So what do I think makes for a good pharmaceutical stock idea? I'd argue you need three ingredients -- a good sales force, a deep pipeline, a solid history of strong returns on capital -- complemented by an attractive valuation. Enter GlaxoSmithKline (NYSE:GSK).

Fourth-quarter results probably won't lead to a lot of breathless hyperbole on TV, but they were still pretty good. Overall revenue climbed 8% on a constant-currency basis, while the operating profit rose about 20%. Even better, free cash flow was up by a nice double-digit percentage -- 26% by the company's calculation.

Not too surprisingly, Glaxo continued to reap good results from many of its top drugs. Compounds including Advair, Valtrex, Coreg, and Lamictal all grew nicely, as did the metabolic-disease and vaccine franchises. While I suppose you could be a bit concerned that Advair has grown to nearly 17% of total pharmaceutical sales, that's still not too bad when you look at how important Lipitor is to Pfizer (NYSE:PFE) or Diovan is to Novartis (NYSE:NVS).

Just as important, Glaxo has a very deep pipeline with some high-potential medicines, particularly in oncology. Not only is the company targeting seven product launches for 2006, but as-yet-unapproved products including Cervarix, eltrombopag, and Tykerb all have billion-dollar sales potential as well. And that's to say nothing of other high-profile notions, like a vaccine to fight avian flu.

I would also not be too surprised to see Glaxo make a play for Serono (NYSE:SRA), a small Swiss pharmaceutical firm that has been on the block for some time now. Not only would Serono bring its own pipeline to the deal, but Glaxo also has a good record of driving synergies from deals and could use the added biological product production capacity. Still, price is always important. So investors would do well to watch just what sort of deal is offered if there ever even is a public bid.

Glaxo doesn't look like the cheapest pharmaceutical stock out there. That title probably belongs to Pfizer, if you believe it can squeak out cash flow growth from cost-cutting initiatives. But it still looks cheap enough to be rather interesting.

I'm a little overly weighted in drug stocks already, but I think Glaxo should get a thorough look from anyone putting new money into the pharma space.

For more Foolish thoughts on pharmaceuticals:

Glaxo is a Motley Fool Income Investor recommendation, and Pfizer is a Motley Fool Inside Value pick. Check out our family of investing newsletters, and start up a free, 30-day trial if you find one that suits your investing style.

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