AbbVie Inc. — Q2 2022 Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2022. AbbVie is a global biopharmaceutical company operating as one reportable business segment. Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net revenues | $14,583 | $13,959 | $28,121 | $26,969 |
| Operating earnings | $3,295 | $4,441 | $8,012 | $8,544 |
| Net earnings attributable to AbbVie | $924 | $766 | $5,414 | $4,319 |
| Diluted EPS | $0.51 | $0.42 | $3.03 | $2.41 |
| Gross margin | 71% | 68% | 71% | 68% |
| Operating margin | 22.6% | 31.8% | 28.5% | 31.7% |
- Revenue grew 4.5% in Q2 and 4.3% for the first half at actual exchange rates; growth was 6.1% and 5.7%, respectively, at constant currency.
- Q2 SG&A rose 71% to $5.4 billion, including a $2.1 billion charge related to a potential opioid settlement. Six-month SG&A rose 42% to $8.5 billion. Reported operating earnings declined despite revenue growth.
- Other expense was $1.5 billion in Q2 versus $2.7 billion a year earlier. It included a $1.6 billion Q2 charge from changes in the fair value of contingent consideration liabilities; the corresponding six-month charge was $861 million versus $2.3 billion in 2021.
- Gross margin percentage improved, which management attributed to product mix and lower amortization of acquired Allergan intangibles. Six-month acquired-intangible amortization was $3.7 billion.
- Six-month operating cash flow was $9.9 billion, compared with $9.8 billion in 2021. Investing cash outflow was $1.5 billion and financing cash outflow was $9.7 billion. Cash and equivalents were $8.5 billion at June 30.
- At June 30, current assets were $29.1 billion and current liabilities $34.5 billion (current ratio approximately 0.84). Short-term investments were $1.4 billion. Current and long-term debt and finance lease obligations totaled approximately $72.9 billion on the balance sheet.
- Six-month financing included $5.0 billion of dividends, $1.5 billion of share repurchases, and $4.9 billion of debt and finance-lease repayments. The quarterly dividend declared was $1.41 per share. AbbVie had no borrowing outstanding under its $4.0 billion revolving credit facility and reported compliance with its covenants.
Material changes and business drivers
- Growth was led by Skyrizi, up 86% in Q2 at reported revenue and 88% at constant currency, and Rinvoq, up 56% and 61%, respectively. Botox Cosmetic, Botox Therapeutic, Venclexta, Vraylar and Ubrelvy also grew.
- Humira revenue grew 6% globally in Q2 at constant currency, with U.S. growth offset by international biosimilar competition. Humira accounted for approximately 36% of first-half revenue.
- Imbruvica revenue fell 17% in Q2, with management citing lower U.S. demand and fewer new patient starts. Restasis fell 48%, and Juvederm Collection fell 16% in Q2 at constant currency. Management cited market and prior-year comparison effects for aesthetics, and COVID-19 disruption for some products and markets.
- AbbVie received $215 million net proceeds from selling Pylera commercial rights and recorded a $172 million pretax gain. It acquired Syndesi Therapeutics for $130 million upfront, with up to $870 million in potential milestone payments.
- Debt was reduced through repayment of $2.9 billion of senior notes and refinancing of a $2.0 billion floating-rate term loan. After quarter-end, AbbVie repaid $1.7 billion of notes scheduled to mature in October 2022.
Outlook, commentary and risks
- The filing provides no explicit full-year revenue or EPS guidance. Management expects approximately $2.5 billion of annual Allergan integration cost synergies in 2022 and expects total cumulative integration charges of approximately $2 billion through 2022.
- Management described a pipeline of approximately 80 compounds, devices or indications, with more than 40 in mid- or late-stage development, and anticipated several regulatory submissions and trial readouts over the next 12 months.
- AbbVie noted potential continuing COVID-19 effects, including lower new patient starts in certain products and markets; the duration and financial impact remain uncertain. It also cited possible broader business effects if the Russia-Ukraine conflict escalates. Aesthetics operations in Russia were suspended.
- Risks include litigation and government actions, intellectual-property challenges, product competition, clinical and regulatory uncertainty, and the ability to realize Allergan acquisition benefits. The company reported thousands of opioid-related matters and recorded a charge for a potential settlement framework whose definitive terms had not been reached.
- The filing describes safety reviews of JAK inhibitors by European regulators. It also notes customer concentration: three U.S. wholesalers represented 76% of net accounts receivable at June 30, 2022.
- Moody’s affirmed AbbVie’s Baa2 long-term rating and revised its outlook to positive in March 2022. Management stated it believed the company had sufficient financial flexibility to meet obligations and fund growth.
Important facts for investors to verify
- Whether the potential opioid settlement reaches definitive terms, its final cost and payment schedule, and whether additional litigation reserves are required.
- Whether growth in Skyrizi and Rinvoq can offset Humira biosimilar competition and declines in products such as Imbruvica and Restasis.
- How reported results are affected by contingent-consideration revaluations, acquired-intangible amortization, litigation charges and other unusual items.
- Debt repayment progress, liquidity and dividend sustainability, given current liabilities exceed current assets and the company has substantial debt obligations.
- Regulatory and clinical developments for the pipeline, including JAK inhibitor safety reviews, and the continuing effects of COVID-19 and geopolitical disruption.