Ernst & Young LLP. The audit committee and the board believe that the continued retention of Ernst &
Young LLP to serve as the company’s independent registered public accounting firm is in the best interests of the
company and its stockholders.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will be given the
opportunity to make a statement if they desire to do so. They will also be available to respond to appropriate questions.
The board of directors recommends that you vote FOR ratification of the appointment of Ernst & Young LLP as
AbbVie’s independent registered public accounting firm for 2016.
2016 Proxy Statement
13NOV201221352027
55
AUDIT INFORMATION
1MAR201604001613
Audit Fees and Non-Audit Fees
.................................................................................................................................................................................................................................................................................................................................
The following table presents fees for professional audit services rendered to AbbVie by Ernst & Young LLP for
the years ended December 31, 2015 and December 31, 2014, and fees for other services rendered to AbbVie by Ernst &
Young LLP for that period.
Audit fees:(1)
Audit related fees:(2)
Tax fees:(3)
All other fees:(4)
Total
2015
(millions)
2014
(millions)
$11.6
$10.0
0.3
6.9
0.5
0.2
5.1
0.5
$19.3
$15.8
(1) Ernst & Young LLP billed or will bill AbbVie for professional services rendered for the audit of AbbVie’s annual
financial statements, the audits of AbbVie’s internal control over financial reporting, statutory and subsidiary audits,
the review of documents filed with the Securities and Exchange Commission, comfort letters, consents and certain
accounting consultations in connection with the audits.
(2) Audit related fees include: agreed upon procedures and audits of certain employee benefit plan financial
statements.
(3) Tax fees consist principally of professional services for corporate tax compliance, expatriate tax compliance and tax
advisory services.
(4) Other fees represent Independent Review Organization services.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent
Registered Public Accounting Firm
.................................................................................................................................................................................................................................................................................................................................
The audit committee has established policies and procedures to pre-approve all audit and permissible non-audit
services performed by the independent registered public accounting firm and its related affiliates.
Prior to engagement of the independent registered public accounting firm for the next year’s audit, management
will submit a schedule of all proposed services expected to be rendered during that year for each of four categories of
services to the audit committee for approval.
Prior to engagement, the audit committee pre-approves these services by category of service. The fees are
budgeted and the audit committee requires the independent registered public accounting firm and management to
report actual fees versus the budget periodically by category of service. During the year, circumstances may arise when it
may become necessary to engage the independent registered public accounting firm for additional services not
contemplated in the original pre-approval. In those instances, the audit committee requires specific pre-approval before
engaging the independent registered public accounting firm.
The audit committee may delegate pre-approval authority to one or more of its members. The member to
whom such authority is delegated must report any pre-approval decisions to the audit committee at its next scheduled
meeting.
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AUDIT INFORMATION
Audit Committee Report
.................................................................................................................................................................................................................................................................................................................................
Management is responsible for the preparation and integrity of AbbVie’s consolidated financial statements. The
independent registered public accounting firm is responsible for performing an audit of the consolidated financial
statements and expressing an opinion on the conformity of those financial statements with accounting principles
generally accepted in the United States of America. The audit committee reviews these processes on behalf of the board
of directors. In this context, the audit committee has reviewed and discussed the audited financial statements contained
in the 2015 Annual Report on Form 10-K with AbbVie’s management and its independent registered public accounting
firm.
The audit committee has discussed with the independent registered public accounting firm the matters required
to be discussed pursuant to Auditing Standards Section No. 16, Communication with Audit Committees, as adopted by
the Public Company Accounting Oversight Board.
The audit committee has received the written disclosures and the letter from the independent registered public
accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the
independent registered public accounting firm’s communications with the audit committee concerning independence, and
has discussed with the independent registered public accounting firm the firm’s independence. The audit committee has
also considered whether the provision of non-audit services is compatible with maintaining the independence of the
independent registered public accounting firm.
Based on the review and discussions referred to above, the audit committee recommended to the board of
directors that the audited financial statements be included in AbbVie’s Annual Report on Form 10-K for the year ended
December 31, 2015 filed with the Securities and Exchange Commission.
Audit Committee
R. Austin, Chair, W. Burnside, E. Rapp, and F. Waddell
2016 Proxy Statement
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57
SAY ON PAY—ADVISORY VOTE ON THE APPROVAL OF
EXECUTIVE COMPENSATION (ITEM 3)
1MAR201604005950
Stockholders are being asked to approve the compensation of AbbVie’s named executive officers, as disclosed
under Securities and Exchange Commission rules, including the Compensation Discussion and Analysis, the compensation
tables and related material included in this proxy statement.
The independent compensation committee of the board of directors, with the counsel of its independent
compensation consultant, has thoroughly examined AbbVie’s programs, the company’s performance related to our
industry and peer group, and market factors. The committee has determined that the specific pay decisions for the
named executive officers are appropriate given the company’s performance, the executives’ contributions, and our
stockholders’ interests.
While this vote is advisory and non-binding, the board of directors and the compensation committee value the
opinion of the stockholders and will review the voting results and take them into account when future compensation
decisions are made.
Accordingly, the board of directors recommends that you vote FOR the approval of the named executive
officers’ compensation.
