Psorilax: prezzo, funziona, recensioni, opinioni, come si usa
The following is a discussion and analysis of the financial condition of
AbbVie Inc.(AbbVie or the company) as of December 31, 2019and 2018 and results of operations for each of the three years in the period ended December 31, 2019. This commentary should be read in conjunction with the consolidated financial statements and accompanying notes appearing in Item 8, "Financial Statements and Supplementary Data." EXECUTIVE OVERVIEW Company Overview AbbVie is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories (Abbott). AbbVie uses its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world's most complex and serious diseases. AbbVie's products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C virus (HCV) and human immunodeficiency virus (HIV); neurological disorders, such as Parkinson's disease; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; pain associated with endometriosis; 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, with additional targeted investment in cystic fibrosis and women's health. AbbVie's products are generally sold worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned distribution centers and public warehouses. In the United States, AbbVie distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to pharmacies and patients. Outside the United States, 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 30,000 employees. AbbVie operates in one business segment-pharmaceutical products. On June 25, 2019, AbbVie announced that it entered into a definitive transaction agreement under which AbbVie will acquire Allergan plc (Allergan). See Note 5 to the Consolidated Financial Statements for additional information regarding the proposed acquisition. 2019 Financial Results AbbVie's strategy has focused on delivering strong financial results, advancing and investing in its pipeline and returning value to shareholders while ensuring a strong, sustainable growth business over the long term. The company's financial performance in 2019 included delivering worldwide net revenues of $33.3 billion, operating earnings of $13.0 billion, diluted earnings per share of $5.28and cash flows from operations of $13.3 billion. Worldwide net revenues grew by 3% on a constant currency basis, primarily driven by revenue growth related to IMBRUVICA and VENCLEXTA as well as the continued strength of HUMIRA in the U.S.and newly launched immunology assets SKYRIZI and RINVOQ, offset by international HUMIRA biosimilar competition. Diluted earnings per share in 2019 was $5.28and included the following after-tax costs: (i) $3.2 billionfor the change in fair value of contingent consideration liabilities; (ii) $1.3 billionrelated to the amortization of intangible assets; (iii) a Stemcentrx-related impairment charge of $823 millionnet of the related fair value adjustment to contingent consideration liabilities; (iv) $364 millionfor acquired in-process research and development (IPR&D); and (v) $338 millionof expenses related to the proposed Allergan acquisition. These costs were partially offset by the following after-tax benefits: (i) $414 millionfrom litigation matters primarily due to the settlement of an intellectual property dispute with a third party; (ii) $400 milliondue to the favorable resolution of various tax positions; and (iii) $297 millionfrom an amended and restated license agreement between AbbVieand Reata Pharmaceuticals, Inc. (Reata). Additionally, financial results reflected continued funding to support all stages of AbbVie's emerging pipeline assets and continued investment in AbbVie's on-market brands. In November 2019, AbbVie's board of directors declared a quarterly cash dividend of $1.18per share of common stock payable in February 2020. This reflects an increase of approximately 10.3% over the previous quarterly dividend of $1.07per share of common stock.
26 ((Immagine rimossa: abbvieimage2a14.gif)) | 2019 Modulo 10-K
2020 Strategic Objectives AbbVie's mission is to be an innovation-driven, patient-focused specialty biopharmaceutical company capable of achieving top-tier financial performance through outstanding execution and a consistent stream of innovative new medicines. AbbVie intends to continue to advance its mission in a number of ways, including: (i) growing revenues by diversifying revenue streams, ensuring strong commercial execution of new product launches and driving late-stage pipeline assets to the market; (ii) continuing to invest and expand its pipeline in support of opportunities in immunology, oncology and neuroscience, with additional targeted investment in cystic fibrosis and women's health as well as continued investment in key on-market products; (iii) expanding operating margins; and (iv) returning cash to shareholders via a strong and growing dividend while also reducing incremental 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: • Completion and successful integration of the proposed Allergan acquisition.
• Crescita dei ricavi dell'oncologia ematologica sia da IMBRUVICA che da VENCLEXTA.
• Crescita dei ricavi dell'immunologia guidata da lanci commerciali di successo
SKYRIZI e RINVOQ, nonché HUMIRA
• Gestione efficace dell'erosione biosimilare internazionale HUMIRA.
• The favorable impact of pipeline products and indications recently approved or currently under regulatory review where approval is expected in 2020. 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, 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 will create 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 will be enhanced with numerous Allergan assets and Allergan's product portfolio will benefit 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 pharmaceutical products and acquire or collaborate on compounds currently in development by other biotechnology or pharmaceutical companies. AbbVie's pipeline currently includes approximately 60 compounds or indications in clinical development individually or under collaboration or license agreements and is focused on such important medical specialties as immunology, oncology and neuroscience along with targeted investments in cystic fibrosis and women's health. Of these programs, approximately 30 are in mid- and late-stage development. The following sections summarize transitions of significant programs from Phase 2 development to Phase 3 development as well as developments in significant Phase 3 and registration programs. AbbVie expects multiple Phase 2 programs to transition into Phase 3 programs in the next 12 months. Significant Programs and Developments Immunology RINVOQ • In
February 2019, the U.S. Food and Drug Administration(FDA) accepted
per revisione prioritaria New Drug Application (NDA) di AbbVie per
upadacitinib, un inibitore selettivo del JAK1 orale sperimentale, per la
treatment of adult patients with moderate to severe rheumatoid arthritis (RA).
the efficacy and safety of upadacitinib in subjects with giant cell arteritis. 2019 Form 10-K | ((Image Removed: abbvieimage2a14.gif)) 27
August 2019, the FDA approved RINVOQ (upadacitinib) for the treatment of adults with moderately to severely active RA who have had an inadequate response or intolerance to methotrexate.
