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It's no secret why Pfizer's shares have dropped 40% in the past two years: The pharmaceutical giant's top seller, cholesterol medicine Lipitor, loses patent protection in 2011. Drugs representing more than a third of Pfizer's revenues will cede their exclusivity in the next five years.

What many investors don't know (or disbelieve) is that Pfizer, which used to chase the ever elusive next blockbuster drug, has changed its ways. The company is now aiming for numerous little hits rather than a few mega-successes, developing 114 drugs, 25 of which are in the final stage before being submitted for approval. (By contrast, rival Merck has nine in the latter category.) Pfizer is also shifting its emphasis from obesity and heart disease to other fields, including pain, Alzheimer's, and cancer. Such markets are not only lucrative but also expensive for generics to enter - a vital shield against the next wave of cheap drugs.

The company's most immediate salve may be its wallet: Pfizer has $26 billion in cash, which is more than Merck, Eli Lilly, and Bristol Myers-Squibb combined. CEO Jeffrey Kindler could snap up a biotech company, many of which are available at low prices; until then, investors can tide themselves over with the company's 8% dividend (again, the best in its class). Caption: CEO Jeffrey Kindler drastically restructured Pfizer last year, breaking the company into smaller, more concentrated units.

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