AbbVie 2014 Annual Report Download - page 48

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SG&A expenses in 2014 included transaction-related costs totaling $1.7 billion incurred in connection
with the terminated proposed combination with Shire. Refer to Note 4 of the Notes to Consolidated
Financial Statements included under Item 8, ‘‘Financial Statements and Supplementary Data’’ for further
information regarding the termination of the company’s proposed combination with Shire.
Excluding the Shire break fee and transaction-related costs, the increase in SG&A expenses in 2014 and
2013 was due primarily to increased selling and marketing support for new products, including preparations
for the expected launch of VIEKIRA PAK, as well as spending relating to new indications and geographic
expansion for HUMIRA. These increases were partially offset by the impact of favorable foreign exchange
rates in 2014 and 2013. SG&A expenses in 2014, 2013 and 2012 include $422 million, $228 million and
$213 million, respectively, of costs associated with the separation of AbbVie from Abbott.
SG&A expenses in 2014 also included a $129 million charge due to additional expenses related to the
Branded Prescription Drug Fee. On July 28, 2014, the Internal Revenue Service issued final rules and
regulations for the Branded Prescription Drug Fee, an annual non-tax-deductible fee payable to the federal
government under the Affordable Care Act based on an allocation of a company’s market share for branded
prescription drugs sold to certain government programs in the prior year. The final rules accelerated the
expense recognition criteria for the fee obligation from the year in which the fee is paid, to the year in
which the market share used to allocate the fee is determined. This change required AbbVie and other
industry participants to recognize an additional year of expense in 2014. As a result, an additional expense
of $129 million was recognized in 2014. The final rules and regulations did not change the amount or
timing of annual fees to be paid.
SG&A expenses in 2013 included restructuring charges aggregating $39 million, which principally
related to the restructuring of certain commercial operations in conjunction with the loss and expected loss
of exclusivity of certain products and, in 2012, included litigation charges of $100 million related to an
investigation of the sales and marketing activities for Depakote which was resolved in May 2012.
Research and Development and Acquired In-Process Research and Development
Percent
change
years ended December 31 (in millions) 2014 2013 2012 2014 2013
Research and development $3,297 $2,855 $2,778 15% 3%
as a % of net sales 17% 15% 15%
Acquired in-process research and development $ 352 $ 338 $ 288 4% 17%
R&D expense in 2014 and 2013 reflected funding to support the company’s emerging mid- and
late-stage pipeline assets and the continued pursuit of additional HUMIRA indications. These increases were
partially offset by the impact of favorable foreign exchange rate fluctuations in 2014 and 2013. R&D
expense included regulatory milestone payments of $40 million in 2014 and $50 million in 2012 related to
the company’s collaboration. R&D expenses also included restructuring charges of $15 million in 2013 and
$183 million in 2012.
Acquired in-process research and development (IPR&D) expense in 2014 principally included a charge
of $275 million as a result of entering into a global collaboration with Infinity to develop and commercialize
duvelisib, a treatment for patients with cancer. Refer to Note 6, ‘‘Acquisitions, Collaborations and Other
Arrangements,’’ of the Notes to Consolidated Financial Statements included under Item 8, ‘‘Financial
Statements and Supplementary Data,’’ for additional information related to the company’s collaborations
and other arrangements.
IPR&D expense in 2013 principally included a charge of $175 million as a result of entering into a global
license agreement with Ablynx to develop and commercialize ALX-0061, a charge of $70 million as a result of
entering into a global collaboration with Alvine to develop ALV003, a charge of $45 million as a result of
42 2014 Form 10-K