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Edited Transcript of AMAG earnings conference call or presentation 7-Aug-19 12:00pm GMT

Q2 2019 AMAG Pharmaceuticals Inc Earnings Call

LEXINGTON Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of AMAG Pharmaceuticals Inc earnings conference call or presentation Wednesday, August 7, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anthony Casciano

AMAG Pharmaceuticals, Inc. - Chief Commercial Officer

* Edward H. Myles

AMAG Pharmaceuticals, Inc. - Executive VP, CFO & Treasurer

* Julie Krop

AMAG Pharmaceuticals, Inc. - Executive VP of Development & Chief Medical Officer

* Linda S. Lennox

AMAG Pharmaceuticals, Inc. - VP of IR & Corporate Communications

* William K. Heiden

AMAG Pharmaceuticals, Inc. - CEO, President & Director

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Conference Call Participants

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* Douglas Dylan Tsao

H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst

* Eason Lee

SVB Leerink LLC, Research Division - Associate

* Jessica Macomber Fye

JP Morgan Chase & Co, Research Division - Analyst

* Serge D. Belanger

Needham & Company, LLC, Research Division - Senior Analyst

* Tyler R. Knisley

SunTrust Robinson Humphrey, Inc., Research Division - Associate

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Presentation

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Operator [1]

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Good morning. My name is Carmen, and I will be your conference operator today. At this time, I would like to welcome everyone to the AMAG Pharmaceuticals Second Quarter 2019 Earnings Call. (Operator Instructions)

It is now my pleasure to turn today's program over to Ms. Linda Lennox, Vice President, Investor Relations. You may begin your conference.

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Linda S. Lennox, AMAG Pharmaceuticals, Inc. - VP of IR & Corporate Communications [2]

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Thank you, Carmen. Good morning, and welcome to the AMAG Pharmaceuticals conference call to discuss our second quarter financial results.

Earlier this morning, we issued a press release. For those of you who don't have a copy, you can access it in the Investors section of our website at amagpharma.com.

Please be reminded that remarks made during this call may include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We want to emphasize that these forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those disclosed in such forward-looking statements. Please refer to our 2018 Form 10-K and our Q1 2019 Form 10-Q for a full review of these risks and uncertainties associated with our business.

On today's call, we will discuss certain non-GAAP financial measures with respect to our performance. We use these non-GAAP measures for financial and operational decision-making and as a means to evaluate our performance because we believe they better represent the ongoing economics of our business. The definitions of our non-GAAP measures are set forth in our earnings release, which was filed with the SEC today. Copies may be obtained at sec.gov and in the Investors section of our website.

We have forward-looking estimates of our long-term outlook, including that we will be adjusted EBITDA neutral by 2020. AMAG's growth trajectory and expectations for adjusted EBITDA on a multiyear time frame are based on a strategy of maximizing commercial product opportunities to fund investments in new products with various assumptions, including certain assumptions about the progression and approval of AMAG's product candidates. So please refer to these additional risk factors.

On today's call are Bill Heiden, our President and Chief Executive Officer; Ted Myles, our Chief Financial Officer; and Tony Casciano, our Chief Commercial Officer. Dr. Julie Krop, our Chief Medical Officer, will also be with us for the question-and-answer portion of today's call.

Let me quickly run through the agenda for this morning's call. Bill will briefly review the second quarter highlights and some recent developments. Ted will provide an overview of our second quarter financial results and revision to our 2019 financial guidance. Tony will provide an overview of our upcoming launch of Vyleesi, and then Bill will close out the call and we'll open it up for Q&A.

With that, it's now my pleasure to turn the call over to Bill. Bill?

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [3]

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Thanks, Linda. Good morning, and thanks for joining us on our quarterly update call. We've got a lot to cover this morning, so let's get started.

As we look at the quarter, we saw a strong and consistent execution from our commercial team. This led to sequential and year-over-year revenue and market share growth with subcutaneous Makena auto-injector, Feraheme and Intrarosa. The tables on our press release show the impressive quarter versus same quarter year ago growth. And on this slide, you can also see that each of our promoted products also grew sequentially versus the first quarter of 2019.

