AbbVie 2012 Annual Report Download - page 49

•In 2011, new formulations of some of AbbVie’s existing pharmaceutical products were approved,
including the 6-month and 3-month strengths of Lupron Depot in the United States in June and
August, respectively. In the United States, a new strength for Creon was approved in June 2011
and AndroGel 1.62% was approved in April 2011. An additional registration submission for a
new strength for Creon was made in September 2012.
Given the numerous sources for potential future growth, no individual project is expected to be
material to cash flows or results of operations over the next five years. Factors considered included
R&D expenses projected to be incurred for the project over the next year relative to AbbVie’s total
R&D expenses as well as qualitative factors, such as marketplace perceptions and impact of a new
product on AbbVie’s overall market position. There were no delays in AbbVie’s 2012 R&D activities
that are expected to have a material impact on operations.
While the aggregate cost to complete the numerous pharmaceutical projects currently in development is
expected to be material, the total cost to complete will depend upon AbbVie’s ability to successfully
complete each project, the rate at which each project advances, the nature and extent of cost-sharing
arrangements, and the ultimate timing for completion. Given the potential for significant delays and the
high rate of failure inherent in the research and development of new pharmaceutical products, it is not
possible to accurately estimate the total cost to complete all projects currently in development.
However, AbbVie plans to continue to manage its portfolio of projects to achieve research and
development spend equal to approximately 14 to 16 percent of net sales each year. AbbVie does not
regularly accumulate or make management decisions based on the total expenses incurred for a
particular development phase in a given period.
Basis of Presentation
AbbVie’s historical combined financial statements have been prepared on a stand-alone basis and are
derived from Abbott’s consolidated financial statements and accounting records as if the former
research-based pharmaceuticals business of Abbott had been part of AbbVie for all periods presented.
The combined financial statements reflect AbbVie’s financial position, results of operations, and cash
flows as its business was operated as part of Abbott prior to the distribution, in conformity with U.S.
generally accepted accounting principles. The combined financial statements principally represent the
historical results of operations and assets and liabilities of Abbott’s Proprietary Pharmaceutical
Products segment.
The historical financial statements included the allocation of certain assets and liabilities that had
historically been held at the Abbott corporate level but which were specifically identifiable or allocable
to AbbVie. Prior to 2012, cash and equivalents, short-term investments and restricted funds held by
Abbott were not allocated to AbbVie unless the cash or investments were held by an entity that was
transferred to AbbVie. At December 31, 2012, cash and equivalents and short-term investments
reflected AbbVie’s direct ownership of these assets. Prior to 2012, long-term debt and short-term
borrowings were not allocated to AbbVie as none of the debt recorded by Abbott was directly
attributable to or guaranteed by AbbVie. In 2012, AbbVie issued $14.7 billion of long-term debt with
maturities ranging from three to 30 years and $1.0 billion of commercial paper, which was reflected on
AbbVie’s combined balance sheet at December 31, 2012.
All intracompany AbbVie transactions have been eliminated. At December 31, 2011 and 2010, all
intercompany transactions between AbbVie and Abbott were considered to be effectively settled in the
combined financial statements at the time the transactions were recorded. The total net effect of the
settlement of these intercompany transactions was reflected in the combined statements of cash flow as
a financing activity and in the combined balance sheets as net parent company investment in AbbVie.
At December 31, 2012, outstanding intercompany transactions between AbbVie and Abbott are
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