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MANAGEMENT PROPOSAL REGARDING THE ANNUAL
ELECTION OF DIRECTORS (cid:4)ITEM 4(cid:5)
1MAR201610263584
Currently, AbbVie’s Amended and Restated Certificate of Incorporation (the ‘‘Certificate of Incorporation’’)
provides for a classified board of directors divided into three classes of directors, with each class elected for three-year
terms.
After considering the advantages and disadvantages of declassification, including through an open dialogue with
our stockholders, the board has determined it is in the best interests of the company and its stockholders to amend the
company’s Certificate of Incorporation and the Amended and Restated By-Laws (the ‘‘By-Laws’’) to declassify the board.
This will result in a fully declassified board by the 2019 Annual Meeting.
The proposed amendment to the Certificate of Incorporation would eliminate the classification of the board over
a three-year period beginning at the 2017 Annual Meeting with directors elected to a one-year term following the
expiration of the directors’ existing terms and provide for the annual election of all directors beginning at the 2019
Annual Meeting. The proposed amendment to the Certificate of Incorporation would become effective upon the filing of
a Certificate of Amendment with the Secretary of State of the State of Delaware, which the company would file promptly
following the 2016 Annual Meeting if our stockholders approve the amendment. The proposed amendment would not
change the present number of directors or the board’s authority to change that number and to fill any vacancies or
newly created directorships.
Delaware law provides, unless otherwise addressed in the certificate of incorporation, that members of a board
that is classified may be removed only for cause. The proposed amendment would provide that once the AbbVie board
is fully declassified as of the 2019 Annual Meeting, directors may be removed with or without cause.
The proposed Certificate of Amendment to the Certificate of Incorporation is attached to this proxy statement as
Appendix A. The affirmative vote of the holders of 80 percent of the outstanding shares of stock entitled to vote
generally in the election of directors on the Record Date is required to approve this proposal pursuant to the Certificate
of Incorporation. If our stockholders approve the proposed amendment to the Certificate of Incorporation, the board will
make certain conforming changes to the company’s By-Laws.
The board of directors recommends that you vote FOR the management proposal to amend the Certificate of
Incorporation to declassify the board of directors for annual elections.
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APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE
GOALS UNDER THE ABBVIE PERFORMANCE INCENTIVE PLAN
(cid:4)ITEM 5(cid:5)
1MAR201610263718
We ask that stockholders approve the material terms of the performance goals under the AbbVie Performance
Incentive Plan to satisfy the stockholder approval component of the performance-based compensation requirements
under Section 162(m) of the Internal Revenue Code.
The Performance Incentive Plan (PIP) provides for awards to designated AbbVie employees based on the
attainment of specified performance goals. The main purposes of the PIP are to facilitate the attraction, motivation and
retention of key management employees and to encourage them to achieve and exceed the company’s established
financial, operational and strategic goals by giving them the opportunity to earn annual incentive awards based on
company and individual performance against these goals.
Section 162(m) of the Internal Revenue Code limits the amount of compensation that may be deducted by the
company in any tax year with respect to the company’s most highly-paid executives. However, certain performance-based
compensation that has been approved by stockholders is not subject to this deduction limit. The PIP is designed to
provide for this type of performance-based compensation and to permit the company to claim the corresponding tax
deduction.
At the annual meeting, stockholders are being asked to approve the material terms of the performance goals for
the PIP so awards paid under the plan will be tax-deductible as performance-based compensation under Section 162(m)
of the Internal Revenue Code. If the stockholders do not approve the material terms of the performance goals, awards
paid to our executive officers under the PIP for the 2016 fiscal year may not be deductible. In such case, however, the
compensation committee will consider other alternatives for the overall compensation package being provided to our
executive officers.
Description of the Performance Incentive Plan
Following is a summary of the material features of the PIP. The summary is qualified by reference to the text of
the plan, which is attached as Exhibit 10.4 to our 2015 Annual Report on Form 10-K.
Plan Administration and Participants
The PIP is administered by the compensation committee of the board of directors. The committee has sole
responsibility for identifying the participants, establishing performance objectives, setting award targets and determining
award amounts. The committee has designated AbbVie’s executive officers as PIP participants for 2016.
Performance Goals
All awards payable under the PIP are based on the company’s consolidated net earnings. If the company does
not have consolidated net earnings, no awards are payable under the plan. The amount of a participant’s award is
determined as follows: the PIP plan document sets the base award allocation for the Chief Executive Officer at .0015 of
the consolidated net earnings of the company for the fiscal year, the base award allocation for the Chief Operating
Officer at .0010 of consolidated net earnings, and the base award allocation for any other participant at .00075 of
consolidated net earnings. After the fiscal year ends and consolidated net earnings are determined, the compensation
committee assesses each participant’s contributions and determines the actual awards by adjusting each individual’s base
award allocation based on his or her performance against company financial, operational and strategic goals and
individual goals during the year. The compensation committee has, and frequently exercises, negative discretion to reduce
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the awards payable to the PIP participants. The PIP does not permit the committee to award amounts that exceed the
base award allocations set forth in the plan document.
Amounts that may be paid under the PIP in the future are not determinable. The Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table set forth in this proxy statement shows the awards paid to
the NEOs under the PIP in 2013 through 2015.
Plan Modification or Termination
The AbbVie board of directors may modify, amend, suspend or terminate the PIP. However, no modification may,
without the consent of the participant, reduce the right of a participant to a payment or distribution to which the
participant is entitled by reason of an outstanding award allocation.
