AbbVie Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. AbbVie is a global biopharmaceutical company operating as one business segment. It completed its ImmunoGen acquisition on February 12, 2024.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 | Change or context |
|---|---|---|---|
| Net revenues | $12.310 billion | $12.225 billion | Up 0.7% reported; up 1.6% at constant currency |
| Operating earnings | $2.798 billion | $2.768 billion | Up about 1% |
| Net earnings attributable to AbbVie | $1.369 billion | $239 million | GAAP diluted EPS was $0.77 versus $0.13 |
| Gross margin | 67% | 67% | Flat; product mix headwind was offset by lower intangible amortization |
| SG&A | $3.315 billion | $3.039 billion | Up 9%; 27% of revenue versus 25%, reflecting acquisition and integration costs |
| R&D | $1.939 billion | $2.292 billion | Down 15%; prior-year period included a $630 million intangible impairment charge |
| Operating cash flow | $4.040 billion | $4.193 billion | Lower year over year |
Cash and equivalents were $18.067 billion at March 31, 2024, compared with $12.814 billion at year-end 2023. Investing cash outflow was $9.588 billion, primarily reflecting the ImmunoGen acquisition; financing cash inflow was $10.819 billion, largely reflecting debt issuance. Capital expenditures were $193 million. Dividends paid were $2.772 billion; the declared quarterly dividend was $1.55 per share.
Current and long-term debt and finance lease obligations totaled approximately $74.0 billion at quarter-end, versus approximately $59.4 billion at December 31, 2023. The company issued $15.0 billion of senior notes to fund the ImmunoGen acquisition and the planned Cerevel transaction, among other purposes. The $5.0 billion revolving credit facility had no borrowings outstanding, and AbbVie reported compliance with its covenants.
Material changes and business drivers
- Humira revenue fell 35% at constant currency, including a 40% U.S. decline, primarily due to biosimilar competition.
- Growth in Skyrizi and Rinvoq partly offset Humira erosion: revenue increased 48% and 62%, respectively, at constant currency. Venclexta grew 16%; Vraylar, Ubrelvy and Qulipta also grew.
- Imbruvica revenue declined 5%. Aesthetics were mixed: Botox Cosmetic declined 3% and Juvederm declined 14%, with inventory timing and consumer demand cited as factors.
- ImmunoGen contributed $91 million of revenue from acquisition through quarter-end and reported $404 million of operating losses, including $349 million of cash-settled employee incentive expense, $47 million of inventory step-up amortization and $21 million of intangible amortization. Acquisition-related expenses were $59 million.
- Net earnings increased substantially, but the comparison was affected by other expense of $586 million versus $1.804 billion in Q1 2023. This line included contingent-consideration fair-value charges of $660 million versus $1.872 billion. The prior-year quarter also included the $630 million intangible impairment.
Outlook, risks and unusual items
- The filing provides no numerical full-year revenue or earnings guidance in the supplied text. Management expects multiple regulatory submissions and clinical data readouts over the next 12 months and continues investment across its pipeline.
- AbbVie agreed to acquire Cerevel Therapeutics for approximately $8.7 billion; closing was expected in 2024, subject to regulatory approval and customary conditions. The company also noted a CEO transition planned for July 1, 2024.
- Management identifies competition, patent challenges, R&D uncertainty, litigation and government actions, and regulatory changes as risks. Humira biosimilar erosion and the ability of newer products to sustain growth are important operating factors.
- Contingent-consideration liabilities were $20.159 billion, measured using significant unobservable inputs. Changes in assumptions about milestone probabilities, timing, discount rates and future sales can materially affect reported earnings and financial position.
- AbbVie disclosed numerous legal matters, including opioid-related cases and antitrust, securities, product-liability and intellectual-property litigation. For certain matters, it could not estimate possible losses beyond recorded accruals; management said ultimate disposition was not expected to materially adversely affect the company.
- The effective tax rate was 22%, versus 49% in Q1 2023. The company said the decrease primarily reflected prior-year contingent-consideration changes and intangible impairment. It noted that gross unrecognized tax benefits could change by up to $162 million within 12 months.
Important facts for investors to verify
- Whether Skyrizi and Rinvoq growth can offset continued Humira biosimilar-related declines.
- The final ImmunoGen purchase-price allocation, integration costs, and commercial contribution; acquired-asset valuations remained preliminary at quarter-end.
- Debt levels, interest costs and funding plans for the proposed Cerevel acquisition, alongside dividends and share repurchases.
- Movements in the $20.159 billion contingent-consideration liability and the status or potential financial effects of significant litigation and tax matters.