(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the financial condition of AbbVie Inc. (AbbVie or the company) as of June 30, 2020 and December 31, 2019 and the results of operations for the three and six months ended June 30, 2020 and 2019. This commentary should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes appearing in Item 1, "Financial Statements and Supplementary Data."
EXECUTIVE OVERVIEW Company Overview AbbVie is a global, research-based biopharmaceutical company. AbbVie uses its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world's most complex and serious diseases. On May 8, 2020, AbbVie completed the acquisition of Allergan plc (Allergan). The acquisition of Allergan 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 4 to the Condensed Consolidated Financial Statements for additional information on the acquisition. Subsequent to the acquisition date, AbbVie's consolidated financial statements include the assets, liabilities, operating results and cash flows of Allergan. AbbVie's products are generally sold worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned distribution centers and public warehouses. Certain aesthetic products and devices are also sold directly to physicians and other licensed healthcare providers. In the United States, AbbVie distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to pharmacies and patients. Outside the United States, AbbVie sells products primarily to customers or through distributors, depending on the market served. Certain products are co-marketed or co-promoted with other companies. AbbVie has approximately 47,000 employees. AbbVie operates as a single global business segment. 2020 Strategic Objectives AbbVie's mission is to discover and develop innovative medicines and products that solve serious health issues today and address the medical challenges of tomorrow while achieving top-tier financial performance through outstanding execution. AbbVie intends to continue to advance its mission in a number of ways, including: (i) maximizing the benefits of the Allergan acquisition to create a more diversified revenue base with multiple long-term growth drivers; (ii) growing revenues by leveraging AbbVie's commercial strength and international infrastructure across Allergan's therapeutic areas and ensuring strong commercial execution of new product launches; (iii) continuing to invest in and expand its pipeline in support of opportunities in immunology, oncology, aesthetics, neuroscience, eye care and women's health as well as continued investment in key on-market products; (iv) expanding operating margins; and (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. Financial Results The company's financial performance for the six months ended June 30, 2020 included delivering worldwide net revenues of $19.0 billion, operating earnings of $4.4 billion, diluted earnings per share of $1.43 and cash flows from operations of $6.9 billion. Worldwide net revenues grew by 18% on a reported basis and 19% on a constant currency basis, which included $2.0 billion of contributed revenues from the Allergan acquisition, growth in the immunology portfolio from Skyrizi, Rinvoq and the continued strength of Humira in the U.S. as well as revenue growth from Imbruvica and Venclexta.
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Diluted earnings per share was $1.43 for the six months ended June 30, 2020 and included the following after-tax costs: (i) $1.9 billion of expenses related to the Allergan acquisition; (ii) $1.6 billion related to the amortization of intangible assets; (iii) $881 million for the change in fair value of contingent consideration liabilities; (iv) $853 million for acquired in-process research and development (IPR&D); and (v) $164 million for milestones and other research and development (R&D) expenses. Additionally, financial results reflected continued funding to support all stages of AbbVie's pipeline assets and continued investment in AbbVie's on-market brands. 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 has 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 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.
In February 2020, AbbVie announced top-line results from its second Phase 3 clinical trial of Rinvoq in adult patients with active psoriatic arthritis (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 New Drug Application (NDA) 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 psoriatic arthritis. 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 met all primary and secondary endpoints versus placebo.
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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). 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 European Commission (EC) approval of Venclyxto in combination with obinutuzumab for patients with previously untreated CLL. In May 2020, AbbVie submitted a supplemental NDA (sNDA) to the FDA for the conversion of the conditional approval of Venclexta to full approval for patients with AML. In June 2020, AbbVie submitted an MAA to the EMA for Venclyxto for the treatment of patients with AML.
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 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.
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�ve, compensated cirrhotic, chronic hepatitis C virus (HCV) patients with genotype 3 infection.
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. AbbVie plans to meet with the FDA and EMA to discuss their comments and determine next steps.
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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.
For a more comprehensive discussion of AbbVie's products and pipeline, see the company's Annual Report on Form 10-K for the year ended December 31, 2019.
