Full Press Release Details
AbbVie Reports Second-Quarter 2018 Financial Results
NORTH CHICAGO, Ill., July 27, 2018 - AbbVie (NYSE:ABBV) announced financial results for the second quarter ended June 30, 2018.
"We are extremely pleased with the strong momentum of our business in the quarter and progress year-to-date. We've driven strong commercial, operational and R&D execution, resulting in top- and bottom-line results once again ahead of our expectations," said Richard A. Gonzalez, chairman and chief executive officer, AbbVie. "This outstanding performance was driven by growth from several assets across our portfolio, including significant contributions from HUMIRA, IMBRUVICA, and MAVYRET. Based on our performance in the first half of the year and the tremendous confidence we have in our business, we are raising our full year 2018 EPS guidance for the third time."
Second-Quarter Results
Second-Quarter Results (continued)
Recent Events (continued)
Recent Events (continued)
Recent Events (continued)
Full-Year 2018 Outlook
AbbVie is updating its GAAP diluted EPS guidance for the full-year 2018 to $6.47 to $6.57. AbbVie is raising its adjusted EPS guidance range for the full-year 2018 from $7.66 to $7.76 to $7.76 to $7.86. The midpoint of this guidance reflects year-over-year growth of 39.5 percent. The company's 2018 adjusted diluted EPS guidance excludes $1.29 per share of intangible asset amortization expense, changes in the fair value of contingent consideration, a one-time net tax benefit related to the timing of the phase in of provisions of the U.S. tax reform legislation on certain subsidiaries, and other specified items.
AbbVie's adjusted EPS guidance range reflects an effective tax rate approaching 9 percent in 2018. In 2018, AbbVie will experience a one-time net tax benefit related to the timing of the phase in of provisions of the new legislation on certain subsidiaries. This benefit has been excluded from the adjusted EPS guidance, and included in the GAAP guidance range.
AbbVie continues to anticipate the company's adjusted effective tax rate to increase to 13 percent over the next five years as a result of increased domestic income and investment.
AbbVie is a global, research-driven biopharmaceutical company committed to developing innovative advanced therapies for some of the world's most complex and critical conditions. The company's mission is to use its expertise, dedicated people and unique approach to innovation to markedly improve treatments across four primary therapeutic areas: immunology, oncology, virology and neuroscience. In more than 75 countries, AbbVie employees are working every day to advance health solutions for people around the world. For more information about AbbVie, please visit us at www.abbvie.com. Follow @abbvie on Twitter, Facebook or LinkedIn.
AbbVie will host an investor conference call today at 8:00 a.m. Central time to discuss our second-quarter performance. The call will be webcast through AbbVie's Investor Relations website at investors.abbvie.com. An archived edition of the call will be available after 11:00 a.m. Central time.
Non-GAAP Financial Results
Financial results for 2018 and 2017 are presented on both a reported and a non-GAAP basis. Reported results were prepared in accordance with GAAP and include all revenue and expenses recognized during the period. Non-GAAP results adjust for certain non-cash items and for factors that are unusual or unpredictable, and exclude those costs, expenses, and other specified items presented in the reconciliation tables later in this release. AbbVie's management believes non-GAAP financial measures provide useful information to investors regarding AbbVie's results of operations and assist management, analysts, and investors in evaluating the performance of the business. Non-GAAP financial measures should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. The company's 2018 financial guidance is also being provided on both a reported and a non-GAAP basis.
Prior Period Reclassifications
Certain reclassifications were made to conform the prior period financial results to the current period presentation.
Forward-Looking Statements
Some statements in this news release are, or may be considered, forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements. AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to, challenges to intellectual property, competition from other products, difficulties inherent in the research and development process, adverse litigation or government action, and changes to laws and regulations applicable to our industry. Additional information about the economic, competitive, governmental, technological and other factors that may affect AbbVie's operations is set forth in Item 1A, "Risk Factors," of AbbVie's 2017 Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission (SEC). AbbVie undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.
