Pharmaceutical giant Pfizer (NYSE:PFE) should thank its lucky stars there is such a thing as a long-term investor. That's because it may take at least a few years for the company's sales growth to resume. So what's a Fool to do in the meantime?

The bad
Pfizer's fourth-quarter and year-end 2006 earnings release highlighted the challenges it has in front of it. Right now, Pfizer is experiencing a number of patent expirations that are causing it to lose exclusivity on several drugs. It recently lost Zithromax and Zoloft to generic competition, and was only able to grow total sales 2% for the year, well below the double-digit gains investors became accustomed to a few years back.

Also, its current drugs have unprecedented competition as other major firms such as Merck (NYSE:MRK), Bristol-Myers Squibb (NYSE:BMY), and Eli Lilly (NYSE:LLY) work to replace their older drugs and develop new ones. A patent expiration led to a 35% decrease in 2006 sales for depression drug Zoloft, Pfizer's third-highest seller, while there were double-digit losses in sales for smaller drugs such as Neorontin and Xanax in the cutthroat market.

The ugly
As Pfizer loses revenue from drugs developed in the 1980s, it must develop new products to offset lost revenue and eventually grow the top line again. Right now, Pfizer is struggling just to keep afloat, and it was stung by a major disappointment in December 2006 when an investigational drug called Torcetrapib was pulled from development. It was anticipated that Torcetrapib would continue the flagship Lipitor franchise. Lipitor, which lowers cholesterol, experienced 6% sales growth for 2006, below management's target for the year. Lipitor's patent will expire around 2010, meaning Pfizer will need to replace about $13 billion in annual sales, based on this year's numbers.

The not-so-bad
For the entire year, Pfizer reported diluted earnings of $2.66 per share, but this figure included gains from the sale of its consumer health-care business to Johnson & Johnson (NYSE:JNJ). Without the gain, earnings were $2.06, up only about 6% from the previous year. Until sales growth returns, Pfizer is pursuing a number of other avenues to keep earnings growth moving along.

From a top-line perspective, Pfizer is working overtime on research and development to bring new drugs to market. It also has a sizeable cash hoard with which to buy promising drugs through acquiring competitors. Former acquisitions of Pharmacia and Warner Lambert worked well, giving Pfizer new drugs and allowing it to aggressively cut costs. Unfortunately, these large purchases may have also masked an inability to bring internal products to market and keep the pipeline stocked with promising drug candidates.

The good
In the face of near-term difficulties, Pfizer continues to generate prodigious amounts of free cash flow. The earnings release didn't include a 2006 figure, so we'll have to wait until the annual 10-K is filed, but management also released forward guidance in another press release today -- one I plan on summarizing soon.

It's also re-emphasizing cost-cutting moves, repurchasing shares, and increasing its dividend. According to its calculations, Pfizer bought back $2.5 billion in stock during the fourth quarter, $7 billion over all of 2006, and more than $35 billion in stock in the past five years. It will also be increasing its first-quarter 2007 dividend by 21% and bumped up the dividend by 26% in 2006, continuing a 40-year streak of dividend hikes.

To give you a feel for just how profitable Pfizer is, on 2006 total sales of $48.4 billion, it posted $13 billion in operating income. That's a 27% operating margin, well above the 20% average for the overall market. And after a number of adjustments, the net margin was even higher.

The potential
Current investors are now left standing until a rebound in growth, now targeted for 2009. The dividend yield in excess of 4% offers some consolation, as do share buybacks. Expect a shareholder revolt if management's financial targets aren't met; if they are met, patient holders might have the opportunity to make a lot of money.

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Pfizer is a Motley Fool Inside Value selection. Eli Lilly and Johnson & Johnson are Income Investor picks, and Merck used to be an Income Investor recommendation. The Fool has a newsletter for almost every type of investor.

Fool contributor Ryan Fuhrmann is long shares of Pfizer but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.