AbbVie Inc. 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. The filing also reports fourth-quarter 2021 results; this is an annual report, not a standalone quarterly filing. AbbVie is a global biopharmaceutical company operating as one business segment. Its portfolio spans immunology, hematologic oncology, aesthetics, neuroscience, eye care and other therapies. Allergan was acquired on May 8, 2020, so 2021 includes a full year of Allergan results versus a partial year in 2020.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Net revenues | $56.2 billion | $45.8 billion |
| Operating earnings | $17.9 billion | $11.4 billion |
| Net earnings attributable to AbbVie | $11.5 billion | $4.6 billion |
| Diluted earnings per share | $6.45 | $2.72 |
| Operating cash flow | $22.8 billion | $17.6 billion |
| Capital expenditures | $0.8 billion | $0.8 billion |
- Revenue grew 22.7% reported and 21.9% at constant currency. Management attributes growth to multiple franchises and the full-year inclusion of Allergan.
- Gross margin was 69%, versus 66% in 2020; the improvement primarily reflected lower Allergan inventory fair-value step-up amortization and favorable product mix, partly offset by higher intangible-asset amortization. Operating margin was approximately 31.9%.
- R&D expense was $7.1 billion; SG&A was $12.3 billion. Intangible-asset amortization was $7.7 billion, versus $5.8 billion in 2020.
- Cash and equivalents were $9.7 billion. Current assets were $27.9 billion and current liabilities $35.2 billion. Long-term debt and finance lease obligations totaled $76.7 billion, including $12.5 billion current; the company reported $76.0 billion of contractual long-term debt obligations. The $4.0 billion revolving credit facility was undrawn, and AbbVie reported covenant compliance.
- Operating cash flow rose 29.5% year over year. Investing cash outflow was $2.3 billion and financing cash outflow was $19.0 billion. AbbVie paid $9.3 billion in dividends and repurchased $0.7 billion of shares.
- Fourth-quarter 2021 revenue was $14.9 billion; gross margin was $10.6 billion; net earnings attributable to AbbVie were $4.0 billion; diluted EPS was $2.26.
Material changes versus the prior comparable period
- Reported revenue rose 22.7%, but the comparison is affected by Allergan being included for a full year in 2021 and only from May 8 in 2020.
- Humira revenue increased 4% globally to $20.7 billion: U.S. sales rose 8%, while international sales declined 13%, primarily from biosimilar competition. Humira represented approximately 37% of 2021 revenue, down from 43% in 2020.
- Growth in newer and diversified franchises included Skyrizi revenue of $2.9 billion, up 84%; Rinvoq revenue of $1.7 billion, more than doubling; and Venclexta revenue of $1.8 billion, up 34%. Imbruvica revenue increased 2% to $5.4 billion.
- Several Allergan-related product lines posted strong year-over-year growth, including Botox Cosmetic, Juvederm and Botox Therapeutic; comparisons reflect the partial-year Allergan contribution in 2020 as well as market recovery.
- Net earnings and EPS increased substantially, but comparisons were affected by unusual tax and acquisition-related items. 2020 included a $1.7 billion net tax benefit; 2021 included a $2.7 billion charge from changes in contingent-consideration fair value.
- AbbVie reduced debt during 2021 through repayments and refinancing. Year-end debt remained substantial following the Allergan acquisition.
Outlook, management commentary, risks and unusual items
- Management’s 2022 priorities include growth in Skyrizi and Rinvoq, continued Humira U.S. growth, expansion of oncology, aesthetics and neuroscience products, pipeline investment, margin improvement, dividends and debt reduction. The filing does not provide a clear numerical 2022 revenue or EPS guidance figure.
- AbbVie expects approximately $2.5 billion of annual Allergan cost synergies in 2022 and approximately $2 billion of cumulative integration charges through 2022.
- The company reported approximately 90 compounds, devices or indications in development, with more than 50 in mid- or late-stage development. Planned regulatory submissions and trial readouts are subject to clinical and approval uncertainty.
- COVID-19 had not materially affected operations overall, but lower new-patient starts in certain products and markets continued and could persist during the pandemic. The company reported prior near-term Lupron supply issues and continued monitoring supply-chain risks.
- Key business risks include Humira biosimilar entry in the United States under settlement agreements beginning in 2023, international biosimilar competition, pricing and reimbursement pressure, product safety or efficacy developments, clinical-development failures, manufacturing and supplier disruptions, and reliance on three U.S. wholesalers.
- Rinvoq’s U.S. label was updated with class-wide JAK-inhibitor boxed-warning information and a narrowed rheumatoid arthritis indication. In February 2022, the European Commission requested an EMA review of JAK-inhibitor safety; the assessment was ongoing at filing.
- Significant legal matters include Allergan opioid litigation, textured breast-implant securities litigation, antitrust proceedings and product-related claims. Management stated that ultimate disposition was not expected to materially affect consolidated financial position, results or cash flows, but outcomes remain uncertain. For discussed matters, the company could not estimate possible losses beyond amounts accrued.
- Unusual 2021 charges included $2.7 billion for contingent consideration fair-value changes, $962 million of acquired in-process R&D, a $500 million Calico collaboration extension, and $253 million of litigation-related charges. The contingent-consideration liability was $14.9 billion at year-end and is based on significant unobservable assumptions, including future product sales and milestone probabilities.
- Other notable exposures include $76.0 billion of net intangible assets and $32.4 billion of goodwill, potential impairment risk, and $6.0 billion of unrecognized tax benefits. The company’s financial statements and internal controls received unqualified audit opinions.
Most important facts for investors to verify
- How U.S. Humira sales and market share respond to biosimilar launches beginning in 2023, and whether Skyrizi and Rinvoq growth offsets erosion.
- Whether reported growth and margins are sustainable after separating underlying performance from Allergan comparison effects, acquisition accounting amortization and one-time items.
- Progress toward the stated $2.5 billion annual synergy target, the remaining integration charges, and debt reduction while sustaining dividends.
- Clinical, regulatory and safety developments for key pipeline assets, particularly Rinvoq and other JAK inhibitors, and the commercial implications of label changes.
- Changes in contingent-consideration estimates, litigation accruals and outcomes, including opioid and breast-implant matters, as well as impairment indicators for acquired intangibles and goodwill.