Jing Chen Hisham Haider Dewan Harout Sahakian AbbVie, Inc. Date: 12 November 2013

Agenda Introduction Holding information Macro-economic overview Industry analysis Company overview Financial analysis and projections Valuation Recommendation

Introduction to AbbVie, Inc. On January 1, 2013 AbbVie was spun off from Abbott Lab. Incorporated in Delaware on April 10, 2012 and is comprised of Abbott's former research-based pharmaceuticals business AbbVie develops and markets advanced therapies 21,500 employees Innovation-driven biopharmaceutical company focused on delivering breakthrough products Products sold in over 170 countries Source: AbbVie Inc. 10K Filing 2012, Page 1, 6, 13

Pharmaceuticals Business Segments Metabolics/Hormones Virology Endocrinology Dyslipidemia Other Source: AbbVie Inc. 10K Filing 2012, Page 1-3

Products and Revenue in Q1-Q3 FY 2013 HUMIRA: $7,620 mil. Metabolics/Hormones products: Synthroid, AndroGel, Creon $1,476m Virology products: Kaletra, Norvir, $816m Endocrinology products: Lupron, $576m Dyslipidemia products: TriCor and TRILIPIX, Niaspan, $893m Other products: Synagis, Anesthesia product Sevoflurane, Duodopa and Duopa, Zemplar, $1,259m 20 products in pipeline add sales number 2013 Source: Bloomberg Terminal, Revenue by product

Revenue Breakdown by Major Drugs 50.40% of FY2012 sales HUMIRA 6.26% of FY2012 sales AndroGel 5.97% of FY2012 sales TriCor/TRILIPIX 5.51% of FY2012 sales Kalerta 4.95% of FY2012 sales Niaspan Pg 47, break down of sales Source: AbbVie, Inc. 2012 10K filing page 45

Where Does AbbVie Sell? Source: AbbVie, Inc. 2012 10K filing page 45 Mexico, Canada, EU – 170 countries update it to 2013 Source: AbbVie, Inc. 2012 10K filing page 45

Revenue by Product Source: AbbVie, Inc. 2012 10K filing page 45 by product quarterly over time 7 Q's Source: AbbVie, Inc. 2012 10K filing page 45

Patent of HUMIRA HUMIRA entitled to 12 years exclusivity under the Biologics Price Competition and Innovation Act EU has created a pathway for approval of biosimilars In the US patent for Humira is expected to expire in December 2016, and the EU patent is expected to expire in the majority of EU countries in April 2018 HUMIRA entitled to exclusivity under the Biologics Price Competition and Innovation Act, which was passed on March 23, 2010 as Title VII to the Patient Protection and Affordable Care Act. The law provides a pathway for approval of biosimilars following the expiration of 12 years of exclusivity for the innovator biologic and a potential additional 180 day-extension term for conducting pediatric studies. The European Union has also created a pathway for approval of biosimilars and has published guidelines for approval of certain biosimilar products. AbbVie believes that no single patent, license, trademark (or related group of patents, licenses, or trademarks), except for those related to adalimumab (HUMIRA), are material in relation to the company’s business as a whole. Source: AbbVie, Inc. 10K 2012 page 5

R&D Process and Patents U.S Patent Protection 20 years from the day filed Discovery to Launch 8 – 12 years Idea to Product Phase: I, II, III AbbVie R&D Expense $2.8B in FY2012 Source pg 6 Source: AbbVie, Inc. 10K 2012 page 3 and 4

Distribution and Marketing Distributors McKesson – 38% Cardinal Health – 27% AmerisourceBergen – 26% Three largest distribute 91% Target market Physicians Health Care Providers Hospitals Government Agencies Source: AbbVie, Inc. 10K 2012 page 6

Current Holdings 400 shares 200 shares @ $27.08 100 shares @ 27.53 Total Purchase Price (adjusted for split) = $11,591 Current Market Value = $19,428 Holding period return (from Jan 02, 2013 to Nov 11, 2013) = 67.61% Double check prices….. Source: Yahoo Finance

Macro-economic Overview Slowing growth in BRICS countries Increasing number of physician visits1 Adults aged 65 and over 13.7% of US population & rising High birth rates in emerging markets Increasing socio-economic status in emerging markets Increasing emphasis on disease prevention Changing regulatory environment Source: 1. IBISWorld Industry Report 33451b Medical Device Manufacturing in the US October 2013, page 4 2. US Census Bureau http://quickfacts.census.gov/qfd/states/00000.html

Brand Name Pharma. Industry in U.S. Source: http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=487 Brand Name Pharmaceutical Manufacturing in the US industry report Page 4

Pharma. Industry In The U.S. U.S. spending on prescription medicine down 1% in 2012 – first decline since 1957 Spending on name brand drugs in the U.S. declined 4.7% in 2012 Market share of generic drugs accounted for 84% of dispensed prescriptions – 5 years ago the share was only 69% Reasons for decline include lower volume growth, loss of patent protection on major drugs, and less spending on new drugs Source: Mergent. North America Pharmaceuticals Sector. July 2013. Pg 9.