Net revenues for the Makena auto-injector were 8.5% higher than the first quarter, and we saw our market share grow 9 percentage points over the first quarter to 63% market share.

Feraheme revenues were up 12% versus the second quarter of last year and up 5% versus Q1. In addition, we achieved record market share of more than 17% in the second quarter.

And finally, Intrarosa net revenues were up significantly versus this quarter a year ago and grew 11% over Q1. Total prescription market share grew through the quarter, exiting Q2 at 4.8% market share, our highest share achievement since launch.

Returning to Makena for a moment. There are a couple of other items to report in the quarter that I wanted to touch on right upfront. As we mentioned previously, we've had sustained supply disruption with the Makena intramuscular product, stemming for issues that are original contract manufacturer. And we intend to pursue all available remedies against that supplier. These ongoing supply issues caused Prasco to lose market share. And in the face of increased generic competition, we made a mutual decision with Prasco to exit the generic IM market. And Ted will cover the impact in more detail in a few minutes, including the impact on our financial expectations for the year.

As I've already mentioned, Makena auto-injector market share grew to 63%, and we're really proud of that achievement. In fact, based on this share growth, that means that the generic intramuscular market has actually been shrinking and is now less than 40% of the total market.

Over the last few months, many of you have asked us about the PROLONG study results and where we go from here with those study results. Today, we also announced that in a recent meeting with the FDA regarding the PROLONG study, the agency informed us that they plan to hold an Advisory Committee meeting in the fourth quarter of this year to facilitate transparent discussions of the PROLONG trial and allow FDA to obtain the necessary input from Advisory Committee members, important stakeholders to inform regulatory decision-making for Makena.

While I can't speak to what the FDA will or won't do, I want to reinforce that AMAG continues to firmly believe in the clinical utility of Makena. The original Meis trial run by the National Institutes of Health demonstrated a 30% reduction in the rate of preterm birth in a U.S. patient population compared to placebo. Women at risk of a preterm birth have no other FDA-approved treatment options to lower their risk of preterm birth other than Makena. And preterm births can lead to devastating health care outcomes for the newborn.

In addition, preterm birth rates are rising in the United States and are highest in some of the most vulnerable patient populations. We think that the Advisory Committee is the logical next step as the agency will have an opportunity to hear directly from the company, clinical experts, medical society representatives and patients on their personal experiences and the scientific data supporting the clinical importance and medical need for Makena.

As the meeting draws closer, we'll provide any information that we can, and we look forward to a productive conversation with the FDA and experts about this important medication later this year.

And now as you know, Vyleesi was approved by the FDA in June. And since that announcement, we've had an incredible amount of media coverage, which has helped raise awareness with potential patients and with medical professionals. More than 300 news outlets across the country, including CNN, Reuters, the L.A. Times and NBC have covered the Vyleesi approval news. This media pickup has helped drive tens of thousands of visitors to our vyleesi.com website, with approximately half of those visitors taking action, such as answering questions on our symptom checker, to see if they might have HSDD; or downloading a guide for having a discussion with their physician. We're currently gearing up for product availability. In just a few weeks, we'll have our national sales force out in the field and we'll also be launching our direct-to-consumer branded digital campaign. Tony will cover some of the details about our upcoming launch and metrics that we'll be watching to gauge early success of the launch a little later on this call.

And with opening remarks, let me turn the call over to Ted to go through the quarterly financials and our update to full year financial guidance. Ted?

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Edward H. Myles, AMAG Pharmaceuticals, Inc. - Executive VP, CFO & Treasurer [4]

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Thanks, Bill. Slide 9 shows our revenue by product for the second quarter of 2019 compared to the same period in 2018. The Makena subcu auto-injector continued its strong performance with $41 million of revenue in the second quarter compared to $13 million in the same period last year, which was the auto-injector's first full quarter on the market.

We've been very pleased with the success of the auto-injector as we've gained significant share every quarter since launch, even in the face of multiple generic intramuscular competitors.

