Of One-Time Gains and Pipelines

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The focus of AstraZeneca's (NYSE: AZN) earnings report illustrates the nature of polar opposites with one-time gains and new drugs. One is to be largely ignored, while the other will drive the drugmaker's future.

Revenue was 5% higher year over year, but about half of that was due to one-time gains. Novartis (NYSE: NVS) had to withdraw its copycat of heart drug Toprol-XL, in a move that led to a windfall for AstraZeneca, but generic competition has returned. The company also got a windfall from its swine flu vaccine. Like GlaxoSmithKline (NYSE: GSK) and Novartis, AstraZeneca will see another boost in the fourth quarter, but let's hope -- for society's sake -- not much after that.

On the new-drug front, things aren't quite as rosy. Onglyza, AstraZeneca's diabetes drug that it sells with Bristol-Myers Squibb (NYSE: BMY), is off to a slow start. The market is huge, but there's plenty of well-established players, such as Merck's (NYSE: MRK) Januvia, that the duo has to bump up against.

AstraZeneca's pipeline took a hit this week, when the company withdrew marketing applications for its lung-cancer drug Zactima, after updated analysis suggested that the drug didn't help improve survival.

That leaves the potential for the next blockbuster on the shoulders of blood thinner Brilinta. The marketing application was recently submitted in the EU, and AstraZeneca expects to file a New Drug Application with the Food and Drug Administration this quarter.  Brilinta fared better than sanofi-aventis' (NYSE: SNY) and Bristol-Myers' Plavix in a clinical trial, but that's not a guarantee of success; Eli Lilly (NYSE: LLY) and Daiichi Sankyo's Effient also proved better than Plavix in the clinic, but it's off to a relatively slow start.

It's kind of hard to get excited about AstraZeneca knowing it'll face increasing generic competition with a pipeline that's rather lackluster. It's probably worth keeping an eye on, but it doesn't look cheap enough to buy at this point. Let other investors enjoy the one-time gains while you and I think a little more long-term.