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Narrower-Than-Expected Loss at AMAG

Zacks Equity Research

AMAG Pharmaceuticals Inc.’s (AMAG) second quarter 2013 loss of 12 cents per share was narrower than the Zacks Consensus Estimate of a loss of 17 cents. The company however reported earnings of 27 cents per share in the year-ago quarter. AMAG’s second quarter results were hurt by lower revenues.

Revenues during the reported quarter declined 36.6% to $19.6 million. The massive decline in revenues for the second quarter of 2013 was primarily due to a fall in license fee and other collaboration revenues. License fee and other collaboration revenues during the quarter declined 87.6%. Revenues still beat the Zacks Consensus Estimate of $18 million.

Quarterly Highlights

AMAG records revenues mainly from Feraheme, an injectable drug for intravenous use as iron replacement therapy for the treatment of iron deficiency anemia (IDA) in adults suffering from chronic kidney disease (:CKD).

In the second quarter of 2013, U.S. net sales of Feraheme amounted to $17.5 million, up 29% year over year. The increase was attributable primarily to volume growth. AMAG mentioned in its press release that this was Feraheme’s highest quarterly sales since its launch.

AMAG is also working on expanding Feraheme’s label. In Dec 2012, the company submitted a supplemental new drug application (sNDA) to the U.S. Food and Drug Administration (:FDA) for Feraheme. AMAG is looking to get Feraheme’s label expanded for the treatment of CKD adults suffering from IDA with a history of unsuccessful oral iron therapy. The U.S. regulatory body is expected to render a final decision on the proposed label expansion by Oct 21, 2013. Successful label expansion would boost the sales potential of the drug in the U.S.

AMAG has an agreement with Takeda Pharmaceuticals (TKPYY) for Feraheme, in the EU and Canada. We note that Rienso (EU trade name of Feraheme) was launched in the EU and Canada during the fourth quarter of 2012. During the second quarter of 2013, Takeda also filed a regulatory application with the European Medicines Agency to expand Rienso’s current CKD indication to include treatment of IDA in all adults who have a history of unsatisfactory oral iron therapy or who cannot tolerate or do not respond to such therapy.

Total operating expenses in the quarter amounted to $19.3 million, down 15% from the year-ago period without the effect of restructuring charges. While research and development (R&D) expenses declined 47.2%, selling, general and administrative (SG&A) expenses remained almost flat in the reported quarter.

Lower R&D expenses resulting from the completion of the company’s global IDA clinical program eased operating expenses.

2013 Outlook

Apart from reporting its financial results for the second quarter 2013, AMAG adjusted its guidance for 2013. The company now expects to generate total revenues in the range of $77–$80 million in 2013 (previous: $73–$77 million). The Zacks Consensus Estimate 2013 revenues of $76 million are however below the company’s lower end of guidance range.

The company also increased its Feraheme U.S. sales guidance to the range of $67 million to $70 million from the previous range of $63 million to $67 million.

AMAG also expects to generate around $10 million from royalties, product sales and milestones.

The company maintained its operating expenses guidance in the range of $78–$82 million.

We are pleased with Feraheme’s performance in the second quarter of 2013. We expect investor focus to stay on Feraheme’s label expansion.

AMAG currently carries a Zacks Rank #3 (Hold). Meanwhile, other stocks such as Actelion Ltd. (ALIOF) and Biogen Idec Inc. (BIIB) currently look more attractive in the pharma space with a Zacks Rank #1 (Strong Buy).

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