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I recently wrote about traders switching their focus from biotech to big pharmaceuticals in order to book gains from biotech's recent run and position ahead of pharmaceuticals historically best two months. One drug maker worth considering is AstraZeneca Group plc (NYSE:AZN).

Astrazeneca has a few high profile drugs coming off patent protection. So, the company has been hard at work ushering drugs through trials to offset the impact of generic competition.

In the company's latest EPS report, generic competition was cited as the key reason behind net income slumping 24% to $1.61 billion in the quarter. Overall, Astra's sales clocked in at $6.7 billion and ex-item EPS fell 11% to $1.27. Despite the challenges, cash from operations in the first six months is just about at last year's levels of $2.8 billion.

The impact of generics on Astra's existing products was widespread enough for the company to guide for a mid-teen sales drop next quarter from last year, following an 15% drop last quarter.

Among drugs losing share to generics was Seroquel IR, which accounted for 80% of the 29% drop in U.S. sales last quarter. The impact of generics accounted for roughly 15% of the 18% drop in constant currency revenue last quarter.

Crestor, the widely cholesterol lowering drug, is another high profile drug losing share. The generic version of Pfizer's (NYSE:PFE) Lipitor helped push Crestor sales 5% lower from last year to $1.58 billion in Q2. Nexium also lost ground, with Q1 sales down 18% to $953 million and Q2 sales $949 million, down 13%.

Helping offset the loss to generics were Symbicort, Onglyza and Falodex

The sales drops were partially offset by Symbicort whose U.S. sales increased 20% thanks to 27% market share in new patients. Worldwide, Symbicort sales were $795 million in Q2, up 3% in constant currency.

Onglyza, used to treat type 2 diabetes and developed with Bristol-Myers Squibb Company (NYSE:BMY), saw alliance revenue rise 72%, producing U.S. sales of $58 million. About 20% of North Americans over age 65 have type 2 diabetes, making this a big and growing market. Across the rest of the world, Onglyza raked in another $21 million.

Faslodex, which blocks estrogen and is used in certain metastatic breast cancers that rely on estrogen to grow, saw sales increase 24% to $161 million in Q2. This brought first half sales to $312 million, giving the drug a $600 million annualized run rate.

Outside of those three, the company's cancer chemotherapy drug Iressa saw sales increase 13% to $154 million in the quarter, following 17% growth in Q1. Astra's Iressa sales totaled $297 million in the first half of this year.

Brilinta also saw growth. The drug had a paltry $9 million in Q1 sales. But, that climbed to $18 million in Q2. The drug is used to treat patients with acute coronary syndrome to prevent stroke or heart attack. The drug has had a hard time winning scripts in the U.S., so Astra hired the Medicines Company (NASDAQ:MDCO) to rep the drug beginning in May.

And, despite Seroquel IR sales falling sharply on generic competition, Seroquel XR is hanging tough with sales falling only 1% in Q2 to $370 million. The drug generated $754 million in first half sales, up 6% - a sharp contrast to the 52% drop in the first half for Seroquel IR.

There are bright spots in the pipeline

The company hopes to see the EMA approve diabetes drug Forxiga following a positive recommendation from the CHMP in April. In collaboration with Bristol, the drug can be used to reduce glucose in type II diabetes patients either as a monotherapy or as a combination therapy.

The CHMP also gave the nod to Zinforo, used to treat patients with soft tissue infections and community acquired pneumonia. Astra was granted ex-U.S., Canada and Japan rights for the drug in 2009 by Forest Labs (NYSE:FRX), which markets the drug in the U.S. under the name of Teflaro. In the most recent quarter, Forest reported $9.4 million in Teflaro sales, up 19% from the prior quarter and substantially higher than the $2.7 million sold a year before.

A collaboration with Amgen (NASDAQ:AMGN) on inflammation related disease includes brodalumab, which is expected to enter Phase III later this year. Back in March, Amgen reported Phase II results showing the majority of participants achieved total clearance of their moderate to severe plaque psoriasis, while on bi-weekly brodalumab. Given 125 million globally have psoriasis and 80% have plaque psoriasis, the market could prove large.

One of its top drugs in the pipeline is Fostamatinib ("FosD"), a drug in Phase III trials for the treatment of rheumatoid arthritis. Astra partnered with Rigel (NASDAQ:RIGL) in early 2010, agreeing to pay development costs, milestones and royalties to Rigel in exchange for marketing rights. I wrote more about this relationship here.

Rheumatoid arthritis is a big market, likely to grow to $15 billion by mid decade. There are a number of candidates moving through various maker's pipelines for the disease, including products at Vertex (NASDAQ:VRTX) and Pfizer. Astra hopes to have leverage Phase III results into an NDA filing in 2013, with hopes of the drug's commercialization in 2014. If all goes well, the drug has a very good shot at blockbuster status.

It's also advancing naloxegol, which is used to treat opiod induced constipation. The Phase III Kodiac trials will have data late this year. And, a 52-week safety study will wrap up in Q1 '13. Additionally, Astra bought Ardea Bio back in April, which brought with it lesinurad, a Phase III gout treatment.

The company isn't without its troubles. But, for investors looking for a shareholder-friendly company, AstraZeneca may prove a good choice. It's dividend yield is 6.2% and it plans to spend $4.5 billion on buybacks this year. Given Phase III trial data across multiple drugs will be released over the coming year, this may prove a good time to pick up shares.

Source: AstraZeneca Offsets Generic Risk With New Drugs