It could have been worse. A lot worse.

Sales of Pfizer's (NYS: PFE) Lipitor fell 25% in the fourth quarter after losing U.S. patent protection in November, but overall revenue fell just 4%. Being the size Pfizer is has its advantages.

The company cut expenses by 9%, including a whopping 17% decrease in R&D spending, which helped bolster the bottom line. Despite the brutal reported bottom line figures, adjusted income was up 3%. Add in the share buybacks the Pfizer has been performing and adjusted earnings per share were up 6%, beating analysts' expectations of flat earnings per share. Not bad, especially when you compare it to a company like Eli Lilly (NYS: LLY) , which is falling off a patent cliff of its own and saw revenue drop 2% in the fourth quarter with adjusted EPS down 22%!

But the fourth quarter still had partial exclusivity on Lipitor, and Pfizer will lose exclusivity on Viagra in March. Where does that leave the pharma giant this year? Not in as bad a shape as you might think. Pfizer is guiding for adjusted earnings per share of $2.20 to $2.30, which is down just slightly from the $2.31 per share seen last year. About a nickel of the expected decrease is due to the strengthening dollar, so Pfizer could theoretically increase earnings next year on a constant currency basis.

How's that possible? More of the same. Selling, informational and administrative expenses are expected to drop as much as 12% and R&D expenses could decline by as much as 23%. Add then there's another  $5 billion worth of share repurchases, which gives each shareholder a larger piece of the pie.

While the earnings stability is impressive, the only way Pfizer is going to get itself out of this mess is to get revenue growing again; you can't cut expenses forever. In the near future, Pfizer is looking for approval of its blood thinner Eliquis, which it developed with Bristol-Myers Squibb (NYS: BMY) . The drug will have competition from others that have entered the market slightly before it -- Boehringer Ingelheim's Pradaxa, and Bayer (OTC: BAYRY) and Johnson & Johnson's (NYS: JNJ) Xarelto-- but Eliquis looks like it has better data and should be able to take a substantial chunk of the market.

Longer term, the dwindling R&D budget is more of a concern. An increase in licensing drugs and acquiring companies, which ends up getting pulled out of the adjusted earnings, likely explains some of the decrease, but investors should keep a close eye on the R&D line to make sure it doesn't continue to fall in subsequent years. If not, it could still get worse. A lot worse.

Pfizer will pay $6 billion in dividends this year, but it didn't make out list of 11 Rock-Solid Dividend Stocks. To see which ones did, click here to grab a copy of Fool's new free report.

At the time this article was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Pfizer. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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