Humira Skyrizi Rinvoq Imbruvica Venclexta Botox Cosmetic Juvéderm Collectionf Fillers CoolSculpting Alloderm Natrelle SkinMedica DiamondGlow Botox peeuuttiicc VVrraayyllaarr DDuuooppaa UUbbrreellvvyy LLuummiiggaann AAllpph Ozurdex Refresh Lo Loestrin Fe Orilissa Liletta Mavyret Creon Lupron Linzess ynthroid Humira Skyrizi Rinvoq Imbruvica Venclexta Botox Cosmetic Juvédermolllllleeeccctttiiiooonnn ooofff FFFiiilllllleeerrrsss CCCoooooolllSSScccuuulllppptttiiinnnggg AAAllllllooodddeeerrrmmm NNNaaatttrrreeelllllleee SSS Botox Therappeutic Vrayylar Duoppa Ubrelvyy Lumiggan Alpphaan Restasis Xen DurOzurdex Refresh Lo Loestrin Fe Orilissa Liletta Mavyret Creon Lupron Linzess ynthroid Humira Skyrz nvoq mbruvica Venclexta Botox osmetc uvermCollection of Fillers CoolSculpting Alloderm Natrelle SkinMedica DiamondGlowBBoottooxx TThheerraapppeeuuttiicc VV rreellvvyyy LLuummiigggaann AAllppphh Ozurdex Refresh Lo Loestrin Fe Orilissa Liletta Mavyret Creon Lupron Linzess ynthroid Humira Skyrizi Rinvoq Imbruvica Venclexta Botox Cosmetic JuvédermCCCoolllllleeccttiiioonn oofff FFFiiilllllleerrss CCC AAlllllloodddeerrmm NNNaattrreellllllee SSSkkk Botox Therapeutic Vraylar Duopa Ubrelvy Lumigan Alphagan Restasis Xen Durzuurddeex Reefreessh Loo Looeesse OOrilissssaa Lileettaa Maavyynntthhrrooiidd HHummiirraa SSkkyrriizii Rvooqq IImmbbrruviiccaa VVeenncclleextt Collection of Fillers CoolSculpting Alloderm Natrelle SkinMedica DiamondGlow TThheerraappeeuuttiicc VVrraayyllaarr DDuuooppaa UUbbrreellvvyy LLuummiigga zrx Refresh Lo Loestrin Fe Orilissa Liletta Mvrt rn Lprn Linz d HHuummiirraa AbbVie & Allergan IImmbbrruuvviic ttooxx CCoossmmeettiicc JJuuvvééddeeeeccttiiioonn oofff FFFiiilllllleerrss CCCoooolllSSSccuulllppttiiinngg AAAllllllooddde eedddiiiccaa DDDiiiaammoonndddGGGllloowwBotox Therapeutic Vraylar Duopa Ubrelvy Lumigan Alphagan Restasis Xen DurOOzzuurrddeexx RReeffrreesshh LLoo LLooeessttrriinn FFee OOrriilliissssaa LLi eeoonn LLuupprroonn LLiinnzzeessss ynthroid Humira Skyrizi Rinvoq Imbruvica Venclexta Botox Cosmetic JuvédermCollection of Fillers CoolSculpting Alloderm Natrelle SkinMedica DiamondGlowBBBoootttoooxx TTThhheeerraaappppeeeuutttiiiccc VVaayylllaaarr DDDuuoooppppaaa UUUbbbrreeelllvvyyy LLLuummiiiggggaa ggggaaann RRReeessstttaaasssiiisss XXXeeenn DDDOzurdex Refresh Lo Loestrin Fe Orilissa Liletta Mavyret Creon Lupron Linzess yynthroid Humira Skrizi Rinvoqq Imbruvica Venclexta Botox Cosmetic JuvédermCollection of Fillers CoolSculpting Alloderm Natrelle SkinMedica DiamondGlowBotox Therapeutic Vraylar Duopa Ubrelvy Lumigan Alphagan Restasis Xen DurOOzzuurrddeexx RRe OOrriilliissssaa LLiilleettttaa MMaavvyyrreett CCrreeoonn LLuupprroonn LLiinn yntthhroiidd HHumra yrz nvoq mbbruviica VVencllextta BBottox CCosmettiic JJuvermCCoolllleeccttiioonn oo llooddeerrmm NNaattrreellllee SSkkiinnMMeeddiiccaa DDiiaammooBotox Therapeutic Vraylar Duopa Ubrelvy Lumigan Alphagan Restasis Xen DurOzurdex Refresh Lo Loestrin Fe Orilissa Liletta Mavyret Creon Lupron Linzess yynntthhrrooiidd HHuumm aa VVeenncclleexxttaa BBoottooxx CCoossmmeettiicc CCoolllleeccttiioonn ooff FFiilllleerrs oddeerrmm NNaattrreellllee SSkkiinnMMeeddiiccaa DDiiaammoonBotox Therapeutic Vraylar Duopa Ubrelvy Lumigan Alphagan Restasis Xen DurOOzzuurrddeexx RReeffrreesshh LLoo LLooeessttrriinn FFee OOrriilliissssaa LLiilleettttaa MMaavvyyrreett CCrreeoonn LLuupprroonn LLiinnzzee yynntthhrrooiidd HHuummiirraa SSkkyyrriizzii RRiinnvvooqq IImmbbrruuvviiccaa VVeenncclleexxttaa BBoottooxx CCoossmmeettiicc JJuuvvééddeerrmCollection of Fillers CoolSculpting Alloderm Natrelle SkinMedica DiamondGlowBotox Therapeutic Vraylar Duopa Ubrelvy Lumigan Alphagan Restasis Xen DurOOzurddex RReffreshh LLo LLoestriin FFe OOriilliissa LLiilletta MMavyret CCreon LLupron LLiinzess hrrooiidd HHuummiirraa SSkkyyrriizzii RRiinnvvooqq IImmbbrruuvviiccaa VVe CCoossmmeettiicc JJuuvvééddeerrmmCollectionofFillersCoolSculptingAllodermNatrelleSkinMedicaDiamondGlow4003_CoverV1.indd 14003_CoverV1.indd 13/10/21 2:26 PM3/10/21 2:26 PM Stockholder Information
AbbVie Inc. Corporate Headquarters
1 North Waukegan Road
North Chicago, IL 60064
847.932.7900
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.
Annual Meeting
The Annual Meeting will be held on
Friday, May 7, 2021, at 9 a.m. CT.
Please see the proxy statement for
information about how to attend the
virtual Annual Meeting.
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
EQ Shareowner Services
P.O. Box 64874
St Paul, MN 55164-0874
www.shareowneronline.com
877.881.5970
651.450.4064
Together, AbbVie and
Allergan, have an even
greater abilit y to meet
the needs of patients
~47,000
employees turning p ossibilitie s
into reality for our patients
60+
conditions treated
across all stage s
of life
30+
brands
220+
research partnerships
About AbbVie
AbbVie's mission is to discover and deliver innovative
medicines that solve serious health issues today
and address the medical challenges of tomorrow. We
strive to have a remarkable impact on people's lives
across several key therapeutic areas: immunology,
oncology, neuroscience, eye care, virology, women's
health and gastroenterology, in addition to products
and services across its Allergan Aesthetics portfolio.
For more information about AbbVie, please visit us
at www.abbvie.com.
175+
countries where
products help pa tients
14 countries with manufacturing
and R&D facilities
We take our role in the global community seriously by
supporting the patients we serve, the people we employ
and the world we live in. In times of crisis, responsibility
and philanthropy are central to AbbVie’s response.
Addressing Racial Equity
Supporting COVID-19 Relief
$55M
to nonprofits to address issues in our
criminal justic e system and supp ort
health and e ducation equity among
underserved Black communities
$35M
donated to support underserved
communities and health car e systems
working to address the impact of the
global pandemic
Over the next 5 years, this investment will:
In the United States, our investment led to:
Promote health equity for
100,000+ Black
Americans
Increase the pool of qualifie d, college
ready candida tes pursuing health car e
careers by at least
800 Black pr ofessionals
Impact
600+ young adults in
underserved communities, empowering
them to achieve economic stabilit y
through development programs
Provide nearly
3,000 under served
students
with mentors to guide them thr ough
high school and help na vigate future
opportunities
26 mobile field units
to increase U.S. hospital capacit y
2.6+ million units of PPE
delivered to 1 million health car e
providers and patients
5 million meals
and supplie s delivered through
200 food banks
In the European Union, our in vestment led to:
1,000 oxygen concentrators
and 1.2 million units of PPE
to hardest-hit European countries
Around the world:
26 additional nonpr ofits
supported through AbbVie COVID-19
Community Resilience Fund
Printed on recycled paper
4003_CoverV1.indd 2
4003_CoverV1.indd 2
3/9/21 8:10 PM
3/9/21 8:10 PM
13NOV201221365766
Dear AbbVie Shareholder,
2020 was truly unprecedented in almost all ways, and our performance was outstanding
on every dimension. We completed the transformative acquisition of Allergan, the largest
transaction in our history, which solidifies our long-term strategic vision and strengthens our
company for continued success over the next decade and beyond. We delivered financial
performance that exceeded our guidance and again raised our quarterly dividend payment
for the eighth consecutive year.
But perhaps most importantly, we met one of the greatest leadership challenges of our
time by adapting to a global pandemic while ensuring an uninterrupted supply of medicines
for our patients, advancing our pipeline and taking a firm stand against discrimination and
bias, and affirming the values of our company and our employees. Additionally, we pledged
support to our communities and stakeholders through our philanthropic commitments to help
in the fight against COVID-19 and supported access to education, health care and job
opportunities for underserved populations. I am extremely proud of the performance of our
employees who joined together to deliver these outstanding results.
A transformative acquisition: AbbVie’s 2020 acquisition of Allergan provides us with
significantly more scale and cash flow to continue our robust investment in R&D and
business development. With approximately $45.8 billion in global sales between the two
companies, Allergan’s portfolio enhances our growth platform and significantly diversifies our
revenue base.
Rapid pipeline advancement: Our pipeline is the lifeblood of our company, and
innovation is at the core of everything we do for our patients. In 2020, we invested
$5.8 billion in R&D to support continued pipeline growth across our key therapeutic areas,
and as a result, we anticipate the approval of more than a dozen new products or
indications over the next two years.
Continued strong performance and financial outlook: With impressive 2020 results,
strong outlook for 2021 and the successful integration of Allergan’s businesses well
underway, AbbVie continues to deliver impressive shareholder value. Full year adjusted EPS
grew more than 18 percent over the prior year to $10.56. We issued 2021 adjusted EPS
guidance of $12.32 to $12.52, representing year over year growth of 17.6 percent at the
midpoint, and expect adjusted net revenue of approximately $55.7 billion. AbbVie’s financial
performance also allowed us to increase our quarterly dividend from $1.18 to $1.30 per
share—a 225 percent increase since our inception.
Committed partner for patients and communities:
In April, shortly after the global
lockdown, AbbVie immediately stepped up to assist the health care delivery system address
the overflow of critically ill COVID-19 patients. This includes AbbVie’s $35 million donation to
nonprofit partners to support COVID-19 relief efforts, with our support going toward
increasing health care capacity, supplying critical equipment and delivering food and
essential supplies. This year, AbbVie employees have also been volunteering to facilitate
vaccine administration, and we are supporting a vaccination clinic for seniors in underserved
communities near our North Chicago headquarters.
Ongoing commitment to racial justice: We publicly announced our commitment to
addressing the racial and social inequality issues that came to the forefront with the tragic
events of 2020. We are committed to being a leader in finding solutions to address these
critical issues. To solidify this commitment in 2020, we announced a donation of $5 million to
NAACP Legal Defense and Education Fund and the Equal Justice Initiative, which are two
important organizations addressing inequities in our criminal justice system. We also made
an additional $50 million commitment to support underserved Black communities across the
United States by promoting education and health equity.
In summary, AbbVie achieved tremendous success in 2020 for all our stakeholders. Our
employees delivered on every element of performance and did so under extraordinary
personal and professional circumstances. 2020 will be a year remembered for a long time to
come, and I believe our performance demonstrates the resiliency and excellence that will
position us extremely well for the prospects of our future.
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)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
(cid:2) EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
(cid:3) SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
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)
32-0375147
(I.R.S. employer
identification number)
1 North Waukegan Road
North Chicago, Illinois 60064-6400
(847) 932-7900
(Address, including zip code, and telephone number of principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Trading
Symbol(s)
Name of Each Exchange on Which Registered
ABBV
Common Stock, par value $0.01 per share
New York Stock Exchange
Chicago Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York 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)
0.500% Senior Notes due 2021
1.500% Senior Notes due 2023
1.375% Senior Notes due 2024
1.250% Senior Notes due 2024
0.750% Senior Notes due 2027
2.125% Senior Notes due 2028
2.625% Senior Notes due 2028
2.125% Senior Notes due 2029
1.250% Senior Notes due 2031
ABBV21C
ABBV23B
ABBV24
ABBV24B
ABBV27
ABBV28
ABBV28B
ABBV29
ABBV31
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 every Interactive Data File required to be submitted 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 such
files).
Yes (cid:2)
No (cid:3)
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 Accelerated Filer
Large Accelerated Filer (cid:2)
Non-Accelerated Filer (cid:3)
Accelerated Filer (cid:3)
Smaller Reporting Company (cid:3)
Emerging growth company (cid:3)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:3)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.(cid:2)
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 1,747,782,344 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, 2020), was $171,597,270,533. AbbVie has no non-voting common equity.
Number of common shares outstanding as of January 31, 2021: 1,765,881,690
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2021 AbbVie Inc. Proxy Statement are incorporated by reference into Part III. The Definitive Proxy Statement will be
filed on or about March 22, 2021.
ABBVIE INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
BUSINESS
PART I
Item 1.
Item 1A. RISK FACTORS
Item 1B. UNRESOLVED STAFF COMMENTS
Item 2.
Item 3.
Item 4.
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
PART II
Item 5.
Item 6.
Item 7.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
[RESERVED]
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8.
Item 9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Item 9A. CONTROLS AND PROCEDURES
Item 9B. OTHER INFORMATION
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTING FEES AND SERVICES
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
FORM 10-K SUMMARY
SIGNATURES
Page
No.
1
20
34
34
34
34
35
38
39
40
58
59
119
119
122
123
123
124
124
124
125
130
131
PART I
ITEM 1. BUSINESS
........................................................................................................................................................................................................................................................................................................................................
Overview
AbbVie(1) is a global, research-based biopharmaceutical company. AbbVie uses its expertise,
dedicated people and unique approach to innovation to develop and market advanced therapies that
address some of the world’s most complex and serious diseases.
On May 8, 2020, AbbVie completed the acquisition of Allergan plc (Allergan). The acquisition of
Allergan creates a diversified biopharmaceutical company positioned for success with a
comprehensive product portfolio that has leadership positions in key therapeutic areas of
immunology, hematologic oncology, aesthetics, neuroscience, eye care and women’s health.
AbbVie’s existing product portfolio and pipeline is enhanced with numerous Allergan assets and
Allergan’s product portfolio benefits from AbbVie’s commercial strength, expertise and international
infrastructure. See Note 5, ‘‘Licensing, Acquisitions and Other Arrangements—Acquisition of
Allergan,’’ to the Consolidated Financial Statements included under Item 8, ‘‘Financial Statements
and Supplementary Data.’’ Subsequent to the acquisition date, AbbVie’s consolidated financial
statements include the assets, liabilities, operating results and cash flows of Allergan.
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% of the outstanding common stock of AbbVie to Abbott’s shareholders.
Impact of the Coronavirus Disease 2019 (COVID-19)
The novel coronavirus (COVID-19) pandemic continues to spread throughout the United States
and around the world. In response to the growing public health crisis, AbbVie has partnered with
global authorities to support the experimental use of multiple AbbVie assets to determine their
efficacy in the treatment of COVID-19. AbbVie continues to closely manage manufacturing and
supply chain resources around the world to help ensure that patients continue to receive an
uninterrupted supply of their medicines. Clinical trial sites are being monitored locally to protect the
safety of study participants, staff and employees. While the impact of COVID-19 on AbbVie’s
operations to date has not been material, AbbVie has experienced lower new patient starts across
the therapeutic portfolio. AbbVie expects this matter could continue to negatively impact its results of
operations throughout the duration of the outbreak. The extent to which COVID-19 may impact
AbbVie’s financial condition and results of operations remains uncertain.
Segments
AbbVie operates as a single global business segment dedicated to the research and
development, manufacturing, commercialization and sale of innovative medicines and therapies. This
operating structure enables the Chief Executive Officer, as chief operating decision maker (CODM),
to allocate resources and assess business performance on a global basis in order to achieve
established long-term strategic goals. Consistent with this structure, a global research and
development and supply chain organization is responsible for the discovery, development,
manufacturing and supply of products. Commercial efforts that coordinate the marketing, sales and
distribution of these products are organized by geographic region or therapeutic area. All of these
activities are supported by a global corporate administrative staff. The determination of a single
(1) As used throughout the text of this report on Form 10-K, the terms ‘‘AbbVie’’ or ‘‘the company’’
refer to AbbVie Inc., a Delaware corporation, or AbbVie Inc. and its consolidated subsidiaries, as
the context requires.
1
2020 Form 10-K
13NOV201221352027
1
business segment is consistent with the consolidated financial information regularly reviewed by the
CODM for purposes of assessing performance, allocating resources and planning and forecasting
future periods. See Note 16, ‘‘Segment and Geographic Area Information’’ to the Consolidated
Financial Statements included under Item 8, ‘‘Financial Statements and Supplementary Data’’ and
the sales information related to AbbVie’s key products and geographies included under Item 7,
‘‘Management’s Discussion and Analysis of Financial Condition and 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.
Immunology products.
rheumatology, dermatology and gastroenterology. AbbVie’s immunology products address unmet
needs for patients with autoimmune diseases. These products are:
AbbVie maintains an extensive immunology portfolio across
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
Adult Crohn’s disease (moderate to severe)
Plaque psoriasis (moderate to severe chronic)
Juvenile idiopathic arthritis (moderate to severe polyarticular)
Ulcerative colitis (moderate to severe)
Axial spondyloarthropathy
Pediatric Crohn’s disease (moderate to severe)
Hidradenitis suppurativa (moderate to severe)
Pediatric enthesitis-related arthritis
Non-infectious intermediate, posterior and panuveitis
Pediatric ulcerative colitis (moderate to severe)
Pediatric uveitis
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
North America, European Union
European Union
North America, European Union
North America, European Union
European Union
North America, European Union
European Union
European Union
Humira is also approved in Japan for the treatment of intestinal Beh¸cet’s disease and
pyoderma gangrenosum.
Humira is sold in numerous other markets worldwide, including Japan, China, Brazil and
Australia, and accounted for approximately 43% of AbbVie’s total net revenues in 2020.
Skyrizi. Skyrizi (risankizumab) is an interleukin-23 (IL-23) inhibitor that selectively blocks
IL-23 by binding to its p19 subunit. It is a biologic therapy administered as a quarterly
subcutaneous injection following an induction dose. Skyrizi is approved in the United States,
Canada and the European Union and is indicated for the treatment of moderate to severe
plaque psoriasis in adults who are candidates for systemic therapy or phototherapy. In Japan,
Skyrizi is approved for the treatment of plaque psoriasis, generalized pustular psoriasis,
erythrodermic psoriasis and psoriatic arthritis in adult patients who have an inadequate response
to conventional therapies.
Rinvoq. Rinvoq (upadacitinib) is an oral, once-daily selective and reversible JAK inhibitor
and is approved in the United States, Canada, Japan and the European Union. Rinvoq is
indicated for the treatment of moderate to severe active rheumatoid arthritis in adult patients
13NOV201221352027
2
2020 Form 10-K
2
who have responded inadequately to, or who are intolerant to one or more disease-modifying
anti-rheumatic drugs (DMARDs). Rinvoq is also approved in the European Union for the
treatment of adult patients with active psoriatic arthritis and adult patients with active ankylosing
spondylitis. Rinvoq may be used as monotherapy or in combination with methotrexate. Rinvoq is
also indicated in Japan in patients with rheumatoid arthritis with inadequate response to
conventional therapy (including inhibition of the progression of structural damage).
Oncology products.
difficult-to-treat cancers. These products are:
AbbVie’s oncology products target some of the most complex and
Imbruvica.
Imbruvica (ibrutinib) is an oral, once-daily therapy that inhibits a protein called
Bruton’s tyrosine kinase (BTK). Imbruvica was one of the first medicines to receive a United
States Food and Drug Administration (FDA) approval after being granted a Breakthrough
Therapy Designation and is one of the few therapies to receive four separate designations.
Imbruvica currently is approved for the treatment of adult patients with:
• Chronic lymphocytic leukemia (CLL)/Small lymphocytic lymphoma (SLL) and CLL/SLL with
17p deletion;
• Mantle cell lymphoma (MCL) who have received at least one prior therapy*;
• Waldenstr ¨om’s macroglobulinemia (WM);
• Marginal zone lymphoma (MZL) who require systemic therapy and have received at least one
prior anti-CD20-based therapy*; and
• Chronic graft versus host disease (cGVHD) after failure of one or more lines of systemic
therapy.
*
Accelerated approval was granted for this indication based on overall response rate.
Continued approval for this indication may be contingent upon verification of clinical benefit
in confirmatory trials.
Venclexta/Venclyxto. Venclexta (venetoclax) is a BCL-2 inhibitor used to treat
hematological malignancies. Venclexta is approved by the FDA for adults with CLL or SLL. In
addition, Venclexta is approved in combination with azacitidine, or decitabine, or low-dose
cytarabine to treat adults with newly-diagnosed acute myeloid leukemia (AML) who are 75 years
of age or older or have other medical conditions that prevent the use of standard chemotherapy.
Venclyxto is approved in Europe for CLL in combination with obinutuzumab for patients with
previously untreated CLL and in combination with rituximab in patients who have received at
least one previous treatment.
AbbVie’s Allergan Aesthetics portfolio consists of toxins and dermal fillers,
Aesthetics products.
plastics and regenerative medicine, body contouring, and skincare products, which hold market-
leading positions in the U.S. and in key markets around the world. In 2020, U.S. sales comprised
approximately two-thirds of total global sales. These products are:
Botox Cosmetic. Botox Cosmetic is an acetylcholine release inhibitor and a neuromuscular
blocking agent indicated for temporary improvement in the appearance of moderate to severe
glabellar lines (frown lines between the eyebrows), moderate to severe crow’s feet and forehead
lines in adults. Having received its initial U.S. Food and Drug Administration (FDA) approval in
2002, Botox Cosmetic is now approved for use in all major markets around the world and has
become one of the world’s most recognized and iconic brands.
3
2020 Form 10-K
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Juvederm Collection. The Juvederm Collection is a portfolio of hyaluronic acid-based
dermal fillers with a variety of approved indications in the U.S. and in all other major markets
around the world to treat volume loss in the cheeks, chin, lips and lower face.
Other aesthetics. Other aesthetics products include, but are not limited to, Coolsculpting
body contouring technology, Alloderm regenerative dermal tissue, Natrelle breast implants, the
SkinMedica skincare line, and DiamondGlow.
Neuroscience products.
difficult-to-treat neurologic diseases. These products are:
AbbVie’s neuroscience products address some of the most
Botox Therapeutic. Botox Therapeutic (onabotulinumtoxinA injection) is a neuromuscular
blocking agent that is injected into muscle tissue in treatment for the following indications in the
United States:
• For the treatment of overactive bladder with symptoms of urge urinary incontinence, urgency,
and frequency, in adults who have an inadequate response to or are intolerant of an
anticholinergic medication.
• For the treatment of urinary incontinence due to detrusor overactivity associated with a
neurologic condition (e.g., spinal cord injury, multiple sclerosis) in adults who have an
inadequate response to or are intolerant of an anticholinergic medication.
• For the prophylaxis of headaches in adult patients with chronic migraine ((cid:2) 15 days per
month with headache lasting 4 hours a day or longer).
• For the treatment of spasticity in patients 2 years of age and older.
• For the treatment of adults with cervical dystonia to reduce the severity of abnormal head
position and neck pain associated with cervical dystonia.
• For the treatment of strabismus and blepharospasm associated with dystonia, including
benign essential blepharospasm or VII nerve disorders in patients 12 years of age and older.
• For the treatment of severe primary axillary hyperhidrosis that is inadequately managed with
topical agents. Licenses around the world vary.
• Focal spasticity associated with dynamic equinus foot deformity due to spasticity in ambulant
pediatric cerebral palsy patients, two years of age or older.
• Focal spasticity of the wrist and hand in adult post stroke patients.
• Focal spasticity of the ankle and foot in adult post stroke patients.
Vraylar. Vraylar (cariprazine) is a dopamine D3-preferring D3/D2 receptor partial agonist
and a 5-HT1A receptor partial agonist. Its D3 binding profile may be linked to observed
improvements in the negative symptoms of schizophrenia and to antidepressant effects in
Bipolar I disorder. Vraylar is indicated for acute and maintenance treatment of schizophrenia in
adults, acute treatment of manic or mixed episodes associated with bipolar disorder in adults
and acute treatment of depressive episodes associated with bipolar I disorder (bipolar
depression) in adults.
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.
Ubrelvy. Ubrelvy (ubrogepant) is indicated for the acute treatment of migraine with or
without aura in adults and is only commercialized in the United States.
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Eye care products.
help preserve and protect patients’ vision. These products are:
AbbVie’s eye care products address unmet needs and new approaches to
Lumigan/Ganfort. Lumigan (bimatoprost ophthalmic solution) 0.01% is a once daily, topical
prostaglandin analog indicated for the reduction of elevated intraocular pressure (IOP) in
patients with open angle glaucoma (OAG) or ocular hypertension (OHT). Ganfort is a once daily
topical fixed combination of bimatoprost 0.03% and timolol 0.5% for the reduction of IOP in adult
patients with OAG or OHT. Lumigan is sold in the United States and numerous markets around
the world, while Ganfort is approved in the EU and some markets in South America, the Middle
East, and Asia.
Alphagan/Combigan. Alphagan (brimonidine tartrate ophthalmic solution) is an alpha-
adrenergic receptor agonist indicated for the reduction of elevated intraocular pressure (IOP) in
patients with open-angle glaucoma or ocular hypertension. Combigan (brimonidine tartrate/
timolol maleate ophthalmic solution) is approved for reducing elevated intraocular pressure (IOP)
in patients with glaucoma who require additional or adjunctive IOP-lowering therapy. Both
Alphagan and Combigan are available for sale in the United States and numerous markets
around the world.
Restasis. Restasis is a calcineurin inhibitor immunosuppressant indicated to increase tear
production in patients whose tear production is presumed to be suppressed due to ocular
inflammation associated with keratoconjunctivitis sicca. Restasis is approved in the United
States and a number of other markets in South America, the Middle East, and Asia.
Other eye care. Other eye care products include Xen, Durysta, Ozurdex and Refresh/Optive.
Women’s health products.
AbbVie’s women’s health products are:
Lo Loestrin. Lo Loestrin Fe is an oral contraceptive. It is indicated for prevention of
pregnancy with the lowest dose of estrogen with only 10mcg and is dispensed in a unique
24/2/2 regimen with a two-day hormone-free interval. It is marketed in the U.S. as Lo Loestrin
Fe (norethindrone acetate and ethinyl estradiol tablets, ethinyl estradiol tablets and ferrous
fumarate tablets) and in select markets outside the U.S. as Lolo.
Orilissa/Oriahnn. Orilissa (elagolix) is the first and only orally-administered, nonpeptide
small molecule gonadotropin-releasing hormone (GnRH) antagonist specifically developed for
women with moderate to severe endometriosis pain. The FDA approved Orilissa under priority
review. It represents the first FDA-approved oral treatment for the management of moderate to
severe pain associated with endometriosis in over a decade. Orilissa inhibits endogenous GnRH
signaling by binding competitively to GnRH receptors in the pituitary gland. Administration
results in dose-dependent suppression of luteinizing hormone and follicle-stimulating hormone,
leading to decreased blood concentrations of ovarian sex hormones, estradiol and progesterone.
Outside the United States, Orilissa is also launched in Canada and Puerto Rico. Oriahnn
(elagolix, estradiol, and norethindrone acetate capsules; elagolix capsules) is a combination
prescription medicine used to control heavy menstrual bleeding related to uterine fibroids in
women before menopause.
Other women’s health. Other women’s health includes Liletta, a sterile, levonorgestrel-
releasing intrauterine system indicated for prevention of pregnancy for up to six years. It is the
only hormonal IUS (Intrauterine System) approved in the U.S. for up to six years of pregnancy
prevention.
AbbVie’s other key products include, among other things, treatments for
Other key products.
patients with hepatitis C virus (HCV), metabolic and hormone products that target a number of
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conditions, including exocrine pancreatic insufficiency and hypothyroidism, as well as
endocrinology products 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. These products are:
Mavyret/Maviret. Mavyret (glecaprevir/pibrentasvir) is approved in the United States and
European Union (Maviret) for the treatment of adult and pediatric patients (12 years and older or
weighing at least 45 kilograms) with chronic HCV genotype 1-6 infection without cirrhosis and
with compensated cirrhosis (Child-Pugh A). It is also indicated for the treatment of adult and
pediatric patients (12 years and older or weighing at least 45 kilograms) with HCV genotype 1
infection, who previously have been treated with a regimen containing an HCV NS5A inhibitor or
an NS3/4A protease inhibitor, but not both. It is an 8-week, pan-genotypic treatment for patients
without cirrhosis and following the EXPEDITION-8 study, also in patients with compensated
cirrhosis who are new to treatment.
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.
Lupron. Lupron (leuprolide 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.
Linzess/Constella. Linzess (linaclotide) is a once-daily guanylate cyclase-C agonist used in
adults to treat irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic
constipation (CIC). The product is marketed as Linzess in the United States and as Constella
outside of the United States.
Synthroid. Synthroid (levothyroxine sodium tablets, USP) is used in the treatment of
hypothyroidism.
AbbVie has the rights to sell Creon and Synthroid only in the United States. AbbVie’s
commercial rights to the sale and distribution of Synagis outside of the United States will revert
to AstraZeneca upon the expiry of the current agreement in 2021.
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 many of the
company’s products must be sold pursuant to a prescription. Outside of the United States, AbbVie
focuses its promotional and market access efforts on key opinion leaders, payers, physicians and
health systems. AbbVie also provides patient support programs closely related to its products.
Throughout the COVID-19 pandemic AbbVie has maintained its promotional activities with key
stakeholders by leveraging digital engagement where permitted and in compliance with the locally
applicable government guidance.
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AbbVie’s products are generally sold worldwide directly to wholesalers, distributors, government
agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned
distribution centers and public warehouses. Certain products (including aesthetic products and
devices) are also sold directly to physicians and other licensed healthcare providers. 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 retailers, pharmacies and patients. In 2020, 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 38% of AbbVie’s 2020 gross revenues in the United States.
Outside the United States, AbbVie sells products primarily to customers or through distributors,
depending on the market served.
Certain products are co-marketed or co-promoted with other companies. AbbVie has 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. Orders are generally filled on a current
basis and order backlog is not material to AbbVie’s business.
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, therapies and biologics. For example, Humira
competes with anti-TNF products and other competitive products intended to treat a number of
disease states and Mavyret/Maviret competes with other available HCV treatment options. In
addition, in the past few years, a number of other companies have started to develop, have
successfully developed and/or are currently marketing products that are being positioned as
competitors to Botox. 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.
New products or treatments brought to market by AbbVie’s competitors could cause revenues for
AbbVie’s products to decrease due to price reductions and sales volume decreases.
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
cost of developing and producing biologic therapies is typically dramatically higher than for
conventional (small molecule) medications, and many 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.
Humira is now facing direct biosimilar competition in Europe and other countries, and AbbVie
will continue to face competitive pressure from these biologics and from orally administered
products.
In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic
Act (the FFDCA), the Public Health Service Act (PHSA) and the regulations implementing such acts.
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The enactment of federal health care reform legislation in March 2010 provided a pathway for
approval of biosimilars under the PHSA, but the approval process for, and science behind,
biosimilars is complex. 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 and potency. The types of data that
could ordinarily be required in an application to show similarity may include analytical data,
bioequivalence studies and studies to demonstrate chemical similarity, animal studies (including
toxicity studies) and clinical studies.
Furthermore, the law provides that only a biosimilar product that is determined to be
‘‘interchangeable’’ will be considered by the FDA as 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 continues to be interpreted and implemented by the FDA.
As a result, its ultimate impact, implementation and meaning remains subject to uncertainty.
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’s intellectual property is materially
valuable to the company, and 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 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 FFDCA. 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 (NDA) for a compound to the submission of the NDA 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. Biological products licensed under the PHSA are similarly eligible
for terms of patent restoration.
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 all existing exclusivities (patent and 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. Other types of regulatory exclusivity may also be
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available, such as Generating New Antibiotic Incentives Now (GAIN) exclusivity, which can provide
new antibiotic or new antifungal drugs an additional 5 years of marketing exclusivity to be added to
certain exclusivities already provided for by law.
Applicable laws and regulations dictate the scope of any exclusivity to which a product or
particular characteristics of a product is entitled upon approval in any particular country. In certain
instances, regulatory exclusivity may offer protection 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 or sometimes even later. However, given the length of time required
to complete clinical development of a pharmaceutical product, the periods of exclusivity that might be
achieved in any individual case would not be expected to exceed a minimum of three years and a
maximum of 14 years. 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
regulatory 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. 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
close regulatory scrutiny over follow-on biosimilar products, which can reduce 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 2021 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 expired in December 2016,
and the equivalent European Union patent expired in October 2018 in the majority of European
Union countries. In the United States, non-composition of matter patents covering adalimumab
expire no earlier than 2022. AbbVie has entered into settlement and license agreements with several
adalimumab biosimilar manufactures. Under the agreements, the license in the United States will
begin in 2023 and the license in Europe began in 2018.
In addition, the following patents, licenses, and trademarks are significant: those related to
ibrutinib (which is sold under the trademark Imbruvica) and those related to risankizumab (which is
sold under the trademark Skyrizi). The United States composition of matter patent covering ibrutinib
is expected to expire in 2027. The United States composition of matter patent covering risankizumab
is expected to expire in 2033.
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AbbVie may rely, in some circumstances, on trade secrets to protect its technology. 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.
Licensing, Acquisitions and Other Arrangements
In addition to its independent efforts to develop and market products, AbbVie enters into
arrangements such as acquisitions, option-to-acquire agreements, licensing arrangements,
option-to-license arrangements, strategic alliances, co-promotion arrangements, co-development and
co-marketing agreements, and joint ventures. The acquisitions and option-to-acquire agreements
typically include, among other terms and conditions, non-refundable purchase price payments or
option fees, option exercise payments, milestones or earn-outs, and other customary terms and
obligations. The licensing and other arrangements typically include, among other terms and
conditions, non-refundable upfront license fees, option fees and option exercise payments, milestone
payments and royalty and/or profit sharing obligations. See Note 5, ‘‘Licensing, Acquisitions and
Other Arrangements—Other Licensing & Acquisitions Activity,’’ to the Consolidated Financial
Statements included under Item 8, ‘‘Financial Statements and Supplementary Data.’’
Third Party Agreements
AbbVie has agreements with third parties for process development, product distribution,
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. 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,’’ to the
Consolidated Financial Statements included under Item 8, ‘‘Financial Statements and Supplementary
Data.’’
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. Other than the Lupron near-term supply issue which has impacted availability of
certain formulations, AbbVie has not experienced any recent significant availability problems or
supply shortages that impacted fulfillment of product demand.
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Research and Development Activities
AbbVie makes a significant investment in research and development and 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. AbbVie also partners
with third parties, such as biotechnology companies, other pharmaceutical companies and academic
institutions to identify and prioritize promising new treatments that complement and enhance
AbbVie’s existing portfolio. AbbVie also supplements its research and development efforts with
acquisitions.
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 an 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.
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 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
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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 submitted and approved by the FDA prior to implementation. 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, patient registries, observational
data 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. Further, the
FDA continues to regulate product labeling, and prohibits the promotion of products for unapproved
or ‘‘off-label’’ uses along with other labeling restrictions.
Outside the United States.
AbbVie is subject to similar regulatory requirements outside the
United States for approval and marketing of pharmaceutical products. AbbVie must obtain approval
of a clinical trial application or product from applicable supervising regulatory authorities before it can
commence clinical trials or marketing of the product in target markets. 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 (EMA). 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). Japan-specific trials and/or 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.
Similarly, applications for a new product in China are submitted to the Center for Drug
Evaluation (CDE) of the National Medical Products Administration (NMPA) for technical review and
approval of a product for marketing in China. Clinical data in Chinese subjects are required to
support approval in China, requiring the inclusion of China in global pivotal studies, or a separate
China/Asian clinical trial.
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 market (such as the United States or Europe) before the country will begin or complete
its regulatory review process. Similar to the requirements in Japan and China, certain countries
(notably South Korea, Taiwan and Russia) also require that local clinical studies be conducted in
order to support 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).
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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 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
lead to updates to the data regarding 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 oversight, 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 payers 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. Political and 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.
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
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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 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.
Under the Patient Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act (together, the Affordable Care Act), AbbVie pays a fee related to its
pharmaceuticals sales to government programs. In addition, AbbVie provides a discount of 50% 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 to
record any transfers of value to physicians and teaching hospitals and to report this data 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 2021 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.
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
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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. Many governments are also following a similar path for biosimilar therapies.
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/
biosimilar 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.
Regulation—Medical Devices
Medical devices are subject to regulation by the FDA, state agencies and foreign government
health authorities. FDA regulations, as well as various U.S. federal and state laws, govern the
development, clinical testing, manufacturing, labeling, record keeping and marketing of medical
device products agencies in the United States. AbbVie’s medical device product candidates,
including AbbVie’s breast implants, must undergo rigorous clinical testing and an extensive
government regulatory clearance or approval process prior to sale in the United States and other
countries. The lengthy process of clinical development and submissions for clearance or approval,
and the continuing need for compliance with applicable laws and regulations, require the expenditure
of substantial resources. Regulatory clearance or approval, when and if obtained, may be limited in
scope, and may significantly limit the indicated uses for which a product may be marketed. Cleared
or approved products and their manufacturers are subject to ongoing review, and discovery of
previously unknown problems with products may result in restrictions on their manufacture, sale,
and/or use or require their withdrawal from the market.
United States.
AbbVie’s medical device products are subject to extensive regulation by the
FDA in the United States. Unless an exemption applies, each medical device AbbVie markets in the
United States must have a 510(k) clearance or a Premarket Approval Application (PMA) in
accordance with the FFDCA and its implementing regulations. The FDA classifies medical devices
into one of three classes, depending on the degree of risk associated with each medical device and
the extent of controls that are needed to ensure safety and effectiveness. Devices deemed to pose a
lower risk are placed in either Class I or Class II, and devices deemed by the FDA to pose the
greatest risk, such as life-sustaining, life-supporting or implantable devices, or a device deemed to
be not substantially equivalent to a previously cleared 510(k) device, are placed in Class III. In
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general, a Class III device cannot be marketed in the United States unless the FDA approves the
device after submission of a PMA, and any changes to the device subsequent to initial FDA
approval must also be reviewed and approved by the FDA. The majority of AbbVie’s medical device
products, including AbbVie’s breast implants, are regulated as Class III medical devices. A Class III
device may have significant additional obligations imposed in its conditions of approval, and the time
in which it takes to obtain approval can be long. Compliance with regulatory requirements is assured
through periodic, unannounced facility inspections by the FDA and other regulatory authorities, and
these inspections may include the manufacturing facilities of AbbVie’s subcontractors or other third-
party manufacturers. Failure to comply with applicable regulatory requirements can result in
enforcement action by the FDA, which may include any of the following sanctions: warning letters or
untitled letters; fines, injunctions and civil penalties; recall or seizure of AbbVie’ products; operating
restrictions, partial suspension or total shutdown of production; refusing AbbVie’ request for 510(k)
clearance or PMA approval of new products; withdrawing 510(k) clearance or PMA approvals that
are already granted; and criminal prosecution.
A clinical trial is almost always required to support a PMA application and is sometimes required
for a 510(k) premarket notification. Clinical trials generally require submission of an application for an
investigational device exemption (IDE), which must be supported by appropriate data, such as
animal and laboratory testing results, showing that it is safe to test the device in humans and that
the testing protocol is scientifically sound. A study sponsor must obtain approval for its IDE from the
FDA, and it must also obtain approval of its study from the Institutional Review Board (IRB)
overseeing the trial. The results of clinical testing may not be sufficient to obtain approval of the
investigational device.
Once a device is approved, the manufacture and distribution of the device remains subject to
continuing regulation by the FDA, including Quality System Regulation requirements, which involve
design, testing, control, documentation and other quality assurance procedures during the
manufacturing process. Medical device manufacturers and their subcontractors are required to
register their establishments and list their manufactured devices with the FDA and are subject to
periodic unannounced inspections by the FDA and certain state agencies for compliance with
regulatory requirements. Manufacturers must also report to the FDA if their devices may have
caused or contributed to a death or serious injury or malfunctioned in a way that could likely cause
or contribute to a death or serious injury, or if the manufacturer conducts a field correction or product
recall or removal to reduce a risk to health posed by a device or to remedy a violation of the FFDCA
that may present a health risk. Further, the FDA continues to regulate device labeling, and prohibits
the promotion of products for unapproved or ‘‘off-label’’ uses along with other labeling restrictions.
European Union.
Medical device products that are marketed in the European Union must
comply with the requirements of the Medical Device Regulation (the MDR), which will come into
effect in May 2021. The MDR provides for regulatory oversight with respect to the design,
manufacture, clinical trials, labeling and adverse event reporting for medical devices to ensure that
medical devices marketed in the European Union are safe and effective for their intended uses.
Medical devices that comply with the MDR are entitled to bear a Conformit ´e Europ ´eenne marking
evidencing such compliance and may be marketed in the European Union. Failure to comply with
these domestic and international regulatory requirements could affect AbbVie’s ability to market and
sell AbbVie’s products in these countries.
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 expenditures for pollution control in 2020 were
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approximately $6 million and operating expenditures were approximately $34 million. In 2021, capital
expenditures for pollution control are estimated to be approximately $9 million and operating
expenditures are estimated to be approximately $36 million.
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 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.
Employees
AbbVie employed approximately 47,000 employees in over 70 countries as of January 31, 2021.
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.
Human Capital Management
Attracting, retaining and providing meaningful growth and development opportunities to AbbVie’s
employees is critical to the company’s success in making a remarkable impact on people’s lives
around the world. AbbVie leverages numerous resources to identify and enhance strategic and
leadership capability, foster employee engagement and create a culture where diverse talent is
productive and engaged. AbbVie invests in its employees through competitive compensation,
benefits and employee support programs and offers best-in-class development and leadership
opportunities. AbbVie has developed a deep talent base through ongoing investment in functional
and leadership training and by sourcing world-class external talent, ensuring a sustainable talent
pipeline. AbbVie continuously cultivates and enhances its working culture and embraces equality,
diversity and inclusion as fundamental to the company’s mission.
Attracting and Developing Talent.
Attracting and developing high-performing talent is
essential to AbbVie’s continued success. AbbVie implements detailed talent attraction strategies, with
an emphasis on STEM skill sets, a diverse talent base and other critical skillsets, including drug
discovery, clinical development, market access, and business development. AbbVie also invests in
competitive compensation and benefits programs. In addition to offering a comprehensive suite of
benefits ranging from medical and dental coverage to retirement, disability and life insurance
programs, AbbVie also provides health promotion programs, mental health awareness campaigns
and employee assistance programs in several countries, financial wellness support, on-site health
screenings and immunizations in several countries and on-site fitness and rehabilitation centers. In
addition, the AbbVie Employee Assistance Fund (a part of the AbbVie Foundation) supports two
programs for global employees: the AbbVie Possibilities Scholarship for children of employees,
which is an annual merit-based scholarship for use at accredited colleges, universities or vocational-
technical schools; and the Employee Relief Program, which is financial assistance to support short
term needs of employees when faced with large-scale disasters (e.g. a hurricane), individual
disasters (e.g. a home fire) or financial hardship (e.g. the death of a spouse). Finally, AbbVie
empowers managers and their teams with tools, tips and guidelines on effectively managing
workloads, managing teams from a distance and supporting flexible work practices.
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New AbbVie employees are given a tailored onboarding experience for faster integration and to
support performance. AbbVie’s mentorship program allows employees to self-nominate as mentors
or mentees and facilitates meaningful relationships supporting employees’ career and development
goals.
AbbVie also provides structured, broad-based development opportunities, focusing on
high-performance skills and leadership training. AbbVie’s talent philosophy holds leaders accountable
for building a high-performing organization, and the company provides development opportunities to
all levels of leadership. AbbVie’s Learn, Develop, Perform program offers year-long, self-directed
leadership education, supplemented with tools and resources, and leverages leaders as role models
and teachers. In addition, the foundation to AbbVie’s leadership pipeline is the company’s
Professional Development Programs, which attract graduates, postgraduates and post-doctoral talent
to participate in formal development programs lasting up to three years, with the objective of
strengthening functional and leadership capabilities. AbbVie also recently introduced additional
development support to senior leaders who are managing increased integration and operational
complexity following the transformational acquisition of Allergan.
Culture.
AbbVie’s shared values of transforming lives, acting with integrity, driving innovation,
embracing diversity and inclusion, and serving the community form the core of the company’s
culture. AbbVie articulates the behaviors associated with these values in the Ways We Work, a core
set of working behaviors that emphasize how the company achieves results is equally as important
as achieving them. The Ways We Work are designed to ensure that every AbbVie employee is
aware of the company’s cultural expectations. AbbVie integrates the Ways We Work into all talent
processes, forming the basis for assessing performance, prioritizing development, and ultimately
rewarding employees. AbbVie believes it culture creates strong engagement, which is measured
regularly through a confidential, third party all-employee survey, and this engagement supports
AbbVie’s mission of making a remarkable impact on people’s lives.
Equity, Equality, Diversity & Inclusion (EED&I).
A cornerstone of AbbVie’s human capital
management approach is to prioritize fostering an inclusive and diverse workforce. In 2019, AbbVie
adopted a five-year Equality, Diversity & Inclusion roadmap that defines key global focus areas,
objectives and associated initiatives, and includes implementation plans organized by business
function and geography. AbbVie’s senior leaders have adopted formal goals aligned with executing
this strategy. Over the past year, AbbVie’s board of directors has prioritized oversight of AbbVie’s
response to the U.S. racial justice movement, including overseeing internal programs designed to
ensure that AbbVie is attracting, retaining and developing diverse talent. Through June 2020, women
represented 49 percent of management positions globally and in the United States, 33 percent of
AbbVie’s workforce was comprised of members of historically underrepresented populations, an
increase from 2019. Further, AbbVie is committed to pay equity and conducts pay equity analyses
annually. A critical component of AbbVie’s strategy is to instill an inclusive mindset in all AbbVie
leaders and employees, so the company can realize the full value of a diverse workforce from
recruitment through retirement. AbbVie recently launched a new toolkit for people who manage
others to reinforce the importance of EED&I to the business, educate leaders on inclusive recruiting
practices and modeling inclusive behavior, and encourage participation in the company’s inclusive
culture learning opportunities. AbbVie’s Employee Resource Groups also help the company nurture
an inclusive culture by building community, hosting awareness events and providing leadership and
career opportunities. In 2020, AbbVie reiterated its commitment to racial equality and social justice
by appointing two additional senior level positions to drive change and awareness company-wide
and taking deliberate steps to ensure AbbVie leads by example in promoting racial equity, as further
described on the company’s website at: https://www.abbvie.com/our-company/our-principles/
our-commitment-to-racial-justice.html.
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COVID-19 Health and Safety.
AbbVie has effectively prioritized the health and safety of its
employees during the COVID-19 pandemic, while continuing to drive strong business performance.
AbbVie also implemented, among other things, temporary office and facility closures and
establishment of new safety and cleaning protocols and procedures; regular communication
regarding the effect of the pandemic on AbbVie’s business and employees; establishment of physical
distancing procedures, modification of workspaces, and provision of personal protective equipment
and cleaning supplies for employees; temperature screening at all company locations; a variety of
testing resources including on-site and at-home testing and COVID case management programs;
and remote working accommodations and related services to support employees’ needs for flexibility.
In addition, COVID-19 is a covered event under the AbbVie Employee Assistance Fund’s Employee
Relief Program, entitling eligible AbbVie employees and their families to financial assistance to pay
for mortgage/rent, utilities, food, childcare and medical expenses not covered by insurance. AbbVie
also provided paid leave and other support and accommodations to the company’s employees with
relevant medical, pharmaceutical, R&D, science, public health and public safety skills, knowledge,
training and experience who desired or were requested or mandated to serve as volunteers during
the pandemic. Lastly, AbbVie’s commitment to employees was evidenced by no workforce
reductions and no salary reductions associated with COVID-19.
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 two groups: risks related to AbbVie’s business 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
Public health outbreaks, epidemics or pandemics, such as the coronavirus (COVID-19),
have had, and could in the future have, an adverse impact on AbbVie’s operations and
financial condition.
Public health outbreaks, epidemics or pandemics have had, and could in the future have, an
adverse impact on AbbVie’s operations and financial condition. The continuing pandemic caused by
the novel strain of coronavirus (COVID-19) has caused many countries, including the United States,
to declare national emergencies and implement preventive measures such as travel bans and
shelter in place or total lock-down orders, some of which have eased. The continuation or
re-implementation of these bans and orders remains uncertain. The COVID-19 pandemic has
caused AbbVie to modify its business practices (including instituting remote work for many of
AbbVie’s employees), and AbbVie may take further actions as may be required by government
authorities or as AbbVie determines are in the best interests of AbbVie’s employees, patients,
customers and business partners.
While the impact of COVID-19 on AbbVie’s operations, including, among others, its
manufacturing and supply chain, sales and marketing, commercial and clinical trial operations,
to-date has not been material, AbbVie has experienced lower new patient starts across the
therapeutic portfolio. The impact of COVID-19 on AbbVie over the long-term is uncertain and cannot
be predicted with confidence. The extent of the adverse impact of COVID-19 on AbbVie’s operations
will depend on the extent and severity of the continued spread of COVID-19 globally, the timing and
nature of actions taken to respond to COVID-19 and the resulting economic consequences.
Ultimately, the outbreak could have a material adverse impact on AbbVie’s operations and financial
condition.
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.
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As patents for certain of its products expire, AbbVie will or could face competition from lower
priced generic or biosimilar 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,
biosimilars 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 or biosimilars. 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 $19.8 billion in 2020, expired in December 2016, and the equivalent European Union
patent expired in the majority of European Union countries in October 2018.
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 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,
circumvented or weakened, 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
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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 43% of AbbVie’s total net revenues in 2020. 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
(as described further in ‘‘—The expiration or loss of patent protection and licenses may adversely
affect AbbVie’s future revenues and operating earnings’’ above), the commercialization 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 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
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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 and joint ventures with pharmaceutical and biotechnology
companies for a portion of the products in its near-term pharmaceutical pipeline. 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 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 are subject to competition from biosimilars.
The Biologics Price Competition and Innovation Act creates 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 and do compete with AbbVie’s biologic products, including Humira. As
competitors 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.
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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 anti-TNF products and other competitive products intended to treat
a number of disease states and Mavyret/Maviret competes with other available hepatitis C treatment
options. In addition, in the past few years, a number of other companies have started to develop,
have successfully developed and/or are currently marketing products that are being positioned as
competitors to Botox. All of these competitors may introduce new products or develop technological
advances that compete with AbbVie’s products in therapeutic areas such as immunology,
hematologic oncology, aesthetics, neuroscience, eye care and women’s health. 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 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.
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Certain aspects of AbbVie’s operations are highly dependent upon third party service
providers.
AbbVie relies on suppliers, vendors and other third party service providers to research, develop,
manufacture, commercialize, promote and sell its products. Reliance on third party manufacturers
reduces AbbVie’s oversight and control of the manufacturing process. Some of these third party
providers are subject to legal and regulatory requirements, privacy and security risks and market
risks of their own. The failure of a critical third party service provider to meet its obligations could
have a material adverse impact on AbbVie’s operations and results. If any third party service
providers have violated or are alleged to have violated any laws or regulations during the
performance of their obligations to AbbVie, it is possible that AbbVie could suffer financial and
reputational harm or other negative outcomes, including possible legal consequences.
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 and regulatory action could be taken
by such 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 other 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. For example, lawsuits are pending
against Allergan, AbbVie’s newly acquired subsidiary, and certain of its current and former officers
alleging they made misrepresentations and omissions regarding Allergan’s textured breast implants.
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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AbbVie is also the subject of other claims, legal proceedings and investigations in the ordinary
course of business, which relate to the intellectual property, commercial, securities and other
matters. Adverse outcomes in such claims, legal proceedings and investigations may also adversely
affect AbbVie’s business and results of operations. Additionally, Allergan has been named as a
defendant in approximately 3,100 matters relating to the promotion and sale of prescription opioid
pain relievers and additional suits may be filed. See Note 15, ‘‘Legal Proceedings and
Contingencies’’ to the Consolidated Financial Statements included under Item 8, ‘‘Financial
Statements and Supplementary Data.’’ AbbVie cannot predict the outcome of these proceedings.
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.
AbbVie is subject to increasing public and legislative pressure with respect to pharmaceutical
pricing. 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
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Development,’’ ‘‘Business—Regulation—Commercialization, Distribution and Manufacturing,’’ and
‘‘Business—Regulation—Medical Devices.’’ 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 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, the U.S.
Physician Payments Sunshine Act, the TRICARE program, the government pricing rules applicable
to the Medicaid, Medicare Part B, 340B Drug Pricing Program 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.
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 made up approximately 24% of
AbbVie’s total net revenues in 2020. 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;
• international trade disruptions or disputes;
• 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 as a result of the United Kingdom’s exit from the
European Union and the COVID-19 pandemic;
• sovereign debt issues;
• price and currency exchange controls, limitations on participation in local enterprises,
expropriation, nationalization and other governmental action and regulation;
• inflation, recession and fluctuations in interest rates;
• restrictions on transfers of funds;
• 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.
If AbbVie does not effectively and profitably commercialize its products, AbbVie’s
revenues and financial condition could be adversely affected.
AbbVie must effectively and profitably commercialize its principal products by creating and
meeting continued market demand; achieving market acceptance and generating product sales;
ensuring that the active pharmaceutical ingredient(s) for a product 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
ensuring that the entire supply chain efficiently and consistently delivers AbbVie’s products to its
customers. The commercialization of AbbVie products 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 approved indications, the relative price of AbbVie’s product as compared to
alternative treatment options and changes to a product’s label that further restrict its marketing. If the
commercialization of AbbVie’s principal products is unsuccessful, AbbVie’s ability to generate
revenue from product sales 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, joint ventures and strategic
alliances, or dispose of some of its assets, as part of its business strategy. AbbVie may not
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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 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, joint ventures,
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 2020, three wholesale distributors (McKesson Corporation, Cardinal Health, Inc. and
AmerisourceBergen Corporation) accounted for substantially all of AbbVie’s sales 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. In particular, AbbVie incurred significant debt in connection with its
acquisition of Allergan. AbbVie’s substantially increased indebtedness and higher debt to equity ratio
as a result of the acquisition may exacerbate these risks and have the effect of, among other things,
reducing its flexibility to respond to changing business and economic conditions and/or lowering its
credit ratings. To the extent AbbVie incurs additional indebtedness or interest rates increase, these
risks could increase further. 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
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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 have a
material adverse effect on AbbVie’s business.
AbbVie relies on sophisticated software applications and complex information technology
systems to operate its business. These systems are potentially vulnerable to malicious intrusion,
random attack, loss of data privacy, disruption, degradation or breakdown. Data privacy or security
breaches by employees or others have resulted, and may in the future result, in the failure of critical
business operations or may cause sensitive data, including intellectual property, trade secrets or
personal information belonging to AbbVie, its patients, customers or business partners, to be
exposed to unauthorized persons or to the public. To date, AbbVie’s business or operations have
not been materially impacted by such incidents. 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 material breakdowns or breaches in AbbVie’s information
technology systems that could adversely affect AbbVie’s business. Such adverse consequences
could include loss of revenue, or the loss of critical or sensitive information from AbbVie’s or third-
party providers’ databases or IT systems and could also result in legal, financial, reputational or
business harm to AbbVie and potentially substantial remediation costs.
In connection with the acquisition of Allergan, AbbVie’s balances of intangible assets,
including developed product rights and goodwill acquired, have increased significantly.
Such balances are subject to impairment testing and may result in impairment charges,
which will adversely affect AbbVie’s results of operations and financial condition.
A significant amount of AbbVie’s total assets is related to acquired intangibles and goodwill. As
of December 31, 2020, the carrying value of AbbVie’s developed product rights and other intangible
assets was $82.9 billion and the carrying value of AbbVie’s goodwill was $33.1 billion.
AbbVie’s developed product rights are stated at cost, less accumulated amortization. AbbVie
determines original fair value and amortization periods for developed product rights based on its
assessment of various factors impacting estimated useful lives and cash flows of the acquired
products. Significant adverse changes to any of these factors require AbbVie to perform an
impairment test on the affected asset and, if evidence of impairment exists, require AbbVie to take
an impairment charge with respect to the asset. For assets that are not impaired, AbbVie may adjust
the remaining useful lives. Such a charge could have a material adverse effect on AbbVie’s results
of operations and financial condition.
AbbVie’s other significant intangible assets include in-process research and development
(IPR&D) intangible projects, acquired in recent business combinations, which are indefinite-lived
intangible assets.
Goodwill and AbbVie’s IPR&D intangible assets are tested for impairment annually, or when
events occur or circumstances change that could potentially reduce the fair value of the reporting
unit or intangible asset. Impairment testing compares the fair value of the reporting unit or intangible
asset to its carrying amount. A goodwill or IPR&D impairment, if any, would be recorded in operating
income and could have a material adverse effect on AbbVie’s results of operations and financial
condition.
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Failure to attract and retain highly qualified personnel could affect AbbVie’s ability to
successfully develop and commercialize products.
AbbVie’s success is largely dependent on its continued ability to attract and retain highly
qualified scientific, technical and management personnel, as well as personnel with expertise in
clinical research and development (R&D), governmental regulation and commercialization.
Competition for qualified personnel in the biopharmaceutical field is intense. AbbVie cannot be sure
that it will be able to attract and retain quality personnel or that the costs of doing so will not
materially increase.
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, data privacy laws,
particularly in the European Union and the United States, 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 and contingent
consideration, 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;
• environmental liabilities in connection with AbbVie’s manufacturing processes and distribution
logistics, including the handling of hazardous materials;
• 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
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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 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 encouraging 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% 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.
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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%
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% 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.
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.
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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 manufacturing facilities are in the following locations:
United States
Abbott Park, Illinois*
Barceloneta, Puerto Rico
Branchburg, New Jersey*
Campbell, California
Cincinnati, Ohio
Dublin, California*
Houston, Texas
Irvine, California
North Chicago, Illinois
Waco, Texas
Worcester, Massachusetts*
Wyandotte, Michigan*
*
Leased property.
Outside the United States
Campoverde di Aprilia, Italy
Clonshaugh, Ireland
Cork, Ireland
Galway, Ireland*
Grace-Hollogne, Belgium*
Guarulhos, Brazil
La Aurora, Costa Rica
Ludwigshafen, Germany
Pringy, France
Singapore*
Sligo, Ireland
Westport, Ireland
In addition to the above, AbbVie has other manufacturing facilities worldwide. AbbVie believes
its facilities are suitable and provide adequate production capacity. There are no material
encumbrances on AbbVie’s owned properties.
In the United States, including Puerto Rico, AbbVie has two central distribution centers. AbbVie
also has research and development facilities in the United States located at: Abbott Park, Illinois;
Branchburg, New Jersey; Irvine, California; Madison, New Jersey; North Chicago, Illinois;
Pleasanton, California; Redwood City, California; Santa Cruz, California; South San Francisco,
California; Sunnyvale, California; Cambridge, Massachusetts; and Worcester, Massachusetts.
Outside the United States, AbbVie’s principal research and development facilities are located in
Ludwigshafen, Germany and Liverpool, United Kingdom.
ITEM 3. LEGAL PROCEEDINGS
........................................................................................................................................................................................................................................................................................................................................
Information pertaining to legal proceedings is provided in Note 15, ‘‘Legal Proceedings and
Contingencies’’ to the 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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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table lists AbbVie’s executive officers:
Name
Age
Position
Richard A. Gonzalez
Michael E. Severino, M.D.
Laura J. Schumacher
Henry O. Gosebruch
Robert A. Michael
Timothy J. Richmond
Azita Saleki-Gerhardt, Ph.D.
Jeffrey R. Stewart
Thomas J. Hudson, M.D.
Elaine K. Sorg
Carrie Strom
Brian L. Durkin
67 Chairman of the Board and Chief Executive Officer
55
57
48
50
54
57
52
59
54
43
60
Vice Chairman and President
Vice Chairman, External Affairs and Chief Legal Officer
Executive Vice President, Chief Strategy Officer
Executive Vice President, Chief Financial Officer
Executive Vice President, Chief Human Resources Officer
Executive Vice President, Operations
Executive Vice President, Commercial Operations
Senior Vice President, Research & Development and Chief Scientific Officer
Senior Vice President, U.S. Commercial Operations
Senior Vice President, AbbVie and President, Global Allergan Aesthetics
Vice President, Controller
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. He was first appointed as an AbbVie
corporate officer in December 2012.
Dr. Severino is AbbVie’s Vice Chairman and President, responsible for research and
development, human resources, operations, and the corporate strategy office. He served as
Executive Vice President, Research and Development and Chief Scientific Officer from 2014 to
2018. 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 and was first appointed
as an AbbVie corporate officer in June 2014. Dr. Severino also serves on the board of Avantor, Inc.
Ms. Schumacher is AbbVie’s Vice Chairman, External Affairs and Chief Legal Officer,
responsible for global legal, health economics outcomes research, corporate responsibility, brand
and communications and government affairs. Prior to her current appointment in 2018, she served
as AbbVie’s Executive Vice President, External Affairs, General Counsel and Corporate Secretary.
Prior to AbbVie’s separation from Abbott, Ms. Schumacher served as Executive Vice President,
General Counsel from 2007 to 2012. Both at Abbott and AbbVie, Ms. Schumacher also led Business
Development and Ventures and Early Stage Collaborations. Ms. Schumacher joined Abbott in 1990
and was first appointed as an AbbVie corporate officer in December 2012. She serves on the board
of General Dynamics Corporation and CrowdStrike Holdings, Inc.
Mr. Gosebruch is AbbVie’s Executive Vice President, 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 and was first appointed as an AbbVie corporate officer in December 2015. He
serves on the board of Aptinyx Inc.
Mr. Michael is AbbVie’s Executive Vice President, Chief Financial Officer. Mr. Michael previously
served as Senior Vice President, Chief Financial Officer from October 2018 to July 2019, and as
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Vice President, Controller from March 2017 to October 2018. He served as AbbVie’s Vice President,
Treasurer from 2015 to 2016, as Vice President, Controller, Commercial Operations from 2013 to
2015 and Vice President, Financial Planning and Analysis from 2012 to 2013. At Abbott, Mr. Michael
served as Division Controller, Nutrition Supply Chain from 2010 to 2012. Mr. Michael joined Abbott in
1993 and was first appointed as an AbbVie corporate officer in December 2015.