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Key Product Revenues
Quarter Ended June 30, 2018
| % Change vs. 2Q17 | ||||||||||||||
| Net Revenues (in millions) | International | Total | ||||||||||||
| U.S. | Int'l. | Total | U.S. | Operational | Reported | Operational | Reported | |||||||
| ADJUSTED NET REVENUES a | $5,449 | $2,809 | $8,258 | 17.3% | 16.9% | 22.2% | 17.1% | 18.9% | ||||||
| Humira | 3,521 | 1,664 | 5,185 | 10.0 | 4.4 | 9.8 | 8.2 | 10.0 | ||||||
| Imbruvica b | 693 | 157 | 850 | 31.1 | 59.5 | 59.5 | 35.6 | 35.6 | ||||||
| HCV | 422 | 551 | 973 | >100.0 | >100.0 | >100.0 | >100.0 | >100.0 | ||||||
| Creon | 219 | - | 219 | 11.4 | n/a | n/a | 11.4 | 11.4 | ||||||
| Lupron | 180 | 43 | 223 | 4.3 | 11.0 | 13.2 | 5.5 | 5.9 | ||||||
| Synthroid | 193 | - | 193 | 0.1 | n/a | n/a | 0.1 | 0.1 | ||||||
| Synagis | - | 44 | 44 | n/a | 13.2 | 10.1 | 13.2 | 10.1 | ||||||
| AndroGel | 128 | - | 128 | (16.8) | n/a | n/a | (16.8) | (16.8) | ||||||
| Duodopa | 20 | 88 | 108 | 41.6 | 21.5 | 31.0 | 25.1 | 32.9 | ||||||
| Sevoflurane | 19 | 94 | 113 | (2.0) | 9.0 | 10.8 | 6.9 | 8.4 | ||||||
| Kaletra | 13 | 78 | 91 | (29.7) | (16.7) | (15.3) | (19.0) | (17.8) |
Note: "Operational" growth reflects the percentage change over the prior year excluding the impact of exchange rate fluctuations.
n/a = not applicable
Key Product Revenues
Six Months Ended June 30, 2018
| % Change vs. 6M17 | ||||||||||||||
| Net Revenues (in millions) | International | Total | ||||||||||||
| U.S. | Int'l. | Total | U.S. | Operational | Reported | Operational | Reported | |||||||
| ADJUSTED NET REVENUES a | $10,239 | $5,953 | $16,192 | 17.7% | 16.7% | 24.4% | 17.4% | 20.1% | ||||||
| Humira | 6,524 | 3,370 | 9,894 | 10.6 | 6.7 | 14.7 | 9.3 | 12.0 | ||||||
| Imbruvica b | 1,317 | 295 | 1,612 | 33.7 | 53.5 | 53.5 | 36.9 | 36.9 | ||||||
| HCV | 765 | 1,127 | 1,892 | >100.0 | >100.0 | >100.0 | >100.0 | >100.0 | ||||||
| Creon | 428 | - | 428 | 12.1 | n/a | n/a | 12.1 | 12.1 | ||||||
| Lupron | 357 | 85 | 442 | 9.2 | 6.6 | 10.4 | 8.8 | 9.5 | ||||||
| Synthroid | 375 | - | 375 | (2.6) | n/a | n/a | (2.6) | (2.6) | ||||||
| Synagis | - | 365 | 365 | n/a | 1.9 | 7.3 | 1.9 | 7.3 | ||||||
| AndroGel | 258 | - | 258 | (11.1) | n/a | n/a | (11.1) | (11.1) | ||||||
| Duodopa | 38 | 173 | 211 | 36.4 | 17.5 | 29.7 | 20.8 | 30.9 | ||||||
| Sevoflurane | 36 | 183 | 219 | (2.8) | 1.6 | 5.1 | 0.9 | 3.7 | ||||||
| Kaletra | 26 | 138 | 164 | (29.5) | (28.9) | (26.6) | (29.0) | (27.1) |
Note: "Operational" growth reflects the percentage change over the prior year excluding the impact of exchange rate fluctuations.
