Seeking Alpha
Profile| Send Message|
( followers)  

AMAG Pharmaceuticals Inc. (NASDAQ:AMAG) posted a loss of $1.05 per share during the first quarter of fiscal 2011, wider than the Zacks Consensus Estimate of a loss of $1.03 per share. The wider loss resulted from a weak top line, sales force turnover and a label change for Feraheme in the quarter. The year-ago loss was $1.15 per share.

The Quarter in Detail

First quarter 2011 revenues of $13.4 million were much below the Zacks Consensus Estimate of $16 million. Revenues were also down 22% sequentially due to weak performance of Feraheme, an injectable drug for intravenous use as an iron replacement therapy for the treatment of iron deficiency anemia (NYSE:IDA) in adult patients suffering from chronic kidney disease (CKD). Revenues were barely above the year-ago figure of $13.3 million.

Sales of Feraheme were down 28% sequentially to $10.9 million from $15.2 million in the prior quarter due to decline in provider demand particularly from the dialysis segment.

Total Feraheme provider demand and launch incentive program utilization was approximately 19,900 grams, down sequentially, due to a virtual disappearance of dialysis sales in the quarter. Dialysis sales were affected by changes in dialysis reimbursement which was made effective from January 2011. Given expectations of lower utilization due to bundling, Feraheme utilization in the dialysis setting has been weak since the second quarter of 2010.

It should however be noted that provider demand in the non-dialysis segment increased month-over-month in the reported quarter. The positive trend continued in April 2011 as well. Consequently, the company is currently focusing on growing Feraheme utilization in non-dialysis dependent CKD patients, specifically in hematology and hospital office sites of care, where a large number of such patients are treated.

Feraheme Update

AMAG has filed regulatory applications for approval of Feraheme in Europe and Canada. A decision in Europe is expected by the end of 2011. In Canada, the company received a Notice of Non-Compliance. AMAG has been granted a 30-day extension to respond to the notice.

AMAG is currently enrolling patients for its global registrational program for Feraheme for IDA treatment irrespective of the underlying cause. The company intends to complete enrollment for the program by the end of 2011.

Recently, AMAG received approval from the U.S. Food and Drug Administration (FDA) to start manufacturing both the active pharmaceutical ingredient (NYSEMKT:API) and the drug product for Feraheme at its second manufacturing facility.

2011 Guidance

AMAG maintained its previously provided 2011 guidance. Feraheme expects 2011 revenue in the range of $55 million to $60 million. The Zacks Consensus Estimate for 2011 is $65 million which is above the guidance range.

Cost of product sales is expected in a band of $12 million to $15 million. AMAG expects 2011 research and development (R&D) expenses in the range of $62 million to $68 million and selling, general and administrative (SG&A) expenses in the neighborhood of $72 million to $78 million range.

The company further expects to end 2011 with approximately $215 million to $220 million in cash that does not include $33 million in potential milestones, which AMAG is eligible to receive upon approval and launch of Feraheme for the treatment of IDA in CKD patients in Europe/Canada.

Our Recommendation

We currently have a Neutral recommendation on the stock. We prefer to remain on the sidelines until more visibility is obtained on Feraheme’s progress despite the improving monthly trend in provider demand.

Source: AMAG Pharmaceuticals Posts Bigger Loss Than Expected