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AMAG Pharmaceuticals Inc.’s (AMAG - Snapshot Report) third quarter 2012 loss of 16 cents per share was narrower than the Zacks Consensus Estimate of a loss of 24 cents and the year-ago loss of 78 cents per share. Lower operating expenses resulted in a narrower loss.

Quarterly revenues climbed 1.1% to $17.4 million, below the Zacks Consensus Estimate of $21 million. Bulk of the revenues in the third quarter of 2012 came from Feraheme sales.

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 reported quarter, net sales of Feraheme amounted to $16.2 million, up 2.4% from the year-ago quarter.

AMAG has a partnership agreement with Takeda Pharmaceuticals (TKPYY) for Feraheme, in the EU and Canada. We note that Rienso (EU trade name of Feraheme) was launched recently in the EU while it was launched in Canada in October this year. AMAG already received $3 million as milestone payment for the Canadian launch of the drug and is anticipating a $15 million milestone payment from Takeda for the European sale of the drug.

AMAG is working on expanding Feraheme’s label. The company is conducting two studies conducted in patients with IDA regardless of the underlying cause. AMAG reported positive results from the second phase III clinical trial during the third quarter of 2012. AMAG intends to submit a supplemental new drug application (sNDA) to the US Food and Drug Administration (FDA) for this indication by year end.

Total operating cost (including cost of goods sold) in the quarter amounted to $22.3 million, down 35.9% from the year-ago period. Lower research and development (R&D) expenses related to the company’s global IDA clinical program helped reduce operating expenses. Both R&D expenses and selling, general and administrative (SG&A) expenses were on the downtrend in the reported quarter.

Feraheme Outlook Raised

AMAG updated its guidance for 2012. Feraheme sales are now expected in the range of $58–$60 million for 2012 (old guidance: $55–$58 million). Further, AMAG has lowered its total operating expenses (excluding cost of goods sold) guidance to the range of $87–$90 million (old guidance: $90 - $95 million).

The company still expects to exit 2012 with cash and investments of $225–$230 million. The guidance excludes the impact of a business development transaction. AMAG also expects to receive milestone payments totaling $33 million pertaining to regulatory approvals and commercial launches of Rienso in the EU and Canada. Of this $33 million AMAG has already received $18 million.

Our Take

We currently have an Outperform recommendation on AMAG. The stock carries a Zacks #3 Rank (short-term Hold rating). We expect investor focus to remain on Feraheme’s performance and the company’s efforts to expand the product’s label.

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