AbbVie 2014 Annual Report Download - page 39

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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The following is a discussion and analysis of the financial condition of AbbVie Inc. (AbbVie or the
company) and results of operations as of and for each of the three years in the period ended
December 31, 2014. This commentary should be read in conjunction with the consolidated financial
statements and accompanying notes appearing in Item 8, ‘‘Financial Statements and Supplementary Data.’’
EXECUTIVE OVERVIEW
Company Overview
AbbVie is a global, research-based biopharmaceutical company. AbbVie develops and markets advanced
therapies that address some of the world’s most complex and serious diseases. AbbVie products are used
to treat chronic autoimmune diseases, including rheumatoid arthritis, psoriasis, and Crohn’s disease;
hepatitis C (HCV); human immunodeficiency virus (HIV); endometriosis; thyroid disease; Parkinson’s disease;
complications associated with chronic kidney disease (CKD) and cystic fibrosis; and other health conditions
such as low testosterone. AbbVie also has a pipeline of promising new medicines, including more than 30
compounds or indications in Phase 2 or Phase 3 development across such important medical specialties as
immunology, virology/liver disease, oncology, renal disease, neurological diseases and women’s health.
AbbVie’s products are generally sold worldwide directly to wholesalers, distributors, government
agencies, health care facilities, specialty pharmacies, and independent retailers from AbbVie-owned
distribution centers and public warehouses. In the United States, AbbVie distributes pharmaceutical
products principally through independent wholesale distributors, with some sales directly to pharmacies and
patients. Outside the United States, sales are made either directly to customers or through distributors,
depending on the market served. Certain products are co-marketed or co-promoted with other companies.
AbbVie has approximately 26,000 employees and its products are sold in over 170 countries. AbbVie
operates in one business segment—pharmaceutical products.
Financial Results
Since becoming an independent company, AbbVie’s strategy has focused on delivering strong financial
results and returns for shareholders while ensuring a strong sustainable growth business over the longer
term. In 2014, AbbVie grew worldwide net sales by 6 percent to $20.0 billion, driven primarily by the
continued strength of HUMIRA and double-digit sales growth from other key products including Creon,
Duodopa and Synthroid. Sales growth in 2014 continued to reflect the impact of the loss of exclusivity in
the company’s lipid franchise, which resulted in the loss of $748 million of revenue in 2014 over the prior
year. Generic competition began in November 2012 for TriCor, July 2013 for Trilipix and September 2013 for
Niaspan.
The company’s financial performance in 2014 included delivering fully diluted earnings per share of
$1.10, including after-tax transaction and financing-related costs totaling $1.8 billion incurred in connection
with the terminated proposed combination with Shire plc (Shire), a $750 million after-tax charge related to
a research and development collaboration agreement with Calico Life Sciences LLC (Calico) and a
$173 million after-tax charge as a result of entering into a global collaboration with Infinity
Pharmaceuticals, Inc. (Infinity). Refer to Note 4 for further information regarding the termination of the
company’s proposed combination with Shire and Note 6 for further information regarding the company’s
collaborations with Calico and Infinity. AbbVie’s financial performance in 2014 also reflected an
improvement in gross margin primarily due to favorable product mix across the product portfolio and
operational efficiencies, as well as increased funding in support of AbbVie’s emerging mid-and late-stage
pipeline assets and additional HUMIRA indications.
2014 Form 10-K 33