Next line item illustrates the Makena IM product. Due to the supply disruptions caused by our primary supplier, we were unable to ship any IM product during the quarter. The $10 million in negative revenue reported in the second quarter includes invoices recently received and our estimated remaining liability for Medicaid and commercial rebate obligations for Makena IM from past periods. It is very common to change the estimated liability based on revised assumptions of channel mix, invoice lag and overall exposure, particularly in a heavily Medicaid-oriented market. In some cases, invoices arrive many quarters after the initial sale of the product. This new information is incorporated in our current reporting and future expectations.

Once again, Feraheme demonstrated strong performance in the quarter with revenue of over $42 million. This growth was all driven by volume. Not only did the IV iron market grow during the quarter, but so did Feraheme's share of that market. Our Heme/Onc team continues to deliver strong results, and we believe Feraheme will continue to be a source of steady cash flow.

Second quarter sales of Intrarosa were $4.9 million, up from $3.2 million in the same period last year. As you recall, we made a couple of changes to the patient co-pay savings program in the first quarter of this year and believe we have optimized that program. As Bill showed, we are back on a steady NRx and TRx growth trajectory.

Moving down the P&L, the next slide presents operating expenses and operating results on a GAAP and non-GAAP basis for the second quarter of 2019 compared to the same period in 2018. We broke out a couple of line items to better illustrate the trends driving our results for that period. Cost of product sales includes amortization of intangible assets.

During the second quarter of 2018, we recognized approximately $61 million of amortization expense, Substantially all of this was related to the Makena IM product. During the second quarter of 2019, we didn't recognize any Makena IM amortization because we did not sell any Makena IM product.

The Q2 2019 direct cost of product sales includes a $4.8 million write-down of Makena intramuscular inventory.

R&D and SG&A were aligned with our expectations. The comparison of the SG&A line item is a bit complicated by the 2018 reversal of approximately $50 million of contingent liability. During that period, we determined that it was unlikely that we would achieve a sales milestone that would have triggered a payment to the former Lumara shareholders and therefore, reversed the liability and recorded a negative expense.

Late in the second quarter of 2019, we determined that it was probable that we would no longer supply Prasco and therefore, our revenue forecast for intramuscular product was revised to $0. This resulted in a full impairment of the Makena IM intangible asset, a noncash charge in the second quarter of 2019 of $77 million.

During the second quarter, we recorded a loss in adjusted EBITDA of approximately $24 million. This is higher than expected, largely driven by lost sales and negative revenue of the intramuscular products.

So as we review our expectations for the full year, we have decided to lower our financial guidance for 2019 due to the loss of revenue from the Makena intramuscular product and our ciraparantag development partner informing us they intend to terminate our agreement. While we believe they have no grounds for termination, we removed the milestone revenue from our 2019 expectations.

You can see on the left side of the slide that for the 6 months ended June 30, 2019, we recorded revenue of approximately $154 million and adjusted EBITDA loss of approximately $50 million.

Our revised guidance on the far right of the slide, revenue of $340 million and adjusted EBITDA loss of $80 million at the respective midpoints, assumes no IM revenue and the removal of approximately $20 million of previously expected milestone revenue. Our operating plan for the back half of the year is based on continued strong commercial performance of the Makena subcu auto-injector and continued growth of Feraheme and Intrarosa and also includes continued investments in the development of ciraparantag and AMAG-423 in a fully funded launch plan for Vyleesi.

Moving to the balance sheet. We believe our products in our portfolio are important opportunities to address unmet medical needs for patients and are worthy of these near-term investments. The work we have done to transform our balance sheet over the past several years, early retirement of more than $1 billion in debt, has positioned us to make these investments and even go into a temporary loss position in 2019.

As we look to the back half of 2019 as a period of narrowing our adjusted EBITDA loss versus the first half of the year, thereby setting up adjusted EBITDA neutral 2020. We ended the second quarter with $261 million of cash. In July, we made the $60 million milestone payment to Palatin.

Tony is now going to provide an overview of our upcoming launch of Vyleesi. Tony?

