I'm not sure whether Pfizer's (NYSE:PFE) latest deal is a sign of desperation, or just proof that the pharmaceutical company's executives know more about these things than I do. Perhaps both.

The company just licensed a drug that treats a few diseases I'd never heard of. Its maker? Auxilium Pharmaceuticals (NASDAQ:AUXL), not exactly the most popular of companies among our CAPS members.

Pfizer is paying $75 million up front to license the European and Asian rights for Auxilium's Xiaflex. The drug has already completed phase 3 trials for Dupuytren's contracture, a disease of the hand that causes fingers to contract. Xiaflex is also in a phase 2b trial for Peyronie's disease, a painful condition that causes the penis to curve during erections. Both problems are caused by the buildup of collagen -- thus the potential two-for-one deal when licensing Xiaflex. Pfizer is on the hook for another $410 million, should the drug get approved and meet marketing goals.

But really, Pfizer, is that the best you can do with your $26 billion war chest? $75 million purchases for Pfizer are kind of like Warren Buffett buying a Jake Peavy rookie card. It could be a good investment, but it's not going to change the net worth of the investor much.

Why not leave the random orphan-drug marketing to Genzyme and BioMarin (NASDAQ:BMRN), and focus on blockbusters to replace Lipitor? Go out and license an obesity drug from VIVUS or Arena. Sure, there's more risk -- they're not done with their phase 3 trials yet -- but at least the drugs would have a better chance at moving the revenue needle. Better yet, take a clue from Bank of America (NYSE:BAC) or JPMorgan Chase (NYSE:JPM), and buy one of your larger competitors. Amgen (NASDAQ:AMGN) or Biogen Idec (NASDAQ:BIIB) both come to mind.

Pfizer can sit on the cash, if that's what management thinks is best, but don't pretend that these little deals will save the company. It'll take an awful lot of Xiaflexs to make up for Lipitor's demise.

Further frugal Foolishness:

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