Pfizer Inc. (NYSE: PFE) is beginning to catch the eye of many value investors as it approaches historically low levels. The pharmaceutical company now trades at just 10.3x earnings while reporting fouth quarter earnings that beat expectations. Pfizer also recently announced a $15 billion share buyback program along with a dividend increase for the 41st consecutive year. So, is the pharma giant a buy at these levels?

Pfizer has faced criticism over its lacking pipeline and many believe that is the reason that it is valued to cheap. The company is facing a number of patent expirations during the next few years - most notably, its #1 drug Lipitor due off patent in 2010. In all, this represents 1/3 of the company’s topline that will need to come from other unidentified sources in the future. Lipitor, which alone accounts for 25% of the company’s revenues, is also quickly losing market share to Zocor. Meanwhile, there are larger economic and political risks that pharmaceutical companies face - most notably, Medicare Part D issues and other government programs that could increase the cost of doing business.

It is important for investors to realize, however, that Pfizer has built up a substantial balance sheet. The company has over $20 billion in cash that it could use to fund acquisitions and refill its pipeline with quality drugs in a very short period of time. Even better, they have no debt which means that they could easily take on debt to make acquisitions. And given the current buyer’s market when it comes to M&A, they could do so for relatively cheap! The company has three years until it loses its blockbuster drug Lipitor and many are sure that it will find a replacement by then.

In the end, there is a lot of uncertainty surrounding Pfizer that has pushed its shares to historically low levels. Many fear that the company faces future expiration issues and has no current pipeline to give investors future hope to bank on. However, the company does have a lot of cold, hard cash that it could use to buy hope - and that’s something that’s definitely worth considering! Combined, these factors make PFE a stock worth watching!

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