Company: ABBV
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0001551152-25-000020
Chunk: 126

Company: AbbVie Inc.
Filing Date: 2025-02-14
Form: 10-K
Item: Item 3
Chunk 126
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. 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:20242023years ended December 31 (in millions)RangeWeighted Average(a)RangeWeighted Average(a)Discount rate4.6% - 5.2%4.8%4.3% - 5.9%4.5 %Probability of payment for royalties by indication(b)100%100%89% - 100%99 %Projected year of payments2025 - 203420292024 - 20342027(a)Unobservable inputs were weighted by the relative fair value of the contingent consideration liabilities.(b)Excluding approved indications, the estimated probability of payment was 89% at December 31, 2023.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 contingent consideration liabilities which are measured using Level 3 inputs:years ended December 31 (in millions)202420232022Beginning balance$19,890 $16,384 $14,887 Additions(a)— — 32 Change in fair value recognized in net earnings3,771 5,128 2,761 Payments(1,995)(1,622)(1,296)Ending balance$21,666 $19,890 $16,384 (a)Additions during the year ended December 31, 2022, represent contingent consideration liabilities assumed in the DJS acquisition.The change in fair value recognized in net earnings is recorded in other expense, net in the consolidated statements of