The board of directors recommends that you vote FOR the approval of the material terms of the performance
goals under the AbbVie Performance Incentive Plan.
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STOCKHOLDER PROPOSALS
1MAR201610263842
Two stockholder proposals will be voted upon at the Annual Meeting if properly presented by or on behalf of
the proponent. The address of each of the proponents is available upon request. The proposed resolutions and the
statements made in support thereof, as well as the Board of Directors’ statements in opposition to these proposals, are
presented on the following pages. The proposal may contain assertions about AbbVie or other statements that we
believe are incorrect.
The board of directors recommends that you vote AGAINST the proposals for the reasons set forth following
the proposals.
Stockholder Proposal on Drug Disposal Report (Item 6 on Proxy Card)
.................................................................................................................................................................................................................................................................................................................................
As You Sow, on behalf of The Gun Denhart Living Trust and Samajak LP, and co-filers Congregation of the Divine
Providence, Providence Trust, and Sisters of Charity of the Incarnate Word, have notified AbbVie that they intend to
present the following proposal at the Annual Meeting and that they collectively own 484 AbbVie shares.
WHEREAS:
Lack of free, convenient programs for proper disposal of unneeded or expired consumer
prescription drugs and accessories contributes to water pollution, illicit drug use, drug addiction, and threats to sanitation
workers.
Consumers lacking drug disposal programs in their communities often flush old drugs down the drain or toilet,
contributing to water pollution. Numerous studies have found detectable levels of pharmaceuticals in surface and
groundwater drinking water sources. Water treatment plants are not equipped to remove such medicines. The U.S.
Environmental Protection Agency advises consumers not to flush prescription drugs, but to return medications to a
disposal or take back program.
In 2013, overdoses from prescription pain medications killed more than 16,000 Americans. President Obama says
most young people who begin misusing prescription drugs get them from the medicine cabinet. Lack of convenient
disposal programs for prescription drugs has been linked to poisoning of children and pets; misuse by teenagers and
adults; and senior accidentally taking the wrong medicine. About 3 billion needles are used in U.S. homes annually to
deliver medication; their improper disposal leads to needles washing up on beaches and threats to sanitation workers
handling waste with used needles.
Most U.S. communities lack free, convenient, on-going collection programs that could help alleviate these critical
problems. The Drug Enforcement Administration has partnered with state and local law enforcement agencies to hold
periodic National Take-Back Days for medicines, collecting and disposing of more than 5.5 million pounds of medications
in just ten events. But far more convenient and ongoing collection services are needed. The National Drug Control
Strategy report calls for establishment of long-term, sustainable disposal programs in communities.
The concept of producer responsibility calls for company accountability for financing take back of unneeded or
expired medications and accessories by the companies that have placed them on the market. Several states have enacted
regulations requiring manufacturers of paint, pesticides, and electronics to develop programs for take back and proper
recycling or disposal. The province of Ontario, Canada enacted a regulation in 2012 assigning responsibility for end-of-life
management of pharmaceutical waste to manufacturers. Many European countries have industry-funded drug take back
programs. While the company has published detailed social responsibility statements on issues like energy and water, it
has not issued a position on this escalating policy area.
Resolved:
Shareowners of AbbVie request that the board of directors issue a report, at reasonable expense
and excluding proprietary information, reviewing the company’s existing policies for safe disposition by users of
prescription drugs to prevent water pollution, and setting forth policy options for a proactive response, including
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determining whether the company should endorse partial or full industry responsibility for take back programs by
providing funding or resources for such programs.
Supporting Statement:
Management may also consider other harms besides water pollution in evaluating take back programs, and
whether, in addition to addressing disposition of prescription drugs, such programs should encompass accessories such as
used needles and syringes.
Board of Directors Statement in Opposition to the Stockholder Proposal on Drug Disposal Report (Item 6
on Proxy Card)
.................................................................................................................................................................................................................................................................................................................................
The Board of Directors recommends that stockholders vote AGAINST this proposal.
At AbbVie, we are committed to developing the highest quality products and ensuring the safety of the patients
who use them. We believe that addressing the world’s health challenges requires a comprehensive and responsible
approach, and we dedicate significant resources to improving healthcare and communities. The issue of secure disposal
of hazardous medical waste is part of this commitment. Accordingly, we have proactively taken a number of steps to
address this concern in a socially responsible manner.
AbbVie has a comprehensive collection, containment, return, and waste treatment option for patients using
Humira, our flagship product. To mitigate potential risk posed by injection needles, we developed the HUMIRA Sharps
Mail-Back Program in 2007. This service provides patients with a safe and environmentally-friendly way to dispose of
Humira needles following an injection and includes collection containers and mail-back boxes with pre-paid postage, to
each individual who enrolls in AbbVie’s program. We believe our proactive approach has created a safer environment for
patients and their communities.
AbbVie believes that effectively addressing industry-wide drug disposal policies requires the collective effort of
numerous interested parties, including pharmacies, law enforcement officials, pharmaceutical drug distributors,
institutional healthcare providers, and others. In September 2014, the Drug Enforcement Administration published final
rules concerning secure drug disposal that encouraged partnerships among retail pharmacies, hospitals, clinics, drug
manufacturers, drug distributors and reverse distributors, other community organizations and law enforcement to provide
methods of safe drug disposal in the communities they serve. AbbVie supports collective effort on this issue.