3 studi clinici su RINVOQ in pazienti adulti con psoriasica attiva
artrite (PsA). Risultati dello studio SELECT-PsA 2, che ha valutato
RINVOQ rispetto al placebo in pazienti che non hanno risposto adeguatamente
il trattamento con uno o più DMARD biologici ha mostrato che entrambe le dosi di
RINVOQ (15 mg e 30 mg) ha raggiunto gli endpoint primari e secondari chiave a
week 12. The safety profile was consistent with that of previous studies across indications, with no new safety risks detected. • In
November 2019, AbbVie announced data from the Phase 2/3 SELECT-AXIS 1 trial in which twice as many adult patients with ankylosing spondylitis treated with RINVOQ achieved the primary
endpoint alla settimana 14 rispetto al placebo. Il profilo di sicurezza era coerente
with that of previous studies across indications, with no new safety risks detected.
the efficacy and safety of RINVOQ in adult patients with axial spondyloarthritis.
authorization for RINVOQ for the treatment of adult patients with moderate to severe active rheumatoid arthritis who have had an inadequate response or intolerance to one or more DMARDs.
Studio clinico di fase 3 di RINVOQ in pazienti adulti con PsA attiva.
Risultati dello studio SELECT-PsA 1, che ha valutato RINVOQ rispetto a
placebo in patients who did not adequately respond to treatment with one or more non-biologic DMARDs, showed that both doses of RINVOQ (15
mg e 30 mg) hanno soddisfatto gli endpoint primari e secondari chiave. La sicurezza
profilo era coerente con quello di studi precedenti in tutto
indicazioni, senza che siano stati rilevati nuovi rischi per la sicurezza.
l'efficacia e la sicurezza di risankizumab, uno studio sperimentale
inibitore dell'interleuchina-23 (IL-23), in soggetti con artrite psoriasica.
April 2019, the FDA approved SKYRIZI (risankizumab) for the treatment of moderate to severe plaque psoriasis in adults who are candidates for systemic therapy or phototherapy.
il trattamento della psoriasi a placche da moderata a grave nei pazienti adulti
che sono candidati per la terapia sistemica.
(obinutuzumab), for adult patients with previously untreated chronic lymphocytic leukemia (CLL)/small lymphocytic lymphoma (SLL). • In
June 2019, AbbVie announced results from the Phase 3 CLL12 trial, evaluating IMBRUVICA in patients with previously untreated CLL, which demonstrated that IMBRUVICA significantly improved event- and progression-free survival.
(sNDA) to the FDA for IMBRUVICA in combination with rituximab for the first-line treatment of younger patients with CLL or SLL.
hold on all clinical trials evaluating VENCLEXTA for the investigational treatment of multiple myeloma (MM). The partial clinical hold followed a review of data from the ongoing Phase 3 BELLINI trial, a study in relapsed/refractory MM, in which a higher proportion of deaths was observed in the VENCLEXTA arm compared to the control arm of the trial. In
June 2019, AbbVie announced that the FDA lifted the partial clinical hold placed on the Phase 3 CANOVA trial, evaluating VENCLEXTA for the investigational treatment of relapsed/refractory MM positive for the translocation (11;14) abnormality, based upon agreement on revisions to the CANOVA study
protocollo, comprese le nuove misure di mitigazione del rischio, specificato dal protocollo
guidelines and updated futility criteria. This action does not impact any of the approved indications for VENCLEXTA, such as CLL or acute myeloid leukemia (AML). 28 ((Image Removed: abbvieimage2a14.gif)) | 2019 Form 10-K
obinutuzumab, per pazienti adulti con CLL / SLL non precedentemente trattati. Il
l'approvazione si basava sui dati dello studio di fase 3 CLL14, valutando il
efficacia e sicurezza di VENCLEXTA più obinutuzumab rispetto a obinutuzumab
plus chlorambucil in previously untreated patients with CLL, which demonstrated that VENCLEXTA plus obinutuzumab prolonged progression-free survival and achieved higher rates of complete
risposta e minima negatività residua della malattia rispetto al comune
standard di cura usato obinutuzumab più clorambucile.
Products for Human Use (CHMP) of the
European Medicines Agency(EMA) granted a positive opinion for VENCLYXTO in combination with obinutuzumab for patients with previously untreated CLL.
Studio INTELLANCE-1 sulla depatuxizumab mafodotin (Depatux-M, precedentemente
noto come ABT-414) in pazienti con glioblastoma di nuova diagnosi, di cui
i tumori hanno amplificazione dell'EGFR (recettore del fattore di crescita epidermico), a
an interim analysis. An Independent Data Monitoring Committee recommended stopping enrollment in INTELLANCE-1 due to lack of survival benefit for patients receiving Depatux-M compared with placebo when
aggiunto al regime standard di radiazioni e temozolomide. Iscrizione
è stato sospeso in tutti gli studi Depatux-M in corso.
