AbbVie 2013 Annual Report Download - page 43

product on AbbVie’s overall market position. There were no delays in AbbVie’s 2013 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 R&D spend equal to
approximately 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.
Separation from Abbott Laboratories
On January 1, 2013, AbbVie became an independent, publicly-traded company as a result of the
distribution by Abbott Laboratories (Abbott) of 100 percent of the outstanding common stock of
AbbVie to Abbott’s shareholders (the separation). Each Abbott shareholder of record as of the close of
business on December 12, 2012, received one share of AbbVie common stock for each Abbott common
share held as of the record date. AbbVie was incorporated in Delaware on April 10, 2012 and is
comprised of Abbott’s former research-based pharmaceuticals business. AbbVie’s common stock began
trading ‘‘regular-way’’ under the ticker symbol ‘‘ABBV’’ on the New York Stock Exchange on January 2,
2013. Refer to the ‘‘Basis of Historical Presentation’’ section below for further information.
Basis of Historical Presentation
Prior to the separation, the historical financial statements were prepared on a stand-alone basis and
were derived from Abbott’s consolidated financial statements and accounting records as if the former
research-based pharmaceutical business of Abbott had been part of AbbVie for all periods presented.
Accordingly, AbbVie’s financial statements for periods prior to January 1, 2013 are presented on a
combined basis and reflect AbbVie’s financial position, results of operations and cash flows as its
business was operated as part of Abbott prior to the separation, in conformity with GAAP in the
United States. The combined financial statements principally represent the historical results of
operations and assets and liabilities of Abbott’s Proprietary Pharmaceutical Products segment.
The historical combined financial statements included the allocation of certain assets and liabilities that
were historically held at the Abbott corporate level but 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 those assets were held by an entity that was transferred to
AbbVie. As of December 31, 2012, AbbVie’s combined balance sheet reflected the direct holdings of
AbbVie legal entities. 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 as of
December 31, 2012.
Prior to 2012, all intercompany transactions between AbbVie and Abbott were considered to be
effectively settled in the historical combined financial statements at the time the transactions were
recorded. As a result, the total net effect of the settlement of these intercompany transactions was
reflected in the combined statements of cash flows for the years ended December 31, 2012 and 2011 as
a financing activity and in the combined balance sheet at December 31, 2012 as net parent company
investment in AbbVie. As of December 31, 2012, outstanding transactions between AbbVie and Abbott
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