In it’s Q4 2020 earnings release AbbVie (NYSE: ABBV) reported that it recorded a $4.7 billion increase in the contingent consideration liability for the drug Skyrizi. This expense wiped out ABBV’s net earnings for the quarter. Therefore, I decided to do some research to try to understand what a contingent consideration liability is.
What is a contingent consideration?
Contingent considerations are financial instruments employed in complex business transactions. Their purpose is to share risk associated with the transaction between buyers and sellers. A contingent consideration is an obligation of the buyer to transfer additional assets (cash, equity, physical assets) to the seller if future events occur or conditions are met.
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The capital allocation for the week of 01/24/2021 to 01/30/2021 will be used to establish a position in AbbVie Inc (NYSE: ABBV).
ABBV – Company Profile
AbbVie (ABBV) is a biopharmaceutical company founded in 2013 as a spin-off of Abbot Laboratories. The company develops and sells treatments in the areas of: immunology, hematologic oncology, aesthetics, neuroscience, eye care, women’s health and others. It’s best known products are Humira and Botox. Official Site | Wikipedia