Studio BROCADE3 che valuta veliparib, un poli orale sperimentale
(adenosina difosfato-ribosio) inibitore della polimerasi (PARP), in
la combinazione con carboplatino e paclitaxel ha raggiunto il suo endpoint primario di
progression-free survival in patients with HER2 negative germline BRCA-mutated advanced breast cancer.
Studio VELIA, condotto in collaborazione con il
valutazione di veliparib con carboplatino e paclitaxel seguiti da
la terapia di mantenimento con veliparib ha raggiunto il suo endpoint primario di
sopravvivenza libera da progressione in pazienti con ovaia di nuova diagnosi
cancro, indipendentemente dallo stato dei biomarcatori.
prova, uno studio di Fase 3 che valuta rovalpituzumab tesirina (Rova-T) come a
terapia di mantenimento di prima linea per carcinoma polmonare avanzato a piccole cellule
(SCLC). Si raccomanda un comitato indipendente di monitoraggio dei dati
la conclusione dello studio dopo che i risultati non hanno dimostrato alcun beneficio in termini di sopravvivenza a
a pre-planned interim analysis for patients receiving Rova-T as compared with placebo. With the closing of the MERU trial, AbbVie announced the termination of the Rova-T research and development program. Virology/Liver Disease • In
August 2019, the EC granted marketing authorization for MAVIRET (glecaprevir/pibrentasvir) to shorten the once-daily treatment duration from 12 to 8 weeks in treatment-naïve, compensated cirrhotic, chronic HCV patients with genotype (GT)1, 2, 4, 5 and 6 infection.
ridurre la durata del trattamento una volta al giorno da 12 a 8 settimane in
pazienti con cirrosi, HCV cronici, naïve al trattamento, compensati in tutto
ha raccomandato una modifica dell'autorizzazione all'immissione in commercio per MAVIRET a
ridurre la durata del trattamento una volta al giorno da 12 a 8 settimane in
pazienti con HCV cronica, cirrotica, compensata, naïve al trattamento con GT 3
sicurezza e tollerabilità di ABBV-951, una levodopa / carbidopa sottocutanea
delivery system, in subjects with Parkinson's disease. • In
July 2019, AbbVie announced the decision to discontinue the Phase 2
Studio ARISE che ha valutato ABBV-8E12, un anticorpo sperimentale anti-tau,
in patients with progressive supranuclear palsy, after an Independent Data 2019 Form 10-K | ((Image Removed: abbvieimage2a14.gif)) 29
Monitoring Committee recommended stopping the trial for futility after the trial showed that ABBV-8E12 did not provide efficacy. Other • In
July 2019, AbbVie submitted an NDA to the FDA for elagolix in combination with estradiol/norethindrone acetate (E2/NETA) daily add-back therapy for the management of heavy menstrual bleeding associated with uterine fibroids. RESULTS OF OPERATIONS Net RevenuesThe comparisons presented at constant currency rates reflect comparative local currency net revenues at the prior year's foreign exchange rates. This measure provides information on the change in net revenues assuming that foreign currency exchange rates had not changed between the prior and the current 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. Percent change At actual currency rates At constant currency rates years ended (dollars in millions) 2019 2018 2017 2019 2018 2019 2018 United States $ 23,907 $ 21,524 $ 18,25111.1 % 17.9 % 11.1 % 17.9 % International 9,359 11,229 9,965 (16.7 )% 12.8 % (13.6 )% 10.4 % Net revenues $ 33,266 $ 32,753 $ 28,2161.6 % 16.1 % 2.6 % 15.2 %
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La tabella seguente descrive i ricavi netti mondiali di AbbVie:
Percent change At actual currency rates At constant currency rates years ended
December 31(dollars in millions) 2019 2018 2017 2019 2018 2019 2018 Immunology HUMIRA United States $ 14,864 $ 13,685 $ 12,3618.6 % 10.7 % 8.6 % 10.7 % International 4,305 6,251 6,066 (31.1 )% 3.1 % (27.8 )% 0.6 % Total $ 19,169 $ 19,936 $ 18,427(3.9 )% 8.2 % (2.9 )% 7.4 % SKYRIZI United States $ 311$ - $ - n/m n/m n/m n/m International 44 - - n/m n/m n/m n/m Total $ 355$ - $ - n/m n/m n/m n/m RINVOQ United States $ 47$ - $ - n/m n/m n/m n/m International - - - n/m n/m n/m n/m Total $ 47$ - $ - n/m n/m n/m n/m Hematologic Oncology IMBRUVICA United States $ 3,830 $ 2,968 $ 2,14429.1 % 38.4 % 29.1 % 38.4 % Collaboration revenues 844 622 429 35.8 % 45.0 % 35.8 % 45.0 % Total $ 4,674 $ 3,590 $ 2,57330.2 % 39.5 % 30.2 % 39.5 % VENCLEXTA United States $ 521 $ 247 $ 89>100.0% >100.0% >100.0% >100.0% International 271 97 33 >100.0% >100.0% >100.0% >100.0% Total $ 792 $ 344 $ 122>100.0% >100.0% >100.0% >100.0% HCV MAVYRET United States $ 1,473 $ 1,614 $ 277(8.8 )% >100.0% (8.8 )% >100.0% International 1,420 1,824 213 (22.1 )% >100.0% (19.6 )% >100.0% Total $ 2,893 $ 3,438 $ 490(15.9 )% >100.0% (14.6 )% >100.0% VIEKIRA United States $ - $ 3 $ 61(100.0 )% (96.7 )% (100.0 )% (96.7 )% International 36 175 723 (79.2 )% (75.6 )% (77.2 )% (74.8 )% Total $ 36 $ 178 $ 784(79.6 )% (77.2 )% (77.6 )% (76.5 )% Other Key Products Creon United States $ 1,041 $ 928 $ 83112.2 % 11.7 % 12.2 % 11.7 % Lupron United States $ 720 $ 726 $ 