Mr. Richmond is AbbVie’s Executive Vice President, Chief Human Resources Officer. He served
as Senior Vice President, Human Resources from 2013 to 2018. Mr. Richmond 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 and was first appointed as an AbbVie
corporate officer in December 2012.
Dr. Saleki-Gerhardt is AbbVie’s Executive Vice President, Operations. She served as Senior
Vice President, Operations from 2013 to 2018. Dr. Saleki-Gerhardt 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 and was first appointed as an AbbVie corporate officer in December
2012. She serves on the board of Entegris Inc.
Mr. Stewart is AbbVie’s Executive Vice President, Commercial Operations. He previously served
as Senior Vice President, U.S. Commercial Operations from 2018 to 2020 and as AbbVie’s
President, Commercial Operations from 2013 to 2018. Prior to AbbVie’s separation from Abbott, he
served as Vice President, Abbott Proprietary Pharmaceutical Division, United States. Mr. Stewart
joined Abbott in 1992 and was first appointed as an AbbVie corporate officer in December 2018.
Dr. Hudson is AbbVie’s Senior Vice President, Research & Development and Chief Scientific
Officer. He previously served as Vice President, Head of Oncology Discovery and Early
Development from 2016 to 2019. Prior to joining AbbVie, Dr. Hudson served at the Ontario Institute
for Cancer Research as President and Scientific Director. He also previously served as Founder and
Director of the McGill University and Genome Quebec Innovation Centre and Assistant Director of
the Whitehead/MIT Center for Genome Research. Dr. Hudson was first appointed as an AbbVie
corporate officer in July 2019.
Ms. Sorg is AbbVie’s Senior Vice President, U.S. Commercial Operations. She previously
served as AbbVie’s President, U.S. Immunology and Patient Services from 2019 to 2020 and as
Vice President, Immunology and Oncology from 2016 to 2018. She served as Vice President,
Immunology prior to AbbVie’s separation from Abbott and until 2016 at AbbVie. Ms. Sorg joined
Abbott in 2012 and was first appointed as an AbbVie corporate officer in November 2020. Prior to
joining Abbott, Ms. Sorg served in management roles at Eli Lilly and Company for 23 years.
Ms. Strom is AbbVie’s Senior Vice President, AbbVie, and President, Global Allergan
Aesthetics, responsible for the worldwide operations of the aesthetics franchise. She was appointed
to the position upon AbbVie’s acquisition of Allergan in 2020 and was first appointed as an AbbVie
corporate officer in May 2020. At Allergan, Ms. Strom previously served as Senior Vice President,
U.S. Medical Aesthetics from 2018 to 2020. She joined Allergan in 2011.
Mr. Durkin is AbbVie’s Vice President, Controller. Mr. Durkin previously served as Vice
President, Internal Audit from 2016 to 2018. Prior to joining AbbVie, he served as Vice President of
Finance and Division Controller for Abbott’s Vision Care business from 2009 to 2016 and Controller
Pharmaceutical Research and Development from 2005 to 2009. Mr. Durkin joined Abbott in 1986
and was first appointed as an AbbVie corporate officer in October 2018.
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
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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.
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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 (Symbol:
ABBV). AbbVie’s common stock is also listed on the Chicago Stock Exchange and traded on various
regional and electronic exchanges.
Stockholders
There were 47,754 stockholders of record of AbbVie common stock as of January 31, 2021.
Performance Graph
The following graph compares the cumulative total returns of AbbVie, the S&P 500 Index and
the NYSE Arca Pharmaceuticals Index for the period from December 31, 2015 through
December 31, 2020. This graph assumes $100 was invested in AbbVie common stock and each
index on December 31, 2015 and also assumes the reinvestment of dividends. The stock price
performance on the following graph is not necessarily indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
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 AbbVie’s filings under the Securities Act of 1933, as amended.
27FEB202113230791
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Dividends
On October 30, 2020, AbbVie’s board of directors declared an increase in the quarterly cash
dividend from $1.18 per share to $1.30 per share, payable on February 16, 2021 to stockholders of
record as of January 15, 2021. The timing, declaration, amount of and payment of any dividends by
AbbVie in the future is within the discretion of its board of directors and will depend upon many
factors, including AbbVie’s financial condition, earnings, capital requirements of its operating
subsidiaries, covenants associated with certain of AbbVie’s debt service obligations, legal
requirements, regulatory constraints, industry practice, ability to access capital markets and other
factors deemed relevant by its board of directors. 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.
Issuer Purchases of Equity Securities
(a) Total
Number
of Shares
(or Units)
Purchased
(b)
Average
Price Paid
per Share
(or Unit)
(c) Total
Number of
(d) Maximum Number (or
Shares (or Units)
Purchased as Part Approximate Dollar Value)
of Shares (or Units) that
May Yet Be Purchased
Under the Plans or
Programs
of Publicly
Announced
Plans or
Programs
Period
4,783 (1) $ 84.46 (1)
October 1, 2020 - October 31, 2020
945 (1) $ 92.50 (1)
November 1, 2020 - November 30, 2020
December 1, 2020 - December 31, 2020 2,431,776 (1) $ 105.61 (1)
—
—
2,430,910
$ 3,450,069,690
$ 3,450,069,690
$ 3,193,341,387
Total
2,437,504 (1) $ 105.56 (1)
2,430,910
$ 3,193,341,387
1.
In addition to AbbVie shares repurchased on the open market under a publicly announced
program, if any, these shares also included the shares purchased on the open market for the
benefit of participants in the AbbVie Employee Stock Purchase Plan — 4,783 in October; 945 in
November; and 866 in December.
These shares do not include the shares surrendered to AbbVie to satisfy minimum tax
withholding obligations in connection with the vesting or exercise of stock-based awards.
ITEM 6. [RESERVED]
........................................................................................................................................................................................................................................................................................................................................
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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). This commentary should be read in conjunction with the consolidated financial
statements and accompanying notes appearing in Item 8, ‘‘Financial Statements and Supplementary
Data.’’ This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year
comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons
between 2019 and 2018 that are not included in this Form 10-K can be found in ‘‘Management’s
Discussion and Analysis of Financial Condition and Results of Operations’’ in Part II, Item 7 of the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
EXECUTIVE OVERVIEW
Company Overview
AbbVie is a global, research-based biopharmaceutical company formed in 2013 following
separation from Abbott Laboratories (Abbott). AbbVie uses its expertise, dedicated people and
unique approach to innovation to develop and market advanced therapies that address some of the
world’s most complex and serious diseases.
On May 8, 2020, AbbVie completed the acquisition of Allergan plc (Allergan). The acquisition of
Allergan creates a diversified biopharmaceutical company positioned for success with a
comprehensive product portfolio that has leadership positions in key therapeutic areas of
immunology, hematologic oncology, aesthetics, neuroscience, eye care and women’s health.
AbbVie’s existing product portfolio and pipeline is enhanced with numerous Allergan assets and
Allergan’s product portfolio benefits from AbbVie’s commercial strength, expertise and international
infrastructure. See Note 5 to the Consolidated Financial Statements for additional information on the
acquisition. Subsequent to the acquisition date, AbbVie’s consolidated financial statements include
the assets, liabilities, operating results and cash flows of Allergan.
AbbVie’s products are generally sold worldwide directly to wholesalers, distributors, government
agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned
distribution centers and public warehouses. Certain products (including aesthetic products and
devices) are also sold directly to physicians and other licensed healthcare providers. In the United
States, AbbVie distributes pharmaceutical products principally through independent wholesale
distributors, with some sales directly to retailers, pharmacies and patients. Outside the United States,
AbbVie sells products primarily to customers or through distributors, depending on the market
served. Certain products are co-marketed or co-promoted with other companies. AbbVie has
approximately 47,000 employees. AbbVie operates as a single global business segment.
2020 Financial Results
AbbVie’s strategy has focused on delivering strong financial results, maximizing the benefits of
the Allergan acquisition, advancing and investing in its pipeline and returning value to shareholders
while ensuring a strong, sustainable growth business over the long term. The company’s financial
performance in 2020 included delivering worldwide net revenues of $45.8 billion, operating earnings
of $11.4 billion, diluted earnings per share of $2.72 and cash flows from operations of $17.6 billion.
Worldwide net revenues increased by 38% on a reported basis and on a constant currency basis,
which included $10.3 billion of contributed revenues from the Allergan acquisition, growth in the
immunology portfolio from Skyrizi, Rinvoq and the continued strength of Humira in the U.S. as well
as revenue growth from Imbruvica and Venclexta.
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Diluted earnings per share in 2020 was $2.72 and included the following after-tax costs:
(i) $5.7 billion for the change in fair value of contingent consideration liabilities; (ii) $4.8 billion related
to the amortization of intangible assets; (iii) $3.0 billion of Allergan acquisition and integration
expenses; (iv) $1.2 billion for acquired in-process research and development (IPR&D); and
$241 million for milestones and other research and development (R&D) expenses. These costs were
partially offset by $1.7 billion of certain tax benefits. Additionally, financial results reflected continued
funding to support all stages of AbbVie’s pipeline assets and continued investment in AbbVie’s
on-market brands.
In October 2020, AbbVie’s board of directors declared a quarterly cash dividend of $1.30 per
share of common stock payable in February 2021. This reflects an increase of approximately 10.2%
over the previous quarterly dividend of $1.18 per share of common stock.
Following the closing of the Allergan acquisition, AbbVie implemented an integration plan
designed to reduce costs, integrate and optimize the combined organization. The integration plan is
expected to realize more than $2 billion of expected annual cost synergies over a three-year period,
with approximately 50% realized in R&D, 40% in selling, general and administrative (SG&A) and
10% in cost of products sold.
To achieve these integration objectives, AbbVie expects to incur approximately $2 billion of
charges through 2022. These costs will consist of severance and employee benefit costs (cash
severance, non-cash severance, including accelerated equity award compensation expense,
retention and other termination benefits) and other integration expenses.
Impact of the Coronavirus Disease 2019 (COVID-19)
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus
(COVID-19) as a pandemic, which continues to spread throughout the United States and around the
world. In response to the growing public health crisis, AbbVie has partnered with global authorities to
support the experimental use of multiple AbbVie assets to determine their efficacy in the treatment of
COVID-19. In June 2020, AbbVie announced that it entered into a collaboration with Harbour
BioMed, Utrecht University and Erasmus Medical Center to develop a novel antibody therapeutic to
prevent and treat COVID-19. Additionally, AbbVie donated $35 million to increase healthcare
capacity, supply critical equipment and deliver food and essential supplies during the crisis. AbbVie
continues to closely manage manufacturing and supply chain resources around the world to help
ensure that patients continue to receive an uninterrupted supply of their medicines. Clinical trial sites
are being monitored locally to protect the safety of study participants, staff and employees. While the
impact of COVID-19 on AbbVie’s operations to date has not been material, AbbVie has experienced
lower new patient starts across the therapeutic portfolio. AbbVie expects this matter could continue
to negatively impact its results of operations throughout the duration of the outbreak. The extent to
which COVID-19 may impact AbbVie’s financial condition and results of operations remains
uncertain.
2021 Strategic Objectives
AbbVie’s mission is to discover and develop innovative medicines and products that solve
serious health issues today and address the medical challenges of tomorrow while achieving top-tier
financial performance through outstanding execution. AbbVie intends to continue to advance its
mission in a number of ways, including: (i) maximizing the benefits of the Allergan acquisition to
create a more diversified revenue base with multiple long-term growth drivers; (ii) growing revenues
by leveraging AbbVie’s commercial strength and international infrastructure across Allergan’s
therapeutic areas and ensuring strong commercial execution of new product launches; (iii) continuing
to invest in and expand its pipeline in support of opportunities in immunology, oncology, aesthetics,
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neuroscience, eye care and women’s health as well as continued investment in key on-market
products; (iv) expanding operating margins; and (v) returning cash to shareholders via a strong and
growing dividend while also reducing debt. In addition, AbbVie anticipates several regulatory
submissions and key data readouts from key clinical trials in the next 12 months.
AbbVie expects to achieve its strategic objectives through:
• Immunology revenue growth driven by increasing market share and expanding patient access
of Skyrizi and Rinvoq, as well as Humira U.S. sales growth.
• Hematologic oncology revenue growth from both Imbruvica and Venclexta.
• Expansion of the company’s revenue base from additional Allergan products contributing to
key aesthetics and neuroscience portfolios.
• Effective management of Humira international biosimilar erosion.
• Optimization of combined AbbVie and Allergan research and development, commercial, and
manufacturing operations while maintaining key growth portfolios.
• The favorable impact of pipeline products and indications recently approved or currently under
regulatory review where approval is expected in 2021. These products are described in
greater detail in the section labeled ‘‘Research and Development’’ included as part of this
Item 7.
AbbVie remains committed to driving continued expansion of operating margins and expects to
achieve this objective through continued leverage from revenue growth, realization of expense
synergies from the Allergan acquisition, productivity initiatives in supply chain and ongoing efficiency
programs to optimize manufacturing, commercial infrastructure, administrative costs and general
corporate expenses.
The combination of AbbVie and Allergan creates a diverse entity with leadership positions
across immunology, hematologic oncology, aesthetics, neuroscience, women’s health, eye care and
virology. AbbVie’s existing product portfolio and pipeline is enhanced with numerous Allergan assets
and Allergan’s product portfolio benefits from AbbVie’s commercial strength, expertise and
international infrastructure.
Research and Development
Research and innovation are the cornerstones of AbbVie’s business as a global
biopharmaceutical company. AbbVie’s long-term success depends to a great extent on its ability to
continue to discover and develop innovative products and acquire or collaborate on compounds
currently in development by other biotechnology or pharmaceutical companies.
AbbVie’s pipeline currently includes more than 90 compounds, devices or indications in
development individually or under collaboration or license agreements and is focused on such
important specialties as immunology, oncology, aesthetics, neuroscience, eye care and women’s
health along with targeted investments in cystic fibrosis. Of these programs, more than 50 are in
mid- and late-stage development.
The following sections summarize transitions of significant programs from mid-stage
development to late-stage development as well as developments in significant late-stage and
registration programs. AbbVie expects multiple mid-stage programs to transition into late-stage
programs in the next 12 months.
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Significant Programs and Developments
Immunology
Skyrizi
•
•
In January 2021, AbbVie announced top-line results from its Phase 3 KEEPsAKE-1 and
KEEPsAKE-2 clinical trials of Skyrizi in adults with active psoriatic arthritis (PsA) met the
primary and ranked secondary endpoints.
In January 2021, AbbVie announced top-line results from its Phase 3 ADVANCE and
MOTIVATE induction studies of Skyrizi in patients with Crohn’s Disease met the primary
and key secondary endpoints.
Rinvoq
•
•
•
•
•
•
•
In February 2020, AbbVie announced top-line results from its second Phase 3 clinical trial
of Rinvoq in adult patients with active PsA. Results from the SELECT-PsA 1 study, which
evaluated Rinvoq versus placebo in patients who did not adequately respond to treatment
with one or more non-biologic disease-modifying anti-rheumatic drugs (DMARDs),
showed that both doses of Rinvoq met the primary and key secondary endpoints. The
safety profile was consistent with that of previous studies across indications, with no new
safety risks detected.
In May 2020, AbbVie submitted a supplemental New Drug Application (sNDA) to the U.S.
Food and Drug Administration (FDA) and, in June 2020, submitted a marketing
authorization application (MAA) to the European Medicines Agency (EMA) for Rinvoq for
the treatment of adult patients with active PsA.
In June 2020, AbbVie announced top-line results from its Phase 3 Measure Up 1 study
and, in July 2020, announced top-line results from its Phase 3 Measure Up 2 and AD Up
studies of Rinvoq for the treatment of moderate to severe atopic dermatitis (AD) met all
primary and secondary endpoints versus placebo.
In August 2020, AbbVie submitted an sNDA to the FDA and, earlier this year, submitted
an MAA to the EMA for Rinvoq for the treatment of adult patients with active ankylosing
spondylitis (AS).
In October 2020, AbbVie submitted an sNDA to the FDA and an MAA to the EMA for
Rinvoq for the treatment of adult and adolescent patients with moderate to severe AD.
In December 2020, AbbVie announced its Phase 3 U-ACHIEVE induction study of Rinvoq
for the treatment of adult patients with moderate to severe ulcerative colitis met the
primary and all ranked secondary endpoints.
In January 2021, AbbVie announced that the European Commission (EC) approved
Rinvoq for the treatment of adults with active PsA and active AS.
Oncology
Imbruvica
•
•
In April 2020, AbbVie received FDA approval for the use of Imbruvica in combination with
rituximab for the treatment of previously untreated patients with chronic lymphocytic
leukemia (CLL) or small lymphocytic lymphoma (SLL).
In August 2020, the EC granted marketing authorization for Imbruvica in combination with
rituximab for the treatment of adult patients with previously untreated CLL.
43
2020 Form 10-K
13NOV201221352027
43
Venclexta
•
•
•
•
•
In February 2020, AbbVie announced that the Phase 3 VIALE-C trial of Venclexta in
combination with low-dose cytarabine in newly-diagnosed patients with acute myeloid
leukemia (AML) did not meet its primary endpoint.
In March 2020, AbbVie announced that top-line results from its Phase 3 VIALE-A trial of
Venclexta in combination with azacitidine in patients with AML met its primary endpoints.
In March 2020, AbbVie received EC approval of Venclyxto in combination with
obinutuzumab for patients with previously untreated CLL.
In June 2020, AbbVie submitted an MAA to the EMA for Venclyxto for the treatment of
patients with AML.
In October 2020, AbbVie received FDA full approval of Venclexta for the treatment of
patients with AML. The approval is supported by data from a series of trials including the
Phase 3 VIALE-A and VIALE-C studies.
Aesthetics
Juvederm Collection
•
In June 2020, AbbVie received FDA approval of Juvederm Voluma XC for the
augmentation of the chin region to improve the chin profile in adults over the age of 21.
Neuroscience
Botox Therapeutic
•
•
In June 2020, the FDA accepted the company’s supplemental Biologics License
Application (sBLA) to expand the Botox prescribing information for the treatment of
detrusor (bladder muscle) overactivity associated with an underlying neurologic condition
in certain pediatric patients. In February 2021, AbbVie received FDA approval of Botox
for the treatment of detrusor overactivity associated with a neurological condition in
certain pediatric patients 5 years of age and older.
In July 2020, AbbVie received FDA approval of Botox for the treatment of lower limb
spasticity caused by cerebral palsy in pediatric patients over the age of 2.
Atogepant
•
•
In July 2020, AbbVie announced that the Phase 3 ADVANCE trial evaluating atogepant,
an orally administered calcitonin gene-related peptide receptor antagonist, for migraine
prevention met its primary endpoint for all doses (10mg, 30mg, and 60mg) compared to
placebo, all secondary endpoints with 30mg and 60mg doses, and four out of six
secondary endpoints with the 10mg dose.
In January 2021, AbbVie submitted a New Drug Application to the FDA for atogepant for
the prevention of episodic migraine.
Elezanumab
•
In September 2020, AbbVie announced that the FDA granted Orphan Drug and Fast
Track designations for elezanumab, an investigational treatment for patients following
spinal cord injury.
44
13NOV201221352027
2020 Form 10-K
44
Virology/Liver Disease
Mavyret
•
In March 2020, AbbVie announced that the EC granted marketing authorization for
Maviret to shorten once-daily treatment duration from 12 to 8 weeks in treatment-na¨ıve,
compensated cirrhotic, chronic hepatitis C virus (HCV) patients with genotype 3 infection.
Eye Care
AGN-190584
•
In October 2020, AbbVie announced that top-line results from its Phase 3 GEMINI 1 and
2 studies of AGN-190584, an investigational ophthalmic solution, for the treatment of
presbyopia met their primary endpoint and majority of the secondary endpoints.
Abicipar pegol
•
In June 2020, AbbVie announced that the FDA issued a Complete Response Letter
(CRL) to the Biologics License Application (BLA) for abicipar pegol, a novel,
investigational DARPin therapy for patients with neovascular (wet) age-related macular
degeneration (nAMD). The CRL indicated that the rate of intraocular inflammation
observed following administration of abicipar pegol results in an unfavorable benefit-risk
ratio in the treatment of nAMD. In July 2020, AbbVie withdrew the regulatory application
with the EMA for abicipar pegol for the treatment of nAMD.
Women’s Health
Oriahnn
•
In May 2020, the FDA approved Oriahnn (elagolix, estradiol, and norethindrone acetate
capsules; elagolix capsules) for the management of heavy menstrual bleeding due to
uterine fibroids in pre-menopausal women.
RESULTS OF OPERATIONS
Net Revenues
The comparisons presented at constant currency rates reflect comparative local currency net
revenues at the prior year’s foreign exchange rates. This measure provides information on the
change in net revenues assuming that foreign currency exchange rates had not changed between
the prior and current periods. AbbVie believes that the non-GAAP measure of change in net
revenues at constant currency rates, when used in conjunction with the GAAP measure of change in
net revenues at actual currency rates, may provide a more complete understanding of the
company’s operations and can facilitate analysis of the company’s results of operations, particularly
in evaluating performance from one period to another.
years ended (dollars in millions)
2020
2019
2018
2020
2019
2020
2019
United States
International
Net revenues
$34,879
10,925
$23,907
9,359
$21,524
11,229
45.9% 11.1% 45.9% 11.1%
16.7% (16.7)% 17.8% (13.6)%
$45,804
$33,266
$32,753
37.7% 1.6% 38.0%
2.6%
Percent change
At actual
currency
rates
At constant
currency
rates
45
2020 Form 10-K
13NOV201221352027
45
The following table details AbbVie’s worldwide net revenues:
years ended December 31 (dollars in millions)
2020
2019
2018
2020
2019
2020
2019
Percent change
At actual
currency
rates
At constant
currency
rates
Immunology
Humira
Skyrizi
Rinvoq
United States
International
Total
United States
International
Total
United States
International
Total
Hematologic Oncology
Imbruvica
United States
Collaboration revenues
Venclexta
Aesthetics
Botox Cosmetic(a)
Juvederm Collection(a)
Other Aesthetics(a)
Neuroscience
Botox Therapeutic(a)
Vraylar(a)
Duodopa
Ubrelvy(a)
Other Neuroscience(a)
Eye Care
Lumigan/Ganfort(a)
Alphagan/Combigan(a)
Restasis(a)
Other Eye Care(a)
Women’s Health
Lo Loestrin(a)
Orilissa/Oriahnn
Other Women’s Health(a)
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
United States
International
Total
United States
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
$16,112
3,720
$14,864
4,305
$13,685
6,251
8.4%
(13.6)%
$19,832
$19,169
$19,936
3.5%
8.6%
(31.1)%
(3.9)%
$ 1,385
205
$ 1,590
$
$
653
78
731
$
$
$
$
311
44
355
47
—
47
$
$
$
$
—
—
—
—
—
—
$ 4,305
1,009
$ 3,830
844
$ 2,968
622
$ 5,314
$ 4,674
$ 3,590
8.4%
(12.5)%
3.7%
>100.0%
>100.0%
>100.0%
>100.0%
>100.0%
>100.0%
12.4%
19.5%
13.7%
54.4%
97.8%
69.3%
8.6%
(27.8)%
(2.9)%
n/m
n/m
n/m
n/m
n/m
n/m
29.1%
35.8%
30.2%
>100.0%
>100.0%
>100.0%
>100.0%
>100.0%
>100.0%
>100.0%
>100.0%
>100.0%
12.4%
19.5%
13.7%
54.4%
97.0%
69.0%
n/m
n/m
n/m
n/m
n/m
n/m
29.1%
35.8%
30.2%
>100.0%
>100.0%
>100.0%
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
247
97
344
—
—
—
—
—
—
—
—
—
—
—
—
—
80
350
430
5.9%
7.4%
7.1%
20.4%
4.2%
7.2%
5.9%
6.3%
6.2%
20.4%
9.8%
11.7%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11
—
11
—
—
—
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
n/m
33.3%
96.1%
34.6%
n/m
n/m
n/m
>100.0%
n/m
>100.0%
n/m
n/m
n/m
33.3%
97.7%
34.6%
n/m
n/m
n/m
>100.0%
n/m
>100.0%
n/m
n/m
n/m
$
804
533
$ 1,337
$
687
425
$ 1,112
$
$
$
$
318
400
718
666
94
760
$ 1,155
232
$ 1,387
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
951
103
391
494
125
528
11
539
165
213
378
223
103
326
755
32
787
305
388
693
346
10
356
121
4
125
181
11
192
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
521
271
792
—
—
—
—
—
—
—
—
—
—
—
—
—
97
364
461
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
91
2
93
—
—
—
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
46
13NOV201221352027
2020 Form 10-K
46
years ended December 31 (dollars in millions)
2020
2019
2018
2020
2019
2020
2019
Percent change
At actual
currency
rates
At constant
currency
rates
Other Key Products
Mavyret
Creon
Lupron
Linzess/Constella(a)
Synthroid
n/m—Not meaningful
United States
International
Total
United States
United States
International
Total
United States
International
Total
United States
All other
Total net revenues
$
785
1,045
$ 1,473
1,420
$ 1,614
1,824
$ 1,830
$ 2,893
$ 3,438
$ 1,114
$ 1,041
$
$
$
$
$
600
152
752
649
18
667
771
$
$
$
$
$
720
167
887
—
—
—
786
$
$
$
$
$
$
928
726
166
892
—
—
—
(46.7)%
(26.4)%
(36.7)%
6.9%
(16.6)%
(9.1)%
(15.2)%
n/m
n/m
n/m
(8.8)%
(22.1)%
(15.9)%
12.2%
(0.8)%
0.8%
(0.5)%
n/m
n/m
n/m
776
(1.9)%
1.3%
$ 2,923
$ 2,068
$ 2,408
$45,804
$33,266
$32,753
41.3%
37.7%
(14.1)%
1.6%
(46.7)%
(26.8)%
(36.9)%
6.9%
(16.6)%
(5.4)%
(14.5)%
n/m
n/m
n/m
(1.9)%
42.4%
38.0%
(8.8)%
(19.6)%
(14.6)%
12.2%
(0.8)%
6.0%
0.5%
n/m
n/m
n/m
1.3%
(11.5)%
2.6%
(a)
Net revenues include Allergan product revenues from the date of the acquisition, May 8, 2020, through December 31, 2020.
The following discussion and analysis of AbbVie’s net revenues by product is presented on a
constant currency basis.
Global Humira sales increased 4% in 2020 primarily driven by market growth across therapeutic
categories, offset by direct biosimilar competition in certain international markets. In the United
States, Humira sales increased 8% in 2020 driven by market growth across all indications and
favorable pricing, partially offset by lower new patient starts due to the COVID-19 pandemic.
Internationally, Humira revenues decreased 12% in 2020 primarily driven by direct biosimilar
competition in certain international markets. Biosimilar competition for Humira is not expected in the
United States until 2023. AbbVie continues to pursue strategies intended to maintain market
leadership among its installed patient base and add to the sustainability of Humira.
Net revenues for Skyrizi increased more than 100% in 2020 primarily driven by market growth
and market share gains over the prior year following the April 2019 regulatory approvals for the
treatment of moderate to severe plaque psoriasis.
Net revenues for Rinvoq increased more than 100% in 2020 primarily driven by the August 2019
FDA approval and December 2019 EC approval for the treatment of moderate to severe rheumatoid
arthritis.
47
2020 Form 10-K
13NOV201221352027
47
Net revenues for Imbruvica represent product revenues in the United States and collaboration
revenues outside of the United States related to AbbVie’s 50% share of Imbruvica profit. AbbVie’s
global Imbruvica revenues increased 14% in 2020 as a result of continued penetration of Imbruvica
for patients with CLL, partially offset by lower new patient starts due to the COVID-19 pandemic in
2020.
Net revenues for Venclexta increased 69% in 2020 primarily due to continued expansion of
Venclexta for the treatment of patients with first-line CLL, relapsed/refractory CLL and first-line AML.
Net revenues for Botox Cosmetic used in facial aesthetics were $1.1 billion in 2020 for the
period subsequent to the completion of the Allergan acquisition.
Net revenues for Juvederm Collection (including Juvederm Ultra XC, Juvederm Voluma XC and
other Juvederm products) used in facial aesthetics were $718 million in 2020 for the period
subsequent to the completion of the Allergan acquisition.
Net revenues for Botox Therapeutic used primarily in neuroscience and urology therapeutic
areas were $1.4 billion in 2020 for the period subsequent to the completion of the Allergan
acquisition.
Net revenues for Vraylar for the treatment of schizophrenia, bipolar I disorder and bipolar
depression were $951 million in 2020 for the period subsequent to the completion of the Allergan
acquisition.
Global Mavyret sales decreased 37% in 2020 primarily driven by lower global new patient starts
due to the COVID-19 pandemic as well as competitive dynamics in the U.S.
Net revenues for Creon increased 7% in 2020 primarily driven by continued market growth,
partially offset by lower new patient starts due to the COVID-19 pandemic. Creon maintains market
leadership in the pancreatic enzyme market with approximately 80% total market share.
Net revenues for Lupron decreased 14% in 2020 primarily due to a near-term supply issue
which has impacted product availability of certain formulations.
Gross Margin
Percent
change
years ended December 31 (dollars in millions)
2020
2019
2018
2020
2019
Gross margin
as a percent of net revenues
$30,417
$25,827
$25,035
18% 3%
66%
78%
76%
Gross margin as a percentage of net revenues in 2020 decreased from 2019 primarily due to
the unfavorable impacts of higher amortization of intangible assets and inventory fair value step-up
adjustments associated with the Allergan acquisition as well as collaboration profit sharing
arrangements for Imbruvica and Venclexta.
Selling, General and Administrative
years ended December 31 (dollars in millions)
2020
2019
2018
2020
2019
Selling, general and administrative
as a percent of net revenues
$11,299
$6,942
$7,399
63% (6)%
25%
21%
23%
Percent
change
48
13NOV201221352027
2020 Form 10-K
48
Selling, general and administrative (SG&A) expenses as a percentage of net revenues in 2020
increased from 2019 primarily due to the unfavorable impacts of incremental SG&A expenses of
Allergan, including transaction and integration costs resulting from the acquisition.
Research and Development and Acquired In-Process Research and Development
Percent
change
years ended December 31 (dollars in millions)
2020
2019
2018
2020
2019
Research and development
as a percent of net revenues
Acquired in-process research and development
$6,557
$6,407
$10,329
2% (38)%
14%
19%
32%
$1,198
$ 385
$
424
>100% (9)%
Research and Development (R&D) expenses as a percentage of net revenues decreased in
2020 primarily due to the $1.0 billion intangible asset impairment charge in 2019, which represented
the remaining value of the IPR&D acquired as part of the 2016 Stemcentrx acquisition following the
decision to terminate the Rova-T R&D program. See Note 7 to the Consolidated Financial
Statements for additional information regarding the impairment charge. R&D expenses as a
percentage of net revenues in 2020 were also favorably impacted by increased scale of the
combined company for the period subsequent to the completion of the Allergan acquisition.
Acquired IPR&D expenses reflect upfront payments related to various collaborations. Acquired
IPR&D expense in 2020 included a charge of $750 million as a result of entering a collaboration
agreement with Genmab A/S (Genmab) to research, develop and commercialize investigational
bispecific antibody therapeutics for the treatment of cancer. Acquired IPR&D expense in 2020 also
included a charge of $200 million as a result of a collaboration agreement with I-Mab Biopharma
(I-Mab) for the development and commercialization of lemzoparlimab for the treatment of multiple
cancers. See Note 5 to the Consolidated Financial Statements for additional information regarding
the Genmab and I-Mab agreements. There were no individually significant transactions or cash flows
during 2019.
Other Operating Expenses and Income
Other operating income in 2019 included $550 million of income from a legal settlement related
to an intellectual property dispute with a third party and $330 million of income related to an
amended and restated license agreement between AbbVie and Reata. See Note 5 to the
Consolidated Financial Statements for additional information on the Reata agreement.
Other Non-Operating Expenses
years ended December 31 (in millions)
Interest expense
Interest income
Interest expense, net
Net foreign exchange loss
Other expense, net
2020
2019
2018
$2,454
(174)
$1,784
(275)
$1,348
(204)
$2,280
$1,509
$1,144
$
71
5,614
$
42
3,006
$
24
18
Interest expense in 2020 increased compared to 2019 primarily due to a higher average debt
balance associated with the financing of the Allergan acquisition as well as the incremental Allergan
debt acquired, partially offset by the favorable impact of lower interest rates on the company’s debt
obligations.
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49
Interest income in 2020 decreased compared to 2019 primarily due to a lower average cash and
cash equivalents balance as a result of the cash paid for the Allergan acquisition and the
unfavorable impact of lower interest rates.
Other expense, net included charges related to the change in fair value of the contingent
consideration liabilities of $5.8 billion in 2020 and $3.1 billion in 2019. The fair value of contingent
consideration liabilities is impacted by the passage of time and multiple other inputs, including the
probability of success of achieving regulatory/commercial milestones, discount rates, the estimated
amount of future sales of the acquired products and other market-based factors. In 2020, the change
in fair value primarily included the increase in the Skyrizi contingent consideration liability due to
higher estimated future sales driven by stronger market share uptake and favorable clinical trial
results as well as lower interest rates. In 2019, the Skyrizi contingent consideration liability increased
due to higher probabilities of success, higher estimated future sales, declining interest rates and
passage of time. The higher probabilities of success primarily resulted from the April 2019 regulatory
approvals of Skyrizi for the treatment of moderate to severe plaque psoriasis. These changes were
partially offset by a $91 million decrease in the Stemcentrx contingent consideration liability due to
the termination of the Rova-T R&D program.
Income Tax Expense
The effective income tax rate was negative 36% in 2020, 6% in 2019 and negative 9% in 2018.
The effective tax rate in each period differed from the statutory tax rate principally due to the impact
of foreign operations which reflects the impact of lower income tax rates in locations outside the
United States, tax incentives in Puerto Rico and other foreign tax jurisdictions, business development
activities, changes in enacted tax rates and laws and related restructuring, the cost of repatriation
decisions, tax audit settlements and Boehringer Ingelheim accretion on contingent consideration. The
decrease in the effective tax rate for 2020 over the prior year was principally due to the recognition
of a net tax benefit of $1.7 billion related to changes in tax laws and related restructuring, including
certain intra-group transfers of intellectual property and deferred tax remeasurement.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
years ended December 31 (in millions)
2020
2019
2018
Cash flows from:
Operating activities
Investing activities
Financing activities
$ 17,588
(37,557)
(11,501)
$13,324
596
18,708
$ 13,427
(1,006)
(14,396)
Operating cash flows in 2020 increased from 2019 and included the results of Allergan
subsequent to the May 8 acquisition date. Operating cash flows in 2020 were favorably impacted by
higher net revenues of the combined company and the timing of working capital cash flows, partially
offset by acquisition-related cash expenses. Operating cash flows also reflected AbbVie’s
contributions to its defined benefit plans of $367 million in 2020 and $727 million in 2019.
Investing cash flows in 2020 primarily included $39.7 billion cash consideration paid to acquire
Allergan offset by cash acquired of $1.5 billion. Investing cash flows also included net sales and
maturities of investments totaling $1.5 billion, payments made for other acquisitions and investments
of $1.4 billion and capital expenditures of $798 million. Investing cash flows in 2019 included net
sales and maturities of investment securities totaling $2.1 billion resulting from the sale of
substantially all of the company’s investments in debt securities, payments made for other
acquisitions and investments of $1.1 billion and capital expenditures of $552 million.
50
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50
Financing cash flows in 2020 included the issuance of term loans totaling $3.0 billion under the
existing $6.0 billion term loan credit agreement which were used to finance the acquisition of
Allergan. Subsequent to these borrowings, AbbVie terminated the unused commitments of the
lenders under the term loan. Additionally, financing cash flows included the May 2020 repayment of
$3.8 billion aggregate principal amount of the company’s 2.50% senior notes at maturity, the
September 2020 repayment of $650 million aggregate principal amount of 3.375% Allergan
exchange notes at maturity, and the November 2020 repayments of e700 million aggregate principal
amount of floating rate Allergan exchange notes at maturity and $450 million aggregate principal
amount of 4.875% Allergan exchange notes due February 2021.
Financing cash flows in 2019 included the issuance of $30.0 billion aggregate principal amount
of floating rate and fixed rate unsecured senior notes which were used to finance the acquisition of
Allergan. Additionally, financing cash flows in 2019 included the issuance of e1.4 billion aggregate
principal amount of unsecured senior Euro notes which the company used to redeem e1.4 billion
aggregate principal amount of 0.38% senior Euro notes that were due to mature in November 2019,
as well as the repayment of a $3.0 billion 364-day term loan credit agreement that was scheduled to
mature in June 2019.
Cash dividend payments totaled $7.7 billion in 2020 and $6.4 billion in 2019. The increase in
cash dividend payments was primarily driven by higher outstanding shares following the 286 million
shares of AbbVie common stock issued to Allergan shareholders in May 2020 as well as an
increase in the dividend rate. On October 30, 2020, AbbVie announced that its board of directors
declared an increase in the quarterly cash dividend from $1.18 per share to $1.30 per share
beginning with the dividend payable on February 16, 2021 to stockholders of record as of
January 15, 2021. This reflects an increase of approximately 10.2% over the previous quarterly rate.
The timing, declaration, amount of and payment of any dividends by AbbVie in the future is within
the discretion of its board of directors and will depend upon many factors, including AbbVie’s
financial condition, earnings, capital requirements of its operating subsidiaries, covenants associated
with certain of AbbVie’s debt service obligations, legal requirements, regulatory constraints, industry
practice, ability to access capital markets and other factors deemed relevant by its board of
directors.
The company’s stock repurchase authorization permits purchases of AbbVie shares from time to
time in open-market or private transactions at management’s discretion. The program has no time
limit and can be discontinued at any time. Under this authorization, AbbVie repurchased 8 million
shares for $757 million in 2020 and 4 million shares for $300 million in 2019. AbbVie cash-settled
$201 million of its December 2018 open market purchases in January 2019. AbbVie’s remaining
stock repurchase authorization was $3.2 billion as of December 31, 2020.
In 2020 and 2019, the company issued and redeemed commercial paper. There were no
commercial paper borrowings outstanding as of December 31, 2020 or December 31, 2019. AbbVie
may issue additional commercial paper or retire commercial paper to meet liquidity requirements as
needed.
Credit Risk
AbbVie monitors economic conditions, the creditworthiness of customers and government
regulations and funding, both domestically and abroad. AbbVie regularly communicates with its
customers regarding the status of receivable balances, including their payment plans and obtains
positive confirmation of the validity of the receivables. AbbVie establishes an allowance for credit
losses equal to the estimate of future losses over the contractual life of outstanding accounts
receivable. AbbVie may also utilize factoring arrangements to mitigate credit risk, although the
receivables included in such arrangements have historically not been a significant amount of total
outstanding receivables.
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Credit Facility, Access to Capital and Credit Ratings
Credit Facility
AbbVie currently has a $4.0 billion five-year revolving credit facility that matures in August 2024.
This amended facility enables the company to borrow funds on an unsecured basis at variable
interest rates and contains various covenants. At December 31, 2020, the company was in
compliance with all covenants, and commitment fees under the credit facility were insignificant. No
amounts were outstanding under the company’s credit facility as of December 31, 2020 and 2019.
Access to Capital
The company intends to fund short-term and long-term financial obligations as they mature
through cash on hand, future cash flows from operations or has the ability to issue additional debt.
The company’s ability to generate cash flows from operations, issue debt or enter into financing
arrangements on acceptable terms could be adversely affected if there is a material decline in the
demand for the company’s products or in the solvency of its customers or suppliers, deterioration in
the company’s key financial ratios or credit ratings, or other material unfavorable changes in
business conditions. At the current time, the company believes it has sufficient financial flexibility to
issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms
to support the company’s growth objectives.
Credit Ratings
Following the acquisition of Allergan, S&P Global Ratings revised its ratings outlook to stable
from negative and lowered the issuer credit rating by one notch to BBB+ from A- and the short-term
rating to A-2 from A-1. There were no changes in Moody’s Investor Service of its Baa2 senior
unsecured long-term rating and Prime-2 short-term rating with a stable outlook.
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,
2020:
(in millions)
Short-term borrowings
Long-term debt, including current portion
Interest on long-term debt(a)
Non-cancelable operating and finance
lease payments
Purchase obligations and other(b)
Other long-term liabilities(c)(d)(e)
$
Total
34
84,948
33,664
1,154
5,432
18,478
Less than
one year
One to
three years
Three to
five years
More than
five years
$
34
8,422
2,752
$
— $
— $
16,643
4,652
16,197
3,898
229
5,040
1,029
323
249
3,036
208
112
4,144
—
43,686
22,362
394
31
10,269
Total
$143,710
$17,506
$24,903
$24,559
$76,742
(a)
Includes estimated future interest payments on long-term debt. Interest payments on debt are
calculated for future periods using forecasted interest rates in effect at the end of 2020.
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
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obligations and agreements outstanding at December 31, 2020. See Note 10 to the
Consolidated Financial Statements for additional information regarding the company’s debt
instruments and Note 11 for additional information on the interest rate swap agreements
outstanding at December 31, 2020.
(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) Excludes liabilities associated with the company’s unrecognized tax benefits as it is not possible
to reliably estimate the timing of the future cash outflows related to these liabilities. See Note 14
to the Consolidated Financial Statements for additional information on these unrecognized tax
benefits.
(d)
Includes $13.0 billion of contingent consideration liabilities which are recorded at fair value on
the consolidated balance sheet. Potential contingent consideration payments that exceed the fair
value recorded on the consolidated balance sheet are not included in the table of contractual
obligations. See Note 11 to the Consolidated Financial Statements for additional information
regarding these liabilities.
(e)
Includes a one-time transition tax liability on a mandatory deemed repatriation of previously
untaxed earnings of foreign subsidiaries resulting from U.S. tax reform enacted in 2017. The
one-time transition tax is generally payable in eight annual installments.
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 insignificant in any one
annual reporting 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 future 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. See Note 5 to the Consolidated Financial Statements for additional
information on 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 control of promised goods or services is transferred to the
company’s customers, in an amount that reflects the consideration AbbVie expects to be entitled to
in exchange for those goods or services. Sales, value add and other taxes collected concurrent with
revenue-producing activities are excluded from revenue. AbbVie generates revenue primarily from
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product sales. For the majority of sales, the company transfers control, invoices the customer and
recognizes revenue upon shipment 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 accounted for as variable consideration and are recorded
as a reduction to revenue in the period the related product is sold. Provisions for rebates and
chargebacks totaled $27.0 billion in 2020, $18.8 billion in 2019 and $16.4 billion in 2018. 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 89% of the total consolidated rebate and chargebacks
recorded as reductions to revenues in 2020. Remaining rebate provisions charged against gross
revenues are not significant in the determination of operating earnings.
(in millions)
Balance at December 31, 2017
Provisions
Payments
Balance at December 31, 2018
Provisions
Payments
Balance at December 31, 2019
Additions(a)
Provisions
Payments
Balance at December 31, 2020
Medicaid
and
Medicare
Rebates
Managed
Care
Rebates
Wholesaler
Chargebacks
$ 1,340
3,493
(3,188)
$ 1,195
4,729
(4,485)
$
522
6,659
(6,525)
1,645
4,035
(3,915)
1,765
1,266
6,715
(6,801)
1,439
5,772
(5,275)
1,936
649
8,656
(8,334)
656
7,947
(7,917)
686
71
8,677
(8,693)
$ 2,945
$ 2,907
$
741
(a) Represents rebate accruals and chargeback allowances assumed in the Allergan acquisition.
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Cash Discounts and Product Returns
Cash discounts and product returns, which totaled $2.4 billion in 2020, $1.6 billion in 2019 and
$1.6 billion in 2018, are accounted for as variable consideration and 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 pension and other post-employment benefit 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, and are disclosed in Note 12 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 corresponding individual spot rates along the yield curve. AbbVie reflects the plans’
specific cash flows and applies them to the corresponding individual 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 rates have a significant effect on the amounts reported for defined
benefit pension and other post-employment plans as of December 31, 2020. A 50 basis point
change in the assumed discount rate would have had the following effects on AbbVie’s calculation of
net periodic benefit costs in 2021 and projected benefit obligations as of December 31, 2020:
(in millions) (brackets denote a reduction)
Defined benefit plans
Service and interest cost
Projected benefit obligation
Other post-employment plans
Service and interest cost
Projected benefit obligation
50 basis point
Increase
Decrease
$
(89)
(1,000)
$ 101
1,140
$
$
(6)
(56)
7
63
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 for
each plan 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, 2020 and will be used in the calculation of net
periodic benefit cost in 2021. A one percentage point change in assumed expected long-term rate of
return on plan assets would increase or decrease the net period benefit cost of these plans in 2021
by $94 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
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the historical trend experience of each plan. Assumed health care cost trend rates have a significant
effect on the amounts reported for health care plans as of December 31, 2020 and will be used in
the calculation of net periodic benefit cost in 2021.
Income Taxes
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.
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. See Note 15 to the Consolidated Financial
Statements for additional 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,
or discontinuation, at which point the intangible asset will be written off. 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 are reviewed for impairment annually or when an event occurs that
could result in an impairment. See 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
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specific to the industry and market, cost factors, 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 the reporting unit is less than its carrying amount, a quantitative
impairment test is performed. AbbVie tests indefinite-lived intangible assets 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 is
less than its carrying amount, a quantitative impairment test is performed.
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, 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. The use of alternative estimates and
assumptions could increase or decrease the estimated fair value of the assets and could potentially
impact the company’s results of operations. Actual results may differ from the company’s estimates.
Contingent Consideration
The fair value measurements of contingent consideration liabilities are determined as of the
acquisition date based on significant unobservable inputs, including the discount rate, estimated
probabilities and timing of achieving specified development, regulatory and commercial milestones
and the estimated amount of future sales of the acquired products. Contingent consideration
liabilities are revalued to fair value at each subsequent reporting date until the related contingency is
resolved. The potential contingent consideration payments are estimated by applying a probability-
weighted expected payment model for contingent milestone payments and a Monte Carlo simulation
model for contingent royalty payments, which are then discounted to present value. Changes to the
fair value of the contingent consideration liabilities can result from changes to one or a number of
inputs, including discount rates, the probabilities of achieving the milestones, the time required to
achieve the milestones and estimated future sales. Significant judgment is employed in determining
the appropriateness of certain of these inputs. Changes to the inputs described above could have a
material impact on the company’s financial position and results of operations in any given period.
The fair value of the company’s contingent consideration liabilities as of December 31, 2020 was
calculated using the following significant unobservable inputs:
Discount rate
Probability of payment for unachieved milestones
Probability of payment for royalties by indication(b)
Projected year of payments
Range
Weighted Average(a)
0.1% - 2.2%
56% - 92%
56% - 100%
2021 - 2034
1.1%
64%
91%
2027
(a) Unobservable inputs were weighted by the relative fair value of the contingent consideration
liabilities.
(b) Excludes early stage indications with 0% estimated probability of payment and includes
approved indications with 100% probability of payment. Excluding approved indications, the
estimated probability of payment ranged from 56% to 89% at December 31, 2020.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements for additional information on recent
accounting pronouncements.
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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. See Note 11 to the Consolidated Financial Statements for additional 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, Canadian dollar
and British pound. The following table reflects the total foreign currency forward exchange contracts
outstanding at December 31, 2020 and 2019:
as of December 31 (in millions)
Receive primarily U.S. dollars
in exchange for the following
currencies:
Euro
Japanese yen
Canadian dollar
British pound
All other currencies
Total
2020
Weighted
average
exchange
rate
Fair and
carrying
value
receivable/
(payable)
Contract
amount
2019
Weighted
average
exchange
rate
Fair and
carrying
value
receivable/
(payable)
Contract
amount
$
$
7,818
837
591
275
1,706
1.213
103.9
1.328
1.341
n/a
(39) $
(7)
(23)
3
(15)
6,217
820
504
427
1,508
1.116
108.7
1.324
1.305
n/a
$ 11,227
$
(81) $
9,476
$
$
(12)
—
(6)
(6)
(10)
(34)
The company estimates that a 10% 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 $1.14 billion at December 31, 2020. If realized, this
appreciation would negatively affect earnings over the remaining life of the contracts. However, 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. A 10%
appreciation is believed to be a reasonably possible near-term change in foreign currencies.
As of December 31, 2020, the company has e6.6 billion aggregate principal amount of
unsecured senior Euro notes outstanding, which are exposed to foreign currency risk. The company
designated these foreign currency denominated notes as hedges of its net investments in certain
foreign subsidiaries and affiliates. As a result, any foreign currency translation gains or losses related
to the Euro notes will be included in accumulated other comprehensive loss. See Note 10 to the
Consolidated Financial Statements for additional information regarding to the senior Euro notes and
Note 11 to the Consolidated Financial Statements for additional information regarding to the net
investment hedging program.
Interest Rate Risk
The company estimates that an increase in interest rates of 100 basis points would adversely
impact the fair value of AbbVie’s interest rate swap contracts by approximately $111 million at
December 31, 2020. 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 $5.7 billion at December 31, 2020. A 100
basis point change is believed to be a reasonably possible near-term change in interest rates.
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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
60
61
62
63
64
65
114
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AbbVie Inc. and Subsidiaries
Consolidated Statements of Earnings
years ended December 31 (in millions, except per share data)
2020
2019
2018
Net revenues
Cost of products sold
Selling, general and administrative
Research and development
Acquired in-process research and development
Other operating (income) expense
Total operating costs and expenses
Operating earnings
Interest expense, net
Net foreign exchange loss
Other expense, net
Earnings before income tax expense
Income tax expense (benefit)
Net earnings
Net earnings attributable to noncontrolling interest
$45,804
$33,266
$32,753
15,387
11,299
6,557
1,198
—
7,439
6,942
6,407
385
(890)
7,718
7,399
10,329
424
500
34,441
20,283
26,370
11,363
12,983
2,280
71
5,614
3,398
(1,224)
4,622
6
1,509
42
3,006
8,426
544
7,882
—
6,383
1,144
24
18
5,197
(490)
5,687
—
Net earnings attributable to AbbVie Inc.
$ 4,616
$ 7,882
$ 5,687
Per share data
Basic earnings per share attributable to AbbVie Inc.
Diluted earnings per share attributable to AbbVie Inc.
Weighted-average basic shares outstanding
Weighted-average diluted shares outstanding
$ 2.73
2.72
$
5.30
$
$ 5.28
$ 3.67
3.66
$
1,667
1,673
1,481
1,484
1,541
1,546
The accompanying notes are an integral part of these consolidated financial statements.
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AbbVie Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
years ended December 31 (in millions)
Net earnings
2020
2019
2018
$4,622
$ 7,882
$5,687
Foreign currency translation adjustments, net of tax expense (benefit)
of $28 in 2020, $(4) in 2019 and $(18) in 2018
1,511
(98)
(391)
Net investment hedging activities, net of tax expense (benefit) of
$(221) in 2020, $22 in 2019 and $40 in 2018
(799)
74
138
Pension and post-employment benefits, net of tax expense (benefit) of
$(47) in 2020, $(323) in 2019 and $35 in 2018
(102)
(1,243)
197
Marketable security activities, net of tax expense (benefit) of $— in
2020, $— in 2019 and $— in 2018
—
10
(10)
Cash flow hedging activities, net of tax expense (benefit) of $(23) in
2020, $70 in 2019 and $23 in 2018
Other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to noncontrolling interest
Comprehensive income attributable to AbbVie Inc.
(131)
141
313
$ 479
$(1,116) $ 247
5,101
6
6,766
—
5,934
—
$5,095
$ 6,766
$5,934
The accompanying notes are an integral part of these consolidated financial statements.
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AbbVie Inc. and Subsidiaries
Consolidated Balance Sheets
as of December 31 (in millions, except share data)
2020
2019
Assets
Current assets
Cash and equivalents
Short-term investments
Accounts receivable, net
Inventories
Prepaid expenses and other
Total current assets
Investments
Property and equipment, net
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities and Equity
Current liabilities
Short-term borrowings
Current portion of long-term debt and finance lease obligations
Accounts payable and accrued liabilities
Total current liabilities
Long-term debt and finance lease obligations
Deferred income taxes
Other long-term liabilities
Commitments and contingencies
Stockholders’ equity (deficit)
Common stock, $0.01 par value, 4,000,000,000 shares authorized,
1,792,140,764 shares issued as of December 31, 2020 and
1,781,582,608 as of December 31, 2019
Common stock held in treasury, at cost, 27,007,945 shares as of
December 31, 2020 and 302,671,146 as of December 31, 2019
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity (deficit)
Noncontrolling interest
Total equity (deficit)
Total liabilities and equity
$
8,449
30
8,822
3,310
3,562
$ 39,924
—
5,428
1,813
2,354
24,173
49,519
293
5,248
82,876
33,124
4,851
93
2,962
18,649
15,604
2,288
$150,565
$ 89,115
$
34
8,468
20,159
28,661
77,554
3,646
27,607
$
—
3,753
11,832
15,585
62,975
1,130
17,597
18
18
(2,264)
17,384
1,055
(3,117)
13,076
21
13,097
(24,504)
15,193
4,717
(3,596)
(8,172)
—
(8,172)
$150,565
$ 89,115
The accompanying notes are an integral part of these consolidated financial statements.
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62
AbbVie Inc. and Subsidiaries
Consolidated Statements of Equity
years ended December 31
(in millions)
Balance at December 31, 2017
Adoption of new accounting
standards(a)
Net earnings attributable to
AbbVie Inc.
Other comprehensive income, net of
tax
Dividends declared
Purchases of treasury stock
Stock-based compensation plans
and other
Balance at December 31, 2018
Net earnings attributable to
AbbVie Inc.
Other comprehensive loss, net of
tax
Dividends declared
Purchases of treasury stock
Stock-based compensation plans
and other
Balance at December 31, 2019
Net earnings attributable to
AbbVie Inc.
Other comprehensive income, net of
tax
Dividends declared
Common shares and equity awards
issued for acquisition of
Allergan plc
Purchases of treasury stock
Stock-based compensation plans
and other
Change in noncontrolling interest
Common
shares
outstanding
Common Treasury
stock
stock
Additional
paid-in
capital
Accumulated
other
Retained comprehensive Noncontrolling
earnings
interest
loss
Total
1,592
$18
$(11,923)
$14,270
$ 5,459
$(2,727)
$ —
$ 5,097
—
—
—
—
(121)
8
1,479
—
—
—
(5)
5
1,479
—
—
—
286
(10)
10
—
—
—
—
—
—
—
18
—
—
—
—
—
18
—
—
—
—
—
—
—
—
—
—
—
(12,215)
—
—
—
—
—
(1,733)
5,687
—
(6,045)
—
30
486
—
—
—
247
—
—
—
(24,108)
14,756
3,368
(2,480)
—
—
—
(428)
—
—
—
—
7,882
—
(6,533)
—
—
(1,116)
—
—
32
437
—
—
(24,504)
15,193
4,717
(3,596)
—
—
—
—
—
—
4,616
—
(8,278)
23,166
(978)
52
—
1,243
—
948
—
—
—
—
—
—
479
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
21
(1,733)
5,687
247
(6,045)
(12,215)
516
(8,446)
7,882
(1,116)
(6,533)
(428)
469
(8,172)
4,616
479
(8,278)
24,409
(978)
1,000
21
Balance at December 31, 2020
1,765
$18
$ (2,264)
$17,384
$ 1,055
$(3,117)
$21
$ 13,097
(a)
Adoption of new accounting standards primarily includes the cumulative-effect adjustment of Accounting Standards Update (ASU)
No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.
The accompanying notes are an integral part of these consolidated financial statements.
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AbbVie Inc. and Subsidiaries
Consolidated Statements of Cash Flows
years ended December 31 (in millions) (brackets denote cash outflows)
Cash flows from operating activities
Net earnings
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation
Amortization of intangible assets
Deferred income taxes
Change in fair value of contingent consideration liabilities
Stock-based compensation
Upfront costs and milestones related to collaborations
Gain on divestitures
Intangible asset impairment
Impacts related to U.S. tax reform
Other, net
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable and other liabilities
Income tax assets and liabilities, net
Cash flows from operating activities
Cash flows from investing activities
Acquisition of businesses, net of cash acquired
Other acquisitions and investments
Acquisitions of property and equipment
Purchases of investment securities
Sales and maturities of investment securities
Other, net
Cash flows from investing activities
Cash flows from financing activities
Net change in commercial paper borrowings
Proceeds from issuance of other short-term borrowings
Repayments of other short-term borrowings
Proceeds from issuance of long-term debt
Repayments of long-term debt and finance lease obligations
Debt issuance costs
Dividends paid
Purchases of treasury stock
Proceeds from the exercise of stock options
Payments of contingent consideration liabilities
Other, net
Cash flows from financing activities
Effect of exchange rate changes on cash and equivalents
Net change in cash and equivalents
Cash and equivalents, beginning of year
Cash and equivalents, end of year
Other supplemental information
Interest paid, net of portion capitalized
Income taxes paid (received)
Supplemental schedule of non-cash investing and financing activities
Issuance of common shares associated with acquisitions of businesses
2020
2019
2018
$ 4,622
$ 7,882
$ 5,687
666
5,805
(2,325)
5,753
753
1,376
—
—
—
832
(929)
(40)
134
1,514
(573)
464
1,553
122
3,091
430
490
(330)
1,030
—
43
(74)
(231)
(225)
97
(1,018)
471
1,294
(1,517)
49
421
1,061
—
5,070
424
76
(591)
(226)
(200)
734
674
17,588
13,324
13,427
(38,260)
(1,350)
(798)
(61)
1,525
1,387
(37,557)
—
—
—
3,000
(5,683)
(20)
(7,716)
(978)
209
(321)
8
(11,501)
(5)
(31,475)
39,924
—
(1,135)
(552)
(583)
2,699
167
596
(699)
—
(3,000)
31,482
(1,536)
(424)
(6,366)
(629)
8
(163)
35
18,708
7
32,635
7,289
—
(736)
(638)
(1,792)
2,160
—
(1,006)
299
3,002
—
5,963
(6,035)
(40)
(5,580)
(12,014)
73
(78)
14
(14,396)
(39)
(2,014)
9,303
$ 8,449
$39,924
$ 7,289
$ 2,619
1,674
$ 1,794
1,447
$ 1,215
(35)
23,979
—
—
The accompanying notes are an integral part of these consolidated financial statements.
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AbbVie Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 Background
........................................................................................................................................................................................................................................................................................................................................
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. Certain products (including aesthetic products and devices) are also sold directly to
physicians and other licensed healthcare providers. In the United States, AbbVie distributes
pharmaceutical products principally through independent wholesale distributors, with some sales
directly to retailers, pharmacies and patients. Outside the United States, AbbVie sells products
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% of the outstanding common stock of AbbVie to Abbott’s shareholders.
On May 8, 2020, AbbVie completed its previously announced acquisition of Allergan plc
(Allergan). Refer to Note 5 for additional information regarding this acquisition.
Note 2 Summary of Significant Accounting Policies
........................................................................................................................................................................................................................................................................................................................................
Use of Estimates
The consolidated financial statements have been prepared in accordance with U.S. generally
accepted accounting principles (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 other post-employment benefits, income taxes, litigation,
valuation of goodwill and intangible assets, contingent consideration liabilities, financial instruments
and inventory and accounts receivable exposures.
Basis of Consolidation
The consolidated financial statements 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, net
in the consolidated statements of earnings. 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 control of promised goods or services is transferred to the
company’s customers, in an amount that reflects the consideration AbbVie expects to be entitled to
in exchange for those goods or services. Sales, value add and other taxes collected concurrent with
revenue-producing activities are excluded from revenue. AbbVie generates revenue primarily from
product sales. For the majority of sales, the company transfers control, invoices the customer and
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recognizes revenue upon shipment to the customer. The company recognizes shipping and handling
costs as an expense in cost of products sold when the company transfers control to the customer.
Payment terms vary depending on the type and location of the customer, are based on customary
commercial terms and are generally less than one year. AbbVie does not adjust revenue for the
effects of a significant financing component for contracts where AbbVie expects the period between
the transfer of the good or service and collection to be one year or less.
Discounts, rebates, sales incentives to customers, returns and certain other adjustments are
accounted for as variable consideration. Provisions for variable consideration are based on current
pricing, executed contracts, government pricing legislation and historical data and 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, factors used in the calculation of the accrual 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 insignificant.
In addition to revenue from contracts with customers, the company also recognizes certain
collaboration revenues. See Note 6 for additional information related to the collaborations with
Janssen Biotech, Inc. and Genentech, Inc. Additionally, see Note 16 for disaggregation of revenue
by product and geography.
Research and Development Expenses
Internal research and development (R&D) costs 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, prior to
regulatory approval, the payment obligations are expensed when the milestone results are achieved.
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 expense 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 selling, general
and administrative (SG&A) expense in the consolidated statements of earnings. Advertising
expenses were $1.8 billion in 2020, $1.1 billion in 2019 and $1.1 billion in 2018.
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Pension and Other Post-Employment Benefits
AbbVie records annual expenses relating to its defined benefit pension and other
post-employment benefit plans based on calculations which utilize various actuarial assumptions,
including discount rates, rates of return on assets, 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 gains and
losses are deferred in accumulated other comprehensive income (loss) (AOCI), net of tax and are
amortized over the remaining service attribution periods of the employees under the corridor method.
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 amounts
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 money market funds and time deposits with original maturities of
three months or less.
Investments
Investments consist primarily of equity securities, held-to-maturity debt securities, marketable
debt securities and time deposits. Investments in equity securities that have readily determinable fair
values are recorded at fair value. Investments in equity securities that do not have readily
determinable fair values are recorded at cost and are remeasured to fair value based on certain
observable price changes or impairment events as they occur. Held-to-maturity debt securities are
recorded at cost. Gains or losses on investments are included in other expense, net in the
consolidated statements of earnings. Investments in marketable debt 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 AOCI on the consolidated balance sheets until realized, at which time the gains or
losses are recognized in earnings.
AbbVie periodically assesses its marketable debt securities for impairment and credit losses.
When a decline in fair value of marketable debt security is due to credit related factors, an allowance
for credit losses is recorded with a corresponding charge to other expense in the consolidated
statements of earnings. When AbbVie determines that a non-credit related impairment has occurred,
the amortized cost basis of the investment, net of allowance for credit losses, is written down with a
charge to other expense, net in the consolidated statements of earnings and an available-for-sale
investment’s unrealized loss is reclassified from AOCI to other expense, net in the consolidated
statements of earnings. Realized gains and losses on sales of investments are computed using the
first-in, first-out method adjusted for any impairments and credit losses that were recorded in net
earnings.
Accounts Receivable
Accounts receivable are stated at amortized cost less allowance for credit losses. The allowance
for credit losses reflects the best estimate of future losses over the contractual life of outstanding
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accounts receivable and is determined on the basis of historical experience, specific allowances for
known troubled accounts, other currently available information including customer financial condition,
and both current and forecasted economic conditions.
Inventories
Inventories are valued at the lower of cost (first-in, first-out basis) or market. Cost includes
material and conversion costs. Inventories consisted of the following:
as of December 31 (in millions)
Finished goods
Work-in-process
Raw materials
Inventories
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
2020
2019
$1,318
1,201
791
$ 485
942
386
$3,310
$1,813
2020
2019
$
288
2,555
6,976
1,040
$
72
1,613
6,012
491
10,859
(5,611)
8,188
(5,226)
$ 5,248
$ 2,962
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.