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Anthony Casciano, AMAG Pharmaceuticals, Inc. - Chief Commercial Officer [5]

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Thanks, Ted, and good morning, everyone. I'd like to take just a couple of minutes to provide a few updates on Vyleesi, including early market signals and elements of our national launch scheduled for September.

The AMAG team is very excited to bring this product to market. We know from market research that approximately 1 in 10 premenopausal women experience symptoms of HSDD. Yet, most of these women do not realize they are experiencing a treatable medical condition. We also believe from our own market research that Vyleesi has the potential to raise awareness by providing a safe and effective new treatment option to an undeserved patient population with acquired, generalized HSDD.

Our very early assessment of the market post approval would suggest we're not the only ones excited about changing the way HSDD is discussed and treated. To date, we've seen over 500,000 visitors to our unbranded patient website, unblush.com, where visitors are staying longer and viewing more content than we typically see on unbranded sites. This time is translating into actions with over 80,000 visitors having completed the HSDD symptom checker to date.

In mid-July, we rolled out our early experience program. This is a targeted program designed to help us learn more about the market. We have 20 sales reps in the field today, calling on a small subset of health care providers across the country. Their feedback is helping us validate and challenge our assumptions from research on the treatment of HSDD, which is further informing our targeting and messaging. We'll use these insights and feedback to refine and improve our plans ahead of launch.

As mentioned, our national launch will take place in September with the activation of our high-performing and fully trained sales force of approximately 125 sales representatives. These are the same sales professionals who are currently promoting Intrarosa and the Makena auto-injector. This team will be calling on approximately 15,000 health care professionals at launch, consisting mostly of OB/GYNs, but will also include sexual medicine specialists and select primary care offices.

As we shared before, we're committed to helping ensure premenopausal women with acquired, generalized HSDD have access to Vyleesi. Over the past couple of months, our market access team has been working hard to educate payers on the clinical profile of Vyleesi. We recently submitted our listing to the compendia, which will now put Vyleesi in the national electronic pharmacy ordering system and payer processing systems. We believe that Vyleesi will eventually reach the same broad commercial coverage as seen with other approved sexual health products, which our research would indicate is currently in the 60% to 70% range of all commercial insurance plans. As you probably anticipate, we expect the price for Vyleesi will vary by patient's insurance. And like most newly approved products, we expect payer access will take time.

In the meantime, we're making the first 4 pack of Vyleesi available to patients for a $0 co-pay on her first prescription and a maximum of $99 on her subsequent refills of the 4 pack.

To help ensure positive experience for patients, we will be launching Vyleesi through 2 specialty pharmacies. We believe that the discreet nature of home delivery coupled with services provided by this type of model will be well received by our target patient demographic.

So I'll close with how I started, by emphasizing the excitement at team AMAG for Vyleesi. This is an important moment as we bring the first FDA-approved as-needed treatment option to the millions of premenopausal women with acquired, generalized HSDD and to the physicians who are treating them.

Vyleesi is an innovative product. We want to provide women and health care providers with an experience to match. This starts by driving awareness of HSDD, helping foster conversations between patients and physicians and ultimately differentiating Vyleesi in the marketplace. Our commercial organization is already hard at work to deliver a successful launch in September.

And with that, I'll turn it back over to Bill for closing remarks. Bill?

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [6]

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Thanks, Tony. Well, as you just heard, this is an important moment for patients and our company. Only 2 years ago, when we had just 2 commercial products, we set the ambitious goal to bring even more innovative treatments to patients, to expand our product portfolio and to build additional durable revenue streams. We set out to in-license or acquire late-stage development medicines and take them through to regulatory approval. And we have done just that.

We have been building additional internal capabilities to support this goal in recent regulatory approvals for Feraheme broad label; the Makena subcutaneous auto-injector; and just this past quarter, the approval of Vyleesi show that we are successfully executing on the strategy.