669(0.8 )% 8.6 % (0.8 )% 8.6 % International 167 166 160 0.8 % 3.4 % 6.0 % 4.7 % Total $ 887 $ 892 $ 829(0.5 )% 7.6 % 0.5 % 7.9 % Synthroid United States $ 786 $ 776 $ 7811.3 % (0.6 )% 1.3 % (0.6 )% Synagis International $ 718 $ 726 $ 738(1.2 )% (1.6 )% 0.9 % (2.8 )% Duodopa United States $ 97 $ 80 $ 6120.4 % 31.4 % 20.4 % 31.4 % International 364 350 294 4.2 % 19.1 % 9.8 % 14.8 % Total $ 461 $ 430 $ 3557.2 % 21.2 % 11.7 % 17.7 % Sevoflurane United States $ 74 $ 74 $ 782.0 % (6.2 )% 2.0 % (6.2 )% International 274 317 332 (13.8 )% (4.4 )% (9.5 )% (4.3 )% Total $ 348 $ 391 $ 410(10.9 )% (4.7 )% (7.4 )% (4.6 )% Kaletra United States $ 38 $ 55 $ 71(31.0 )% (22.1 )% (31.0 )% (22.1 )% International 245 281 352 (12.9 )% (20.2 )% (9.5 )% (20.1 )% Total $ 283 $ 336 $ 423(15.8 )% (20.5 )% (12.9 )% (20.4 )% AndroGel United States $ 172 $ 469 $ 577(63.3 )% (18.8 )% (63.3 )% (18.8 )% ORILISSA United States $ 91 $ 11$ - >100.0% n/m >100.0% n/m International 2 - - n/m n/m n/m n/m Total $ 93 $ 11$ - >100.0% n/m >100.0% n/m All other $ 511 $ 308 $ 87666.1 % (64.9 )% 73.0 % (73.2 )% Total net revenues $ 33,266 $ 32,753 $ 28,2161.6 % 16.1 % 2.6 % 15.2 %
n / m – Non significativo
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The following discussion and analysis of AbbVie's net revenues by product is presented on a constant currency basis. Global HUMIRA sales decreased 3% in 2019 and increased 7% in 2018. The sales decrease in 2019 was primarily driven by direct biosimilar competition in certain international markets, partially offset by market growth across therapeutic categories. The sales increase in 2018 was primarily driven by market growth across therapeutic categories and geographies as well as favorable pricing in certain geographies. In
the United States, HUMIRA sales increased 9% in 2019 and 11% in 2018. The sales increases in 2019 and 2018 were primarily driven by market growth across all indications and favorable pricing. Internationally, HUMIRA revenues decreased 28% in 2019 and increased 1% in 2018. The sales decrease in 2019 was primarily driven by direct biosimilar competition in Europefollowing the expiration of the European Unioncomposition of matter patent for adalimumab in October 2018. The sales increase in 2018 was primarily driven by market growth across indications partially offset by direct biosimilar competition. Biosimilar competition for HUMIRA is not expected in the United Statesuntil 2023. AbbVie continues to pursue strategies intended to further differentiate HUMIRA from competing products and add to the sustainability of HUMIRA. Net revenues for SKYRIZI were $355 millionin 2019 following the April 2019regulatory approvals for the treatment of moderate to severe plaque psoriasis. Net revenues for RINVOQ were $47 millionin 2019 following the August 2019FDA approval for the treatment of moderate to severe rheumatoid arthritis. Net revenues for IMBRUVICA represent product revenues in the United Statesand collaboration revenues outside of the United Statesrelated to AbbVie's 50% share of IMBRUVICA profit. AbbVie's global IMBRUVICA revenues increased 30% in 2019 and 39% in 2018 as a result of continued penetration of IMBRUVICA for patients with CLL as well as favorable pricing. Net revenues for VENCLEXTA increased by more than 100% in 2019 and 2018 primarily due to market share gains following additional regulatory approvals of VENCLEXTA for the treatment of patients with relapsed/refractory CLL and first-line AML in 2018 and first-line CLL in 2019. Global MAVYRET sales decreased by 15% in 2019 primarily driven by lower patient volumes in certain international markets and competitive dynamics in the U.S.Global MAVYRET sales increased more than 100% in 2018 as a result of market share gains following the FDA and EMA approvals of MAVYRET in the second half of 2017 as well as further geographic expansion. Global VIEKIRA sales decreased by 78% in 2019 and 76% in 2018 primarily due to lower market share following the launch of MAVYRET. Net revenues for Creon increased 12% in 2019 and 12% in 2018, primarily driven by continued market growth and favorable pricing. Creon maintains market leadership in the pancreatic enzyme market. Net revenues for Duodopa increased 12% in 2019 and 18% in 2018, primarily driven by increased market penetration. Gross Margin Percent change years ended December 31(dollars in millions) 2019 2018 2017 2019 2018 Gross margin $ 25,827 $ 25,035 $ 21,1743 % 18 % as a percent of net revenues 78 % 76 % 75 % Gross margin as a percentage of net revenues in 2019 increased from 2018 primarily due to the full year effect of the expiration of HUMIRA royalties, partially offset by the IMBRUVICA profit sharing arrangement and unfavorable impact from higher intangible asset amortization. Gross margin as a percentage of net revenues in 2018 increased from 2017 primarily due to the expiration of HUMIRA royalties and a 2017 intangible asset impairment charge of $354 millionpartially offset by the IMBRUVICA profit sharing arrangement.
