Various AbbVie foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany transactions denominated in a currency other than the functional currency of the local entity. These contracts, with notional amounts totaling $1.3 billion at June 30, 2024 and $1.8 billion at December 31, 2023, are designated as cash flow hedges and are recorded at fair value. The durations of these forward exchange contracts were generally less than 18 months. Accumulated gains and losses as of June 30, 2024 are reclassified from accumulated other comprehensive income (loss) (AOCI) and included in cost of products sold at the time the products are sold, generally not exceeding six months from the date of settlement.

In 2019, the company entered into treasury rate lock agreements with notional amounts totaling $10.0 billion to hedge exposure to variability in future cash flows resulting from changes in interest rates related to the issuance of long-term debt in connection with the acquisition of Allergan. The treasury rate lock agreements were designated as cash flow hedges and recorded at fair value. The agreements were net settled upon issuance of the senior notes in 2019 and the resulting net gain was recognized in AOCI. This gain is reclassified to interest expense, net over the term of the related debt.

In June 2023, the company entered into a cross-currency swap contract that matured in November 2023 with a notional amount totaling €433 million to hedge the company’s exposure to changes in future cash flows of foreign currency denominated debt related to changes in foreign exchange rates. The cross-currency swap contract was designated as a cash flow hedge and effectively converted the interest and principal payments of the related foreign currency denominated debt to U.S. dollars. The unrealized gains and losses on the contract were included in AOCI and reclassified to net foreign exchange loss over the term of the related debt.

The company also enters into foreign currency forward exchange contracts to manage its exposure to foreign currency denominated trade payables and receivables and intercompany loans. These contracts are not designated as hedges and are recorded at fair value. Resulting gains or losses are reflected in net foreign exchange gain or loss in the condensed consolidated statements of earnings and are generally offset by losses or gains on the foreign currency exposure being managed. These contracts had notional amounts totaling $8.6 billion at June 30, 2024 and $7.9 billion at December 31, 2023.

The company also uses foreign currency forward exchange contracts or foreign currency denominated debt to hedge its net investments in certain foreign subsidiaries and affiliates. The company had an aggregate principal amount of senior Euro notes designated as net investment hedges of €3.2 billion at June 30, 2024 and €5.4 billion at December 31, 2023. In addition, the company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling €7.1 billion, SEK1.9 billion, CAD750 million and CHF70 million at June 30, 2024 and €4.9 billion, SEK1.4 billion, CAD750 million and CHF50 million at December 31, 2023. The company uses the spot method of assessing hedge effectiveness for derivative instruments designated as net investment hedges. Realized and unrealized gains and losses from these hedges are included in AOCI and the initial fair value of hedge components excluded from the assessment of effectiveness is recognized in interest expense, net over the life of the hedging instrument.

The company is a party to interest rate swap contracts designated as fair value hedges with notional amounts totaling $3.5 billion at June 30, 2024 and $5.0 billion at December 31, 2023. The effect of the hedge contracts is to change a fixed-rate interest obligation to a floating rate for that portion of the debt. AbbVie records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.

The following table summarizes the amounts and location of AbbVie’s derivative instruments on the condensed consolidated balance sheets:


	Fair value – Derivatives in asset position					Fair value – Derivatives in liability position
(in millions)	Balance sheet caption	June 30, 2024		December 31, 2023		Balance sheet caption	June 30, 2024		December 31, 2023
Foreign currency forward exchange contracts
Designated as cash flow hedges	Prepaid expenses and other	$	21	$	12	Accounts payable and accrued liabilities	$	2	$	32
Designated as cash flow hedges	Other assets	1		—		Other long-term liabilities	—		—
Designated as net investment hedges	Prepaid expenses and other	78		13		Accounts payable and accrued liabilities	17		66
Designated as net investment hedges	Other assets	55		—		Other long-term liabilities	4		69
Not designated as hedges	Prepaid expenses and other	37		41		Accounts payable and accrued liabilities	14		36


Interest rate swap contracts

Designated as fair value hedges	Other assets	—		—		Other long-term liabilities	304		293
Total derivatives		$	192	$	66		$	341	$	496

The following table presents the pre-tax amounts of gains (losses) from derivative instruments recognized in other comprehensive loss:


	Three months ended June 30,				Six months ended June 30,
(in millions)	2024		2023		2024		2023
Foreign currency forward exchange contracts
Designated as cash flow hedges	$	20	$	14	$	75	$	5
Designated as net investment hedges	88		6		222		(88)
Cross-currency swap contracts designated as cash flow hedges	—		9		—		9

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $55 million into cost of products sold for foreign currency cash flow hedges and pre-tax gains of $22 million into interest expense, net for treasury rate lock agreement cash flow hedges during the next 12 months.

