The halcyon days for the pharmaceutical industry when the sector easily expanded its revenues by 10% to 15% per annum, and earnings at an even brisker clip seem to be long gone. Loss of patent protection coupled with the dearth of new drugs being churned out by research labs have taken a hit on the bottom lines of large pharmaceuticals, and have been holding down a number of pharma stocks in recent times. But there are still several notable top performers that have been defying patent cliff concerns dogging the industry. One of these is giant drugmaker Pfizer (NYSE:PFE).

Pfizer's stock has gained 23.5% year to date, which is considerably more than the 7% it gained in all of 2012. Although Pfizer will in time lose patent protection on some of the drugs it manufactures, the better-than-expected third-quarter results could easily offset any concerns about possible future revenue losses. Pfizer's biggest concern had been Viagra's imminent loss of patent protection, but the patent expiration date has been pushed back to 2020.

Pfizer reported earnings of $3.86 billion, or $0.58 per share, on Oct. 29; that EPS was $0.02 better than consensus estimates. The company's 73.85% operating margin and 20.59% net margin are higher than the industry average.

Revenue declined slightly by 2% compared to the third quarter of 2012. The lighter-than-expected revenue of $12.5 billion was as a result of the negative impact of fluctuating currency exchange rates and not due to weaker sales. What's even better is that several analysts expect Pfizer's earnings per share to grow 6% in 2014, marking the first time the big pharma will grow its earnings on a year-to-year basis since it lost U.S. patent protection for blockbuster cholesterol-lowering drug Lipitor.

Lipitor was once the world's biggest selling drug, but only brought in $533 million in revenues last quarter, which was 26% lower than for the same period last year. U.S. Lipitor sales have tanked a massive 59%. Lipitor is, however, expected to make a major comeback with 2015 sales of $3 billion, according to a report by AARP's Public Policy Institute.

Cancer drugs a silver bullet
Pfizer's cancer drugs were the main highlight of the third-quarter report. Pfizer's oncology division continues to be in the pink of health. Pfizer's CEO Ian Read singled out the firm's new cancer drugs Xalkori and Inlyta as the key drugs that helped boost Pfizer's oncology segment by 26%. Revenues from Inlyta and Xalkori rose by 186% and 92%, respectively.

Other patent-protected cancer-fighting drugs such as Celebrex and Lyrica have also been doing well. Pfizer made it abundantly clear during the earnings call that it would continue to focus strongly on cancer-fighting drugs in the future. The production of palbociclib, a drug designed to treat recurrent breast cancer, is already in phase 3 trials.

Expanding pipeline and share buybacks
Other than breast cancer drug palbociclib, Pfizer has a number of other promising drugs in the pipeline as well. These include drugs for lowering cholesterol levels in the body, for treating type 2 diabetes, and for treating osteoarthritis pain.

Apart from the drugs in its pipeline, Pfizer has also been aggressively buying back its own shares. This year alone, the company has bought back 13.1 billion of its shares, with 3.8 billion purchased in the third quarter alone. This aptly demonstrates the firm has good cash flow and the financial wherewithal to do so.

Pfizer peers face looming loss of patent protection
Pfizer's peers are not so lucky when it comes to imminent loss of patent protection. Teva Pharmaceutical (NYSE:TEVA), AstraZeneca (NYSE:AZN), Novartis (NYSE:NVS) all face loss of patent protection on some of their leading drugs in 2014.

The hardest hit pharma looks like Teva, whose multiple-sclerosis drug Copaxone, with 2012 sales of $4 billion, will lose patent protection in May. Teva's revenues from drug sales in 2012 were $20.3 billion, meaning that Copaxone alone accounted for almost 20% of its 2012 revenues. Teva is the world's largest maker of generic drugs.

Source: YCharts.

AstraZeneca will also be hard hit, when Nexium, its heartburn and reflux treatment drug, loses protection in May. AstraZeneca sold Nexium worth $4 billion last year, accounting for 15.3% of its total revenues.

Source: YCharts.

Novartis will lose patent protection on two of its leading drugs in 2014. One of these is Sandostatin LAR, with 1.5 billion sales in 2012; the cancer drug goes off patent in June. The other drug, hypertension drug Exforge, will lose patent protection in October. Novartis sold Exforge worth $1.4 billion in 2012. The two drugs combined accounted for 5% of Pfizer's $58.5 billion 2012 sales.

Source: YCharts.

Bottom line
The pharmaceutical industry continues to be the target of a lot of flak from multiple quarters, with claims that its pricing on major important drugs, and proliferation of me-too drugs instead of innovative ones is hardly a model of American free enterprise. Although some of these concerns are genuine, no one can deny that drug patents are necessary as a means to encourage investments in research and spur innovation of new drugs that will benefit humanity.

Pfizer investors are luckier than many when it comes to near-term loss of patent protection. The company's $2 billion-a-year drug Viagra is no longer in danger of losing patent protection any time soon. Pfizer has several promising drugs in the pipeline which could turn out to be blockbusters, and in my opinion its stock is worth a closer look.