AMAG Pharmaceuticals' (AMAG) CEO Bill Heiden on Q2 2016 Results - Earnings Call Transcript

| About: AMAG Pharmaceuticals, (AMAG)

AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG)

Q2 2016 Earnings Conference Call

August 9, 2016 08:00 ET

Executives

Linda Lennox - VP, IR

Bill Heiden - CEO

Frank Thomas - President & COO

Nick Grund - Chief Commercial Officer

Julie Krop - Chief Medical Officer

Ted Myles - CFO

Analysts

Bill Tanner - Guggenheim Securities

Brett Larson - Leerink Partners

Jessica Fye - JPMorgan

Chris Raymond - Raymond James

Greg Fraser - Deutsche Bank

Kyle Smith - Jefferies

Operator

Good morning, my name is Shannon, and I will be your conference operator today. At this time, I would like to welcome everyone to AMAG Pharmaceuticals' Second Quarter Financial Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

It is now my pleasure to turn today's call over to Ms. Linda Lennox, Vice President, Investor Relations. Ms. Lennox, you may begin your conference.

Linda Lennox

Thank you, Shannon. Good morning and welcome to the AMAG Pharmaceuticals' conference call to discuss our second quarter 2016 financial results.

We issued a press release earlier this morning. For those of you who don't have a copy of the release, you can access it in the Investors section of our website at amagpharma.com. Please be reminded that remarks made during this call may include forward-looking statements pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. We want to emphasize that these forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those discussed in such forward-looking statements. Please refer to our 2015 Form 10-K, subsequent filings on Form 10-Q and other filings with the SEC for a full review of risks and uncertainties associated with our business.

On today's call, we will discuss certain non-GAAP financial measures with respect to our performance. We use these non-GAAP measures for financial and operational decision making, and as mean to evaluate our performance because we believe that they better represent the ongoing economics of our business. The definitions of non-GAAP revenue, non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP measures along with their reconciliations to GAAP are set forth in our earnings release, which was filed with the SEC today. Copies may be obtained at sec.gov and in the Investors section of our website.

With me on today’s call are Bill Heiden, our Chief Executive Officer; Frank Thomas, our President and Chief Operating Officer; Nick Grund, our Chief Commercial Officer, and Julie Krop, our Chief Medical Officer; and Ted Myles our Chief Financial Officer.

Let me quickly run through the agenda for this morning's call. Bill will cover second quarter 2016 highlights. Next, Nick will update you on the commercial performance for each of our products. Julie will provide an update on the progress we've made in our next-generation development programs for Makena and Feraheme. Ted will then walk you through our second quarter financial results and guidance. Frank will close with an update on business development and progress on our 2016 key priorities, and then we'll open the call for Q&A.

With that, it's my pleasure to now turn the call over to Bill. Bill?

Bill Heiden

Thanks, Linda and good morning to all of you joining us on the phone here. I'll quickly update hitting on some of the quarter's key highlights and then we'll dig into the details.

Let's start with nice graphic on revenues where we increased second quarter 2016 product and service revenue by 50% to $127.4 million over the second quarter of last year. This increase is attributable to record growth in both, Makena and Feraheme sales, as well as the addition of our CBR business which is shown here in purple, and we purchased CBR in August of last year.

In addition to strong revenue growth and record sales in the second quarter we advanced our Makena and Feraheme next-generation development programs but especially our Makena subcutaneous auto-injector program where we've completed our pilot PK studies and are preparing to start both, the definitive pharmacokinetic or PK study, as well as the comparative pain study. In our ongoing Feraheme IDA trial patient recruitment is tracking well ahead of schedule, and Julie will provide additional details on both of these next-generation programs later on the call. This past quarter we also received FDA approval for an additional manufacturer of our single-dose preservative free formulation of Makena. At CBR, our cord blood and tissue collection and storage business, we've turned the corner and have begun to see some growth now being generated in this business, up 5% versus the first quarter of this year which Nick will tell you more about in few minutes.

Strong revenue growth across the portfolio drove strong operating margins in the quarter, and in the first half of 2016 we've generated more than $80 million, increasing our current cash position to $546 million, and that includes having repurchased $20 million of our stock in the first half and making requisite debt payments. Ted will cover that quarter's financials in more detail a little later on the call. So a very strong quarter.

Let me now turn the call over to Nick Grund who will tell you more about our commercial performance in the quarter.

Nick Grund

Thanks, Bill. As Bill mentioned, we had a very good quarter with all of our major brands contributing strong performance, demonstrating the company's ability to execute commercially.

Let's start with our maternal health franchise with Makena. As you can see here on Slide 7, Makena sales in the second quarter grew 23% to $78.4 million over the same period last year. Importantly, second quarter sales increased 21% over first quarter sales, in both cases, this growth was driven entirely by volume. While we don't typically provide quarterly sales guidance, we chose to do so last quarter for Makena to help investors better understand how the launch of the single-dose file and the increase in Makena at home enrollment would impact Makena quarterly sales in 2016. This quarterly guidance is meant to show a trend rather than be exact. Today we are reiterating our Makena 2016 annual revenue guidance of $310 million to $314 million.