And today, we have 2 other exciting development programs, AMAG-423 and ciraparantag. 423 is a polyclonal antibody in development for the treatment of severe preeclampsia in pregnant women. There are currently no FDA-approved treatment options for severe preeclampsia and it is the leading cause of maternal and neonatal mortality. Enrollment in clinical trials for this condition is challenging and as such, difficult to predict when the timing of enrollment completion. We are continuing to add new sites and enroll additional patients in this Phase IIa/IIIB trial for AMAG-423.

Ciraparantag is our other development program. Ciraparantag is in development as a single dose, ready-to-use solution for patients treated with Novel Oral Anticoagulants or low-molecular-weight heparin when reversal of the anticoagulant effect is needed for emergency surgery or serious uncontrolled bleeding. We and our partners from Perosphere Technology recently met with the FDA to discuss the upcoming submission of an IDE, or an investigational device exemption, for the automated coagulometer. Based on approval of that IDE submission, we expect to initiate a Phase IIIa program for ciraparantag in the fourth quarter of this year.

We have considered pursuing a breakthrough designation for ciraparantag. But based on feedback from the agency on additional data that might be required to achieve breakthrough, we've decided not to pursue that application. Ciraparantag already has fast track designation, which will allow us to apply for an expedited review at our NDA filing.

Investments in the launch of Vyleesi and our development-stage products will allow AMAG to bring additional innovative therapies to patients in need and build a new chapter of durable growth for shareholders.

And with that, we'll conclude our prepared remarks, and we will open the call for questions. Carmen?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from the line of Douglas Tsao with H.C. Wainwright.

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Douglas Dylan Tsao, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [2]

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Just as a starting point, in terms of the FDA adcom that's upcoming, have you been engaged in conversations with any of the key medical societies in terms of ACOG to get their perspective on the results from PROLONG and in anticipation of what they might sort of discuss at this meeting?

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [3]

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Thanks, Doug. I'm going to ask Julie. Julie Krop, our Chief Medical Officer, is here and I'm going to ask her to answer that question for you.

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Julie Krop, AMAG Pharmaceuticals, Inc. - Executive VP of Development & Chief Medical Officer [4]

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Yes. Of course, it's critical. And I think the FDA, in asking for this adcom, is very interested in understanding sort of the totality of the data from a variety of different stakeholders, obviously including the medical societies. And yes, of course, we are in -- we are in contact with them and we'll continue to provide them with all the information they need in order to be able to be active participants in this whole discussion at the Advisory Committee.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [5]

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Yes. They're obviously an important stakeholder, Doug. They treat these patients. They are aware that this is the only treatment option for patients who are at risk of a preterm birth, so they have a lot at stake here. And Julie and her team have been working closely, so they will definitely play a role at the Advisory Committee.

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Douglas Dylan Tsao, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [6]

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And maybe can you share some of just the early feedback that you've gotten from them in terms of the results from -- of PROLONG?

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Julie Krop, AMAG Pharmaceuticals, Inc. - Executive VP of Development & Chief Medical Officer [7]

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Yes. I mean I really can't speak for the medical societies. I mean I think we at AMAG, as Bill reiterated, I mean this is a unique situation as the product that's been on the market for over 50 years, obviously, widely used by physicians is in the guideline both for ACOG and SMFM for treatment of patients with a prior preterm birth. Strong safety profile. Obviously, the recent PROLONG data reinforce that. And I think we're in just as unique a situation with prior U.S. positive data and now a negative trial in patients outside the U.S. with a different health care system and a different set of risk factors than patients treated in the U.S. And so if that totality of the data is all that we can put together to try to understand how this will be handled, then I think that -- as I said, I just can't speak for how the medical societies will respond because that's -- we can't speak for them. So...

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Douglas Dylan Tsao, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [8]

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Okay. And then just one quick one. I'm jumping between calls this morning, so I might have missed it. But just in terms of the termination of the collaboration agreement on ciraparantag, just what that means in terms of the time lines and development and even just the future of the program for AMAG?

