Is It Safe? Pipeline Pain at AstraZeneca

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AstraZeneca's(AZN Quote) best-known drugs -- Nexium, Crestor and Seroquel -- generated 48% of its revenue in the first quarter. But in a few years, the company won't be able to rely on these money-makers.

The drugmaker will lose the patents on these heavy hitters by 2014, leaving a hole in AstraZeneca's lineup that will need to be plugged if the company expects to maintain, let alone increase, its revenue.

The London-based company has 10 drugs in phase III trials with another 31 in phase II trials. The chances of these drugs matching the success of Crestor or Nexium is slim, but the pipeline is large enough to potentially add a couple of strong drugs to help bolster revenue.

AstraZeneca's shares are cheaper than average for a drug company, and the company offers a track record of earnings growth and strong debt management. But with the threat of generic competition looming, the company will need to be aggressive in developing new products.

To advance its research efforts, the company is teaming with competitors to develop treatments for some of the most common afflictions. For example, AstraZeneca is working with larger rival Merck & Co.(MRK Quote) in the hopes of improving a cancer drug. Should this partnership prove effective, this could lead to future collaborations and the potential for a more robust product pipeline.

AstraZeneca is also working with Bristol-Myers Squibb (BMY Quote) on a drug to treat Type 2 diabetes, one of the most pervasive diseases in America. That drug, dapagliflozin, is currently in phase III trials and could be a big winner for AstraZeneca.