Buildings include leasehold improvements which are amortized over the life of the related facility
lease (including any renewal periods, if appropriate) or the asset, whichever is shorter. The
estimated useful life for equipment ranges from 2 to 25 years. Equipment includes certain computer
software and software development costs incurred in connection with developing or obtaining
software for internal use and is amortized over 3 to 10 years. Depreciation expense was
$666 million in 2020, $464 million in 2019 and $471 million in 2018.
Leases
Short-term leases with a term of 12 months or less are not recorded on the balance sheet. For
leases commencing or modified in 2019 or later, AbbVie does not separate lease components from
non-lease components.
The company records lease liabilities based on the present value of lease payments over the
lease term. AbbVie generally uses an incremental borrowing rate to discount its lease liabilities, as
the rate implicit in the lease is typically not readily determinable. Certain lease agreements include
renewal options that are under the company’s control. AbbVie includes optional renewal periods in
the lease term only when it is reasonably certain that AbbVie will exercise its option.
Variable lease payments include payments to lessors for taxes, maintenance, insurance and
other operating costs as well as payments that are adjusted based on an index or rate. The
company’s lease agreements do not contain any significant residual value guarantees or restrictive
covenants.
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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. The liabilities are evaluated quarterly and adjusted if necessary as additional
information becomes available. Receivables for insurance recoveries for product liability claims, if
any, are recorded as assets on an undiscounted basis when it is probable that a recovery will be
realized.
Business Combinations
AbbVie utilizes the acquisition method of accounting for business combinations. This method
requires, among other things, that results of operations of acquired companies are included in
AbbVie’s results of operations beginning on the respective acquisition dates and that assets acquired
and liabilities assumed are recognized at fair value as of the acquisition date. Any excess of the fair
value of consideration transferred over the fair values of the net assets acquired is recognized as
goodwill. Contingent consideration liabilities are recognized at the estimated fair value on the
acquisition date. Subsequent changes to the fair value of contingent consideration liabilities are
recognized in other expense, 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 during a period of time not to exceed 12 months from the acquisition
date. 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 using the
estimated pattern of economic benefit. 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, the intangible asset is written down to 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 could
occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. An
impairment of indefinite-lived intangible assets would occur if the fair value of the intangible asset is
less than the carrying value.
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 the reporting unit is less than its carrying
amount, a quantitative impairment test is performed. AbbVie tests indefinite-lived intangible assets
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 is less than its carrying amount, a quantitative impairment test is performed.
For its quantitative impairment tests, the company uses an estimated future cash flow approach that
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requires significant judgment with respect to future volume, revenue and expense growth rates,
changes in working capital use, 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. 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.
Acquired In-Process Research and Development
In an asset acquisition, the initial costs of rights to IPR&D projects acquired 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. In a business combination, the fair value of IPR&D projects
acquired 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. R&D costs incurred after the acquisition are expensed as incurred.
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 income (loss) (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.
Derivatives
All derivative instruments are recognized as either assets or liabilities at fair value on the
consolidated balance sheets and are classified as current or long-term based on the scheduled
maturity of the instrument.
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 hedged risk are recognized in earnings
immediately. 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. If it is determined that a derivative is no longer highly effective as a hedge,
the company discontinues hedge accounting prospectively. If a hedged forecasted transaction
becomes probable of not occurring, any gains or losses are reclassified from AOCI to earnings.
Derivatives that are not designated as hedges are adjusted to fair value through current earnings.
The company also uses derivative instruments or foreign currency denominated debt to hedge
its net investments in certain foreign subsidiaries and affiliates. Realized and unrealized gains and
losses from these hedges are included in AOCI.
Derivative cash flows, with the exception of net investment hedges, are principally classified in
the operating section of the consolidated statements of cash flows, consistent with the underlying
hedged item. Cash flows related to net investment hedges are classified in the investing section of
the consolidated statements of cash flows.
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Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
ASU No. 2016-13
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The standard
changes how credit losses are measured for most financial assets and certain other instruments. For
trade and other receivables, held-to-maturity debt securities, loans and other financial instruments,
the standard requires the use of a new forward-looking ‘‘expected credit loss’’ model that generally
will result in the earlier recognition of allowances for losses. For available-for-sale debt securities
with unrealized losses, the standard now requires allowances to be recorded instead of reducing the
amortized cost of the investment. AbbVie adopted the standard in the first quarter of 2020.
Upon adoption of the standard, accounts receivable are stated at amortized cost less allowance
for credit losses. The allowance for credit losses reflects the best estimate of future losses over the
contractual life of outstanding accounts receivable and is determined on the basis of historical
experience, specific allowances for known troubled accounts, other currently available information
including customer financial condition, and both current and forecasted economic conditions. The
adoption did not have a material impact on the company’s consolidated financial statements. The
allowance for credit losses was $262 million at December 31, 2020. There were no significant
changes in credit loss risk factors that impacted the company’s recorded allowance during 2020.
Recent Accounting Pronouncements Not Yet Adopted
ASU No. 2019-12
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740). The
standard includes simplifications related to accounting for income taxes including removing certain
exceptions related to the approach for intraperiod tax allocation and the recognition of deferred tax
liabilities for outside basis differences. The standard also clarifies the accounting for transactions that
result in a step-up in the tax basis of goodwill. The standard will be effective for AbbVie starting with
the first quarter of 2021. AbbVie has completed its assessment of the new standard and concluded
that the adoption will not have a material impact 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
2020
2019
2018
$2,454
(174)
$1,784
(275)
$1,348
(204)
$2,280
$1,509
$1,144
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Accounts Payable and Accrued Liabilities
as of December 31 (in millions)
Sales rebates
Dividends payable
Accounts 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)
Contingent consideration liabilities
Liabilities for unrecognized tax benefits
Income taxes payable
Pension and other post-employment benefits
Other
Other long-term liabilities
2020
2019
$ 7,188
2,335
2,276
1,669
483
6,208
$ 4,484
1,771
1,452
830
324
2,971
$20,159
$11,832
2020
2019
$12,289
5,680
3,847
3,413
2,378
$ 7,201
2,772
3,453
2,949
1,222
$27,607
$17,597
Note 4 Earnings Per Share
........................................................................................................................................................................................................................................................................................................................................
AbbVie grants certain restricted stock units (RSUs) that are considered to be participating
securities. Due to the presence of participating securities, AbbVie calculates earnings per share
(EPS) using the more dilutive of the treasury stock or the two-class method. For all periods
presented, the two-class method was more dilutive.
The following table summarizes the impact of the two-class method:
(in millions, except per share data)
Basic EPS
Net earnings attributable to AbbVie Inc.
Earnings allocated to participating securities
Earnings available to common shareholders
Weighted average basic shares of common stock outstanding
Basic earnings per share attributable to AbbVie Inc.
Diluted EPS
Net earnings attributable to AbbVie Inc.
Earnings allocated to participating securities
Earnings available to common shareholders
Weighted average shares of common stock outstanding
Effect of dilutive securities
Weighted average diluted shares of common stock outstanding
Diluted earnings per share attributable to AbbVie Inc.
Years ended December 31,
2020
2019
2018
$4,616
60
$7,882
40
$5,687
30
$4,556
$7,842
$5,657
1,667
1,481
1,541
$ 2.73
$ 5.30
$ 3.67
$4,616
60
$7,882
40
$5,687
30
$4,556
$7,842
$5,657
1,667
6
1,673
1,481
3
1,484
1,541
5
1,546
$ 2.72
$ 5.28
$ 3.66
Certain shares issuable under stock-based compensation plans were excluded from the
computation of EPS because the effect would have been antidilutive. The number of common shares
excluded was insignificant for all periods presented.
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Note 5 Licensing, Acquisitions and Other Arrangements
........................................................................................................................................................................................................................................................................................................................................
Acquisition of Allergan
On May 8, 2020, AbbVie completed its previously announced acquisition of all outstanding
equity interests in Allergan in a cash and stock transaction. Allergan is a global pharmaceutical
leader focused on developing, manufacturing and commercializing branded pharmaceutical, device,
biologic, surgical and regenerative medicine products for patients around the world. The combination
creates a diverse entity with leadership positions across immunology, hematologic oncology,
aesthetics, neuroscience, eye care and women’s health. AbbVie’s existing product portfolio and
pipeline is enhanced with numerous Allergan assets and Allergan’s product portfolio benefits from
AbbVie’s commercial strength, expertise and international infrastructure. Under the terms of the
acquisition, each ordinary share of Allergan common stock was converted into the right to receive
(i) $120.30 in cash and (ii) 0.8660 of a share of AbbVie common stock.
Total consideration for the acquisition of Allergan is summarized as follows:
(in millions)
Cash consideration paid to Allergan shareholders(a)
Fair value of AbbVie common stock issued to Allergan shareholders(b)
Fair value of AbbVie equity awards issued to Allergan equity award holders(c)
Total consideration
$39,675
23,979
430
$64,084
(a) Represents cash consideration transferred of $120.30 per outstanding Allergan ordinary share
based on 330 million Allergan ordinary shares outstanding at closing.
(b) Represents the acquisition date fair value of 286 million shares of AbbVie common stock issued
to Allergan shareholders based on the exchange ratio of 0.8660 AbbVie shares for each
outstanding Allergan ordinary share at the May 8, 2020 closing price of $83.96 per share.
(c) Represents the pre-acquisition service portion of the fair value of 11 million AbbVie stock
options and 8 million RSUs issued to Allergan equity award holders.
The acquisition of Allergan has been accounted for as a business combination using the
acquisition method of accounting. The acquisition method requires, among other things, that assets
acquired and liabilities assumed in a business combination be recognized at their fair values as of
the acquisition date. The valuation of assets acquired and liabilities assumed has not yet been
finalized as of December 31, 2020. As a result, AbbVie recorded preliminary estimates for the fair
value of assets acquired and liabilities assumed as of the acquisition date. Subsequent to the
acquisition date, the company made certain measurement period adjustments to the preliminary
purchase price allocation, including: (i) an increase to developed product rights intangible assets of
$9.1 billion; (ii) an increase to IPR&D intangible assets of $710 million; (iii) an increase to property
and equipment of $215 million; (iv) other individually insignificant adjustments for a net increase to
identifiable net assets of $73 million; and (v) a corresponding decrease to goodwill of $10.0 billion.
The measurement period adjustments primarily resulted from revised future cash flow estimates for
certain intangible assets and completing valuations of property and equipment. These measurement
period adjustments have been reflected in the table below. The company made these measurement
period adjustments to reflect facts and circumstances that existed as of the acquisition date and did
not result from intervening events subsequent to such date. These adjustments did not have a
significant impact on AbbVie’s results of operations. Finalization of the valuation during the
measurement period could result in a change in the amounts recorded for the acquisition date fair
value of intangible assets, goodwill and income taxes among other items. The completion of the
valuation will occur no later than one year from the acquisition date.
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The following table summarizes the preliminary fair value of assets acquired and liabilities
assumed as of the acquisition date:
(in millions)
Assets acquired and liabilities assumed
Cash and equivalents
Short-term investments
Accounts receivable
Inventories
Prepaid expenses and other current assets
Investments
Property and equipment
Intangible assets
Developed product rights
In-process research and development
Other noncurrent assets
Short-term borrowings
Current portion of long-term debt and finance lease obligations
Accounts payable and accrued liabilities
Long-term debt and finance lease obligations
Deferred income taxes
Other long-term liabilities
Total identifiable net assets
Goodwill
Total assets acquired and liabilities assumed
$ 1,537
1,421
2,374
2,340
1,982
137
2,127
67,330
1,750
1,395
(60)
(1,899)
(5,852)
(18,937)
(3,792)
(4,765)
47,088
16,996
$ 64,084
The fair value step-up adjustment to inventories of $1.2 billion is being amortized to cost of
products sold when the inventory is sold to customers, which is expected to be within approximately
one year from the acquisition date.
Intangible assets relate to $67.3 billion of developed product rights and $1.8 billion of IPR&D.
The acquired definite-lived intangible assets are being amortized over a weighted-average estimated
useful life of approximately twelve years using the estimated pattern of economic benefit. The
estimated fair values of identifiable intangible assets were 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 these asset valuations
include the estimated net cash flows for each year for each asset or product, the appropriate
discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle
of each asset, the potential regulatory and commercial success risk, competitive trends impacting the
asset and each cash flow stream, as well as other factors.
The fair value of long-term debt was determined by quoted market prices as of the acquisition
date and the total purchase price adjustment of $1.3 billion is being amortized as a reduction to
interest expense, net over the lives of the related debt.
Goodwill was 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 Allergan represents the value of additional growth platforms and an expanded
revenue base as well as anticipated operational synergies and cost savings from the creation of a
single combined global organization. The goodwill is not deductible for tax purposes.
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Following the acquisition date, the operating results of Allergan have been included in the
consolidated financial statements. For the period from the acquisition date through December 31,
2020, net revenues attributable to Allergan were $10.3 billion and operating losses attributable to
Allergan were $1.1 billion, inclusive of $4.0 billion of intangible asset amortization and $1.2 billion of
inventory fair value step-up amortization.
Acquisition-related expenses, which were comprised primarily of regulatory, financial advisory
and legal fees, totaled $781 million for the year ended December 31, 2020 and $103 million for the
year ended December 31, 2019 which were included in SG&A expenses in the consolidated
statements of earnings.
Pro Forma Financial Information
The following table presents the unaudited pro forma combined results of AbbVie and Allergan
for 2020 and 2019 as if the acquisition of Allergan had occurred on January 1, 2019:
years ended December 31 (in millions)
Net revenues
Net earnings (loss)
2020
2019
$50,521
6,746
$49,028
(38)
The unaudited pro forma combined financial information was prepared using the acquisition
method of accounting and was based on the historical financial information of AbbVie and Allergan.
In order to reflect the occurrence of the acquisition on January 1, 2019 as required, the unaudited
pro forma financial information includes adjustments to reflect 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-related costs incurred during the year ended
December 31, 2020 to the year ended December 31, 2019. 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, 2019. In addition, the unaudited pro forma
financial information is not a projection of future results of operations of the combined company nor
does it reflect the expected realization of any synergies or cost savings associated with the
acquisition.
Other Licensing & Acquisitions Activity
Cash outflows related to other acquisitions and investments totaled $1.4 billion in 2020,
$1.1 billion in 2019 and $736 million in 2018. AbbVie recorded acquired IPR&D charges of
$1.2 billion in 2020, $385 million in 2019 and $424 million in 2018. Significant arrangements
impacting 2020, 2019 and 2018, some of which require contingent milestone payments, are
summarized below.
Luminera
In October 2020, AbbVie entered into an agreement with Luminera, a privately held aesthetics
company based in Israel, to acquire Luminera’s full dermal filler portfolio and R&D pipeline including
HArmonyCa, a dermal filler intended for facial soft tissue augmentation. The aggregate accounting
purchase price of $186 million was comprised of a $122 million upfront cash payment and
$64 million for the acquisition date fair value of contingent consideration liabilities, for which AbbVie
may owe up to $90 million in future payments upon achievement of certain commercial milestones.
HArmonyCa is currently commercially available in Israel and Brazil and AbbVie will continue to
develop this product for its international and U.S. markets. The agreement was accounted for as a
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business combination using the acquisition method of accounting. As of the acquisition date, AbbVie
acquired $127 million of intangible assets for in-process research and development and $33 million
of intangible assets for developed product rights. Other assets and liabilities assumed were
insignificant. The acquisition resulted in the recognition of $12 million of goodwill which is not
deductible for tax purposes.
I-Mab Biopharma
In September 2020, AbbVie and I-Mab Biopharma (I-Mab) entered into a collaboration
agreement for the development and commercialization of lemzoparlimab, an anti-CD47 monoclonal
antibody internally discovered and developed by I-Mab for the treatment of multiple cancers. Both
companies will collaborate to design and conduct further global clinical trials to evaluate
lemzoparlimab. The collaboration provides AbbVie an exclusive global license, excluding greater
China, to develop and commercialize lemzoparlimab. The companies will share manufacturing
responsibilities with AbbVie being the primary manufacturer for global supply. The agreement also
allows for potential collaboration on future CD47-related therapeutic agents, subject to further
licenses to explore each other’s related programs in their respective territories. The terms of the
arrangement include an initial upfront payment of $180 million to exclusively license lemzoparlimab
along with a milestone payment of $20 million based on the Phase I results, for a total of
$200 million, which was recorded to IPR&D in the consolidated statements of earnings in the fourth
quarter of 2020 after regulatory approval of the transaction. In addition, I-Mab will be eligible to
receive up to $1.7 billion upon the achievement of certain clinical development, regulatory and
commercial milestones, and AbbVie will pay tiered royalties from low-to-mid teen percentages on
global net revenues outside of greater China.
Genmab A/S
In June 2020, AbbVie and Genmab A/S (Genmab) entered into a collaboration agreement to
jointly develop and commercialize three of Genmab’s early-stage investigational bispecific antibody
therapeutics and entered into a discovery research collaboration for future differentiated antibody
therapeutics for the treatment of cancer. Under the terms of the agreement, Genmab granted to
AbbVie an exclusive license to its epcoritamab (DuoBody-CD3xCD20), DuoHexaBody-CD37 and
DuoBody-CD3x5T4 programs. For epcoritamab, the companies will share commercial responsibilities
in the U.S. and Japan, with AbbVie responsible for further global commercialization. Genmab will
record net revenues in the U.S. and Japan, and the parties will share equally in pre-tax profits from
these sales. Genmab will receive tiered royalties on remaining global sales. For the discovery
research partnership, Genmab will conduct Phase 1 studies for these programs and AbbVie retains
the right to opt-in to program development. During 2020, AbbVie made an upfront payment of
$750 million, which was recorded to IPR&D in the consolidated statements of earnings. AbbVie
could make additional payments of up to $3.2 billion upon the achievement of certain development,
regulatory and commercial milestones for all programs.
Reata Pharmaceuticals, Inc.
In October 2019, AbbVie and Reata Pharmaceuticals, Inc. (Reata) entered into an amended and
restated license agreement. Under the terms of the agreement, Reata reacquired exclusive
development, manufacturing and commercialization rights concerning its proprietary Nrf2 activator
product platform originally licensed to AbbVie for territories outside of the United States with respect
to bardoxolone methyl and worldwide with respect to omaveloxolone and other next-generation Nrf2
activators. As consideration for the rights reacquired by Reata, AbbVie received a total of
$250 million as of December 31, 2020 and will receive $80 million in cash in 2021. Total
consideration of $330 million was recognized in other operating (income) expense in the
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consolidated statements of earnings in 2019. In addition, AbbVie will receive low single-digit, tiered
royalties from worldwide sales of omaveloxolone and certain next-generation Nrf2 activators.
Calico Life Sciences LLC
In June 2018, AbbVie and Calico Life Sciences LLC (Calico) entered into an extension of a
collaboration to discover, develop and bring to market new therapies for patients with age-related
diseases, including neurodegeneration and cancer. Under the terms of the agreement, AbbVie and
Calico will each contribute an additional $500 million to the collaboration and the term is extended
for an additional three years. Calico will be responsible for research and early development until
2022 and will advance collaboration projects through Phase 2a through 2027. Following completion
of Phase 2a, AbbVie will have the option to exclusively license collaboration compounds. AbbVie will
support Calico in its early research and development efforts and, upon exercise, would be
responsible for late-stage development and commercial activities. Collaboration costs and profits will
be shared equally by both parties post option exercise. During 2018, AbbVie recorded $500 million
in other operating (income) expense in the consolidated statements of earnings related to its
commitments under the agreement.
Other Arrangements
In addition to the significant arrangements described above, AbbVie entered into several other
arrangements resulting in charges to IPR&D of $248 million in 2020, $385 million in 2019 and
$424 million in 2018. In connection with the other individually insignificant early-stage arrangements
entered into in 2020, AbbVie could make additional payments of up to $5.1 billion upon the
achievement of certain development, regulatory and commercial milestones.
Note 6 Collaborations
........................................................................................................................................................................................................................................................................................................................................
The company has ongoing transactions with other entities through collaboration agreements.
The following represent the significant collaboration agreements impacting 2020, 2019 and 2018.
Collaboration with Janssen Biotech, Inc.
In December 2011, Pharmacyclics, a wholly-owned subsidiary of AbbVie, entered into a
worldwide collaboration and license agreement with Janssen Biotech, Inc. and its affiliates
(Janssen), one of the Janssen Pharmaceutical companies of Johnson & Johnson, for the joint
development and commercialization of Imbruvica, a novel, orally active, selective covalent inhibitor of
Bruton’s tyrosine kinase (BTK) and certain compounds structurally related to Imbruvica, for oncology
and other indications, excluding all immune and inflammatory mediated diseases or conditions and
all psychiatric or psychological diseases or conditions, in the United States and outside the United
States.
The collaboration provides Janssen with an exclusive license to commercialize Imbruvica
outside of the United States and co-exclusively with AbbVie in the United States. Both parties are
responsible for the development, manufacturing and marketing of any products generated as a result
of the collaboration. The collaboration has no set duration or specific expiration date and provides
for potential future development, regulatory and approval milestone payments of up to $200 million
to AbbVie. The collaboration also includes a cost sharing arrangement for associated collaboration
activities. Except in certain cases, Janssen is responsible for approximately 60% of collaboration
development costs and AbbVie is responsible for the remaining 40% of collaboration development
costs.
In the United States, both parties have co-exclusive rights to commercialize the products;
however, AbbVie is the principal in the end-customer product sales. AbbVie and Janssen share
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pre-tax profits and losses equally from the commercialization of products. Sales of Imbruvica are
included in AbbVie’s net revenues. Janssen’s share of profits is included in AbbVie’s cost of
products sold. Other costs incurred under the collaboration are reported in their respective expense
line items, net of Janssen’s share.
Outside the United States, Janssen is responsible for and has exclusive rights to commercialize
Imbruvica. AbbVie and Janssen share pre-tax profits and losses equally from the commercialization
of products. AbbVie’s share of profits is included in AbbVie’s net revenues. Other costs incurred
under the collaboration are reported in their respective expense line items, net of Janssen’s share.
The following table shows the profit and cost sharing relationship between Janssen and AbbVie:
years ended December 31 (in millions)
2020
2019
2018
United States—Janssen’s share of profits (included in cost of products sold)
International—AbbVie’s share of profits (included in net revenues)
Global—AbbVie’s share of other costs (included in respective line items)
$2,012 $1,803 $1,372
622
326
1,009
295
844
321
AbbVie’s receivable from Janssen, included in accounts receivable, net, was $283 million at
December 31, 2020 and $235 million at December 31, 2019. AbbVie’s payable to Janssen, included
in accounts payable and accrued liabilities, was $562 million at December 31, 2020 and $455 million
at December 31, 2019.
Collaboration with Genentech, Inc.
AbbVie and Genentech, Inc. (Genentech), a member of the Roche Group, are parties to a
collaboration and license agreement executed in 2007 to jointly research, develop and
commercialize human therapeutic products containing BCL-2 inhibitors and certain other compound
inhibitors which includes Venclexta, a BCL-2 inhibitor used to treat certain hematological
malignancies. AbbVie shares equally with Genentech all pre-tax profits and losses from the
development and commercialization of Venclexta in the United States. AbbVie pays royalties on
Venclexta net revenues outside the United States.
AbbVie manufactures and distributes Venclexta globally and is the principal in the end-customer
product sales. Sales of Venclexta are included in AbbVie’s net revenues. Genentech’s share of
United States profits is included in AbbVie’s cost of products sold. AbbVie records sales and
marketing costs associated with the United States collaboration as part of SG&A expenses and
global development costs as part of R&D expenses, net of Genentech’s share. Royalties paid for
Venclexta revenues outside the United States are also included in AbbVie’s cost of products sold.
The following table shows the profit and cost sharing relationship between Genentech and
AbbVie:
years ended December 31 (in millions)
Genentech’s share of profits, including royalties (included in cost of products
sold)
AbbVie’s share of sales and marketing costs from U.S. collaboration (included
in SG&A)
AbbVie’s share of development costs (included in R&D)
2020
2019
2018
$533
$320
$141
46
129
41
128
27
160
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Note 7 Goodwill and Intangible Assets
........................................................................................................................................................................................................................................................................................................................................
Goodwill
The following table summarizes the changes in the carrying amount of goodwill:
(in millions)
Balance as of December 31, 2018
Foreign currency translation adjustments
Balance as of December 31, 2019
Additions(a)
Foreign currency translation adjustments
Balance as of December 31, 2020
$15,663
(59)
15,604
17,008
512
$33,124
(a) Goodwill additions related to the acquisition of Allergan in the second quarter of 2020 and the
acquisition of Luminera in the fourth quarter of 2020 (see Note 5).
The company performs its annual goodwill impairment assessment in the third quarter, or earlier
if impairment indicators exist. As of December 31, 2020, there were no accumulated goodwill
impairment losses.
Intangible Assets, Net
The following table summarizes 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
2020
2019
Gross
Net
Gross
Net
carrying Accumulated carrying
amount
amortization
amount
carrying Accumulated carrying
amount
amortization
amount
$87,707
7,828
$(11,620) $76,087 $19,547
7,798
(2,916)
4,912
$(6,405) $13,142
5,507
(2,291)
95,535
(14,536)
80,999
27,345
(8,696)
18,649
development
1,877
—
1,877
—
—
—
Total intangible assets, net
$97,412
$(14,536) $82,876 $27,345
$(8,696) $18,649
Definite-Lived Intangible Assets
The increase in definite-lived intangible assets during 2020 was primarily due to the acquisition
of Allergan in the second quarter of 2020. The intangible assets will be amortized using the
estimated pattern of economic benefit. Refer to Note 5 for additional information regarding this
acquisition.
Definite-lived intangible assets are amortized over their estimated useful lives, which range
between 1 to 16 years with an average of 12 years for developed product rights and 11 years for
license agreements. Amortization expense was $5.8 billion in 2020, $1.6 billion in 2019 and
$1.3 billion in 2018 and was included in cost of products sold in the consolidated statements of
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earnings. The anticipated annual amortization expense for definite-lived intangible assets recorded
as of December 31, 2020 is as follows:
(in billions)
Anticipated annual amortization expense
2021
2022
2023
2024
2025
$7.7
$7.2
$7.5
$8.0
$8.4
No definite-lived intangible asset impairment charges were recorded in 2020, 2019 or 2018.
Indefinite-Lived Intangible Assets
Indefinite-lived intangible assets represent acquired IPR&D associated with products that have
not yet received regulatory approval. The increase in indefinite-lived research and development
assets during 2020 was due to the acquisition of Allergan in the second quarter of 2020 and the
acquisition of Luminera in the fourth quarter of 2020. Refer to Note 5 for additional information
regarding these acquisitions.
The company performs its annual impairment assessment of indefinite-lived intangible assets in
the third quarter, or earlier if impairment indicators exist. No indefinite-lived intangible asset
impairment charges were recorded in 2020. In 2019, following the announcement of the decision to
terminate the rovalpituzumab tesirine (Rova-T) R&D program, the company recorded an impairment
charge of $1.0 billion which represented the remaining value of the IPR&D acquired as part of the
2016 Stemcentrx acquisition. This termination was subsequent to the decision to stop enrollment for
the TAHOE trial, which resulted in an impairment charge of $5.1 billion in 2018. These impairment
charges were recorded to R&D expense in the consolidated statements of earnings in 2019 and
2018.
Note 8 Integration and Restructuring Plans
........................................................................................................................................................................................................................................................................................................................................
Allergan Integration Plan
Following the closing of the Allergan acquisition, AbbVie implemented an integration plan
designed to reduce costs, integrate and optimize the combined organization. To achieve these
integration objectives, AbbVie expects to incur approximately $2 billion of charges through 2022.
These costs will consist of severance and employee benefit costs (cash severance, non-cash
severance, including accelerated equity award compensation expense, retention and other
termination benefits) and other integration expenses.
The following table summarizes the charges associated with the Allergan acquisition integration
plan:
year ended December 31 (in millions)
Cost of products sold
Research and development
Selling, general and administrative
Total charges
2020
Severance and
employee
benefits
Other
integration
$109
199
388
$696
$ 21
177
237
$435
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The following table summarizes the cash activity in the recorded liability associated with the
integration plan:
year ended December 31 (in millions)
Charges
Payments and other adjustments
Accrued balance as of December 31, 2020
Other Restructuring
2020
Severance and
employee
benefits
Other
integration
$ 594
(227)
$ 367
$ 435
(415)
$ 20
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. As a result, AbbVie management periodically
approves individual restructuring plans to achieve these objectives. In 2020, 2019 and 2018, no such
plans were individually significant. Restructuring charges recorded were $60 million in 2020,
$234 million in 2019 and $70 million in 2018 and were primarily related to employee severance and
contractual obligations. These charges were recorded in cost of products sold, R&D expense and
SG&A expenses in the consolidated statements of earnings based on the classification of the
affected employees or operations.
The following table summarizes the cash activity in the restructuring reserve for 2020, 2019 and
2018:
(in millions)
Accrued balance as of December 31, 2017
2018 restructuring charges
Payments and other adjustments
Accrued balance as of December 31, 2018
2019 restructuring charges
Payments and other adjustments
Accrued balance as of December 31, 2019
2020 restructuring charges
Payments and other adjustments
Accrued balance as of December 31, 2020
$ 86
59
(46)
99
219
(178)
140
58
(108)
$ 90
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Note 9 Leases
........................................................................................................................................................................................................................................................................................................................................
AbbVie’s lease portfolio primarily consists of real estate properties, vehicles and equipment. The
following table summarizes the amounts and location of operating and finance leases on the
consolidated balance sheets:
as of December 31 (in millions)
Balance sheet caption
2020
2019
Assets
Operating
Finance
Total lease assets
Liabilities
Operating
Current
Noncurrent
Finance
Current
Noncurrent
Other assets
Property and equipment, net
$ 895
27
$ 922
Accounts payable and accrued liabilities
Other long-term liabilities
$ 175
832
Current portion of long-term debt and
finance lease obligations
Long-term debt and finance lease
obligations
8
21
$344
23
$367
$109
251
7
20
Total lease liabilities
$1,036
$387
The following table summarizes the lease costs recognized in the consolidated statements of
earnings:
years ended December 31 (in millions)
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
2020
$192
59
60
$311
2019
$124
34
62
$220
Sublease income and finance lease costs were insignificant in 2020 and 2019. Lease expense
prior to the adoption of ASU No. 2016-02 was $161 million in 2018.
The following table presents the weighted-average remaining lease term and weighted-average
discount rate for operating and finance leases:
Weighted-average remaining lease term (years)
Operating
Finance
Weighted-average discount rate
Operating
Finance
December 31,
2020
December 31,
2019
8
3
2.5%
1.4%
5
3
3.9%
3.9%
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The following table presents supplementary cash flow information regarding the company’s
leases:
years ended December 31 (in millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new operating lease liabilities
2020
2019
$185
692
$125
26
Finance lease cash flows were insignificant in 2020 and 2019. Right-of-use assets obtained in
exchange for new operating lease liabilities included $453 million of right-of-use assets acquired in
the Allergan acquisition.
The following table summarizes the future maturities of AbbVie’s operating and finance lease
liabilities as of December 31, 2020:
(in millions)
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Interest
Present value of lease liabilities
Operating
leases
Finance
leases
$ 202
178
140
111
96
394
1,121
114
$27
3
2
1
—
—
33
4
Total(a)
$ 229
181
142
112
96
394
1,154
118
$1,007
$29
$1,036
(a) Lease payments recognized as part of lease liabilities for optional renewal periods are
insignificant.
Note 10 Debt, Credit Facilities and Commitments and Contingencies
........................................................................................................................................................................................................................................................................................................................................
The following table summarizes long-term debt:
as of December 31 (dollars in millions)
Senior notes issued in 2012
2.90% notes due 2022
4.40% notes due 2042
Senior notes issued in 2015
2.50% notes due 2020
3.20% notes due 2022
3.60% notes due 2025
4.50% notes due 2035
4.70% notes due 2045
Senior notes issued in 2016
2.30% notes due 2021
2.85% notes due 2023
3.20% notes due 2026
4.30% notes due 2036
4.45% notes due 2046
Effective
interest rate
in 2020(a)
Effective
interest rate
in 2019(a)
2020
2019
2.97% $ 3,100
2,600
4.46%
2.97% $ 3,100
2,600
4.46%
2.65%
3.28%
3.66%
4.58%
4.73%
2.40%
2.91%
3.28%
4.37%
4.50%
—
1,000
3,750
2,500
2,700
1,800
1,000
2,000
1,000
2,000
2.65%
3.28%
3.66%
4.58%
4.73%
2.40%
2.91%
3.28%
4.37%
4.50%
3,750
1,000
3,750
2,500
2,700
1,800
1,000
2,000
1,000
2,000
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as of December 31 (dollars in millions)
Senior Euro notes issued in 2016
1.375% notes due 2024 (e1,450 principal)
2.125% notes due 2028 (e750 principal)
Senior notes issued in 2018
3.375% notes due 2021
3.75% notes due 2023
4.25% notes due 2028
4.875% notes due 2048
Senior Euro notes issued in 2019
0.75% notes due 2027 (e750 principal)
1.25% notes due 2031 (e650 principal)
Senior notes issued in 2019
Floating rate notes due May 2021
Floating rate notes due November 2021
Floating rate notes due 2022
2.15% notes due 2021
2.30% notes due 2022
2.60% notes due 2024
2.95% notes due 2026
3.20% notes due 2029
4.05% notes due 2039
4.25% notes due 2049
Term loan facilities
Floating rate notes due 2023
Floating rate notes due 2025
Senior notes acquired in 2020
5.000% notes due 2021
3.450% notes due 2022
3.250% notes due 2022
2.800% notes due 2023
3.850% notes due 2024
3.800% notes due 2025
4.550% notes due 2035
4.625% notes due 2042
4.850% notes due 2044
4.750% notes due 2045
Senior Euro notes acquired in 2020
0.500% notes due 2021 (e750 principal)
1.500% notes due 2023 (e500 principal)
1.250% notes due 2024 (e700 principal)
2.625% notes due 2028 (e500 principal)
2.125% notes due 2029 (e550 principal)
Other
Fair value hedges
Unamortized bond discounts
Unamortized deferred financing costs
Unamortized bond premiums(b)
Total long-term debt and finance lease obligations
Current portion
Noncurrent portion
Effective
interest rate
in 2020(a)
Effective
interest rate
in 2019(a)
2020
2019
1.46%
2.18%
3.51%
3.84%
4.38%
4.94%
0.86%
1.30%
1.33%
1.42%
1.62%
2.23%
2.42%
2.69%
3.02%
3.25%
4.11%
4.29%
1.29%
1.42%
1.59%
1.89%
1.85%
2.08%
1.98%
2.00%
3.43%
3.93%
4.02%
4.13%
0.68%
0.48%
0.64%
1.18%
1.18%
1,783
922
1,250
1,250
1,750
1,750
922
799
750
750
750
1,750
3,000
3,750
4,000
5,500
4,000
5,750
1,000
2,000
1,200
2,878
1,700
350
1,032
3,021
1,789
457
1,074
881
922
615
861
615
677
29
278
(146)
(287)
1,200
86,022
8,468
$77,554
1.46%
2.18%
3.51%
3.84%
4.38%
4.94%
0.86%
1.30%
2.08%
2.12%
2.29%
2.23%
2.42%
2.69%
3.02%
3.25%
4.11%
4.29%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
1,625
840
1,250
1,250
1,750
1,750
840
728
750
750
750
1,750
3,000
3,750
4,000
5,500
4,000
5,750
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
27
(48)
(161)
(323)
—
66,728
3,753
$62,975
(a) Excludes the effect of any related interest rate swaps.
(b) Represents unamortized purchase price adjustments of Allergan debt.
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Allergan-Related Financing
In connection with the acquisition of Allergan, in May 2020, the company borrowed $3.0 billion
under a $6.0 billion term loan credit agreement, of which $1.0 billion was outstanding under a
floating rate three-year term loan tranche and $2.0 billion outstanding under a floating rate five-year
term loan tranche as of December 31, 2020. Subsequent to these borrowings, AbbVie terminated
the unused commitments of the lenders under the term loan.
In May 2020, AbbVie completed its previously announced offers to exchange any and all
outstanding notes of certain series issued by Allergan for new notes to be issued by AbbVie and
cash. Following the settlement of the exchange offers, AbbVie issued $14.0 billion and e3.1 billion of
new notes in exchange for the Allergan notes tendered in the exchange offers. The aggregate
principal amount of Allergan notes that remained outstanding following the settlement of the
exchange offers was approximately $1.5 billion and e635 million. The exchange transaction was
accounted for as a modification of the assumed debt instruments.
In September 2020, the company repaid $650 million aggregate principal amount of 3.375%
Allergan exchange notes at maturity.
In November 2020, the company repaid e700 million aggregate principal amount of floating rate
Allergan exchange notes at maturity and $450 million aggregate principal amount of 4.875% Allergan
exchange notes due February 2021 three months prior to maturity.
In November 2019, the company issued $30.0 billion aggregate principal amount of unsecured
senior notes. These senior notes rank equally with all other unsecured and unsubordinated
indebtedness of the company. AbbVie may redeem the fixed-rate senior notes prior to maturity at a
redemption price equal to the greater of the principal amount or the sum of present values of the
remaining scheduled payments of principal and interest on the fixed-rate senior notes to be
redeemed plus a make-whole premium. With exception of the fixed-rate notes due 2021 and 2022,
AbbVie may also redeem the fixed-rate senior notes at par between one and six months prior to
maturity. In connection with the offering, debt issuance costs incurred totaled $173 million and debt
discounts totaled $52 million, which are being amortized over the respective terms of the notes to
interest expense, net in the consolidated statements of earnings. AbbVie used the net proceeds to
fund a portion of the aggregate cash consideration due to Allergan shareholders in connection with
the acquisition described in Note 5 and to pay related fees and expenses.
Other Long-Term Debt
In May 2020, the company repaid $3.8 billion aggregate principal amount of 2.50% senior notes
at maturity.
In September 2019, the company issued e1.4 billion aggregate principal amount of unsecured
senior Euro notes. These 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
may redeem the senior notes at par between one and three months prior to maturity. In connection
with the offering, debt issuance costs incurred totaled $9 million and debt discounts totaled $5 million
and are being amortized over the respective terms of the notes to interest expense, net in the
consolidated statements of earnings. In October 2019, the company used the proceeds to redeem
e1.4 billion aggregate principal amount of 0.375% senior Euro notes that were due to mature in
November 2019.
In May 2018, the company also repaid $3.0 billion aggregate principal amount of 1.80% senior
notes at maturity.
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In September 2018, the company issued $6.0 billion aggregate principal amount of unsecured
senior notes. These 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 3.375% notes due 2021, AbbVie may redeem the senior notes at par between one
and six months prior to maturity. In connection with the offering, debt issuance costs incurred totaled
$37 million and debt discounts totaled $37 million and are being amortized over the respective terms
of the senior notes to interest expense, net in the consolidated statements of earnings. Of the
$5.9 billion net proceeds, $2.0 billion was used to repay the company’s outstanding three-year term
loan credit agreement in September 2018 and $1.0 billion was used to repay the aggregate principal
amount of 2.00% senior notes at maturity in November 2018. The company used the remaining
proceeds to repay term loan obligations in 2019 as they became due.
AbbVie has outstanding e2.2 billion aggregate principal amount of unsecured senior Euro notes
which were issued in 2016. 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
AbbVie may redeem the senior notes at par between one and three months prior to maturity.
AbbVie has outstanding $7.8 billion aggregate principal amount of unsecured senior notes which
were issued in 2016 and $10.0 billion aggregate principal amount of unsecured senior notes which
were issued in 2015. AbbVie may redeem the senior notes, at any time, prior to maturity at a
redemption price equal to the principal amount of the senior notes redeemed plus a make-whole
premium and AbbVie may redeem the senior notes at par between one and six months prior to
maturity.
AbbVie has outstanding $5.7 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, or
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, 2020, the company was in compliance with its senior note covenants and term
loan covenants.
Short-Term Borrowings
There were no commercial paper borrowings outstanding as of December 31, 2020 and
December 31, 2019. The weighted-average interest rate on commercial paper borrowings was 1.8%
in 2020, 2.5% in 2019 and 2.0% in 2018.
In August 2019, AbbVie entered into an amended and restated $4.0 billion five-year revolving
credit facility that matures in August 2024. This amended facility enables the company to borrow
funds on an unsecured basis at variable interest rates and contains various covenants, all of which
the company was in compliance with as of December 31, 2020. Commitment fees under AbbVie’s
revolving credit facilities were insignificant in 2020, 2019 and 2018. No amounts were outstanding
under the company’s credit facilities as of December 31, 2020 and December 31, 2019.
In March 2019, AbbVie repaid a $3.0 billion 364-day term loan credit agreement that was drawn
on in June 2018 and was scheduled to mature in June 2019.
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Maturities of Long-Term Debt
The following table summarizes AbbVie’s debt maturities as of December 31, 2020:
as of and for the years ending December 31 (in millions)
2021
2022
2023
2024
2025
Thereafter
Total obligations and commitments
Fair value hedges, unamortized bond premiums and discounts, deferred financing costs
and finance lease obligations
Total long-term debt and finance lease obligations
$ 8,422
12,428
4,215
7,426
8,771
43,686
84,948
1,074
$86,022
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 and no special-purpose entities. 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.
Note 11 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. AbbVie’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 and nonderivative instruments to reduce its exposure to foreign
currency exchange rates. AbbVie also periodically enters into interest rate swaps 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 at December 31, 2020 and $1.0 billion at December 31,
2019, are designated as cash flow hedges and are recorded at fair value. The durations of these
forward exchange contracts were generally less than 18 months. Accumulated gains and losses as
of December 31, 2020 will be reclassified from AOCI and included in cost of products sold at the
time the products are sold, generally not exceeding six months from the date of settlement.
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In the third quarter of 2019, the company entered into treasury rate lock agreements with
notional amounts totaling $10.0 billion to hedge exposure to variability in future cash flows resulting
from changes in interest rates related to the issuance of long-term debt in connection with the
proposed acquisition of Allergan. The treasury rate lock agreements were designated as cash flow
hedges and recorded at fair value. The agreements were net settled upon issuance of the senior
notes in November 2019 resulting in a gain of $383 million recognized in other comprehensive
income (loss). This gain is reclassified to interest expense, net over the lives of the related debt.
In the fourth quarter of 2019, the company entered into interest rate swap contracts with
notional amounts totaling $2.3 billion at December 31, 2020 and December 31, 2019. The effect of
the hedge contracts is to change a floating-rate interest obligation to a fixed rate for that portion of
the floating-rate debt. The contracts were designated as cash flow hedges and are recorded at fair
value. Realized and unrealized gains or losses are included in AOCI and are reclassified to interest
expense, net over the lives of the floating-rate debt.
The company also enters into foreign currency forward exchange contracts to manage its
exposure to foreign currency denominated trade payables and receivables and intercompany loans.
These contracts are not designated as hedges and are recorded at fair value. Resulting gains or
losses are reflected in net foreign exchange loss in the consolidated statements of earnings and are
generally offset by losses or gains on the foreign currency exposure being managed. These
contracts had notional amounts totaling $8.6 billion at December 31, 2020 and $7.1 billion at
December 31, 2019.
The company also uses foreign currency forward exchange contracts or foreign currency
denominated debt to hedge its net investments in certain foreign subsidiaries and affiliates. The
company had an aggregate principal amount of senior Euro notes designated as net investment
hedges of e6.6 billion at December 31, 2020 and e3.6 billion at December 31, 2019. In addition, the
company had foreign currency forward exchange contracts designated as net investment hedges
with notional amounts totaling e971 million at December 31, 2020 and e971 million, £204 million,
and CHF62 million at December 31, 2019. The company uses the spot method of assessing hedge
effectiveness for derivative instruments designated as net investment hedges. Realized and
unrealized gains and losses from these hedges are included in AOCI and the initial fair value of
hedge components excluded from the assessment of effectiveness is recognized in interest expense,
net over the life of the hedging instrument.
AbbVie is a party to interest rate swap contracts designated as fair value hedges with notional
amounts totaling $4.8 billion at December 31, 2020 and $10.8 billion at December 31, 2019. The
effect of the hedge contracts is to change a fixed-rate interest obligation to a floating rate for that
portion of the debt. AbbVie records the contracts at fair value and adjusts the carrying amount of the
fixed-rate debt by an offsetting amount.
No amounts are excluded from the assessment of effectiveness for cash flow hedges or fair
value hedges.
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The following table summarizes the amounts and location of AbbVie’s derivative instruments on
the consolidated balance sheets:
Fair value—
Derivatives in asset position
Fair value—
Derivatives in liability position
as of December 31 (in millions)
Balance sheet caption
2020 2019 Balance sheet caption 2020 2019
Foreign currency forward exchange contracts
Designated as cash flow hedges
Prepaid expenses and other $
2 $ 3
Accounts payable and $ 82 $ 14
accrued liabilities
Designated as cash flow hedges
Other assets
— — Other long-term liabilities
Designated as net investment hedges
Prepaid expenses and other
— —
Not designated as hedges
Prepaid expenses and other
49
19
Interest rate swap contracts
Designated as cash flow hedges
Prepaid expenses and other
— —
Accounts payable and
accrued liabilities
Accounts payable and
accrued liabilities
Accounts payable and
accrued liabilities
Designated as cash flow hedges
Other assets
—
3 Other long-term liabilities
Designated as fair value hedges
Prepaid expenses and other
7 —
Accounts payable and
accrued liabilities
6
11
—
24
33
18
14
20
—
—
—
2
Designated as fair value hedges
Other assets
131
28 Other long-term liabilities
— 74
Total derivatives
$189 $53
$166 $132
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 following table presents the pre-tax amounts of gains (losses) from derivative instruments
recognized in other comprehensive income (loss):
years ended in December 31 (in millions)
Foreign currency forward exchange contracts
Designated as cash flow hedges
Designated as net investment hedges
Interest rate swap contracts designated as cash flow hedges
Treasury rate lock agreements designated as cash flow hedges
2020
2019
2018
$(71) $ (5) $175
—
33
(95)
—
(53)
4
—
— 383
Assuming market rates remain constant through contract maturities, the company expects to
reclassify pre-tax losses of $93 million into cost of products sold for foreign currency cash flow
hedges, pre-tax losses of $24 million into interest expense, net for interest rate swap cash flow
hedges and pre-tax gains of $24 million into interest expense, net for treasury rate lock agreement
cash flow hedges during the next 12 months.
Related to AbbVie’s non-derivative, foreign currency denominated debt designated as net
investment hedges, the company recognized in other comprehensive income (loss) pre-tax losses of
$907 million in 2020, pre-tax gains of $90 million in 2019 and pre-tax gains of $178 million in 2018.
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The following table summarizes the pre-tax amounts and location of derivative instrument net
gains (losses) recognized in the consolidated statements of earnings, including the net gains (losses)
reclassified out of AOCI into net earnings. See Note 13 for the amount of net gains (losses)
reclassified out of AOCI.
years ended December 31 (in millions)
Statement of earnings caption
2020
2019
2018
Foreign currency forward exchange contracts
Designated as cash flow hedges
Designated as net investment hedges
Not designated as hedges
Treasury rate lock agreements designated as cash
flow hedges
Interest rate swap contracts
Designated as cash flow hedges
Designated as fair value hedges
Debt designated as hedged item in fair value
hedges
Cost of products sold $ 23 $ 167 $(161)
—
Interest expense, net
83
Net foreign exchange loss
27
(70)
18
58
Interest expense, net
24
3
—
Interest expense, net
Interest expense, net
(17)
365
1
418
—
(71)
Interest expense, net
(365)
(418)
71
Fair Value Measures
The fair value hierarchy consists of the following three levels:
• Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets
that the company has the ability to access;
• Level 2—Valuations based on quoted prices for similar instruments in active markets, quoted
prices for identical or similar instruments in markets that are not active and model-based
valuations in which all significant inputs are observable in the market; and
• Level 3—Valuations using significant inputs that are unobservable in the market and include
the use of judgment by the company’s management about the assumptions market
participants would use in pricing the asset or liability.
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The following table summarizes the bases used to measure certain assets and liabilities carried
at fair value on a recurring basis on the consolidated balance sheet as of December 31, 2020:
(in millions)
Assets
Cash and equivalents
Money market funds and time deposits
Debt securities
Equity securities
Interest rate swap contracts
Foreign currency contracts
Total assets
Liabilities
Interest rate swap contracts
Foreign currency contracts
Contingent consideration
Total liabilities
Total
$ 8,449
12
50
159
138
51
$ 8,859
$
34
132
12,997
$13,163
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)
$2,758
—
—
149
—
—
$2,907
$ —
—
—
$ —
$5,691
12
50
10
138
51
$5,952
$
34
132
—
$
$
$
—
—
—
—
—
—
—
—
—
12,997
$ 166
$12,997
The following table summarizes the bases used to measure certain assets and liabilities carried
at fair value on a recurring basis on the consolidated balance sheet as of December 31, 2019:
(in millions)
Assets
Cash and equivalents
Debt securities
Equity securities
Interest rate swap contracts
Foreign currency contracts
Total assets
Liabilities
Interest rate swap contracts
Foreign currency contracts
Contingent consideration
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)
$1,542
—
24
—
—
$1,566
$ —
—
—
$ —
$38,382
3
—
31
22
$38,438
$
76
56
—
$
132
$ —
—
—
—
—
$ —
$ —
—
7,340
$7,340
Total
$39,924
3
24
31
22
$40,004
$
76
56
7,340
$ 7,472
Equity securities consist of investments for which the fair values were determined by using the
published market price per unit multiplied by the number of units held, without consideration of
transaction costs. The derivatives entered into by the company were valued using observable market
inputs including published interest rate curves and both forward and spot prices for foreign
currencies.
The fair value measurements of the contingent consideration liabilities were determined based
on significant unobservable inputs, including the discount rate, estimated probabilities and timing of
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achieving specified development, regulatory and commercial milestones and the estimated amount of
future sales of the acquired products. The potential contingent consideration payments are estimated
by applying a probability-weighted expected payment model for contingent milestone payments and
a Monte Carlo simulation model for contingent royalty payments, which are then discounted to
present value. Changes to the fair value of the contingent consideration liabilities can result from
changes to one or a number of inputs, including discount rates, the probabilities of achieving the
milestones, the time required to achieve the milestones and estimated future sales. Significant
judgment is employed in determining the appropriateness of certain of these inputs. Changes to the
inputs described above could have a material impact on the company’s financial position and results
of operations in any given period.
The fair value of the company’s contingent consideration liabilities as of December 31, 2020
was calculated using the following significant unobservable inputs:
Discount rate
Probability of payment for unachieved milestones
Probability of payment for royalties by indication(b)
Projected year of payments
Range
Weighted Average(a)
0.1% - 2.2%
56% - 92%
56% - 100%
2021 - 2034
1.1%
64%
91%
2027
(a) Unobservable inputs were weighted by the relative fair value of the contingent consideration
liabilities.
(b) Excludes early stage indications with 0% estimated probability of payment and includes
approved indications with 100% probability of payment. Excluding approved indications, the
estimated probability of payment ranged from 56% to 89% at December 31, 2020.
There have been no transfers of assets or liabilities into or out of Level 3 of the fair value
hierarchy. The following table presents the changes in fair value of contingent consideration liabilities
which are measured using Level 3 inputs:
years ended December 31 (in millions)
Beginning balance
Additions(a)
Change in fair value recognized in net earnings
Payments
Ending balance
2020
2019
2018
$ 7,340
225
5,753
(321)
$4,483
—
3,091
(234)
$4,534
—
49
(100)
$12,997
$7,340
$4,483
(a) Additions during the year ended December 31, 2020 represent contingent consideration
liabilities assumed in the Allergan acquisition as well as contingent consideration resulting from
the Luminera acquisition.
The change in fair value recognized in net earnings is recorded in other expense, net in the
consolidated statements of earnings. During the fourth quarter of 2020, the company recorded a
$4.7 billion increase in the Skyrizi contingent consideration liability due to higher estimated future
sales driven by stronger market share uptake and favorable clinical trial results as well as lower
interest rates. During the second quarter of 2019, the company recorded a $2.3 billion increase in
the Skyrizi contingent consideration liability due to higher probabilities of success, higher estimated
future sales and declining interest rates. The higher probabilities of success resulted from the April
2019 regulatory approvals of Skyrizi for the treatment of moderate to severe plaque psoriasis. During
the third quarter of 2019, the company recorded a $91 million decrease in the Stemcentrx contingent
consideration liability due to the termination of the Rova-T R&D program. During the fourth quarter of
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2018, the company recorded a $428 million decrease in the Stemcentrx contingent consideration
liability due to a reduction in probabilities of success of achieving regulatory approval.
Certain financial instruments are carried at historical cost or some basis other than fair value.
The book values, approximate fair values and bases used to measure the approximate fair values of
certain financial instruments as of December 31, 2020 are shown in the table below:
(in millions)
Liabilities
Short-term borrowings
Current portion of long-term debt
and finance lease obligations,
excluding fair value hedges
Long-term debt and finance lease
obligations, excluding fair value
hedges
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)
Book value
Approximate
fair values
$
34
$
34
$
—
$
34
$—
8,461
8,542
8,249
293
—
77,283
87,761
$85,778
$96,337
86,137
$94,386
1,624
$1,951
—
$—
The book values, approximate fair values and bases used to measure the approximate fair
values of certain financial instruments as of December 31, 2019 are shown in the table below:
(in millions)
Liabilities
Current portion of long-term debt
and finance lease obligations,
excluding fair value hedges
Long-term debt and finance lease
obligations, excluding fair value
hedges
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)
Book value
Approximate
fair values
$ 3,755
$ 3,760
$ 3,753
$ 7
63,021
66,651
$66,776
$70,411
66,631
$70,384
20
$27
$—
—
$—
AbbVie also holds investments in equity securities that do not have readily determinable fair
values. The company records these investments at cost and remeasures them to fair value based on
certain observable price changes or impairment events as they occur. The carrying amount of these
investments was $102 million as of December 31, 2020 and $66 million as of December 31, 2019.
No significant cumulative upward or downward adjustments have been recorded for these
investments as of December 31, 2020.
Concentrations of Risk
Of total net accounts receivable, three U.S. wholesalers accounted for 72% as of December 31,
2020 and 68% as of December 31, 2019, and substantially all of AbbVie’s net revenues in the
United States were to these three wholesalers.
Humira (adalimumab) is AbbVie’s single largest product and accounted for approximately 43%
of AbbVie’s total net revenues in 2020, 58% in 2019 and 61% in 2018.
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Note 12 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 on the consolidated balance sheets as of December 31, 2020 and 2019.
The following table summarizes benefit plan information for the global AbbVie-sponsored defined
benefit and other post-employment plans:
as of and for the years ended December 31 (in millions)
2020
2019
2020
2019
Defined
benefit plans
Other
post-employment
plans
Projected benefit obligations
Beginning of period
Service cost
Interest cost
Employee contributions
Amendments
Actuarial loss
Benefits paid
Acquisition
Other, primarily foreign currency translation adjustments
End of period
Fair value of plan assets
Beginning of period
Actual return on plan assets
Company contributions
Employee contributions
Benefits paid
Acquisition
Other, primarily foreign currency translation adjustments
End of period
Funded status, end of period
Amounts recognized on the consolidated balance
sheets
Other assets
Accounts payable and accrued liabilities
Other long-term liabilities
Net obligation
Actuarial loss, net
Prior service cost (credit)
Accumulated other comprehensive loss
$
$ 8,646
370
264
2
—
1,105
(249)
1,409
245
$ 6,618
269
259
2
—
1,703
(206)
—
1
$1,050
42
34
—
(397)
40
(17)
43
—
561
25
29
—
—
451
(17)
—
1
11,792
8,646
795
1,050
7,116
979
367
2
(249)
1,296
191
9,702
5,637
946
727
2
(206)
—
10
7,116
—
—
17
—
(17)
—
—
—
—
—
17
—
(17)
—
—
—
$(2,090) $(1,530) $ (795) $(1,050)
$
563
(12)
(2,641)
$
395
(8)
(1,917)
$ — $ —
(18)
(1,032)
(23)
(772)
$(2,090) $(1,530) $ (795) $(1,050)
$ 4,163
8
$ 3,633
10
$ 482
(408)
$ 4,171
$ 3,643
$
74
$
$
469
(16)
453
The projected benefit obligations (PBO) in the table above included $3.5 billion at December 31,
2020 and $2.3 billion at December 31, 2019, related to international defined benefit plans.
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For plans reflected in the table above, the accumulated benefit obligations (ABO) were
$10.5 billion at December 31, 2020 and $7.6 billion at December 31, 2019.
Information For Pension Plans With An Accumulated Benefit Obligation In Excess Of Plan Assets
as of December 31 (in millions)
Accumulated benefit obligation
Fair value of plan assets
2020
2019
$7,527
6,066
$5,752
4,820
Information For Pension Plans With A Projected Benefit Obligation In Excess Of Plan Assets
as of December 31 (in millions)
Projected benefit obligation
Fair value of plan assets
2020
2019
$8,719
6,066
$6,820
4,895
The 2020 actuarial losses of $1.1 billion for qualified pension plans and $40 million for other
post-employment plans were primarily driven by a decrease in the assumed discount rate from 2019.
The 2019 actuarial losses of $1.7 billion for qualified pension plans and $451 million for other
post-employment plans were primarily driven by a decrease in the assumed discount rate from 2018.
A change to AbbVie’s U.S. retiree health benefit plan was approved in 2020 and communicated
to employees and retirees in October 2020. Beginning in 2022, Medicare-eligible retirees and
Medicare-eligible dependents will choose health care coverage from insurance providers through a
private Medicare exchange. AbbVie will continue to provide financial support to Medicare-eligible
retirees. This change decreased AbbVie’s post-employment benefit obligation and increased
AbbVie’s unrecognized prior service credit as of December 31, 2020 by $397 million.
In connection with the Allergan acquisition, AbbVie assumed certain post-employment benefit
obligations which were recorded at fair value. Upon acquisition in the second quarter of 2020, the
excess of projected benefit obligations over the plan assets was recognized as a liability totaling
$156 million.
Amounts Recognized in Other Comprehensive Income (Loss)
The following table summarizes the pre-tax losses (gains) included in other comprehensive
income (loss):
years ended December 31 (in millions)
Defined benefit plans
Actuarial loss
Amortization of prior service cost
Amortization of actuarial loss
Foreign exchange loss (gain) and other
Total loss
Other post-employment plans
Actuarial loss (gain)
Prior service cost (credit)
Amortization of prior service credit
Amortization of actuarial loss
Total loss (gain)
2020
2019
2018
$ 701
(2)
(227)
56
$1,231
—
(109)
(6)
$ 209
—
(140)
(13)
$ 528
$1,116
$ 56
$ 40
(397)
4
(26)
$ 451
—
—
(1)
$(379)
$ 450
$(287)
—
—
(1)
$(288)
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Net Periodic Benefit Cost
years ended December 31 (in millions)
Defined benefit plans
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Net periodic benefit cost
Other post-employment plans
Service cost
Interest cost
Amortization of prior service credit
Amortization of actuarial loss
Net periodic benefit cost
2020
2019
2018
$ 370
264
(575)
2
227
$ 269
259
(474)
—
109
$ 285
227
(439)
—
140
$ 288
$ 163
$ 213
$ 42
34
(4)
26
$ 25
29
—
1
$ 26
25
—
1
$ 98
$ 55
$ 52
The components of net periodic benefit cost other than service cost are included in other
expense, net in the consolidated statements of earnings.
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
Cash balance interest crediting rate
Other post-employment plans
Discount rate
2020
2019
2.4% 3.0%
4.6% 4.6%
2.8% 2.8%
2.8% 3.6%
The assumptions used in calculating the December 31, 2020 measurement date benefit
obligations will be used in the calculation of net periodic benefit cost in 2021.
Weighted-Average Assumptions Used in Determining Net Periodic Benefit Cost
years ended December 31
Defined benefit plans
Discount rate for determining service cost
Discount rate for determining interest cost
Expected long-term rate of return on plan assets
Expected rate of change in compensation
Cash balance interest crediting rate
Other post-employment plans
Discount rate for determining service cost
Discount rate for determining interest cost
2020
2019
2018
3.1% 4.0% 3.4%
3.0% 4.0% 3.1%
7.1% 7.6% 7.7%
4.6% 4.6% 4.4%
2.8% 2.8% 2.8%
3.7% 4.7% 4.0%
3.2% 4.3% 3.7%
For the December 31, 2020 post-retirement health care obligations remeasurement, the
company assumed a 6.3% pre-65 (6.7% 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% in 2090 and
remain at that level thereafter. For purposes of measuring the 2020 post-retirement health care
costs, the company assumed a 6.4% pre-65 (7.0% post-65) annual rate of increase in the per capita
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cost of covered health care benefits. The rate was assumed to decrease gradually to 4.5% for 2050
and remain at that level thereafter.
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)
Total
Total assets measured at NAV
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)
Total
Total assets measured at NAV
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)
$1,143
164
524
$ —
—
—
18
178
397
294
4
10
250
114
676
147
3
306
—
2
$—
—
—
—
—
—
—
—
—
—
$2,982
$1,248
$—
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)
$ 884
138
349
21
112
84
318
4
9
132
$ —
—
—
128
260
118
2
292
—
—
$—
—
—
—
—
—
—
—
—
—
$2,051
$800
$—
2020
$1,143
164
524
132
854
544
297
310
10
252
$4,230
5,472
$9,702
2019
$ 884
138
349
149
372
202
320
296
9
132
$2,851
4,265
$7,116
(a) A mix of index funds and actively managed equity accounts that are benchmarked to various
large cap indices.
(b) A mix of index funds and actively managed equity accounts that are benchmarked to various
mid cap indices.
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(c) A mix of index funds and actively managed equity accounts that are benchmarked to various
non-U.S. equity indices in both developed and emerging markets.
(d) Securities held by actively managed accounts, index funds and mutual funds.
(e) Primarily 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.
Equities and registered investment companies having quoted prices are valued at the published
market prices. Fixed income securities that are valued using significant other observable inputs are
quoted at prices obtained from independent financial service industry-recognized vendors.
Investments held in pooled investment funds, common collective trusts or limited partnerships are
valued at the net asset value (NAV) practical expedient to estimate fair value. The NAV is provided
by the fund administrator and is based on the value of the underlying assets owned by the fund
minus its liabilities.
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 2020 target investment
allocation for the AbbVie Pension Plan was 50% in equity securities, 20% in fixed income securities
and 30% 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 of any other plans.
The expected return on plan assets assumption for each plan is based on management’s
expectations of long-term average rates of return to be achieved by the underlying investment
portfolio. 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 Benefit Payments
The following table summarizes total benefit payments expected to be paid to plan participants
including payments funded from both plan and company assets:
years ending December 31 (in millions)
2021
2022
2023
2024
2025
2026 to 2030
Defined
benefit plans
Other
post-employment
plans
$ 284
301
319
339
362
2,169
$ 23
29
31
33
36
217
Defined Contribution Plan
AbbVie’s principal defined contribution plans are the AbbVie Savings Plan and the Allergan
Savings Plan. AbbVie recorded expense of $191 million in 2020, $102 million in 2019 and
$89 million in 2018 related to these plans. AbbVie provides certain other post-employment benefits,
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primarily salary continuation arrangements, to qualifying employees and accrues for the related cost
over the service lives of the employees.