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [9]

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Yes. So the -- I mean, the background I think to the termination, this is a partner that actually did not end up having a significant stake in the U.S. anticoagulant market. This was a U.S. codevelopment agreement. And so certainly, background is understandable. From a contractual standpoint, we don't believe that the partner actually has the ability to terminate. So we think, ultimately, we will prevail, but thought the most conservative course was to remove it from our financial guidance. The development plan is really unchanged. We are developing this product in combination or for use with the various anticoagulants and low-molecular-weight heparin, but it does not change the development plans. Julie, any further comments?

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Julie Krop, AMAG Pharmaceuticals, Inc. - Executive VP of Development & Chief Medical Officer [10]

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Yes. No. And it doesn't -- it also doesn't change our time line. Our time lines were not dependent on the agreement.

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Operator [11]

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And your next question is from the line of Jessica Fye with JPMorgan.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [12]

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First on guidance. I appreciate you reiterating the guidance for 2020 to be neutral on an adjusted EBITDA basis. When we think about the roughly $80 million year-over-year improvement you're projecting, can you help us think about how much of that will come from higher revenue versus lower OpEx? I ask because consensus has your 2020 revenue up about $10 million year-over-year, suggesting the rest would need to come from expense cuts, assuming consensus is close.

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Edward H. Myles, AMAG Pharmaceuticals, Inc. - Executive VP, CFO & Treasurer [13]

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Jess, it's Ted here. So it's a little early to talk specifically about our next year expectations, but we see a lot of stability in the portfolio. Obviously, 2020 EBITDA neutral assumes continued great execution on Makena subcu, Feraheme. Intrarosa will clearly, by the end of the year, will be in cash flow-positive bucket with Makena and with Feraheme.

And then there's a bit of -- as you know, 2019 was a big R&D year and a 2 launch -- 2-product launch year. As we get into 2020, we're still driving the Vyleesi launch, but less so on Intrarosa because we're out of launch mode there. And we believe a lot of the R&D costs that aren't being incurred in 2019 will mitigate in 2020.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [14]

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Okay. Got it. And just sticking with guidance, with the '19 revenue guidance coming in, not fully explained by I think the $20 million ciraparantag milestone that was supposed to come in this year, is the rest from Makena IM? And are you standing by the $40 million to $50 million quarterly run rate from Makena with solely the subcu product?

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Edward H. Myles, AMAG Pharmaceuticals, Inc. - Executive VP, CFO & Treasurer [15]

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Yes. So the big drivers of the guidance lowering were clearly, as you said, Makena IM. As you know, we had -- so $10 million of negative revenue in Q2. There were some headwinds in Q1. So not only that were we counting on positive revenue for the Makena, we'd particularly get generic IM product through our authorizing our partnership, but we actually incurred negative revenue. So that's a bit of a hole. So that's a key driver, and then the -- what we'll call the conservative removal of the $20 million of ciraparantag development milestone revenue. Those 2 drove the guidance revision.

And your other question about $40 million to $50 million of Makena, and we've talked about that sort of big picture and largely driven by the subcu. We're really proud of the results in Q2. The subcu delivered $41 million of revenue. So we're in that range, and we're continually encouraged by the progress the commercial team is making with the subcu and the adoption by physicians.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [16]

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Yes. If you think about the go forward now, Jess, the -- this is Bill. Obviously, the share that we've achieved for the full quarter, 63%, for the auto-injector is performing very, very nicely. The intramuscular market has been shrinking over the last several quarters. And so as we look to the future, sort of -- we eventually were likely going to get out of the intramuscular market anyway as multiple players came into that market and it became sort of less interesting, if you will. But the success of the Makena auto-injector is really what's going to drive revenues going forward.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [17]

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Okay. Got it. And just last one following up on the prior question on ciraparantag. Can you help us understand like what Daiichi was asserting to be able to terminate the agreement? And remind me when you believe you could report the Phase IIIa results for that product?

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [18]

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Sure. So I don't want to get into the specifics of what Daiichi is asserting because then we get into legal contractual language and so I don't want to get into that. Again, you can certainly understand, from a commercial perspective, they don't have a presence in the U.S. market. And so I certainly understand there may be some background where you could understand why they might want to try and get out of this agreement, but we think contractually, they actually don't have the ability to do so. In terms of timing, let me turn it over to Julie.

