Shares in Amag Pharmaceuticals (NASDAQ:AMAG) have lost half their value since late July, driven to a four-year low on regulatory and safety news. The most dramatic fall came Tuesday from the company’s Monday announcement that it will not appear at an investor conference because of an upcoming FDA meeting over a cardiac safety signal in its lead product, Feraheme (ferumoxytol).
For a product that took three tries to pass FDA muster, a new safety concern is a worrying sign, even more so after Amag was forced in February to respond to reports of hypersensitivity reactions; at the time the company noted the event rates were consistent with disclosures in the product labeling. This comes on top of looming changes to reimbursement at US kidney dialysis centers that may price Feraheme, an intravenous iron-replacement therapy for patients with chronic kidney disease (CKD), out of a key market.
In late August, the FDA added Feraheme to a list of products with potential signals of serious risks or new safety information identified by its Adverse Events Reporting System (AERS). The FDA list identifies Feraheme as being linked to “serious cardiac disorders,” but does not specify the disorders.
On Monday, the company disclosed in an 8-K filing with the Securities and Exchange Commission that it was canceling an appearance Wednesday at the UBS Global Life Sciences Conference in New York City because of an upcoming meeting with the FDA over the safety signal. Following Feraheme’s inclusion in the list, the stock fell 6%, but the announcement of the conference cancellation caused more significant erosion in the share price, 15% Tuesday to $19.96.
While it is not uncommon for drugs to appear in an AERS listing, an industry observer noted that the disclosure of the meeting appears more ominous to investors because it is not clear how often company executives meet with the FDA on safety issues, or who requested the meeting. Based on those unknown factors, investors sold because they feared the worst.
Amag did not return calls seeking comment.
Waiting for a sunny day
Since signing an ex-US licensing deal with Takeda (TKPHF.P) in early April, a steady accumulation of news has weighed down the stock (AMAG seals Takeda deal to take Feraheme worldwide, April 1, 2010). For patients undergoing dialysis, the treatment for CKD patients with iron deficiency anemia will be subject to payment rules under the Medicare system that will set a single “bundled” unadjusted visit rate of $251.60, starting January 1, 2011 (Medicare dialysis rules to re-shape ESA market, July 28, 2010). With a wholesale acquisition cost of $396.78 per single-dose of a 510mg vial, Feraheme is looking like a rather pricey option for dialysis centers treating CKD patients.
Indicating the headwinds facing Feraheme, EvaluatePharma’s consensus estimates for sales in 2016 have fallen 15% since February. Two of the analysts included in that consensus, Citi and Morgan Stanley, cite slow adoption at dialysis clinics because of price and concerns about Medicare payment bundling as reasons to lower their estimates.
Current sales forecasts have Feraheme achieving sales of $382m in the US by 2016, with no estimates currently assigned to Takeda in the rest of the world. Since Feraheme appeared on the safety watch list, Amag’s market capitalization has shrunk to less than Feraheme’s net present value of $549m, suggesting that investors believe current sales forecasts are still too high.
As a result of current trends, analysts from Needham say that long-term growth will come in pre-dialysis CKD patients. Seeking a broad global iron deficiency anemia label, the company also has initiated trials in pediatric CKD patients, women with abnormal uterine bleeding, postpartum women, cancer patients and patients with gastrointestinal disease, as well as head-to-head trials against iron sucrose.
The drip-drip of negative news has been steadily weighing down Amag’s shares for weeks. Even if the FDA's concerns about the cardiac signal are baseless reimbursement issue will remain, as well as the risk that expansion into other markets might not happen.
For any hope of a recovery, fears of a label change or more restrictive prescribing must be allayed.