What happened

After AbbVie Inc. (NYSE:ABBV) reported fourth-quarter financial results that were better than expected and offered up a rosy outlook for the full year, shares in the drugmaker are soaring, up 12.6% at 2:15 p.m. EST Friday.

Earlier this month, at the influential J.P. Morgan Healthcare Conference, AbbVie's management offered insight into its longer-term plans. The presentation to investors suggested a long runway for growth is still ahead; the fourth-quarter and full-year financial results add conviction to the outlook.

So what

Until last year, AbbVie's share price was weighed down by worry that the company's best-selling drug, Humira, would soon face biosimilar competition. However, after a positive patent decision led to the company making a deal with Amgen (NASDAQ:AMGN) that could delay a Humira biosimilar in the U.S. until 2023, AbbVie's share-price performance has been nothing shy of stellar.

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In the fourth quarter, a 14% increase in global Humira revenue and a big uptick in sales of Imbruvica contributed to companywide sales increasing 12.6% to $7.74 billion, excluding one-time items.

Humira, a widely used autoimmune disease therapy that accounts for over 60% of AbbVie's revenue, posted fourth-quarter and full-year revenue of $4.9 billion and $18.4 billion, respectively. Sales of Imbruvica, a treatment for chronic lymphocytic leukemia, climbed 38.7% to $708 million in Q4, bringing its sales to $2.6 billion in 2017. For the full year, AbbVie's revenue was $28.2 billion, 10.1% higher than in 2016, excluding one-time items.

The company's bottom-line growth was even better. In Q4, adjusted earnings of $1.48 per share grew 23.3% year over year, while full-year adjusted EPS clocked in at $5.60, up nearly 14% from the previous year.

Now what

AbbVie also updated its view on 2018. It expects revenue of $32 billion, up 13% from 2017, and it's forecasting adjusted EPS of $7.33 to $7.43, up from its previous expected range of $6.37 to $6.57. The company pointed to stronger-than-expected operating results, as well as benefits associated with tax reform, to support its upward revision to earnings guidance. AbbVie estimates its effective tax rate will be 9% in 2018 but expects its rate will increase to 13% over the next five years. For perspective, the company's tax rate was 18.9% in 2017.

The increased guidance for this year isn't the only reason for optimism. Management said earlier this month that it thinks Humira sales can grow to nearly $21 billion in 2020. It also said that non-Humira revenue will climb from about $10 billion in 2017 to over $16 billion in 2020. Assuming positive trial results and a smooth regulatory process, it anticipates non-Humira sales of $35 billion in 2025.

Given the potential for significant revenue growth and tailwinds associated with a lower tax rate, it's understandable that AbbVie's shares are rallying. After all, if the company's earnings grow as expected, there's little reason to think that its dividend payments to investors won't head higher.

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