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Julie Krop, AMAG Pharmaceuticals, Inc. - Executive VP of Development & Chief Medical Officer [19]

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Yes. So I don't have the exact timing today, but probably -- definitely some time in the first half of next year we'll be able to report about that data for the IIIa study.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [20]

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And fortunately, these trials are pretty fast...

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Julie Krop, AMAG Pharmaceuticals, Inc. - Executive VP of Development & Chief Medical Officer [21]

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Yes. They're pretty fast. I mean, as you remember, healthy volunteer studies -- so yes, it's pretty quick. So...

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Operator [22]

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Your next question comes from the line of Ami Fadia with SVB Leerink.

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Eason Lee, SVB Leerink LLC, Research Division - Associate [23]

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This is Eason on for Ami. Maybe first, I think you sort of touched on this, Bill, but just wanted to confirm. So the fact that you didn't change sort of your preliminary view of 2020 despite the lowering of 2019 guidance. It sounds like you didn't assume -- basically that the IM has pretty negligible contribution in 2020. Just wanted to sort of confirm that, if that's the case.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [24]

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Yes. That's right, Eason. And again, the subcu auto-injector is performing as well or better than we had expected. And so interesting versus our forecast from a year or 2 ago, the intramuscular market is shrinking. And so as uninteresting as that market was forecasted to be, it's becoming even less interesting as it continues to get smaller. There are other generics that have entered the market. And so rather than be a contributor with our authorized generic to being another player in that market and as complicated by the supply challenges that we've had with the intramuscular, we decided the best course going forward was to focus on the continued execution and great success we've had with the subcutaneous auto-injector.

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Eason Lee, SVB Leerink LLC, Research Division - Associate [25]

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Okay. And then, maybe I guess focusing on the rest of the year, just on sort of generic IMs, there seem to be one that's -- that has been picking up share pretty recently. Maybe could you just sort of give us maybe more -- like more broadly sort of your expectations in terms of number of generics for the rest of the year? And then also in terms of your sort of AG contribution. I think we still see some scripts, obviously, flowing from Prasco into the third quarter. Will there be any sort of financial impact, a failure to supply penalty that sort of kicks in, in third quarter? Maybe just -- maybe help us just work through the numbers there.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [26]

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Okay. So let me start with just a big comment, which is I think some of the analyst community is actually buying a different dataset than we buy. So we have very accurate data on the market. And so as I mentioned, the intramuscular market is shrinking. Now there are some folks trading share within that market, but important to keep in mind that the market is actually getting smaller. In terms of the financial impact, Ted, maybe you want to mention...

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Edward H. Myles, AMAG Pharmaceuticals, Inc. - Executive VP, CFO & Treasurer [27]

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Yes. So if you're seeing some Prasco shipments currently, that makes sense. But we didn't ship any product to Prasco in Q2 or Q3 for that matter. They still hold -- they may still hold some inventory and will be putting that out in the market based on their own demand.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [28]

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Right. But we've already booked those revenues in Q1.

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Edward H. Myles, AMAG Pharmaceuticals, Inc. - Executive VP, CFO & Treasurer [29]

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Yes. So there's minimal financial exposure to us. There is a small amount of inventory and minimal exposure.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [30]

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Yes. The expectation is they will continue to bleed out that inventory and ultimately deplete the inventory that they have on hand. Tony, anything further?

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Anthony Casciano, AMAG Pharmaceuticals, Inc. - Chief Commercial Officer [31]

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No. Just a comment maybe. A question was asked on the number of generics. So we see a number of them today. I think Bill hit it on the head, there's some horse trading going on. We focus on the big number, which is total generic uptake versus branded subcutaneous auto-injector. That's moving in the right way. We would expect more generics simply because we know there's at least a couple more out there with files sitting with the FDA. But from a generic perspective today, we think the market is fully supplied. There's enough of them out here, so we're starting to see what we believe are kind of 2 discrete markets out there.

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Operator [32]

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Your next question comes from the line of Serge Belanger with Needham.

