In a period of economic distress, owning stocks with stable cash flows is a great way to avoid the carnage found in other parts of the market. One sector traditionally known to provide consistent cash flow to investors is the pharmaceutical industry.

Patent protection on drugs provides the industry with the ability to generate revenue unencumbered by competition. Investors generally pay a premium to own a piece of that stream -- no matter what is happening in the economy.

During the last few years, market premium for drug companies has been diminished. As drugs from the major pharmaceutical makers come off patent, revenues and cash flow suffers.

That fact explains why drug companies invest so much money on research and development. When older drugs come off patent they are replaced by a steady stream of new drugs.

What happens when that pipeline goes dry? Obviously, the company is not worth as much.

That has been the situation at Pfizer (NYSE: PFE). During the last five years, we have been hearing about a dwindling drug pipeline with no sign of abating. During that time, patents for working drugs only aged

Continue reading Pfizer 'admits' it's in trouble

Pfizer 'admits' it's in trouble originally appeared on BloggingStocks on Tue, 06 Jan 2009 11:25:00 EST. Please see our terms for use of feeds.