AbbVie 2012 Annual Report Download - page 53

Gross Margin
Percent
change
years ended December 31 (in millions) 2012 2011 2010 2012 2011
Gross margin $13,872 $12,805 $11,345 8% 13%
as a % of net sales 75% 73% 73%
The increase in the gross profit margin in 2012 was primarily due to product mix, improved efficiencies,
higher prices in certain geographies, and the favorable impact of foreign currency, partially offset by
pricing pressures in various other markets. The improvement also reflects lower amortization expense
for intangible assets and the impact of restructuring programs implemented in 2011 to realign various
manufacturing operations. Changes in various governmental rebate programs continue to have a
negative effect on the gross profit margins. The 2010 health care reform legislation in the United States
resulted in increased and additional Medicaid rebates beginning in 2010 and in additional rebates
related to the Medicare Part D ‘‘donut hole’’ beginning in 2011, which negatively affected AbbVie’s
business. The negative impact of the rebates resulting from the 2010 health care reform legislation grew
from more than $200 million in 2010 to approximately $300 million in 2011 and 2012.
Selling, General and Administrative
Percent
change
years ended December 31 (in millions) 2012 2011 2010 2012 2011
Selling, general and administrative $4,989 $5,894 $3,820 (15)% 54%
as a % of net sales 27% 34% 24%
Selling, general and administrative (SG&A) expenses in 2012 included $213 million of costs associated
with the separation of AbbVie from Abbott. SG&A expenses in 2012 and 2011 included litigation
charges of $100 million and $1.5 billion, respectively, related to the Depakote investigation. SG&A
expenses in 2011 and 2010 included $11 million and $56 million, respectively, related to restructuring
and integration projects associated with the 2010 acquisition of Solvay. Refer to Note 12 for
information on the Depakote charge and Note 4 for information on the Solvay acquisition.
Excluding separation costs, litigation charges and Solvay-related restructuring and integration costs
from all years, SG&A expenses increased 7 percent, 16 percent and 12 percent in 2012, 2011 and 2010,
respectively. The increases in SG&A expenses over the three-year period were due primarily to
increased selling and marketing support for new and existing products, including continued spending for
HUMIRA, and in 2012 and 2011, the impact of the pharmaceutical fee imposed by U.S. health care
reform legislation.
Research and Development and Acquired In-Process Research and Development
Percent
change
years ended December 31 (in millions) 2012 2011 2010 2012 2011
Research and development $2,778 $2,618 $2,495 6% 5%
as a % of net sales 15% 15% 16%
Acquired in-process research and development $ 288 $ 673 $ 313 (57)% 115%
R&D increased in 2012 and 2011, reflecting continued pipeline spending on programs in biologics,
neuroscience and virology as well as a $50 million R&D milestone payment related to a product in
development for the treatment of chronic kidney disease in 2012. R&D expenses also included
restructuring charges of $169 million in 2012 and $69 million in 2011.
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