Note 13 Equity
........................................................................................................................................................................................................................................................................................................................................
Stock-Based Compensation
AbbVie grants stock-based awards to eligible employees pursuant to the AbbVie 2013 Incentive
Stock Program (2013 ISP), which provides for several different forms of benefits, including
nonqualified stock options, RSUs and various performance-based awards. Under the 2013 ISP,
100 million shares of AbbVie common stock were reserved for issuance as awards to AbbVie
employees. The 2013 ISP also facilitated the assumption of certain awards granted under Abbott’s
incentive stock program, which were adjusted and converted into Abbott and AbbVie stock-based
awards as a result of AbbVie’s separation from Abbott.
AbbVie measures compensation expense for stock-based awards based on the grant date fair
value of the awards and the estimated number of awards that are expected to vest. Forfeitures are
estimated based on historical experience at the time of grant and are revised in subsequent periods
if actual forfeitures differ from those estimates. Compensation cost for stock-based awards is
amortized over the service period, which could be shorter than the vesting period if an employee is
retirement eligible. Retirement eligible employees generally are those who are age 55 or older and
have at least 10 years of service.
Stock-based compensation expense is principally related to awards issued pursuant to the 2013
ISP and is summarized as follows:
years ended December 31 (in millions)
Cost of products sold
Research and development
Selling, general and administrative
Pre-tax compensation expense
Tax benefit
After-tax compensation expense
2020
2019
2018
$ 47
247
459
753
131
$ 29
171
230
430
80
$ 27
169
225
421
73
$622
$350
$348
Realized excess tax benefits associated with stock-based compensation totaled $34 million in
2020, $15 million in 2019 and $78 million in 2018.
Stock Options
Stock options awarded to employees typically have a contractual term of 10 years and generally
vest in one-third increments over a three-year period. The exercise price is equal to at least 100% of
the market value on the date of grant. The fair value is determined using the Black-Scholes model.
The weighted-average grant-date fair values of stock options granted were $12.14 in 2020, $12.54 in
2019 and $21.63 in 2018.
In connection with the Allergan acquisition, during the second quarter of 2020, AbbVie issued
11.2 million stock options to holders of Allergan options as a result of the conversion of such
options. These options were fair-valued using a lattice valuation model. Refer to Note 5 for additional
information regarding the Allergan acquisition.
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The following table summarizes AbbVie stock option activity in 2020:
(options in thousands, aggregate intrinsic value in millions)
Options exercise price life (in years)
Weighted-
average
Weighted-
average
remaining
Aggregate
intrinsic value
Outstanding at December 31, 2019
Granted
Granted in acquisition
Exercised
Lapsed
Outstanding at December 31, 2020
Exercisable at December 31, 2020
6,761
1,995
11,152
(4,129)
(88)
$ 60.39
93.50
70.48
51.29
107.33
15,691
$ 73.90
12,440
$ 69.99
5.9
$207
4.7
3.6
$559
$498
The total intrinsic value of options exercised was $186 million in 2020, $22 million in 2019 and
$215 million in 2018. The total fair value of options vested during 2020 was $292 million. As of
December 31, 2020, $13 million of unrecognized compensation cost related to stock options is
expected to be recognized as expense over approximately the next two years.
RSUs and Performance Shares
RSUs awarded to employees other than senior executives and other key employees generally
vest in ratable increments over a three or four-year period. Recipients of these RSUs are entitled to
receive dividend equivalents as dividends are declared and paid during the RSU vesting period.
The majority of the equity awards AbbVie grants to its senior executives and other key
employees are performance-based. Equity awards granted to senior executives and other key
employees consist of a combination of performance-vested RSUs and performance shares as well
as non-qualified stock options described above. The performance-vested RSUs have the potential to
vest in one-third increments during a three-year performance period. For awards granted in 2020,
performance is based on AbbVie’s return on invested capital (ROIC) relative to a defined peer group
of pharmaceutical, biotech and life science companies. For awards granted in 2018 and 2019, the
tranches tied to 2020 performance are based on AbbVie’s return on equity (ROE) relative to a
defined peer group of pharmaceutical, biotech and life sciences companies. The recipient may
receive one share of AbbVie common stock for each vested award. The performance shares have
the potential to vest over a three-year performance period and may be earned based on AbbVie’s
EPS achievement and AbbVie’s total stockholder return (TSR) (a market condition) relative to a
defined peer group of pharmaceutical, biotech and life sciences companies. Dividend equivalents on
performance-vested RSUs and performance shares accrue during the performance period and are
payable at vesting only to the extent that shares are earned.
The weighted-average grant-date fair value of RSUs and performance shares generally is
determined based on the number of shares/units granted and the quoted price of AbbVie’s common
stock on the date of grant. The weighted-average grant-date fair values of performance shares with
a TSR market condition are determined using the Monte Carlo simulation model.
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The following table summarizes AbbVie RSU and performance share activity for 2020:
(share units in thousands)
Outstanding at December 31, 2019
Granted
Granted in acquisition
Vested
Forfeited
Outstanding at December 31, 2020
Share units
Weighted-average
grant date fair value
10,232
5,524
8,234
(6,667)
(1,405)
15,918
$81.72
92.35
83.96
80.09
84.13
$87.03
The fair market value of RSUs and performance shares (as applicable) vested was $618 million
in 2020, $371 million in 2019 and $583 million in 2018.
In connection with the Allergan acquisition, during the second quarter of 2020, AbbVie issued
8.2 million RSUs to holders of Allergan equity awards based on a conversion factor described in the
transaction agreement. Refer to Note 5 for additional information regarding the Allergan acquisition.
As of December 31, 2020, $579 million of unrecognized compensation cost related to RSUs and
performance shares is expected to be recognized as expense over approximately the next two
years.
Cash Dividends
Cash dividends declared per common share totaled $4.84 in 2020, $4.39 in 2019 and $3.95 in
2018. The following table summarizes quarterly cash dividends declared during 2020, 2019 and
2018:
Date
Declared
10/30/20
09/11/20
06/17/20
02/20/20
2020
Payment
Date
02/16/21
11/16/20
08/14/20
05/15/20
Dividend Per
Share
Date
Declared
$1.30
$1.18
$1.18
$1.18
11/01/19
09/06/19
06/20/19
02/21/19
2019
Payment
Date
02/14/20
11/15/19
08/15/19
05/15/19
Dividend Per
Share
Date
Declared
$1.18
$1.07
$1.07
$1.07
11/02/18
09/07/18
06/14/18
02/15/18
2018
Payment
Date
02/15/19
11/15/18
08/15/18
05/15/18
Dividend Per
Share
$1.07
$0.96
$0.96
$0.96
Stock Repurchase Program
The company’s stock repurchase authorization permits purchases of AbbVie shares from time to
time in open-market or private transactions at management’s discretion. The program has no time
limit and can be discontinued at any time. Shares repurchased under these programs are recorded
at acquisition cost, including related expenses and are available for general corporate purposes.
AbbVie repurchased 8 million shares for $757 million in 2020 and 4 million shares for
$300 million in 2019. AbbVie’s remaining stock repurchase authorization was $3.2 billion as of
December 31, 2020.
On February 15, 2018, AbbVie’s board of directors authorized a new $10.0 billion stock
repurchase program, which superseded AbbVie’s previous stock repurchase program. On
December 13, 2018, AbbVie’s board of directors authorized a $5.0 billion increase to the existing
$10.0 billion stock repurchase program. Under this authorization, AbbVie repurchased approximately
109 million shares for $10.7 billion in 2018.
Under previous stock repurchase programs, AbbVie made open-market share repurchases of
approximately 11 million shares for $1.3 billion in 2018.
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Accumulated Other Comprehensive Loss
The following table summarizes the changes in each component of accumulated other
comprehensive loss, net of tax, for 2020, 2019 and 2018:
(in millions) (brackets denote losses)
Foreign
currency
translation
adjustments
Net
investment
hedging
activities
Pension
and post- Marketable
employment
benefits
security
activities
Cash
flow
hedging
activities
Total
Balance as of December 31, 2017
$ (439)
$(203)
$(1,919)
$ —
$(166) $(2,727)
Other comprehensive income (loss)
before reclassifications
Net losses reclassified from
accumulated other
comprehensive loss
Net current-period other
comprehensive income (loss)
Balance as of December 31, 2018
Other comprehensive income (loss)
(391)
138
84
(14)
156
(27)
—
—
(391)
(830)
138
(65)
113
197
(1,722)
4
157
274
(10)
(10)
313
147
247
(2,480)
before reclassifications
(98)
95
(1,330)
12
298
(1,023)
Net losses (gains) reclassified from
accumulated other
comprehensive loss
Net current-period other
comprehensive income (loss)
Balance as of December 31, 2019
Other comprehensive income (loss)
—
(21)
87
(2)
(157)
(93)
(98)
(928)
74
9
(1,243)
(2,965)
10
—
—
—
—
141
288
(1,116)
(3,596)
(108)
318
(23)
161
(131)
479
before reclassifications
1,511
(785)
(300)
Net losses (gains) reclassified from
accumulated other
comprehensive loss
Net current-period other
—
(14)
198
comprehensive income (loss)
1,511
(799)
(102)
Balance as of December 31, 2020
$ 583
$(790)
$(3,067)
$ —
$ 157
$(3,117)
Other comprehensive income (loss) included foreign currency translation adjustments totaling
gains of $1.5 billion in 2020 which were principally due to the impact of the strengthening of the
Euro on the translation of the company’s Euro-denominated assets. Other comprehensive income
(loss) included foreign currency translation adjustments totaling losses of $98 million in 2019 and
$391 million in 2018 which were principally due to the impact of the weakening of the Euro on the
translation of the company’s Euro-denominated assets.
Other comprehensive loss for 2019 included pension and post-employment benefit plan losses
of $1.2 billion primarily due to an actuarial loss driven by lower discount rates. See Note 12 for
additional information.
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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)
2020
2019
2018
Net investment hedging activities
Gains on derivative amount excluded from effectiveness testing(a)
Tax expense
Total reclassifications, net of tax
Pension and post-employment benefits
Amortization of actuarial losses and other(b)
Tax benefit
Total reclassifications, net of tax
Cash flow hedging activities
Losses (gains) on foreign currency forward exchange contracts(c)
Gains on treasury rate lock agreements(a)
Losses (gains) on interest rate swap contracts(a)
Tax expense (benefit)
$ (18) $ (27) $ —
—
4
6
$ (14) $ (21) $ —
$251
(53)
$ 110
(23)
$141
(28)
$198
$ 87
$113
$ (23) $(167) $161
—
—
(4)
(24)
17
7
(3)
(1)
14
Total reclassifications, net of tax
$ (23) $(157) $157
(a) Amounts are included in interest expense, net (see Note 11).
(b) Amounts are included in the computation of net periodic benefit cost (see Note 12).
(c) Amounts are included in cost of products sold (see Note 11).
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, 2020, no shares of preferred stock were
issued or outstanding.
Note 14 Income Taxes
........................................................................................................................................................................................................................................................................................................................................
Earnings Before Income Tax Expense
years ended December 31 (in millions)
Domestic
Foreign
Total earnings before income tax expense
2020
2019
2018
$(4,467) $ (2,784) $(4,274)
9,471
11,210
7,865
$ 3,398
$ 8,426
$ 5,197
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Income Tax Expense
years ended December 31 (in millions)
2020
2019
2018
Current
Domestic
Foreign
Total current taxes
Deferred
Domestic
Foreign
$
907
194
$ 102
320
$
593
434
$ 1,101
$ 422
$ 1,027
$
(58) $(137) $(1,497)
(20)
259
(2,267)
Total deferred taxes
Total income tax expense (benefit)
$(2,325) $ 122
$(1,517)
$(1,224) $ 544
$ (490)
Effective Tax Rate Reconciliation
years ended December 31
Statutory tax rate
Effect of foreign operations
U.S. tax credits
Impacts related to U.S. tax reform
Non-deductible expenses
Tax law changes and related restructuring
Stock-based compensation excess tax benefit
Tax audit settlements
All other, net
Effective tax rate
2020
2019
2018
21.0% 21.0% 21.0%
(28.7)
(8.4)
(7.3)
(3.3)
8.2
(1.6)
1.2
1.0
—
3.1
(1.5)
(0.2)
(2.5)
(4.7)
0.2
(0.4)
2.4
(10.6)
(1.1)
7.2
(48.5)
(0.9)
(5.1)
(0.4)
(36.0)% 6.5% (9.4)%
The effective income 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 changes in tax law, acquisitions and collaborations. The effective income tax rates in 2020,
2019 and 2018 differed from the statutory tax rate principally due to the impact of foreign operations
which reflects the impact of lower income tax rates in locations outside the United States, tax
incentives in Puerto Rico and other foreign tax jurisdictions, business development activities,
changes in enacted tax rates and laws and related restructuring, the cost of repatriation decisions,
tax audit settlements and Boehringer Ingelheim accretion on contingent consideration. The 2020
effective income tax rate included the recognition of a net tax benefit of $1.7 billion related to
changes in tax laws and related restructuring, including certain intra-group transfers of intellectual
property and deferred tax remeasurement. 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 Puerto Rico excise tax credits relate to legislation
enacted by Puerto Rico that assesses an excise tax 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 2020, 2019 and 2018 included impacts related to U.S. tax
reform. The Tax Cuts and Jobs Act (the Act) was signed into law in December 2017, resulting in
significant changes to the U.S. corporate tax system, including a one-time transition tax on a
mandatory deemed repatriation of earnings of certain foreign subsidiaries that were previously
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untaxed. The Act also created a minimum tax on certain foreign sourced earnings. The company’s
accounting policy for the minimum tax on foreign sourced earnings is to report the tax effects on the
basis that the minimum tax will be recognized in tax expense in the year it is incurred as a period
expense. In 2018, there was a favorable impact of the effective date of provisions of the Act related
to the earnings from certain foreign subsidiaries. For 2019, the impact of the Act affected the full
year earnings of these subsidiaries, resulting in additional tax expense compared to the previous
year. The effective income tax rates for 2019 and 2018 also included the effects of Stemcentrx
impairment related expenses.
Deferred Tax Assets and Liabilities
as of December 31 (in millions)
Deferred tax assets
Compensation and employee benefits
Accruals and reserves
Chargebacks and rebates
Advance payments
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
Other
Total deferred tax liabilities
Net deferred tax liabilities
2020
2019
$ 1,109
438
555
324
2,765
1,371
6,562
(1,203)
5,359
$
810
371
477
615
838
406
3,517
(731)
2,786
(5,274)
(335)
(982)
(2,712)
(249)
(440)
(6,591)
(3,401)
$(1,232) $ (615)
The increases in deferred tax liabilities are primarily due to the acquisition of Allergan in which
the company recorded the excess of book basis over tax basis of intangible assets. The increases in
deferred tax assets are primarily due to deferred tax asset recognition related to the intra-group
transfer of intellectual property.
As of December 31, 2020, the company had U.S. federal and state credit carryforwards of
$293 million as well as U.S. federal, state and non-U.S. net operating loss carryforwards of
$4.3 billion, which will expire at various times through 2040. The remaining U.S. federal and
non-U.S. loss carryforwards of $5.8 billion have no expiration.
The company had valuation allowances of $1.2 billion as of December 31, 2020 and
$731 million as of December 31, 2019. These were principally related to foreign and state net
operating losses and credit carryforwards that are not expected to be realized.
The Act significantly changed the timing and manner in which earnings of foreign subsidiaries
are subject to U.S. tax. Therefore, unremitted foreign earnings previously considered indefinitely
reinvested that were subject to the Act’s transition tax are no longer considered indefinitely
reinvested. Post-2017 earnings subject to the U.S. minimum tax on foreign sourced earnings or
eligible for the 100 percent foreign dividends received deduction are also not considered indefinitely
reinvested earnings. However, the company generally considers instances of outside basis
differences in foreign subsidiaries that would incur additional U.S. tax upon reversal (e.g., capital
gain distribution) to be permanent in duration. The unrecognized tax liability is not practicable to
determine.
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Unrecognized Tax Benefits
years ended December 31 (in millions)
Beginning balance
Increase due to acquisition
Increase due to current year tax positions
Increase due to prior year tax positions
Decrease due to prior year tax positions
Settlements
Lapse of statutes of limitations
Ending balance
2020
2019
2018
$2,661
2,674
91
59
(7)
(141)
(73)
$2,852
—
113
499
(21)
(749)
(33)
$2,701
—
163
110
(36)
(79)
(7)
$5,264
$2,661
$2,852
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.
If recognized, the net amount of potential tax benefits that would impact the company’s effective
tax rate is $5.0 billion in 2020 and $2.4 billion in 2019. Of the unrecognized tax benefits recorded in
the table above as of December 31, 2020, AbbVie would be indemnified for approximately
$81 million. The ‘‘Increase due to current year tax positions’’ and ‘‘Increase due to prior year tax
positions’’ in the table above include amounts related to federal, state and international tax items.
‘‘Increase due to acquisition’’ in the table above includes amounts related to federal, state and
international tax items recorded in acquisition accounting related to the Allergan acquisition.
AbbVie recognizes interest and penalties related to income tax matters in income tax expense in
the consolidated statements of earnings. AbbVie recognized gross income tax expense of
$142 million in 2020, $51 million in 2019 and $73 million in 2018, for interest and penalties related to
income tax matters. AbbVie had an accrual for the payment of gross interest and penalties of
$642 million at December 31, 2020, $191 million at December 31, 2019 and $190 million at
December 31, 2018.
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 12 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 12 months up to $68 million. All significant federal, state, local and
international matters have been concluded for years through 2008. The company believes adequate
provision has been made for all income tax uncertainties.
Note 15 Legal Proceedings and Contingencies
........................................................................................................................................................................................................................................................................................................................................
AbbVie is subject to contingencies, such as various claims, legal proceedings and investigations
regarding product liability, intellectual property, commercial, securities and other matters that arise in
the normal course of business. The most significant matters are described below. Loss contingency
provisions are recorded for probable losses at management’s best estimate of a loss, or when a
best estimate cannot be made, a minimum loss contingency amount within a probable range is
recorded. The recorded accrual balance for litigation was approximately $60 million as of
December 31, 2020 and approximately $290 million as of December 31, 2019. Initiation of new legal
proceedings or a change in the status of existing proceedings may result in a change in the
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estimated loss accrued by AbbVie. In addition, other operating income in 2019 included $550 million
of income from a legal settlement related to an intellectual property dispute with a third party. 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 of its business, but were discontinued prior to the distribution, as well as assumed or
retained liabilities, and will indemnify Abbott for any liability arising out of or resulting from such
assumed legal matters.
Antitrust Litigation
Lawsuits are pending against AbbVie and others generally alleging that the 2005 patent litigation
settlement involving Niaspan entered into between Kos Pharmaceuticals, Inc. (a company acquired
by Abbott in 2006 and presently a subsidiary of AbbVie) and a generic company violates federal and
state antitrust laws and state unfair and deceptive trade practices and unjust enrichment laws.
Plaintiffs generally seek monetary damages and/or injunctive relief and attorneys’ fees. The lawsuits
pending in federal court consist of four individual plaintiff lawsuits and two consolidated purported
class actions: one brought by Niaspan direct purchasers and one brought by Niaspan end-payers.
The cases are pending in the United States District Court for the Eastern District of Pennsylvania for
coordinated or consolidated pre-trial proceedings under the MDL Rules as In re: Niaspan Antitrust
Litigation, MDL No. 2460. In August 2019, the court certified a class of direct purchasers of Niaspan.
In June 2020, the court denied the end-payers’ motion to certify a class. In October 2016, the
Orange County, California District Attorney’s Office filed a lawsuit on behalf of the State of California
regarding the Niaspan patent litigation settlement in Orange County Superior Court, asserting a
claim under the unfair competition provision of the California Business and Professions Code
seeking injunctive relief, restitution, civil penalties and attorneys’ fees.
In September 2014, the Federal Trade Commission (FTC) filed a lawsuit, FTC v. AbbVie Inc., et
al., against AbbVie and others in the United States District Court for the Eastern District of
Pennsylvania, alleging that 2011 patent litigation with two generic companies regarding AndroGel
was sham litigation and the settlements of that litigation violated federal antitrust law. In May 2015,
the court dismissed the FTC’s settlement-related claim. In June 2018, following a bench trial, the
court found for the FTC on its sham litigation claim and ordered a disgorgement remedy of
$448 million, plus prejudgment interest. The court denied the FTC’s request for injunctive relief. In
September 2020, the United States Court of Appeals for the Third Circuit reversed the district court’s
finding of sham litigation with respect to one generic company and affirmed with respect to the other
but held the FTC lacked authority to obtain a disgorgement remedy and vacated the district court’s
award. The Third Circuit also affirmed the district court’s denial of the FTC’s injunction request and
reinstated the FTC’s settlement-related claim for further proceedings in the district court.
In August 2019, direct purchasers of AndroGel filed a lawsuit, King Drug Co. of Florence, Inc.,
et al. v. AbbVie Inc., et al., against AbbVie and others in the United States District Court for the
Eastern District of Pennsylvania, alleging that 2006 patent litigation settlements and related
agreements by Solvay Pharmaceuticals, Inc. (a company Abbott acquired in February 2010 and now
known as AbbVie Products LLC) with three generic companies violated federal antitrust law, and
also making allegations similar to those in FTC v. AbbVie Inc. (above). In May 2020, Perrigo
Company and related entities filed a lawsuit against AbbVie and others in the United States District
Court for the Eastern District of Pennsylvania, making sham litigation allegations similar to those in
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FTC v. AbbVie Inc. (above). In October 2020, the Perrigo lawsuit was transferred to the United
States District Court for New Jersey.
Between March and May 2019, 12 putative class action lawsuits were filed in the United States
District Court for the Northern District of Illinois by indirect Humira purchasers, alleging that AbbVie’s
settlements with biosimilar manufacturers and AbbVie’s Humira patent portfolio violated state and
federal antitrust laws. The court consolidated these lawsuits as In re: Humira (Adalimumab) Antitrust
Litigation. In June 2020, the court dismissed the consolidated litigation with prejudice. The plaintiffs
have appealed the dismissal.
Lawsuits are pending against Forest Laboratories, LLC and others generally alleging that 2009
and 2010 patent litigation settlements involving Namenda entered into between Forest and generic
companies and other conduct by Forest involving Namenda, violated state antitrust, unfair and
deceptive trade practices, and unjust enrichment laws. Plaintiffs generally seek monetary damages,
injunctive relief and attorneys’ fees. The lawsuits, purported class actions filed by indirect purchasers
of Namenda, are consolidated as In re: Namenda Indirect Purchaser Antitrust Litigation in the United
States District Court for the Southern District of New York.
Lawsuits are pending against Allergan Inc. generally alleging that Allergan’s petitioning to the
U.S. Patent Office and Food and Drug Administration and other conduct by Allergan involving
Restasis violated federal and state antitrust laws and state unfair and deceptive trade practices and
unjust enrichment laws. Plaintiffs generally seek monetary damages, injunctive relief and attorneys’
fees. The lawsuits, certified as a class action filed on behalf of indirect purchasers of Restasis, are
consolidated for pre-trial purposes in the United States District Court for the Eastern District of New
York under the MDL Rules as In re: Restasis (Cyclosporine Ophthalmic Emulsion) Antitrust
Litigation, MDL No. 2819.
Lawsuits are pending against Forest Laboratories, LLC and others generally alleging that 2012
and 2013 patent litigation settlements involving Bystolic with six generic manufacturers violated
federal and state antitrust laws and state unfair and deceptive trade practices and unjust enrichment
laws. Plaintiffs generally seek monetary damages, injunctive relief, and attorneys’ fees. The lawsuits,
purported class actions filed on behalf of direct and indirect purchasers of Bystolic, are consolidated
as In re: Bystolic Antitrust Litigation in the United States District Court for the Southern District of
New York.
Government Proceedings
Lawsuits are pending against Allergan and several other manufacturers generally alleging that
they improperly promoted and sold prescription opioid products. Approximately 3,100 matters are
pending against Allergan. The federal court cases are consolidated for pre-trial purposes in the
United States District Court for the Northern District of Ohio under the MDL rules as In re: National
Prescription Opiate Litigation, MDL No. 2804. Approximately 300 of the claims are pending in
various state courts. The plaintiffs in these cases, which include states, counties, cities, and Native
American tribes, generally seek compensatory damages.
In July 2019, the New Mexico Attorney General filed a lawsuit, State of New Mexico ex rel.
Balderas v. AbbVie Inc., et al., in New Mexico District Court for Santa Fe County against AbbVie
and other companies alleging their marketing of AndroGel violated New Mexico’s Unfair Practices
Act. In October 2020, the state added a claim under the New Mexico False Advertising Act.
Shareholder and Securities Litigation
In June 2016, a lawsuit, Elliott Associates, L.P., et al. v. AbbVie Inc., was filed by five
investment funds against AbbVie in the Cook County, Illinois Circuit Court alleging that AbbVie made
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misrepresentations and omissions in connection with its proposed transaction with Shire. Similar
lawsuits were filed between July 2017 and October 2019 against AbbVie and in some instances its
chief executive officer in the same court by additional investment funds. The court granted motions
dismissing the claims of three investment-fund plaintiffs, which they are appealing. One of these
plaintiffs refiled its lawsuit in New York state court in June 2020 while the appeal of its dismissal in
Illinois is pending. In November 2020, the New York Supreme Court for the County of New York
dismissed that lawsuit. Plaintiffs seek compensatory and punitive damages.
In October 2018, a federal securities lawsuit, Holwill v. AbbVie Inc., et al., was filed in the
United States District Court for the Northern District of Illinois) against AbbVie, its chief executive
officer and former chief financial officer, alleging that reasons stated for Humira sales growth in
financial filings between 2013 and 2017 were misleading because they omitted alleged misconduct
in connection with Humira patient and reimbursement support services and other services and items
of value that allegedly induced Humira prescriptions.
In February 2020, a shareholder derivative lawsuit, Elfers v. Gonzalez, et al., was filed in the
United States District Court for the District of Delaware alleging that certain AbbVie directors and
officers breached their fiduciary duties regarding alleged misconduct in connection with Humira
patient and reimbursement support services and other services and items of value and in connection
with the announcements of results of AbbVie’s 2018 Dutch auction tender offer. In December 2020,
the court dismissed the lawsuit.
Lawsuits are pending against Allergan and certain of its current and former officers alleging they
made misrepresentations and omissions regarding Allergan’s textured breast implants. The lawsuits,
which were filed by Allergan shareholders, have been consolidated in the United States District
Court for the Southern District of New York as In re: Allergan plc Securities Litigation. The plaintiffs
generally seek compensatory damages and attorneys’ fees. In September 2019, the court partially
granted Allergan’s motion to dismiss. In September 2020, the court denied plaintiffs’ class
certification motion because it found the lead plaintiff to be an inadequate representative of the
proposed class but allowed another putative class member to propose itself as a new lead plaintiff.
In December 2020, the court appointed a new lead plaintiff.
Lawsuits are pending against Allergan and certain of its current and former officers alleging they
made misrepresentations and omissions regarding Allergan’s former Actavis generics unit and its
alleged anticompetitive conduct with other generic drug companies. The lawsuits were filed by
Allergan shareholders and consist of three purported class actions and one individual action that
have been consolidated in the U.S. District Court for the District of New Jersey as In re: Allergan
Generic Drug Pricing Securities Litigation. Another individual action in New Jersey state court was
dismissed in September 2020. The plaintiffs seek monetary damages and attorneys’ fees.
Product Liability and General Litigation
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. Approximately 92 cases are pending in the United States District Court for the Southern
District of Illinois along with one other pending in state court. Plaintiffs generally seek compensatory
and punitive damages. Approximately ninety-eight percent of these pending cases, plus other unfiled
claims, are subject to confidential settlement agreements or agreements-in-principle and are
expected to be dismissed with prejudice.
In 2018, a qui tam lawsuit, U.S. ex rel. Silbersher v. Allergan Inc., et al., was filed in the United
States District Court for the Northern District of California against several Allergan entities and
others, alleging that their conduct before the U.S. Patent Office resulted in false claims for payment
being made to federal and state healthcare payors for Namenda XR and Namzaric. The plaintiff-
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relator seeks damages and attorneys’ fees under the federal False Claims Act and state law
analogues. The federal government and state governments declined to intervene in the lawsuit.
Intellectual Property Litigation
Pharmacyclics LLC, a wholly owned subsidiary of AbbVie, is seeking to enforce its patent rights
relating to ibrutinib capsules (a drug Pharmacyclics sells under the trademark Imbruvica). In
February 2018 a lawsuit was filed in the United States District Court for the District of Delaware
against Sandoz Inc. and Lek Pharmaceuticals D.D. In the case, Pharmacyclics alleges the
defendants’ proposed generic ibrutinib product infringes certain Pharmacyclics patents and seeks
declaratory and injunctive relief. Janssen Biotech, Inc. which is in a global collaboration with
Pharmacyclics concerning the development and marketing of Imbruvica, is the co-plaintiff in this suit.
Pharmacyclics LLC, a wholly owned subsidiary of AbbVie, is seeking to enforce its patent rights
relating to ibrutinib tablets (a drug Pharmacyclics sells under the trademark Imbruvica). Cases were
filed in the United States District Court for the District of Delaware in March 2019 and March 2020
against Alvogen Pine Brook LLC and Natco Pharma Ltd., and in April 2020 against Zydus Worldwide
DMCC and Cadila Healthcare Limited. In each case, Pharmacyclics alleges defendants’ proposed
generic ibrutinib tablet product infringes certain Pharmacyclics patents and seeks declaratory and
injunctive relief. Janssen Biotech, Inc. which is in a global collaboration with Pharmacyclics
concerning the development and marketing of Imbruvica, is the co-plaintiff in these suits.
Allergan USA, Inc., Allergan Sales, LLC, and Forest Laboratories Holdings Limited, wholly
owned subsidiaries of AbbVie, are seeking to enforce patent rights relating to cariprazine (a drug
sold under the trademark Vraylar). Litigation was filed in the United States District Court for the
District of Delaware in December 2019 against Sun Pharmaceutical Industries Limited and Sun
Pharma Global FZE; Aurobindo Pharma Limited and Aurobindo Pharma USA, Inc.; and Zydus
Pharmaceuticals (USA), Inc. and Cadila Healthcare Limited. Allergan alleges defendants’ proposed
generic cariprazine products infringe certain patents and seeks declaratory and injunctive relief.
Gedeon Richter Plc, Inc. which is in a global collaboration with Allergan concerning the development
and marketing of Vraylar, is the co-plaintiff in this suit.
In January 2019, Allergan, Inc. and Allergan plc (now Allergan Limited) and Medytox Inc.
(collectively, ‘‘Complainants’’) filed a complaint with the United States International Trade
Commission (ITC) against Daewoong Pharmaceuticals Co., Ltd., Daewoong Co., Ltd., and
Evolus Inc. (collectively, ‘‘Respondents’’) requesting the ITC commence an investigation regarding
the importation into the United States of Respondents’ botulinum neurotoxin products, including
Jeuveau, which Complainants assert were developed using Medytox’s trade secrets. Complainants
seek permanent exclusion and cease and desist orders covering Respondents’ products, including
Jeuveau. In July 2020, the administrative law judge issued an initial ruling in favor of Allergan and
Medytox. In December 2020, the full Commission affirmed, in part, and reversed, in part, the initial
ruling.
In August 2020, BTL Industries, Inc. (BTL) filed an ITC action against Allergan USA, Inc.,
Allergan Limited, Allergan, Inc., Zeltiq Aesthetics, Inc., Zeltiq Ireland Unlimited Company, and
Zimmer Medizinsysteme GmbH, for patent infringement alleging that the CoolTone and
CoolSculpting devices infringe its patents and seeking an exclusion order preventing importation of
the devices and any components used to make or use the devices.
Note 16 Segment and Geographic Area Information
........................................................................................................................................................................................................................................................................................................................................
AbbVie operates as a single global business segment dedicated to the research and
development, manufacturing, commercialization and sale of innovative medicines and therapies. This
operating structure enables the Chief Executive Officer, as chief operating decision maker (CODM),
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to allocate resources and assess business performance on a global basis in order to achieve
established long-term strategic goals. Consistent with this structure, a global research and
development and supply chain organization is responsible for the discovery, manufacturing and
supply of products. Commercial efforts that coordinate the marketing, sales and distribution of these
products are organized by geographic region or therapeutic area. All of these activities are supported
by a global corporate administrative staff. The determination of a single business segment is
consistent with the consolidated financial information regularly reviewed by the CODM for purposes
of assessing performance, allocating resources and planning and forecasting future periods.
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)
2020
2019
2018
Immunology
Humira
Skyrizi
Rinvoq
United States
International
Total
United States
International
Total
United States
International
Total
Hematologic Oncology
Imbruvica
United States
Collaboration revenues
Venclexta
Aesthetics
Botox Cosmetic(a)
Juvederm Collection(a)
Other Aesthetics(a)
Neuroscience
Botox Therapeutic(a)
Vraylar(a)
Duodopa
Ubrelvy(a)
Other Neuroscience(a)
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
United States
International
Total
United States
United States
International
Total
$16,112
3,720
$14,864
4,305
$13,685
6,251
$19,832
$19,169
$19,936
$ 1,385
205
$ 1,590
$
$
653
78
731
$
$
$
$
311
44
355
47
—
47
$
$
$
$
—
—
—
—
—
—
$ 4,305
1,009
$ 3,830
844
$ 2,968
622
$ 5,314
$ 4,674
$ 3,590
$
804
533
$ 1,337
$
687
425
$ 1,112
$
$
$
$
318
400
718
666
94
760
$ 1,155
232
$ 1,387
$
$
$
$
$
$
951
103
391
494
125
528
11
539
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
521
271
792
$
$
247
97
344
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
97
364
461
$
$
— $
— $
—
— $
80
350
430
—
—
—
—
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111
years ended December 31 (in millions)
2020
2019
2018
Eye Care
Lumigan/Ganfort(a)
Alphagan/Combigan(a)
Restasis(a)
Other Eye Care(a)
Women’s Health
Lo Loestrin(a)
Orilissa/Oriahnn
Other Women’s Health(a)
Other Key Products
Mavyret
Creon
Lupron
Linzess/Constella(a)
Synthroid
All other
Total net revenues
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
International
Total
United States
United States
International
Total
United States
International
Total
United States
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
165
213
378
223
103
326
755
32
787
305
388
693
346
10
356
121
4
125
181
11
192
$
$
$
$
$
$
$
$
$
$
$
$
$
$
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
— $
91
2
93
$
$
— $
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11
—
11
—
—
—
785
1,045
$ 1,473
1,420
$ 1,614
1,824
$ 1,830
$ 2,893
$ 3,438
$ 1,114
$ 1,041
$
$
$
$
$
600
152
752
649
18
667
771
$
$
$
$
$
$
$
$
720
167
887
— $
—
— $
928
726
166
892
—
—
—
786
$
776
$ 2,923
$ 2,068
$ 2,408
$45,804
$33,266
$32,753
(a) Net revenues include Allergan product revenues from the date of the acquisition, May 8, 2020, through December 31,
2020.
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112
Net revenues to external customers by geographic area, based on product shipment destination,
were as follows:
years ended December 31 (in millions)
2020
2019
2018
United States
Japan
Canada
Germany
France
Australia
United Kingdom
China
Spain
Brazil
Italy
All other countries
Total net revenues
$34,879
1,198
1,159
1,049
797
527
509
471
453
406
379
3,977
$23,907
1,211
813
909
695
395
372
195
472
359
372
3,566
$21,524
1,591
730
1,292
783
350
855
152
611
350
652
3,863
$45,804
$33,266
$32,753
Long-lived assets, primarily net property and equipment, by geographic area were as follows:
as of December 31 (in millions)
United States and Puerto Rico
Europe
All other
Total long-lived assets
2020
2019
$3,354
1,534
360
$2,026
646
290
$5,248
$2,962
Note 17 Fourth Quarter Financial Results (unaudited)
........................................................................................................................................................................................................................................................................................................................................
quarter ended December 31 (in millions except per share data)
Net revenues
Gross margin
Net earnings attributable to AbbVie Inc.(a)
Basic earnings per share attributable to AbbVie Inc.
Diluted earnings per share attributable to AbbVie Inc.
Cash dividends declared per common share
2020
$13,858
9,174
36
0.01
0.01
1.30
$
$
$
(a) Fourth quarter results in 2020 included after-tax charges of $4.7 billion related to the change in
fair value of contingent consideration liabilities partially offset by an after-tax benefit of
$1.5 billion due to impacts related to tax law changes.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of AbbVie Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AbbVie Inc. and subsidiaries
(the Company) as of December 31, 2020 and 2019, 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, 2020, and the related notes (collectively referred to as the ‘‘financial
statements’’). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2020 and 2019, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2020, 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) (PCAOB), the Company’s internal control over financial reporting as
of December 31, 2020, 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, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on the Company’s financial statements based on our audits. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures to respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of
the financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the financial statements, taken as a
whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Description of the
Matter
Sales rebate accruals for Medicaid, Medicare and managed care
programs
As discussed in Note 2 to the consolidated financial statements under the
caption ‘‘Revenue Recognition,’’ the Company established provisions for
sales rebates in the same period the related product is sold. At
December 31, 2020, the Company had $7,188 million in sales rebate
accruals, a large portion of which were for rebates provided to pharmacy
benefit managers, state government Medicaid programs, insurance
companies that administer Medicare drug plans and private entities for
Medicaid, Medicare and managed care programs. In order to establish these
sales rebate accruals, the Company estimated its rebates based upon the
identification of the products subject to a rebate, the applicable price and
rebate terms and the estimated lag time between the sale and payment of
the rebate.
Auditing the Medicaid, Medicare and managed care sales rebate accruals
was complex and required significant auditor judgment because the accruals
consider multiple subjective and complex estimates and assumptions. These
estimates and assumptions included the estimated inventory in the
distribution channel, which impacts the lag time between the sale to the
customer and payment of the rebate, and the final payer related to product
sales, which impacts the applicable price and rebate terms. In deriving these
estimates and assumptions, the Company used both internal and external
sources of information to estimate product in the distribution channels, payer
mix, prescription volumes and historical experience. Management
supplemented its historical data analysis with qualitative adjustments based
upon changes in rebate trends, rebate programs and contract terms,
legislative changes, or other significant events which indicate a change in
the reserve is appropriate.
How We Addressed We obtained an understanding, evaluated the design and tested the
the Matter in Our
Audit
operating effectiveness of controls over the Company’s sales rebate accruals
for Medicaid, Medicare and managed care programs. This included testing
controls over management’s review of the significant assumptions and other
inputs used in the estimation of Medicaid, Medicare and managed care
rebates, among others, including the significant assumptions discussed
above. The testing was inclusive of management’s controls to evaluate the
accuracy of its reserve judgments to actual rebates paid, rebate validation
and processing, and controls to ensure that the data used to evaluate and
support the significant assumptions was complete, accurate and, where
applicable, verified to external data sources.
To test the sales rebate accruals for Medicaid, Medicare, and managed care
programs, our audit procedures included, among others, understanding and
evaluating the significant assumptions and underlying data used in
management’s calculations. Our testing of significant assumptions included
corroboration to external data sources. We evaluated the reasonableness of
assumptions considering industry and economic trends, product profiles, and
other regulatory factors. We assessed the historical accuracy of
management’s estimates by comparing actual activity to previous estimates
and performed analytical procedures, based on internal and external data
sources, to evaluate the completeness of the reserves. For Medicaid, we
involved a specialist with an understanding of statutory reimbursement
requirements to assess the consistency of the Company’s calculation
methodologies with applicable government regulations and policy.
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Description of the
Matter
Valuation of contingent consideration
As discussed in Note 2 to the consolidated financial statements under the
caption ‘‘Business Combinations’’ and in Note 11 under the caption
‘‘Financial Instruments and Fair Value Measures,’’ the Company recognized
contingent consideration liabilities at the estimated fair value on the
acquisition date in connection with applying the acquisition method of
accounting for business combinations. Subsequent changes to the fair value
of the contingent consideration liabilities were recorded within the
consolidated statement of earnings in the period of change. At
December 31, 2020, the Company had $12,997 million in contingent
consideration liabilities, which represented a ‘Level 3’ fair value
measurement in the fair value hierarchy due to the significant unobservable
inputs used in determining the fair value and the use of management
judgment about the assumptions market participants would use in pricing the
liabilities.
Auditing the valuation of contingent consideration liabilities was complex and
required significant auditor judgment due to the use of a Monte Carlo
simulation model and the high degree of subjectivity in evaluating certain
assumptions required to estimate the fair value of contingent royalty
payments. In particular, the fair value measurement was sensitive to the
significant assumptions underlying the estimated amount of future sales of
the acquired products. Management utilized its expertise within the industry,
including commercial dynamics, trends and utilization, as well as knowledge
of clinical development and regulatory approval processes to determine
certain of these assumptions.
How We Addressed We obtained an understanding, evaluated the design and tested the
the Matter in Our
Audit
operating effectiveness of controls over the Company’s contingent
consideration liabilities process including, among others, management’s
process to establish the significant assumptions and measure the liability.
This included testing controls over management’s review of the significant
assumptions and other inputs used in the determination of fair value. The
testing was inclusive of key management review controls to monitor and
evaluate clinical development of the acquired products and estimated future
sales, and controls to ensure that the data used to evaluate and support the
significant assumptions was complete, accurate and, where applicable,
verified to external data sources.
To test the estimated fair value of contingent consideration liabilities, our
audit procedures included, among others, inspecting the terms of the
executed agreement, assessing the Monte Carlo simulation model used and
testing the key contractual inputs and significant assumptions discussed
above. We evaluated the assumptions and judgments considering
observable industry and economic trends and standards, external data
sources and regulatory factors. Estimated amounts of future sales were
evaluated for reasonableness in relation to internal and external analyses,
clinical development progress and timelines, probability of success
benchmarks, and regulatory notices. Our procedures included evaluating the
data sources used by management in determining its assumptions and,
where necessary, included an evaluation of available information that either
corroborated or contradicted management’s conclusions. We involved a
valuation specialist to assess the Company’s Monte Carlo simulation model
and to perform corroborative fair value calculations.
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Description of the
Matter
Accounting for Allergan plc acquisition—Valuation of intangible assets
As discussed in Note 5 to the consolidated financial statements under the
caption ‘‘Licensing, Acquisitions and Other Arrangements’’, the Company
completed the acquisition of Allergan plc (‘‘Allergan’’) on May 8, 2020 for
approximately $64,084 million. The Company measured the assets acquired
and liabilities assumed at fair value, which resulted in the recognition of
$69,080 million of intangible assets, comprised of $67,330 million of
developed product rights and $1,750 million of in-process research and
development (‘‘IPR&D’’).
Auditing the valuation of intangible assets was complex and required
significant auditor judgment due to the high degree of subjectivity in
evaluating certain assumptions required to estimate the fair value of the
identified intangible assets. In particular, the fair value measurement was
sensitive to management’s forecasts of net revenues, including growth rates
used to estimate future net cash flows for acquired aesthetics and recently
launched products.
How We Addressed We obtained an understanding, evaluated the design and tested the
the Matter in Our
Audit
operating effectiveness of controls over the Company’s accounting for
acquisitions including, among others, management’s process to establish the
significant assumptions used in determining the fair values of intangible
assets. This included testing controls over management’s review of the
significant assumptions and other inputs used in the determination of
estimated future net revenues, the determination of future net cash flows,
estimated growth rates, and review of the valuation model.
Description of the
Matter
To test the estimated fair value of intangible assets, our audit procedures
included, among others, inspecting the terms of the executed agreement,
evaluating the valuation methods used, and testing the significant
assumptions discussed above. We evaluated the assumptions and
judgments considering observable industry and economic trends and
standards, external data sources, and historical product trends, including
those of comparable products, to the extent applicable. Estimated future net
revenues were evaluated for reasonableness against internal and external
analyses, including analyst expectations, industry trends, and market trends.
Our procedures included evaluating the data sources used by management
in determining its assumptions and, where necessary, included an evaluation
of available information that either corroborated or contradicted
management’s conclusions. We involved a valuation specialist to assess the
valuation model and to perform corroborative fair value calculations.
Accounting for Allergan plc acquisition—Unrecognized tax benefits
As discussed in Note 14 under the caption ‘‘Income Taxes,’’ as part of the
acquisition of Allergan plc, the Company recorded $2,674 million of
unrecognized tax benefits resulting from uncertain tax positions. The
Company applied judgment in evaluating the completeness of unrecognized
tax benefits assumed as of the acquisition date. Some of the more
significant judgments inherent in the Company’s evaluation of assumed
uncertain tax positions included whether a tax position’s technical merits
were more-likely-than-not to be sustained, including consideration of
applicable tax statutes and related interpretations and precedents and the
expected outcome of proceedings (or negotiations) with taxing and legal
authorities.
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Auditing the Company’s analysis and accounting for uncertain tax positions
was complex due to the interpretation of tax laws and legal rulings in
multiple tax paying jurisdictions and required significant judgment in
determining whether an assumed tax position’s technical merits were
more-likely-than-not to be sustained. In particular, each assumed
unrecognized tax benefit involved unique facts and circumstances and
multiple potential outcomes that were evaluated, with many uncertainties
around initial recognition, including regulatory changes, litigation and
examination activity. Management utilized outside tax and legal counsel,
where appropriate, in its evaluation.
How We Addressed We obtained an understanding, evaluated the design and tested the
the Matter in Our
Audit
operating effectiveness of controls over the Company’s accounting for
acquisitions including, among others, management’s process to evaluate the
completeness and estimation of unrecognized tax benefits. This included
testing controls over management’s determination of whether an assumed
tax position’s technical merits were more-likely-than-not to be sustained and,
if so, recognizing the estimated amount of qualified tax benefit. We also
obtained an understanding, evaluated the design and tested the operating
effectiveness of controls to ensure that the data used to evaluate and
support the significant fair value assumptions and unrecognized tax benefits
was complete, accurate and, where applicable, verified to external data
sources.
To test the completeness and recognition of unrecognized tax benefits, our
audit procedures included, among others, testing management’s process for
estimating the unrecognized tax benefits. Testing management’s process
included assessing management’s interpretation of the unique facts,
circumstances and related tax laws and legal rulings in each tax paying
jurisdiction, examining whether the technical merits of each tax position were
more-likely-than-not to be sustained, and evaluating the recognition of the
amount of qualified tax benefit. Professionals with specialized skill and
knowledge were used to assist in the evaluation of the completeness and
recognition of the Company’s unrecognized tax benefits, including
consideration of applicable tax statutes and related interpretations and
precedents.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2013.
Chicago, Illinois
February 19, 2021
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
........................................................................................................................................................................................................................................................................................................................................
None.
ITEM 9A. CONTROLS AND PROCEDURES
........................................................................................................................................................................................................................................................................................................................................
Disclosure Controls and Procedures; Internal Control Over Financial Reporting
Evaluation of disclosure controls and procedures.
The Chief Executive Officer, Richard A.
Gonzalez, and the Chief Financial Officer, Robert A. Michael, 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.
Changes in internal control over financial reporting.
There were no 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, 2020.
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.
Management’s annual 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.
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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, 2020. 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, 2020, based
on the COSO criteria.
The effectiveness of AbbVie’s internal control over financial reporting as of December 31, 2020
has been audited by Ernst & Young LLP, an independent registered public accounting firm, as
stated in their attestation report below, which expresses an unqualified opinion on the effectiveness
of AbbVie’s internal control over financial reporting as of December 31, 2020.
Report of independent registered public accounting firm.
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 below.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of AbbVie Inc.
Opinion on Internal Control over Financial Reporting
We have audited AbbVie Inc. and subsidiaries’ internal control over financial reporting as of
December 31, 2020, 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). In our opinion, AbbVie Inc. and subsidiaries (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2020, based
on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (PCAOB), the consolidated balance sheets of AbbVie Inc. and
subsidiaries as of December 31, 2020 and 2019, 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, 2020, and the related notes and our report dated February 19, 2021 expressed
an unqualified opinion thereon.
Basis for Opinion
The Company’s 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 Annual 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 are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations on Internal Control Over Financial Reporting
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.
/s/ Ernst & Young LLP
Chicago, Illinois
February 19, 2021
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ITEM 9B. OTHER INFORMATION
........................................................................................................................................................................................................................................................................................................................................
None.
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122
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,’’ and ‘‘Procedure for
Recommendation and Nomination of Directors and Transaction of Business at Annual Meeting’’ to
be included in the 2021 AbbVie Inc. Proxy Statement. The 2021 Definitive Proxy Statement will be
filed on or about March 22, 2021. Also incorporated herein by reference is the text found in this
Form 10-K under the caption, ‘‘Information about Our Executive Officers.’’
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 Vice Chairman, External
Affairs and Chief Legal 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 2021 AbbVie Inc. Proxy Statement under the headings
‘‘Director Compensation,’’ ‘‘Executive Compensation,’’ and ‘‘Compensation Committee Report’’ is
incorporated herein by reference. The 2021 Definitive Proxy Statement will be filed on or about
March 22, 2021.
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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, 2020 about AbbVie’s equity
compensation plans under which AbbVie common stock has been authorized for issuance:
(a)
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights(1)
(b)
Weighted-
average exercise
price of
outstanding
options,
warrants and
rights(2)
(c)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))(3)
31,608,617
$73.90
36,857,294
—
—
—
31,608,617
$73.90
36,857,294
Plan Category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by
security holders
Total
(1)
Includes 377,583 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,
restricted stock awards and performance shares that have no exercise price.
(3) Excludes shares issuable upon the exercise of stock options and pursuant to other rights
granted under the Stemcentrx 2011 Equity Incentive Plan, which was assumed by AbbVie
upon the consummation of its acquisition of Stemcentrx, Inc. As of December 31, 2020,
77,467 options remained outstanding under this plan. The options have a weighted-average
exercise price of $16.55. No further awards will be granted under this plan.
(b)
Information Concerning Security Ownership.
under the heading ‘‘Securities Ownership—Securities Ownership of Executive Officers and
Directors’’ in the 2021 AbbVie Inc. Proxy Statement. The 2021 Definitive Proxy Statement will
be filed on or about March 22, 2021.
Incorporated herein by reference is the material
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
........................................................................................................................................................................................................................................................................................................................................
The material to be included in the 2021 AbbVie Inc. 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 2021 Definitive
Proxy Statement will be filed on or about March 22, 2021.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
........................................................................................................................................................................................................................................................................................................................................
The material to be included in the 2021 AbbVie Inc. 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 2021 Definitive Proxy Statement will be filed on or about March 22, 2021.
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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 59 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 set forth in Item 15(b) below.
(b) Exhibits:
Exhibit
Number
2.1
2.2
2.3
2.4
3.1
3.2
4.1
4.2
4.3
4.4
4.5
Exhibit Description
*Transaction Agreement, dated as of June 25, 2019, between AbbVie Inc., Allergan plc and
Venice Subsidiary, LLC (incorporated by reference to Exhibit 2.1 of the company’s Current
Report on Form 8-K filed on June 25, 2019).
*Appendix III to the Rule 2.5 Announcement, dated as of June 25, 2019 (Conditions
Appendix) (incorporated by reference to Exhibit 2.2 of the company’s Current Report on
Form 8-K filed on June 25, 2019).
*Expenses Reimbursement Agreement, dated as of June 25, 2019, between AbbVie Inc.
and Allergan plc (incorporated by reference to Exhibit 2.3 of the company’s Current Report
on Form 8-K filed on June 25, 2019).
*Amendment to the Transaction Agreement, dated as of May 5, 2020, between
AbbVie Inc., Allergan plc and Venice Subsidiary, LLC (incorporated by reference to
Exhibit 2.1 of the company’s Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2020).
*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 3.1
of the company’s Current Report on Form 8-K filed on October 22, 2019).
Description of the company’s securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
*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).
*Supplemental Indenture No. 3 dated May 12, 2016, 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 12, 2016).
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Exhibit
Number
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
Exhibit Description
*Supplemental Indenture No. 4, dated as of November 17, 2016, among AbbVie Inc., U.S.
Bank National Association, as trustee, Elavon Financial Services DAC, U.K. Branch, as
paying agent and Elavon Financial Services DAC, as transfer agent and registrar, including
forms of notes (incorporated by reference to Exhibit 4.1 of the company’s Current Report
on Form 8-K filed on November 17, 2016).
*Supplemental Indenture No. 5, dated September 18, 2018, between AbbVie Inc. and U.S.
Bank National Association, as trustee, including forms of notes (incorporated by reference
to Exhibit 4.2 of the company’s Current Report on Form 8-K filed on September 18, 2018).
*Supplemental Indenture No. 6, dated September 26, 2019, among AbbVie Inc., U.S. Bank
National Association, as trustee, transfer agent and registrar, and Elavon Financial Services
DAC, UK Branch, as paying agent, including forms of notes (incorporated by reference to
Exhibit 4.2 of the company’s Current Report on Form 8-K filed on September 26, 2019).
*Supplemental Indenture No. 7, dated November 21, 2019, by and between AbbVie Inc.
and U.S. Bank National Association, as trustee, including forms of notes (incorporated by
reference to Exhibit 4.2 of the company’s Current Report on Form 8-K filed on
November 26, 2019).
*Supplemental Indenture No. 8, dated May 14, 2020, by and between AbbVie Inc. and U.S.
Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of the
company’s Current Report on Form 8-K filed on May 14, 2020).
*Supplemental Indenture No. 9, dated May 14, 2020, among AbbVie Inc., U.S. Bank and
National Association, as trustee, transfer agent and registrar, and Elavon Financial Services
DAC, U.K. Branch, as paying agent (incorporated by reference to Exhibit 4.15 of the
company’s Current Report on Form 8-K filed on May 14, 2020).
*Agency Agreement, dated as of November 17, 2016, among AbbVie Inc., U.S. Bank
National Association, as trustee, Elavon Financial Services DAC, U.K. Branch, as paying
agent and Elavon Financial Services DAC, as transfer agent and registrar (incorporated by
reference to Exhibit 4.2 of the company’s Current Report on Form 8-K filed on
November 17, 2016).
*Agency Agreement, dated September 26, 2019, among AbbVie Inc., U.S. Bank National
Association, as trustee, transfer agent and registrar, and Elavon Financial Services DAC,
U.K. Branch, as paying agent (incorporated by reference to Exhibit 4.3 of the company’s
Current Report on Form 8-K filed on September 26, 2019).
*Registration Rights Agreement, dated November 21, 2019, among AbbVie Inc. and
Morgan Stanley & Co. LLC, BofA Securities, Inc. and Barclays Capital Inc. (acting for
themselves and as representatives of the several initial purchasers) (incorporated by
reference to Exhibit 4.13 of the company’s Current Report on Form 8-K filed on
November 26, 2019).
*Agency Agreement, dated May 14, 2020, among AbbVie Inc., U.S. Bank National
Association, as trustee, transfer agent and registrar, and Elavon Financial Services DAC,
U.K. Branch, as paying agent and calculation agent (incorporated by reference to
Exhibit 4.16 of the company’s Current Report on Form 8-K filed on May 14, 2020).
*Registration Rights Agreement, dated May 14, 2020, among AbbVie Inc. and Morgan
Stanley & Co. LLC, BofA Securities, Inc., Citigroup Global Markets Inc., BNP Paribas
Securities Corp., HSBC Securities (USA) Inc., Mizuho Securities USA LLC and Wells Fargo
Securities, LLC (incorporated by reference to Exhibit 4.23 of the company’s Current Report
on Form 8-K filed on May 14, 2020).
10.1
*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).**
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126
Exhibit
Number
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
Exhibit Description
*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 Inc. 2013 Incentive Stock Program Second Amendment (incorporated by reference
to Exhibit 10.5 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2019).**
*AbbVie Performance Incentive Plan, as amended and restated (incorporated by reference
to Exhibit 10.4 of the company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2015).**
*AbbVie Deferred Compensation Plan, as amended and restated (incorporated by
reference to Exhibit 10.5 of the company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2016).**
*AbbVie Inc. Supplemental Pension Plan, as amended and restated (incorporated by
reference to Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2019).**
*AbbVie Inc. Supplemental Savings Plan, as amended and restated (incorporated by
reference to Exhibit 10.8 of the company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2015). **
*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).**
*Form of AbbVie Inc. Non-Employee Director Restricted Stock Unit Agreement
(incorporated by reference to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2016).**
*Form of AbbVie Inc. Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2016).**
*Form of AbbVie Inc. Non-Employee Director Restricted Stock Unit Agreement
(incorporated by reference to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2017).**
*Form of AbbVie Inc. Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2017).**
*Form of AbbVie Inc. Performance Share Award Agreement (incorporated by reference to
Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2018).**
*Form of AbbVie Inc. Performance-Vested Restricted Stock Unit Agreement (incorporated
by reference to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2018).**
*Form of AbbVie Inc. Non-Employee Director RSU Agreement (US) (incorporated by
reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2018).**
*Form of AbbVie Inc. Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.4 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2018).**
*Form of AbbVie Inc. Performance Share Award Agreement (incorporated by reference to
Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2019).**
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Exhibit
Number
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
Exhibit Description
*Form of AbbVie Inc. Performance-Vested Restricted Stock Unit Agreement (incorporated
by reference to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2019).**
*AbbVie Non-Employee Directors’ Fee Plan, as amended and restated (incorporated by
reference to Exhibit 10.6 of the company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2020).**
*Form of AbbVie Inc. Non-Employee Director RSU Agreement (US) (incorporated by
reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2019).**
*Form of AbbVie Inc. Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.4 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2019).**
*Form of AbbVie Inc. Performance Share Award Agreement (incorporated by reference to
Exhibit 10.2 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2020).**
*Form of AbbVie Inc. Performance-Vested Restricted Stock Unit Agreement (incorporated
by reference to Exhibit 10.1 of the company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2020).**
*Form of AbbVie Inc. Non-Employee Director RSU Agreement (US) (incorporated by
reference to Exhibit 10.3 of the company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2020).**
*Form of AbbVie Inc. Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.4 of the company’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2020).**
*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).**
*Amended and Restated Revolving Credit Agreement, dated as of August 27, 2019, among
AbbVie Inc., the lenders and other parties party thereto and JPMorgan Chase Bank, N.A.,
as administrative agent (incorporated by reference to Exhibit 10.1 of the company’s Current
Report on Form 8-K filed on August 30, 2019).
*364-Day Bridge Credit Agreement, dated as of June 25, 2019, among AbbVie Inc.,
Morgan Stanley Senior Funding, Inc. and the lenders party thereto (incorporated by
reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed on June 25,
2019).
*Term Loan Credit Agreement, dated as of July 12, 2019, among AbbVie Inc., certain
lenders party thereto 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 July 16, 2019).
*Underwriting Agreement, dated September 17, 2019, among AbbVie Inc. and Morgan
Stanley & Co. International plc, HSBC Bank plc and Merrill Lynch International (acting for
themselves and as representatives of the several underwriters named therein)
(incorporated by reference to Exhibit 1.1 of the company’s Current Report on Form 8-K
filed on September 23, 2019).
*Purchase Agreement, dated November 12, 2019, among AbbVie Inc. and Morgan
Stanley & Co. LLC, BofA Securities, Inc. and Barclays Capital Inc. (acting for themselves
and as representatives of the several initial purchasers named therein) (incorporated by
reference to Exhibit 1.1 of the company’s Current Report on Form 8-K filed on
November 13, 2019).
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128
Exhibit
Number
21
23
31.1
31.2
32.1
32.2
101
Subsidiaries of AbbVie Inc.
Exhibit Description
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, 2020 filed on February 19, 2021, formatted in
Inline XBRL (eXtensible Business Reporting Language): (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.
104
Cover Page Interactive Data File (the cover page from the AbbVie Inc. Annual Report on
Form 10-K formatted as Inline XBRL and contained in Exhibit 101).
The AbbVie Inc. 2021 Definitive Proxy Statement will be filed with the Securities and
Exchange Commission under separate cover on or about March 22, 2021.
*
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.
Exhibits 32.1 and 32.2, above, are furnished herewith and should not be deemed to be ‘‘filed’’
under the Securities Exchange Act of 1934. 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.
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ITEM 16. FORM 10-K SUMMARY
........................................................................................................................................................................................................................................................................................................................................
None.
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130
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, 2021
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, 2021 in the
capacities indicated below.
/s/ RICHARD A. GONZALEZ
Richard A. Gonzalez
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ BRIAN L. DURKIN
Brian L. Durkin
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/ BRETT J. HART
Brett J. Hart
Director of AbbVie Inc.
/s/ MELODY B. MEYER
Melody B. Meyer
Director of AbbVie Inc.
/s/ REBECCA B. ROBERTS
Rebecca B. Roberts
Director of AbbVie Inc.
/s/ FREDERICK H. WADDELL
Frederick H. Waddell
Director of AbbVie Inc.
/s/ ROBERT A. MICHAEL
Robert A. Michael
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
/s/ ROXANNE S. AUSTIN
Roxanne S. Austin
Director of AbbVie Inc.
/s/ THOMAS C. FREYMAN
Thomas C. Freyman
Director of AbbVie Inc.
/s/ EDWARD M. LIDDY
Edward M. Liddy
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.
131
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(This page has been left blank intentionally.)
Notice of 2021
Annual Meeting
of Stockholders
To the stockholders of our company:
You are cordially invited to attend the 2021 Annual Meeting of Stockholders to be held on May 7, 2021, where we will be
voting on the below matters. You will be able to attend the Annual Meeting, vote, and submit questions via live webcast by
visiting www.virtualshareholdermeeting.com/ABBV2021.
Items of business
• To elect four directors to hold office until the 2024 Annual Meeting or until their successors are elected.
• To ratify the appointment of Ernst & Young LLP as AbbVie’s independent registered public accounting firm for
2021.
• To vote on an advisory basis on the approval of executive compensation.
• To approve the amended and restated 2013 incentive stock program.
• To approve the amended and restated 2013 employee stock purchase plan for non-U.S. employees.
• To vote on a management proposal to eliminate supermajority voting.
• To consider any other matters that may properly come before the meeting, including two stockholder proposals, if
presented during the meeting.
Your vote is important.
Please vote promptly using one of
the methods mentioned below:
The Annual Meeting of Stockholders of AbbVie Inc. (the “Annual Meeting”) will be
held on Friday, May 7, 2021 at 9:00 a.m. CT. This year’s Annual Meeting will be a
virtual meeting of stockholders.
DATE AND TIME:
Friday, May 7, 2021
9:00 a.m. CT
WHERE:
Via live webcast online at
www.virtualshareholdermeeting.com/ABBV2021.
ADMISSION:
Stockholders of record at
the close of business on
March 8, 2021 are entitled
to notice of and to vote at
the annual meeting.
Thank you for your continued support of and interest in the company.
By Order of the Board of Directors,
Laura J. Schumacher
Secretary
March 22, 2021
Internet
Visit www.proxyvote.com to vote online.
Mail
Sign and return your proxy card in the
enclosed envelope if you received a
printed version of the proxy card.
Telephone
Call toll-free 1-800-690-6903 in the U.S.
and Canada.
At the virtual meeting
To be admitted to the virtual meeting,
you must enter the control number found
on your proxy card, voting instructions
form, or notice you received.