RESULTS OF OPERATIONS Net Revenues The comparisons presented at constant currency rates reflect comparative local currency net revenues at the prior year's foreign exchange rates. This measure provides information on the change in net revenues assuming that foreign currency exchange rates had not changed between the prior and current periods. AbbVie believes that the non-GAAP measure of change in net revenues at constant currency rates, when used in conjunction with the GAAP measure of change in net revenues at actual currency rates, may provide a more complete understanding of the company's operations and can facilitate analysis of the company's results of operations, particularly in evaluating performance from one period to another. Three months ended Percent change Six months ended Percent change June 30, At actual At constant June 30, At actual At constant (dollars in millions) 2020 2019 currency rates currency rates 2020 2019 currency rates currency rates United States $ 8,147 $ 5,964 36.6 % 36.6 % $ 14,305 $ 11,234 27.3 % 27.3 % International 2,278 2,291 (0.5 )% 2.5 % 4,739 4,849 (2.2 )% 0.2 % Net revenues $ 10,425 $ 8,255 26.3 % 27.1 % $ 19,044 $ 16,083 18.4 % 19.1 %
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The following table details AbbVie's worldwide net revenues:
Three months ended Percent change Six months ended Percent change June 30, At actual At constant June 30, At actual At constant (dollars in millions) 2020 2019 currency rates currency rates 2020 2019 currency rates currency rates Immunology Humira United States $ 3,974 $ 3,793 4.8 % 4.8 % $ 7,630 $ 7,008 8.9 % 8.9 % International 863 1,077 (19.9 )% (17.4 )% 1,910 2,308 (17.2 )% (14.9 )% Total $ 4,837 $ 4,870 (0.7 )% (0.2 )% $ 9,540 $ 9,316 2.4 % 3.0 % Skyrizi United States $ 289 $ 42 >100% >100% $ 555 $ 42 >100% >100% International 41 6 >100% >100% 75 6 >100% >100% Total $ 330 $ 48 >100% >100% $ 630 $ 48 >100% >100% Rinvoq United States $ 136 $ - n/m n/m $ 218 $ - n/m n/m International 13 - n/m n/m 17 - n/m n/m Total $ 149 $ - n/m n/m $ 235 $ - n/m n/m Hematologic Oncology Imbruvica United States $ 1,055 $ 886 19.0 % 19.0 % $ 2,021 $ 1,715 17.9 % 17.9 % Collaboration revenues 233 213 9.4 % 9.4 % 499 406 22.9 % 22.9 % Total $ 1,288 $ 1,099 17.2 % 17.2 % $ 2,520 $ 2,121 18.8 % 18.8 % Venclexta United States $ 191 $ 117 63.5 % 63.5 % $ 392 $ 222 76.7 % 76.7 % International 112 52 >100% >100% 228 98 >100% >100% Total $ 303 $ 169 79.2 % 81.5 % $ 620 $ 320 93.7 % 95.8 % Aesthetics Botox Cosmetic (a) United States $ 147 $ - n/m n/m $ 147 $ - n/m n/m International 79 - n/m n/m 79 - n/m n/m Total $ 226 $ - n/m n/m $ 226 $ - n/m n/m Juvederm Collection (a) United States $ 56 $ - n/m n/m $ 56 $ - n/m n/m International 57 - n/m n/m 57 - n/m n/m Total $ 113 $ - n/m n/m $ 113 $ - n/m n/m Other Aesthetics (a) United States $ 127 $ - n/m n/m $ 127 $ - n/m n/m International 15 - n/m n/m 15 - n/m n/m Total $ 142 $ - n/m n/m $ 142 $ - n/m n/m Neuroscience Botox Therapeutic (a) United States $ 254 $ - n/m n/m $ 254 $ - n/m n/m International 43 - n/m n/m 43 - n/m n/m Total $ 297 $ - n/m n/m $ 297 $ - n/m n/m Vraylar (a) United States $ 192 $ - n/m n/m $ 192 $ - n/m n/m Duodopa United States $ 25 $ 24 8.3 % 8.3 % $ 50 $ 46 9.3 % 9.3 % International 93 91 1.6 % 3.7 % 192 180 6.7 % 9.2 % Total $ 118 $ 115 2.9 % 4.6 % $ 242 $ 226 7.2 % 9.2 % Ubrelvy (a) United States $ 22 $ - n/m n/m $ 22 $ - n/m n/m Other Neuroscience (a) United States $ 103 $ - n/m n/m $ 103 $ - n/m n/m International 2 - n/m n/m 2 - n/m n/m Total $ 105 $ - n/m n/m $ 105 $ - n/m n/m
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Three months ended Percent change Six months ended Percent change June 30, At actual At constant June 30, At actual At constant (dollars in millions) 2020 2019 currency rates currency rates 2020 2019 currency rates currency rates Eye Care Lumigan/Ganfort (a) United States $ 35 $ - n/m n/m $ 35 $ - n/m n/m International 41 - n/m n/m 41 - n/m n/m Total $ 76 $ - n/m n/m $ 76 $ - n/m n/m Alphagan/Combigan(a) United States $ 47 $ - n/m n/m $ 47 $ - n/m n/m International 22 - n/m n/m 22 - n/m n/m Total $ 69 $ - n/m n/m $ 69 $ - n/m n/m Restasis (a) United States $ 138 $ - n/m n/m $ 138 $ - n/m n/m International 6 - n/m n/m 6 - n/m n/m Total $ 144 $ - n/m n/m $ 144 $ - n/m n/m Other Eye Care (a) United States $ 54 $ - n/m n/m $ 54 $ - n/m n/m International 74 - n/m n/m 74 - n/m n/m Total $ 128 $ - n/m n/m $ 128 $ - n/m n/m Women's Health Lo Loestrin (a) United States $ 78 $ - n/m n/m $ 78 $ - n/m n/m International 2 - n/m n/m 2 - n/m n/m Total $ 80 $ - n/m n/m $ 80 $ - n/m n/m Orilissa/Oriahnn United States $ 30 $ 18 57.3 % 57.3 % $ 60 $ 31 88.6 % 88.6 % International 1 1 90.2 % 95.4 % 2 1 >100% >100% Total $ 31 $ 19 58.0 % 58.1 % $ 62 $ 32 90.3 % 90.4 % Other Women's Health (a) United States $ 34 $ - n/m n/m $ 34 $ - n/m n/m International 2 - n/m n/m 2 - n/m n/m Total $ 36 $ - n/m n/m $ 36 $ - n/m n/m Other Key Products Mavyret United States $ 146 $ 396 (62.9 )% (62.9 )% $ 380 $ 799 (52.4 )% (52.4 )% International 230 384 (40.2 )% (39.6 )% 555 771 (28.1 )% (27.2 )% Total $ 376 $ 780 (51.7 )% (51.4 )% $ 935 $ 1,570 (40.4 )% (39.9 )% Creon United States $ 252 $ 257 (1.9 )% (1.9 )% $ 528 $ 484 9.3 % 9.3 % Lupron United States $ 167 $ 168 (0.1 )% (0.1 )% $ 362 $ 359 1.1 % 1.1 % International 38 41 (8.9 )% (3.2 )% 76 79 (4.7 )% (0.6 )% Total $ 205 $ 209 (1.8 )% (0.7 )% $ 438 $ 438 - % 0.7 % Linzess/Constella (a) United States $ 130 $ - n/m n/m $ 130 $ - n/m n/m International 3 - n/m n/m 3 - n/m n/m Total $ 133 $ - n/m n/m $ 133 $ - n/m n/m Synthroid United States $ 183 $ 203 (9.7 )% (9.7 )% $ 388 $ 385 0.7 % 0.7 % All other $ 590 $ 486 21.5 % 24.6 % $ 1,143 $ 1,143 (0.1 )% 2.0 % Total net revenues $ 10,425 $ 8,255 26.3 % 27.1 % $ 19,044 $ 16,083 18.4 % 19.1 %
n/m - Not meaningful
Aug 04, 2020
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