Investing in large-cap pharmaceutical stocks has been a dangerous game this past year. Big names such as Pfizer (NYSE:PFE) and Sanofi-Aventis (NYSE:SNY) have been hit hard by pipeline defeats or generic challenges. Other firms have futures just as bleak, with patents expiring on billions of dollars' worth of drugs in the next few years. Fortunately for investors in drugmaker Eli Lilly (NYSE:LLY), an appeals-court win regarding the company's previous Zyprexa patent trial has ensured that concerns about generic competition eroding Lilly's top line are now years away.

Lilly reported its 2006 earnings numbers today. Sales inched 7% higher for the year, as Zyprexa sales leapt 12% last quarter, despite a weak showing for much of 2006. Other, faster-growing drugs like Cymbalta and Forteo built up sales from a much smaller base. Gross margins rose slightly by 1.1 percentage points to 77.4%, and net income (adjusted for various charges) rose 11% higher, to $3.18 a share. GAAP earnings came in at $2.45 a share for the year.

Comparing a drugmaker to its peers is a quick way to gauge its relative valuation. For a quick and (extremely) dirty valuation comparison, this is OK. But a much more complete valuation analysis will obviously account for more than just trailing-12-month GAAP earnings.

TTM P/E

Dividend Yield

Pfizer

10

4.5%

GlaxoSmithKline (NYSE:GSK)

15

3.3%

Sanofi-Aventis

30

1.7%

Merck (NYSE:MRK)

19

3.3%

Lilly

22

3.2%


As this list shows, Lilly has one of the higher valuations based on TTM P/E ratios, thanks to impressive sales growth in much of its diversified product portfolio.

Lilly has a lot on its plate this year, including integrating ICOS after its shareholders approved a merger. It will also be launching Amylin Pharmaceuticals' (NASDAQ:AMLN) Byetta in the second quarter and filing for marketing approval of the once-a-month version of Zyprexa at midyear. Guidance calls for adjusted earnings per share of between $3.25 and $3.35; sales are expected to grow in the high single or low double digits. This isn't exactly exciting top- or bottom-line growth, but at least Lilly sports a nice 3.2% dividend yield to tide investors over until more lucrative times arrive.

Eli Lilly and GlaxoSmithKline are Income Investor recommendations, while Pfizer is an Inside Value selection. Try any of our Foolish newsletters free for 30 days.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.