Related to AbbVie’s non-derivative, foreign currency denominated debt designated as net investment hedges, the company recognized in other comprehensive loss pre-tax gains of $50 million for the three months and $207 million for the six months ended June 30, 2024 and pre-tax gains of $36 million for the three months and pre-tax losses of $126 million for the six months ended June 30, 2023.

The following table summarizes the pre-tax amounts and location of derivative instrument net gains (losses) recognized in the condensed consolidated statements of earnings, including the net gains (losses) reclassified out of AOCI into net earnings. See Note 10 for the amount of net gains (losses) reclassified out of AOCI.


		Three months ended June 30,				Six months ended June 30,
(in millions)	Statement of earnings caption	2024		2023		2024		2023
Foreign currency forward exchange contracts
Designated as cash flow hedges	Cost of products sold	$	10	$	26	$	22	$	56
Designated as net investment hedges	Interest expense, net	31		29		58		57
Not designated as hedges	Net foreign exchange loss	34		4		16		34
Treasury rate lock agreements designated as cash flow hedges	Interest expense, net	6		6		12		12
Cross-currency swap contracts designated as cash flow hedges	Net foreign exchange loss	—		8		—		8
Interest rate swap contracts
Designated as fair value hedges	Interest expense, net	54		(21)		(11)		14
Debt designated as hedged item in fair value hedges	Interest expense, net	(54)		21		11		(14)

•Level 2 – Valuations based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations in which all significant inputs are observable in the market; and

•Level 3 – Valuations using significant inputs that are unobservable in the market and include the use of judgment by the company’s management about the assumptions market participants would use in pricing the asset or liability.

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the condensed consolidated balance sheet as of June 30, 2024:


			Basis of fair value measurement
(in millions)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash and equivalents	$	13,130	$	6,770	$	6,360	$	—
Money market funds and time deposits	10		—		10		—
Debt securities	32		—		32		—
Equity securities	97		69		28		—

Foreign currency contracts	192		—		192		—

Total assets	$	13,461	$	6,839	$	6,622	$	—
Liabilities
Interest rate swap contracts	$	304	$	—	$	304	$	—

Foreign currency contracts	37		—		37		—

Contingent consideration	21,150		—		—		21,150
Total liabilities	$	21,491	$	—	$	341	$	21,150

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the condensed consolidated balance sheet as of December 31, 2023:


			Basis of fair value measurement
(in millions)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash and equivalents	$	12,814	$	6,223	$	6,591	$	—
Money market funds and time deposits	10		—		10		—
Debt securities	26		—		26		—
Equity securities	111		86		25		—
Foreign currency contracts	66		—		66		—
Total assets	$	13,027	$	6,309	$	6,718	$	—
Liabilities
Interest rate swap contracts	$	293	$	—	$	293	$	—
Foreign currency contracts	203		—		203		—
Contingent consideration	19,890		—		—		19,890
Total liabilities	$	20,386	$	—	$	496	$	19,890

Money market funds and time deposits are valued using relevant observable market inputs including quoted prices for similar assets and interest rate curves. Equity securities primarily consist of investments for which the fair values were determined by using the published market prices per unit multiplied by the number of units held, without consideration of transaction costs. The derivatives entered into by the company were valued using observable market inputs including published interest rate curves and both forward and spot prices for foreign currencies.

The fair value measurements of the contingent consideration liabilities were determined based on significant unobservable inputs, including the discount rate, estimated probabilities and timing of achieving specified development, regulatory and commercial milestones and the estimated amount of future sales of the acquired products. The potential contingent consideration payments are estimated by applying a probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for contingent royalty payments, which are then discounted to present value. Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of inputs, including discount rates, the probabilities of achieving the milestones, the time required to achieve the milestones and estimated future sales. Significant judgment is

employed in determining the appropriateness of certain of these inputs. Changes to the inputs described above could have a material impact on the company's financial position and results of operations in any given period.

The fair value of the company's contingent consideration liabilities was calculated using the following significant unobservable inputs:


	June 30, 2024		December 31, 2023
	Range	Weighted average(a)	Range	Weighted average(a)
Discount rate	4.8% - 5.9%	5.0%	4.3% - 5.9%	4.5%
Probability of payment for royalties by indication(b)	89% - 100%	100%	89% - 100%	99%

Projected year of payments	2024 - 2034	2029	2024 - 2034	2027

There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy. The following table presents the changes in fair value of total contingent consideration liabilities which are measured using Level 3 inputs:


	Six months ended June 30,
(in millions)	2024		2023
Beginning balance	$	19,890	$	16,384
Change in fair value recognized in net earnings	2,136		3,424
Payments	(876)		(657)
Ending balance	$	21,150	$	19,151

The change in fair value recognized in net earnings is recorded in other expense, net in the condensed consolidated statements of earnings. Contingent consideration payments of amounts up to the initial acquisition date fair value are classified as cash outflows from financing activities and payments of amounts in excess of the initial acquisition date fair value are classified as cash outflows from operating activities in the condensed consolidated statements of cash flows.