AbbVie and other companies have also been actively engaged with the Pharmaceutical Research and
Manufacturers of America (‘‘PhRMA’’) and Biotechnology Industry Organization (‘‘BIO’’) in working to develop an effective
solution to the secure drug disposal issue. In February 2015, PhRMA created a working group with the goal of effecting
positive change in the area of secure drug disposal.
The proponent requests that our Board of Directors issue a report to ‘‘set forth policy options for a proactive
response,’’ among other things. We are one of many participants in a broader industry-wide discussion that continues to
develop. Therefore, neither AbbVie, nor any individual company, is best-suited to set forth policy options on this issue.
Further, preparation of a comprehensive report on the issue of secure drug disposal, as proposed, would require
significant resources and expenditures, which would be better addressed in partnership with numerous interested parties
as PhRMA has undertaken. We believe that a report requested by the proposal would neither be an effective use of
company resources, nor in the best interests of our stockholders.
The Board of Directors recommends that you vote AGAINST the proposal.
Stockholder Proposal on Lobbying Report (Item 7 on Proxy Card)
.................................................................................................................................................................................................................................................................................................................................
Zevin Asset Management on behalf of Janet Axelrod has notified AbbVie that it intends to present the following
proposal at the Annual Meeting and that the proponent owns 1,800 AbbVie shares.
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STOCKHOLDER PROPOSALS
Whereas, we believe in full disclosure of AbbVie’s direct and indirect lobbying activities and expenditures to
assess whether AbbVie’s lobbying is consistent with AbbVie’s expressed goals and in the best interests of stockholders.
Resolved, the stockholders of AbbVie request the preparation of a report, updated annually, disclosing:
1.
2.
3.
4.
Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying
communications.
Payments by AbbVie used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each
case including the amount of the payment and the recipient.
AbbVie’s membership in and payments to any tax-exempt organization that writes and endorses model
legislation.
Description of management’s decision making process and the Board’s oversight for making payments described
in section 2 above.
For purposes of this proposal, a ‘‘grassroots lobbying communication’’ is a communication directed to the
general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and
(c) encourages the recipient of the communication to take action with respect to the legislation or regulation. ‘‘Indirect
lobbying’’ is lobbying engaged in by a trade association or other organization of which AbbVie is a member.
Both ‘‘direct and indirect lobbying’’ and ‘‘grassroots lobbying communications’’ include efforts at the local, state
and federal levels.
The report shall be presented to the Audit Committee or other relevant oversight committees and posted on
AbbVie’s website.
Supporting Statement
As stockholders, we encourage transparency and accountability in the use of corporate funds to influence
legislation and regulation. AbbVie spent $8.08 million in 2013 and 2014 on direct federal lobbying activities
(opensecrets.org). This figure does not include lobbying expenditures to influence legislation in states, where AbbVie also
lobbies but disclosure is uneven or absent. For example, AbbVie spent $615,908 on lobbying in California in 2013 and
2014. AbbVie’s lobbying on tax inversions has attracted media scrutiny (‘‘Corporate Tax Dodgers Might Make Congress
Actually Do Something,’’ Fortune, July 22, 2014).
AbbVie is a member of the Chamber of Commerce, which spent over $124 million lobbying in 2014 and has
spent over $1 billion on lobbying since 1998. AbbVie is also a member of the Pharmaceutical Research and
Manufacturers of America and the Business Roundtable, which together spent over $61 million on lobbying in 2013 and
2014. AbbVie does not disclose its payments to trade associations or the amounts used for lobbying.
Transparent reporting would reveal whether company assets are being used for objectives contrary to AbbVie’s
long-term interests. For example, AbbVie supports smoking cessation, yet the Chamber has worked to block global
antismoking laws (‘‘U.S. Chamber Works Globally to Fight Antismoking Measures,’’ New York Times, June 30, 2015).
AbbVie also believes it has an obligation to reduce its greenhouse gas emissions, yet the Chamber is aggressively
attacking the EPA on its new Clear Power Plan to address climate change (‘‘Move to Fight Obama’s Climate Plan Started
Early,’’ New York Times, Aug. 3, 2015).
Board of Directors Statement in Opposition to the Stockholder Proposal on Lobbying Report (Item 7 on
Proxy Card)
.................................................................................................................................................................................................................................................................................................................................
The Board of Directors recommends that stockholders vote AGAINST this proposal. This proposal is unnecessary,
because AbbVie already makes extensive disclosures regarding our lobbying and political activities as required by law and
we voluntarily disclose additional related information on our website, as outlined below. AbbVie has already
demonstrated transparency with respect to lobbying activities and strong risk mitigation procedures governing such
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activities. The preparation and maintenance of an additional report, as proposed, is neither a good use of resources, nor
would it increase stockholder value.
The Board, through its Public Policy Committee, exercises oversight of AbbVie’s political and lobbying activities.
•
The Board of Directors Public Policy Committee exercises oversight of AbbVie’s political expenditures and
lobbying activities, as specifically enumerated in the Committee’s charter, and further governed by the
Committee’s approved policy on political contributions. The Public Policy Committee and AbbVie’s senior
management review these activities and expenditures on a regular basis.