So let's talk about the market dynamics. The pie on the left breaks down market share. We're happy to report that Makena's estimated market share expanded to 37% in the second quarter of 2016. This is a four percentage point over first quarter market share of 33%. We estimate that all of the share increase came from the compounded segment. On the right side of the slide are the key drug drivers of Makena and some recent accomplishments of those growth drivers. As many of you know, the length of treatment of a woman on Makena can be as long as approximately five months. Therefore, from the time of the start of treatment to the end of treatment can span several months and can span multiple quarters. First as I just mentioned, we have and will continue to take market share from compounders.

Prior to the commercial availability of our new FDA approved formulation of Makena, healthcare providers and patients who wanted a single-dose preservative free formulation of hydroxyprogesterone caproate had to use non-FDA approved compounded versions. We believe that we will continue to capture additional market share from compounding pharmacies, now that we have the single-dose preservative free formulation of Makena on the market by either one, converting these compounders to distributors of Makena; or two, they simply start making what would now be an exact copy of our FDA approved product. Additionally, 30% of our sales by the end of the second quarter was a single-dose vials. A majority of vial sales in any given quarter are made up of patients who started in the previous quarter. So I expect the single-dose vial to continue to grow as a percentage of our business throughout the second half of 2016. In fact, in July it was greater than 40%.

Second, our Makena at home service provides women with weekly injections of Makena in the comfort of their home when covered by the patients insurance. With the addition of our new Optimum Home Health contract, we were able to significantly expand this service to offering. Prior to the launch of the single-dose preservative free formulation of Makena, they previously utilized only compound hydroxyprogesterone caproate. Optimum home health now exclusively administers Makena to their patients, we believe that this represents one of the largest pools of Makena eligible patients who were formally receiving compounded product instead of Makena. Additionally, we saw some nice progress on the number of paid doses per patient which increased from 13.7 to 14 in the second quarter.

Our third growth driver is to continue to optimize our larger maternal health sales force. With the acquisition of CBR last August, we expanded the sales force by more than 35% and reconfigured territories so that our talented team of sales representatives could call on more physicians, more frequently. This supported a record number of new physicians sending enrollments through Makena Care Connection in the second quarter, up 33% versus the first quarter.

I'll now turn to our cord blood registry business. CBR has been an attractive business model that consists of an upfront collection and processing fee, and an ongoing annual storage fee. With more than 600,000 units stored to-date and an attrition rate of less than 1% per year, storage revenue contributes more than 50% of the total revenue of CBR. GAAP revenue is presented on the left, but we believe non-GAAP revenue shown on the right more accurately represents the size and performance of this business. I am pleased to report that second quarter non-GAAP revenue grew 5% to $29.4 million compared with $28.1 million in the first quarter of this year; this growth was due to improved net revenue per new customer. In addition, new customer volume has stabilized on a sequential quarter basis.

On the left side of Slide 10, you can see that approximately 5% of families having babies in the U.S. currently elect to store cord blood with only half of those family cord blood privately. We have an opportunity to help more families take advantage of the potential future advances in stem cell research by storing cord blood and tissue today. Moving the need on expanding the percentage of family storing to just 1% would be a significant boost in our business. As we look ahead, there are number of growth drivers for this business but I'll just mention the first one where we're focused on differentiating CBRs offerings and enhancing our messaging. Previously, this business was built around generation-X which was the generation having babies when this businesses was started 20 years ago. Today however 90% of moms are part of the millennial generation, and they approach parenthood and consumer purchasing decision slightly differently than generation-X families.

As a result of research we conducted, we have started to shift our messaging to more focus on the preservation of a newborn stem cells today as an investment in the future of regenerative medicine. We continue to invest meaningfully in expanding the science behind newborn stem cells and are optimistic that as progress is made in stem cell research, this will not only benefit the families who today store CBR but will also facilitate more families electing to store with CBR in the future. All said, we believe that CBR is now positioned for growth both near and longer term.

Turning to Feraheme; in the second quarter of 2016 we generated record breaking sales for Feraheme increasing 18% over last year's second quarter sales, approximately two-thirds of this increase was due to volume growth. Listed on the right side of Slide 11 are number of near and longer term growth drivers for this business. We continue to focus on growing Feraheme in our two customer segments of hematology-oncology at hospital. The momentum continues with a solid second quarter year-over-year and sequential quarter growth in both segments.

Additionally, due to our broad-based patient access strategy and strong contract offering, we are continuing to grow net revenue program. As many of you know, last quarter we initiated a Phase 3 head-to-head clinical trial in iron deficiency anemia, that if approved would double our addressable market. Julie will review the progress of this trial right after she updates on our Makena subcutaneous auto-injector development program.

So with that, I'll turn it over to Julie.