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [33]

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I guess first on Makena. Can you just talk whether the supply issues that are affecting the intramuscular product can have any carryover to the auto-injector going forward?

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [34]

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Yes. No, they don't. The 2 separate suppliers and this whole intramuscular supply issue really was caused by 1 supplier, our primary supplier on the intramuscular form. And again, they have nothing to do with the subcu auto-injector.

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [35]

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Okay. And then on ciraparantag, just remind us what kind of collaboration structure was in place. And now that it's being terminated, whether you will seek an additional partner to -- for development?

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [36]

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So the development partnership was really funding based on the development of our reversal agent in combination with a particular oral anticoagulant. And so as I said, whether that's in or out, frankly, does not change our development plan or program at all.

In terms of additional development partner, certainly not the way this program was structured. There is interest in partnering ciraparantag ex U.S. and so there may be eventually some type of partnership that's consummated around ciraparantag ex U.S., but I don't see a replacement development program that's structured the same way this current development program is structured with Daiichi Sankyo. Does that answer your question, Serge?

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [37]

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Yes. And then one last one on Vyleesi. I guess what kind of commercial coverage do you expect at launch in September? And how should we think about WACC and net pricing progression this year and next year?

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Anthony Casciano, AMAG Pharmaceuticals, Inc. - Chief Commercial Officer [38]

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Yes. Sure. So thanks for the question. So super early to be putting targets out there for coverage. As stated in the forward comments, I think we do anticipate eventually we'll get in the levels seen with other therapies out in the marketplace today of roughly 60% to 70%. But Vyleesi is a one-of-a-kind product. We're just now going to go back and start having discussions with payers with now the WACC price listed. And we'll kind of let you know as we go forward. We've got high expectations for coverage over time, but it's early to say just when and how that kind of takes form.

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [39]

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Yes. If you just want to restate, Tony, the patient access program...

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Anthony Casciano, AMAG Pharmaceuticals, Inc. - Chief Commercial Officer [40]

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Yes, absolutely. I apologize. And I know some folks are jumping on the call midway and late, so maybe I'll just restate for the benefit of the folks that may be joining later in the call. So even though we do anticipate that type of coverage, we do anticipate, like I said, it's going to take some time. In the interim, we believe access to the product is critical at launch, so we will be launching with a $0 co-pay for first fill of a 4 pack and then a $99 max out-of-pocket for patients for subsequent refills of the 4 pack.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [41]

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So I think what you'll see, Serge, not uncommon right in a product launch, you'll see a relatively high gross to net to start and then that will come down over time. The net price will go up over time based on coverage.

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Operator [42]

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Your next question comes from the line of Tyler Knisley with SunTrust.

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Tyler R. Knisley, SunTrust Robinson Humphrey, Inc., Research Division - Associate [43]

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This is Tyler on for Greg. I just have one quick one on Makena. Do you think that the recent court ruling on the compounding vasopressin could have any implications for the Makena market?

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [44]

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No. I don't think so. Because when you think of -- obviously, we've got generics which are lower-priced versions -- a lesser version, if you will, in intramuscular form versus the subcutaneous auto-injector, but I think today there is a low-priced option. And -- so I don't think that we're going to reopen that Pandora's box of exposing patients to compounded hydroxyprogesterone caproate because of the availability of generics. So no, I don't think that has any impact.

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Operator [45]

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There are no other questions at this time. I will now turn the call back over to Bill Heiden for any closing remarks.

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William K. Heiden, AMAG Pharmaceuticals, Inc. - CEO, President & Director [46]

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Great. Thank you, Carmen, and I want to thank everybody for joining us on the call today. We have got a busy Q3 in front of us, and we look forward to updating you on our continued progress. That busy Q3 includes the launch of Vyleesi, which is really just a few weeks away. So we're all very enthusiastic to get that out into the marketplace and help even more patients. So thank you, again, for your time, and we look forward to continuing to update you on our progress.

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Operator [47]

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Thank you. Thank you, again, for joining today's conference. You may now disconnect.