TABLE OF CONTENTS
PROXY SUMMARY
About the Meeting
Who We Are
Our Business Performance
Our Governance Highlights
Our Corporate Responsibility 2020
Highlights
Executive Compensation Highlights
INFORMATION CONCERNING DIRECTOR
NOMINEES
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
Summary Compensation Table
2020 Grants of Plan-Based Awards
2020 Outstanding Equity Awards at Fiscal
Year End
2020 Option Exercises and Stock Vested
Potential Payments upon Termination or
Change in Control
RATIFICATION OF ERNST & YOUNG LLP
AS ABBVIE’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
1
1
2
3
6
8
13
14
21
27
28
30
32
32
51
51
53
56
58
60
64
67
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
TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK
PROGRAM
TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 EMPLOYEE STOCK
PURCHASE PLAN FOR NON-U.S.
EMPLOYEES
MANAGEMENT PROPOSAL TO ELIMINATE
SUPERMAJORITY VOTING
STOCKHOLDER PROPOSALS
Stockholder Proposal on Lobbying Report
Stockholder Proposal on Independent
Chair
ADDITIONAL INFORMATION
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
68
68
68
69
70
71
82
88
90
90
92
95
99
99
99
99
99
99
Each Item on the Proxy
100
Effect of Broker Non-Votes and Abstentions 100
100
Inspectors of Election
100
Cost of Soliciting Proxies
100
AbbVie Savings Plan
PROXY SUMMARY
About the Meeting
The accompanying proxy is solicited on
behalf of the Board of Directors for use at the
Annual Meeting of Stockholders. This
summary highlights selected information in
the proxy statement. Please review the entire
proxy statement and the AbbVie 2020 Annual
Report before voting. The voting items
expected to be proposed at the meeting are
listed below along with the board’s voting
recommendations.
2021 Annual Meeting of Stockholders Information
Date and Time: Friday, May 7, 2021 at 9:00 a.m. CT
Place: Via live webcast online at
www.virtualshareholdermeeting.com/ABBV2021
Record Date: March 8, 2021
Proposal 1: Election of Directors
Rebecca B. Roberts
Glenn F. Tilton
Roxanne S. Austin
Richard A. Gonzalez
Each of the nominees has the skills and experience necessary to fulfill his or her oversight
role with respect to AbbVie’s business and culture. See pages 14-20 for more information
about the qualifications of our directors.
Proposal 2: Ratification of Independent Auditor
Ernst & Young LLP has served as our independent auditor since 2013. The board and the
audit committee believe it is in the best interests of the company and its stockholders to retain
Ernst & Young LLP as the company’s independent auditor. See page 67 for more information.
Proposal 3: Say on Pay – Advisory Vote on Executive Compensation
AbbVie’s compensation program aligns executive interests with the drivers of long-term,
sustainable growth. Our program balances short- and long-term strategic objectives and
directly links compensation to stockholder value. See pages 32-66 for more information.
Proposal 4: To Approve the Amended and Restated 2013 Incentive Stock
Program
AbbVie is seeking approval to increase the number of shares available and extend the term
of the program. See pages 71-81 for more information.
Proposal 5: To Approve the Amended and Restated 2013 Employee Stock
Purchase Plan for Non-U.S. Employees
AbbVie is seeking approval to extend the term of the program. See pages 82-87 for more
information.
Proposal 6: Management Proposal to Eliminate Supermajority Voting
AbbVie is again seeking stockholder approval to eliminate supermajority voting thresholds in
our charter and by-laws. See pages 88-89 for more information.
Stockholder Proposals
Proposal 7: Stockholder Proposal on Lobbying Report
Proposal 8: Stockholder Proposal on Independent Chair
FOR
Each Nominee
FOR
FOR
FOR
FOR
FOR
AGAINST
AGAINST
2021 Proxy Statement |
1
PROXY SUMMARY
Who We Are
~ 47,000
employees
worldwide
Launched in
2013
Millions
of patient lives
touched
In more than 70 countries, AbbVie employees are working every
day to advance health solutions for people around the world.
Since becoming a public company in 2013, AbbVie’s mission has been to create an
innovation-driven, patient focused biopharmaceutical company capable of achieving
sustainable top-tier performance through outstanding execution and a consistent
stream of new medicines. In 2020, AbbVie continued to advance its robust mid- and
late-stage pipeline. Collectively, the new medicines that AbbVie has introduced since
inception—including new therapies in rheumatoid arthritis, psoriasis, hematologic
oncology and hepatitis C virus—represented approximately a quarter of AbbVie’s
total sales in 2020 and will be important contributors in 2021 and beyond. AbbVie
delivered another year of outstanding performance in 2020, which reflects the
continued strength of its execution across business priorities.
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 virus and human immunodeficiency
virus; 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 in clinical development across such important medical specialties as
immunology, oncology, and neuroscience.
In May 2020, AbbVie completed its acquisition of Allergan plc. Allergan is a global
pharmaceutical leader focused on developing, manufacturing, and commercializing
branded pharmaceutical, device, biologic, surgical, and regenerative medicine
products for patients around the world. Allergan markets a portfolio of brands and
products focused on key therapeutic areas such as aesthetics, eye care,
neuroscience, women’s health, and gastroenterology.
AbbVie’s Principles are foundational:
Transforming
Lives
We inspire hope and
transform lives every
day. We make
decisions based on
our deep caring and
compassion for
people, delivering a
lasting impact to our
patients, their
families, our
employees and the
community.
Acting with
Integrity
We strive to
always do the
right thing. With
uncompromising
integrity at the
heart of
everything we do,
we pursue the
highest standards
in quality,
compliance,
safety and
performance.
Driving
Innovation
We innovate
relentlessly in
everything we do
to tackle unmet
needs. We invest
in the discovery
and development
of new medicines
and healthcare
approaches for a
healthier world.
Embracing
Diversity
& Inclusion
We treat everyone
equally, with dignity
and respect. Around
the world, our
employees embrace
diverse backgrounds
and perspectives,
which allows us all to
achieve our best.
Serving the
Community
We are proud to
serve and
support the
community and
do our part to
protect the
environment. We
make a
remarkable
impact that's felt
within healthcare
and beyond.
2
| 2021 Proxy Statement
PROXY SUMMARY
Our Business Performance
AbbVie has delivered robust financial results since our launch in 2013
13.6%
Adjusted net revenues
- compound annual growth rate (CAGR)*
334.1%
8 year total stockholder return
~$11BN
Revenues in 2020 from products launched since
inception (excludes Allergan portfolio)
~$135BN
Increase in market capitalization
- added significant stockholder value
18.9%
annual growth rate*
Adjusted diluted earnings per share - compound
225%
Increase in quarterly dividend
- raised quarterly dividend to $1.30 per share from
$0.40 per share at inception
1,170 bps
Operating margin expansion, adjusted*
90+
Active clinical development programs
- more than 50 compounds, devices, or indications
in mid- and late-stage development
The measures set forth above were calculated as of December 31, 2020.
*Net revenues, diluted earnings per share, and operating margin are adjusted to exclude certain specified items and are non-GAAP measures,
which are reconciled in Appendix B.
Adjusted Net Revenues*
Adjusted EPS*
$32.7
$33.3
$28.2
$25.6
)
N
B
$
(
$18.8
$19.9
$22.8
$45.8
$10.56
$8.94
$7.91
$5.60
$4.82
$4.29
$3.14
$3.32
2013
2014
2015
2016
2017
2018
2019
2020
2013
2014
2015
2016
2017
2018
2019
2020
*Net revenues and diluted earnings per share are adjusted for specified items, including the impact of intangible asset amortization, and are
non-GAAP measures, which are reconciled in Appendix B.
2021 Proxy Statement |
3
PROXY SUMMARY
Since its launch in 2013, AbbVie has demonstrated an outstanding track record,
consistently delivering top-tier results
AbbVie has delivered a strong compound annual
growth rate (CAGR) since inception on adjusted net
revenues and adjusted diluted earnings per share
(EPS), placing AbbVie in the top tier of its Health
Care Peer Group.
Additionally, AbbVie is committed to a robust return of
capital to stockholders with an increase of 225% in its
quarterly dividend since 2013 as part of a balanced
and disciplined capital allocation program. AbbVie’s
total stockholder return (TSR) since inception of
334.1% also places AbbVie at the top of its Health
Care Peer Group, and more than 124 percentage
points above the Standard & Poor’s 500 Index and
more than 199 percentage points above the NYSE
Arca Pharmaceutical Index over the same time
period.
Total stockholder return (TSR) since inception
334.1%
209.6%
135.0%
AbbVie
S&P 500
NYSE Arca Pharma Index
AbbVie Rankings vs. Peer Group
% Revenue Growth
% Adjusted EPS Growth
2020
2nd place out of 10
3 Years
2nd place out of 10
5 Years
2nd place out of 10
2020
3rd place out of 10
3 Years
2nd place out of 10
5 Years
2nd place out of 10
Total Stockholder Return
Our Peer Group
2020
2nd place out of 10
3 Years
5th place out of 10
5 Years
2nd place out of 10
4
| 2021 Proxy Statement
AbbVie’s peer group above includes:
Amgen, Inc.
Bristol-Myers Squibb Company
Eli Lilly and Company
Gilead Sciences, Inc.
GlaxoSmithKline plc
Johnson & Johnson
Merck & Company, Inc.
Novartis AG
Pfizer Inc.
AbbVie also delivered strong business performance in 2020
PROXY SUMMARY
Net Revenues: AbbVie reported worldwide net revenues of $45.8 billion in 2020.
Worldwide net revenues increased by 38% on a reported basis and on a constant currency
basis, which included $10.3 billion of contributed revenues from the Allergan acquisition,
growth in the immunology portfolio from Skyrizi, Rinvoq and the continued strength of
Humira in the U.S., as well as revenue growth from Imbruvica and Venclexta.
Gross and Operating Margins: In 2020, AbbVie reported a gross margin of 66.4% on a
GAAP basis or 82.1% of net revenues on an adjusted basis. AbbVie’s operating margin
was 24.8% on a GAAP basis or 48.0% of net revenues on an adjusted basis. The adjusted
operating margin reflects an improvement of 70 basis points versus 2019.
Earnings Per Share: For 2020, AbbVie reported full-year diluted EPS of $2.72 on a GAAP
basis and adjusted diluted EPS of $10.56, up 18.1%. For 2021, AbbVie provided a diluted
EPS guidance range of $6.69 to $6.89 on a GAAP basis and $12.32 to $12.52 on an
adjusted basis. The midpoint of the 2021 adjusted guidance represents growth of 17.6%
over 2020, reflecting strong operating dynamics in the underlying business.
Business Development: AbbVie acquired Allergan, creating a more diversified
biopharmaceutical company positioned for success with a comprehensive product portfolio
that has leadership positions in key therapeutic areas of immunology, hematologic
oncology, aesthetics, neuroscience, eye care, and women's health. AbbVie also entered
into collaboration agreements with Genmab to research, develop, and commercialize
investigational bispecific antibody therapeutics for the treatment of cancer, as well as I-Mab
Biopharma for the development and commercialization of lemzoparlimab for the treatment
of multiple cancers.
Regulatory Milestones: AbbVie also achieved a number of regulatory milestones in
markets worldwide for several key products, including regulatory approvals for Imbruvica in
combination with rituximab for the treatment of previously untreated patients with chronic
lymphocytic leukemia (CLL) or small lymphocytic lymphoma (SLL), full approval of
Venclexta in combination with azacitidine or decitabine or low-dose cytarabine in newly
diagnosed acute myeloid leukemia (AML) patients ineligible for intensive chemotherapy,
Oriahnn for the management of heavy menstrual bleeding due to uterine fibroids in pre-
menopausal women, and Juvederm Voluma XC for the augmentation of the chin region to
improve the chin profile in adults over the age of 21. AbbVie also submitted regulatory
applications for Rinvoq in three additional indications: the treatment of adult patients with
active psoriatic arthritis (PsA), for the treatment of adult patients with active ankylosing
spondylitis (AS), and for the treatment of adults and adolescents with moderate to severe
atopic dermatitis (AD).
Pipeline Development: With more than 50 programs in mid- and late-stage development,
AbbVie made significant pipeline advancements in 2020. The company initiated several
important Phase 3 programs including studies for Skyrizi in ulcerative colitis, Venclexta in
myelodysplatic syndrome (MDS), and navitoclax in myelofibrosis. AbbVie also reported
positive data from Phase 3 studies in other areas of the pipeline, including atogepant for
migraine prevention and AGN-190584, an investigational ophthalmic solution, for the
treatment of presbyopia.
2021 Proxy Statement |
5
PROXY SUMMARY
Our Governance Highlights
Our board of directors is committed to strong corporate governance tailored to meet the needs of AbbVie and its
stockholders to enhance long-term stockholder value. Each year, AbbVie completes a robust investor
engagement program with governance investment teams. In 2020, we reached out to stockholders representing
over 40% of our outstanding shares. Our engagements in 2020 generally focused on (1) the impact of COVID on
our business and how the company is supporting our employees, (2) the Allergan acquisition and integration,
including the culture of the combined company, (3) AbbVie’s equity, equality, diversity, and inclusion programs
and disclosures, (4) AbbVie’s executive compensation programs, and (5) AbbVie’s board composition and
leadership structure, including the responsibilities of our lead independent director.
The board reviews feedback from these engagements and discusses opportunities to improve AbbVie’s
governance practices. The following chart summarizes some of the governance practices that the board has
adopted over the past several years as a result of dialogue with our stockholders:
Topic:
Actions taken by our board:
Stockholder
Voting Rights
approved a management proposal to eliminate supermajority voting in this proxy
statement (Item 6) to seek stockholder approval to amend the company’s Amended and
Restated Certificate of Incorporation to provide for a simple majority of shares
outstanding for all provisions previously subject to a supermajority provision, as
described in Item 6 and previously submitted the same proposal to stockholder vote in
2020, 2019, and 2018 as well as a declassification management proposal to a
stockholder vote in 2018, 2017, and 2016
Proxy Access
approved and implemented in 2016 a proxy access by-law provision, as further
detailed in the company’s By-Laws
significantly expanded disclosure on the lead independent director
responsibilities in the 2019 and 2018 proxy statements, to better inform our
stockholders on the robust leadership that the role provides
Lead Independent
Director Role
changed the election criteria for the lead independent director, so that the lead
independent director can be elected from all of AbbVie’s independent directors, instead
of the role being linked to the chair of the nominations and governance committee
appointed the lead independent director to all committees in 2019, further
strengthening his active leadership role
Board Skills
Disclosure
shared our board skills matrix beginning in 2016, which contains the skills
considered by the nominations and 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
Environmental,
Social, and
Governance (ESG)
Disclosures
disclosed detailed data on the diversity of AbbVie’s U.S. workforce by publishing
AbbVie’s EEO-1 report on our website in 2020
incorporated an overview of AbbVie’s corporate responsibility approach and
initiatives in the proxy statement beginning in 2018
expanded the description of AbbVie’s clawback policy, starting in the 2019 proxy
statement
added board diversity data, starting in the 2019 proxy statement, along with an
expanded discussion of the value of director diversity in this proxy statement
6
| 2021 Proxy Statement
Additional highlights of our governance practices include:
Director independence
Stockholder rights
Eleven of AbbVie’s twelve
directors are independent and
regularly meet in executive
session
Since our inception, we have
had a lead independent
director with robust
responsibilities
All members of our audit,
compensation, nomination
and governance, and public
policy committees are
independent
Adopted a proxy access By-
Law provision for 3%/3 years
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
Board composition and
effectiveness
Clawback and anti-hedging
and anti-pledging policies
Our governance guidelines
The Board has broad authority
restrict the number of boards
our directors may serve on to
prevent overboarding
Annual board and committee
self-assessments and annual
board succession planning
For inclusion on the board, the
nominations and governance
committee considers diversity
of race, ethnicity, gender, and
geography, together with other
voluntarily identified diversity
criteria
to recover incentive plan
awards
Directors and executive
officers are prohibited from
buying or selling any financial
instruments designed to
hedge or offset any decrease
in the market value of AbbVie
equity securities they hold
Directors and executive
officers are prohibited from
pledging AbbVie stock as
collateral for a loan
PROXY SUMMARY
Board and executive
accountability
Annual executive succession
planning, including an
assessment of the diversity of
executive candidates
Minimum stock ownership
guidelines are in place for the
CEO and other NEOs
We have a related person
transaction policy to ensure
appropriate oversight
We hold an annual say-on-pay
advisory vote on executive
compensation
Other ESG practices
All executives have
performance goals related to
protecting the reputation and
driving the sustainability of the
company
We are guided by strong ethics
programs and supplier
guidelines
We disclose our corporate
political contributions, our trade
association memberships, and
oversight process on our
website
2021 Proxy Statement |
7
PROXY SUMMARY
Our Corporate Responsibility 2020 Highlights
Acting responsibly is ingrained in everything we do and is how we drive a long-term, sustainable business that
makes a genuine and lasting positive impact for patients, employees, and communities. During 2020, our
corporate responsibility efforts focused on three key areas:
1
Using our expertise and
resources to contribute
to the fight against
COVID-19
2
Driving meaningful
change within AbbVie
and our broader
communities on equity,
equality, diversity, and
inclusion, as well as
racial justice
3
Proactively addressing
other environmental,
social, and
governance (ESG)
topics material to
AbbVie
Contributing to the fight against COVID-19
From the early days of the pandemic, AbbVie quickly marshalled our resources and expertise to help contribute to
the fight against COVID-19 in four main areas:
• Protecting our employees’ well-being
o The health and safety of our employees remains a key priority for AbbVie during the pandemic. In
order to protect our employees, we implemented, among other things, temporary office and
facility closures and establishment of new safety and cleaning protocols; regular communication
regarding the effect of the pandemic on our business and employees; establishment of physical
distancing procedures, modification of workspaces, and provision of personal protective
equipment for employees; temperature screening at all of our locations; a variety of testing
resources including on-site and at-home testing; and remote working accommodations.
o We also provided paid leave and other support and accommodations to our employees with
relevant medical, pharmaceutical, R&D, science, and public health experience who desired or
were requested to serve as volunteers during the pandemic.
o We recognize the challenges working professionals are facing, especially those who are parents.
In addition to existing employee assistance programs, we created new resources, such as a
COVID-19 Childcare Relief Fund to support eligible employees to help with childcare or remote
learning expenses.
o Lastly, AbbVie’s commitment to employees included no workforce reductions or salary reductions
due to COVID-19.
• Using our experience as a research-based biopharmaceutical company
o
In response to the growing public health crisis, AbbVie has partnered with global authorities to
support the experimental use of multiple AbbVie assets to determine their efficacy in the
treatment of COVID-19.
o Our R&D team reviewed our compounds, existing medicines, and pipeline assets to evaluate
their efficacy as potential treatments while simultaneously building and accelerating discovery
efforts for COVID-19 treatments. We also launched a Phase 2 study of ibrutinib as a potential
treatment for COVID-19.
o We have participated in numerous external collaborations, such as the Accelerating COVID-19
Therapeutic Interventions and Vaccines (ACTIV) partnership led by the National Institutes of
Health and the Foundation for the NIH (FNIH), in order to help accelerate research on COVID-19
medicines.
o Given the need to significantly increase access to testing, in 2020 we began using our laboratory
expertise to work with health authorities locally and globally to create a clinical COVID testing
capability. We have also used our capabilities to manufacture viral transport medium, which is
necessary to preserve swabs prior to lab testing.
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| 2021 Proxy Statement
PROXY SUMMARY
• Giving back to communities through product donations, PPE donations, and financial support
o
In 2020, AbbVie donated $35 million to help support underserved communities and health care
systems working to address the impact of the COVID-19 global pandemic. This funding has led
to, among other things, the creation and operation of 26 mobile field hospitals across the U.S.,
distribution of millions of units of personal protective equipment, distribution of equipment and
supplies in the hardest-hit European countries (including oxygen concentrators, ventilators and
personal protective equipment), and protection for the most vulnerable, including the elderly, by
enabling access to food and essential household supplies with minimal contact.
o We donated over 100,000 units of our HIV medicine Kaletra/Aluvia (lopinavir/ritonavir) globally as
an experimental option for the treatment of COVID-19 during the early part of the pandemic. We
also donated approximately 50,000 units of Nimbex, which is administered to intubated patients,
to the U.S. government.
o We donated over 350,000 surgical and N95 masks to various hospital systems across major
locations where AbbVie operates. Additionally, AbbVie manufactured hand sanitizer and donated
pallets of excess personal protective equipment, including gowns, gloves and hair covers, to
various institutions, including health departments, jails, long term care facilities, medical centers
and veterans’ organizations in Illinois and the Bay Area.
o To support the Illinois Department of Public Health, we donated approximately 280,000 units of
viral transport media.
• Ensuring continuity of supply and access for AbbVie’s patients
o
In the initial weeks of the pandemic, AbbVie made a global decision to give up all patent rights to
Kaletra/Aluvia. The pandemic caused unprecedented demand for Kaletra/Aluvia, which was
widely tested as a potential COVID-19 treatment. Releasing our patent rights allowed other
companies to manufacture Kaletra/Aluvia, helping to meet this unprecedented demand.
o As assurance of treatment supply for our patients has been our most critical priority during
COVID-19, AbbVie’s Manufacturing, Purchasing and Supply Chain readied its network to ensure
we pre-purchased our key materials to maintain zero back orders in 2020 and build enough
inventory to support our 2021 demand.
o Through our U.S. patient assistance program, myAbbVieAssist, and the Allergan Patient
Assistance Program, we help patients who may be having trouble paying for their AbbVie
medicine. In 2020, more than 153,000 patients received their AbbVie medicines from our
programs at no cost. Starting in March 2020, we leveraged national television, newspaper, and
digital advertisements to raise awareness about our patient assistance programs to help people
affected by the pandemic continue to receive their AbbVie medicine.
Driving meaningful change on EED&I and racial justice
During 2020, AbbVie intensified its efforts to drive
meaningful change on equity, equality, diversity, and
inclusion (EED&I), as well as racial justice. These
efforts included internal initiatives at the company and
significant external philanthropic initiatives to support
underserved Black communities across the United
States.
“The private sector has a responsibility to help
address racial inequity issues plaguing our nation.
We believe investing in this important work – in
partnership with national and local nonprofits – will
create immediate opportunities and advance
meaningful and lasting change.”
– Richard A. Gonzalez, Chairman and CEO, AbbVie
• A cornerstone of AbbVie’s human capital management approach is to value and take into account the
backgrounds and perspectives of our diverse workforce. In 2019, we adopted a five-year Equity, Equality,
Diversity & Inclusion (EED&I) roadmap that defines key global focus areas, objectives and associated
initiatives, and includes implementation plans organized by business function and geography. AbbVie’s
senior leaders have adopted formal goals aligned with executing this strategy.
In 2020, AbbVie appointed two additional senior level positions, including our Chief Equity Officer, to drive
change and awareness company-wide and take deliberate steps to ensure we lead by example in
promoting racial equity.
•
• An important part of our strategy is to instill an inclusive mindset in all leaders and employees, so we can
realize the full value of our diverse workforce. In 2020, we increased education resources across the
2021 Proxy Statement |
9
PROXY SUMMARY
company by launching our virtual Impact through Inclusion Learning Series comprised of two awareness
sessions: Stand by Me, completed by more than 18,000 employees and Talking Race, completed by
more than 5,000 people leaders. More than 6,000 employees globally completed AbbVie’s Inclusive
Culture Learning Series as well.
• With a focus on nurturing an inclusive culture, our Employee Resource Groups (ERGs) created
connections and community, hosted awareness events, and provided leadership and career
opportunities. In 2020, we increased membership across every Employee Resource Group, 53% overall
and 165% outside the United States.
• We made a donation of $5 million to NAACP Legal Defense and Education Fund and the Equal Justice
Initiative to address issues in our criminal justice system and made an additional commitment of $50
million in a five-year program to support underserved Black communities across the United States. On
December 9, 2020, we announced the nonprofit partners for the $50 million investment. AbbVie will
collaborate with these partners to bring lasting and real change at the community level by 1) promoting
health equity for Black Americans and other historically underserved populations, 2) fostering workforce
development opportunities for Black Americans, and 3) expanding educational opportunities for
historically underserved youth and young adults. In addition, we expanded our employee matching
program to $3-to-$1 for donations to civil rights nonprofits fostering racial equity.
• Allergan Aesthetics, an AbbVie company, and Skinbetter Science® announced the launch of a new long-
term, educational initiative – DREAM: Driving Racial Equity in Aesthetic Medicine™. The DREAM
Initiative™ is committed to furthering the principles of racial and ethnic diversity, inclusion, respect and
understanding in the fields of dermatology and plastic surgery.
Proactively addressing environmental, social, and governance priorities
At AbbVie, we know that in order to be successful over the long-term, we need to proactively address
environmental, social, and governance topics that are material to the company, including:
• Delivering innovative medicines that offer significant health benefit
o At AbbVie, we strive to make a remarkable impact on patients and drive sustainable growth by
discovering and delivering a consistent stream of innovative medicines that address serious
health problems. In order to drive the long-term sustainability of our business we will continue to
make responsible pricing decisions for these medicines, and this is reflected in our long-range
plan. Our growth is primarily driven by reaching more patients with innovative new medicines, not
increases in price.
In 2020, AbbVie achieved 12 new product or indication approvals or expansions. These included
treatments for rheumatoid arthritis, moderate to severe plaque psoriasis, and previously untreated
chronic lymphocytic leukemia.
o
o ABBV-4083, an investigational compound that AbbVie is co-developing on a pro-bono basis, has
been shown to be safe in a Phase 1 study in healthy volunteers. Preparations to start a Phase 2
study in patients with river blindness in the Democratic Republic of the Congo included renovating
a clinic and training medical staff in a remote area. The study, which will start in early 2021, will
be conducted by our partner, Drugs for Neglected Diseases initiative, with drug product and pro-
bono technical support from AbbVie.
o AbbVie announced that the FDA granted Orphan Drug and Fast Track designation for
elezanumab (ABT-555), an investigational treatment for patients following spinal cord injury.
Elezanumab is currently in phase 2 studies for the treatment of spinal cord injuries, multiple
sclerosis, and acute ischemic stroke.
• Advancing our environmental sustainability
o We continued progress on our environmental sustainability strategy focused on reducing our
environmental footprint, growing sustainably and inspiring, educating and engaging our workforce
to steward sustainability within and beyond AbbVie. On Earth Day, we launched an employee
sustainability engagement campaign called EcoChallenge to encourage the adoption of
sustainable behaviors at work and home. Over 48,100 sustainable actions were completed and
2,200 colleagues from 36 different countries participated.
10
| 2021 Proxy Statement
PROXY SUMMARY
o We completed the first year of our SPARK Innovation Accelerator, an incubator for employee-
driven AbbVie sustainability proposals. The estimated positive impact from the proposals is a
reduction of 95,700 cubic meters of water (38 Olympic swimming pools) and a reduction of 613
metric tons of waste (307 garbage trucks). The program was highly successful prompting us to
solicit proposals again for 2021. Colleagues from 37 different global sites submitted over 200
ideas for the second year of the innovation program.
o We continued to make progress against our 2025 environmental targets. Since 2015, we have
reduced our absolute carbon dioxide emissions (scope 1 and 2) by more than 20%, on track to
meet our 2025 target of 25%. We increased the percentage of purchased electricity that is from
renewable sources to more than 25%, also on track to meet our 2025 target of 50%.
o At our manufacturing site in Sligo, Ireland, our on-site water treatment system has reduced 5,000
metric tons of water waste. Similarly, our new co-generation system at our manufacturing site in
Barceloneta, Puerto Rico enables AbbVie’s plant to generate its own electricity and operates
completely on liquified natural gas, replacing our use of #6 fuel oil, which has higher emissions.
o AbbVie is actively working toward fleet sustainability through the transition of sales force vehicles
to electric and hybrid vehicles, with some of our global markets already over 75% transitioned.
• Stewarding our ethical business
o As part of our commitment to ethical privacy practices and compliance with global privacy laws, in
2020 we launched a global privacy awareness campaign with engaging interactive content,
highlighting important privacy principles for our employees. The program reinforced the ways our
employees can remain compliant with privacy requirements in their day-to-day work and
emphasizes the importance of being good stewards of AbbVie’s data.
o With the acquisition of Allergan in 2020, we began executing on plans to merge and harmonize
the robust ethics and compliance programs of AbbVie and Allergan to best meet the needs of our
business. All employees received AbbVie’s annual training on our Code of Business Conduct
and updated conflicts of interest training. Employees in relevant functions also received
mandatory training on topics such as anti-corruption and anti-bribery, recognizing and reporting
safety information, appropriate product promotion, and appropriate interactions with health care
providers and patient groups. Our compliance training is continually reviewed and updated as
necessary to ensure employees are receiving the most relevant and timely information on these
important topics.
o Creating an environment where employees can raise questions and concerns helps us advance
our commitment to ethical behavior. We have established systems and processes for all
employees to ask questions and report suspected or actual violations of our Code, policies, and
procedures. We offer various reporting resources to employees, such as our Ethics and
Compliance Helpline (which permits reports in several different languages), a telephone and
Web-based hotline available 24 hours a day, seven days a week. Employees may also contact
the Office of Ethics and Compliance or Chief Ethics and Compliance Officer directly. Pursuant to
our Code, AbbVie does not tolerate retaliation against anyone who makes a good faith report.
2021 Proxy Statement |
11
PROXY SUMMARY
AbbVie has been consistently recognized by external rankings and ratings as a leader on corporate responsibility.
For more information about our efforts, please visit abbvie.com/responsibility.
EXTERNAL RECOGNITION
DiversityInc.
Top 50 Companies for
Diversity
Ranked in the top 20
FORTUNE
100 Best Companies to Work For
Great Place to Work
World’s Best Workplaces
Included for three consecutive years
Included for four consecutive
years
Human Rights Campaign
Corporate Equality Index
Working Mother
100 Best Companies
Dow Jones
Sustainability World Index
Scored 100% for five consecutive
years
Top 10 for three consecutive years
Included in the index for eight
consecutive years
3BL Media
100 Best Corporate Citizens
Top 30
EcoVadis
Advanced ranking
PEOPLE’s
50 Companies that Care
Included for two consecutive
years
12
| 2021 Proxy Statement
PROXY SUMMARY
Executive Compensation Highlights
The compensation committee has designed and implemented an executive compensation program in which a
substantial majority of named executive officer (NEO) compensation at AbbVie is performance-based.
The goals of our compensation program are to:
1
Align executive
interests with the drivers
of stockholder returns and
profitable growth
2
Support achievement of
the company’s primary
business goals to have
a remarkable impact on
patients’ lives
3
Attract and retain
world-class executives
whose talents and
contributions sustain the
growth in long-term
stockholder value
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.
Key components and design of our executive compensation program:
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 compensation program.
Element
Type
Primary
Objective
Key Characteristics
Base Salary
Fixed
Attract & retain
top talent
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
At-Risk
Encourage
achievement of
company’s
primary
business goals
Plan utilizes non-GAAP financial goals as well as an assessment
of individual performance against strategic objectives:
— Net revenues
— Income before taxes
— Operating margin
— Return on assets
— Strategic and leadership goals
Long-Term
Incentives
At-Risk
Align NEO
interests with
stockholders
Long-term incentive annual awards are granted in the form of:
— Performance shares and performance vested restricted stock
units (80% of NEO’s LTI award)
— Non-qualified stock options (20% of NEO’s LTI award)
2021 Proxy Statement |
13
INFORMATION CONCERNING DIRECTOR
NOMINEES
What am I voting on
and how should I
vote?
You are being asked to elect four Class III directors at the Annual
Meeting.
The board of directors therefore recommends you vote “FOR” each
of the nominees set forth below.
The board of directors consists of three classes currently comprised of four directors in Class I, four directors in
Class II, and four directors in Class III. Directors of one class are elected each year for a term of three years. The
Class III directors are presented for re-election to hold office until the expiration of their term at the 2024 annual
meeting of stockholders and until their successors are elected and qualified or until their earlier death or
resignation. All of the nominees are currently serving as directors.
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 2020 Annual Report on Form 10-K.
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INFORMATION CONCERNING DIRECTOR
NOMINEES
Nominees (Class III)
Roxanne S. Austin
Director Since: 2013
Age: 60
Committees: Audit and Compensation
Primary Occupation: President, Austin Investment Advisors
Business Experience:
Ms. Austin is president of Austin Investment Advisors, a private investment and consulting firm, and chairs the
U.S. Mid-market Investment Advisory Committee of EQT Partners. Previously, Ms. Austin also served as the
president and chief executive officer of Move Networks, Inc., a provider of Internet television services.
Ms. Austin served as president and chief operating officer of DIRECTV, Inc. Ms. Austin also 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, Crowdstrike, Inc., Teledyne
Technologies, Inc., and Verizon Communications Inc. Ms. Austin has notified Teledyne of her intent to resign
from its Board of Directors at the company’s next annual meeting of stockholders, currently planned for April
2021. Ms. Austin also served as a director of Telefonaktiebolaget LM Ericsson from 2008 to 2016.
Key Contributions to the Board:
• Through her extensive management and operating roles, including her financial roles, Ms. Austin contributes
significant oversight and leadership experience to the board, including financial expertise and knowledge of
financial statements, corporate finance, and accounting matters.
Richard A. Gonzalez
Director Since: 2013
Age: 67
Primary Occupation: Chairman of the Board and Chief Executive Officer, AbbVie Inc.
Business Experience:
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.
2021 Proxy Statement |
15
INFORMATION CONCERNING DIRECTOR
NOMINEES
Rebecca B. Roberts
Director Since: 2018
Age: 68
Committees: Nominations & Governance and Public Policy
Primary Occupation: Retired President of Chevron Pipe Line Company
Business Experience:
Ms. Roberts served as president of Chevron Pipe Line Company from 2006 until her retirement in 2011. She
previously served as the president of Chevron Global Power Generation from 2003 to 2006, in addition to
various technical and management positions during her thirty-six year career with Chevron. Ms. Roberts began
her career as a chemist and research scientist. Ms. Roberts currently serves on the board of directors at Black
Hills Corporation and MSA Safety Incorporated. Ms. Roberts served as a director of Enbridge, Inc. from 2015 to
2018.
Key Contributions to the Board:
• Ms. Roberts brings management, operational, safety, and strategy development expertise with a scientific
background and extensive global experience at Chevron.
• She provides an informed perspective to the board on regulatory and operational matters faced by a
complex international company.
Glenn F. Tilton
Director Since: 2013
Age: 72
Committees: Audit, Compensation, Nominations & Governance, and Public Policy
Primary Occupation: Retired Chairman and Chief Executive Officer of the UAL
Corporation
Lead Independent Director
Business Experience:
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.
• His experience as non-executive chairman of the board of United Continental Holdings, Inc. also enhances
his contributions as AbbVie’s lead independent director.
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INFORMATION CONCERNING DIRECTOR
NOMINEES
Class I – Directors whose terms expire in 2022
William H.L. Burnside
Director Since: 2013
Age: 69
Committees: Audit and Nominations & Governance
Primary Occupation: Retired Senior Vice President and Director at The Boston
Consulting Group
Business Experience:
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.
Key Contributions to the Board:
• Through his experience with The Boston Consulting Group, Mr. Burnside contributes knowledge and
understanding of corporate finance and capital markets matters to the board, as well as global and domestic
strategic advisory experience across a broad base of industries.
Thomas C. Freyman
Director Since: 2020
Age: 66
Committees: Compensation
Primary Occupation: Retired Executive Vice President, Finance and Administration,
Abbott Laboratories
Business Experience:
Mr. Freyman served as a director at Allergan from 2018 to 2020, when AbbVie acquired Allergan plc.
Mr. Freyman previously served as executive vice president, finance and administration at Abbott Laboratories
from 2015 until his retirement in 2017. He previously served at Abbott as chief financial officer and executive
vice president, finance and was first appointed chief financial officer and senior vice president, finance in 2001.
He also serves as a director of Tenneco Inc. and Hanger, Inc.
Key Contributions to the Board:
• Mr. Freyman’s extensive experience as a leader in the healthcare industry, knowledge of the Allergan
businesses, and expertise in complex accounting and financial issues provides the board with significant
global industry experience, continuity in oversight of the Allergan businesses, and finance and risk expertise.
2021 Proxy Statement |
17
INFORMATION CONCERNING DIRECTOR
NOMINEES
Brett J. Hart
Director Since: 2016
Age: 51
Committees: Nominations & Governance and Public Policy
Primary Occupation: President, United Airlines Holdings, Inc.
Business Experience:
Mr. Hart is the president of United Airlines Holdings, Inc. (UAL) and United Airlines, Inc. He served as executive
vice president and chief administrative officer between March 2019 and May 2020, executive vice president,
chief administrative officer and general counsel between May 2017 and March 2019, and as executive vice
president and general counsel between February 2012 and May 2017. 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 president and as 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.
Edward J. Rapp
Director Since: 2013
Age: 63
Committees: Audit and Nominations & Governance
Primary Occupation: Retired Group President for Resource Industries of Caterpillar Inc.
Business Experience:
Mr. Rapp served as the Caterpillar Inc. group president for resource industries from 2014 until his retirement in
mid-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. He is currently a
member of the University of Missouri College of Business Advisory Board. Mr. Rapp previously served as a
director of FM Global.
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.
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INFORMATION CONCERNING DIRECTOR
NOMINEES
Class II—Directors whose terms expire in 2023
Robert J. Alpern, M.D.
Director Since: 2013
Age: 70
Committees: Nominations & Governance and Public Policy
Primary Occupation: Ensign Professor of Medicine, Professor of Internal Medicine, and
Former Dean of Yale School of Medicine
Business Experience:
Dr. Alpern has served as the Ensign Professor of Medicine and Professor of Internal Medicine at Yale School of
Medicine since June 2004. He served as Dean of Yale School of Medicine from June 2004 to January 2020.
From July 1998 to May 2004, Dr. Alpern was the Dean of The University of Texas Southwestern Medical
Center. Dr. Alpern served on the board of Yale-New Haven Hospital from October 2005 to January 2020.
Dr. Alpern also serves as a director of Abbott Laboratories and Tricida, Inc.
Key Contributions to the Board:
• Through his position as Ensign Professor of Medicine, Professor of Internal Medicine, as well as his previous
service as Dean of Yale School of Medicine, Dean of The University of Texas Southwestern Medical Center,
and 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.
Edward M. Liddy
Director Since: 2013
Age: 75
Committees: Compensation and Public Policy
Primary Occupation: Retired Chairman & CEO, The Allstate Corporation
Business Experience:
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. Mr. Liddy also served as a director at 3M Company from 2000 to 2020 and The
Boeing Company from 2010 to 2020.
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.
2021 Proxy Statement |
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INFORMATION CONCERNING DIRECTOR
NOMINEES
Melody B. Meyer
Director Since: 2017
Age: 63
Committees: Audit and Public Policy
Primary Occupation: Retired President, Chevron Asia Pacific Exploration and
Production
Business Experience:
Ms. Meyer is president of Melody Meyer Energy, LLC, a private consulting firm, a position she has held since
June 2016. From March 2011 to April 2016, Ms. Meyer served as the president of Chevron Asia Pacific
Exploration and Production Company. She previously served as president of Chevron Energy Technology
Company from 2008 to 2011, in addition to various other roles over her thirty-seven year career at Chevron.
Ms. Meyer is also a director at bp p.I.c. and NOV, Inc.
Key Contributions to the Board:
• As a result of her tenure at Chevron, Ms. Meyer has acquired operational, management, strategic planning,
and financial expertise with extensive global experience and provides an informed perspective to the board
on financial and operational matters faced by a complex international company.
Frederick H. Waddell
Director Since: 2013
Age: 67
Committees: Audit and Compensation
Primary Occupation: Former Chairman of the Board and Chief Executive Officer of
Northern Trust Corporation and The Northern Trust Company
Business Experience:
Mr. Waddell served as chairman of the board of Northern Trust Corporation and The Northern Trust Company
from November 2009 until his retirement in January 2019. He previously served as chief executive officer from
2008 through 2017, as president from 2006 to 2011 and again from October to December 2016, and chief
operating officer from 2006 to 2008. Mr. Waddell is also a director of International Business Machines
Corporation.
Key Contributions to the Board:
• As former chairman and chief executive officer of Northern Trust Corporation and The Northern Trust
Company, Mr. Waddell contributes broad financial services experience with a strong record of leadership in
a highly regulated industry.
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
The board of directors held seven meetings in 2020. The average attendance of all incumbent directors at board
and committee meetings in 2020 was ninety-eight percent, and each director attended at least seventy-five
percent of the total number of board meetings and meetings of the committees of which he or she served. AbbVie
encourages its board members to attend the annual stockholder meeting. All of AbbVie’s directors attended the
2020 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. Freyman, Mr. Hart, Mr. Liddy,
Ms. Meyer, Mr. Rapp, Ms. Roberts, Mr. Tilton, and Mr. Waddell. 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 reviews enterprise risks and discusses them with our senior
management on a regular basis. AbbVie’s risk management program focuses on issues relevant to AbbVie’s
business, reputation, and strategy, including but not limited to pipeline advancement, healthcare industry
dynamics such as pricing and patient access, manufacturing, regulatory and compliance matters, and others. The
board and its committees regularly review environmental, social, and governance (ESG) topics that are material
to AbbVie. For more details about committee responsibilities and oversight, please see the committee discussion
on pages 24-26.
The board oversees AbbVie’s culture, employee engagement, and overall management of human capital. This
oversight ensures that AbbVie is attracting, developing, and retaining best in class employees dedicated to
making a remarkable impact on patients’ lives around the world.
In 2020, the board spent a significant amount of time overseeing the company’s response to the COVID-19
pandemic, including the impact on AbbVie’s employees and the availability of resources to support employees’
health and well-being. The board also reviewed the pandemic’s impact on pipeline and marketed products, as
well as overall company strategy. Finally, the board oversaw AbbVie’s efforts to contribute to the fight against
COVID-19, via product and financial donations as well as research and development programs designed to
develop treatments.
Over the past year, the board has also prioritized oversight of AbbVie’s response to the U.S. racial justice
movement, including overseeing internal programs designed to ensure that AbbVie is attracting, retaining, and
developing diverse talent. The board also reviewed AbbVie’s efforts to drive racial justice externally, including the
commitment of $55 million in charitable donations to promote health and education equity in underserved Black
communities and to address issues in our criminal justice system.
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 with a board appointed lead independent 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.
2021 Proxy Statement |
21
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Our Lead Independent Director has robust and well-defined responsibilities that provide our board with
significant leadership and oversight:
leads the CEO succession planning process
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 schedule
sufficiency, and, where appropriate, information
provided to other board members
fostering an environment of open dialogue and
constructive feedback among independent
directors
encourages effective director participation by
involved in selection and interviewing of new
reviews and guides agenda items for board
board members
meetings
serves as the liaison between the chairman of the
board and the independent directors
has the authority to call meetings of the
independent directors
leads the board’s evaluation of the CEO
leads the annual board and committee evaluation
process, including discussing evaluations with
each director individually
if requested by major stockholders, ensures that
he or she is available for consultation and direct
communication as needed
if required, represents independent board
members externally
performs such other duties as the board may
determine from time to time
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.
Each year, the board and its committees conduct detailed self-evaluations covering topics such as board and
committee leadership structure, composition and effectiveness, quality of board and committee materials and
discussions, priority agenda items, schedule sufficiency, and board processes. To ensure candid feedback, the
evaluations are anonymous. The full board, led by the lead independent director, discusses the evaluation reports
to determine what, if any, actions or improvements should be undertaken in the near-term and long-term. The
board, committee, and CEO evaluations are discussed in executive session to allow for additional candid
discussion. In 2020, AbbVie engaged an independent firm to review the board and committee self-evaluation
materials, in order to ensure the self-evaluation process reflects current best practices.
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 and 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.
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
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 the 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.
ALPERN AUSTIN BURNSIDE
FREYMAN
GONZALEZ HART LIDDY MEYER RAPP ROBERTS TILTON WADDELL
Healthcare
Industry
Leadership
Global
Business
& Strategy
Corporate
Governance &
Public
Company
Board
Finance or
Accounting
Government
Relations &
Regulatory
2021 Proxy Statement |
23
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board Diversity
AbbVie is committed to diversity in its workforce and on its board of directors. AbbVie
serves patients in over 175 countries and across many different diseases. A diverse
workforce and a diverse board are critical to bringing innovative new medicines to
patients and to meeting their unique needs. In particular, diverse perspectives
strengthen the oversight of AbbVie’s business.
42%
women or ethnically
diverse board members
Diversity, including diversity of race, ethnicity, gender, and age, is an integral factor in identifying prospective
directors. In the process of identifying nominees to serve as a member of the board of directors, the nominations
and governance committee considers the existing board’s diversity and assesses the effectiveness of the
recruitment process in achieving a diverse board. More details about our workforce diversity efforts are available
in the ‘‘Corporate Responsibility Highlights’’ section of this proxy statement.
Committees of the Board of Directors
Audit Committee
Members
R. Austin
(Chair)
W. Burnside
M. Meyer
E. Rapp
G. Tilton
F. Waddell
Key Characteristics and Responsibilities
The audit committee is governed by a written charter. The charter sets forth the purposes of the audit
committee, identifies qualifications required for the audit committee members, and describes the
committee’s authority and responsibilities.
Meetings in 2020: 6
The audit 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, including a review of significant accounting policies, 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. The audit committee is directly responsible for the appointment, fees,
retention, and oversight of the work of AbbVie’s independent auditors.
Each of the members of the audit committee is financially 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.’’
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
Compensation Committee
Members
Key Characteristics and Responsibilities
The compensation committee is governed by a written charter.
Meetings in 2020: 3
R. Austin
T. Freyman
E. Liddy
(Chair)
G. Tilton
F. Waddell
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 committee 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 2020.
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.
2021 Proxy Statement |
25
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Nominations and Governance Committee
Members
R. Alpern
W. Burnside
B. Hart
E. Rapp
(Chair)
R. Roberts
G. Tilton
Key Characteristics and Responsibilities
The nominations and governance committee is governed by a written charter.
Meetings in 2020: 4
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 22-23.
From time to time, AbbVie engages an executive search firm to assist the committee in identifying
individuals qualified to be board members.
Public Policy Committee
Key Characteristics and Responsibilities
The public policy committee is governed by a written charter.
Meetings in 2020: 3
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, governmental affairs,
healthcare compliance, and social responsibility and environmental matters that affect or could affect
AbbVie.
Other topics within the committee’s purview include but are not limited to ethics and compliance
matters, government and regulatory trends relevant to AbbVie’s business, political contributions, and
corporate philanthropy.
Members
R. Alpern
B. Hart
(Chair)
E. Liddy
M. Meyer
R. Roberts
G. Tilton
Executive Committee
The executive committee members are Mr. Gonzalez, chair, Ms. Austin, Mr. Hart, Mr. Liddy, Mr. Rapp, 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.
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| 2021 Proxy Statement
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.
2021 Proxy Statement |
27
DIRECTOR COMPENSATION
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. As described in “Committees of the Board of Directors—Compensation
Committee,” director compensation is reviewed annually by the compensation committee with the independent
compensation consultant, including a review of director compensation against AbbVie’s Health Care Peer Group,
and a recommendation is then provided to the full board.
The following table sets forth the non-employee directors’ 2020 compensation.
Fees
Earned or
Paid in Cash
Restricted
Stock Unit
Awards
($)(1)
($)(2)
112,917
137,917
118,917
67,083
132,917
132,917
118,917
138,917
112,917
168,917
118,917
194,934
194,934
194,934
194,934
194,934
194,934
194,934
194,934
194,934
194,934
194,934
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
Option
Awards
($)(3)
0
0
0
0
0
0
0
0
0
0
0
($)(4)
44,483
0
0
0
0
0
0
0
0
0
0
Name
R. Alpern
R. Austin
W. Burnside
T. Freyman
B. Hart
E. Liddy
M. Meyer
E. Rapp
R. Roberts
G. Tilton
F. Waddell
All Other
Compensation
($)(5)
Total
($)
377,334
357,851
338,851
262,017
352,851
327,851
338,851
360,172
332,851
394,550
340,170
25,000
25,000
25,000
0
25,000
0
25,000
26,321
25,000
30,699
26,319
(1) Under the Non-Employee Directors’ Fee Plan as in effect during 2020, non-employee directors earned
$115,000 per year for service as a director and $20,000 per year for service as a chair of a board committee,
other than the chair of the audit committee. The chair of the audit committee received $25,000 per year for
service as chair of that committee and the other members of the audit committee received $500 for each
month of service as a committee member. The lead director received $50,000 in 2020 for service in that role.
The non-employee director and committee fees are earned monthly for each calendar month or portion
thereof that the director holds the position, excluding the month in which the director is first elected to the
position.
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 an eligible 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 2020, 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.
In addition to the fees described in footnote (1), each non-employee director elected to or serving on the
board of directors on the day of the 2020 annual stockholder meeting received under the AbbVie 2013
28
| 2021 Proxy Statement
DIRECTOR COMPENSATION
Incentive Stock Program vested restricted stock units with a target grant date value of $195,000. In 2020, this
equated to 2,333 restricted stock units (after rounding the award down to the nearest whole unit), with a
reportable value of $194,934. 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, 2020: R. Alpern, 28,440;
R. Austin, 36,103; W. Burnside, 19,881; B. Hart, 12,395; T. Freyman, 2,333; E. Liddy, 23,867; M. Meyer,
9,421; E. Rapp, 19,881; R. Roberts, 6,651; G. Tilton, 32,087; and F. Waddell, 19,881. 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, 2020.
(4) The totals in this column include reportable interest credited under the AbbVie Non-Employee Directors’ Fee
Plan during 2020.
(5) Charitable contributions made by AbbVie’s non-employee directors are eligible for a matching contribution (up
to $25,000 annually). For 2020 contributions, the AbbVie Foundation made charitable matching contributions
on behalf of the following AbbVie directors: R. Alpern, $25,000; R. Austin, $25,000; W. Burnside, $25,000;
B. Hart, $25,000; M. Meyer, $25,000; E. Rapp, $25,000; R. Roberts, $25,000; G. Tilton, $25,000; and
F. Waddell, $25,000. This column also includes reimbursement for certain taxes.
2021 Proxy Statement |
29
SECURITIES OWNERSHIP
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,
2021, by each director and director nominee, 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
T. Freyman
B. Hart
E. Liddy
M. Meyer
E. Rapp
R. Roberts
G. Tilton
F. Waddell
R. Michael
L. Schumacher
C. Alban
M. Severino
All directors and executive officers as a group(4)
Shares
Beneficially
Stock Options
Exercisable
within 60 days
Stock
Equivalent
Units
Owned(1)(2)(3) of January 31, 2020
315,815
28,440
119,447
19,881
123,674
12,395
25,002
9,421
35,870
6,651
44,837
21,881
20,270
177,541
155,341
67,281
1,522,722
678,291
0
0
0
0
0
0
0
0
0
0
0
65,935
373,300
445,047
460,189
4,444,067
0
7,602
0
0
0
0
27,440
0
19,289
0
33,651
0
0
0
0
0
87,982
(1) The table includes shares held in the executive officers’ accounts in the AbbVie Savings Plan as follows: all
executive officers as a group, 5,057. 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, 28,415;
T. Freyman, 4,000; G. Tilton, 350; C. Alban, 40,442; and all directors and executive officers as a group,
142,616.
(4) The directors and executive officers as a group own less than one percent of the outstanding shares of
AbbVie.
Securities Ownership of Principal Stockholders
The table below reports the number of shares of AbbVie common stock beneficially owned as of December 31,
2020 by The Vanguard Group and BlackRock, Inc. (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 The Vanguard
Group on February 10, 2021 and by BlackRock, Inc. on January 29, 2021. The Vanguard Group reported that it
had sole voting power with respect to 0 shares, shared voting power with respect to 3,048,712 shares, sole
dispositive power with respect to 134,585,241 shares and shared dispositive power with respect to 7,977,833
shares. BlackRock, Inc. reported that it had sole voting power with respect to 107,834,642 shares, shared voting
power with respect to 0 shares, sole dispositive power with respect to 124,423,484 shares and shared dispositive
power with respect to 0 shares.
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| 2021 Proxy Statement
Name and Address of Beneficial Owner
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
SECURITIES OWNERSHIP
Shares Beneficially Owned Percent of Class
142,563,074
8.08 %
124,423,484
7.0 %
2021 Proxy Statement |
31
EXECUTIVE COMPENSATION
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
ROBERT A.
MICHAEL
LAURA J.
SCHUMACHER
CARLOS
ALBAN
MICHAEL E.
SEVERINO
Chairman of the Board
of Directors and Chief
Executive Officer
Executive Vice
President, Chief
Financial Officer
Vice Chairman,
External Affairs and
Chief Legal Officer
Vice Chairman, Chief
Commercial Officer
Vice Chairman and
President
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.
The content of this section is organized according to the following.
EXECUTIVE SUMMARY
Unique Events In 2020
Compensation Philosophy
Business Overview
Business Performance Highlights
Components of our Compensation Program
2020 Performance Results
Stockholder Engagement
Compensation Program Governance Summary
33 COMPENSATION PLAN ELEMENTS
33 Base Salary
33 Short-Term Incentives
Long-Term Incentives
34
35 Benefits
39 Employment Agreements
39 Excise Tax Gross-Ups
41 Change in Control Agreements
42
EXECUTIVE COMPENSATION PROCESS
Commitment to Performance-Based Awards
Committee Process for Setting Total
Compensation
Compensation Benchmarking
Role of the Compensation Consultant
Compensation Risk Oversight
43 OTHER MATTERS
43 Stock Ownership Guidelines
43 Clawback Policy
43 Anti-Hedging and Anti-Pledging Policies
43
44
44
44
44
47
48
49
49
49
50
50
50
50
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| 2021 Proxy Statement
EXECUTIVE COMPENSATION
Executive Summary
UNIQUE EVENTS IN 2020
Throughout this CD&A you will see references to our successful completion of the acquisition of Allergan plc on
May 8, 2020 and subsequent integration. Adjusting for Allergan’s accretive impact on our business results caused
us to revise our full year financial plan and, accordingly, our goals were increased to become more challenging in
both our short-term and long-term incentive plans.
This year we also faced the unprecedented challenge of COVID-19. Despite the uncertainty of a fast-developing
global pandemic, our strong culture and operating principles allowed us to respond quickly and effectively. Our
response to COVID-19 took many forms, some of which are highlighted here:
• No workforce reductions and no salary reductions associated with COVID-19
• No compensation discretion was used in 2020 to account for COVID-19
• Placing our patients first by ensuring no disruption to supply chains or access to key medicines
• Prioritizing the wellbeing of our workforce with onsite testing and safety protocols to protect onsite
employees, as well as supporting remote work arrangements
• Goals were adjusted to be more challenging, not less challenging
• $35 million in charitable donations directed toward COVID-19 relief efforts
During 2020, AbbVie also intensified its efforts to drive meaningful change on equity, equality, diversity, and
inclusion (EED&I), as well as racial justice. For example, we committed $55 million in charitable donations to
support health and education opportunity in underserved Black communities and to address issues in our criminal
justice system.
For more information about AbbVie’s leadership through 2020, COVID-19, racial equity, and other areas of
corporate responsibility, see “Our Corporate Responsibility 2020 Highlights”.
COMPENSATION PHILOSOPHY
We believe that a well-designed compensation program should:
1
Align executive
interests with the
drivers of stockholder
returns and profitable
growth
2
Support achievement of
the company’s primary
business goals to have
a remarkable impact on
patients’ lives
3
Attract and retain
world-class
executives whose
talents and
contributions sustain
the growth in long-term
stockholder value
2021 Proxy Statement |
33
EXECUTIVE COMPENSATION
WHAT WE DO
WHAT WE DO NOT DO
We balance short- and long-term strategic
objectives and directly link compensation to
stockholder value.
We tie more than three-fourths of our NEO
compensation to performance.
We complete an annual review to ensure pay is
equitable across genders and ethnicities among
U.S. employees.
We have broad discretion to claw back incentive
awards in the unlikely event of a restatement of
earnings or material breach of the AbbVie Code
of Business Conduct.
We engage annually with our largest
stockholders to gather feedback on our policies
and practices.
We have robust stock ownership guidelines and
prohibit the selling of shares unless ownership
guidelines have been met.
BUSINESS OVERVIEW
X We do not have employment agreements with
any of our NEOs.
X We do not provide excise tax gross-ups on NEO
compensation.
X NEOs are prohibited from entering 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.
X We do not include pay design features that may
have the potential to encourage excessive risk-
taking.
X We do not pay dividends on unearned
performance shares.
X We do not have single trigger change in control.
On May 8, 2020, AbbVie completed the acquisition of Allergan plc (Allergan). The acquisition of Allergan creates
a diversified biopharmaceutical company positioned for success with a comprehensive product portfolio that has
leadership positions in key therapeutic areas of immunology, hematologic oncology, aesthetics, neuroscience,
eye care, and women's health. AbbVie also has a pipeline of promising new medicines in clinical development
across such important medical specialties as immunology, oncology, and neuroscience.
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| 2021 Proxy Statement
EXECUTIVE COMPENSATION
BUSINESS PERFORMANCE HIGHLIGHTS
AbbVie has delivered robust financial results since our launch in 2013
Adjusted Net Revenues
TSR
Revenues in 2020
13.6%
compound annual growth rate*
334.1%
8 year total stockholder return
~$11BN
from products launched since
inception (excludes Allergan portfolio)
Market Capitalization Increase
Quarterly Dividend Increase
Adjusted Diluted EPS
$135BN
added significant stockholder value
225%
raised to $1.30 per share from $0.40 per
18.9%
compound annual growth rate*
share at inception
1,170 bps
90+
operating margin expansion, adjusted*
active clinical development programs
The measures set forth in this table
were calculated as of 12/31/2020.
* Net revenues, diluted earnings per share
and operating margin are adjusted to
exclude certain specified items and are
non-GAAP measures, which are
reconciled in Appendix B.
AbbVie has delivered a strong compound annual growth rate (CAGR) since inception on adjusted net revenues
and adjusted diluted earnings per share (EPS), placing AbbVie in the top tier of its Health Care Peer Group.
Additionally, AbbVie is committed to a robust return of capital to stockholders with an increase of 225% in its
quarterly dividend since 2013 as part of a balanced and disciplined capital allocation program. AbbVie’s total
stockholder return (TSR) since inception of 334.1% also places AbbVie at the top of its Health Care Peer Group,
and more than 124 percentage points above the Standard & Poor’s 500 Index and more than 199 percentage
points above the NYSE Arca Pharmaceutical Index over the same time period.
Adjusted Net Revenues*
Adjusted EPS*
$32.7
$33.3
$28.2
$25.6
)
N
B
$
(
$18.8
$19.9
$22.8
$45.8
$10.56
$8.94
$7.91
$5.60
$4.82
$4.29
$3.14
$3.32
2013
2014
2015
2016
2017
2018
2019
2020
2013
2014
2015
2016
2017
2018
2019
2020
*Net revenues and diluted earnings per share are adjusted for specified items, including the impact of intangible asset amortization, and are
non-GAAP measures, which are reconciled in Appendix B.
2021 Proxy Statement |
35
EXECUTIVE COMPENSATION
NET REVENUES
AbbVie reported worldwide net revenues of $45.8 billion in 2020. Worldwide net revenues increased by 38% on a
reported basis and on a constant currency basis, which included $10.3 billion of contributed revenues from the Allergan
acquisition, growth in the immunology portfolio from Skyrizi, Rinvoq and the continued strength of Humira in the U.S., as
well as revenue growth from Imbruvica and Venclexta.
BUSINESS DEVELOPMENT
AbbVie acquired Allergan creating a more diversified biopharmaceutical company positioned for success with a
comprehensive product portfolio that has leadership positions in key therapeutic areas of immunology, hematologic
oncology, aesthetics, neuroscience, eye care, and women's health.
AbbVie also entered into collaboration agreements with Genmab to research, develop and commercialize investigational
bispecific antibody therapeutics for the treatment of cancer, as well as I-Mab Biopharma for the development and
commercialization of lemzoparlimab for the treatment of multiple cancers.
GROSS AND OPERATING MARGINS
In 2020, AbbVie reported a gross margin of 66.4% on a GAAP basis or 82.1% of net revenues on an adjusted basis.
AbbVie’s operating margin was 24.8% on a GAAP basis or 48.0% of net revenues on an adjusted basis. The adjusted
operating margin reflects an improvement of 70 basis points versus 2019.
EARNINGS PER SHARE
For 2020, AbbVie reported full-year diluted EPS of $2.72 on a GAAP basis and adjusted diluted EPS of $10.56, up 18.1%.
For 2021, AbbVie provided a diluted EPS guidance range of $6.69 to $6.89 on a GAAP basis and $12.32 to $12.52 on an
adjusted basis. The midpoint of the 2021 adjusted guidance represents growth of 17.6% over 2020, reflecting strong
operating dynamics in the underlying business.
REGULATORY MILESTONES
AbbVie also achieved a number of regulatory milestones in markets worldwide for several key products, including
regulatory approvals for Imbruvica in combination with rituximab for the treatment of previously untreated patients with
chronic lymphocytic leukemia (CLL) or small lymphocytic lymphoma (SLL), full approval of Venclexta in combination with
azacitidine or decitabine or low-dose cytarabine in newly diagnosed acute myeloid leukemia patients ineligible for
intensive chemotherapy, Oriahnn for the management of heavy menstrual bleeding due to uterine fibroids in pre-
menopausal women, and Juvederm Voluma XC for the augmentation of the chin region to improve the chin profile in
adults over the age of 21.
AbbVie also submitted regulatory applications for Rinvoq in three additional indications including for the treatment of adult
patients with active psoriatic arthritis (PsA), for the treatment of adult patients with active ankylosing spondylitis (AS), and
for the treatment of adults and adolescents with moderate to severe atopic dermatitis (AD).
PIPELINE DEVELOPMENT
With more than 50 programs in mid- and late-stage development, AbbVie made significant pipeline advancements in
2020. The company initiated several important Phase 3 programs including studies for Skyrizi in ulcerative colitis,
Venclexta in myelodysplatic syndrome (MDS) and navitoclax in myelofibrosis. AbbVie also reported positive data from
Phase 3 studies in other areas of the pipeline including atogepant for migraine prevention and AGN-190584, an
investigational ophthalmic solution, for the treatment of presbyopia.
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| 2021 Proxy Statement
Performance Relative to Peer Group
AbbVie is in the top tier of its peers on several financial measures. The chart below outlines AbbVie’s seven-year
performance relative to its Health Care Peer Group.
EXECUTIVE COMPENSATION
Metric
GAAP Sales Growth
Adjusted Operating Income Growth
Adjusted EPS Growth
GAAP Operating Cash Flow Growth
Adjusted Return on Equity
Since Inception (2013-2020)
0th
25th
50th
75th
100th
86%
95%
100%
100%
100%
Metric
0th
25th
50th
75th
100th
Last Year (2020)
GAAP Sales Growth
Adjusted Operating Income Growth
Adjusted EPS Growth
GAAP Operating Cash Flow Growth
Adjusted Return on Equity
94%
90%
90%
77%
80%
2021 Proxy Statement |
37
EXECUTIVE COMPENSATION
TOTAL STOCKHOLDER RETURN (TSR)
Since becoming a public company in 2013, AbbVie has delivered a total stockholder return of 334.1%, which
places AbbVie at the top of its Health Care Peers and surpasses the cumulative total returns of the Standard &
Poor’s 500 Index and the NYSE Arca Pharmaceutical Index, as shown in the graph below. The 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, 2020. The 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 in the following
graph is not necessarily indicative of future stock price performance.
Comparison of Cumulative Total Return since AbbVie’s Launch
$450
$400
$350
$300
$250
$200
$150
$100
1/02/13
12/31/13
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
AbbVie Inc.