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Vendita, generale e amministrativa
Percent change years ended
December 31(dollars in millions) 2019 2018 2017 2019 2018 Selling, general and administrative $ 6,942 $ 7,399 $ 6,295(6 )% 18 % as a percent of net revenues 21 % 23 % 22 % Selling, general and administrative (SG&A) expenses as a percentage of net revenues in 2019 decreased from 2018 primarily due to the favorable impacts of international HUMIRA expense reductions and lower litigation reserve charges that decreased by $326 million. This favorability was partially offset by new product launch expenses, higher restructuring charges and $103 millionof transaction expenses associated with the proposed Allergan transaction. Additionally, SG&A expenses in 2018 included non-recurring philanthropic contributions of $350 millionto certain U.S.not-for-profit organizations. SG&A expenses as a percentage of net revenues in 2018 increased from 2017 primarily due to new product launch expenses and non-recurring philanthropic contributions to certain U.S.not-for-profit organizations partially offset by continued leverage from revenue growth. Research and Development and Acquired In-Process Researchand Development Percent change years ended December 31(dollars in millions) 2019 2018 2017 2019 2018 Research and development $ 6,407 $ 10,329 $ 5,007(38 )% >100% as a percent of net revenues 19 % 32 % 18 % Acquired in-process research and development $ 385 $ 424 $ 327
Research and Development (R&D) expenses decreased in 2019 and increased in 2018 principally due to impairment charges related to IPR&D acquired as part of the 2016 Stemcentrx acquisition. In 2019, the company recorded a
$1.0 billionintangible asset impairment charge which represented the remaining value of the IPR&D acquired following the decision to terminate the Rova-T R&D program. In 2018, the company recorded a $5.1 billionintangible asset impairment charge following the decision to stop enrollment in the TAHOE trial, which lowered the probabilities of success of achieving regulatory approval across Rova-T and other early-stage assets obtained in the acquisition. See Note 7 to the Consolidated Financial Statements for additional information regarding these impairment charges. Acquired IPR&D expenses reflect upfront payments related to various collaborations. There were no individually significant transactions or cash flows during 2019 or 2018. Acquired IPR&D expense in 2017 included a charge of $205 millionas a result of entering into a global strategic collaboration with Alector, Inc. (Alector) to develop and commercialize medicines to treat Alzheimer's disease and other neurodegenerative disorders. See Note 5 to the Consolidated Financial Statements for additional information regarding the Alector agreement. Other Operating Expenses and Income Other operating income in 2019 included $550 millionof income from a legal settlement related to an intellectual property dispute with a third party and $330 millionof 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 operating expenses in 2018 included a $500 millioncharge related to the extension of the previously announced Calico collaboration to discover, develop and bring to market new therapies for patients with age-related diseases, including neurodegeneration and cancer. See Note 5 to the Consolidated Financial Statements for additional information regarding the Calico agreement.
