Wily Wyeth

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I've said it before, but it bears repeating: Big-cap pharma investing is all about the "hurry up and wait." It takes time to develop drugs and launch them, and while there are periodic clinical updates, most of the single-point news events are bad (generic threats, trial failures, lawsuits, etc.). So I'm not too bothered or surprised that Wyeth's (NYSE: WYE) shares aren't much higher than when I last reviewed the company.

That said, Wyeth had a surprisingly strong quarter. Sales were up 6%, as expected. But margin improvements were the big surprise; gross margins improved by 260 basis points, leading to adjusted earnings growth of about 13%.

A quick note on those adjusted earnings: I really like how the company presents that information. While it can't restate past results to account for stock compensation expense, it nevertheless gives you that information so you can do an apples-to-apples comparison, rather than pretending that that expense didn't happen. Now, if the company would just include a balance sheet and cash flow statement with the regular earnings release..

Individual drug sales can vary from one quarter to the next, but this was a solid quarter across the board. All of the major drugs were up, and all but Effexor rose by double digits. Enbrel enjoyed another robust quarter, as Wyeth's overseas sales of this drug (Amgen (Nasdaq: AMGN) sells it domestically) rose 42%.

For now, there's still some waiting to do. The company expects to make five new drug applications to the FDA this year, and it'll take a while for those filings to be processed, reviewed, and (hopefully) approved. It's also important to keep a stock like Wyeth, or a competitor like Pfizer (NYSE: PFE) or Merck (NYSE: MRK), in context.

For the most part, this business will produce high-single-digit revenue growth, and hopefully low-teens growth in earnings and cash flow. That means Fools should be a little conservative buying in, but patient when holding -- barring deterioration in margins or major clinical failures -- to make money from the big-cap pharma space.

For more Foolish pharmaceutical takes:

• Could Schering-Plough Do More With More?
• Lilly: Like the Flower, Not the Stock
• Wyeth: Waiting on the Pipeline

Pfizer is a Motley Fool Inside Value recommendation, while Merck is a Motley Fool Income Investor recommendation. Whatever your investing style, the Fool has a newsletter for you.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).