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AMAG Beats Expectations

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AMAG Pharmaceuticals Inc. (AMAG - Free Report) posted second quarter 2012 earnings of 20 cents per share, narrower than the Zacks Consensus Estimate which predicted a loss of 39 cents and the year-ago loss of 92 cents per share. Higher revenues and lower operating expenses boosted earnings.

Quarterly revenues climbed 101.4% to $31.0 million, well above the Zacks Consensus Estimate of $19 million. Revenues were boosted by a $15 million milestone payment received from Takeda Pharmaceuticals on the EU approval of Rienso (EU trade name of Feraheme) in June 2012.

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 $14.1 million, up 10% from the year-ago quarter.

AMAG is planning to launch Rienso in both Canada and the EU by year end. Takeda will make a milestone payment of $15 million to AMAG on the first sales of Rienso in Europe. AMAG will receive tiered, double-digit royalties on sales of Rienso in the licensed territories.

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

AMAG also received encouraging news on the competitive front with Luitpold Pharmaceuticals, Inc. receiving a complete response letter from the FDA for Injectafer which was under review for the treatment of IDA. Any delay in the entry of competition bodes well for AMAG.

Total operating cost (including cost of goods sold) in the quarter amounted to $26.0 million, down 27% from the year ago period. The decrease was attributable to the restructuring efforts of the company. Moreover, 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 downswing in the reported quarter.

Feraheme Outlook Modified

AMAG updated its guidance for 2012. Feraheme sales are expected to amount to $55 - $58 million for 2012 (old guidance: $53 - $57 million). Guidance excludes any royalties and sales in the ex-US markets.

Further, AMAG continues to expect operating expenses (excluding cost of goods sold) in the range of $90 - $95 million, which includes employee-related restructuring charges and charges related to closure of company’s manufacturing facility.

The company expects to exit 2012 with cash and investments of $225 - $230 million, which excludes cash utilized for acquiring and in-licensing additional marketed products.

Our Take

We currently have an Outperform recommendation on AMAG, which carries a Zacks #2 Rank (short-term ‘Buy’ rating). We are encouraged by the company’s efforts to cut costs and drive efficiencies through the streamlining of operations. 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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