• Our Executive Vice President, External Affairs, who reports directly to the CEO, and our Vice President,
Government Affairs, each review and approve all plans for corporate political contributions and lobbying at
the recommendation of AbbVie’s Government Affairs function to ensure that these activities are consistent
with the company’s guidelines and comply with applicable laws.
• We believe this approach minimizes risk and reflects our guiding commitment to transparency, stewardship
of corporate and stockholder funds, sound corporate practice, and high standards of ethical conduct.
AbbVie already makes extensive disclosures regarding lobbying and political activities and has been recognized by a
leading organization for transparency in this area.
•
•
•
•
•
•
Since our launch as a new public company in 2013, AbbVie has provided robust transparency through the
disclosures described below. AbbVie’s website describes our oversight process and our guiding principles for
lobbying and political activities. We pursue activities that shape policies to benefit patients, with a focus on
improving patient access to new therapeutic advances.
AbbVie files quarterly reports that include (i) total federal lobbying expenditures, (ii) the name of the
legislation or subject matter covered, (iii) individuals who lobbied on behalf of AbbVie, and (iv) identification
of the legislative body or executive branch that was contacted, in compliance with the Lobbying Disclosure
Act. These reports include expenses associated with lobbying the federal government and the portion of
trade association dues associated with federal lobbying. AbbVie provides links to these reports on our
website at http://www.abbvie.com/responsibility/transparency-policies/home.html#cpc. We file similar
publicly-available lobbying reports with state and local agencies as required by law.
AbbVie also provides a listing of corporate contributions to political candidates, political parties, political
committees, ballot measure committees, and organizations operating under Section 527 of the Internal
Revenue Code. These reports are updated every six months and are archived for reference on our website
identified above.
AbbVie does not currently make direct expenditures toward U.S. federal or state grassroots lobbying
communications to the general public and does not currently contribute funds intended for use in elections
to tax-exempt organizations under Section 501(c)(4) of the Internal Revenue Code, as disclosed on our
website. If such a contribution were made, it would be enumerated in AbbVie’s reports on other corporate
political contributions.
AbbVie discloses trade associations and membership organizations to which AbbVie provides $100,000 or
more in annual membership, which are reviewed by the Public Policy Committee. AbbVie also posts a list of
global trade associations in which an AbbVie employee serves on the organization’s board of directors. Both
of these lists are available on our website.
AbbVie also provides a link to the Federal Election Commission reports of the AbbVie Political Action
Committee (‘‘PAC’’), which detail the PAC’s political contributions and expenditures.
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STOCKHOLDER PROPOSALS
•
•
In part due to the extensive disclosures described above, AbbVie is listed in the first tier of companies
providing the highest level of political transparency and accountability in the 2015 CPA-Zicklin Index of
Corporate Political Accountability and Disclosure.
Attempting to quantify indirect lobbying would be difficult to estimate and potentially misleading to
stockholders as AbbVie is not directing the lobbying activities of trade, civic or patient groups. Further, it
would be difficult for us to determine which third parties may endorse model legislation and whether such
activities fall within the proposal’s request.
In summary, our robust oversight mechanisms and extensive disclosures address the concerns underlying the
proposal, but without the unnecessary business risks and additional resources the proposal would introduce if
implemented.
The Board of Directors recommends that you vote AGAINST the proposal.
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1MAR201604001183
Corporate Governance Materials
.................................................................................................................................................................................................................................................................................................................................
AbbVie’s corporate governance guidelines with the outline of directorship qualifications; director independence
guidelines; code of business conduct; and audit committee, compensation committee, nominations and governance
committee, and public policy committee charters are all available in the corporate governance section of AbbVie’s
investor relations website at www.abbvieinvestor.com.
Procedures for Approval of Related Person Transactions
.................................................................................................................................................................................................................................................................................................................................
It is AbbVie’s policy that the nominations and governance committee review, approve, ratify or disapprove of all
transactions in which AbbVie participates and in which any related person has a direct or indirect material interest if
such transaction involves or is expected to involve payments of $120,000 or more in the aggregate per fiscal year.
Related person transactions requiring review by the nominations and governance committee pursuant to this policy are
identified in:
•
•
•
questionnaires annually distributed to AbbVie’s directors and executive officers;
certifications submitted annually by AbbVie executive officers related to their compliance with AbbVie’s Code
of Business Conduct; or
communications made directly by the related person to the chief financial officer or general counsel.
In determining whether to approve or ratify a related person transaction, the nominations and governance
committee will consider the following items, among others:
•
•
•
•
•
the related person’s relationship to AbbVie and interest in the transaction;
the material facts of the transaction, including the aggregate value of such transaction or, in the case of
indebtedness, the amount of principal involved;
the benefits to AbbVie of the transaction;
if applicable, the availability of other sources of comparable products or services;
an assessment of whether the transaction is on terms that are comparable to the terms available to an
unrelated third party or to employees generally;
• whether a transaction has the potential to impair director independence; and
• whether the transaction constitutes a conflict of interest.
This process is included in the nominations and governance committee’s written charter, which is available on
the corporate governance section of AbbVie’s investor relations website at www.abbvieinvestor.com.
Section 16(a) Beneficial Ownership Reporting Compliance
.................................................................................................................................................................................................................................................................................................................................