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Other Non-Operating Expenses years ended December 31 (in millions) 2019 2018 2017 Interest expense
$ 1,784 $ 1,348 $ 1,150Interest income (275 ) (204 ) (146 ) Interest expense, net $ 1,509 $ 1,144 $ 1,004Net foreign exchange loss $ 42 $ 24 $ 348Other expense, net 3,006 18 466 Interest expense in 2019 increased compared to 2018 primarily due to $363 millionof incremental interest and debt issuance costs associated with financing the proposed acquisition of Allergan, as well as the unfavorable impact of higher interest rates on the company's debt obligations. Interest expense in 2018 increased compared to 2017 primarily due to the unfavorable impact of higher interest rates on the company's debt obligations and a higher average outstanding debt balance during 2018. Interest income in 2019 increased compared to 2018 primarily due to a higher average cash and cash equivalents balance during 2019, partially offset by decreased investments in debt securities. Interest income in 2018 increased compared to 2017 primarily due to higher interest rates. Net foreign exchange loss in 2017 included $316 millionof historical currency translation losses that were reclassified from accumulated other comprehensive income (AOCI) related to the liquidation of certain foreign entities following the enactment of U.S.tax reform. Other expense, net included charges related to the change in fair value of the contingent consideration liabilities of $3.1 billionin 2019, $49 millionin 2018 and $626 millionin 2017. 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 still in development and other market-based factors. In 2019, the Boehringer Ingelheim (BI) 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 2019regulatory approvals of SKYRIZI for the treatment of moderate to severe plaque psoriasis. These changes were partially offset by a $91 milliondecrease in the Stemcentrx contingent consideration liability due to the termination of the Rova-T R&D program during the third quarter of 2019. In 2018, the BI contingent consideration liability increased due to the passage of time and higher estimated future sales partially offset by the effect of rising interest rates. This increase in the BI contingent consideration liability was primarily offset by a $428 milliondecrease in the Stemcentrx contingent consideration liability recorded during the fourth quarter of 2018 due to a reduction in probabilities of success of achieving regulatory approval across Rova-T and other early-stage Stemcentrx assets. In 2017, the change in fair value represented mainly higher probabilities of success, the passage of time and declining interest rates. Other expense, net for 2017 also included realized gains on available-for-sale investment securities of $90 million. Income Tax Expense The effective income tax rate was 6% in 2019, negative 9% in 2018 and 31% in 2017. The effective tax rate in each period differed from the statutory tax rate principally due to the allocation of the company's taxable earnings among jurisdictions, the benefit from foreign operations which reflects the impact of lower income tax rates in locations outside the United States, tax incentives in Puerto Ricoand other foreign tax jurisdictions and business development activities. The increase in the effective tax rate for 2019 over the prior year was principally due to the timing of provisions of the Tax Cuts and Jobs Act (the Act) related to the earnings from certain foreign subsidiaries. The increase is also attributable to changes in the jurisdictional mix of earnings, including a change in fair value of contingent consideration liabilities. These increases were partially offset by the favorable resolution of various tax positions in the current year. The effective tax rate for 2018 also included the effects of Stemcentrx intangible impairment related expenses. The effective tax rate in 2017 included tax expense of $4.5 billionon the one-time mandatory repatriation of previously untaxed earnings of foreign subsidiaries, partially offset by a $3.6 billionnet tax benefit for the remeasurement of deferred taxes related to the Act and foreign tax law changes.
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The Act significantly changed the
U.S.corporate tax system. The Act reduced the U.S.federal corporate tax rate from 35% to 21% and created a territorial tax system that included new taxes on certain foreign sourced earnings. See Note 14 to the Consolidated Financial Statements for additional information regarding the Act. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES years ended December 31 (in millions) 2019 2018 2017 Cash flows from: Operating activities $ 13,324 $ 13,427 $ 9,960Investing activities 596 (1,006 ) (274 ) Financing activities 18,708 (14,396 ) (5,512 ) Operating cash flows in 2019 decreased slightly from 2018 primarily due to higher payments for income taxes offset by improved results of operations resulting from an increase in operating earnings. Operating cash flows in 2018 increased from 2017 primarily due to improved results of operations from revenue growth and a decrease in income tax payments. Operating cash flows also reflected AbbVie's contributions to its defined benefit plans of $727 millionin 2019, $873 millionin 2018 and $246 millionin 2017. Investing cash flows in 2019 included net sales and maturities of investments totaling $2.1 billionresulting from the sale of substantially all of the company's investments in debt securities, payments made for other acquisitions and investments of $1.1 billionand capital expenditures of $552 million. Investing cash flows in 2018 included payments made for other acquisitions and investments of $736 millionand capital expenditures of $638 million, partially offset by net sales and maturities of investment securities totaling $368 million. Investing cash flows in 2017 included capital expenditures of $529 millionand payments made for other acquisitions and investments of $308 million, partially offset by net sales and maturities of investment securities totaling $563 million. Financing cash flows in 2019 included the issuance of $30.0 billionaggregate principal amount of floating rate and fixed rate unsecured senior notes at maturities ranging from 18 months to 30 years. AbbVie expects to use the net proceeds of $29.8 billionto fund a portion of the aggregate cash consideration due to Allergan shareholders in connection with the proposed acquisition and to pay related fees and expenses. Pending the consummation of the proposed Allergan acquisition, the net proceeds from the offering are permitted to be invested temporarily in short-term investments. All of the notes are