It's been a depressing day for pharmaceutical stocks, in large part due to GlaxoSmithKline's (NYSE:GSK) fourth-quarter poor showing, as well as its dismal view for the coming year.

Costs had an impact on Glaxo's numbers, but worse was the amount generics have eaten into a major portion of its sales, notably for antidepressants. The pharmaceutical giant said its 2004 earnings will be "in line" with those for 2003. For the fourth quarter, the Europe-based Glaxo reported net income down 16% at $1.41 billion and revenues down 5.1% at $10.17 billion.

Glaxo sees the first three quarters of 2004 to be a study in the blues. The idea that this depressing turn of events could come about has been known since September. Now, the company says it expects "substantial loss of sales due to generic competition to Paxil and Wellbutrin." Augmentin is another Glaxo drug that has been battered by copycats.

As far as Paxil goes, as of last month, 52% of prescriptions for the drug were for generics. Although Wellbutrin, another antidepressant, showed sales up 18% for the year, limited generic competition began in January; for now, 6% of prescriptions are for no-name meds, but one can only imagine that number should increase.

Growth engines for Glaxo include asthma treatment Advair, with sales up 39%, and diabetes drug Avandia, up 24%. The company also said its Valtrex and Lamictal medications are approaching blockbuster status; it's also the name behind a major erectile-dysfunction drug, Levitra.

It's a bummer when blockbusters lose their exclusivity, and once-soaring sales start to sour -- but, of course, it's hardly unusual in the industry. Fool Zeke Ashton explored "blockbuster dependence" in October, pointing out the difficulties faced by companies such as Schering-Plough (NYSE:SGP), which lost Claritin, and Eli Lilly (NYSE:LLY), which lost Prozac.

Zeke's perspective on Merck (NYSE:MRK) highlights the kinds of things investors should look for in this situation. A promising pipeline, for example, is essential. Glaxo highlighted several drugs that are approaching hoped-for approval and subsequent launch, including solifenacin succinate, a treatment for a bladder disorder that affects 17 million people in the U.S., as well as Epivir/Ziagen, touted as the first once-daily combination HIV/AIDS treatment in a single tablet.

Glaxo sweetened the deal with the promise of a dividend hike, though by only about 1%, the same amount as last year. Investors couldn't shake the sadness, however, pushing the stock down nearly 5% in this morning's trading. Other pharmaceutical companies that suffered included AstraZeneca (NYSE:AZN), Eli Lilly, and Schering-Plough.

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Alyce Lomax does not own shares of any companies mentioned.