AbbVie believes that during 2015 its executive officers and directors timely complied with all filing requirements
under Section 16(a) of the Securities Exchange Act of 1934.
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ADDITIONAL INFORMATION
Performance-Based Compensation Arrangements
.................................................................................................................................................................................................................................................................................................................................
The Performance Incentive Plan and the Incentive Stock Program, which are described above, are intended to
comply with Internal Revenue Code Section 162(m) to permit deductibility of performance-based compensation.
The compensation committee reserves the flexibility to take actions that may be based on considerations in
addition to tax deductibility. The committee believes that stockholder interests are best served by not restricting the
committee’s discretion and flexibility in crafting compensation programs, even if such programs may result in certain
non-deductible compensation expenses. Accordingly, the committee may from time to time approve components of
compensation for certain executive officers that are not deductible.
While the compensation committee does not anticipate there would ever be circumstances where a restatement
of earnings upon which any incentive plan award decisions were based would occur, the committee, in evaluating such
circumstances, has discretion to take all actions necessary to protect the interests of stockholders up to and including
actions to recover such incentive awards.
Exclusive Forum
.................................................................................................................................................................................................................................................................................................................................
AbbVie is incorporated in the state of Delaware and Delaware law governs the relationship among its directors,
officers, and stockholders (also known as the internal affairs doctrine). To provide for the orderly, efficient and cost-
effective resolution of Delaware-law issues affecting AbbVie, the company’s Certificate of Incorporation provides that
unless the board of directors otherwise determines, Delaware courts are the exclusive forum for cases involving the
internal affairs doctrine, derivative actions brought on behalf of the company, claims for breach of fiduciary duty, and
other matters concerning Delaware statutory and common law. The provision does not apply to any other cases brought
against AbbVie.
Other Matters
.................................................................................................................................................................................................................................................................................................................................
The board of directors knows of no other business to be transacted at the 2016 Annual Meeting of
Stockholders, but if any other matters do come before the meeting, it is the intention of the persons named in the
accompanying proxy to vote or act with respect to them in accordance with their best judgment.
Date for Receipt of Stockholder Proposals for the 2017 Annual Meeting Proxy Statement
.................................................................................................................................................................................................................................................................................................................................
Stockholder proposals for presentation at the 2017 Annual Meeting must be received by AbbVie no later than
November 21, 2016 and must otherwise comply with the applicable requirements of the Securities and Exchange
Commission to be considered for inclusion in the proxy statement and proxy for the 2017 meeting.
Procedure for Recommendation and Nomination of Directors and Transaction of Business at Annual
Meeting
.................................................................................................................................................................................................................................................................................................................................
A stockholder may recommend persons as potential nominees for director by submitting the names of such
persons in writing to the secretary of AbbVie. Recommendations must be accompanied by certain information about
both the nominee and the stockholder making the nomination, as set forth in AbbVie’s Amended and Restated By-Laws.
A nominee who is recommended by a stockholder following these procedures will receive the same consideration as
other comparably qualified nominees.
A stockholder entitled to vote for the election of directors at an Annual Meeting and who is a stockholder of
record on:
•
•
•
the record date for that Annual Meeting,
the date of this proxy statement, and
the date of the Annual Meeting
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may nominate persons for director, or make proposals of other business to be brought before the Annual Meeting, by
providing proper timely written notice to the secretary of AbbVie. That notice must include certain information required
by Article II of AbbVie’s Amended and Restated By-Laws, including information about the stockholder, any beneficial
owner on whose behalf the nomination or proposal is being made, their respective affiliates or associates or others
acting on concert with them, and any proposed director nominee.
For each matter the stockholder proposes to bring before the Annual Meeting, the notice must also include a
brief description of the business to be discussed, the reasons for conducting such business at the Annual Meeting, any
material interest of the stockholder in such business and certain other information specified in the By-Laws. In addition,
in the case of a director nomination, the notice must include a completed and signed questionnaire, representation and
agreement of the nominee addressing matters specified in the By-Laws.
To be timely, written notice either to directly nominate persons for director or to bring business properly before
the Annual Meeting must be received at AbbVie’s principal executive offices not less than ninety days and not more than
one hundred twenty days prior to the anniversary date of the preceding Annual Meeting. If the Annual Meeting is called
for a date that is more than thirty days before or sixty days after such anniversary date, notice by the stockholder must
be received not less than ninety days and not more than one hundred twenty days prior to the date of such Annual
Meeting and not later than the close of business on the later of ninety days prior to the date of such Annual Meeting,
or, if the first public announcement of the date of such Annual Meeting is less than one hundred days prior to the date
of such Annual Meeting, the tenth day following the day on which public announcement of the date of such meeting is
first made by AbbVie. To be timely for the 2017 Annual Meeting, this written notice must be received by AbbVie no later
than February 8, 2017.
In addition, the notice must be updated and supplemented, if necessary, so that the information provided or
required to be provided is true and correct as of the record date for the Annual Meeting and as of the date that is ten
business days prior to the meeting. Any such update or supplement must be delivered to the secretary of AbbVie at
AbbVie’s principal executive offices not more than five business days after the record date for the Annual Meeting, and
not less than eight business days before the date of the Annual Meeting in the case of any update or supplement
required to be made as of ten business days prior to the Annual Meeting.
