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Bear of the Day: AMAG Pharmaceuticals (AMAG)

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Pharma companies that see fluctuating sales from one of their biggest revenue drivers tend to make investors nervous about their future prospects.  Couple this with increasing costs for a new drug with unverified revenue potential, and future earnings estimates begin to fall.  These are some of the issues facing our Zacks Bear of the Day: AMAG Pharmaceuticals (AMAG - Free Report) .  

This Zacks Rank #5 (Strong Sell) is a biopharmaceutical company, manufactures, develops, and commercializes therapeutics for women’s health, anemia management, and cancer supportive care in the United States. It markets Makena, a hydroxyprogesterone caproate injection to reduce the risk of preterm birth in women pregnant with a single baby who have a history of singleton spontaneous preterm birth; Feraheme (ferumoxytol), an intravenous iron replacement therapeutic agent for the treatment of iron deficiency anemia in adult patients with chronic kidney disease; and MuGard Mucoadhesive Oral Wound Rinse for the management of oral mucocitis/stomatiits and various types of oral wounds. The company also offers Cord Blood Registry services that are related to the collection, processing, and storage of umbilical cord blood and cord tissue units for pregnant women and their families.

Recent Earnings Data

On May 2nd, AMAG reported Q1 17 results, and they were not good; the company significantly missed both the Zacks consensus earnings estimate (estimate was $0.09, actual -$1.06), and revenue estimate (estimate $154 million, actual $139 million).  The main driver behind the revenue miss was due to two separate items;  First, a one-time payment of $60 million to Palatin Technologies “related to the bremelanotide licensing transaction”, and second, the drug Makena, as the untreated segment saw no gains and remained at 30% market share.  It is believed that many doctors are not completely sold on the drug’s therapeutic benefits.  

Further, the company is expected to see higher SG&A expenses due to the addition of commercial reps for their drug Intrarosa, and the company is facing the ever-present threat of the generic drug impact.  

Management’s Take

According to William Heiden, President and CEO, “Today we are reaffirming our 2017 annual revenue guidance on our existing commercial portfolio of Makena, Feraheme and CBR based on the strong underlying fundamentals of those products. "While our commercial team drove higher physician-level Makena demand (distributor shipments to end users) in the first quarter of 2017 compared to the fourth quarter of 2016, first quarter 2017 ex-factory sales of Makena (shipments to distributors) decreased compared to the fourth quarter of 2016. The difference between demand and ex-factory sales was primarily due to a decline in channel inventory, as well as one-time items impacting net price in the first quarter of 2017.”

Price and Earnings Consensus Graph

As you can see below, AMAG’s stock price peaked in 2015, and fell through 2016.  The company began to stabilize in late 2016, but this recent earnings announcement caused the stock price to plunge again.  Further, the company’s future earnings estimates are all trending in the wrong direction.

AMAG Pharmaceuticals, Inc. Price and Consensus

AMAG Pharmaceuticals, Inc. Price and Consensus | AMAG Pharmaceuticals, Inc. Quote

Declining Earnings Estimates

90 days ago, the company’s estimates were strong; Q2 17 $0.52, Q3 17 $0.51, FY 17 $1.92, and FY 18 $1.28.  But as you can see in the table below, these estimates have been slashed three times to their current levels of Q2 17 -$0.58, Q3 17 $0.14, FY 17 -$1.79, FY 18 -$2.67.

Bottom Line

While management reaffirmed their 2017 annual revenue guidance on their existing commercial portfolio of Makena, Feraheme and CBR, they still have several upfront payments in FY 17 (Rekynda $60 million, Intrarosa $50 million).  Moreover, these licenses for these two drugs (Rekynda & Intrarosa) will still require large investment in FY 17.  Therefore, it would be suggested to wait on the sidelines till these issues have more clarity.  

If you are inclined to invest in the Biomedical & Genetics sector, you would be best served by looking into Akari Therapeutics (AKTX - Free Report) , Catalyst Biosciences (CBIO - Free Report) and or Regeneron Pharmaceuticals (REGN - Free Report) , all of whom currently carry a Zacks Rank #1 (Strong Buy).

More Stocks to Sell. Now

Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 6X worse than the S&P 500.  

See today's Zacks "Strong Sells" absolutely free >>


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