S&P 500 Index
NYSE Arca Pharmaceutical Index
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| 2021 Proxy Statement
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 compensation program are listed below.
EXECUTIVE COMPENSATION
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, and
experience, and internal
equity, as well as the
company’s annual operating
budget
Short-Term
Incentives
Long-Term
Incentives
80% Performance
shares and
performance-vested
restricted stock units
20% Non-qualified
stock options
Performance Incentive
Plan (PIP)
Based on non-GAAP
performance measures
such as:
— Net revenues
— Income before taxes
— Operating margin
— Return on assets
— Strategic and
leadership goals
Our Compensation
Philosophy
Align executive interests
with the drivers of
stockholder returns and
profitable growth
Support achievement of
the company’s primary
business goals to have a
remarkable impact on
patients’ lives
Attract and retain world-
class executives whose
talents and contributions
sustain the growth in long-
term stockholder value
The compensation 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.
The committee believes the use of non-GAAP metrics to measure company performance for incentive plan
purposes is appropriate. The use of certain non-GAAP metrics aligns NEOs to performance objectives that are
commonly used to evaluate the performance of the company, provide accountability, and avoid inappropriate
windfalls or penalties due to factors outside of their control. Importantly, both the goals and the financial
performance are presented on a consistent non-GAAP basis.
2020 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 2020 performance goals. The specific weightings for each NEO 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 are set rigorously; achievement of these targets has resulted in
top-tier industry performance.
2021 Proxy Statement |
39
EXECUTIVE COMPENSATION
Financial Goals
Goal and Expected Result(1)
GAAP Net Revenues
A. Non
GAAP Income Before Taxes
B. Non
‑
C. Adjusted Return on Assets
‑
D. Non
GAAP Operating Margin
2020 Target vs.
2019 Actual 2020 Target
45.5 BN
$
19.5 BN
$
33.3 BN (2) $
14.7 BN (2) $
30.5 %
15.8 BN (2) $
$
20.7 % (3)
22.1 BN
2019 Actual 2020 Actual
45.5 BN (2)
20.1 BN (2)
22.1 %
22.1 BN (2)
137 % $
133 % $
N/A (3)
140 % $
2020 Actual vs.
2020 Target
100 %
103 %
107 %
100 %
‑
(1) Results achieved reflect certain specified items, which are reconciled in Appendix B. Following the acquisition
of Allergan, which closed on May 8, 2020, 2020 target performance goals were increased to become more
challenging.
(2) Evaluated on a constant currency basis.
(3) Target was increased to account for the accretive impact of the acquisition of Allergan, but also reflects a
larger asset base due to Allergan.
The committee reviews and ensures all goals are appropriately rigorous and in line with the long-term success of
the company. Each NEO achieved or exceeded his or her 2020 goals, which are listed below:
• Richard A. Gonzalez: Drive top-tier business performance; execute key strategic initiatives to drive
sustainable long-term business performance; deliver value to our stockholders, building investor confidence
and credibility; successfully advance mid- and late-stage pipeline assets; continue to drive employee
engagement and motivation around AbbVie’s mission and future prospects; and advance our transformation
to a biopharmaceutical culture.
• Robert A. Michael: Achieve proprietary pharmaceutical pipeline enhancement objectives; and provide
support on corporate strategic initiatives and build shareholder value through investor activities.
• 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.
In 2020, our NEOs continued to take a formal goal aligned to protecting AbbVie’s reputation as a top employer
and ensuring its long-term sustainability by driving the company’s culture in a manner consistent with our
Principles.
Key achievements included, for example:
• Donated $35 million to help support underserved communities and health care systems working to address
•
the impact of the COVID-19 global pandemic.
In 2019, we adopted a five-year Equity, Equality, Diversity & Inclusion (EED&I) roadmap that defines key
global focus areas, objectives and associated initiatives, and includes implementation plans organized by
business function and geography. AbbVie’s senior leaders have adopted formal goals aligned with executing
this strategy.
• Appointed two additional senior level positions, including our Chief Equity Officer, to drive change and
awareness company-wide and taking deliberate steps to ensure we lead by example in promoting racial
equity.
• Committed $55 million in charitable donations to support health and education opportunity in underserved
Black communities and to address issues in our criminal justice system.
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EXECUTIVE COMPENSATION
• We continued to make progress against our 2025 environmental targets. Since 2015, we have reduced our
absolute carbon dioxide emissions (scope 1 and 2) by more than 20%, on track to meet our 2025 target of
25%. We increased the percentage of purchased electricity that is from renewable sources to more than 25%,
also on track to meet our 2025 target of 50%.
• Continued to be named to prestigious “top employer” lists, including DiversityInc. “Top 50 Companies for
Diversity,” Fortune’s “100 Best Companies to Work For,” Great Place to Work’s “World’s Best Workplaces,”
Human Rights Campaign’s “Corporate Equality Index,” and Working Mother’s “100 Best Companies.”
• For more information about AbbVie’s leadership through 2020, COVID-19, racial equity, and other areas of
corporate responsibility, see “Our Corporate Responsibility 2020 Highlights”.
STOCKHOLDER ENGAGEMENT
2020 Say on Pay Results
At our 2020 Annual Meeting, the say on pay proposal received support from nearly
94% of our stockholders. The board and compensation committee are encouraged
by the continued, consistent stockholder support for our executive compensation
program.
94%
Say on Pay Results
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 2020 AbbVie reached out to stockholders holding over 40% of the
company’s outstanding shares.
In these discussions, the aggregate feedback acknowledged the alignment of our executives’ pay with AbbVie’s
performance and expressed support for our compensation program, consistent with the level of stockholder
support for our say on pay proposals since inception. 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 programs.
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41
EXECUTIVE COMPENSATION
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:
Good Governance Practices
Balanced Incentive
Plan Design
Annual incentive plan includes financial, operational, and strategic metrics to assess
performance
Annual incentive payout matrix used to define and cap the range for the committee’s
determinations (at or below the plan maximum of 200% of target)
Long-term incentive design emphasizing multiple, relative performance metrics and
multi-year performance periods
No duplication of performance metrics in short- and long-term incentives
Pay Equity and
Sustainability
Equitable pay across genders and ethnicities
Incorporation of reputation and sustainability into the strategic/leadership goals
within the annual incentive plan
Strong Governance
Practices
Committee has broad discretion to claw back incentive awards in the unlikely event
of a restatement of earnings or material breach of the AbbVie Code of Business
Conduct
Anti-hedging and anti-pledging policies
Annual comprehensive compensation program risk review
Independent compensation consultant that performs no other work for the company
Pay for Performance
and Stockholder
Alignment
Short- and long-term incentive programs closely align with performance
Majority of NEO compensation tied to long-term performance
Proactive stockholder engagement process
Robust Stock
Ownership
Requirements
6x salary for CEO and 3x salary for NEOs
5x annual fees for non-employee directors
NEOs must hold and not sell equity until the minimum stock ownership requirement
is satisfied
Responsible Pay
Practices
No single trigger vesting of equity or other benefits in the event of a change in
control
No repricing of stock options without express stockholder approval
No tax gross-ups in executive compensation program
No employment contracts
No guaranteed short-term incentives or equity awards
No dividends paid on unearned performance awards
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| 2021 Proxy Statement
EXECUTIVE COMPENSATION
Executive Compensation Process
COMMITMENT TO PERFORMANCE-BASED AWARDS
The majority 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 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 compensation levels based on company performance, each NEO’s individual performance, leadership, and
contributions to AbbVie’s business and 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, Inc.
GlaxoSmithKline plc
Johnson & Johnson
Merck & Company, Inc.
Novartis AG
Pfizer Inc.
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.
2021 Proxy Statement |
43
EXECUTIVE COMPENSATION
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 or based on misconduct that would constitute a material breach of the AbbVie Code of
Business Conduct. The committee, in collaboration with its independent compensation consultant, identified no
material risks in AbbVie’s compensation programs in 2020.
When considering compensation-related risk, the committee is aware of certain risks associated with drug pricing
decisions. The Committee weighs these, as well as other risks material to the company, when designing AbbVie’s
compensation programs. In addition, the committee, comprised entirely of independent directors, has discretion to
adjust incentive payments, if needed, including to reflect decisions executives make that may impact AbbVie’s
reputation and long-term sustainability.
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
8%
Base Salary
CEO
23%
Short-Term
Incentives
66%
Long-Term
Incentives
76%
Performance-Based
Income
Avg
Other
NEOs
11%
Base Salary
23%
Short-Term
Incentives
69%
Long-Term
Incentives
79%
Performance-Based
Income
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.
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 measured at the company and individual levels.
AbbVie’s PIP structure is designed to align NEOs’ interests directly with AbbVie’s annual operating strategies to
advance our mission, 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 followed by qualitative assessments of clearly defined strategic progress
and leadership behaviors.
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| 2021 Proxy Statement
EXECUTIVE COMPENSATION
NEO target incentive amounts are set as a percentage of base salary. For the 2020 performance year,
Mr. Gonzalez’s target was increased to 165% of base salary. The targets for the other NEOs range from 110% to
125% of base salary. The maximum potential payout under the PIP is capped at 200% of target for all
participants.
Determining actual incentive amounts is a multi-step process. First, an initial performance score is calculated for
each NEO based on performance against weighted financial and strategic/leadership goals. This performance
score results in a preliminary award amount of up to 100% of target only. Final awards are determined by the
compensation committee based on a qualitative assessment of holistic performance. A formal payout matrix
based on net revenues and income before taxes guides the committee by capping the range of final awards at or
below the plan maximum of 200% of target. This process is more fully described below:
Illustration of 2020 Incentive Calculation
Target
Award
x
Performance
Score
=
Preliminary
Award
→
Final Committee
Decision
=
Final
Award
Plan Governance:
Maximum
100% of Target
per plan design
2020 Performance results:
Capped at 175% of Target per payout matrix
(below 200% plan maximum)
Initial Performance Score
Initial performance scores are calculated for each NEO based on performance against weighted financial and
strategic/leadership goals. The goals and their respective weightings are summarized in the chart below. The
specific goals and weightings for each NEO (including 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.
Income
Before
Taxes
Net Revenues,
Operating Margin,
and Return on
Assets
R&D/
Reputation/
Business
Innovation Development Sustainability
Allergan
Integration
Other
Richard A. Gonzalez
Robert A. Michael
Laura J. Schumacher
Carlos Alban
Michael E. Severino
20 %
20 %
20 %
20 %
20 %
50 %
60 %
20 %
50 %
20 %
10 %
10 %
30 %
10 %
10 %
10 %
10 %
10 %
10 %
10 %
10 %
10 %
10 %
10 %
10 %
20 %
10 %
Assessments of performance against financial results consider the effect of foreign exchange and other specified
adjustments and/or unusual or unpredictable events, and the appropriateness of these adjustments is reviewed
annually by the committee. In 2020, specified adjustments included intangible asset amortization, acquisition and
integration-related costs, milestones and other research and development expenses, acquired in process
research and development, change in fair value of contingent consideration, tax audit settlements, impacts related
to tax law changes, and other items, as described in Appendix B.
2021 Proxy Statement |
45
EXECUTIVE COMPENSATION
Annual Incentive Payout Matrix and Final Committee Decisions
The annual incentive payout matrix establishes a potential range of final incentive outcomes based on net
revenues and operating margin performance. For 2020, actual net revenue performance was 100% compared to
target, while actual income before taxes was 103% compared to target. As a result of this performance, the
annual incentive payout matrix capped the annual incentives at 175% of target, below the plan maximum of 200%
of target.
Annual Incentive
Payout Matrix(1)
Non
Non
Taxes
GAAP Net Revenues
GAAP Income Before
‑
‑
2019 Actual 2020 Target
$ 33.3 BN (2) $ 45.5 BN
2019 Actual
137 % $
2020 Actual
45.5 BN (2)
2020 Target vs.
2020 Actual vs.
2020 Target
100 %
$ 14.7 BN (2) $ 19.5 BN
133 % $
2020 Payout
Matrix Result
20.1 BN (2)
Capped at 175% of target
(below 200% plan maximum)
103 %
(1) Results achieved reflect certain specified items, which are reconciled in Appendix B. Following the acquisition
of Allergan, which closed on May 8, 2020, 2020 target performance goals were increased to become more
challenging.
(2) Evaluated on a constant currency basis.
Final awards are determined by the compensation committee based on a qualitative assessment of holistic
performance. While the committee relies heavily on objective, quantitative metrics to determine PIP awards, this
qualitative element ensures the review is comprehensive and includes all individual, strategic, and leadership
goals for which assessment is not dictated solely 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.
Target Actual Award
Award
Paid
Actual Award
as a % of
Target
Richard A. Gonzalez
Robert A. Michael
Laura J. Schumacher
Carlos Alban
Michael E. Severino
$2,805,000 $4,908,750
2,110,000
2,550,000
2,475,000
2,700,000
1,210,000
1,464,000
1,464,000
1,724,000
175 %
174 %
174 %
169 %
157 %
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| 2021 Proxy Statement
LONG-TERM INCENTIVES
The LTI program design aligns 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
2020, NEOs received annual grant LTI awards with the following characteristics:
Long-Term Incentive Program
EXECUTIVE COMPENSATION
Award Type
40% Performance Shares
40% Performance
20% Non
Qualified Stock Options
Vested Restricted Stock
‑
Metric
Performance Period
Year Relative TSR Modifier
EPS 3
Relative Return on Invested Capital
Stock Price Appreciation
‑
3 Years
3 Years
year term
10
‑
‑
• 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 200% of target in one-third increments during a three-year performance period based on AbbVie’s
return on invested capital (ROIC) 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)—These awards have the potential to vest in
one-third increments on each of the first three annual anniversaries of the grant date, subject to continued
employment with the company. The option exercise price is set at or above fair market value on the grant
date. To the extent that the options vest, the award expires ten years after the grant date.
Performance Share and Performance-Vested Restricted Stock Performance Targets and
Results
Performance targets and results associated with the 2020 annual grant awards of performance shares and
performance-vested restricted stock are shown below. Total stockholder return results are in progress; these
results and their impact on final payout will be disclosed following the completion of the three-year performance
period. Beginning with performance-vested restricted stock awards made in 2020, we replaced the relative return
on equity (ROE) metric with a relative ROIC metric in order to place more emphasis on debt management and
debt reduction, particularly in the context of the Allergan acquisition. We continue to proactively monitor the
effectiveness of our incentive design and look for ways to further align with the strategic direction of the company
and the interests of stockholders.
Performance Objective
Adjusted Diluted
EPS(1)
Relative TSR
Relative ROIC
(2020 Award)
Relative ROE
(2018 & 2019 Award)
Threshold
$10.23
Target
Maximum
Result
Impact on Payout
$10.28
$10.48
$10.56
200%
Relative TSR is measured over a 3
year performance period and used as a modifier
40th
50th
percentile
‑
75th
50th
percentile
‑
50th
65th
percentile
‑
75th
90th
percentile
‑
‑
>85th
percentile
>90th
percentile
76th
percentile
>90th
percentile
175%
150%
(1) Diluted earnings per share is adjusted to exclude certain specified items and is a non-GAAP measure, which
is reconciled in Appendix B. Following the acquisition of Allergan, which closed on May 8, 2020, the
performance range targets were increased to become more challenging.
2021 Proxy Statement |
47
EXECUTIVE COMPENSATION
AbbVie granted performance shares in 2018 that were subject to a 3-year performance cycle that ended
December 31, 2020. The table below describes the performance objectives, outcomes, and shares earned.
Performance
Objective
Relative TSR
Threshold
15 pts below
index
Target
Equal to index
performance
Maximum
15 pts above
index
Actual
12.4 pts below
index
Performance
Modifier
85%
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 2020 annual grant was $93.50. The high, low and
closing prices of an AbbVie common share on the grant date (February 20, 2020) were $94.39, $92.59, and
$94.23 respectively. All LTI awards are subject to a minimum vesting period of 12 months.
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.
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
The NEOs and other eligible U.S. employees 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 eligible NEOs receive an annual cash payment equal to
the increase in the present value of their Supplemental Pension Plan benefit. Eligible 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 surviving 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 surviving spouse) by AbbVie.
Savings Plans
The NEOs and other eligible U.S. employees are permitted 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. Eligible NEOs also may 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.
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| 2021 Proxy Statement
EXECUTIVE COMPENSATION
Eligible 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 paid an annual stipend of $10,000 for estate planning advice, tax preparation and general financial
planning fees. The stipend is income to the NEO, who is responsible for payment of all resulting taxes 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 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 64 of this proxy statement.
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.”
2021 Proxy Statement |
49
EXECUTIVE COMPENSATION
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
Robert A. Michael
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.
CLAWBACK POLICY
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 or circumstances where an executive officer
engages in misconduct that would constitute a material breach of the AbbVie Code of Business Conduct.
Nevertheless, 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 incentive awards. Further, the
company is committed to disclosing in its annual proxy statement the occurrence of any recoupment regarding an
executive officer when the underlying violation has already been publicly disclosed in company filings with the
SEC. For more details, AbbVie’s Code of Business Conduct is available in the corporate governance section of
AbbVie’s investor relations website at www.abbvieinvestor.com.
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 Legal department prior to entering into such transaction.
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EXECUTIVE COMPENSATION
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, T. Freyman, G. Tilton, and F. Waddell
Compensation Risk Assessment
During 2020, 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:
• Annually, AbbVie completes a review to ensure pay is equitable across genders and ethnicities among U.S.
employees.
• 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.
• 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 aligns NEOs
with stockholder interests through the use of multi-year performance periods and multiple performance
measures, including relative total stockholder return. In 2020, AbbVie’s NEOs received roughly two-thirds of
their total direct compensation in the form of long-term incentives (20% of which are stock options that may
vest over a three-year period and 80% of which are performance-based awards that may vest over a
three-year performance period).
• 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.
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EXECUTIVE COMPENSATION
• AbbVie’s compensation committee has broad discretion to claw back incentive compensation that was
awarded based on financials that were later restated or based on a material breach of the AbbVie Code of
Business Conduct.
• 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.
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Summary Compensation Table
This section contains compensation information for AbbVie’s NEOs for the fiscal year ended December 31, 2020.
The following table summarizes compensation awarded to, earned by and/or paid to AbbVie’s NEOs in
connection with their service to AbbVie during 2020, 2019 and 2018, as applicable. The section of this proxy
statement captioned “Compensation Plan Elements” describes in greater detail the information reported in this
table.
Salary Bonus
($)
Name and Principal Position
Richard A. Gonzalez
Chairman of the Board and
Chief Executive Officer
Robert A. Michael
Executive Vice President,
Chief Financial Officer
Laura J. Schumacher
Vice Chairman, External Affairs
and Chief Legal Officer
Carlos Alban
Vice Chairman,
Chief Commercial Officer
Michael E. Severino
Vice Chairman and President
Year
($)
2020 $ 1,688,462
2019 1,650,000
2018 1,650,000
2020 1,065,385
906,865
2019
2018
553,654
2020 1,211,808
2019 1,176,538
2018 1,043,582
2020 1,211,808
2019 1,176,538
2018 1,016,526
2020 1,369,923
2019 1,330,000
2018 1,100,605
Non
Change
in Pension
Value and
qualified
Deferred
‑
Earnings Compensation
($)(6)
All Other
Stock
Equity
Option Incentive Plan Compensation
Non
‑
($)(1)
Awards Awards Compensation
($)(3)
($)(2)
4,908,750
0 11,644,996 2,781,662
4,335,000
0
8,887,088 2,246,253
3,898,125
0 11,509,090 2,760,764
2,110,000
5,406,515 1,291,477
0
1,800,000
683,643
2,704,766
0
950,000
0
173,724
724,041
2,550,000
5,822,401 1,390,831
0
2,400,000
859,429
3,400,155
0
1,954,549
4,134,594
0
991,720
2,475,000
5,822,401 1,390,831
0
2,400,000
781,305
3,091,161
0
1,836,219
4,005,388
0
961,216
2,700,000
5,822,401 1,390,831
0
2,400,000
3,199,248
0
808,642
1,818,200
4,176,037 1,002,105
0
($)(4)(5)
2,224,135
3,366,720
463,205
3,571,858
2,622,108
679,532
5,716,702
6,579,440
2,739,969
5,629,242
6,456,803
821,930
1,910,985
1,525,091
359,057
Total
($)
759,586 $ 24,007,591
1,125,537 21,610,598
1,002,403 21,283,587
49,394 13,494,629
8,772,853
55,471
3,118,888
37,937
434,534 17,126,276
727,225 15,142,787
518,745 11,383,159
324,644 16,853,926
500,283 14,406,090
341,800
8,983,079
216,918 13,411,058
9,508,448
245,467
8,607,359
151,355
(1) 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 generally 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. The grant date
fair value of performance shares with a TSR market condition are determined using the Monte Carlo
simulation model.
(2) 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. 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 estimate the
grant date fair value of options granted in 2020, along with the weighted-average grant date fair value, are
shown below:
free interest rate
Assumption
Risk
Average life of options (years)
‑
Volatility
Dividend yield
Fair value per stock option
1.40 %
6.0
26.96 %
5.30 %
$
12.14
(3) The compensation reported in this column for 2020 was earned as a performance-based incentive award
pursuant to the AbbVie Performance Incentive Plan. Additional information regarding the plan can be found in
the Compensation Plan Elements section of this proxy statement.
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EXECUTIVE COMPENSATION
(4) The plan amounts shown below are reported in this column, except as described in this paragraph. The
amounts shown beside each NEO’s name are for 2020, 2019, and 2018, respectively, as applicable. 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: $8,696 / $(8,305) / $(111,651); R. Michael: $214,038 / $246,392 / $(46,048); L. Schumacher:
$219,159 / $318,167 / $72,009; C. Alban: $242,266 / $353,675 / $(33,817); and M. Severino: $58,277 /
$57,916 / $11,833.
AbbVie Supplemental Pension Plan
R. Gonzalez: $1,298,329 / $2,485,115 / $(1,790,327); R. Michael: $3,357,820 / $2,375,716 / $725,580;
L. Schumacher: $4,235,519 / $5,040,017 / $2,027,233; C. Alban: $4,484,978 / $5,265,442 / $432,490; and
M. Severino: $1,416,157 / $1,127,049 / $210,855.
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: $917,110 / $889,910 / $463,205; L. Schumacher: $1,262,024 / $1,221,256 / $640,727; C. Alban:
$901,998 / $837,686 / $423,257; and M. Severino: $436,551 / $340,126 / $136,369.
(5) 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 2020,
interest rates decreased and the discount rates used for the Pension Plan and the Supplemental Pension
Plan were decreased to reflect that change. A decrease in the discount rate increases the present value of
participants’ pension benefits while actual payments to be made to participants are not changed. The discount
rate used for 2020 was 3.02% for the Pension Plan and 2.94% for the Supplemental Pension Plan. The
discount rate used for 2019 was 3.56% for the Pension Plan and 3.51% for the Supplemental Pension Plan,
while the discount rate used for 2018 was 4.62% for the Pension Plan and 4.58% for the Supplemental
Pension Plan. The mortality assumptions that apply for actuarial purposes also affect pension values.
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 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.
(6) The amounts shown below are reported in this column for 2020, 2019 and 2018, respectively, as applicable.
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Earnings for Non-Qualified Defined Benefit and Non-Qualified Defined Contribution Plans
R. Gonzalez: $212,566 / $372,310 / $246,041; L. Schumacher: $341,999 / $621,724 / $420,337; C. Alban:
$236,002 / $412,229 / $266,141; and M. Severino: $100,398 / $135,497 / $66,157.
Each of the NEOs’ awards under the AbbVie Performance Incentive Plan is paid in cash to the NEO on a
current basis and, for eligible NEOs, may be deposited into a grantor trust established by the NEO, net of
maximum tax withholdings. Each of the eligible NEOs has also established grantor trusts in connection with
the AbbVie Supplemental Pension Plan and the AbbVie Supplemental Savings Plan. These amounts include
earnings net of the reportable interest included in footnote (4).
Employer Contributions to Defined Contribution Plans
R. Gonzalez: $84,423 / $82,500 / $82,500; R. Michael: $14,250 / $14,000 / $13,750; L. Schumacher: $60,590
/ $58,827 / $52,179; C. Alban: $60,590 / $58,827 / $50,826; and M. Severino: $68,496 / $66,500 / $55,030.
These amounts include AbbVie contributions to the AbbVie Savings Plan and the AbbVie Supplemental
Savings Plan, as applicable. The Supplemental Savings Plan permits eligible 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 eligible 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 2020 Compensation
The totals shown in the table include the cost of providing a corporate automobile less the amount reimbursed
by the NEO: R. Gonzalez: $19,982; R. Michael: $13,823; L. Schumacher: $12,127; C. Alban: $18,052; and
M. Severino: $23,140. AbbVie imputes income to the NEO, if required, and the NEO pays taxes in
accordance with tax regulations without gross-ups.
The totals shown in the table include a $10,000 financial planning services allowance for each NEO. AbbVie
imputes income to the NEO, if required, and the NEO pays taxes in accordance with tax regulations without
gross-ups.
The totals shown in the table include the following costs for non-business-related air travel and services:
R. Gonzalez: $340,001; R. Michael; $11,321; L. Schumacher: $9,818; and M. Severino $14,884. 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, if required, and the NEO pays taxes in accordance with tax regulations without gross-ups.
For Mr. Gonzalez, the total includes $92,614 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 and in accordance with the AbbVie security program. AbbVie imputes income to Mr. Gonzalez,
if required, and he pays taxes in accordance with tax regulations without gross-ups.
The NEOs also are eligible to participate in an executive disability benefit, which is described on page 64 of
this proxy statement.
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55
EXECUTIVE COMPENSATION
REQUIRED PAY RATIO DISCLOSURE
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item
402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total
compensation of our employees and the annual total compensation of our CEO, Richard Gonzalez. The pay ratio
included in this information is a reasonable estimate calculated in a manner consistent with Regulation S-K Item
402(u). The ratio of Mr. Gonzalez’s annual total compensation for 2020, as reported in the Summary
Compensation Table in this proxy statement, to the median employee annual total compensation determined on
the same basis was 154:1. For 2020, the annual total compensation of our median employee (other than Mr.
Gonzalez) was $155,772. To identify the median employee, we prepared a list of active AbbVie employees
throughout the world as of December 25, 2020. In accordance with SEC rules, we omitted approximately 16,935
legacy Allergan employees who became our employees during 2020 as a result of our acquisition of Allergan plc.
The consistently applied compensation measure used to identify the median employee was annual base pay and
target bonus, using hours worked during 2020 for hourly employees and base salary for the remaining
employees. This process resulted in a median group consisting of several employees and a representative
employee was selected, taking into account demographic characteristics that best represent a typical AbbVie
employee, including tenure, location, employment status and applicable compensation and benefit programs.
2020 Grants of Plan-Based Awards
The following table summarizes the equity awards granted under the AbbVie 2013 Incentive Stock Program to the
NEOs during 2020.
Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards(1)
Grant Target Maximum
($)
Date
($)
Estimated
Future
Payouts
Under
Equity
All Other
Option
Awards: Exercise
Incentive Numbers of
Securities
Underlying
Options
(#)
Plan
Awards
Target
($)
59,893 (2)
59,893 (3)
or Base Closing
Price of Market
Option Price on
Grant
Awards
Date
(#)
Grant Date
Fair Value
of Stock
and Option
Awards
229,132 (5) $ 93.50 $ 94.23
27,807 (2)
27,807 (3)
29,946 (2)
29,946 (3)
29,946 (2)
29,946 (3)
29,946 (2)
29,946 (3)
106,382 (5) 93.50
114,566 (5) 93.50
114,566 (5) 93.50
114,566 (5) 93.50
$ 6,045,599 (4)
5,599,397 (4)
2,781,662 (6)
2,806,839 (4)
2,599,676 (4)
1,291,477 (6)
3,022,749 (4)
2,799,652 (4)
1,390,831 (6)
3,022,749 (4)
2,799,652 (4)
1,390,831 (6)
3,022,749 (4)
2,799,652 (4)
1,390,831 (6)
94.23
94.23
94.23
94.23
Name
R. Gonzalez
R. Michael
L. Schumacher
C. Alban
M. Severino
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
2/20/2020
(1) During 2020, each of the NEOs participated in the AbbVie Performance Incentive Plan. The annual cash
incentive award earned by the NEO in 2020 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 2020 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) This is a performance share award that has the potential to vest at 0% to 250% of target during a three-year
performance period 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
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EXECUTIVE COMPENSATION
Pharmaceutical Index. Dividends accrue during the performance period and are paid in cash at vesting only to
the extent that shares are earned. In 2020, AbbVie’s EPS performance resulted in the banking of the award
on February 28, 2021 at 200% of target, with vesting to be determined based on the company’s relative TSR
performance following the three-year performance period that ends December 31, 2022. The performance
metrics are described in the section of this proxy statement captioned “Compensation Discussion and
Analysis—Compensation Plan Elements—Long-Term Incentives.”
(3) This is a performance-vested restricted stock unit award that has the potential to vest at 0% to 200% of target,
in one-third increments, during a three-year performance period based on AbbVie’s return on invested capital
(ROIC) 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 in cash at vesting only to
the extent that shares are earned. In 2020, AbbVie’s relative ROIC performance resulted in the vesting on
February 28, 2021 of one-third of the award at 175% of target. The performance metrics are described in the
section of this proxy statement captioned “Compensation Discussion and Analysis—Compensation Plan
Elements—Long-Term Incentives.”
(4) The grant date fair value of stock awards is generally determined by multiplying the number of shares or units
granted by the average of the high and low market prices of one share of AbbVie common stock on the award
grant date. The grant date fair value of performance shares with a TSR market condition is determined using
the Monte Carlo simulation model. In the event of a grantee’s death or disability, these awards will be deemed
earned either based on actual performance through the date of death or disability or at target, depending on
the timing of the death or disability, as set forth in the award agreement. 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.”
(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, subject to satisfaction of the service requirements set forth in the
award agreements. 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 (2) to the Summary Compensation Table.
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57
EXECUTIVE COMPENSATION
2020 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)
Stock Awards
Number of
Securities
Underlying
Unexercised
Options -(#)
Exercisable Unexercisable
Number of
Securities
Underlying
Unexercised
Options -(#)
Option
Exercise
Price -($)
Market
Value of
Shares of
Option Stock That Stock That
Have Not
Number of
Shares of
Have Not
Expiration
Date Vested -(#) Vested -($) Vested -(#)
Name
R. Gonzalez
R. Michael
L. Schumacher
C. Alban
M. Severino
170,113
261,150
85,073
59,709
-
10,140
11,420
5,353
18,173
-
103,220
78,450
100,100
30,560
22,845
-
81,500
101,960
79,870
95,750
29,620
20,769
-
74,309
104,480
91,990
100,100
30,880
21,495
-
-
-
-
-
-
119,418 (2)
229,132 (2)
36,344 (2)
106,382 (2)
- $ 54.8600 2/17/2026
-
61.3600 2/15/2027
42,537 (2) 114.3600 2/14/2028
79.0200 2/20/2029
93.5000 2/19/2030
54.8600 2/17/2026
61.3600 2/15/2027
2,677 (2) 114.3600 2/14/2028
79.0200 2/20/2029
93.5000 2/19/2030
58.8800 2/18/2025
54.8600 2/17/2026
61.3600 2/15/2027
15,280 (2) 114.3600 2/14/2028
45,690 (2)
79.0200 2/20/2029
114,566 (2)
93.5000 2/19/2030
51.4200 2/19/2024
58.8800 2/18/2025
54.8600 2/17/2026
61.3600 2/15/2027
14,810 (2) 114.3600 2/14/2028
41,536 (2)
79.0200 2/20/2029
114,566 (2)
93.5000 2/19/2030
54.4400 6/01/2024
58.8800 2/18/2025
54.8600 2/17/2026
61.3600 2/15/2027
15,440 (2) 114.3600 2/14/2028
42,990 (2)
79.0200 2/20/2029
114,566 (2)
93.5000 2/19/2030
-
-
-
-
-
-
-
-
(1) Except as noted, the stock options are fully vested.
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| 2021 Proxy Statement
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares
or Other
Rights That
Have Not
-
-
-
-
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares
or Other
Rights That
Have Not
Vested -($)
62,947 (2) 6,744,771
97,021 (2) 10,395,800
119,786 (2) 12,835,070
-
-
3,960 (2)
424,314
29,528 (2) 3,163,925
55,614 (2) 5,959,040
-
-
22,613 (2) 2,422,983
37,120 (2) 3,977,408
59,892 (2) 6,417,428
-
-
-
21,907 (2) 2,347,335
33,746 (2) 3,615,884
59,892 (2) 6,417,428
-
-
-
-
22,840 (2) 2,447,306
34,926 (2) 3,742,321
59,892 (2) 6,417,428
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2) The vesting dates of AbbVie unexercisable stock options and unvested performance share and restricted
stock/unit awards outstanding at December 31, 2020 are as follows:
Option Awards
Stock or Unit Awards
EXECUTIVE COMPENSATION
Number of
Unexercised
Shares
Remaining
from
Original
Number of
Option
Shares
Vesting—
Date
Number of
Option
Shares
Vesting—
Date
Number of
Option Number of
Shares of
Shares
Number of
Shares of
Restricted
Stock or
Vesting— Restricted Units Vesting— Units Vesting— Units Vesting—
Date
Date
Vested 2023
Number of
Shares of
Restricted
Stock or
Number of
Shares of
Restricted
Stock or
Vested 2021
Vested 2022
Stock or
Units
Date
Date
Name
R. Gonzalez
Grant Vested 2021 Vested 2022 Vested 2023
42,537 42,537 - 2/15
119,418 59,709 - 2/21 59,709 - 2/21
229,132 76,378 - 2/20 76,377 - 2/20 76,377 - 2/20
R. Michael
2,677
2,677 - 2/15
36,344 18,172 - 2/21 18,172 - 2/21
106,382 35,461 - 2/20 35,461 - 2/20 35,460 - 2/20
L. Schumacher
15,280 15,280 - 2/15
45,690 22,845 - 2/21 22,845 - 2/21
114,566 38,189 - 2/20 38,189 - 2/20 38,188 - 2/20
C. Alban
M. Severino
14,810 14,810 - 2/15
41,536 20,768 - 2/21 20,768 - 2/21
114,566 38,189 - 2/20 38,189 - 2/20 38,188 - 2/20
15,440 15,440 - 2/15
42,990 21,495 - 2/21 21,495 - 2/21
114,566 38,189 - 2/20 38,189 - 2/20 38,188 - 2/20
47,210
15,737
58,213
38,808
59,893
59,893
2,970
990
17,717
11,811
27,807
27,807
16,960
5,653
22,272
14,848
29,946
29,946
16,430
5,477
20,248
13,498
29,946
29,946
17,130
5,710
20,956
13,970
29,946
29,946
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(b)
(c)
(d)
(e)
(f)
(a) These are performance shares that remained outstanding and unvested on December 31, 2020 from an
award made on February 15, 2018. The award has the potential to vest at 0% to 250% of target during a
3-year performance period 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 accrue during the performance period and are paid at vesting only to the
extent that shares are earned. In 2018, AbbVie’s EPS performance resulted in the banking of the award at
200% of target, with vesting to be determined based on the company’s relative TSR performance during the
3-year performance period that ends December 31, 2020. In 2020, AbbVie’s 3-year relative TSR performance
resulted in a 15% downward modification of the previously-banked award, and final vesting on February 28,
2021 of the award at 170% of target.
(b) These are performance-vested restricted stock units that remained outstanding and unvested on
December 31, 2020, from an award made on February 15, 2018. The award has the potential to vest at 0% to
150% of target, in one-third increments, during a 3-year performance period based on AbbVie’s return on
equity (ROE) 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. In 2020, AbbVie’s relative ROE performance resulted in the vesting on
February 28, 2021 of one-third of the award at 150% of target.
(c) These are performance shares that remained outstanding and unvested on December 31, 2020 from an
award made on February 21, 2019. The award has the potential to vest at 0% to 250% of target during a
2021 Proxy Statement |
59
EXECUTIVE COMPENSATION
3-year performance period 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 accrue during the performance period and are paid at vesting only to the
extent that shares are earned. In 2019, AbbVie’s EPS performance resulted in the banking of the award at
200% of target, with vesting to be determined based on the company’s relative TSR performance during the
3-year performance period that ends December 31, 2021.
(d) These are performance-vested restricted stock units that remained outstanding and unvested on
December 31, 2020, from an award made on February 21, 2019. The award has the potential to vest at 0% to
150% of target, in one-third increments, during a 3-year performance period based on AbbVie’s return on
equity (ROE) 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. In 2020, AbbVie’s relative ROE performance resulted in the vesting on
February 28, 2021 of one-third of the award at 150% of target.
(e) These are performance shares that remained outstanding and unvested on December 31, 2020 from an
award made on February 20, 2020. The award has the potential to vest at 0% to 250% of target during a
3-year performance period 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 accrue during the performance period and are paid at vesting only to the
extent that shares are earned. In 2020, AbbVie’s EPS performance resulted in the banking of the award at
200% of target, with vesting to be determined based on the company’s relative TSR performance during the
3-year performance period that ends December 31, 2022.
(f) These are performance-vested restricted stock units that remained outstanding and unvested on
December 31, 2020, from an award made on February 20, 2020. The award has the potential to vest at 0% to
200% of target, in one-third increments, during a 3-year performance period based on AbbVie’s return on
invested capital (ROIC) 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. In 2020, AbbVie’s relative ROIC performance resulted in the vesting on
February 28, 2021 of one-third of the award at 175% of target.
2020 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 2020:
Option Awards
Stock Awards
Number of
Shares
Acquired On
Exercise (#) Exercise ($) Vesting (#)
Number of
Shares
Realized On Acquired On
Value
194,154 $ 7,761,926
0
0
115,830
0
0
0
7,427,020
0
Value
Realized On
Vesting ($)
200,262 $ 17,106,380
1,434,629
6,506,100
6,187,739
6,457,325
16,795
76,166
72,439
75,595
Name
R. Gonzalez
R. Michael
L. Schumacher
C. Alban
M. Severino
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EXECUTIVE COMPENSATION
PENSION BENEFITS
During 2020, 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.
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
2021 Proxy Statement |
61
EXECUTIVE COMPENSATION
employee’s age plus years of benefit service total 70 or more. Mr. Gonzalez, Mr. Michael, 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 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, Mr. Michael, 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 an eligible NEO. Consistent with the distribution requirements of Internal Revenue Code
Section 409A and its regulations, an eligible NEO who became an officer prior to 2009 may have the entire
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| 2021 Proxy Statement
EXECUTIVE COMPENSATION
amount of his or her vested plan benefits funded through a grantor trust. An eligible NEO who became an
officer after 2008 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.
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 eligible NEO’s
Supplemental Pension Plan grantor trust to fund plan benefits are actuarially determined. The plan is designed to
result in AbbVie paying the eligible NEO’s Supplemental Pension Plan benefits to the extent assets held in his or
her trust are insufficient.
PENSION BENEFITS TABLE
Name
R. Gonzalez
R. Michael
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
Present
Value of
Accumulated
Benefit
Number of
Years
Credited
Service (#)
$
281,372
20,833,310
953,584
7,411,852
1,494,631
22,231,288
1,685,356
21,917,194
222,565
3,963,034
35
35
28
28
30
30
34
34
7
7
Payments
During Last
Fiscal Year
($)
($)(1)
$
0
1,092,715 (2)
0
0
0
1,558,708 (2)
0
1,992,801 (2)
0
0
(1) AbbVie calculated these present values using: (i) a discount rate of 3.02% for the Pension Plan and a
discount rate of 2.94% for the Supplemental Pension Plan, the same discount rates it uses for Financial
Accounting Standards Board (FASB) Accounting Standards Codification (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 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 Pri-2012
Healthy Annuitant table with white collar adjustment projected fully generationally with MP2020 mortality
improvement scale), but do not include a factor for preretirement termination, mortality, or disability.
(2) During 2020, the amounts shown, less applicable tax withholdings, were distributed and deposited into the
individual grantor trusts established by the eligible NEOs and included in the NEOs’ income, as applicable.
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 eligible
participants’ individual grantor trusts and included in their income. Amounts held in an eligible 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
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, 2020. Earnings would have continued to be paid for the NEO’s Performance Incentive Plan and
Supplemental Savings Plan grantor trusts, as applicable, until the trust assets were fully distributed. The amount
of these payments would depend on the trust earnings and fees and the period over which the trust assets were
distributed. Based on current earnings rates, if the trust assets were distributed over a 10-year period, the NEOs
would receive the following average annual earnings payments over such 10-year period: Mr. Gonzalez,
$859,156; Ms. Schumacher, $1,183,493; Mr. Alban, $870,680; and Dr. Severino, $478,544. 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, $0; Mr. Michael $2,838,460, Ms. Schumacher, $1,944,244;
Mr. Alban, $1,615,543 and Dr. Severino, $381,722. As of December 31, 2020, Mr. Gonzalez, Mr. Michael,
Ms. Schumacher and Mr. Alban were eligible to retire, and therefore were eligible to receive the pension benefits
previously described.
If the termination of employment had been due to disability, then the respective NEO also would have received, in
addition to AbbVie’s standard disability benefits, a monthly long-term disability benefit in the following amount:
Mr. Gonzalez: $245,438; Mr. Michael, $105,500; Ms. Schumacher: $127,500; Mr. Alban: $123,750; and
Dr. Severino: $135,000. This long-term disability benefit would continue for up to 24 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, restricted
stock or unit awards and performance shares would have vested on December 31, 2020 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, 2022, 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.
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EXECUTIVE COMPENSATION
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.
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.
If a change in control had occurred on December 31, 2020, immediately followed by one of the covered
circumstances described above, Mr. Gonzalez, Mr. Michael, 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—$17,664,375; additional Supplemental Pension Plan benefits—
$2,922,024; welfare and fringe benefits—$81,926.
• Mr. Michael: cash termination payments—$6,930,000; additional Supplemental Pension Plan benefits—
$1,445,048; welfare and fringe benefits—$84,453.
• Ms. Schumacher: cash termination payments—$9,969,049; additional Supplemental Pension Plan benefits—
$3,977,454; welfare and fringe benefits—$68,646.
• Mr. Alban: cash termination payments—$9,732,419; additional Supplemental Pension Plan benefits—
$4,028,736; welfare and fringe benefits—$63,079.
• Dr. Severino: cash termination payments—$10,310,900; additional Supplemental Pension Plan benefits—
$1,279,341; welfare and fringe benefits—$85,413.
EQUITY AWARDS
The AbbVie 2013 Incentive Stock Program was approved by AbbVie’s stockholders and covers approximately
9,000 participants, including a broad group of management and professional staff.
The AbbVie 2013 Incentive Stock Program provides that any unvested equity awards granted in or after January
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.
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EXECUTIVE COMPENSATION
If a change in control had occurred on December 31, 2020 and the surviving company did not assume, convert or
replace any of the awards granted in or after January 2013, or the NEO’s employment had terminated without
cause or he or she had resigned for good reason, as described above, then the unvested equity awards of the
NEOs would have vested as follows:
• Mr. Gonzalez would have vested in (i) 391,087 unvested AbbVie stock options with a value of $6,486,880,
(ii) 146,982 AbbVie restricted stock units with a value of $15,749,148, and (iii) 346,416 AbbVie performance
shares with a value of $37,118,421.
• Mr. Michael would have vested in (i) 145,403 unvested AbbVie stock options with a value of $2,474,471,
(ii) 94,890 AbbVie restricted stock units with a value of $10,167,490, and (iii) 190,993 AbbVie performance
shares with a value of $20,464,846.
• Ms. Schumacher would have vested in (i) 175,536 unvested AbbVie stock options with a value of $2,849,086,
(ii) 103,846 AbbVie restricted stock units with a value of $11,127,045 and (iii) 220,123 AbbVie performance
shares with a value of $23,586,179.
• Mr. Alban would have vested in (i) 170,912 unvested AbbVie stock options with a value of $2,732,234,
(ii) 103,582 AbbVie restricted stock units with a value of $11,098,758, and (iii) 219,222 AbbVie performance
shares with a value of $23,489,637.
• Dr. Severino would have vested in (i) 172,996 unvested AbbVie stock options with a value of $2,773,134,
(ii) 103,931 AbbVie restricted stock units with a value of $11,136,207, and (iii) 220,412 AbbVie performance
shares with a value of $23,617,146.
The value of stock options shown is based on the excess of the closing price of one share of common stock on
December 31, 2020 over the exercise price of such options, multiplied by the number of unvested stock options
held by the NEO. The value of restricted stock units and performance shares shown is determined by multiplying
the number of units or shares that would vest as of December 31, 2020 in accordance with the applicable equity
award agreement terms and the closing price of one share of common stock on December 31, 2020.
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| 2021 Proxy Statement
RATIFICATION OF ERNST & YOUNG LLP AS
ABBVIE’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
What am I
voting on and
how should I
vote?
You are being asked to ratify the appointment of Ernst & Young LLP to perform
independent audit services for the fiscal year ending December 31, 2021. Ernst &
Young LLP has served as our independent auditor since 2013. The board and the
audit committee believe it is in the best interests of the company and its
stockholders to retain Ernst & Young LLP as the company’s independent auditor.
The board of directors therefore recommends you vote “FOR” ratification of
the appointment of Ernst & Young LLP as AbbVie’s independent registered
public accounting firm for 2021.
The audit committee of the board of directors is directly responsible for the appointment, fees, retention and
oversight of the independent registered public accounting firm retained to audit the company’s financial
statements. On October 22, 2020, the audit committee appointed Ernst & Young LLP (the independent auditor) to
perform independent audit services for the fiscal year ending December 31, 2021. Ernst & Young LLP has served
as our independent auditor 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 auditor.
Although the audit committee has sole authority to appoint the independent auditor, it would like to know the
opinion of the stockholders regarding its appointment of Ernst & Young LLP for 2021. For this reason,
stockholders are being asked to ratify this appointment. If the stockholders do not ratify the appointment of
Ernst & Young LLP for 2021, 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 auditor is in the best interests of the company and its
stockholders.
Representatives of Ernst & Young LLP are expected to attend 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.
2021 Proxy Statement |
67
AUDIT INFORMATION
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, 2020 and December 31, 2019, and fees for other services rendered to AbbVie by
Ernst & Young LLP for those periods.
Audit fees:(1)
Audit related fees:(2)
Tax fees:(3)
Other fees: (4)
Total
2020
(millions)
23.7
0.4
7.6
0.5
32.1
$
$
2019
(millions)
10.6
0.9
2.5
0.0
14.0
$
$
(1) Ernst & Young LLP billed or will bill AbbVie for professional services rendered for the audit of AbbVie’s annual
financial statements, the review of AbbVie’s financial statements included in AbbVie’s quarterly reports, 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 audits of certain employee benefit plan financial statements, accounting
consultations in connection with proposed acquisitions, and other agreed upon procedures.
(3) Tax fees consist principally of professional services for corporate tax compliance and tax advisory services.
(4) Other fees principally relate to a pre-implementation assessment of certain information systems.
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 (the independent auditor) and its related
affiliates.
Prior to engagement of the independent auditor for the next year’s audit, management will submit a schedule of
all proposed permissible 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 auditor 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 auditor for additional services not contemplated in the original pre-approval.
In those instances, the audit committee requires specific pre-approval before engaging the independent auditor.
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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bn
AUDIT INFORMATION
Audit Committee Report
The audit committee is comprised of six non-employee members of the board of directors. Each audit committee
member meets the independence requirements of the New York Stock Exchange and Rule 10A-3 of the
Exchange Act. The committee operates under a written charter adopted by the board of directors. Consistent with
the responsibilities set forth in its charter, the audit committee assists the board of directors in its oversight of
AbbVie’s accounting, auditing and financial reporting practices.
The audit committee has reviewed and discussed the audited financial statements contained in the 2020 Annual
Report on Form 10-K with AbbVie’s management and its independent registered public accounting firm (the
independent auditor). Management is responsible for the preparation and integrity of AbbVie’s consolidated
financial statements. The independent auditor 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. Periodically, during the year, the audit committee reviewed and discussed with AbbVie’s
management, internal auditors, and independent auditor the effectiveness of AbbVie’s internal control over
financial reporting and the overall quality of AbbVie’s financial reporting.
The audit committee has discussed with the independent auditor the matters required to be discussed by the
applicable requirements of the Public Company Accounting Oversight Board (PCAOB). In addition, the audit
committee has received the written disclosures and the letter from the independent auditor regarding its
independence required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees
Concerning Independence, and has discussed with the independent auditor 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 auditor and concluded the independent auditor’s independence has not been
impaired.
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, 2020 filed with the Securities and Exchange Commission.
Audit Committee
R. Austin, Chair, W. Burnside, M. Meyer, E. Rapp, G. Tilton, and F. Waddell
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SAY ON PAY—ADVISORY VOTE ON THE APPROVAL
OF EXECUTIVE COMPENSATION
What am I
voting on and
how should I
vote?
You are being asked to approve the compensation of AbbVie’s named executive
officers described in the Executive Compensation section of this proxy statement. This
vote is non-binding. The board will take the results into account when making future
compensation decisions.
The compensation committee has thoroughly reviewed the company’s
compensation program and has determined that the pay decisions for the
named executive officers are appropriate given the company’s performance, the
executives’ contributions, and our stockholders’ interests. The board of
directors therefore recommends you vote “FOR” the approval of the named
executive officers’ compensation.
As required by Section 14A of the Exchange Act, 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. We currently ask our stockholders to vote on executive
compensation on an annual basis.
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.
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK PROGRAM
What am I
voting on and
how should I
vote?
We are asking stockholders to approve the AbbVie Amended and Restated 2013
Incentive Stock Program (the “Amended Plan”), which amends and restates the
AbbVie 2013 Incentive Stock Program (the “Plan”), including to increase the number of
shares available for issuance and extend the term of the program. The Amended Plan
has been adopted by the board, subject to stockholder approval. If the Amended Plan
is approved at the Annual Meeting, it will become effective as of May 7, 2021 upon
such stockholder approval and will remain in effect for a period of 10 years, unless
earlier terminated by the board.
If the Amended Plan is not approved by stockholders, then the Amended Plan will not
become effective and the Plan will continue in full force and effect.
A copy of the Amended Plan is attached to this proxy statement as Appendix C.
The board of directors therefore recommends you vote “FOR” the approval of
the Amended Plan.
WHY STOCKHOLDERS SHOULD APPROVE THE AMENDED PLAN
• Program expiration. The current equity Plan will expire on January 1, 2023. By forward planning for the
Plan’s continuity, AbbVie ensures its ability to attract, retain, and motivate its employees, officers and non-
employee directors.
• Equity incentives align the interests of our employees, officers and non-employee directors with
those of other stockholders. AbbVie believes that equity incentives motivate recipients to focus on
behaviors that, over time, lead to sustained growth in stockholder value.
• The Amended Plan provides flexibility. AbbVie will be able to continue to adapt the compensation of key
individuals to accommodate changes in best practices, law, accounting principles, and corporate objectives if
the Amended Plan is approved.
Share Usage
The table below identifies the annual share usage under the Plan for the last three fiscal years.
Fiscal
Year
20201
2019
2018
Stock Options
Granted
Restricted Stock Units
and Performance Shares
Granted
Weighted Average
Common Shares
Outstanding
Run Rate
1,995,477
1,002,000
634,000
5,524,337
5,584,000
4,771,000
1,667,000,000
1,481,000,000
1,541,000,000
0.45%
0.44%
0.35%
Three-Year Average
0.42%
1Excludes approximately 19,386,000 substitute awards granted in connection with AbbVie’s acquisition of Allergan.
2021 Proxy Statement |
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK PROGRAM
Outstanding Awards
The table below outlines key information regarding outstanding awards under the Plan as of December 31, 2020.
As of December 31, 2020, AbbVie had 1,765,132,819 total shares of common stock outstanding.
Stock options outstanding
Weighted average exercise price
Weighted average remaining contractual life
Full-value awards outstanding (unvested)
Shares remaining for grant under the Plan
2013 Incentive Stock Program
15,690,880
$73.90
4.66 years
15,917,737
29,143,956
For additional information regarding stock-based awards previously granted, see Note 13 to the Company's
consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December
31, 2020.
Request for Increase in Share Reserve for the Amended Plan
Taking into account the 29,143,956 shares remaining available for issuance under the Plan as of December 31,
2020, and in order to have an appropriate number of shares available for future equity awards to hire and retain
the talent necessary to achieve strong performance, on recommendation of the compensation committee, the
board approved an increase in the number of shares reserved for issuance under the Amended Plan of
44,000,000 shares. Accordingly, an aggregate of 73,143,956 shares initially will be available for issuance under
the Amended Plan, as adjusted to reflect awards issued and forfeited between January 1, 2021 and the effective
date of the Amended Plan.
The number of additional shares reserved for issuance under the Amended Plan was determined based on
analysis of various factors, including historical run rate, potential dilution, industry plan cost standards, and
anticipated equity compensation needs. Over 2018, 2019 and 2020, the Plan’s average run rate was 0.42%,
calculated by dividing the number of stock options plus full value shares granted under the Plan in each fiscal
year by the weighted average shares of common stock outstanding during that fiscal year.
The potential dilution to current stockholders that could result from the future issuance of shares available under
the Amended Plan, in addition to shares subject to awards outstanding under the Plan, would be approximately
5.9%. For this purpose, dilution is calculated as a percentage, where the numerator is the sum of the 29,143,956
shares remaining available under the Plan for granting of equity awards, plus the 31,608,617 shares subject to
outstanding awards, plus, for purposes of the estimated future dilution, the 44,000,000 new shares that would be
added if our Amended Plan is approved by stockholders, and the denominator is the number of our shares of
common stock outstanding.
Based on these factors and AbbVie’s current grant practices, the shares requested for use under the Amended
Plan are expected to meet AbbVie’s equity grant needs for approximately 8 years. The shares reserved may,
however, last for more or less than 8 years depending on currently unknown factors, such as the number of grant
recipients, future grant practices, and AbbVie’s share price.
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK PROGRAM
Material Changes to the Plan
The following summary highlights the proposed material changes to the Plan.
• Term of the Plan: The term of the plan is extended through the tenth anniversary of the date on which our
•
stockholders approve the Amended Plan (i.e., assuming approval, to May 7, 2031).
Increase in Authorized Shares: An additional 44,000,000 shares are authorized for issuance under the
Amended Plan.
Other Changes to the Plan
In addition to the changes noted above, the amendments include the following, as well as other administrative,
clarifying and conforming changes:
• Elimination of Replacement Options: The Amended Plan no longer provides for the grant of replacement
options in connection with the exercise of certain options originally granted under an Abbott Laboratories
stock program, prior to AbbVie’s separation from Abbott Laboratories in 2013.
• Tax Cuts and Jobs Act Updates: The Plan has been updated to remove provisions required to grant awards
that qualified for the “performance-based compensation” deduction limit exception under Section 162(m) of
the Internal Revenue Code (“the Code”), given the repeal of that exception by the Tax Cuts and Jobs Act,
including provisions preventing the exercise of positive discretion in determining the amount payable under an
award to a 162(m) covered employee. However, the Amended Plan maintains the same individual annual
award limits as applied under the Plan.
• Forfeiture and Clawback: The Amended Plan incorporates AbbVie’s clawback, reflecting the compensation
committee’s discretion to cancel awards or recoup amounts paid pursuant to awards in the event of a material
restatement of results on which such awards were based or a participant’s breach of the AbbVie Code of
Business Conduct, as well as to the extent required to comply with applicable laws.
• Fractional Shares: The Amended Plan gives the committee discretion to determine whether fractional shares
will be issued pursuant to awards.
• Tax Withholding: The tax withholding provisions of the Plan are updated, including to reflect the AbbVie’s
ability to use a variety of specified methods and other methods to satisfy tax withholding.
• Compliance with Laws: The Amended Plan strengthens AbbVie’s ability to amend the Amended Plan or
outstanding awards to qualify for or comply with any tax or regulatory requirement.
KEY PLAN FEATURES
We have sought to design the Amended Plan in accordance with currently accepted corporate governance
standards for the design and implementation of employee equity incentive programs. Accordingly, the Amended
Plan:
• Limits grants to any individual participant in a calendar year
• Prohibits repricing of underwater stock options or stock appreciation rights without stockholder approval, other
than in the case of adjustment for corporate transactions
• Prohibits liberal share recycling, such that shares tendered by a participant to pay the exercise price of an
option, shares repurchased using proceeds from option exercises and shares withheld for payment of taxes
or not issued as a result of a net settlement of an option or stock appreciation right will not be added back to
the number of shares available for issuance.
• Does not have evergreen share pool provisions
• Does not have a replacement option feature
• Does not provide tax gross-ups to officers or non-employee directors
2021 Proxy Statement |
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK PROGRAM
PLAN SUMMARY:
This summary of the Amended Plan’s principal features is qualified in its entirety by reference to the Amended
Plan, which is attached to this proxy statement as Appendix C.
The purpose of the Amended Plan is to attract and retain outstanding employees, officers, and non-employee
directors of AbbVie and its subsidiaries and to motivate such individuals by providing opportunities to acquire
AbbVie shares of common stock or to receive payments based on the value of such shares or on the financial
performance of AbbVie, or both, on advantageous terms and to further align such persons’ interests with those of
AbbVie’s other stockholders. To enable AbbVie to accomplish this, the Amended Plan authorizes the grant of
several different forms of benefits including nonqualified stock options, restricted stock awards, restricted stock
units, performance awards, other share-based awards, including stock appreciation rights, dividend equivalents
and recognition awards, and foreign benefits (“Benefits” or “awards”).
The Amended Plan also contains provisions relating to awards that were initially granted under an Abbott
Laboratories stock program prior to AbbVie’s separation from Abbott and that were converted into AbbVie awards
and granted under the Plan as of its initial effective date in January 2013 (such awards, the “Adjusted Awards”).
Shares Reserved
An aggregate of 100,000,000 shares of AbbVie common stock were initially reserved for issuance under the Plan
as of its inception on January 1, 2013, and an additional 44,000,000 shares have been reserved for issuance
under the Amended Plan, subject to adjustment as described below under "Adjustments.” As of December 31,
2020, 29,143,956 shares remain available for issuance under the Plan and such number of shares less the
shares subject to awards issued or forfeited under the Plan prior to the effective date of the Amended Plan, will be
available for issuance under the Amended Plan, along with the additional 44,000,000 shares authorized under the
Amended Plan.
If there is a lapse, expiration, termination, forfeiture, cancellation, or cash settlement of any Benefit granted under
the Amended Plan or the Plan without the issuance of shares, the shares that had been subject to that Benefit
may be used for the grant of new Benefits under the Amended Plan.
Shares that are issued under any Benefit and thereafter reacquired by AbbVie pursuant to rights reserved upon
the issuance of the shares or pursuant to the payment of the exercise price under stock options by delivery of
other AbbVie shares, shares under options or stock-settled stock appreciation rights that are not issued upon the
net exercise or net settlement of the option or stock appreciation right, and shares of common stock that are
exchanged by the grantee or withheld by AbbVie to satisfy tax withholding requirements in connection with any
Benefit will not be available for subsequent awards under the Amended Plan. Benefits settled in cash will not
reduce the number of shares of common stock available for subsequent awards under the Amended Plan.
Notwithstanding the foregoing, any shares issued pursuant to Adjusted Awards are not counted against the
shares available under the Amended Plan and if such Adjusted Awards lapse, expire, terminate or are forfeited,
cancelled or cash settled, the shares subject to those awards do not become available under the Amended Plan.
The shares of common stock covered by the Amended Plan may be either authorized but unissued shares or
shares that have been or may be reacquired by AbbVie in the open market, in private transactions, or otherwise.
On March 18, 2021, the closing price of an AbbVie share on the New York Stock Exchange was $103.77.
Administration
The Amended Plan provides that grants of Benefits and other determinations under the Amended Plan will be
made by the compensation committee of the board of directors or such other committee consisting entirely of
persons who are “non-employee directors” as defined in Rule 16b-3 of the Securities Exchange Act, as amended
(the “committee”), except that the committee may delegate its authority to the extent consistent with applicable
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK PROGRAM
law and Securities and Exchange Commission rules, and except that the Chief Executive Officer may grant
Benefits under the Amended Plan to eligible persons other than directors and executive officers of AbbVie, which
grants shall be reported to the committee.
To the extent not inconsistent with the Amended Plan’s provisions, the committee’s powers will include the power:
•
•
•
•
•
•
•
•
•
•
•
to administer the Amended Plan;
to exercise all the power and authority either specifically granted to it under the Amended Plan or necessary
or advisable in the administration of the Amended Plan;
to grant Benefits;
to determine the persons to whom and the time or times at which Benefits will be granted;
to determine the type and number of Benefits to be granted and the terms and conditions relating to any
Benefit;
to determine whether and to what extent, a Benefit may be settled, canceled, forfeited, accelerated,
exchanged, deferred in accordance with Code Section 409A, or surrendered;
to make adjustments in the terms and conditions (including performance goals) applicable to Benefits;
to construe and interpret the Amended Plan and any Benefit;
to prescribe, amend, and rescind rules and regulations relating to the Amended Plan;
to determine the terms and provisions of any Benefit agreement; and
to make all other determinations deemed necessary or advisable for the administration of the Amended Plan.
All determinations of the committee will be made by the vote of a majority of its members, which will constitute a
quorum.
Eligibility
Employees of AbbVie and its subsidiaries selected by the committee will be eligible to receive Benefits under the
Amended Plan. Directors who are not employees of AbbVie or its subsidiaries are eligible to receive certain
restricted stock unit awards and nonqualified stock options, as described in more detail below. As of December
31, 2020, approximately 13,619 persons, including 13,561 employees, 47 senior executives and officers and 11
non-employee directors were eligible to receive awards under the Amended Plan.
Duration
The Amended Plan was adopted by the board of directors on February 18, 2021, subject to the approval of
AbbVie stockholders, and will become effective on the date of such stockholder approval. If approved by the
stockholders, the Amended Plan will continue in effect until the tenth anniversary of its approval by AbbVie’s
stockholders, unless terminated earlier by the board of directors.
Individual Award Limits
Under the Amended Plan, an individual participant can receive in any year: (i) no more than 2 million shares
subject to stock options and stock appreciation rights; and (ii) no more than $15 million worth of shares subject to
other awards that are performance awards, determined by multiplying the number of shares or units granted
under the award by the fair market value of a share on the date of grant.
Adjustments
The Amended Plan provides for equitable adjustment by the committee in the event of certain corporate events
such as a stock split, special dividend (in cash, shares or other property), merger, spin-off, or similar occurrence
affecting the shares including, for example, adjustments to the number of shares reserved under the Amended
Plan, the number of shares covered by, or issuable pursuant to each outstanding Benefit, the exercise price or
purchase price relating to any Benefit, the performance goals, and the individual and share limitations under the
Amended Plan.
2021 Proxy Statement |
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK PROGRAM
No Repricing
The Amended Plan prohibits repricing of stock options or stock appreciation rights other than in connection with
an adjustment. Specifically, the Amended Plan provides that without prior approval of stockholders, the committee
may not lower the exercise price or base price of an outstanding stock option or stock appreciation right nor grant
any Benefit or provide cash in replacement of a canceled stock option or stock appreciation right which had been
granted at a higher exercise price or base price.
