AstraZeneca ( AZN - Analyst Report ) recently announced that the European Commission (EC) has approved Zinforo (ceftaroline fosamil) for treating adults with complicated skin and soft tissue infections (cSSTI) or community acquired pneumonia (CAP).

The European approval did not come as a surprise as Zinforo had earlier received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA). Approval was based on encouraging data from four phase III trials - CANVAS 1 and 2 (cSSTI) and FOCUS 1 and 2 (CAP).

While we are pleased with the European approval of Zinforo, we note that the market is highly competitive given the presence of players like Cubist Pharmaceutical’s ( CBST - Analyst Report ) Cubicin and Pfizer’s ( PFE - Analyst Report ) Tygacil.

We note that in 2009, Forest Laboratories ( FRX - Analyst Report ) had out-licensed co-exclusive development and exclusive commercial rights to Zinforo in all territories except the US, Canada and Japan. In March 2011, Forest Labs launched ceftaroline fosamil under the trade name Teflaro in the US. The company reported Teflaro sales of $9.4 million for the three months ending June 30, 2012.

Neutral on AstraZeneca

We are encouraged by AstraZeneca’s focus on high-potential emerging markets and are pleased with its effort to drive the bottom line through cost-cutting initiatives and share buybacks.

However, we remain concerned about the generic competition faced by the company’s key products. In 2011, the company lost revenues worth almost $2 billion to generic competition. The weak late-stage pipeline coupled with slow Brilinta uptake also bothers us.

We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run.