n/a = not applicable
Consolidated Statements of Earnings
Quarter and Six Months Ended June 30, 2018 and 2017
(Unaudited) (In millions, except per share data)
| Second Quarter Ended June 30 | Six Months Ended June 30 | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net revenues | $ | 8,278 | $ | 6,944 | $ | 16,212 | $ | 13,482 | |||||||
| Cost of products sold | 1,934 | 1,529 | 3,861 | 3,145 | |||||||||||
| Selling, general and administrative | 1,760 | 1,509 | 3,551 | 2,882 | |||||||||||
| Research and development | 1,322 | 1,229 | 2,566 | 2,371 | |||||||||||
| Acquired in-process research and development | - | 15 | 69 | 15 | |||||||||||
| Other expense | 500 | - | 500 | - | |||||||||||
| Total operating cost and expenses | 5,516 | 4,282 | 10,547 | 8,413 | |||||||||||
| Operating earnings | 2,762 | 2,662 | 5,665 | 5,069 | |||||||||||
| Interest expense, net | 272 | 253 | 523 | 500 | |||||||||||
| Net foreign exchange loss | 8 | 6 | 16 | 19 | |||||||||||
| Other expense, net | 470 | 50 | 317 | 111 | |||||||||||
| Earnings before income tax expense | 2,012 | 2,353 | 4,809 | 4,439 | |||||||||||
| Income tax expense | 29 | 438 | 43 | 813 | |||||||||||
| Net earnings | $ | 1,983 | $ | 1,915 | $ | 4,766 | $ | 3,626 | |||||||
| Diluted earnings per share | $ | 1.26 | $ | 1.19 | $ | 2.99 | $ | 2.25 | |||||||
| Adjusted diluted earnings per share a | $ | 2.00 | $ | 1.42 | $ | 3.87 | $ | 2.70 | |||||||
| Weighted-average diluted shares outstanding | 1,572 | 1,600 | 1,584 | 1,602 |
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Quarter Ended June 30, 2018
(Unaudited) (In millions, except per share data)
1. Specified items impacted results as follows:
| 2Q18 | |||||||||||
| Earnings | Diluted | ||||||||||
| Pre-tax | After-tax | EPS | |||||||||
| As reported (GAAP) | $ | 2,012 | $ | 1,983 | $ | 1.26 | |||||
| Adjusted for specified items: | |||||||||||
| Intangible asset amortization | 324 | 266 | 0.17 | ||||||||
| Milestones and other R&D expenses | 55 | 55 | 0.03 | ||||||||
| Calico collaboration | 500 | 500 | 0.32 | ||||||||
| Charitable contributions | 120 | 93 | 0.06 | ||||||||
| Change in fair value of contingent consideration | 485 | 485 | 0.30 | ||||||||
| Impacts of U.S. tax reform | - | (202 | ) | (0.13 | ) | ||||||
| Other | (20 | ) | (15 | ) | (0.01 | ) | |||||
| As adjusted (non-GAAP) | $ | 3,476 | $ | 3,165 | $ | 2.00 |
Milestones and other R&D expenses are associated with milestone payments for previously announced collaborations. Impacts of U.S. tax reform reflects a net tax benefit related to the timing of the new legislation's phase in on certain subsidiaries. Other primarily includes milestone revenue under a previously announced collaboration.
2. The impact of the specified items by line item was as follows:
| 2Q18 | |||||||||||||||||||||||
| Net revenues | Cost of products sold | SG&A | R&D | Other operating expense | Other expense, net | ||||||||||||||||||
| As reported (GAAP) | $ | 8,278 | $ | 1,934 | $ | 1,760 | $ | 1,322 | $ | 500 | $ | 470 | |||||||||||
| Adjusted for specified items: | |||||||||||||||||||||||
| Intangible asset amortization | - | (324 | ) | - | - | - | - | ||||||||||||||||
| Milestones and other R&D expenses | - | - | - | (55 | ) | - | - | ||||||||||||||||
| Calico collaboration | - | - | - | - | (500 | ) | - | ||||||||||||||||
| Charitable contributions | - | - | (120 | ) | - | - | - | ||||||||||||||||
| Change in fair value of contingent consideration | - | - | - | - | - | (485 | ) | ||||||||||||||||
| Other | (20 | ) | (3 | ) | 3 | - | - | - | |||||||||||||||
| As adjusted (non-GAAP) | $ | 8,258 | $ | 1,607 | $ | 1,643 | $ | 1,267 | $ | - | $ | (15 | ) |
3. The adjusted tax rate for the second quarter of 2018 was 9.0 percent, as detailed below:
| 2Q18 | ||||||||||
| Pre-tax income | Income taxes | Tax rate | ||||||||
| As reported (GAAP) | $ | 2,012 | $ | 29 | 1.5 | % | ||||
| Specified items | 1,464 | 282 | 19.3 | % | ||||||
| As adjusted (non-GAAP) | $ | 3,476 | $ | 311 | 9.0 | % |
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Quarter Ended June 30, 2017
(Unaudited) (In millions, except per share data)
1. Specified items impacted results as follows:
| 2Q17 | |||||||||||
| Earnings | Diluted | ||||||||||
| Pre-tax | After-tax | EPS | |||||||||
| As reported (GAAP) | $ | 2,353 | $ | 1,915 | $ | 1.19 | |||||
| Adjusted for specified items: | |||||||||||
| Intangible asset amortization | 269 | 202 | 0.12 | ||||||||
| Milestones and other R&D expenses | 8 | 8 | 0.01 | ||||||||
| Acquired IPR&D | 15 | 15 | 0.01 | ||||||||
| Acquisition related costs | 35 | 24 | 0.01 | ||||||||
| Change in fair value of contingent consideration | 61 | 61 | 0.04 | ||||||||
| Litigation reserves | 93 | 62 | 0.04 | ||||||||
| Other | 3 | 2 | - | ||||||||
| As adjusted (non-GAAP) | $ | 2,837 | $ | 2,289 | $ | 1.42 |
Milestones and other R&D expenses are associated with milestone payments for previously announced collaborations. Acquired IPR&D primarily reflects upfront payments related to R&D collaborations and licensing arrangements with third parties. Acquisition related costs primarily includes the amortization of the acquisition date fair value step-up for inventory related to the acquisition of Pharmacyclics. Other includes restructuring charges associated with streamlining global operations.
