A friend of mine actually failed biochem her first year. She did fine otherwise, honoring quite a few of her basic science courses and getting all High Passes or Honors during her 3rd and 4th year. Though she actually knew her biochem very well, she had difficulty with this particular professor's essay exams. The man had a rule where if you failed one exam, you automatically get a Conditional and fail two, you fail the course regardless of average. She failed two biochem exams by just a matter of a couple of points and the guy didn't show her any mercy. She remediated over the summer at another university and did extremely well in the remedial course, ending up with an A average. Her Step 1 was around 220. I think that her Step 2 was a little higher, but I am not sure.
However, when it came to the Match, she was extremely worried as she wanted to go into surgery. She applied to something like 35 programs. She did get rejected from some of the more competitive programs and she thinks that failing biochem may have had something to do with that. However, she wound up getting enough interviews at other places that she had to start cancelling them because she could not possibly go to them all. She says that at almost every interview she went to, she was asked about what happened to her in biochem, but most of those places were impressed with the fact that she did well in everything else, particulary her surgery rotation and her surgical electives. Though she didn't get a few interviews that she really wanted, she did match at her #2 program at a major state university. Though biochem was definitely a setback for her, she bounced back well and was very happy with the final outcome.
I am not going to lie. Failing a course may hurt you somewhat at some of the more highly competitive programs and you will have to answer some questions about it. However, it is not the end of the world. Concentrate on doing well from here on out, especially in the clinical years. Letters of recommendation and performance evaluations go a long way in helping you obtain the residency that you want.
When you get to your third year, I would suggest making an appointment with the program director in your field at your school. They can probably offer you some suggestions as to how you can improve your application. Also, make sure you apply to your own school's residency program. If they like you and know that you work hard, they may tend to overlook the failure when they rank you for residency.