Certain financial instruments are carried at historical cost or some basis other than fair value. The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of June 30, 2024 are shown in the table below:


					Basis of fair value measurement
(in millions)	Book value		Approximate fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)



Liabilities

Current portion of long-term debt and finance lease obligations, excluding fair value hedges	$	12,569	$	12,388	$	12,244	$	144	$	—
Long-term debt and finance lease obligations, excluding fair value hedges	58,352		54,084		53,678		406		—
Total liabilities	$	70,921	$	66,472	$	65,922	$	550	$	—

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 2023 are shown in the table below:


					Basis of fair value measurement
(in millions)	Book value		Approximate fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)



Liabilities

Current portion of long-term debt and finance lease obligations, excluding fair value hedges	$	7,191	$	7,069	$	6,862	$	207	$	—
Long-term debt and finance lease obligations, excluding fair value hedges	52,460		49,541		48,983		558		—
Total liabilities	$	59,651	$	56,610	$	55,845	$	765	$	—

AbbVie also holds investments in equity securities that do not have readily determinable fair values. The company records these investments at cost and remeasures them to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $160 million as of June 30, 2024 and $159 million as of December 31, 2023. No significant cumulative upward or downward adjustments have been recorded for these investments as of June 30, 2024.

Of total net accounts receivable, three U.S. wholesalers accounted for 77% as of June 30, 2024 and 81% as of December 31, 2023, and substantially all of AbbVie’s pharmaceutical product net revenues in the United States were to these three wholesalers.

In connection with the acquisitions of ImmunoGen and Cerevel Therapeutics, in February, 2024, the company issued $15.0 billion aggregate principal amount of unsecured senior notes. The notes are unsecured, unsubordinated obligations of AbbVie and will rank equally in right of payment with all of AbbVie’s existing and future unsecured, unsubordinated indebtedness, liabilities and other obligations. AbbVie may redeem the fixed-rate senior notes prior to maturity at a redemption price equal to the greater of the principal amount or the sum of present values of the remaining scheduled payments of principal and interest on the fixed-rate senior notes to be redeemed plus a make-whole premium. AbbVie may also redeem the fixed-rate senior notes at par between one and six months prior to maturity. In connection with the offering, debt issuance costs incurred totaled $99 million and debt discounts totaled $37 million, which are being amortized over the respective terms of the notes to interest expense, net in the condensed consolidated statements of earnings.

AbbVie used the net proceeds received from the issuance of the notes to finance the acquisition of ImmunoGen, repay its term-loan, repay commercial paper borrowings, pay fees and expenses in respect of the foregoing, finance general corporate purposes and, together with cash on hand, fund AbbVie’s acquisition of Cerevel Therapeutics. See Note 4 for additional information.


(in millions)
Senior Notes
	4.80% Senior Notes due 2027	$	2,250
	4.80% Senior Notes due 2029	2,500
	4.95% Senior Notes due 2031	2,000
	5.05% Senior Notes due 2034	3,000
	5.35% Senior Notes due 2044	750
	5.40% Senior Notes due 2054	3,000
	5.50% Senior Notes due 2064	1,500
Total debt issued		$	15,000

In December 2023, AbbVie entered into a $9.0 billion 364-day bridge credit agreement and $5.0 billion 364-day term loan credit agreement. In February, 2024, AbbVie borrowed and repaid $5.0 billion under the term loan credit agreement. Interest charged on this borrowing was based on Secured Overnight Financing Rate Reference Rate (SOFR) +0.975% with an effective interest rate of 6.29%. Subsequent to the $15.0 billion issuance of senior notes, AbbVie terminated both the bridge and term loan credit agreements in the first quarter of 2024. In February 2024, concurrent with the acquisition, the company assumed and repaid an ImmunoGen senior secured term loan at a fair value of $99 million.

In January 2023, the company repaid a $1.0 billion floating rate three-year term loan that was scheduled to mature in May 2023. In March 2023, the company repaid a $350 million aggregate principal amount of 2.80% senior notes at maturity.

During the six months ended June 30, 2024, the company issued and redeemed $1.7 billion of commercial paper. There were no commercial paper borrowings outstanding as of June 30, 2024 and December 31, 2023. The weighted average interest rate on commercial paper borrowings was 5.54% for the six months ended June 30, 2024.

In March 2023, AbbVie entered into an amended and restated five-year revolving credit facility. The amendment increased the unsecured revolving credit facility commitments from $4.0 billion to $5.0 billion and extended the maturity date of the facility from August 2023 to March 2028. This amended facility enables the company to borrow funds on an unsecured basis at variable interest rates and contains various covenants. At June 30, 2024, the company was in compliance with all covenants, and commitment fees under the credit facility were insignificant. No amounts were outstanding under the company's credit facilities as of June 30, 2024 and December 31, 2023.