Last week was a sickening week for pharmaceuticals. First, Merck (NYSE:MRK) pulled Vioxx, its $2.5 billion pain medication, amid concerns of increased risks of heart attacks. Then Chiron's (NASDAQ:CHIR) license to manufacture flu vaccines was pulled by British health officials. Similar bad news happens regularly to one company or another, suggesting that investors might want to consider several ways to profit from such events.

1) Buy the diseased company
Sometimes, what looks like the plague will turn out to be little more than a head cold. The important question is the extent to which the unfortunate event will affect the company's long-term competitive position. If the answer is "not much" then the market could be providing the opportunity to buy a strong company at a discount. Think Intel (NASDAQ:INTC), and its performance since the mid-'90s when it tanked due to a processor bug.

Merck's competitive position will certainly be damaged losing such a huge revenue generator and the potential lawsuits. But Chiron's difficulties may only last a year and not hurt its long-term competitive position significantly.

2) Buy the competitors
When one company falters, a competitor will often pick up the slack. However, investors must be certain that the troubling event is company-specific, rather than affecting the entire industry. Investors who tried to profit from Lucent's (NYSE:LU) misfortunes in early 2000 by getting into Nortel Networks (NYSE:NT) have suffered as the whole industry tanked.

Pfizer (NYSE:PFE) may profit from Merck's troubles, if its competing drugs don't have similar repercussions. Vaccine-providers Aventis (NYSE:AVE) and MedImmune (NASDAQ:MEDI) could benefit from Chiron's troubles. But they're unlikely to profit substantially, because flu vaccines require months to incubate and for other reasons.

3) Buy the indirect beneficiaries
Sometimes, one company's difficulties may help another company or just provide hints about the future performance of another company. For instance, while Florida insurers have suffered recently, home improvement stores like Home Depot (NYSE:HD) have been doing brisk business. On an even more ghoulish note, influenza has a significant effect on death rates, which could help funeral service providers. During last year's bad flu season, Service Corp. (NYSE:SCI) observed increased business due to influenza. It, and over-achieving Hidden GemAlderwoods Group (NASDAQ:AWGI), may see similar effects this year.

4) Do Nothing
You don't need to join the crowd just because there's much ado. If the news is temporary, then it will neither demolish a strong company, nor transform a sickly company into a powerhouse. So, if your portfolio is filled with over-achievers, some short-lived bad news is no reason to deviate from your long-term strategy. Doing nothing can be the best decision you can make.

On the other hand, if your portfolio could use a few more over-achievers, you might want to check out our new Motley Fool Rule Breakers newsletter. You can take a free, no-obligation trial today.

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Also, join us on our Merck or Chiron discussion boards, which are among the best on the Web.

Fool contributor Richard Gibbons is only slightly contagious. He owns shares of Service Corp., but none of the other companies discussed in this article.