AMAG Pharma’s Feraheme Holds Promise

Yesterday, AMAG Pharmaceuticals Inc. (AMAG - Snapshot Report) reported second-quarter net loss of $26.5 million, or $1.55 per share, which was slightly higher than the Zacks Consensus estimate of $1.53. The company had reported a net loss of $17.0 million, or $1.00 per share, in the year-ago period.

The higher quarterly net loss is attributable to a 39% increase in year-over-year operating expenses. Research and development expenses rose 43% as the company is working on expanding its manufacturing capabilities and development infrastructure. Selling, general and administrative expenses also increased 37% for commercialization of anti-anemia drug candidate, Feraheme.

Since Feraheme is a very important product for the company, we expect investor focus to remain on the initial sales ramp of the product.

As a reminder, the US Food and Drug Administration (FDA) granted marketing approval to Feraheme injection on June 30. AMAG officially launched Feraheme in the U.S. on July 13. It is an intravenous iron-replacement therapy used to fight anemia in patients with chronic kidney disease. The drug can be used by patients irrespective of dialysis.

Wholesalers and specialty distributors will primarily distribute Feraheme in the U.S. AMAG will use its commercial organization, consisting of approximately 150 seasoned professionals which includes an 80-person specialized sales force, to market the drug. For every 510 mg vial, the wholesale acquisition cost (WAC) of Feraheme is $396.78.

Iron deficiency anemia is a significant problem in patients with chronic kidney disease and often goes undiagnosed and undertreated. We believe peak sales of Feraheme could reach $500 million.

Although we are pleased to hear about Feraheme’s approval and subsequent launch, stiff competition awaits AMAG’s drug in the IV iron replacement therapy market. Fresenius Medical Care AG & Co.’s (FMS - Snapshot Report) Venofer and Watson Pharmaceuticals Inc. (WPI - Snapshot Report)-Sanofi-Aventis’ (SNY - Analyst Report) Ferrlecit are AMAG’s main competitors in this market.

We believe that Feraheme's safety and efficacy profile should help it gain share in the market and advice investors to Buy the stock at the current price.