Where’s the Growth Opportunity? Emerging Markets - By 2018, global drug makers expect emerging markets to account for more than 33% of company sales FDA Approvals - In 2012, the FDA approved 39 new medicines – the highest in 15 years Hepatitis C - Affects 150 million people worldwide - 10 drugs in development for treating disease Source: Mergent. North America Pharmaceuticals Sector. July 2013. Pg 15-16.

Patient Protection & Affordable Care Act: Impact on ABBV Healthcare coverage available to all Americans An attempt to keep costs lows Changes how care is paid for Annual Fee on branded prescription pharmaceutical manufacturers and importers Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals. On Aug. 15, 2011, the IRS issued temporary regulations and a notice of proposed rulemaking on the branded prescription drug fee. The temporary regulations describe the rules related to the fee, including how it is computed and how it is paid. On Aug. 5, 2013, the IRS issued Notice 2013-51, which provides additional guidance on the branded prescription drug fee for the 2014 fee year. For information on the fee for the 2012 fee year and for the 2013 fee year, see Notice 2011-92 and Notice 2012-74. Source: IRS website http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

Risks to AbbVie Increased regulation Loss of patents, trademarks, or intellectual property Delays in regulatory approval of new products Increased delay in receipt of payments from government entities Product liability claims

Porter's Five Forces Analysis for ABBV Rivalry among existing firms (High) Threat of New Entrant (Low) High barriers to entry Challenging to find "blockbuster drugs" Challenging regulatory conditions Supplier bargaining power (Medium) Suppliers generally have little room for negotiation Buyer bargaining power (High) Only have three distributors in U.S., high dependency on distributors Pricing pressure from government Consolidation of managed care providers Threat of substitute products ( Medium) Threat from generic competition and biosimilars Generic companies are increasing focused on establishing global operations Humira expires on Dec 2016 in U.S. Approval of follow–on biosimilars 2)  Degree of rivalry among existing firms - HIGH Mature, consolidating, highly competitive industry (many large pharmaceutical acquisitions closed in 2007 including AstraZeneca’s $15.6Bn purchase of Medlmmune Inc. and Schering-Plough’s $15Bn acquisition of Organon BioSciences). Strong credit profiles: companies operate off of high margins (high 70%), healthy balance sheets, and good liquidity Industry benefits from strong demand from consumers. Weak, small companies usually go out of business (bankruptcy) if they have no potential “blockbuster” in future pipeline. Others that have some significant research or valuable assets will be bought by big and strong pharmaceutical companies. 

SWOT Analysis for AbbVie Strengths Patent protection Brand recognition International distribution channel Humira extremely popular Weaknesses R&D cost and lengthy investment timeframe Humira's patent expires in Dec 2016 in U.S. Opportunities New ground breaking drug for HCV Rising healthcare needs in the international arena Collaborate with third party to develop near-term pharmaceutical pipeline Threats Barriers to entry are decreasing as the tax incentives program targeting small pharmas Challenging regulatory conditions Increased tax burden Generic pharmaceutical manufacturers Biosimilars

AbbVie Life Cycle Challenge- medium pressure coming from the competitors and customers Focus- mainly focused on the nutritional, diagnostics, genetic drug market Money Source- stayed stable over the years Source: http://marygardiner.wordpress.com/2013/05/28/product-cycles/

Recent Financial Performance Humira sales grew 22.3% in U.S. Q3 FY2013 TriCor/Trilipix sales decline due to the loss of exclusivity R&D was 15.2% of sales in 3Q, reflecting growing need to fund mid and late-stage pipeline asset Expects to commercialize HCV by 2015 jp morgan, two sentences Source: ABBV 8K filed on 2013-10-25, ABBV CFO presentation in JP Morgan Healthcare Conference http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTY2OTgyfENoaWxkSUQ9LTF8VHlwZT0z&t=1

Equity Performance Source: Google Finance Jan 2, 2013 to Nov 11, 2013

Technical Analysis Source: Google Finance Feb 5, 2013 to Nov 11, 2013

Quarterly Ratio Analysis Profitability Q1 FY 2013 Q2 FY 2013 Q3 FY 2013 Return on Assets % 12.1% 13.8% 13.82%# Liquidity Q1 FY 2013 Q2 FY 2013 Q3 FY 2013 Current Ratio 2.2x 2.3x NA Quick Ratio 1.7x 1.8x Solvency Q1 FY 2013 Q2 FY 2013 Q3 FY 2013 Total Debt/Equity* 512.6% 425.9% LT Debt/Equity* 497.9% 413.8% Total Liabilities/Total Assets* 89.1% 87.3% EBIT / Interest Exp. 18.3x 19.3x 24.0x Source: Capital IQ Ratios based on quarterly data; #based on end of Q2 FY 2013 Total Assets; *Assumes book value of debt and equity

DCF, Comparable, Ben Graham formula Valuation DCF, Comparable, Ben Graham formula

