Double Trouble for AstraZeneca

Editors' note: An earlier version of this article appeared without including the news about the temporary ruling. The Fool regrets this oversight.

AstraZeneca (NYSE:AZN) got a double dose of bad news yesterday: Current revenue is vanishing, and potential revenue is failing to materialize. This caused investors to send the stock spiraling by 12%. Is there more downside risk ahead?

Let’s look at AstraZeneca’s situation in more detail. First, Teva Pharmaceutical (NASDAQ:TEVA) decided to launch a generic version of its asthma treatment Pulmicort Respules. AstraZeneca signed a deal with Par Pharmaceutical to launch an authorized generic, but it's not likely to replace much of the nearly $1 billion worth of U.S. sales that will now be facing direct competition.

All isn't completely lost on that front. AstraZeneca has a lawsuit against Teva, and if it wins the trial set to begin in January, it'll get to recover the damages it suffered and then some. This isn't the first time Teva has made an "at risk" launch -- it made a major launch of generic versions of Wyeth's (NYSE:WYE) Protonix late last year before any court decision. AstraZeneca has landed the first jab, though. The judge has issued a temporary ruling forbidding both Teva and Par from selling the generic drug until the court's decision at a preliminary injunction hearing, scheduled for Nov. 25.

On to AstraZeneca's second woe, which came with the release of its results from three phase 3 trials testing its lung-cancer treatment candidate Zactima. The drug seems to work well in combination with Sanofi-Aventis' (NYSE:SNY) chemotherapy treatment Taxotere, but not with Eli Lilly's (NYSE:LLY) Alimta. The failure in combination with Alimta could eliminate more than half of the potential patients for Zactima.

Going two-for-three might have made this a positive day for the drugmaker, but the third trial turned out to be a downer, too. In a head-to-head trial as a monotherapy, Zactima failed to best current cancer treatment Tarceva from OSI Pharmaceuticals (NASDAQ:OSIP) and Genentech (NYSE:DNA). Even if it makes it to market, Zactima may have a hard time pushing into the crowded and complex lung-cancer market.

All in all, it was a pretty bad day for AstraZeneca, and its stock deserved every bit of the thrashing it got. Losing heartburn medication Prilosec, beta blocker Toprol-XL, and now Pulmicort Respules to generic competition wouldn't be so bad if the company wasn't having issues with potential blockbusters in the pipeline. I think the downside risk is mostly priced in at this point, but don't expect much growth from AstraZeneca unless it's able to pick up a cheap development-stage drugmaker.