Procedure for Stockholder Nominations to be Included in AbbVie’s Proxy Materials
.................................................................................................................................................................................................................................................................................................................................
AbbVie recently adopted a proxy access By-Law provision to permit a stockholder, or a group of up to 20
stockholders, continuously owning shares of our company for at least 3 years and representing an aggregate of at least
3% of the outstanding shares of common stock, to nominate and include in our proxy materials director nominee(s)
constituting up to 25% of the total number of the directors in office, provided that the stockholder(s) and the
nominee(s) satisfy the requirements in our By-Laws. Notice must include certain information required by Article II of
AbbVie’s Amended and Restated By-Laws. To be timely, written notice must be received at AbbVie’s principal executive
offices not earlier than 150 days and not later than 120 days before the anniversary of the date that the company
mailed its proxy statement for the prior year’s annual meeting of stockholders. To be timely for the 2017 Annual
Meeting, this written notice must be received by AbbVie no later than November 21, 2016 and must include the specific
information required by, and otherwise comply with the requirements of, our By-Laws.
Householding of Proxy Materials
.................................................................................................................................................................................................................................................................................................................................
The Securities and Exchange Commission has adopted rules that permit companies and intermediaries (such as
brokers or banks) to satisfy the delivery requirements for proxy statements with respect to two or more security holders
sharing the same address by delivering a single Notice or proxy statement addressed to those security holders. This
process, which is commonly referred to as ‘‘householding,’’ potentially provides extra convenience for security holders
and cost savings for companies.
Several brokers and banks with accountholders who are AbbVie stockholders will be ‘‘householding’’ our proxy
materials. As indicated in the notice provided by these brokers to AbbVie stockholders, a single proxy statement will be
delivered to multiple stockholders sharing an address unless contrary instructions have been received from an affected
stockholder. Once you have received notice from your broker that it will be ‘‘householding’’ communications to your
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ADDITIONAL INFORMATION
address, ‘‘householding’’ will continue until you are notified otherwise or until you revoke your consent. If, at any time,
you no longer wish to participate in ‘‘householding’’ and you prefer to receive a separate proxy statement, please notify
your broker, or contact Broadridge Financial Solutions at 1-866-540-7095, or write to us at Investor Relations, AbbVie Inc.,
1 North Waukegan Road, North Chicago, Illinois 60064. Stockholders who currently receive multiple copies of the proxy
statement at their address and would like to request ‘‘householding’’ of their communications should contact their
broker or bank.
Cautionary Statement Regarding Forward-Looking Statements
.................................................................................................................................................................................................................................................................................................................................
This proxy statement contains certain forward-looking statements regarding business strategies, market potential,
future financial performance and other matters. The words ‘‘believe,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘project’’ and similar
expressions, among others, generally identify ‘‘forward-looking statements,’’ which speak only as of the date the
statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties and
other factors that may cause actual results to differ materially from those projected, anticipated or implied in the
forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or
events is expressed, such expectation or belief is based on the current plans and expectations of AbbVie management
and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation
or belief will result or be achieved or accomplished. Factors that could cause actual results or events to differ materially
from those anticipated include the matters described in AbbVie’s Annual Report on Form 10-K for the year ended
December 31, 2015 under Item 1A, ‘‘Risk Factors’’ and Item 7, ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations.’’ AbbVie does not undertake any obligation to update the forward-looking
statements included in this proxy statement to reflect events or circumstances after the date hereof, unless AbbVie is
required by applicable securities law to do so.
General
.................................................................................................................................................................................................................................................................................................................................
It is important that proxies be returned promptly. Stockholders are urged to vote, regardless of the number of
shares of AbbVie common stock owned. Stockholders may vote by telephone, by Internet, or by mail if a printed version
of the proxy card was received or requested. Stockholders who vote by telephone or the Internet do not need to return
a proxy card.
The Annual Meeting will be held at the Fairmont Chicago, Millennium Park, 200 North Columbus Drive, Chicago,
Illinois 60601. Admission to the meeting will be by admission card only. A stockholder planning to attend the meeting
should promptly complete and return the reservation form. Reservation forms must be received before April 29, 2016.
An admission card admits only one person. A stockholder may request two admission cards, but a guest must be
accompanied by a stockholder.
By order of the board of directors.
LAURA J. SCHUMACHER
SECRETARY
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2016 Proxy Statement
Appendix A
Proposed Certificate of Amendment to the Amended and Restated Certificate of Incorporation of AbbVie Inc.
The text of the proposed amendment is marked to reflect the proposed changes.
AbbVie Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the ‘‘Corporation’’), does hereby certify:
Sections 2, 3, and 4 of Article VI of AbbVie’s Amended and Restated Certificate of Incorporation are amended to
1.
read as follows:
Section 2. Classes of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect
directors under specified circumstances, the directors shall, until the annual meeting of stockholders to be held in
2019, be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in
number as is reasonably possible. , with tThe term of office of the class of directors elected at the annual meeting
of stockholders in 2016 shall first class to expire at the 201913 annual meeting of stockholders, the term of office of
the class of directors elected at the annual meeting of stockholders held in 2017 shall second class to expire at the
20184 annual meeting of stockholders and the term of office of the third class to class of directors elected at the
annual meeting of stockholders held in 2018 shall expire at the 201915 annual meeting of stockholders, with each
director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting
of stockholders, commencing with the 20173 annual meeting, (a) directors elected to succeed those directors whose
terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of
stockholders held in the year following the year of after their election, with each director to hold office until his or
her successor shall have been duly elected and qualified, and (b) if authorized by a resolution of the Board of
Directors, directors may be elected to fill any vacancy on the Board of Directors, regardless of how such vacancy
shall have been created.