subject to special mandatory redemption at a redemption price equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest if the proposed acquisition of Allergan is not completed by January 30, 2021or the company notifies the trustee in respect of the notes that it will not pursue the consummation of the proposed Allergan acquisition. Additionally, financing cash flows in 2019 included the issuance of €1.4 billion aggregate principal amount of unsecured senior Euro notes which the company used to redeem €1.4 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 billion364-day term loan credit agreement that was scheduled to mature in June 2019. Financing cash flows in 2018 included proceeds from the issuance of $3.0 billiondrawn under the term loan in June 2018. In September 2018, the company issued $6.0 billionaggregate principal amount of unsecured senior notes. Of the $5.9 billionnet proceeds, $2.0 billionwas used to repay the company's outstanding three-year term loan credit agreement in September 2018and $1.0 billionwas used to repay the aggregate principal amount of 2.00% senior notes at maturity in November 2018. Financing cash flows in 2018 also included the May 2018repayment of $3.0 billionaggregate principal amount of the company's 1.80% senior notes at maturity. In 2019, 2018 and 2017, the company issued and redeemed commercial paper. There were no commercial paper borrowings outstanding as of December 31, 2019and there was $699 millionoutstanding as of December 31, 2018. AbbVie may issue additional commercial paper or retire commercial paper to meet liquidity requirements as needed. Cash dividend payments totaled $6.4 billionin 2019, $5.6 billionin 2018 and $4.1 billionin 2017. The increase in cash dividend payments was primarily driven by an increase in the dividend rate. On November 1, 2019, AbbVie announced that its board of directors declared an increase in the quarterly cash dividend from $1.07per share to $1.18per share beginning with the dividend payable on February 14, 2020to stockholders of record as of January 15, 2020. This reflects an increase of approximately 10.3% 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
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debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by its board of directors. On
February 15, 2018, AbbVie's board of directors authorized a new $10.0 billionstock repurchase program, which superseded AbbVie's previous stock repurchase program. On December 13, 2018, AbbVie's board of directors authorized a $5.0 billionincrease to the existing $10.0 billionstock 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. Under this authorization, AbbVie repurchased 4 million shares for $300 millionin 2019 and 109 million shares for $10.7 billionin 2018. AbbVie cash-settled $201 millionof its December 2018open market purchases in January 2019. AbbVie's remaining stock repurchase authorization was $4.0 billionas of December 31, 2019. Under previous stock repurchase programs, AbbVie made open market share repurchases of 11 million shares for $1.3 billionin 2018 and 13 million shares for $1.0 billionin 2017. AbbVie cash-settled $285 millionof its December 2016open market purchases in January 2017. In 2019, AbbVie made contingent consideration milestone and royalty payments to BI totaling $234 millionfollowing the commercial launch of SKYRIZI in certain geographies. $163 millionof these payments were included in financing cash flows and $71 millionof the payments were included in operating cash flows. In 2018, AbbVie paid $100 millionof contingent consideration to BI related to BLA and MAA acceptance milestones. $78 millionof these payments were included in financing cash flows and $22 millionof the payments were included in operating cash flows. In 2017, AbbVie paid $305 millionof contingent consideration to BI related to a Phase 3 enrollment milestone. $268 millionof this milestone was included in financing cash flows and $37 millionwas included in operating cash flows. In connection with the proposed acquisition of Allergan, on June 25, 2019, AbbVie entered into a $38.0 billion364-day bridge credit agreement and on July 12, 2019, AbbVie entered into a $6.0 billionterm loan credit agreement. The company incurred a total of $242 millionof debt issuance costs related to the two agreements. On October 25, 2019, AbbVie commenced offers to exchange any and all outstanding notes of certain series issued by Allergan for up to $15.5 billionaggregate principal amount and €3.7 billion aggregate principal amount of new notes to be issued by AbbVie and cash, subject to conditions including the closing of the proposed acquisition. See Note 10 to the Consolidated Financial Statements for additional information. In February 2020, the remaining commitments under the bridge credit agreement were reduced to $0as a result of cash on hand at AbbVie. AbbVie subsequently terminated the bridge credit agreement in its entirety as permitted under its terms. Credit Risk AbbVie monitors economic conditions, the creditworthiness of customers and government regulations and funding, both domestically and abroad. AbbVie regularly communicates with its customers regarding the status of receivable balances, including their payment plans and obtains positive confirmation of the validity of the receivables. AbbVie establishes an allowance against accounts receivable when it is probable they will not be collected. AbbVie may also utilize factoring arrangements to mitigate credit risk, although the receivables included in such arrangements have historically not been a significant amount of total outstanding receivables. Credit Facility, Access to Capital and Credit Ratings Credit Facility In August 2019, AbbVie entered into an amended and restated $4.0 billionfive-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, 2019, the company was in compliance with all its credit facility covenants. Commitment fees under the credit facility were insignificant. No amounts were outstanding under the company's credit facilities as of December 31, 2019and 2018. Access to Capital The company intends to fund short-term and long-term financial obligations as they mature through cash on hand, future cash flows from operations, or by issuing additional debt. The company's ability to generate cash flows from operations, issue debt or enter into financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for the company's products or in the solvency of its customers or suppliers, deterioration in the company's key financial ratios or credit ratings, or other material unfavorable changes in business conditions. At the current time, the company 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.