Options
The Amended Plan provides that the exercise price of any stock option will be at least 100% of the fair market
value of the shares of common stock on the grant date of the option, except in connection with an adjustment or a
substitute option granted in connection with a corporate transaction. The committee may provide for the payment
of the exercise price in cash, by delivery of other AbbVie shares of common stock having a market value equal to
the purchase price of such shares, including by withholding of shares that would otherwise be distributed to the
grantee upon exercise, through an open-market broker-assisted transaction, or by any other method approved by
the committee.
No option other than a substitute option or an option granted to a non-employee director in lieu of directors’ fees
(as discussed below) may be exercisable earlier than six months from its date of grant. No option may be granted
with a term in excess of ten years from the date of grant. The Amended Plan contains special rules covering the
time of exercise in case of retirement, death, disability, or other termination of employment.
Restricted Stock Awards and Restricted Stock Units
Restricted stock awards consist of shares of common stock transferred to participants, without payment, as
additional compensation for their services to AbbVie or one of its subsidiaries. Restricted stock units consist of a
contractual right of the participant to receive shares of common stock, or cash equal in value to those shares, in
the future, without payment, as additional compensation for their services to AbbVie or one of its subsidiaries.
Restricted stock awards and restricted stock units awarded under the Amended Plan will be subject to such terms
and conditions as the committee determines are appropriate, including without limitation, restrictions on the sale
or other disposition of such shares.
Performance Awards
The Amended Plan permits the grant of performance awards in the form of restricted stock, restricted stock units
and other share-based awards. The goals established by the committee shall be based on any one or a
combination of the following criteria, or such other criteria as determined by the committee in its discretion:
earnings per share, return on equity, return on assets, return on net assets, return on investment, total
stockholder return, net operating income, cash flow, increase in revenue, economic value added, increase in
share price or cash flow return on investment, and may be applied to the performance of AbbVie, a subsidiary, or
a division or strategic business unit of AbbVie, or may be applied to AbbVie performance relative to a market
index, a group of other companies or a combination thereof, all as determined by the committee. The
performance goals may include a threshold level of performance below which no payment will be made (or no
vesting will occur), levels of performance at which specified payments will be made (or specified vesting will
occur), and a maximum level of performance above which no additional payment will be made (or at which full
vesting will occur). The committee may make equitable adjustments to the performance goals in recognition of
unusual or non-recurring events affecting AbbVie or any subsidiary or the financial statements of AbbVie or any
subsidiary, in response to changes in applicable laws or regulations, or to account for items of gain, loss or
expense determined to be unusual in nature or infrequent in occurrence or related to the disposal of a segment of
a business or related to a change in accounting principles. Payments earned under awards may be decreased or
increased in the sole discretion of the committee based on such factors as it deems appropriate.
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK PROGRAM
Other Share-Based Awards and Recognition Awards
The committee may grant other share-based awards, stock appreciation rights and other awards based on the
value of AbbVie shares of common stock, subject to such terms and conditions as the committee determines are
appropriate. The committee may provide the right to vote and receive dividends on restricted stock and dividend
equivalents on restricted stock units granted under the Amended Plan. Unless otherwise provided in a Benefit
agreement or determined by the committee, any dividends or dividend equivalents received, including in
connection with a stock split of the shares of common stock underlying an award, generally will be subject to the
same restrictions as the shares of common stock underlying the award. The Amended Plan provides that the
base price of any stock appreciation right will be at least equal to the fair market value of the shares of common
stock on the date of grant of the stock appreciation right, except in connection with an adjustment, and that a
stock appreciation right may not be granted with a term in excess of ten years from the date of grant. The
committee may grant no more than one thousand fully vested shares of common stock to any one individual in
any one calendar year, as a “recognition award.”
Foreign Benefits
The committee may grant Benefits to such officers and employees of AbbVie and its subsidiaries who reside in
foreign jurisdictions, subject to such terms and conditions as the committee determines are appropriate. The
committee may amend or vary the terms of the Amended Plan in order to conform such terms with the
requirements of each jurisdiction where a subsidiary is located as it considers necessary or desirable to take into
account or to mitigate the burden of taxation and social security contributions for participants and/or the
subsidiary, or amend or vary the terms of the Amended Plan in a jurisdiction where the subsidiary is located as it
considers necessary or desirable to meet the objectives of the Amended Plan. The committee may establish one
or more sub-plans for these purposes. The committee may establish administrative rules and procedures to
facilitate the operation of the Amended Plan in such jurisdictions. To the extent permitted under applicable law,
the committee, which may delegate its authority and responsibilities regarding Foreign Benefits to one or more
officers of AbbVie, has delegated its authority and responsibilities with respect to the administration of Benefits
granted to officers and employees of AbbVie and its subsidiaries who reside in foreign jurisdictions to the
Executive Vice President, Chief Human Resources Officer.
Nonqualified Stock Options to Non-Employee Directors
The Amended Plan permits each director of AbbVie who is not also an employee of AbbVie or its subsidiaries
(“non-employee directors”) to elect to receive any or all of his or her directors’ fees earned under AbbVie’s Non-
Employee Directors’ Fee Plan in the form of nonqualified stock options, provided that such election is made by
December 31 of the year preceding the period in which the fees are earned. The fees covered by any such
election will be converted to stock options based on a reasonable valuation method. Each nonqualified stock
option due to a director under the Amended Plan will be granted annually, on the date of the annual stockholders
meeting, will be immediately exercisable and non-forfeitable and will not be exercisable after the tenth anniversary
of the date of grant.
Restricted Stock Units to Non-Employee Directors
The Amended Plan also provides that restricted stock units will automatically be awarded to each person elected
a director of AbbVie at the annual stockholders meeting who is not also an employee of AbbVie or its subsidiaries.
The awards will be made on the date the person is elected as a director, and each award will cover a number of
shares of common stock set by the board in its sole discretion, upon recommendation by the committee, provided
that the fair market value of the shares on the award date will not exceed $250,000. The shares covered by the
awards will be fully vested on the award date. The non-employee director receiving the restricted stock units will
be entitled to receive one share for each restricted stock unit upon the earliest of the date the director experiences
a “separation from service” (within the meaning of Code Section 409A), the date the director dies or the date of a
Change in Control that also qualifies as a “change in control event” within the meaning of Code Section 409A.
2021 Proxy Statement |
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 INCENTIVE STOCK PROGRAM
Change in Control
Unless otherwise provided in an award agreement (including award agreements with executive officers), upon the
occurrence of a Change in Control of AbbVie, the Amended Plan provides that: (i) stock options will become fully
vested and exercisable; (ii) terms and conditions of restricted stock awards and restricted stock units will be
deemed to be satisfied, and all restrictions will lapse; (iii) other share-based awards will become fully vested and
stock appreciation rights will become fully vested and exercisable; and (iv) performance awards will be deemed to
have been fully earned and immediately payable. The Amended Plan’s award agreements for AbbVie’s executive
officers provide for accelerated vesting of Benefits in connection with a Change in Control only in double-trigger
circumstances.
Forfeiture and Clawback
Subject to the discretion of the compensation committee, all awards (including any shares, proceeds, gains, or
other economic benefit received by a participant under an award) are subject to forfeiture and/or repayment to
AbbVie to the extent and in the event (i) required to comply with any applicable laws or securities exchange rules
or regulations, (ii) of a material restatement of applicable AbbVie earnings or other financial results upon which
the award was based, or (iii) the award holder has engaged in misconduct constituting a material breach of the
AbbVie Code of Business Conduct.
Tax Withholding
The committee may permit or require a participant to pay all or a portion of the federal, state and local taxes (in
U.S. or non-U.S. jurisdictions), including social security and Medicare withholding tax, arising in connection with
the receipt or exercise of any Benefit, by having AbbVie withhold shares or by delivering shares received in
connection with the Benefit or previously acquired, having a fair market value approximating the amount to be
withheld, by having AbbVie or a subsidiary withhold from any cash compensation payable to the participant or sell
shares issued pursuant to a Benefit and withhold from the proceeds, or by having the participant repay AbbVie for
taxes paid on the participant’s behalf.
Nontransferability
Except as provided by the committee, Benefits granted under the Amended Plan will be exercisable only by the
holder during the holder’s lifetime; provided, however, that such Benefits will be transferable by will or by the laws
of descent and distribution.
Amendment and Termination
The Amended Plan may be amended from time to time or terminated by the board of directors. In the absence of
stockholder approval, however, no such amendment may increase the aggregate number of shares available for
Benefits, extend the term of the Amended Plan, or change or add a category or categories of individuals who are
eligible to participate in the Amended Plan. In addition, without the written consent of the holder, no amendment
or termination of the Amended Plan may materially and adversely modify the holder’s rights under the terms and
conditions of an outstanding Benefit, except that the Amended Plan may be amended for purposes of granting
Benefits to employees in foreign jurisdictions (as described above under “Foreign Benefits”) or as needed to
comply with any tax or regulatory requirement, as determined by the board of directors or the committee. Without
limiting the foregoing, the Amended Plan provides that the Amended Plan or any Benefit may be amended
without the consent of the holder to comply with or qualify for exemption from Code Section 409A.
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New Plan Benefits
Future awards of Benefits under the Amended Plan will be determined by the committee and may vary from year
to year and from participant to participant. Future awards under the Amended Plan are generally not determinable
at this time because the awards are discretionary and/or depend on the value of AbbVie’s shares of common
stock at the time that grants are determined. In addition, as discussed above, under the Amended Plan, each
non-employee director who is elected to the board of directors at the annual stockholder meeting receives an
award of a number of restricted stock units covering the number of shares of common stock having a fair market
value on the date of the grant not exceeding $250,000. In 2020, this was 2,333 restricted stock units.
Prior Grants under the Plan
The following table shows, as of December 31, 2020, information regarding the grants of stock-based awards
under the Plan among the persons and groups identified below, but excluding approximately 19,386,000
substitute awards granted in connection with AbbVie’s acquisition of Allergan. No awards have been granted
under the Plan to any nominee for election as a director prior to their election or to any associate of a non-
employee director, nominee or executive officer, and no other person has been granted 5% or more of the total
amount of awards granted under the Plan.
Named Executive Officers:
Richard A. Gonzalez
Chairman of the Board and
Chief Executive Officer
Robert A. Michael
Executive Vice President,
Chief Financial Officer
Laura J. Schumacher
Vice Chairman, External Affairs
and Chief Legal Officer
Carlos Alban
Vice Chairman,
Chief Commercial Officer
Michael E. Severino
Vice Chairman and President
Current Executive Officers as a
Group
Current Non-Executive Director
Group
Non-Executive Officer Employee
Group
Stock Options
Number of Shares
Restricted Stock Units and
Performance Shares1
Number of Shares
2,186,939
1,339,641
190,489
759,289
696,211
596,250
5,374,791
-
146,294
522,915
452,057
509,739
3,856,459
167,634
5,914,787
41,666,148
1Performance-vested RSUs and performance shares are disclosed by reference to the target number of shares granted.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States federal income tax consequences of the
Amended Plan for a participant who is a U.S. tax resident under the provisions of the Code currently in effect. The
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RESTATED 2013 INCENTIVE STOCK PROGRAM
Internal Revenue Code and its regulations are subject to change. This summary is not intended to be exhaustive
and does not describe, among other things, state, local or foreign income and other tax consequences. The
specific tax consequences to a participant will depend upon that participant’s individual circumstances.
Options and Stock Appreciation Rights
Under existing law and regulations, the grant of nonqualified stock options and stock appreciation rights will not
result in income taxable to the employee or director or provide a deduction to AbbVie. However, the exercise of a
nonqualified stock option or stock appreciation right results in taxable income to the holder, and AbbVie may be
entitled to a corresponding tax deduction, subject to the limits of Code Section 162(m). At the time of the exercise
of a nonqualified stock option, the participant will be taxed at ordinary income tax rates on the excess of the fair
market value of the shares purchased over the option’s exercise price. At the time of the exercise of a stock
appreciation right, the participant will be taxed at ordinary income tax rates on the amount of the cash, or the fair
market value of the shares, received by the employee upon exercise.
Restricted Stock Awards
A participant in the Amended Plan who is granted a restricted stock award will not be taxed upon the acquisition
of such shares so long as the interest in such shares is subject to a “substantial risk of forfeiture” within the
meaning of Code Section 83. Upon lapse or release of the restrictions, the recipient will be taxed at ordinary
income tax rates on an amount equal to the then current fair market value of the shares. Any such awards that
are not subject to a substantial risk of forfeiture will be taxed at the time of grant. AbbVie may be entitled to a
corresponding tax deduction when the value of the award is included in the recipient’s taxable income, subject to
the limits of Code Section 162(m). The basis of restricted shares held after lapse or termination of restrictions will
be equal to their fair market value on the date of lapse or termination of restrictions, and upon subsequent
disposition any further gain or loss will be a long-term or short-term capital gain or loss, depending upon the
length of time the shares are held. A recipient of a restricted stock award may elect to be taxed at ordinary income
tax rates on the full fair market value of the restricted shares at the time of grant. If this election is made, the basis
of the shares acquired will be equal to the fair market value at the time of grant, no tax will be payable upon the
subsequent lapse or release of the restrictions, and any gain or loss upon disposition will be a capital gain or loss.
Restricted Stock Units
An employee or non-employee director who is granted a restricted stock unit will not be taxed upon the grant of
the award. Upon receipt of payment of cash or shares of common stock pursuant to a restricted stock unit, the
employee or non-employee director will realize ordinary income in an amount equal to any cash received and the
fair market value of any shares of common stock received. Subject to the limits of Code Section 162(m), AbbVie
may be entitled to an income tax deduction equal to the amount of ordinary income recognized by the employee
or non-employee director.
Performance Awards
A recipient of a performance award will generally realize ordinary income at the time shares of common stock are
transferred or cash is paid to the grantee with respect to such award. AbbVie may be entitled to a corresponding
tax deduction equal to the ordinary income recognized by the participant, subject to the limits of Code Section
162(m).
Section 409A
Section 409A of the Code imposes certain requirements on nonqualified deferred compensation arrangements.
These include requirements on an individual’s election to defer compensation and the individual’s selection of the
timing and form of distribution of the deferred compensation. Section 409A also generally provides that
distributions must be made on or following the occurrence of certain events (such as the individual’s separation
from service, a predetermined date, or the individual’s death). Section 409A imposes restrictions on an
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RESTATED 2013 INCENTIVE STOCK PROGRAM
individual’s ability to change his or her distribution timing or form after the compensation has been deferred. For
certain individuals who are officers, Section 409A requires that such individual’s distribution commence no earlier
than six months after such officer’s separation from service. Certain awards under the Amended Plan may be
designed to be subject to the requirements of Section 409A in form and in operation. For example, restricted
stock units that provide for a settlement date following the vesting date may be subject to Section 409A. If an
award under the Amended Plan is subject to and fails to satisfy the requirements of Section 409A, the recipient of
that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which
may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to
Section 409A fails to comply with the requirements of Section 409A, Section 409A imposes an additional 20%
federal penalty tax on compensation recognized as ordinary income, as well as interest on such deferred
compensation.
The board of directors recommends a vote “FOR” the approval of the AbbVie Amended and Restated
2013 Incentive Stock Program.
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TO APPROVE THE ABBVIE AMENDED AND
RESTATED 2013 EMPLOYEE STOCK PURCHASE
PLAN FOR NON-U.S. EMPLOYEES
What am I
voting on and
how should I
vote?
We are asking stockholders to approve the AbbVie Amended and Restated 2013
Employee Stock Purchase Plan for Non-U.S. Employees (the “Amended ESPP”),
which amends and restates the AbbVie 2013 Employee Stock Purchase Plan for Non-
U.S. Employees (the “ESPP”) and extends the term of the plan. We are not asking
stockholders to approve an increase in the number of shares available under the
ESPP. The Amended ESPP has been adopted by the board, subject to stockholder
approval. If the Amended ESPP is approved at the Annual Meeting, it will become
effective as of August 1, 2021 and will remain in effect for a period of 10 years, unless
earlier terminated by the board.
If the Amended ESPP is not approved by stockholders, then the Amended ESPP will
not become effective and the ESPP will continue in full force and effect.
A copy of the Amended ESPP is attached to this proxy statement as Appendix D.
The board of directors therefore recommends you vote “FOR” the approval of
the Amended ESPP.
Material Changes to the ESPP
The following summary highlights the proposed material changes to the ESPP.
• Term of the Plan: The term of the ESPP is extended through the tenth anniversary of the effective date of the
Amended ESPP (i.e., assuming approval, to August 1, 2031).
Other Changes to the ESPP
In addition to the change noted above, the amendments include the following, as well as other administrative,
clarifying and conforming changes:
• Contribution Limits: The Amended ESPP gives its Administrator authority to alter the maximum amount that a
participant may contribute towards the purchase of shares in a purchase cycle (currently, $12,500).
• Sub-Plans: The Amended ESPP clarifies that shares purchased under sub-plans to the plan are counted
against the authorized shares available under the Amended ESPP, and upon forfeiture of the purchase rights
to which they relate, again become available for issuance under the Amended ESPP.
• Fractional Shares: The Amended ESPP provides for the ability for participants’ plan contributions to be
applied to acquire a notional interest in a fractional share, which will be paid in cash upon distribution of a
participant’s account under the plan.
• Compliance with Laws: The Amended ESPP strengthens AbbVie’s ability to amend the Amended ESPP to
qualify for or comply with any tax or regulatory requirement.
• Termination of Employment: The Amended ESPP eliminates discretion on the part of a participant’s employer
to allow a participant who terminates employment in connection with a spinoff or similar event to purchase
shares at the end of the purchase cycle in which the participant terminated using pre-termination
contributions.
AMENDED ESPP SUMMARY
The Amended ESPP is a broad-based plan offering eligible employees the opportunity to acquire a stock
ownership interest in AbbVie, through periodic contributions applied towards the purchase of AbbVie shares of
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common stock at a discount from the then-current market price. The purpose of the Amended ESPP is to provide
an opportunity for non-U.S. employees of certain AbbVie subsidiaries to share in AbbVie’s growth.
This summary of the principal features of the Amended ESPP is qualified in its entirety by reference to the
Amended ESPP, which is attached to this proxy statement as Appendix D.
Administration
The Amended ESPP provides that either the compensation committee or any other committee as the board of
directors may designate from time to time (the "Administrator") will administer the Amended ESPP. To the extent
permitted under applicable law, the Administrator may delegate its authority and responsibilities under the
Amended ESPP to one or more AbbVie officers at any time in its sole discretion. In this regard, to the extent
permitted under applicable law, the Administrator’s authority and responsibilities under the Amended ESPP are
delegated to AbbVie’s Executive Vice President, Chief Human Resources Officer. Further, subject to applicable
law, the board of directors may administer the Amended ESPP.
The Administrator and, to the extent permitted under applicable law, its delegate(s), have full power and authority
to promulgate any rules and regulations deemed necessary for the proper administration of the Amended ESPP,
to interpret the provisions and supervise the administration of the Amended ESPP, to correct any defect or supply
any omission or reconcile any inconsistency in the terms of the Amended ESPP and any enrollment form or other
instrument, to make factual determinations relevant to Amended ESPP entitlements and to take all action in
connection with administration of the Amended ESPP as deemed necessary or advisable. Decisions of each of
the Administrator and, where applicable, its delegate(s) will be final and binding upon all eligible employees who
elect to participate in the Amended ESPP. AbbVie will pay all reasonable expenses incurred in the administration
of the Amended ESPP.
The Administrator may amend or vary the terms of the Amended ESPP, including through the adoption of one or
more sub-plans, to: (i) conform such terms with the requirements of each jurisdiction where an Employer (as
defined below) is located, (ii) take into account or mitigate or reduce the burden of taxation and social security
contributions for participants and/or the Employer, or (iii) meet the goals and objectives of the Amended ESPP.
Eligibility and Participation
Any individual who is an employee, as defined under the Amended ESPP, of a participating AbbVie subsidiary
(each an "Employer"), is eligible to participate in the Amended ESPP. However, the Administrator or, to the extent
permitted by applicable law, an Employer, may prospectively condition participation by its employees upon a
period of service with such Employer. AbbVie’s officers and directors are not eligible to participate in the
Amended ESPP. A participant's employment with an Employer will be deemed to be terminated on the day such
entity ceases to be an AbbVie subsidiary.
Eligible employees may join a purchase cycle prior to the start of that purchase cycle. The first purchase cycle
under the ESPP commenced on February 1, 2013 and ended on July 31, 2013 and subsequent purchase cycles
have commenced on each August 1 and February 1 thereafter through the present time. As of December 31,
2020, AbbVie estimates that approximately 13,700 employees are eligible to participate in the Amended ESPP.
Share Reserve
An aggregate of 10,000,000 shares of AbbVie common stock were initially reserved for issuance under the ESPP
as of its inception on January 1, 2013, subject to adjustment as described below under "Adjustments.” As of
December 31, 2020, 7,713,338 shares remain available for issuance under the ESPP and such number of
shares, less the shares purchased under the ESPP prior to the effective date of the Amended ESPP, will be
available for issuance under the Amended ESPP, including under any sub-plans to the Amended ESPP.
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The shares may be authorized but unissued shares, treasury shares, shares purchased on the open market, or a
combination of each, as determined from time to time by the board of directors. If any purchase right granted
under the Amended ESPP or under any sub-plan expires or terminates for any reason without having been
exercised in full, the unpurchased shares subject to that purchase right will become available under the Amended
ESPP.
If on any purchase date the number of shares otherwise purchasable by participants is greater than the number of
shares then remaining available under the Amended ESPP, the Administrator will allocate the available shares
among the participants in such manner as it deems appropriate in its sole discretion.
Purchase Cycles and Purchase Dates
AbbVie shares of common stock will be offered under the Amended ESPP through a series of purchase cycles.
Unless otherwise determined by the Administrator, including with respect to a particular jurisdiction, subsidiary, or
sub-plan, each purchase cycle will be six consecutive calendar months and subsequent purchase cycles will run
consecutively after each preceding purchase cycle. Purchases will occur on the last business day of each
purchase cycle. Except where prohibited by applicable law, the Administrator will have the power to make any
changes without approval of the board of directors, and without regard to the expectations of any participants;
provided, however, that AbbVie and/or the Employer must notify participants of any such change within a
reasonable time before such change becomes effective.
Purchase Price
The purchase price of the AbbVie shares of common stock acquired on each purchase date will be 85% of the
lesser of (i) the closing selling price per share of AbbVie shares of common stock on the date such purchase
cycle begins and (ii) the closing selling price per share of AbbVie shares of common stock on the last business
day of such purchase cycle.
The closing selling price of AbbVie shares of common stock on any relevant date under the Amended ESPP will
be deemed to be equal to the closing selling price per share on such date as reported in the New York Stock
Exchange Composite Transactions, or if no sale has been reported in the New York Stock Exchange Composite
Transactions on that date, the closing price reported in the New York Stock Exchange Composite Transactions on
the last preceding date on which there was a sale. On March 18, 2021, the closing selling price per share
determined on such basis was $103.77 per share.
Payroll Deductions/Contributions and Stock Purchases
Each participant may authorize periodic payroll deductions in any multiple of 1% to 10% (or such other maximum
percentage that may be specified by the Administrator), in whole percentages only, of his or her eligible
compensation. Where payroll deductions are prohibited under local law, the Administrator may permit
participants to contribute to the Amended ESPP by an alternative method of contribution, including personal
checks or direct debits from personal bank accounts. Under procedures established by the Administrator, a
participant's authorization and enrollment form will continue in effect from one purchase cycle to the next, unless
the participant suspends his or her payroll deductions or contributions or discontinues his or her participation in
the Amended ESPP. Unless otherwise prohibited under local law or unless alternative procedures are established
by the Administrator in its sole discretion, each Employer will convert the payroll deductions or contributions of its
participants paid in non-U.S. currency into U.S. dollars at the end of the applicable purchase cycle. For purposes
of the Amended ESPP, eligible compensation means the basic rate of cash remuneration of any employee as it
appears on the books and records of such employee's Employer.
Unless a participant has previously ceased participation in the Amended ESPP during a purchase cycle, a
participant's purchase right will be automatically exercised on each purchase date to purchase that number of full
AbbVie shares of common stock that the balance credited to such participant's account will entitle him or her to
purchase. Unless otherwise determined by the Administrator, any cash remaining in a participant's account after
the purchase of AbbVie shares of common stock will be credited towards an interest in a fractional share, and in
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EMPLOYEE STOCK PURCHASE PLAN FOR NON-U.S. EMPLOYEES
any case will remain in such participant's account for use in the next purchase cycle. Upon distribution of a
participant’s account, any interest in a fractional share will be paid in cash.
Special Limitations
The Amended ESPP imposes certain limitations upon a participant's right to acquire AbbVie shares of common
stock, including that no participant may contribute more than the equivalent in local currency of $12,500 during
any purchase cycle towards the purchase of AbbVie shares of common stock, unless otherwise determined by
the Administrator.
Discontinuance of Participation or Termination of Employment
The participant may discontinue participation in the Amended ESPP during a purchase cycle and his or her
accumulated payroll deductions will be refunded without interest (unless otherwise required under local law) as
soon as administratively practicable. A participant who discontinues participation during a purchase cycle will be
ineligible to participate in the Amended ESPP until he or she re-enrolls in the Amended ESPP for a subsequent
purchase cycle in accordance with the Amended ESPP.
If a participant terminates employment with his or her Employer for any reason prior to the expiration of a
purchase cycle, then the participant's participation in the Amended ESPP will immediately terminate and the
amount credited to the participant's account will be refunded as soon as reasonably practicable.
Stockholder Rights
No participant will have any voting, dividend, or other stockholder rights with respect to AbbVie shares of common
stock subject to any purchase right under the Amended ESPP until the shares of common stock have been
purchased and delivered to the participant or into an account for the benefit of the participant as provided in the
Amended ESPP.
Adjustments
If after the grant of a purchase right, but prior to the purchase of AbbVie shares of common stock with respect to a
particular purchase period, there is any increase or decrease in the number of outstanding AbbVie shares of
common stock because of a stock split, stock dividend, combination or recapitalization, the Administrator in its
sole discretion will make any substitution or adjustment as it deems appropriate with respect to: the maximum
number and kind of AbbVie shares of common stock that may be issued under the Amended ESPP, the purchase
price per share of AbbVie shares of common stock, and any other limitations provided under the Amended ESPP.
In the event AbbVie effects one or more reorganizations, recapitalizations, spin-offs, split-ups, rights offerings or
reductions of its outstanding shares of common stock, the Administrator in its sole discretion may make any
substitution or adjustment as it deems appropriate with respect to: the maximum number of AbbVie shares of
common stock available under the Amended ESPP, the purchase price per share of AbbVie shares of common
stock covered by each outstanding purchase right, and any other limitations provided under the Amended ESPP.
Assignability
No purchase rights will be assignable or transferable by the participant. Any attempted assignment, transfer,
pledge or other disposition will be null and void and without effect.
Liquidation or Dissolution
In the event of the proposed liquidation or dissolution of AbbVie, the purchase cycle then in progress will
terminate immediately prior to the consummation of such proposed liquidation or dissolution, unless otherwise
provided by the Administrator in its sole discretion, and all outstanding purchase rights will automatically terminate
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EMPLOYEE STOCK PURCHASE PLAN FOR NON-U.S. EMPLOYEES
and the amounts of all payroll deductions will be refunded without interest (unless otherwise required under local
law) to the participants as soon as reasonably practicable.
Change in Control
In the event of a proposed sale of all or substantially all of the assets of AbbVie, or the merger or consolidation of
AbbVie with or into another entity, then in the sole discretion of the Administrator, (i) each purchase right will be
assumed, or an equivalent purchase right will be substituted, by the successor corporation or parent or subsidiary
of such successor corporation, or (ii) a new purchase date will be established by the Administrator on or before
the date of the consummation of such merger, consolidation or sale, and all outstanding purchase rights will be
automatically exercised on such new date.
Duration, Termination or Amendment of the Amended ESPP
If the stockholders approve the Amended ESPP, then it will be effective as of August 1, 2021 and terminate on
August 1, 2031, unless terminated earlier by the Board in its sole discretion. If stockholders do not approve the
Amended ESPP, then the extension of the ESPP’s term will not become effective.
The board of directors may at any time amend the Amended ESPP without stockholder approval; however,
stockholder approval must be obtained if required by any applicable laws, stock exchange rules or regulations.
The Board may terminate or suspend the Amended ESPP at any time in its sole discretion including shortening a
purchase cycle and establishing a new purchase date for such purchase cycle for some or all participants in
connection with a spin-off or other similar corporate event. The termination, suspension or amendment of the
Amended ESPP will not alter rights or obligations under any purchase right previously granted under the
Amended ESPP in any material adverse way without the consent of the affected participants, unless such
termination, suspension or amendment is necessary or advisable to qualify for or comply with any tax or
regulatory requirement.
Certain Income Tax Consequences
AbbVie does not offer the Amended ESPP to employees in the United States, so the issuance and exercise of
purchase rights under the Amended ESPP should generally not have any federal income tax consequences for
AbbVie or Amended ESPP participants. However, depending on the tax rules of the foreign jurisdictions in which
Amended ESPP participants reside, there may be ordinary income to the participants at the time of their purchase
of shares of common stock under the Amended ESPP. If the participant recognizes ordinary income in
connection with his or her purchase of shares of common stock under the Amended ESPP, then the Employer
may be entitled to a deduction in the same amount at the time such ordinary income is recognized.
In the event that AbbVie or an Employer is required to withhold any applicable taxes with regard to any
compensation or other income realized by a participant under the Amended ESPP, then AbbVie or such Employer
may deduct from any benefits of any kind otherwise due to a participant, including without limitation the proceeds
of any sale of AbbVie shares of common stock for the account of the participant, the aggregate amount of such
applicable taxes required to be withheld or, if such payments are insufficient to satisfy such applicable taxes, the
participant will be required to pay to AbbVie or such Employer, or make other arrangement satisfactory to AbbVie
or such Employer regarding payment to AbbVie or such Employer of, the aggregate amount of any such taxes.
The Amended ESPP is not intended to qualify under Section 423 of the Internal Revenue Code.
The foregoing is only a general summary of the effect of income taxation with respect to the purchase of shares
under the Amended ESPP and does not discuss U.S. federal income tax laws or the income tax laws of any
municipality, state or foreign country.
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New Plan Benefits
The benefits to be received by those AbbVie employees who are eligible to participate in the Amended ESPP are
not determinable, since the amounts of future purchases by participants are based on elective participant
contributions and also depend on the value of AbbVie's shares of common stock. No purchase rights have been
granted, and no shares of common stock have been issued, with respect to the share increase for which
stockholder approval is sought under this Proposal.
Past Participation in the ESPP
The table below sets forth the number of shares of common stock purchased by participating employees since the
inception of the ESPP through December 31, 2020. Executive officers and non-employee directors of the
Company (including nominees for election as director) and associates of such individuals, were not eligible to
participate in the ESPP. No participating employee has purchased five percent or more of the total amount of
shares of common stock purchased under the ESPP.
Name and Position
Named Executive Officers
Aggregate Number of Shares Purchased
0
All current executive officers as a group
All current directors who are not
executive officers as a group
All current and former employees,
excluding current executive officers as a
group
0
0
2,286,662
The board of directors recommends a vote “FOR” the approval of the AbbVie Amended and Restated
2013 Employee Stock Purchase Plan for NonU.S. Employees.
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MANAGEMENT PROPOSAL TO ELIMINATE
SUPERMAJORITY VOTING
What am I
voting on and
how should I
vote?
You are being asked to amend and restate the Certificate of Incorporation to remove
the supermajority voting requirement. Currently, certain amendments to the
company’s Certificate of Incorporation or By-Laws require the affirmative vote of at
least 80 percent of the outstanding shares. The proposed amendment will allow for
a regular majority to pass such amendments in the future.
The board of directors therefore recommends you vote “FOR” the
management proposal to amend and restate the Certificate of Incorporation to
eliminate supermajority voting.
Currently, AbbVie’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”)
provides that certain amendments to the Certificate of Incorporation or AbbVie’s Amended and Restated By-Laws
(the “By-Laws”) require the affirmative vote of shares representing no less than 80 percent of AbbVie’s
outstanding shares of stock entitled to vote generally in the election of directors. We refer to these provisions
listed below as the “Supermajority Voting Requirement.”
Specifically, Article VIII of the Certificate of Incorporation provides that any stockholder-approved alteration,
amendment, or repeal of any of the By-Law provisions listed below, or the adoption of any stockholder-approved
By-Law provision inconsistent with those By-Law provisions, must be approved pursuant to the Supermajority
Voting Requirement. The By-Law provisions covered by the Supermajority Voting Requirement are in regards to:
•
special meetings of stockholders and written consents by stockholders (Article II, Sections 2.2 and 2.12,
respectively);
• board size and tenure, classes of directors, board vacancies, and director removal (Article III, Sections 3.2,
3.3, 3.10 and 3.11, respectively);
indemnification of directors and officers (Article VII); and
•
• amendments to the By-Laws (Article X).
Article XI of the Certificate of Incorporation provides that any alteration, amendment, or repeal of any of the
provisions of the Certificate of Incorporation listed below, or the adoption of any provision inconsistent with those
provisions, must be approved pursuant to the Supermajority Voting Requirement. The provisions covered by the
Supermajority Voting Requirement are in regards to:
• board size, classes of directors, board vacancies, and director removal (Article VI, Sections 1, 2, 3 and 4,
respectively); and
• written consents by stockholders and special meetings of stockholders (Article VII, Sections 1 and 2,
respectively).
After reviewing the advantages and disadvantages of the Supermajority Voting Requirement at this time, the
board approved, and recommends that stockholders approve, the amendment and restatement of Articles VIII
and XI of the Certificate of Incorporation to remove the Supermajority Voting Requirement contained therein. If
approved, future stockholder-approved amendments to the By-Law and Certificate of Incorporation provisions
listed above will not be subject to the Supermajority Voting Requirement and will instead require the affirmative
vote of a majority of AbbVie’s outstanding shares of stock entitled to vote generally in the election of directors.
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MANAGEMENT PROPOSAL TO ELIMINATE
SUPERMAJORITY VOTING
The proposed Certificate of Amendment to the Certificate of Incorporation is attached to this proxy statement as
Appendix A, which the company would file promptly following the 2021 Annual Meeting if our stockholders
approve the amendment. 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. The board has approved certain conforming changes to the
company’s By-Laws, contingent on the effectiveness of the proposed amendment to the Certificate of
Incorporation.
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STOCKHOLDER PROPOSALS
What am I
voting on and
how should I
vote?
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 you vote “AGAINST” the proposals for the
reasons set forth following the proposals.
Stockholder Proposal on Lobbying Report
Zevin Asset Management, on behalf of William Creighton, and co-filers Benedictine Sisters of Virginia,
Congregation of Divine Providence Trust, Dana Investment Advisors, Dominican Sisters of Springfield, IL, First
Affirmative Financial Network, LLC for Jane M. Ritchie Trust, Miller/Howard for Michael Roomberg, and
Providence Trust have notified AbbVie that they intend to present the following proposal at the Annual Meeting
and that they each own at least $2,000 worth of AbbVie shares.
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 its expressed goals and in the best interests of
stockholders.
Resolved, the stockholders of AbbVie request the preparation of a report, updated annually, disclosing:
1.
Company policy and procedures governing lobbying, both direct and indirect, and grassroots
lobbying communications.
2.
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.
3.
AbbVie’s membership in and payments to any tax-exempt organization that writes and endorses
model legislation.
4.
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 Public Policy Committee and posted on AbbVie’s website.
Supporting Statement
AbbVie spent $41,580,000 from 2013 – 2019 on federal lobbying. This does not include state lobbying,
where AbbVie also lobbies but disclosure is uneven or absent. For example, AbbVie had at least 67 lobbyists in
14 states in 2019 (followthemoney.org) and spent $2,346,703 on lobbying in California from 2013 – 2019.
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STOCKHOLDER PROPOSALS
AbbVie belongs to the Chamber of Commerce, which has spent over $1.6 billion on lobbying since 1998,
and sits on the board of the Pharmaceutical Research and Manufacturers of America (PhRMA). AbbVie does not
disclose the portions of its payments to trade associations and social welfare organizations that are used for
lobbying, including grassroots. Grassroots lobbying does not get reported at the federal level under the Lobbying
Disclosure Act, and disclosure is uneven or absent in states.
We are concerned AbbVie’s payments to third party groups are potentially being used for undisclosed
grassroots lobbying. For example, PhRMA, which brought in $459 million in revenue for 2018, has given millions
to “dark money” social welfare groups which then “advocated policies favored by drugmakers.”1 And AbbVie is a
member of the Alliance for Patient Access, a nonprofit with a “consumer-friendly vibe that pushes drugmakers’
message.”2
AbbVie’s lack of disclosure presents reputational risk when its lobbying contradicts company public
positions. For example, AbbVie believes patients need access to affordable medicines, yet funds PhRMA’s
opposition to lower drug price initiatives.3 And AbbVie publicly supported COVID-19 efforts, but the Chamber of
Commerce directly lobbied against using the Defense Production Act to speed production of personal protective
equipment for workers.4
_______________________
1 https://www.opensecrets.org/news/2019/11/big-pharma-bankrolled-conservative-groups-tax-returns-show/.
2 https://apnews.com/article/7c8d0728c38345cd8dfc0fe1abd456ae.
3 https://www.cnn.com/2019/01/23/health/phrma-lobbying-costs-bn/index.html
4 https://chamberofcommercewatch.org/2054-2/.
Board of Directors Statement in Opposition to the Stockholder
Proposal on Lobbying Report
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 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 which are 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 Vice Chairman, External Affairs and Chief Legal Officer, who reports directly to the CEO, and our Vice
President, Government Affairs, each review and approve AbbVie’s lobbying strategy and all plans for
corporate political contributions 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, as explained on our website, 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 as a leader 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
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•
lobbying and political activities. We pursue activities that shape policies to benefit patients, with a focus on
improving patient access to new medical advances.
In part due to the extensive disclosures described below, AbbVie has been consistently recognized as a
leader in providing the highest level of political transparency and accountability. In 2020, AbbVie was again
recognized as a “trendsetter” in this area by the CPA-Zicklin Index, the highest ranking a company can
receive. This index, which is produced by the non-profit Center for Political Accountability in conjunction with
the Zicklin Center for Business Ethics Research at The Wharton School at the University of Pennsylvania,
benchmarks the political disclosure and accountability policies and practices of leading U.S. public
companies. AbbVie was also ranked in the top tier of companies in 2019, 2018, 2017, 2016, 2015, and 2014.
• 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.
In 2016, we enhanced our website with a comprehensive list of our state lobbying reports with direct links to
our state filings or the relevant database.
•
• 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 to which AbbVie provides $50,000 or more in annual membership, which
are reviewed by the Public Policy Committee. This threshold was lowered in 2016 from $100,000. 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 chooses to participate as a member of
various associations based on our commitment to voice our concerns as appropriate through our colleagues
who serve on the boards and committees of these groups. Such participation does not imply that we always
agree with the positions of the larger organization and/or other members.
• 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.
• 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.
Stockholder Proposal on Independent Chair
The Employees’ Retirement System of Rhode Island and co-filers Common Spirit Health and Vermont Pension
Investment Committee have notified AbbVie that they intend to present the following proposal at the Annual
Meeting and that they collectively own 154,634 AbbVie shares.
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RESOLVED: Shareholders request the Board of Directors adopt as policy, and amend the bylaws as necessary,
to require henceforth that the Chair of the Board of Directors, whenever possible, be an independent member of
the Board. This independence policy shall apply prospectively so as not to violate any contractual obligations. If
the Board determines that a Chair who was independent when selected is no longer independent, the Board shall
select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance
with this policy is waived if no independent director is available and willing to serve as Chair.
This policy would be phased in for the next CEO transition.
STOCKHOLDER PROPOSALS
SUPPORTING STATEMENT
We believe:
• The role of the CEO and management is to run the company.
• The role of the Board of Directors is to provide independent oversight of management and the CEO.
• There is a potential conflict of interest for a CEO to have an inside director act as Chair.
As of March 2020, approximately 33% of S&P 500 firms had an independent chair. ISS reported in September
2020 that 85% percent of investors responding to its policy survey indicated that an independent chair is their
preferred model.
We are concerned by the number and types of patent litigation in which AbbVie and its wholly-owned subsidiaries
are, and have been, involved, including significant issues of alleged antitrust and anticompetitive pharmaceutical
agreements. It is alleged that these settlement agreements violate state and federal antitrust laws and allowed the
company to raise the price of Humira and limit options for patients.
Additionally, the U.S. House of Representatives Committee on Oversight and Reform has announced plans to
serve a subpoena to the company for documents, as part of the Committee’s ongoing investigation of drug
company pricing practices. In a September 1, 2020 memorandum, Chairwoman Maloney explained the need for a
subpoena, stating that “After more than 18 months, AbbVie has demonstrated its unwillingness to comply
voluntarily with the Committee’s investigation”.
In light of rising material legal, regulatory, financial and reputational risks, as well as the controversies and legal
challenges facing the company we are concerned that the Board is not providing the necessary oversight of the
company’s culture, strategy, and risk management.
In our view, shareholders are best served by an independent Board Chair who can provide a balance of power
between the CEO and the Board. Taking this step is in the long-term interests of shareholders and will promote
effective oversight of management.
In order to ensure that our Board can provide rigorous oversight for our Company with greater independence and
accountability, we urge a vote FOR this shareholder proposal.
Board of Directors Statement in Opposition to the Stockholder
Proposal on Independent Chair
The board of directors recommends that stockholders vote AGAINST this proposal.
Our board of directors believes that our stockholders are best served by preserving the flexibility to
determine the appropriate leadership structure for the company in light of the circumstances at the time.
We believe the proposal would unnecessarily restrict the board’s ability to exercise its fiduciary duty to determine
the board leadership structure most appropriate for the company given the specific circumstances and leadership
needs at any particular point in time. The company’s robust governance framework ensures that board leadership
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is balanced with independent participation given the extensive involvement of the lead director and his oversight.
Therefore, adopting a proposal that would limit the board’s ability to exercise decision making on the appropriate
leadership is not in stockholders’ best interests.
AbbVie’s existing leadership structure and corporate governance practices provide strong independent
oversight.
Since its inception in 2013, AbbVie has had a robust lead independent director role. The lead independent
director has significant authority and responsibilities and works directly with the Chairman and CEO, as well as
the independent directors, to ensure meaningful oversight of the board. Among other duties, our lead independent
director:
•
•
•
•
reviews and guides agenda items for board meetings;
leads the CEO succession planning process;
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 schedule sufficiency, and, where appropriate, information provided to
other board members;
serves as the liaison between the chairman of the board and the independent directors;
•
• has the authority to call meetings of the independent directors;
•
•
leads the board’s evaluation of the CEO;
leads the annual board and committee evaluation process, including discussing evaluations with each director
individually;
• encourages effective director participation by fostering an environment of open dialogue and constructive
•
•
feedback among independent directors;
involved in selection and interviewing of new board members;
if requested by major stockholders, ensures that he or she is available for consultation and direct
communication as needed;
if required, represents independent board members externally; and
•
• performs such other duties as the board may determine from time to time.
AbbVie has other robust corporate governance practices designed to protect long-term shareholder value. All
directors, other than the CEO, are independent. All key committees and committee chairs are comprised
completely of independent directors. Our independent directors meet regularly in executive session, which is
presided over by the lead director. Our directors are also subject to majority voting as set forth in our By-Laws.
Other corporate governance practices, which are highlighted in our Governance Guidelines (available at
www.abbvieinvestor.com) and throughout this proxy statement, include a comprehensive board risk management
oversight process; an annual investor engagement program, reaching over 40% of outstanding shares; annual
say on pay votes; and proxy access.
The board periodically considers AbbVie’s leadership structure and has determined that its needs are
best met through the existing structure.
In light of the lead independent director authority and responsibilities and other corporate governance practices,
the board has determined that its current leadership structure, in which the offices of Chairman and Chief
Executive Officer are held by one individual, along with a strong and independent Lead Director, ensures the
appropriate level of oversight, independence, and responsibility is applied to all board decisions and is in the best
interests of AbbVie and its stockholders.
The board of directors recommends that you vote AGAINST the proposal.
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ADDITIONAL INFORMATION
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.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires AbbVie’s directors and executive officers, and persons who own more
than 10% of a registered class of AbbVie’s equity securities, to file with the SEC initial reports of ownership and
reports of changes in beneficial ownership of such equity securities of AbbVie. With the exception of one
amended report filed on behalf of an executive officer on April 24, 2020 and one amended report filed on behalf of
a director on May 22, 2020, each of which reported the omission of one transaction in the original, timely-filed
report due to administrative error, to AbbVie’s knowledge, no executive officer or director of AbbVie failed to file
reports required by Section 16(a) on a timely basis.
Performance-Based Compensation Arrangements
The Performance Incentive Plan and the Incentive Stock Program are intended to comply with Internal Revenue
Code Section 162(m) to permit deductibility of performance-based compensation with respect to awards granted
before November 2017. In connection with such awards, the compensation committee expects to take appropriate
steps to preserve deductibility, but has 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
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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 approve components of
compensation for certain executive officers that are not deductible.
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. There is uncertainty as to whether a court would enforce the
exclusive forum provision with respect to claims under the federal securities laws. The preceding paragraph is not
an exhaustive description.
Other Matters
The board of directors knows of no other business to be transacted at the 2021 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 2022 Annual Meeting Proxy Statement
Stockholder proposals for presentation at the 2022 Annual Meeting must be received by AbbVie no later than
November 23, 2021 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 2022 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
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 in 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.
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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 2022 Annual Meeting,
this written notice must be received by AbbVie no later than February 7, 2022.
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 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 2022
Annual Meeting, this written notice must be received by AbbVie no later than November 23, 2021 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 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.
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Cautionary Statement Regarding Forward-Looking Statements
Some statements in this proxy statement are, or may be considered, forward-looking statements for purposes of
the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "project" and
similar expressions, among others, generally identify forward-looking statements. AbbVie cautions that these
forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially
from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited
to, the failure to realize the expected benefits of AbbVie's acquisition of Allergan or to promptly and effectively
integrate Allergan's business, challenges to intellectual property, competition from other products, difficulties
inherent in the research and development process, adverse litigation or government action, and changes to laws
and regulations applicable to our industry. Additional information about the economic, competitive, governmental,
technological and other factors that may affect AbbVie's operations is set forth in Item 1A, "Risk Factors," of
AbbVie's 2020 Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission,
as updated by its Quarterly Reports on Form 10-Q and in other documents that AbbVie subsequently files with the
Securities and Exchange Commission that update, supplement or supersede such information. AbbVie
undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent
events or developments, except as required by law.
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 on Friday, May 7, 2021 at 9:00 a.m. CT. The safety of our stockholders is
important to us, and given the current guidance by public health officials surrounding COVID-19 and group
gatherings, this year’s Annual Meeting will be a virtual meeting of stockholders. It is also important to us that our
stockholders be able to engage with the company and its executives during the annual meeting. AbbVie held a
virtual stockholder meeting in 2020, and we found that more stockholders were able to attend and our executive
leadership team was able to answer more stockholder questions than in prior years, when the company held in-
person meetings. A virtual meeting allows more stockholders to attend the meeting equally and without cost, from
anywhere around the globe. At the 2021 virtual shareholder meeting, stockholders will be able to attend the
Annual Meeting, vote, and submit questions via live webcast by visiting www.virtualshareholdermeeting.com/
ABBV2021. This website can be accessed on a computer, tablet, or phone with internet connection. For
stockholders without access to the internet, you may listen to the Annual Meeting by telephone at
1-877-328-2502. AbbVie will make any required list of stockholders available during the meeting. Closed
captioning will be available on the meeting platform.
On the day of the Annual Meeting, stockholders may begin to log in to the online virtual annual meeting platform
beginning at 8:45 a.m. Central Time, and the meeting will begin promptly at 9:00 a.m. Central Time. Please allow
ample time for online login. If you encounter any difficulties accessing the virtual meeting or during the meeting
time, please call 1-844-986-0822 (USA) or 1-303-562-9302 (International) for technical support. Consistent with
prior practice at our in-person meetings, we will address as many stockholder-submitted question topics as time
permits.
To be admitted to the Annual Meeting at www.virtualshareholdermeeting.com/ABBV2021, you must enter the
control number found on your proxy card, voting instruction form or notice you received. You may vote during the
Annual Meeting by following the instructions available on the meeting website during the meeting.
By order of the board of directors.
LAURA J. SCHUMACHER
SECRETARY
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INFORMATION ABOUT THE ANNUAL MEETING
Who Can Vote
Stockholders of record at the close of business on March 8, 2021 will be entitled to notice of and to vote during
the Annual Meeting. As of March 8, 2021, AbbVie had 1,764,825,805 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 2021. 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 during 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 during 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 otherwise specified 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 four 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 four 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 share plan amendment
proposals, FOR the management proposal to eliminate supermajority voting, and AGAINST each of the
stockholder proposals.
The board of directors is not aware of any other issue that 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.
2021 Proxy Statement |
99
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 to eliminate supermajority voting, 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 to eliminate supermajority voting, the two proposals to amend the stock
plans, 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 that 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 Alliance Advisors LLC to aid in the solicitation of proxies, at an estimated cost of $15,500
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 The Northern Trust Company. The members of the investment committee are William H.S. Preece,
Scott T. Reents 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.
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| 2021 Proxy Statement
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:
1. Articles VIII and XI of AbbVie’s Amended and Restated Certificate of Incorporation are amended to read as
follows:
Appendix A
ARTICLE VIII
AMENDMENTS TO BY-LAWS
In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the By-laws of
the Corporation (the “By-laws”) may be altered, amended or repealed, in whole or in part, and new By-laws may
be adopted, (i) by the affirmative vote of shares representing a majority of the outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors; provided, however, that any proposed
alteration, amendment or repeal of, or the adoption of any By-law inconsistent with, Sections 2.2, 2.12, 3.2, 3.3,
3.10 or 3.11, Article VII or Article X of the By-laws (in each case, as in effect on the date hereof), or the alteration,
amendment or repeal of, or the adoption of any provision inconsistent with this sentence, may only be made by
the affirmative vote of shares representing not less than eighty percent (80%) of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of directors; and provided further, however, that
in the case of any such stockholder action at a meeting of stockholders, notice of the proposed alteration,
amendment, repeal or adoption of the new By-law or By-laws must be contained in the notice of such meeting, or
(ii) by action of the Board of Directors of the Corporation; provided, however, that the case of any such action at a
meeting of the Board of Directors, notice of the proposed alteration, amendment, repeal or adoption of the new
By-law or By-laws must be given not less than two days prior to the meeting.
* * *
ARTICLE XI
AMENDMENTS
The Corporation reserves the right to amend, alter or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are subject to this reservation. In furtherance and not in limitation of the
powers conferred by the laws of the State of Delaware as they presently exist or may hereafter be amended,
subject to any limitations contained elsewhere in this Amended and Restated Certificate of Incorporation, the
Corporation may from time to time adopt, amend or repeal any provisions of this Amended and Restated
Certificate of Incorporation; provided, however, that any proposed alteration, amendment or repeal of, or the
adoption of any provision inconsistent with, Article VI and Article VII of this Amended and Restated Certificate of
Incorporation (in each case, as in effect on the date hereof), or the alteration, amendment or repeal of, or the
adoption of any provision inconsistent with this sentence, may only be made by the affirmative vote of shares
representing not less than eighty percent (80%) of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors.
2. The foregoing amendment to the Amended and Restated Certificate of Incorporation of the Corporation was
duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law.
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 day
of 2021.
AbbVie Inc.
By:
Name:
Title:
2021 Proxy Statement |
A-1
Appendix B
AbbVie Inc.
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Year Ended December 31, 2020
(Unaudited) (In millions, except per share data)
Non-GAAP Financial Results
Financial results are presented on both a reported and a non-GAAP basis. Reported results were prepared in
accordance with GAAP and include all revenues and expenses recognized during the period. Non-GAAP results
adjust for certain non-cash items and for factors that are unusual or unpredictable, and exclude those costs,
expenses, and other specified items. AbbVie’s management believes non-GAAP financial measures provide
useful information to investors regarding AbbVie’s results of operations and assist management, analysts, and
investors in evaluating the performance of the business. Non-GAAP financial measures should be considered in
addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP.
Business Performance Highlights Reconciliations
1. Net Revenues since 2013 Inception and Compound Annual Growth Rate
As reported (GAAP)
Adjusted for specified
items:
As adjusted
GAAP)
(non
2020
2013
2017
$ 45,804 $ 33,266 $ 32,753 $ 28,216 $ 25,638 $ 22,859 $ 19,960 $ 18,790
2018
2019
2014
2015
2016
2020
2013
CAGR
‑
13.6 %
(20)
—
(20)
—
(78)
(40)
(81)
—
—
$ 45,784 $ 33,266 $ 32,733 $ 28,216 $ 25,560 $ 22,819 $ 19,879 $ 18,790
13.6 %
‑
The 2020 specified revenue item represents an upfront payment received under a previously announced legacy
Allergan collaboration. The 2018 specified revenue item represents a milestone payment received under a
previously announced collaboration. The 2016 specified revenue items included milestone revenue under
previously announced collaborations and prior period royalty revenue related to a patent lawsuit settlement. The
2015 net revenue specified item represents a milestone payment received under a previously announced
collaboration. The 2014 net revenue specified item reflects royalty income from prior periods recognized in the
fourth quarter of 2014 as a result of the settlement of a licensing arrangement.
2. Diluted Earnings Per Share Compound Annual Growth Rate and Operating Margin Expansion since 2013
Inception
Operating Margin Expansion
2019
2020
24.8 % 39.0 % 30.1 % (1,420) bps
23.2 %
8.3 %
48.0 % 47.3 % 36.3 %
2013
2019 2020
2020
Expansion Expansion
‑
(530) bps
6.2 % 1,490 bps 1,700 bps
70 bps 1,170 bps
2013
‑
Earnings Per Share
2020
2013
As reported (GAAP)
Adjusted for specified items:
As adjusted (non
GAAP)
2020
2013
$ 2.72 $ 2.56
0.58
$ 10.56 $ 3.14
7.84
CAGR
‑
0.9 %
18.9 %
3. Net Revenues Increase over 2019
‑
As reported (GAAP)
Adjusted for specified and other items:
Adjusted for foreign exchange:
As adjusted (non
GAAP)
Net Revenues
37.7 %
(0.1)%
0.3 %
37.9 %
‑
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| 2021 Proxy Statement
4. Diluted Earnings
Per Share since 2013 Inception
As reported (GAAP)
Adjusted for specified items:
$
related impairment
Intangible asset amortization
Separation costs
Milestones and other R&D expenses
Acquired IPR&D
Reata divestiture
Calico collaboration
Stemcentrx
Charitable contribution
‑
Acquisition related costs
Shire transaction and termination
costs
Change in fair value of contingent
consideration
Restructuring(1)
Litigation reserves
Intangible asset impairment
Venezuela devaluation loss
Revaluation due to Section 987 tax
law change
Impacts related to tax law changes
and audit settlements
Other
As adjusted (non
GAAP)
2020
2013
2.72 $ 5.28 $ 3.66 $ 3.30 $ 3.63 $ 3.13 $ 1.10 $ 2.56
2019
2014
2016
2017
2015
2018
2.87
—
0.14
0.71
—
—
—
1.81
0.86
—
0.20
0.25
(0.20)
—
0.56
—
0.23
0.69
—
0.09
0.27
—
0.32
2.66
0.18
—
0.51
—
0.09
0.20
—
—
—
—
0.03
0.38
—
0.05
0.12
—
—
—
—
0.16
0.20
0.13
0.26
0.09
—
—
—
—
0.25
0.18
0.24
0.48
0.15
—
—
—
—
—
—
—
—
—
—
0.10
1.12
3.43
—
—
—
—
2.14
0.10
(0.28)
—
—
0.31
—
0.18
—
—
0.39
—
0.18
0.15
—
0.14
—
—
—
0.18
—
—
0.08
—
—
—
—
—
—
0.12
—
—
—
—
—
—
—
0.23
0.10
—
0.21
—
—
—
—
—
—
—
—
—
—
—
—
(1.14)
0.02
—
0.04
$ 10.56 $ 8.94 $ 7.91 $ 5.60 $ 4.82 $ 4.29 $ 3.32 $ 3.14
(0.27)
0.07
(0.49)
0.04
—
0.05
—
0.04
—
0.05
0.71
0.04
(1)
Except for 2019, restructuring impacts were minimal and included in the Other category.
‑
2020 Performance Results for Financial Goals Reconciliations
As reported (GAAP)
Adjusted for specified items:
Net
Revenues
45,804
Income Before
Taxes
3,398
Operating
Margin
11,363
Net
Earnings*
4,616
Intangible asset amortization
Acquisition and integration costs
Milestones and other R&D expenses
Acquired IPR&D
Change in fair value of contingent consideration
Impacts related to tax law changes and audit settlements
Other
Adjusted for foreign exchange:
As adjusted (non-GAAP)
—
—
—
—
—
—
(20)
(249)
45,535
5,805
3,366
273
1,198
5,753
—
239
26
20,058
5,805
3,092
273
1,198
—
—
377
(3)
22,105
4,805
3,023
241
1,194
5,749
(1,889)
42
—
17,781
*Represents net earnings attributable to AbbVie Inc.
Acquisition and integration costs reflect transaction and financing costs, compensation expense and other
integration costs as well as amortization of the acquisition date fair value step-up for inventory related to the
Allergan acquisition. Milestones and other R&D expenses include milestone payments for previously announced
collaborations and the purchase of an FDA priority review voucher from a third party. Acquired IPR&D primarily
reflects upfront payments related to R&D collaborations and licensing arrangements with third parties. Other
primarily includes tax related items and COVID-19 related charitable contributions and expenses.
2021 Proxy Statement |
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ABBVIE AMENDED AND RESTATED 2013 INCENTIVE STOCK PROGRAM
(Effective as of January 1, 2013, conformed through the Second Amendment, and amended and restated
effective as of May 7, 2021)
Appendix C
ABBVIE
AMENDED AND RESTATED 2013 INCENTIVE STOCK PROGRAM
1. PURPOSE.
The purpose of the AbbVie Amended and Restated 2013 Incentive Stock Program is to (i) attract and retain
outstanding directors, officers, and other employees of AbbVie Inc. (the “Company”) and its Subsidiaries, and to
furnish incentives to such persons by providing opportunities to acquire shares of the Company’s common stock,
or monetary payments based on the value of such Shares or the financial performance of the Company, or both,
on advantageous terms as herein provided and to further align such persons’ interests with those of the
Company’s other stockholders through compensation that is based on the value of Shares, and (ii) assume
certain awards granted under the Abbott Stock Programs and adjusted as described in the Employee Matters
Agreement.
2. ADMINISTRATION.
The Program will be administered by the Committee. For purposes of the Program, the “Committee” shall be a
committee of at least two persons which shall be either the Compensation Committee of the Board or such other
committee comprised entirely of persons who are “non-employee directors” as defined in Rule 16b-3 of the
Securities and Exchange Commission. The Compensation Committee of the Board shall serve as the Committee
administering the Program until such time as the Board designates a different Committee.
The Committee has the following powers, which it may exercise in its sole discretion, subject to and not
inconsistent with the express provisions of the Program: (i) to administer the Program; (ii) to exercise all the
power and authority either specifically granted to it under the Program or necessary or advisable in the
administration of the Program; (iii) to grant Benefits; (iv) to determine the persons to whom and the time or times
at which Benefits shall be granted; (v) to determine the type and number of Benefits to be granted, the number of
Shares to which a Benefit may relate and the terms, conditions, restrictions and Performance Goals relating to
any Benefit; (vi) to determine whether, to what extent, and under what circumstances a Benefit may be settled,
canceled, forfeited, accelerated, exchanged, deferred (in accordance with the requirements of Code
Section 409A) or surrendered; provided that, except as described in Section 6, the Committee shall neither lower
the exercise price or base price of an outstanding option or Stock Appreciation Right nor grant any Benefit or
provide cash in replacement of a canceled option or Stock Appreciation Right which had been granted at a higher
exercise price or base price without the prior approval of the Company’s stockholders; (vii) to make adjustments
in the terms and conditions (including Performance Goals) applicable to Benefits; (viii) to construe and interpret
the Program and any Benefit; (ix) to prescribe, amend and rescind rules and regulations relating to the Program,
including any sub-Program contemplated by Section 10; (x) to determine the terms and provisions of any Benefit
Agreement (which need not be identical for each Grantee); and (xi) to make all other determinations deemed
necessary or advisable for the administration of the Program. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in the Program or in any Benefit Agreement in the manner and to the
extent it shall deem necessary or advisable to carry the Program into effect and shall be the sole and final judge
of such necessity or advisability.
A majority of the members of the Committee shall constitute a quorum and all determinations of the Committee
shall be made by a majority of its members. Any determination of the Committee under the Program may be
made without notice of a meeting of the Committee by a writing signed by all of the Committee members. The
decision of the Committee as to all questions of interpretation, application and administration of the Program shall
be final, binding and conclusive on all persons.
The Committee may, from time to time, delegate any or all of its duties, powers and authority to any officer or
officers of the Company, except to the extent such delegation would be inconsistent with Rule 16b-3 promulgated
under the Exchange Act or other applicable law, rule or regulation. The Chief Executive Officer of the Company
may grant Benefits under the Program other than to persons subject to Section 16(b) of the Exchange Act with
respect to transactions involving equity securities of the Company at the time that delegated authority is
exercised. All such grants by the Chief Executive Officer shall be reported annually to the Committee; however,
the Committee is not required to take any action with respect to such grants. No Committee member or delegate
thereof shall be liable for any action taken or determination made, or which the Committee member or delegate
fails to take or make, in good faith with respect to the Program or any Benefit.
2021 Proxy Statement |
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3. PARTICIPANTS.
Participants in the Program shall consist of the employees of the Company or any of its Subsidiaries who the
Committee in its sole discretion may designate from time to time to receive Benefits, and, solely for purposes of
receiving Benefits under Section 11 and Section 12, Non-Employee Directors of the Company. The Committee’s
designation of a person to receive a Benefit in any year shall not require the Committee to designate such person
to receive a Benefit in any other year. The Committee shall consider such factors as it deems pertinent in
selecting participants and in determining the type and amount of their respective Benefits. Notwithstanding the
foregoing, Adjusted Awards may be granted under the Program in accordance with the terms of the Employee
Matters Agreement.
4. SHARES RESERVED UNDER THE PROGRAM AND ADJUSTMENTS.
Subject to adjustment as provided in this Section 4, the maximum number of Shares available for issuance under
the Program as of the Restatement Effective Date is 144,000,000 Shares, which reflects an increase of
44,000,000 Shares over the number of Shares initially reserved under the Program as of the Effective Date (the
“Share Limit”). Such Shares may, in whole or in part, be authorized but unissued Shares or Shares that have
been or may be reacquired by the Company in the open market, in private transactions or otherwise.