Section 3. Vacancies. Subject to applicable law and the rights of the holders of any series of Preferred Stock
with respect to such series of Preferred Stock, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created
directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative
vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, and in the event
that there is only one director remaining in office, by such sole remaining director, and directors so chosen shall
hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to
which they have been appointed expires and until such director’s successor shall have been duly elected and
qualified and, if the Board of Directors at such time is classified, for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which such director has been appointed expires.
Section 4. Removal. Except as provided in the subsequent sentence and subject to the rights of the holders
of any series of Preferred Stock with respect to such series of Preferred Stock, any director, or the entire Board of
Directors, may be removed from office at any time, with or without cause by the affirmative vote of the holders of
at least a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally in the
election of directors. Notwithstanding the immediately preceding sentence, subject to the rights of the holders of
any series of Preferred Stock with respect to such series of Preferred Stock, until the 2019 annual meeting of the
stockholders, a director may be removed from office only for cause by the affirmative vote of the holders of at least
a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of
directorsSubject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred
Stock, any director, or the entire Board of Directors, may be removed from office at any time but only for cause by
the affirmative vote of the holders of at least a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors.
The foregoing amendment to the Amended and Restated Certificate of Incorporation of the Corporation was duly
2.
adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law.
2016 Proxy Statement
13NOV201221352027
A-1
Appendix A
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to the Amended and Restated
Certificate of Incorporation to be executed by the undersigned officer, duly authorized, as of the
2016.
day of
AbbVie Inc.
By:
Name:
Title:
A-2
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2016 Proxy Statement
13NOV201221352027
AbbVie Inc.
1 North Waukegan Road
North Chicago, Illinois 60064 U.S.A.
Notice of Annual Meeting
of Stockholders
and Proxy Statement
Meeting Date
May 6, 2016
YOUR VOTE IS IMPORTANT!
Please sign and promptly return your proxy
in the enclosed envelope or vote your
shares by telephone or using the Internet.
Reservation Form for Annual Meeting
I am a stockholder of AbbVie Inc. and I plan to attend the Annual Meeting to be held at the Fairmont Chicago,
Millennium Park, 200 North Columbus Drive, Chicago, Illinois 60601 at 9:00 a.m. CT on May 6, 2016.
Please send me an admission card for each of the following persons.
Name
Address
City
State
Zip Code
Name
Address
City
State
Zip Code
Phone Number (
)
Phone Number (
)
If you plan to attend the meeting, please complete the Reservation Form and send it to AbbVie Inc., Annual Meeting
Ticket Requests, AP34, 1 North Waukegan Road, North Chicago, Illinois 60064. Due to space limitations, Reservation
Forms must be received before April 29, 2016. An admission card, along with a form of photo identification, admits
one person. A stockholder may request two admission cards, but a guest must be accompanied by a stockholder.
To prevent a delay in the receipt of your admission card, do not return this form with your proxy card or mail it in
the enclosed business envelope.
Printed on Recyclable Paper
about abbvie
AbbVie is a global, research-based
biopharmaceutical company formed
in 2013 following separation from
Abbott Laboratories. The company’s
mission is to use 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. Together
with its wholly-owned subsidiary,
Pharmacyclics, AbbVie employs more
than 28,000 people worldwide and markets
medicines in more than 170 countries.
For further information on the company
and its people, portfolio, and commitments,
please visit www.abbvie.com.
stockholder information
AbbVie Inc. Corporate Headquarters
1 North Waukegan Road
North Chicago, IL 60064
847.932.7900
www.abbvie.com
Investor Relations
Dept. ZZ05, AP34
Corporate Secretary
Dept. V364, AP34
Stock Listing
The ticker for AbbVie’s common stock
is ABBV. The principal market for AbbVie
common stock is the NYSE. AbbVie
common stock is also listed on the Chicago
Stock Exchange, the NYSE Euronext Paris,
and the SIX Swiss Exchange.
Annual Meeting
The Annual Meeting will be held on
Friday, May 6, 2016, at 9 AM at
the Fairmont Chicago, Millennium Park,
200 North Columbus Drive,
Chicago, IL 60601.
Dividend Reinvestment Plan
The AbbVie Dividend Reinvestment
Plan offers registered stockholders
an opportunity to purchase additional
shares, commission-free, through
automatic dividend reinvestment
and/or optional cash investments.
Interested persons may contact the
transfer agent.
Transfer Agent
Computershare Trust Co. NA
P.O. Box 43078
Providence, RI 02940-3078
877.881.5970 (toll free)
732.645.4123
www.computershare.com
Printed on recycled paper
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AbbVie
1 North Waukegan Road
North Chicago, IL 60064 U.S.A.
abbvie.com
2015 ANNUAL REPORT
ON FORM 10-K
2016 NOTICE OF
ANNUAL MEETING AND
PROXY STATEMENT
Copyright© 2016 AbbVie. All rights reserved.
PEOPLE. PASSION. POSSIBILITIES.
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