2. The impact of the specified items by line item was as follows:
| 2Q17 | |||||||||||||||||||
| Cost of products sold | SG&A | R&D | Acquired IPR&D | Other expense, net | |||||||||||||||
| As reported (GAAP) | $ | 1,529 | $ | 1,509 | $ | 1,229 | $ | 15 | $ | 50 | |||||||||
| Adjusted for specified items: | |||||||||||||||||||
| Intangible asset amortization | (269 | ) | - | - | - | - | |||||||||||||
| Milestones and other R&D expenses | - | - | (8 | ) | - | - | |||||||||||||
| Acquired IPR&D | - | - | - | (15 | ) | - | |||||||||||||
| Acquisition related costs | (26 | ) | (5 | ) | (3 | ) | - | (1 | ) | ||||||||||
| Change in fair value of contingent consideration | - | - | - | - | (61 | ) | |||||||||||||
| Litigation reserves | - | (93 | ) | - | - | - | |||||||||||||
| Other | (2 | ) | (1 | ) | - | - | - | ||||||||||||
| As adjusted (non-GAAP) | $ | 1,232 | $ | 1,410 | $ | 1,218 | $ | - | $ | (12 | ) |
3. The adjusted tax rate for the second quarter of 2017 was 19.3 percent, as detailed below:
| 2Q17 | ||||||||||
| Pre-tax income | Income taxes | Tax rate | ||||||||
| As reported (GAAP) | $ | 2,353 | $ | 438 | 18.6 | % | ||||
| Specified items | 484 | 110 | 22.7 | % | ||||||
| As adjusted (non-GAAP) | $ | 2,837 | $ | 548 | 19.3 | % |
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Six Months Ended June 30, 2018
(Unaudited) (In millions, except per share data)
1. Specified items impacted results as follows:
| 6M18 | |||||||||||
| Earnings | Diluted | ||||||||||
| Pre-tax | After-tax | EPS | |||||||||
| As reported (GAAP) | $ | 4,809 | $ | 4,766 | $ | 2.99 | |||||
| Adjusted for specified items: | |||||||||||
| Intangible asset amortization | 654 | 538 | 0.34 | ||||||||
| Milestones and other R&D expenses | 87 | 87 | 0.05 | ||||||||
| Acquired IPR&D | 69 | 69 | 0.04 | ||||||||
| Calico collaboration | 500 | 500 | 0.32 | ||||||||
| Charitable contributions | 120 | 93 | 0.06 | ||||||||
| Change in fair value of contingent consideration | 337 | 337 | 0.21 | ||||||||
| Litigation reserves | 118 | 100 | 0.06 | ||||||||
| Impacts of U.S. tax reform | - | (357 | ) | (0.22 | ) | ||||||
| Other | 31 | 32 | 0.02 | ||||||||
| As adjusted (non-GAAP) | $ | 6,725 | $ | 6,165 | $ | 3.87 |
Milestones and other R&D expenses are associated with milestone payments for previously announced collaborations. Acquired IPR&D primarily reflects upfront payments related to R&D collaborations and licensing arrangements with third parties. Impacts of U.S. tax reform reflects a net tax benefit related to the timing of the new legislation's phase in on certain subsidiaries. Other primarily includes milestone revenue under a previously announced collaboration and restructuring charges associated with streamlining global operations.