With respect to Benefits other than Adjusted Awards: (i) to the extent there is a lapse, expiration, termination,
forfeiture, cancellation or cash settlement of any Benefit without the issuance of Shares thereunder, the Shares
reserved for such Benefit may again be used for the grant of new Benefits of any type authorized under the
Program; provided, however, that in no event may the number of Shares issued under the Program exceed the
total number of Shares reserved for issuance hereunder; and (ii) Shares that are issued under any Benefit and
thereafter reacquired by the Company pursuant to rights reserved upon the issuance thereof, or pursuant to the
payment of the exercise price of Shares under options by delivery of other Shares, or Shares under options or
stock-settled Stock Appreciation Rights that were not issued upon the net exercise or net settlement of such
options or Stock Appreciation Rights, or Shares repurchased by the Company with the proceeds collected in
connection with the exercise of outstanding options, or Shares that are exchanged by a Grantee or withheld by
the Company to satisfy tax withholding requirements in connection with any Program Benefit shall not be
available for subsequent awards of Program Benefits. Upon the exercise of any Benefit granted in tandem with
any other Benefits, such related Benefits shall be canceled to the extent of the number of Shares as to which the
Benefit is exercised and, notwithstanding the foregoing, such number of Shares shall no longer be available for
Program Benefits. Benefits that may be settled only in cash shall not reduce the number of Shares available for
subsequent awards of Benefits.
Subject to adjustment as provided in this Section 4, the maximum number of Shares with respect to which Non-
Qualified Stock Options under Section 6 and Stock Appreciation Rights under Section 9(a) may be granted to any
one participant in the aggregate in any one calendar year shall be 2,000,000 Shares.
Notwithstanding anything in the Program to the contrary, (i) any Shares issued, or awards granted, under the
Program pursuant to Adjusted Awards shall not count against the Share Limit or the Individual Limits, and (ii) the
lapse, expiration, termination, forfeiture or cancellation of any Adjusted Award without the issuance of Shares or
payment of cash thereunder shall not result in an increase in the number of Shares available for issuance under
the Program.
Except as provided in a Benefit Agreement or as otherwise provided in the Program, if the Committee determines
that any special dividend or other distribution (whether in the form of cash, Shares, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event, affects the Shares such that an
equitable change or adjustment relating to the Program or Program Benefits is appropriate, then the Committee
shall make any such equitable changes or adjustments as it deems necessary or appropriate, including by way of
illustration, changes or adjustments to any or all of (i) the number and kind of Shares or other property (including
cash) that may thereafter be issued in connection with Benefits, including the Share Limit, (ii) the number and kind
of Shares or other property issued or issuable in respect of outstanding Benefits, (iii) the exercise price, grant
price or purchase price relating to any Benefit, (iv) the Performance Goals and (v) the individual and other
limitations applicable to Benefits, including the Individual Limits; provided that no such adjustment shall cause any
Benefit hereunder which is or becomes subject to Code Section 409A to fail to comply with the requirements of
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| 2021 Proxy Statement
such section; and provided further that, unless otherwise determined by the Committee, any additional Shares or
other securities or property issued with respect to Shares covered by awards granted under the Program as a
result of any stock split, combination, stock dividend, recapitalization or other adjustment event described in this
Section 4 shall be subject to the restrictions and other provisions of the original Benefit awarded under the
Program.
5. TYPES OF BENEFITS.
The following Benefits, alone or in combination, may be granted under the Program: (i) Nonqualified Stock
Options, (ii) Restricted Stock Awards, (iii) Restricted Stock Units, (iv) Performance Awards, (v) Other Share-
Based Awards (including Stock Appreciation Rights, dividend equivalents and recognition awards), (vi) awards to
Non-Employee Directors, and (vii) Foreign Benefits, all as described below.
6. NON-QUALIFIED STOCK OPTIONS.
The Committee may grant Nonqualified Stock Options to Grantees which may be subject to such restrictions,
terms and conditions as the Committee shall determine in its sole discretion and as shall be evidenced by the
applicable Benefit Agreement.
The Committee shall determine the exercise price for each Share purchasable under an option, but in no event
shall the exercise price per Share be less than the Fair Market Value of a Share on the option’s date of grant
unless such option is granted in connection with a corporate transaction in substitution for an option previously
granted by an entity involved in such corporate transaction (any such option, a “Substitute Option”). The exercise
price shall be paid in full at the time of exercise, and payment may be made as determined by the Committee,
including: (i) in cash, which may be paid by check, or other instrument acceptable to the Company; (ii) unless
otherwise provided in the Benefit Agreement, in Shares having a then market value equal to the aggregate
exercise price (including by withholding Shares that otherwise would be distributed to the Grantee upon exercise
of the option); (iii) delivery of a properly executed exercise notice, together with irrevocable instructions to a
broker to deliver promptly to the Company the amount of sales proceeds from the option Shares or loan proceeds
to pay the exercise price; or (iv) by any other method permitted by the Committee. Any amount necessary to
satisfy applicable federal, state or local tax withholding requirements (or corresponding requirements under
applicable laws in non-U.S. jurisdictions) shall be paid promptly upon notification of the amount due. The amount
of tax withholding may be paid in Shares having a then market value equal to the amount required to be withheld
(including by withholding Shares that otherwise would be distributed to the Grantee upon exercise of the option),
or a combination of cash and Shares.
An option shall be exercisable over its term (which shall not exceed ten years from the date of grant), at such
times and upon such conditions as the Committee may determine, as reflected in the Benefit Agreement. An
option may be exercised to the extent of any or all full Shares as to which the option has become exercisable, by
giving written, electronic or telephonic notice of such exercise to the Committee or its designated agent, in such
form as the Committee may prescribe. Notwithstanding the foregoing, no option granted pursuant to this Section 6
shall be exercisable earlier than six months from its date of grant, unless such option is a Substitute Option.
Except as otherwise provided in the applicable Benefit Agreement, (i) in the event of termination of employment
for any reason other than retirement, disability or death, the right of the optionee to exercise an option shall
terminate upon the earlier of the end of the original term of the option or three months after the optionee’s last day
of work for the Company or its Subsidiaries; (ii) in the event of termination of employment due to retirement or
disability, or if the optionee should die while employed, the right of the optionee or his or her successor in interest
to exercise an option shall terminate upon the end of the original term of the option; and (iii) if the optionee should
die within three months after termination of employment for any reason other than retirement or disability, the right
of his or her successor in interest to exercise an option shall terminate upon the earlier of the end of the original
term of the option or three months after the date of such death.
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7. RESTRICTED STOCK AWARDS AND RESTRICTED STOCK UNITS.
(a) Restricted Stock Awards.
The Committee may grant Restricted Stock Awards, subject to such restrictions, terms and conditions as the
Committee shall determine in its sole discretion and as shall be evidenced by the applicable Benefit Agreement
(provided that any such Benefit is subject to the vesting requirements described herein). The vesting of a
Restricted Stock Award may be conditioned upon the completion of a specified period of employment or service
with the Company or any Subsidiary, upon the attainment of specified Performance Goals, and/or upon such
other criteria as the Committee may determine in its sole discretion.
Except as provided in the applicable Benefit Agreement, no Shares underlying a Restricted Stock Award may be
sold, assigned, transferred, or otherwise encumbered or disposed of by the Grantee until such Shares have
vested in accordance with the terms of such Benefit. Subject to such other restrictions as are imposed by the
Committee, the Shares covered by an award of Restricted Stock to a participant who is subject to Section 16 of
the Exchange Act may be sold or otherwise disposed of only after six months from the grant date (unless such
sale would not affect the exemption under Rule 16b-3 of the Securities and Exchange Commission).
If and to the extent that the applicable Benefit Agreement may so provide, a Grantee shall have the right to vote
and receive dividends on Restricted Stock granted under the Program. Unless otherwise provided in the
applicable Benefit Agreement, any Shares received as a dividend on or in connection with a stock split of the
Shares underlying a Restricted Stock Award awarded under this Section shall be subject to the same restrictions
as the Shares underlying such Restricted Stock Award.
Upon the termination of a Grantee’s employment or service with the Company and its Subsidiaries, the Restricted
Stock granted to such Grantee shall be subject to the terms and conditions specified in the applicable Benefit
Agreement.
(b) Restricted Stock Units.
The Committee may grant Restricted Stock Units, subject to such restrictions, terms and conditions, as the
Committee shall determine in its sole discretion and as shall be evidenced by the applicable Benefit Agreement
(provided that any such Restricted Stock Unit is subject to the vesting requirements described herein). The
vesting of a Restricted Stock Unit granted under the Program may be conditioned upon the completion of a
specified period of employment or service with the Company or any Subsidiary, upon the attainment of specified
Performance Goals, and/or upon such other criteria as the Committee may determine in its sole discretion.
Unless otherwise provided in a Benefit Agreement, upon the vesting of a Restricted Stock Unit there shall be
delivered to the Grantee, as soon as practicable following the date on which such Benefit (or any portion thereof)
vests, subject to Section 13, that number of Shares equal to the number of Restricted Stock Units that have
vested (or the cash equivalent thereof in the case of a cash-settled award).
Except as provided in the applicable Benefit Agreement, a Restricted Stock Unit may not be sold, assigned,
transferred or otherwise encumbered or disposed of by the Grantee. Subject to the requirements of Code
Section 409A, Restricted Stock Units may provide the Grantee with the right to receive dividend equivalent
payments with respect to Shares subject to the Benefit (both before and after the Benefit is earned or vested),
which payments may be either made currently or credited to an account for the participant, and may be settled in
cash or Shares, as determined by the Committee. Any such settlements and any such crediting of dividend
equivalents may be subject to such conditions, restrictions and contingencies as the Committee shall establish,
including the reinvestment of such credited amounts in Share equivalents.
Upon the termination of a Grantee’s employment or service with the Company and its Subsidiaries, the Restricted
Stock Units granted to such Grantee shall be subject to the terms and conditions specified in the applicable
Benefit Agreement.
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8. PERFORMANCE AWARDS.
The Committee may grant Benefits including Restricted Stock, Restricted Stock Units and Other Share-Based
Awards, which may be earned in whole or in part based on the attainment of performance goals established by
the Committee, which shall be based on one or more of the following criteria or such other criteria as determined
by the Committee in its discretion: earnings per share, return on equity, return on assets, return on net assets,
return on investment, total stockholder return, net operating income, cash flow, increase in revenue, economic
value added, increase in share price or cash flow return on investment, and any combination of, or a specified
increase in, any of the foregoing (the “Performance Goals”). Where applicable, the Performance Goals may be
expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage
increase or decrease in the particular criteria, and may be applied to one or more of the Company, a Subsidiary,
or a division or strategic business unit of the Company, or may be applied to the performance of the Company
relative to a market index, a group of other companies or a combination thereof, all as determined by the
Committee. The Performance Goals may include a threshold level of performance below which no payment will
be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified
vesting will occur), and a maximum level of performance above which no additional payment will be made (or at
which full vesting will occur). In addition, partial achievement of Performance Goals may result in payment or
vesting corresponding to the degree of achievement of the Performance Goal. The Committee may make
equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the
Company or any Subsidiary or the financial statements of the Company or any Subsidiary, in response to
changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a
business or related to a change in accounting principles. No payment shall be made to a participant prior to the
written certification or other determination by the Committee that the Performance Goals have been attained.
The maximum amount which may be granted under this Section 8 for any one year for any one participant shall
be $15 million, determined by multiplying the number of Shares or units granted under the Benefit by the Fair
Market Value of a Share on the date of grant. For any performance period in excess of one year, such maximum
value shall be determined by multiplying $15 million by a fraction, the numerator of which is the number of months
in the performance period and the denominator of which is twelve.
Payments earned in respect of any Benefit may be decreased or increased in the sole discretion of the
Committee based on such factors as it deems appropriate. Notwithstanding the foregoing, any Benefits may be
adjusted in accordance with Section 4.
9. OTHER SHARE-BASED AWARDS AND RECOGNITION AWARDS.
(a) Other Share-Based Awards.
The Committee may grant Other Share-Based Awards, including Stock Appreciation Rights, under terms and
conditions specified by the Committee in the applicable Benefit Agreement, which may include the attainment of
Performance Goals; provided, however, that with respect to a Stock Appreciation Right, in no event shall (i) the
base price per Share be less than the Fair Market Value of a Share on the Stock Appreciation Right’s date of
grant, or (ii) the term of such Stock Appreciation Right exceed ten years from the date of grant. Such terms and
conditions shall be consistent with the terms of the Program. Shares or other securities or property delivered
pursuant to a Benefit in the nature of a purchase right granted under this Section 9 shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms, including, without limitation, Shares,
other Benefits, notes or other property, as the Committee shall determine, subject to any required corporate
action.
(b) Recognition Awards.
In addition to Restricted Stock Awards governed by Section 7(a), the Committee may grant fully vested Shares to
employees of the Company, its Subsidiaries, in recognition of the employee’s contribution to the Company;
provided that the aggregate value of such recognition awards granted in any fiscal year to any single individual
shall not exceed 1,000 Shares.
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10. FOREIGN BENEFITS.
The Committee may grant Benefits to employees of the Company and its Subsidiaries who reside in foreign
jurisdictions. Notwithstanding anything in the Program to the contrary, the Committee may, in its sole discretion:
(i) amend or vary the terms of the Program to conform such terms with the requirements of each jurisdiction
where a Subsidiary is located; (ii) amend or vary the terms of the Program in each jurisdiction where a Subsidiary
is located as it considers necessary or desirable to take into account or to mitigate or reduce the burden of
taxation and social security contributions for participants and/or the Subsidiary; or (iii) amend or vary the terms of
the Program in each jurisdiction where a Subsidiary is located as it considers necessary or desirable to meet the
goals and objectives of the Program. The Committee may, where it deems appropriate in its sole discretion,
establish one or more sub-Programs for these purposes. The terms and conditions contained herein which are
subject to variation in a jurisdiction shall be reflected in a written attachment to the Program for each Subsidiary in
such jurisdiction. The Committee may, in its sole discretion, also establish administrative rules and procedures to
facilitate the operation of the Program in each jurisdiction where a Subsidiary is located. To the extent permitted
under applicable law, the Committee may delegate its authority and responsibilities under this Section 10 to one
or more officers of the Company. In this regard and to the extent permitted under applicable law, the Committee
hereby delegates its authority and responsibilities under this Section 10 to the Executive Vice President, Chief
Human Resources Officer.
11. NONQUALIFIED STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS.
Each Non-Employee Director may elect to receive any or all of his or her fees earned under Section 3 of the
AbbVie Non-Employee Directors’ Fee Plan (the “Directors’ Fee Plan”) in the form of Nonqualified Stock Options
under this Section. Each such election shall be irrevocable, and must be made in writing and filed with the
Secretary of the Company by December 31 of the calendar year preceding the period in which such fees are
earned. A Non-Employee Director may file a new election each calendar year applicable to fees earned in the
immediately succeeding calendar year, provided that a new election to receive benefits in the form of options shall
not be effective until the period covered by the Non-Employee Director’s current election has ended. If no new
election is received by December 31 of any calendar year, the election, if any, then in effect shall continue in
effect until a new election is made and has become effective. If a director does not elect to receive his or her fees
in the form of Nonqualified Stock Options, the fees due such director shall be paid or deferred as provided in the
Directors’ Fee Plan and any applicable election thereunder by the director.
Each Nonqualified Stock Option due to a director under the Program pursuant to an election shall be granted
annually, on the date of the annual stockholders meeting. Except as otherwise provided, each such Nonqualified
Stock Option shall be (i) subject to the terms and conditions of Section 6, (ii) immediately exercisable and non-
forfeitable, and (iii) exercisable until the expiration of ten years from the date of grant.
12. RESTRICTED STOCK UNITS TO NON-EMPLOYEE DIRECTORS.
Each year, on the date of the annual stockholders meeting, each person who is elected a Non-Employee Director
at the annual stockholders meeting shall be awarded Restricted Stock Units covering a number of Shares with a
Fair Market Value on the date of the award closest to, but not in excess of, a value determined annually by the
Compensation Committee. The annual award value shall not exceed $250,000 per Non-Employee Director.
The Restricted Stock Units granted to Non-Employee Directors shall be fully vested on the date of the award and
shall be awarded and/or issued or paid in a manner that will comply with Code Section 409A. Subject to the
requirements of Code Section 409A, the Non-Employee Director receiving the Restricted Stock Units shall be
entitled to receive one Share for each Restricted Stock Unit upon the earliest of (i) the director’s “separation from
service” (within the meaning of Code Section 409A), (ii) the date the director dies, or (iii) the date of occurrence of
a Change in Control that also qualifies as a “change in control event” (within the meaning of Treasury Regulation
Section 1.409A-3(i)(5)).
Subject to the requirements of Code Section 409A, the Non-Employee Director receiving the Restricted Stock
Units shall be entitled to receive cash payments equal to the dividends and distributions paid on the Shares (other
than dividends or distributions of securities of the Company which may be issued with respect to its Shares by
virtue of any stock split, combination, stock dividend or recapitalization) to the same extent as if each Restricted
Stock Unit was a Share, and those Shares were not subject to the restrictions imposed by the Program, provided
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that the record date with respect to such dividend or distribution occurs within the period commencing with the
date of grant of the Benefit and ending upon the earliest of (i) the date of the director’s death, (ii) the date of the
director’s “separation from service” (within the meaning of Code Section 409A), (iii) the date of the occurrence of
a Change in Control that also qualifies as a “change in control event” (within the meaning of Treasury Regulation
Section 1.409A-3(i)(5)), or (iv) such other date specified in the Benefit Agreement.
While outstanding, the Restricted Stock Units may not be sold, assigned, transferred, pledged, hypothecated,
exchanged or otherwise disposed of except by will or the laws of descent and distribution.
Except in the event of conflict, all provisions of the Program shall apply to this Section 12. In the event of any
conflict between the other provisions of the Program and this Section 12, this Section 12 shall control.
13. CHANGE IN CONTROL PROVISIONS.
(a)
Notwithstanding any other provision of this Program, the following provisions shall apply upon the
occurrence of a Change in Control, unless otherwise provided in a Benefit Agreement:
(i)
All options then outstanding under this Program shall become fully vested and
exercisable as of the date of the Change in Control, whether or not then otherwise vested or exercisable;
(ii)
All Stock Appreciation Rights and Other Share-Based Awards then outstanding shall
become fully vested and exercisable as of the date of the Change in Control, whether or not then
otherwise vested or exercisable;
(iii)
All terms and conditions of all Restricted Stock Awards then outstanding shall be deemed
satisfied and all restrictions on those Restricted Stock Awards will lapse as of the date of the Change in
Control;
(iv)
All terms and conditions of all Restricted Stock Units then outstanding shall be deemed
satisfied, all restrictions on those Restricted Stock Units will lapse and the Restricted Stock Units shall be
immediately payable as of the date of the Change in Control; and
(v)
All performance criteria shall be deemed to have been attained and all Performance
Awards then outstanding shall be deemed to have been fully earned and to be immediately payable as of
the date of the Change in Control.
Notwithstanding the foregoing, with respect to each Benefit that is subject to Code Section 409A, if a Change in
Control would have occurred under the Program but such Change in Control does not also qualify as a “change in
control event” (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)), then each such Benefit shall
become vested and non-forfeitable; provided, however, that the Grantee shall not be able to exercise the Benefit,
and the Benefit shall not become payable, except in accordance with the terms of such Benefit or until such
earlier time as the exercise and/or payment complies with Code Section 409A.
(b)
A “Change in Control” shall be deemed to have occurred on the earliest of the following dates:
(i)
The date any Person is or becomes the Beneficial Owner (as defined below), directly or
indirectly, of securities of the Company (not including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its Affiliates) representing 20% or more of the
combined voting power of the Company’s then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction described in clause (A) of paragraph
(iii) below; or
(ii)
The date the following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the Effective Date, constitute the Board and any
new director (other than a director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board or nomination for election by the
Company’s stockholders was approved or recommended by a vote of at least two-thirds of the directors
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then still in office who either were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or recommended; or
(iii)
The date on which there is consummated a merger or consolidation of the Company or
any direct or indirect Subsidiary of the Company with any other corporation or other entity, other than
(A) a merger or consolidation (1) immediately following which the individuals who comprise the Board
immediately prior thereto constitute at least a majority of the board of directors of the Company, the entity
surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a
Subsidiary, the ultimate parent thereof, and (2) which results in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, at least 50% of the combined
voting power of the securities of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation; or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Company or its Affiliates) representing
20% or more of the combined voting power of the Company’s then outstanding securities; or
(iv)
The date the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets, other than a sale or disposition by the
Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined
voting power of the voting securities of which are owned by stockholders of the Company, in combination
with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any Subsidiary, in substantially the same proportions as their ownership of the Company
immediately prior to such sale.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated transactions immediately following which the record
holders of Shares immediately prior to such transaction or series of transactions continue to have substantially the
same proportionate ownership in an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
For purposes of the Program: “Affiliate” shall have the meaning set forth in Rule 12b-2 under Section 12 of the
Exchange Act; “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act;
“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and as used in
Section 13(d) and 14(d) thereof and the rules thereunder, except that such term shall not include (w) the
Company or any of its Subsidiaries, (x) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any Subsidiary, (y) an underwriter temporarily holding securities pursuant to an offering of
such securities, or (z) a corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Shares; and “Subsidiary” shall mean any corporation,
partnership, joint venture or business trust, 50% or more of the control of which is owned, directly or indirectly, by
the Company.
(c)
In the event that, in connection with a Change in Control, outstanding options under the Program
are either assumed or converted into substituted options consistent with Section 4, each such assumed or
substituted option shall continue to be subject to the same terms and conditions to which it was subject
immediately prior to the transaction resulting in the assumption or substitution.
(d)
Unless otherwise provided in a Benefit Agreement, upon a Change in Control in which the
outstanding Shares are changed into, or exchanged for, property (including cash) other than solely stock or
securities of the Company or another corporation (disregarding, for this purpose, cash paid in lieu of fractional
shares), each Grantee may, to the extent such right would not cause the applicable stock option or Stock
Appreciation Right to be considered deferred compensation for purposes of Code Section 409A, elect to receive,
immediately following such Change in Control, in exchange for cancellation of any stock option or Stock
Appreciation Right held by such Grantee immediately prior to the Change in Control, a cash payment with respect
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to each Share subject to such option or right, equal to the difference between the value of consideration (as
determined by the Committee) received by the stockholders for a Share in the Change in Control, less any
applicable purchase price.
(e)
Notwithstanding any other provision of the Program, if a Change in Control occurs, the Adjusted
Awards shall be handled as described in the Employee Matters Agreement.
14. GENERAL PROVISIONS.
(a) Adjusted Awards.
Notwithstanding anything in the Program to the contrary, the terms of the Program will apply to Adjusted Awards
only to the extent that they are not inconsistent with the Employee Matters Agreement and the terms of the
applicable Adjusted Awards assumed in accordance with the Employee Matters Agreement. To the extent that
the terms of the Program are inconsistent with the terms of an Adjusted Award Benefit Agreement, the terms of
the applicable Adjusted Award shall be governed by the Employee Matters Agreement, the applicable Abbott
Stock Program, and the applicable Benefit Agreement.
(b) Nontransferability, Deferrals and Settlements.
Unless otherwise determined by the Committee or provided in a Benefit Agreement, Benefits shall not be
transferable by a Grantee except by will or the laws of descent and distribution and shall be exercisable during the
lifetime of a Grantee only by such Grantee or his guardian or legal representative. Notwithstanding the foregoing,
any transfer of Benefits to independent third parties for cash consideration without stockholder approval is
prohibited. Any Benefit shall be null and void and without effect upon any attempted assignment or transfer,
except as herein provided, including without limitation any purported assignment, whether voluntary or by
operation of law, pledge, hypothecation or other disposition, attachment, divorce, trustee process or similar
process, whether legal or equitable, upon such Benefit. With respect to Benefits other than options, the
Committee may require or permit Grantees to elect to defer the issuance of Shares (with settlement in cash or
Shares as may be determined by the Committee or elected by the Grantee in accordance with procedures
established by the Committee), or the settlement of Benefits in cash under such rules and procedures as
established under the Program to the extent that such deferral complies with Code Section 409A and any
regulations or guidance promulgated thereunder. It may also provide that such deferred settlements include the
payment or crediting of interest, dividends or dividend equivalents on the deferral amounts.
(c) No Right to Continued Employment, etc.
Nothing in the Program or in any Benefit granted or any Benefit Agreement or other agreement entered into
pursuant hereto shall confer upon any Grantee the right to continue in the employ or service of the Company, any
Subsidiary or to be entitled to any remuneration or benefits not set forth in the Program or such Benefit
Agreement or other agreement or to interfere with or limit in any way the right of the Company or any such
Subsidiary to terminate such Grantee’s employment or service.
(d) Sale of Subsidiary.
For all purposes hereunder, except as otherwise provided by the Committee, a Grantee’s employment or service
with a Subsidiary shall be deemed to be terminated on the day such entity ceases to be a Subsidiary of the
Company.
(e) Taxes.
The Company shall be entitled to withhold, or require a participant to remit to the Company, the amount of any tax
attributable to any amount payable or Shares deliverable under the Program. The Company may defer making
payment or delivery if any such tax may be pending unless and until indemnified to its satisfaction, and the
Company shall have no liability to any participant for exercising the foregoing right. The Committee may, in its
sole discretion and subject to such rules as it may adopt, permit or require a Grantee to pay all or a portion of the
federal, state and local taxes, including social security and Medicare withholding tax (or corresponding taxes
under applicable laws in non-U.S. jurisdictions), arising in connection with the receipt or exercise of any Benefit,
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by, without limitation, (i) having the Company withhold Shares, (ii) tendering Shares received in connection with
such Benefit back to the Company, (iii) delivering other previously acquired Shares having a Fair Market Value
approximately equal to the amount to be withheld; (iv) selling Shares issued pursuant to such Benefit and having
the Company withhold from proceeds of the sale of such Shares, (v) having the Company or a Subsidiary, as
applicable, withhold from any cash compensation payable to the Grantee, or (vi) requiring the Grantee to repay
the Company or Subsidiary, in cash or in Shares, for taxes paid on the Grantee’s behalf.
(f) Amendment and Termination.
The Program may be amended or terminated at any time by action of the Board. However, no amendment may,
without stockholder approval: (i) increase the aggregate number of Shares available for Benefits (except to reflect
an event described in Section 4); (ii) extend the term of the Program; or (iii) change or add a category or
categories of individuals who are eligible to participate in the Program. No amendment or termination of the
Program may materially and adversely modify any person’s rights under the express terms and conditions of an
outstanding Benefit without such person’s written consent, except that the Committee may amend the Program in
accordance with Section 10 above, or to qualify for or comply with any tax or regulatory requirement for which or
with which the Board or Committee deems it necessary or desirable to qualify or comply including, without
limitation, pursuant to Section 14(n) hereof.
(g) Duration of Program.
Unless earlier terminated by the Board pursuant to the provisions of the Program, the Program shall expire on the
tenth anniversary of the Restatement Effective Date. No Benefits shall be granted under the Program after such
date.
(h) No Rights to Benefits; No Stockholder Rights.
No individual shall have any claim to be granted any Benefit under the Program, and there is no obligation for
uniformity of treatment of Grantees. No individual shall have any right to a Benefit or to payment or settlement
under any Benefit unless and until the Committee or its designee shall have determined that a Benefit or payment
or settlement is to be made. Except as provided specifically herein, a Grantee or a transferee of a Benefit shall
have no rights as a stockholder with respect to any Shares covered by the Benefit until the date of the issuance of
such Shares.
(i) Unfunded Status of Benefits.
The Program is intended to constitute an “unfunded” plan for purposes of incentive and deferred compensation.
With respect to any payments not yet made to a Grantee pursuant to a Benefit, nothing contained in the Program
or any Benefit shall give any such Grantee any rights that are greater than those of a general creditor of the
Company.
(j) No Fractional Shares.
Unless otherwise determined by the Committee, no fractional Shares shall be issued or delivered pursuant to the
Program or any Benefit. The Committee shall determine whether cash, other Benefits, or other property shall be
issued or paid in lieu of such fractional Shares or whether such fractional Shares or any rights thereto shall be
forfeited or otherwise eliminated.
(k) Regulations and Other Approvals.
The obligation of the Company to sell or deliver Shares with respect to any Program Benefit shall be subject to all
applicable laws, rules and regulations, including all applicable securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.
(l) Listing, Registration or Qualification of Shares.
Each Benefit is subject to the requirement that, if at any time the Committee or its delegate determines, in its sole
discretion, that the listing, registration or qualification of Shares issuable pursuant to the Program is required by
any securities exchange or under any state or federal law (or corresponding requirements under applicable laws
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in non-U.S. jurisdictions), or the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of a Benefit or the issuance of Shares, no such Benefit
shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions not acceptable to the Committee or its
delegate.
(m) Restricted Securities.
If the disposition of Shares acquired pursuant to the Program is not covered by a then current registration
statement under the Securities Act of 1933 (the “Securities Act”), and is not otherwise exempt from such
registration, then such Shares shall be restricted against transfer to the extent required by the Securities Act or
regulations thereunder and the Committee may require a Grantee receiving Shares pursuant to the Program, as a
condition precedent to receipt of such Shares, to represent to the Company in writing that the Shares acquired by
such Grantee is acquired for investment only and not with a view to distribution.
(n) Section 409A.
Notwithstanding any provision of the Program, to the extent that any Benefit would be subject to Code
Section 409A, no such Benefit may be granted if it would fail to comply with the requirements set forth in Code
Section 409A. To the extent that the Committee determines that the Program or any Benefit is subject to Code
Section 409A and fails to comply with the requirements of Code Section 409A, notwithstanding anything to the
contrary contained in the Program or in any Benefit Agreement, the Committee reserves the right to amend or
terminate the Program and/or amend, restructure, terminate or replace the Benefit, without the consent of the
Grantee, to cause the Benefit to either not be subject to Code Section 409A or to comply with the applicable
provisions of such section. In addition, for each Benefit subject to Code Section 409A, a termination of
employment or service with the Company and its Subsidiaries shall be deemed to have occurred under the
Program with respect to such award on the first day on which an individual has experienced a “separation from
service” within the meaning of Code Section 409A; further, with respect to any such Benefit, if the Grantee is one
of the Company’s “specified employees” under Code Section 409A at the time of the Grantee’s separation from
service, any payment that otherwise would be made to such Grantee during the first six (6) months on or following
his or her separation from service shall not be made until the date that is six (6) months and one (1) day after
such separation from service, except to the extent that earlier payment would not result in such Grantee’s
incurring interest or additional tax under Code Section 409A.
(o) Governing Law.
The Program and all determinations made and actions taken pursuant hereto shall be governed by the laws of the
State of Delaware without giving effect to the conflict of laws principles thereof.
(p) Construction.
Any reference in the Program to any law, statute, rule, regulation, or official guidance thereunder, shall be
construed as a reference to such law, statute, rule, regulation, or official guidance, as the same may be amended,
from time to time, or any successor provision to such law, statute, rule, regulation or official guidance.
(q) Forfeiture and Clawback Provisions.
Subject to the discretion of the Compensation Committee, all Benefits (including any proceeds, gains or other
economic benefit actually or constructively received by a participant upon any receipt or exercise of any Benefit or
upon the receipt or resale of any Shares underlying the Benefit) shall be subject to forfeiture and/or repayment to
the Company to the extent and in the event (i) required to comply with any requirements imposed under
applicable laws and/or the rules and regulations of the securities exchange or inter-dealer quotation system on
which the Shares are listed or quoted, (ii) of a material restatement of applicable Company earnings or other
financial results upon which the calculation of the amount of such Benefit was based, or (iii) such participant has
engaged in misconduct constituting a material breach of the Company Code of Business Conduct.
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(r) Outstanding Qualified Performance-Based Awards.
All provisions of the Program governing Outstanding Qualified Performance-Based Awards that were in effect
prior to the Restatement Effective Date shall continue in effect with respect to Outstanding Qualified Performance-
Based Awards, notwithstanding the elimination of such provisions from the Program as of the Restatement
Effective Date. Further, no amendment or restatement of the Program shall affect the terms and conditions of any
Outstanding Qualified Performance-Based Award or any other benefit or award that the Company intends to
qualify for grandfathering under P.L. 115-97, Section 13601(e)(2), to the extent that it would result in a material
modification of such award within the meaning of such Section 13601(e)(2). For purposes of this Section 14(r),
“Outstanding Qualified Performance-Based Award” means any award granted prior to the Restatement Effective
Date that is outstanding as of the Restatement Effective Date and that is intended to constitute “qualified
performance-based compensation” as described in Section 162(m)(4)(C) of the Code, as in effect prior to its
amendment by the Tax Cuts and Jobs Act, P.L. 115-97.
(s) Effective Date.
The Program became effective as of January 1, 2013 (the “Effective Date”). The Program was amended and
restated by the Board as of February 18, 2021 and approved by the stockholders as of May 7, 2021 (the
“Restatement Effective Date”).
15. DEFINITIONS.
For purposes of the Program, the following terms shall be defined as set forth below:
(a)
(b)
“Abbott Stock Program” has the meaning ascribed to it in the Employee Matters Agreement.
“Adjusted Awards” means awards granted under the Abbott Stock Programs and converted into
awards denominated with respect to Shares, as described in the Employee Matters Agreement.
(c)
(d)
“Benefit” means a grant under the Program of any of the types of awards described in Section 5.
“Benefit Agreement” means any written agreement, contract, or other instrument or document
evidencing the terms and conditions of a Benefit.
(e)
(f)
“Board” means the Board of Directors of the Company.
“Change in Control” has the meaning ascribed to it in Section 13.
(g)
“Code” means the Internal Revenue Code of 1986, as amended from time to time, together with
the regulations and official guidance promulgated thereunder, whether issued prior or subsequent to the grant of
any Benefit.
(h)
(i)
“Committee” has the meaning ascribed to it in Section 2.
“Company” or “AbbVie” means AbbVie Inc., a corporation organized under the laws of the State
of Delaware, or any successor corporation.
(j)
(k)
“Effective Date” has the meaning ascribed to it in Section 14(s).
“Employee Matters Agreement” means the Employee Matters Agreement by and between Abbott
Laboratories and AbbVie Inc., dated as of December 31, 2012.
(l)
“Exchange Act” means the Securities Exchange Act of 1934.
(m)
“Executive Vice President, Chief Human Resources Officer” means the Company’s Executive
Vice President, Human Resources, or the individual holding equivalent duties and responsibilities.
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(n)
“Fair Market Value” means, with respect to Shares or other property, the fair market value of such
Share or other property determined by such methods or procedures as shall be established from time to time by
the Committee.
(o)
“Grantee” means (i) a person who, as a Non-Employee Director of the Company or an employee
of the Company or a Subsidiary of the Company, or a beneficiary or estate of such person, has been granted a
Benefit, or (ii) a recipient of an Adjusted Award in accordance with the terms of the Employee Matters Agreement.
(p)
“Individual Limits” means the limitations on awards to a single individual set forth in the third
paragraph of Section 4 and in the second paragraph of Section 8.
(q)
“Non-Employee Director” means a member of the Board who is not a full-time employee of the
Company or any of its Subsidiaries.
(r)
“Nonqualified Stock Option” means any option that is not intended to be designated as an
incentive stock option within the meaning of Code Section 422.
(s)
a specified price.
“option” means a contractual right granted to a Grantee under the Program to purchase Shares at
(t)
“optionee” means a person who, as a Non-Employee Director of the Company or an employee of
the Company or a Subsidiary of the Company, or a beneficiary or estate of such person, has been granted an
option.
(u)
“Other Share-Based Award” means a Benefit granted to a Grantee pursuant to Section 9, which
may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related
to, Shares.
(v)
“Outstanding Qualified Performance-Based Award” has the meaning ascribed to it in
Section 14(r).
(w)
“Performance Goals” has the meaning ascribed to it in Section 8.
(x)
(y)
“Person” has the meaning ascribed to it in Section 13(b).
“Program” means this AbbVie Amended and Restated 2013 Incentive Stock Program, as
amended from time to time.
(z)
“Restatement Effective Date” has the meaning ascribed to it in Section 14(s).
(aa)
“Restricted Stock” or “Restricted Stock Award” means Shares awarded to a Grantee under
Section 7(a), without payment, as compensation for services to the Company or its Subsidiaries, which are
subject to vesting restrictions, which may include the attainment of specified Performance Goals.
(bb)
“Restricted Stock Unit” means a contractual right to receive a number of Shares or an amount of
cash equal to the value of that number of Shares corresponding to the number of units granted to a Grantee,
without payment, as compensation for services to the Company or its Subsidiaries, which right may be subject to
vesting restrictions including the attainment of specified Performance Goals.
(cc)
“Shares” means shares of the Company’s common stock.
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(dd)
“Stock Appreciation Right” means an Other Share-Based Award, payable in cash or Shares, that
entitles a Grantee upon exercise to the excess of the Fair Market Value of the Shares underlying the Benefit over
a base price established by the Committee in respect of such Shares.
(ee)
“Subsidiary” has the meaning ascribed to it in Section 13(b).
(ff)
“Substitute Option” has the meaning ascribed to it in Section 6.
(gg)
“Treasury Regulations” means the Federal tax regulations promulgated by the United States
Department of Treasury.
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ABBVIE
AMENDED AND RESTATED 2013 EMPLOYEE STOCK PURCHASE PLAN FOR NON-U.S. EMPLOYEES
(Effective as of January 1, 2013, and amended and restated effective as of August 1, 2021)
Appendix D
ABBVIE
AMENDED AND RESTATED 2013 EMPLOYEE STOCK PURCHASE PLAN FOR NON-U.S. EMPLOYEES
Introduction. The purpose of the AbbVie 2013 Employee Stock Purchase Plan for Non-U.S. Employees
1.
is to provide an opportunity for non-U.S. Employees of Subsidiaries to purchase Common Stock of AbbVie Inc.
and thereby to have the opportunity to share in its growth. The Plan is not intended to qualify as an “employee
stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended.
Definitions. When used herein, the following words and terms shall have the meanings set forth below,
2.
unless a different meaning clearly is required by the context. Whenever appropriate, words used in the singular
shall be deemed to include the plural, and vice versa, and the masculine gender shall be deemed to include the
feminine gender, unless a different meaning clearly is required by the context.
2.1
“Administrator” shall mean the Compensation Committee of the Board or any other committee or
individual as the Board may designate from time to time in its sole discretion.
2.2
“Board” shall mean the Board of Directors of the Company.
2.3
Company.
2.4
2.5
“Common Stock” shall mean a share of common stock, par value USD 0.01 per share, of the
“Company” shall mean AbbVie Inc., a Delaware corporation.
“Eligible Compensation” shall mean the basic rate of cash remuneration of an Employee as it
appears on the books and records of the Employee’s Employer for services rendered. To the extent permitted by
applicable law, each Employer with the approval of the Administrator shall have the authority to determine what
constitutes the basic rate of cash remuneration for purposes of the definition of “Eligible Compensation,”
consistent with local custom and past practice.
2.6
“Employee” shall mean an individual who is classified as an employee by an Employer in its sole
discretion on its payroll records and who is ineligible to participate in the AbbVie Savings Plan. The term
“Employee” shall include a full-time employee and a permanent part-time employee of an Employer. For all
purposes hereunder, except as otherwise provided by the Administrator, a Participant’s employment or service
with an Employer shall be deemed to be terminated on the day such entity ceases to be a Subsidiary of the
Company.
2.7
“Employer” shall mean each Subsidiary that has been designated by the Administrator or its
delegate as eligible to participate in the Plan with respect to its Employees.
2.8
“Enrollment Period” shall mean such period of time, as determined by the Administrator in its sole
discretion, preceding an Offering Date during which an Employee may enroll in the Plan.
2.9
“Fair Market Value” of a share of Common Stock shall mean the closing price of a single share of
Common Stock reported in the New York Stock Exchange Composite Transactions on the relevant date, or, if no
sale shall have been reported on that date, the closing price reported in the New York Stock Exchange Composite
Transactions on the last preceding day on which there was a sale.
2.10
“Offering Date” shall mean the first business day of each Purchase Cycle.
2.11
Section 4 of the Plan.
“Participant” shall mean an Employee who elects to participate in the Plan in accordance with
2.12
“Plan” shall mean the Amended and Restated AbbVie 2013 Employee Stock Purchase Plan for
Non-U.S. Employees, as amended from time to time.
2.13
“Purchase Date” shall mean the last business day of each Purchase Cycle, or such other date as
may be established by the Administrator pursuant to Section 9(b) or Section 11.2.
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2.14
“Purchase Cycle” shall mean each six-month period, or such other period as determined by the
Administrator in its sole discretion pursuant to Section 5.2.
2.15
“Subsidiary” shall mean any corporation, partnership, joint venture, business trust or other entity
50% or more of the voting stock or control of which is owned, directly or indirectly, by the Company.
2.16
“U.S.” shall mean the United States of America.
Eligibility. Any person who is an Employee during the Enrollment Period, other than an officer or director
3.
of the Company, shall be eligible to enroll and participate in the Plan. Notwithstanding the foregoing sentence, the
Administrator may prospectively condition participation by an Employee upon a period of service with such
Employer.
4.
Participation and Withdrawal.
4.1
Enrollment. An eligible Employee may become a Participant with respect to an upcoming
Purchase Cycle by filing during the Enrollment Period preceding the Offering Date a completed authorization and
enrollment form in such form as shall be specified by the Administrator, or by following an electronic or other
enrollment process as prescribed by the Administrator. Unless otherwise determined by the Administrator, an
eligible Employee who fails to follow the prescribed procedures to enroll in the Plan on or before the enrollment
deadline for such Offering Date shall not participate in the Plan with respect to that Purchase Cycle, but instead
may participate in the next following Purchase Cycle. Under procedures established by his Employer, a
Participant’s authorization and enrollment form shall continue in effect from one Purchase Cycle to the next,
unless the Participant suspends his payroll deductions or contributions or discontinues his participation in
accordance with Section 4.3. Notwithstanding the foregoing, the Administrator may permit a new Employee who
commences employment as a result of a merger, acquisition, purchase of assets or business, spin-off, or other
corporate transaction involving an Employer, to become a Participant during the Purchase Cycle in which he
becomes a new Employee, in accordance with such procedures and enrollment process as prescribed by the
Administrator.
4.2
Payroll Deductions/Contributions.
(a)
An eligible Employee may authorize payroll deductions at the rate of 1% to 10% (or such
other maximum percentage as specified by the Administrator), in whole percentages only, of the
Employee’s Eligible Compensation. Where payroll deductions are prohibited under local law, the
Administrator may permit Employees to contribute to the Plan by an alternative method of contribution,
including (but not limited to) personal checks or direct debits from personal banking accounts. Payroll
deductions or contributions shall commence as of the Offering Date and as soon as administratively
practicable following the date on which the eligible Employee completes the enrollment process, subject
to any approvals or other requirements under local law. Each Employer may use the payroll deductions or
contributions of its Participants for any corporate purpose, except where prohibited by local law. Neither
the Company nor the Employer shall be obligated to segregate such payroll deductions or contributions,
except as required by local law.
(b)
Each Employer shall maintain a separate bookkeeping account, or other type of account
if required by local law, for each of its Employees who participate in the Plan and shall credit to that
account all payroll deductions or contributions made by or on behalf of the Employee pursuant to
Section 4.2(a). No interest shall be paid or credited to the account of any Participant except where
required by local law.
(c)
Unless otherwise prohibited under local law or unless alternative procedures are
established by the Administrator in its sole discretion, each Employer shall convert the payroll deductions
or contributions of its Participants paid in non-U.S. currency into U.S. dollars at the end of the applicable
Purchase Cycle at the then prevailing exchange rate, at which time such amounts shall be forwarded to
the Company for the purchase of shares of Common Stock for Participants on the Purchase Date.
(d)
Subject to Section 4.2(a) and such other limitations and requirements, if any, as
prescribed by his Employer, a Participant may prospectively increase or decrease the rate of payroll
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deductions or contributions at any time by filing a new authorization with his Employer or by following
electronic or other procedures prescribed by his Employer. Such increase or decrease shall become
effective as of the next Purchase Cycle. If a Participant fails to follow such procedures to change the rate
of payroll deductions or contributions, the rate of payroll deductions or contributions shall remain
unchanged at the originally elected rate throughout the Purchase Cycle and future Purchase Cycles,
unless reduced to reflect a change by the Administrator in the maximum permissible rate.
4.3
Suspension of Payroll Deductions/Contributions or Discontinuance of Participation.
(a)
Under procedures established by the Administrator, a Participant may suspend payroll
deductions or contributions, or discontinue participation under the Plan, at any time during a Purchase
Cycle by completing and filing an authorization form in such form as shall be specified by the
Administrator, or by following electronic or other procedures prescribed by the Administrator. Such
suspension or discontinuance shall become effective as soon as administratively practicable.
(b)
In the event of the suspension of payroll deductions or contributions during a Purchase
Cycle, the amount credited to the Participant’s account as of the date of suspension shall be used to
purchase shares of Common Stock pursuant to Section 6 of the Plan. A Participant who suspends payroll
deductions or contributions during a Purchase Cycle shall not be entitled to participate in any future
Purchase Cycle and shall have no additional amounts withheld or contributed until he completes a new
authorization with his Employer for a subsequent Purchase Cycle or otherwise complies with his
Employer’s enrollment process in accordance with the enrollment procedures set forth in Section 4.1.
(c)
Upon the Participant’s discontinuation of participation during a Purchase Cycle, the
amount credited to the Participant’s account shall be refunded as soon as administratively practicable
without interest (unless otherwise required by local law). Such Participant shall be ineligible to participate
in the Plan until he re-enrolls in the Plan for a subsequent Purchase Cycle in accordance with the
enrollment procedures set forth in Section 4.1.
4.4
Termination of Employment. If a Participant terminates employment with his Employer for any
reason (including death or disability) prior to the expiration of a Purchase Cycle, the Participant’s participation in
the Plan shall immediately terminate, and the amount credited to the Participant’s account shall be refunded to
the Participant or the Participant’s estate without interest (unless otherwise required by local law) as soon as
administratively practicable. The Administrator in its discretion shall determine whether Employees have
terminated employment for purposes of the Plan, and such determinations shall be final and binding on all parties.
The Administrator also may establish rules regarding when a leave of absence or other change of employment
status will be considered to be a termination of employment with respect to Employees for purposes of the Plan.
5.
Offering.
5.1
Authorized Shares. The maximum number of shares of Common Stock that may be issued
pursuant to the Plan, including under the AbbVie Employee Share Ownership Plan (the “UK Plan”) or any other
sub-plan to the Plan, shall be Ten Million (10,000,000) shares, which reflects the number of Shares initially
authorized under the Plan as of the Effective Date. Such shares may be authorized but unissued shares, treasury
shares, shares purchased on the open market, or a combination of any of the foregoing, as determined from time
to time by the Board. If any purchase right granted under the Plan, or under the UK Plan or any other sub-plan to
the Plan, shall expire or terminate for any reason without having been exercised in full, the unpurchased shares
subject to that purchase right shall again become available for purposes of the Plan. If on any Purchase Date the
number of shares otherwise purchasable by Participants is greater than the number of shares then remaining
available under the Plan, the Administrator shall allocate the available shares among the Participants in such
manner as it deems appropriate in its sole discretion.
5.2
Purchase Cycles. Unless otherwise determined by the Administrator with respect to a particular
jurisdiction, Subsidiary, or sub-plan: (a) the duration of each Purchase Cycle shall be six consecutive calendar
months; (b) each Purchase Cycle shall commence on February 1 or August 1; and (c) subsequent Purchase
Cycles shall run consecutively after each preceding Purchase Cycle. Except where prohibited by applicable law,
the Administrator shall have the power to make any such changes without Board approval, and without regard to
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the expectations of any Participants; provided, however, that the Company and/or Employer shall notify
Participants of any such change within a reasonable time before such change becomes effective.
5.3
Grant of Purchase Right. On each Offering Date, each Participant who has timely enrolled in a
Purchase Cycle in accordance with Section 4.1 shall be granted the right to purchase that number of shares of
Common Stock which may be purchased with the balance credited to the Participant’s account as of the
applicable Purchase Date.
5.4
Purchase Cycle Limitation. Notwithstanding any other provision of the Plan to the contrary, unless
otherwise determined by the Administrator, no Participant may contribute more than the equivalent in local
currency of USD 12,500 during each Purchase Cycle towards the purchase of shares of Common Stock under
the Plan. Any amounts contributed in excess of this limitation shall be carried over to the immediately following
Purchase Cycle, or shall be refunded to the Participant, as the Administrator in its sole discretion shall determine.
6.
Purchase of Shares.
6.1
Automatic Purchase of Shares. Unless a Participant has previously ceased participation in the
Plan during a Purchase Cycle, a Participant’s purchase right shall be automatically exercised on each Purchase
Date to purchase that number of shares of Common Stock which the balance credited to the Participant’s account
shall entitle him to purchase. Any cash remaining in a Participant’s account after the purchase of shares of
Common Stock may, unless otherwise determined by the Administrator, be applied to purchase a notional interest
in fractional Common Stock, and shall remain in the Participant’s account. Upon distribution of a Participant’s
account, any such interest in a fractional Common Stock will be paid in cash.
6.2
Purchase Price. The purchase price for a single share of Common Stock for each Purchase
Cycle shall be 85% of the lesser of: (a) the Fair Market Value of a share of Common Stock on the Offering Date;
and (b) the Fair Market Value of a share of Common Stock on the Purchase Date.
7.
Payment and Delivery.
7.1
Direct Deposit of Shares. Unless and until otherwise determined by the Administrator, all shares
of Common Stock purchased under the Plan on the Purchase Date shall be deposited directly into an account
established in the name of each Participant with a broker or agent designated by the Administrator. Upon the
purchase and allocation of shares of Common Stock, the Administrator shall arrange for delivery (by electronic or
other means) to Participants a record of the shares of Common Stock purchased. The Administrator may
authorize the broker or agent to utilize electronic or automated methods of share transfer for these purposes.
7.2
Mandatory Retention of Shares. Before the commencement of any Purchase Cycle, the
Administrator may require that: (a) any shares of Common Stock purchased under the Plan during such Purchase
Cycle be retained with a designated broker or agent for a designated period of time (and may restrict dispositions
during that period) and/or may establish other procedures to restrict transfer of such shares of Common Stock;
and/or (b) shares of Common Stock purchased under the Plan automatically participate in a dividend
reinvestment plan or program maintained by the Company.
7.3
Fully-Paid and Non-Assessable. The Company shall retain the amount of payroll deductions or
contributions transmitted by each Employer and used to purchase shares of Common Stock as full payment for
the shares of Common Stock, and the shares of Common Stock shall then be fully paid and non-assessable.
7.4
No Voting or Dividend Rights. No Participant shall have any voting, dividend, or other shareholder
rights with respect to shares of Common Stock subject to any purchase right under the Plan until the shares of
Common Stock have been purchased and delivered to the Participant or into an account for the benefit of the
Participant, as provided in this Section 7.
8.
Recapitalization.
8.1
In General. If after the grant of purchase right, but prior to the purchase of shares of Common
Stock with respect to a particular Purchase Cycle, there is any increase or decrease in the number of outstanding
shares of Common Stock because of a stock split, stock dividend, combination or recapitalization, the
Administrator in its sole discretion shall make any such substitution or adjustment, if any, as it deems appropriate,
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with respect to: (a) the maximum number of shares of Common Stock specified in Section 5.1; (b) the purchase
price per share of Common Stock; and (c) any other limitations provided under this Plan. The Administrator shall
take any further actions which, in the exercise of its discretion, may be necessary or appropriate under the
circumstances.
8.2
Adjustments. In the event the Company effects one or more reorganizations, recapitalizations,
spinoffs, split-ups, rights offerings or reductions of its outstanding shares of Common Stock, the Administrator in
its sole discretion may make any such substitution or adjustment, if any, as it deems appropriate, with respect to:
(a) the number and kind of shares specified in Section 5.1, (b) the purchase price per share of Common Stock
covered by each outstanding purchase right, and (c) any other limitations provided under this Plan.
8.3
Binding Decisions. The determinations of the Administrator under this Section 8 shall be
conclusive and binding on all parties.
9.
Merger, Liquidation, Other Company Transactions.
9.1
Liquidation or Dissolution. In the event of the proposed liquidation or dissolution of the Company,
the Purchase Cycle then in progress shall terminate immediately prior to the consummation of such proposed
liquidation or dissolution, unless otherwise provided by the Administrator in its sole discretion, and all outstanding
purchase rights shall automatically terminate and the amounts of all payroll deductions and contributions will be
refunded without interest (unless otherwise required under local law) to the Participants as soon as reasonably
practicable.
9.2
Sale or Merger. In the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger or consolidation of the Company with or into another entity, then in the sole discretion of
the Administrator: (a) each purchase right shall be assumed, or an equivalent purchase right shall be substituted,
by the successor corporation or parent or subsidiary of such successor corporation; or (b) a new Purchase Date
shall be established by the Administrator on or before the date of consummation of such merger, consolidation or
sale, and all outstanding purchase rights shall be automatically exercised on such new date.
Transferability. Purchase rights granted to Participants may not be voluntarily or involuntarily assigned,
10.
transferred, pledged, or otherwise disposed of in any way, and are exercisable during the Participant’s lifetime
only by the Participant. Any attempted assignment, transfer, pledge, or other disposition of a purchase right
hereunder shall be null and void and without effect. If a Participant in any manner attempts to transfer, assign or
otherwise encumber his or her rights or interest under the Plan, such act shall be treated as an election by the
Participant to discontinue participation in the Plan pursuant to Section 4.3 of the Plan.
11.
Amendment or Termination of the Plan.
11.1
Term of Plan. The Plan shall continue until the tenth anniversary of the Restatement Effective
Date, unless previously terminated in accordance with Section 11.2.
11.2
Amendment and Termination. The Board or Committee may amend the Plan from time to time as
it deems desirable in its sole discretion without approval of the shareholders of the Company, except to the extent
shareholder approval is required by Rule 16b-3 of the Securities Exchange Act of 1934, as amended, applicable
New York Stock Exchange or other stock exchange rules, or other applicable laws or regulations. The Board may
terminate or suspend the Plan at any time in its sole discretion, including shortening a Purchase Cycle and
establishing a new Purchase Date for such Purchase Cycle for some or all Participants in connection with a spin-
off or other similar corporate event. The termination, suspension or amendment of the Plan shall not alter or
impose rights or obligations under any purchase right theretofore granted under the Plan in any material adverse
way without the consent of the affected Participants, unless such termination, suspension or amendment is
necessary or advisable to qualify for or comply with any tax or regulatory requirement for which or with which the
Board or Committee deems it necessary or desirable to qualify or comply, including, without limitation, pursuant to
Section 18 hereof.
Administration. The Administrator shall have the power, authority and responsibility for the day-to-day
12.
administration of the Plan, the power, authority and responsibility specifically provided in this Plan, and any
additional duties and responsibilities approved by the Board. To the extent permitted under applicable law, the
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Administrator may delegate its power, authority and responsibilities under the Plan to one or more officers of the
Company at any time in its sole discretion. In this regard and to the extent permitted under applicable law, the
Administrator hereby delegates its power, authority and responsibilities under the Plan to the Company’s
Executive Vice President, Chief Human Resources Officer (or the individual holding equivalent duties and
responsibilities). The Administrator and, to the extent permitted under applicable law, its delegate, shall have full
power and authority to promulgate any rules and regulations which are deemed necessary for the proper
administration of the Plan, to interpret the provisions and supervise the administration of the Plan, to correct any
defect or supply any omission or reconcile any inconsistency in the terms of the Plan and any enrollment form or
other instrument or agreement relating to the Plan, to make factual determinations relevant to Plan entitlements
and to take all action in connection with administration of the Plan as deemed necessary or advisable. Decisions
of the Administrator and, where applicable, its delegate, shall be final and binding upon all Participants. The
Company shall pay all reasonable expenses incurred in the administration of the Plan. Notwithstanding anything
in the Plan to the contrary, subject to applicable law, any authority or responsibility that, under the terms of the
Plan, may be exercised by the Administrator may alternatively be exercised by the Board. Neither the Board,
Administrator nor any delegate of the Administrator shall be liable for any action or determination made in good
faith with respect to the Plan or any purchase right granted hereunder.
Rules for Certain Jurisdictions. Notwithstanding anything in the Plan to the contrary, the Administrator
13.
(or its delegate) may, in its sole discretion: (a) amend or vary the terms of the Plan in order to conform such terms
with the requirements of each jurisdiction where an Employer is located; (b) amend or vary the terms of the Plan
in each jurisdiction where an Employer is located as it considers necessary or desirable to take into account or to
mitigate or reduce the burden of taxation and social security contributions for Participants and/or the Employer; or
(c) amend or vary the terms of the Plan in a jurisdiction where the Employer is located as it considers necessary
or desirable to meet the goals and objectives of the Plan. The Administrator (or its delegate) may, where it deems
appropriate in its sole discretion, establish one or more sub-plans for these purposes. Without limitation to the
above, the UK Plan annexed to the Plan shall be considered henceforth as a sub-plan to the Plan. The
Administrator (or its delegate) may, in its sole discretion, establish administrative rules and procedures to facilitate
the operation of the Plan in such jurisdictions. The terms and conditions contained herein which are subject to
variation in a jurisdiction shall be reflected in a written attachment to the Plan, or shall be otherwise documented
in such manner as may be prescribed by the Administrator. To the extent permitted under applicable law, the
Administrator may delegate its authority and responsibilities under this Section 13 to one or more officers of the
Company in addition to the delegation made under Section 12.
Compliance with Legal and Exchange Requirements. The Company shall not be under any obligation
14.
to issue shares of Common Stock upon the exercise of any purchase right unless and until the Company has
determined that: (a) it and the Participant have taken all actions required to register the shares of Common Stock
under the Securities Act of 1933, or to perfect an exemption from the registration requirements thereof; (b) any
applicable listing requirement of any stock exchange on which the shares of Common Stock is listed has been
satisfied; and (c) all other applicable provisions of U.S. federal, state, local and applicable non-U.S. law have
been satisfied.
Governmental Approvals. This Plan and the Company’s obligation to sell and deliver shares of
15.
Common Stock under the Plan in any jurisdiction shall be subject to approval of any governmental authority
required in connection with the Plan or the authorization, issuance, sale, or delivery of shares of Common Stock
hereunder in such jurisdiction.
No Enlargement of Employee Rights. Nothing contained in this Plan shall be deemed to give any
16.
Employee the right to be retained in the employ of the Company or an Employer or to interfere with the right of the
Company or an Employer to discharge any Employee at any time. Any rights or benefits provided under this Plan
shall not be considered part of normal or expected compensation for purposes of calculating any severance,
resignation, redundancy, end of service payments, bonuses, long service awards, pension, retirement or similar
payments.
Withholding Taxes. In the event that the Company or an Employer is required to withhold any
17.
applicable taxes in respect of any compensation or other income realized by a Participant under the Plan, the
Company or such Employer may deduct from any benefits of any kind otherwise due to such Participant, including
without limitation the proceeds of any sale of shares of Common Stock for the account of the Participant, the
aggregate amount of such applicable taxes required to be withheld or, if such payments are insufficient to satisfy
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such applicable taxes, the Participant will be required to pay to the Company or such Employer, or make other
arrangement satisfactory to the Company or such Employer regarding payment to the Company or such
Employer of, the aggregate amount of any such taxes.
Code Section 409A. Notwithstanding any provision in the Plan to the contrary, if the Administrator
18.
determines that a purchase right granted under the Plan to a Participant who is subject to U.S. federal income tax
may be subject to Section 409A of the Code or that any provision in the Plan would cause such a purchase right
under the Plan to be subject to Section 409A of the Code, the Administrator may amend the terms of the Plan
and/or of the outstanding purchase right or take such other action the Administrator determines is necessary or
appropriate, in each case, without the Participant’s consent, to exempt the outstanding purchase right or future
purchase right that may be granted under the Plan from, or to allow any such purchase rights to comply with
Section 409A of the Code, provided that any such amendment or action by the Administrator would not violate
Section 409A of the Code. Notwithstanding the foregoing, the Company will have no liability to a Participant or
any other party if the purchase right under the Plan that is intended to be exempt from or compliant with Section
409A of the Code is not so exempt or compliant or for any action taken by the Administrator with respect thereto.
The Company makes no representation that any purchase right under the Plan is compliant with Section 409A of
the Code.
Governing Law. This Plan shall be governed by and construed in accordance with the laws of the State
19.
of Delaware, without regard to conflicts of law principles. Each sub-plan established pursuant to Section 13 of the
Plan shall be governed by and construed in accordance with the laws of the applicable jurisdiction, unless
otherwise provided in such sub-plan document.
Severability. If any provision of the Plan shall be held illegal or invalid in any jurisdiction, such illegality
20.
or invalidity shall not affect the remaining provisions of the Plan in such jurisdiction, or any provision of the Plan in
any other jurisdiction, and the Plan shall be construed and applied in such jurisdiction as if the invalid provision
had never been contained herein.
Effective Date. This Plan became effective January 1, 2013 (the “Effective Date”). The Plan was
21.
amended and restated by the Board as of February 18, 2021 and approved by the stockholders on May 7, 2021
to become effective as of August 1, 2021 (the “Restatement Effective Date”).
28FEB201710025299
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D-7
| 2021 Proxy Statement
Stockholder Information
AbbVie Inc. Corporate Headquarters
1 North Waukegan Road
North Chicago, IL 60064
847.932.7900
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.
Annual Meeting
The Annual Meeting will be held on
Friday, May 7, 2021, at 9 a.m. CT.
Please see the proxy statement for
information about how to attend the
virtual Annual Meeting.
Dividend Reinvestment Plan
The AbbVie Dividend Reinvestment
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
EQ Shareowner Services
P.O. Box 64874
St Paul, MN 55164-0874
www.shareowneronline.com
877.881.5970
651.450.4064
Together, AbbVie and
Allergan, have an even
greater abilit y to meet
the needs of patients
~47,000
employees turning p ossibilitie s
into reality for our patients
60+
conditions treated
across all stage s
of life
30+
brands
220+
research partnerships
About AbbVie
AbbVie's mission is to discover and deliver innovative
medicines that solve serious health issues today
and address the medical challenges of tomorrow. We
strive to have a remarkable impact on people's lives
across several key therapeutic areas: immunology,
oncology, neuroscience, eye care, virology, women's
health and gastroenterology, in addition to products
and services across its Allergan Aesthetics portfolio.
For more information about AbbVie, please visit us
at www.abbvie.com.
175+
countries where
products help pa tients
14 countries with manufacturing
and R&D facilities
We take our role in the global community seriously by
supporting the patients we serve, the people we employ
and the world we live in. In times of crisis, responsibility
and philanthropy are central to AbbVie’s response.
Addressing Racial Equity
Supporting COVID-19 Relief
$55M
to nonprofits to address issues in our
criminal justic e system and supp ort
health and e ducation equity among
underserved Black communities
$35M
donated to support underserved
communities and health car e systems
working to address the impact of the
global pandemic
Over the next 5 years, this investment will:
In the United States, our investment led to:
Promote health equity for
100,000+ Black
Americans
Increase the pool of qualifie d, college
ready candida tes pursuing health car e
careers by at least
800 Black pr ofessionals
Impact
600+ young adults in
underserved communities, empowering
them to achieve economic stabilit y
through development programs
Provide nearly
3,000 under served
students
with mentors to guide them thr ough
high school and help na vigate future
opportunities
26 mobile field units
to increase U.S. hospital capacit y
2.6+ million units of PPE
delivered to 1 million health car e
providers and patients
5 million meals
and supplie s delivered through
200 food banks
In the European Union, our in vestment led to:
1,000 oxygen concentrators
and 1.2 million units of PPE
to hardest-hit European countries
Around the world:
26 additional nonpr ofits
supported through AbbVie COVID-19
Community Resilience Fund
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