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AMAG Pharmaceuticals (AMAG - Snapshot Report) recently announced its preliminary fourth quarter 2012 financial results and its guidance for 2013. The company’s total revenue for 2012 is expected to be around $85.3–$85.7 million, well below the Zacks Consensus Estimate of $91 million.

The company expects to swing to profitability based on its efficient cost structureing and top-line growth.

4Q 2012 Snapshot

AMAG’s total revenue for the fourth quarter of 2012 is expected to be within $21.1–$21.5 million, including $14.4–$14.8 million of net Feraheme (ferumoxytol) product revenues in the US, with higher volume and improved pricing driving year-over year growth of 14%.

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). AMAG is looking to expand Feraheme’s label as a treatment for anemia in adults suffering from IDA with a history of unsuccessful oral iron therapy.

In December, the company submitted a supplemental new drug application (sNDA) to the US Food and Drug Administration (FDA) for the intravenous (IV) dose of Feraheme. The label expansion may double the market opportunity in the US for the product.

AMAG expects fourth quarter operating expenses to be within $21.0–$22.5 million, down about 31% from the year-ago period. AMAG exited 2012 with cash and investments of around $227 million.

2013 Outlook Misses Expectation

AMAG expects to generate total revenues of $73–$77 million in 2013, below the Zacks Consensus Estimate of $78 million. The company expects Feraheme US sales of $63–$67 million.

AMAG also expects to generate around $10 million as royalties and product sales related to ex-US sales of Feraheme/Rienso (EU trade name of Feraheme) and recognition of milestones.

The company expects to incur operating expenses of around $78–$82 million (research and development expenses of $24–$27 million and selling, general and administrative expenses of $54–$57 million), down 10% from 2012. The company expects lower clinical trial costs in 2013 which will be offset by new investments in a lower-cost production process and pre-launch investments for the expansion of Feraheme’s label.

AMAG expects to exit 2013 with cash and investments of around $206–$211 million.

Our Take

We believe that the company’s guidance for 2013 is achievable. We expect investor focus to remain on Feraheme’s performance and the company’s efforts to expand the product’s label.

We currently have a Neutral recommendation on AMAG. The stock carries a Zacks #3 Rank (Hold). However, other stocks in the pharma sector that carry a Zacks #1 Rank (Strong Buy) are Targacept, Inc (TRGT) and Repligen Corporation (RGEN - Snapshot Report).

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