Cost of Capital Cost of equity using CAPM Beta 1.18 9.74% Weighted average cost of debt 2.40% Cost of equity using goal post method (CAPM Re + 1.85% ) 11.59% Market value of debt $Mil. * 14,758 Market value of equity $Mil. * 76,148.1 Weight of debt* 16.23% Weight of equity* 83.77% Tax rate 22.00% Number of shares outstanding 1,577 WACC 10.01% Cost of equity using CAPM Beta 1.18 Market risk premium (Rm-Rf) 6.00% 10 year treasury yeild 2.66% 9.74% * Assumes market value of debt & equity instead of book value on the balance sheet

Free Cash Flow to Firm 2013 2014 2015 2016 2017 2018 EBIT $6,217.04   2013 2014 2015 2016 2017 2018 EBIT $6,217.04 $6,465.72 $6,724.35 $6,993.32 $7,273.05 $7,563.97 Taxes $1,295.99 $1,361.94 $1,422.31 $1,485.10 $1,550.33 $1,588.57 Plus: Depreciation & Amortization $1,190.11 $1,152.98 $1,101.13 $1,043.29 Less: Capital Expenditures + Acquisitions ($1,083.27) ($1,126.60) ($1,171.67) ($1,218.53) ($1,267.27) ($1,317.97) Less: Change in Net Working Capital ($7.00) $358.70 ($200.83) ($187.29) ($194.78) ($202.57) Free Cash Flow to Firm $5,034.88 $4,771.45 $5,432.33 $5,520.26 $5,693.51 $5,903.30

Discounted Cash Flow WACC 10.0118% % Growth Rate 4.00% Implied Enterprise Value $88,933.79 Less: Debt $14,758.00 Value of equity $74,175.79 Shares Outstanding 1,577.00 Estimated price per share $47.04

DCF – Sensitivity to WACC and G Growth rate Discount rate $47.04 3.00% 3.50% 4.00% 4.50% 5.00% 9.5118% $44.61 $47.94 $51.87 $56.58 $62.33 10.0118% $40.97 $43.77 $50.89 $55.52 10.5118% $37.82 $40.20 $42.95 $46.15 $49.94

Scenario Analysis (based on revenue) Best case  2013 2014 2015 2016 2017 2018 Hepatitis C Virus Franchise 800 1,200 1,700 2000 Daclizumab (Multiple Sclerosi) 100 175 200 Revenue boost from pipeline 1,300 1,875 2,200 Base case 2013 2014 2015 2016 2017 2018 Hepatitis C Virus Franchise 800 1,200 1700 Daclizumab (Multiple Sclerosi) 100 175 Revenue boost from pipeline 1,300 1,875 Estimated share price (Best case) $51.77 Estimated share price (Base case) $51.21 Estimated share price (Worst case) $47.04

Comparable Companies to AbbVie Company Name Market Capitalization ($Mil) Total Revenue ($Mil) Actavis plc (NYSE:ACT) 27,278.5 7,648.5 Amgen Inc. (NasdaqGS:AMGN) 85,374.6 18,086.0 AstraZeneca PLC (LSE:AZN) 65,698.2 26,149.0 Bristol-Myers Squibb Company (NYSE:BMY) 86,196.5 16,135.0 Eli Lilly and Company (NYSE:LLY) 55,371.1 23,261.7 Johnson & Johnson (NYSE:JNJ) 265,356.3 70,515.0 Merck & Co. Inc. (NYSE:MRK) 136,746.3 44,450.0 Mylan, Inc. (NasdaqGS:MYL) 15,471.3 6,823.5 Pfizer Inc. (NYSE:PFE) 207,347.8 56,246.0 Teva Pharmaceutical Industries Limited (NYSE:TEVA) 31,493.2 20,133.0 AbbVie Inc. (NYSE:ABBV) 76,148.1 18,885.0

Implied price per share Comparable analysis Comparable ratio Multiple Weight Implied price per share TEV/Total Revenues 3.6x 5.0% $36.71 TEV/EBITDA 11.5x 10.0% $47.84 TEV/EBIT 16.6x 15.0% $59.15 TEV/Forward Total Revenue (Capital IQ) 3.4x $36.49 TEV/Forward EBITDA (Capital IQ) 10.1x $42.72 Market Cap/Total Revenues 3.3x $39.42 P/Diluted EPS Before Extra 22.4x $65.30 Market Cap / Forward Total Revenues (Capital IQ) 3.2x $39.38 Forward P/E (Capital IQ) 14.6x 25.0% $44.77 P/BV 3.7x 0.0% $8.35 Implied price using comparable company data   100% $48.49

Valuation using Benjamin Graham's formula Earnings from 2013 $4,594.87 Expected Annual growth rate G 4.00 Value of equity (E*8.5+2*G) 75815.39 Implied price per share $48.08

Key decision driver Upside Strong presence and growth of Humira Potential breakthrough in hepatitis C therapy and 20 products in pipeline Skilled management capable of delivering groundbreaking therapy Downside Failure to deliver new products or getting regulatory approval Sales dependent heavily on Humira & limited diversity of products Product recalls, litigation, high tax burden Changing regulatory requirements

Recommendation HOLD Current price/share: $48.57 (Nov 11, 2013) DCF $47.04 DCF Scenario: Best case $51.77, Base case $51.21 Comparable $48.49 Ben Graham $48.08