2. The impact of the specified items by line item was as follows:
| 6M18 | |||||||||||||||||||||||||||
| Net revenues | Cost of products sold | SG&A | R&D | Acquired IPR&D | Other operating expense | Other expense, net | |||||||||||||||||||||
| As reported (GAAP) | $ | 16,212 | $ | 3,861 | $ | 3,551 | $ | 2,566 | $ | 69 | $ | 500 | $ | 317 | |||||||||||||
| Adjusted for specified items: | |||||||||||||||||||||||||||
| Intangible asset amortization | - | (654 | ) | - | - | - | - | - | |||||||||||||||||||
| Milestones and other R&D expenses | - | - | - | (87 | ) | - | - | - | |||||||||||||||||||
| Acquired IPR&D | - | - | - | - | (69 | ) | - | - | |||||||||||||||||||
| Calico collaboration | - | - | - | - | - | (500 | ) | - | |||||||||||||||||||
| Charitable contributions | - | - | (120 | ) | - | - | - | - | |||||||||||||||||||
| Change in fair value of contingent consideration | - | - | - | - | - | - | (337 | ) | |||||||||||||||||||
| Litigation reserves | - | - | (118 | ) | - | - | - | - | |||||||||||||||||||
| Other | (20 | ) | (28 | ) | - | (23 | ) | - | - | - | |||||||||||||||||
| As adjusted (non-GAAP) | $ | 16,192 | $ | 3,179 | $ | 3,313 | $ | 2,456 | $ | - | $ | - | $ | (20 | ) |
3. The adjusted tax rate for the first six months of 2018 was 8.3 percent, as detailed below:
| 6M18 | ||||||||||
| Pre-tax income | Income taxes | Tax rate | ||||||||
| As reported (GAAP) | $ | 4,809 | $ | 43 | 0.9 | % | ||||
| Specified items | 1,916 | 517 | 27.0 | % | ||||||
| As adjusted (non-GAAP) | $ | 6,725 | $ | 560 | 8.3 | % |
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Six Months Ended June 30, 2017
(Unaudited) (In millions, except per share data)
1. Specified items impacted results as follows:
| 6M17 | |||||||||||
| Earnings | Diluted | ||||||||||
| Pre-tax | After-tax | EPS | |||||||||
| As reported (GAAP) | $ | 4,439 | $ | 3,626 | $ | 2.25 | |||||
| Adjusted for specified items: | |||||||||||
| Intangible asset amortization | 540 | 405 | 0.25 | ||||||||
| Milestones and other R&D expenses | 36 | 36 | 0.02 | ||||||||
| Acquired IPR&D | 15 | 15 | 0.01 | ||||||||
| Acquisition related costs | 73 | 49 | 0.03 | ||||||||
| Change in fair value of contingent consideration | 146 | 145 | 0.09 | ||||||||
| Litigation reserves | 93 | 62 | 0.04 | ||||||||
| Other | 13 | 11 | 0.01 | ||||||||
| As adjusted (non-GAAP) | $ | 5,355 | $ | 4,349 | $ | 2.70 |
Milestones and other R&D expenses are associated with milestone payments for previously announced collaborations. Acquired IPR&D primarily reflects upfront payments related to R&D collaborations and licensing arrangements with third parties. Acquisition related costs primarily includes the amortization of the acquisition date fair value step-up for inventory related to the acquisition of Pharmacyclics. Other primarily includes restructuring charges associated with streamlining global operations.
2. The impact of the specified items by line item was as follows:
| 6M17 | |||||||||||||||||||
| Cost of products sold | SG&A | R&D | Acquired IPR&D | Other expense, net | |||||||||||||||
| As reported (GAAP) | $ | 3,145 | $ | 2,882 | $ | 2,371 | $ | 15 | $ | 111 | |||||||||
| Adjusted for specified items: | |||||||||||||||||||
| Intangible asset amortization | (540 | ) | - | - | - | - | |||||||||||||
| Milestones and other R&D expenses | - | - | (36 | ) | - | - | |||||||||||||
| Acquired IPR&D | - | - | - | (15 | ) | - | |||||||||||||
| Acquisition related costs | (52 | ) | (14 | ) | (5 | ) | - | (2 | ) | ||||||||||
| Change in fair value of contingent consideration | - | - | - | - | (146 | ) | |||||||||||||
| Litigation reserves | - | (93 | ) | - | - | - | |||||||||||||
| Other | (8 | ) | (5 | ) | - | - | - | ||||||||||||
| As adjusted (non-GAAP) | $ | 2,545 | $ | 2,770 | $ | 2,330 | $ | - | $ | (37 | ) |
3. The adjusted tax rate for the first six months of 2017 was 18.8 percent, as detailed below:
| 6M17 | ||||||||||
| Pre-tax income | Income taxes | Tax rate | ||||||||
| As reported (GAAP) | $ | 4,439 | $ | 813 | 18.3 | % | ||||
| Specified items | 916 | 193 | 21.0 | % | ||||||
| As adjusted (non-GAAP) | $ | 5,355 | $ | 1,006 | 18.8 | % |