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Credit Ratings Following the announcement of the proposed acquisition of Allergan and the
$30.0 billionsenior notes issuance, Moody's Investor Service affirmed its Baa2 senior unsecured long-term rating and Prime-2 short-term rating with a stable outlook. S&P Global Ratings revised its ratings outlook to negative from stable and expects to lower the issuer credit rating by one notch to BBB+ from A- and the short-term rating to A-2 from A-1 when the acquisition is complete. 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, 2019: Less than One to Three to More than (in millions) Total one year three years five years five years Long-term debt, including current portion $ 67,233 $ 3,750 $ 14,150 $ 7,625 $ 41,708Interest on long-term debt(a) 30,494 2,146 4,087 3,479 20,782 Non-cancelable operating and finance lease payments(f) 774 129 224 125 296 Purchase obligations and other(b) 3,532 3,295 186 45 6 Other long-term liabilities (c) (d) (e) 11,544 166 1,395 2,123 7,860 Total $ 113,577 $ 9,486 $ 20,042 $ 13,397 $ 70,652
(a) Include i pagamenti di interessi futuri stimati sul debito a lungo termine. Interesse
i pagamenti sul debito sono calcolati per periodi futuri utilizzando gli interessi previsti
tassi in vigore alla fine del 2019. I pagamenti di interessi previsti comprendono il
effetti correlati degli accordi di swap su tassi di interesse. Alcuni di questi proiettati
i pagamenti di interessi potrebbero differire in futuro in base alle variazioni del floating
tassi di interesse o altri fattori o eventi. I pagamenti degli interessi previsti
riguardano solo gli obblighi e gli accordi in essere presso
Per ulteriori informazioni, consultare la Nota 10 del bilancio consolidato
informazioni relative agli strumenti di debito della società e alla nota 11 per
ulteriori informazioni sugli accordi di swap su tassi di interesse in essere presso
(b) Include i significativi obblighi di acquisto incondizionati della società. Questi
gli impegni non superano i requisiti previsti dalla società e vengono assunti
nel normale corso degli affari.
(c) Esclude le passività associate ai benefici fiscali non riconosciuti della società
in quanto non è possibile stimare in modo affidabile i tempi della liquidità futura
deflussi relativi a tali passività. Vedi nota 14 al testo consolidato
Bilanci per ulteriori informazioni su tali imposte non riconosciute
registrato al valore equo nel bilancio consolidato. Potenziale
pagamenti di corrispettivi potenziali che eccedono il valore equo registrato nel
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) Include un'obbligo fiscale di transizione una tantum su un obbligo ritenuto
conseguente rimpatrio di utili precedentemente non tassati di filiali estere
a partire dal
generalmente pagabile in otto rate annuali. Vedi nota 14 al
Bilancio consolidato per ulteriori informazioni al riguardo
(f) I pagamenti per il leasing includono circa
pagamenti per contratti di locazione eseguiti ma non ancora iniziati. Questi contratti di locazione lo faranno
iniziare nel 2020 con un contratto di locazione di circa 11 anni.
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
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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 Statesrequires 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 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. Rebates and chargebacks totaled $18.8 billionin 2019, $16.4 billionin 2018 and $12.9 billionin 2017. 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.
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The following table is an analysis of the three largest rebate accruals and chargeback allowances, which comprise approximately 94% of the total consolidated rebate and chargebacks recorded as reductions to revenues in 2019. Remaining rebate provisions charged against gross revenues are not significant in the determination of operating earnings. Medicaid and Managed Medicare Care Wholesaler (in millions) Rebates Rebates Chargebacks
2,909 3,990 5,026 Payments (2,736 ) (3,962 ) (4,887 ) Balance at December 31, 2017 1,340 1,195 522 Provisions 3,493 4,729 6,659 Payments (3,188 ) (4,485 ) (6,525 ) Balance at December 31, 2018 1,645 1,439 656 Provisions 4,035 5,772 7,947 Payments (3,915 ) (5,275 ) (7,917 )
Cash Discounts and Product Returns Cash discounts and product returns, which totaled
$1.6 billionin 2019, $1.6 billionin 2018 and $1.3 billionin 2017, 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 31each 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, 2019. 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 2020 and projected benefit obligations as of December 31, 2019: 50 basis point (in millions) (brackets denote a reduction) Increase Decrease Defined benefit plans Service and interest cost $ (76 ) $ 92Projected benefit obligation (723 ) 825 Other post-employment plans Service and interest cost $ (11 ) $ 14Projected benefit obligation (101 ) 117
Il tasso di rendimento atteso a lungo termine si basa sull'allocazione delle attività,
performance storica e visione attuale dei rendimenti futuri attesi. Abbvie
considera questi input con un focus a lungo termine per evitare il mercato a breve termine
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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, 2019and will be used in the calculation of net periodic benefit cost in 2020. 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 2020 by $71 million. The health care cost trend rate is selected by reviewing historical trends and current views on projected future health care cost increases. The current health care cost trend rate is supported by the historical trend experience of each plan. Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans as of December 31, 2019and will be used in the calculation of net periodic benefit cost in 2020. A one percentage point change in assumed health care cost trend rates would have the following effects on AbbVie's calculation of net periodic benefit costs in 2020 and the projected benefit obligation as of December 31, 2019: One percentage point (in millions) (brackets denote a reduction) Increase Decrease Service and interest cost $ 40 $ (28 )Projected benefit obligation 244 (186 ) 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 Goodwilland 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. Goodwilland 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 specific to the industry and market, cost factors, the overall financial
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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. At
December 31, 2019, a 50 basis point increase/decrease in the assumed discount rate would have decreased/increased the value of the contingent consideration liabilities by approximately $280 million. Additionally, at December 31, 2019, a five percentage point increase/decrease in the assumed probability of success across all potential indications would have increased/decreased the value of the contingent consideration liabilities by approximately $150 million. Recent Accounting Pronouncements See Note 2 to the Consolidated Financial Statements for additional information on recent accounting pronouncements.
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