While the latest earnings report from AstraZeneca (AZN -0.68%) missed market estimates, the company had some positive news to report on its treatment for Alzheimer's disease. While I am still hesitant about the company's chance for success with this drug, Foolish investors should watch upcoming results closely to see if this stock is a good opportunity.

The stock is currently valued at 14 times 2014 earnings and below its industry and S&P 500 averages. During fiscal 2013, AstraZeneca reported a disappointing drop in revenue of 6% in constant currency from the prior year to $25 billion. Full-year core EPS came in at $5.05, down 23% in constant currency from 2012.

Of greater interest to the market is the progress of the company's experimental Alzheimer's disease drug, AZD3293, which recently moved into late-stage, phase 3 clinical testing. Alzheimer's patients still don't have a go-to treatment for their condition, so it's expected that the first pharmaceutical company to develop a suitable treatment for the disease could have a breakthrough product on their hands. So far, developing a treatment for Alzheimer's disease has proved to be daunting. Researchers have encountered numerous problems with the toxicity of some of the drugs under development.

Patent expirations impacting revenues and growth
Generic competition was a major contributor to decreasing revenues at AstraZeneca that affected heartburn therapy Nexium and cholesterol drug Crestor. Nexium and Crestor will probably see more losses in the coming years. Unlike its peers, AstraZeneca has a negative PEG ratio of 2.82, and at its current price valued at 15 times 2015 earnings, it's probably best to keep the stock on your watch list for now.

Growth in key areas like cardiovascular drug Brilinta, its diabetes and respiratory segments, and sales from emerging markets and Japan were not enough to offset the impact of patent losses. As 2017 approaches, revenue is expected to approximate levels seen in 2013, suggesting that losses should curtail by then. So the advance of AZD3293's clinical trials is a silver lining for AstraZeneca, as it also contends with competing Alzheimer's treatments under development by its peers.

Competing drugs
AZD3293 is a BACE inhibitor that targets a form of protein buildup in brain cells, known as amyloid plaques, that interfere with brain cell function and the ability of those cells to relay information. Competition is fairly brisk in this area of research, with the likes of Merck & Co (MRK -0.90%) and Roche Holding AG (RHHBY -1.15%) also involved in finding a cure.

Merck has also initiated phase 3 trials for MK-8931, its own investigational BACE inhibitor. Back in December 2013, the company received the green light from a safety panel to recruit additional patients without any changes to its "EPOCH" study protocol. Two new trials that may run between 18 months and two years will seek to enroll more than 3,000 people. Analysts predict that if the treatment is regarded as successful in treating the condition, it could generate $5 billion in annual sales.

Roche is known for its robust and well-developed Neuroscience segment, which includes its treatments under development for Alzheimer's. The company reported early this year that its Brain Shuttle technology showed a reduction in amyloid buildup in a mouse's brain with Alzheimer's disease. This new technology transfers investigational antibodies from the blood through the blood-brain barrier that surrounds the brain, permitting the antibodies to reach the brain. The company's current pipeline has three molecular entities under study for the treatment of the disease and one -- RG1450, gantenerumab -- is in phase 3 trials with results expected by 2017 or later.

My Foolish conclusion
Alzheimer's research is a high risk-high reward proposition and so far the risks have outweighed the rewards. Some companies, like Sanofi, believe the science has not advanced far enough to create a viable treatment and to justify the costs of research.

Investors should watch companies, such as AstraZeneca, Merck, and Roche, with Alzheimer's disease treatments in phase 3 testing. Overall, these companies will continue to feel the impact of patent expirations over the next few quarters, making it critical for them to focus on the development of their respective pipelines. If an Alzheimer's breakthrough is made, it could mean a major earnings turnaround that could be just around the corner, even if history is not on its side.