Julie Krop

Thanks, Nick. We're happy to report that we've made significant progress this quarter on our Makena subcutaneous auto-injector development program. Slide 13 outlines the benefits that this new drug device combination should provide the patients and healthcare providers. Our next-generation subcutaneous auto-injector program was typically designed to address the pitfalls associated with the current intramuscular injection. Due to its high viscosity, Makena currently has to be drawn up with a bile, with a large needle and then the needle has to switched over to 21-gauge needle for injection, currently it takes up to a minute to administer.

This is in contrast to the auto-injector which is pre-filled, ready for injection and faster at administering drug. Plus the auto-injector should be much easier and high precision for healthcare providers. Injection site pain was the most frequent adverse event reported in our registration trial. Subcutaneous injections are more superficial and thus result in less tissue disruption, so are typically less painful than intramuscular injections. And coupled with an auto-injector, the injection can be given with a substantially shorter and narrower wide needle, also likely to result in less pain than the current routed administration. In fact, there are multiple studies that show reductions in pain with subcutaneous administration of drug comparison to intramuscular injection.

Another great feature of the auto-injector is that the needle is hidden from view, and this is psychologically important because there is a significant amount of anticipatory pain that patient's experience simply by viewing the needle. We're also fortunate to be working Antares, a highly experienced device partner, which has a proven track record in auto-injector approval including two auto-injector devices that have already been approved by the FDA and are currently on the market.

As Bill mentioned, we have completed pilot PK studies and selected the product that we plan to take into the definitive PK studies later this year. We also had a productive meeting with the FDA recently and confirmed a number of key elements of our expected sNDA filing. In addition, based on this meeting we made the decision to accelerate our comparative pain study and conducted concurrently with the definitive PK study. I'll walk you through the design of each of these studies in a moment. Previously based on input from outside regulatory experts, we have planned to conduct and submit the pain study after the initial sNDA filing. However, the FDA clarified that the pain data had to be included in the original filing for consideration of orphan exclusivity, and so we decided to accelerate the pain study.

As you probably know, orphan exclusivity is granted when a drug under evaluation is deemed to be clinically superior in the eyes of the FDA to the existing standard of care because of a significant therapeutic advantage in either efficacy or safety. This successful inclusion of the pain data may afford us the opportunity to gain seven years of orphan drug exclusivity on the drug-device combination. In terms of the sNDA approval, including data showing a reduction in pain may also enhance our overall benefit to risk ratio and therefore strengthen our likelihood of approval.

Even though the addition of the clinical data and the sNDA likely extends the regulatory review timeline from six months to ten months strategically, we believe that the potential of gaining seven years of orphan drug exclusivity combined with the issued patent from the device and the pending patent on the route administration is the best path forward to expand and protect the Makena franchise. We still plan to file the sNDA in the second quarter of 2017, an anticipated approval in the first quarter of 2018.

Let me now walk you through the two upcoming studies; the first on the left is the definitive bioequivalence study. Just to be clear about the terminology, when I was referred to the word bioequivalence, I am using it in accordance with the FDA guidance on bioavailability and bioequivalence studies submitted in NDA.

Under this guidance, the term bioequivalence actually represents comparative bioavailability, not strict bioequivalence that is required for generic sNDA filing. If any PK parameters differ, an explanation of the potential clinical impact on safety or efficacy is required. In the case of Makena, we cover it as a long acting drug we have disposed from demonstrating bioequivalence for area under the curve AUC which we believe is the most relevant PK parameter for this drug. The AUC data generated in a small number of patients and our pilot studies gives us confidence in our ability to gain approval if we can replicate the AUC data in our definitive PK study.

The bioequivalence trial is a randomized open label parallel study to demonstrate comparable bioavailability between subcutaneous and intramuscular injections of Makena. The trial will enroll 120 healthy post-menopausal women in a one to one randomization that the study will take approximately three to four months to complete. The comparative pain study shown on the right is also a randomized open label parallel study and will compare the average injection pain of four weekly injections between subcutaneous and the IM injection using a validated pain scale. The study will enroll 60 healthy post-menopausal women with one to one randomization. This study will also take approximately three to four months to complete.

So in summary, we significantly advance this program during this quarter and I really look forward to updating you on our progress on this important program in the future.

Let me now jump to Feraheme development program where as Nick mentioned, we are looking to double the market opportunity by seeking approval for the broader IDA of the patient population. We initiated head to head study versus Injectafer in the first quarter of 2016 and enrollment is going extremely well. We are currently 25% enrolled which is well ahead of our enrollment projections. As a reminder, the Phase 3 program is a randomized double-blind safety trial comparing Feraheme to Injectafer. The study will enroll approximately 2,000 patients with iron deficiency anemia who have failed on oral iron and in IV-iron is indicated. Once enrolled, patients will be randomized in a one to one ratio to either Feraheme or Injectafer. Those randomized to Feraheme receive two doses of 510 milligrams and those randomized to Injectafer receive two doses of 715 milligrams.

Interestingly, Injectafer is given at a 50% higher dose than Feraheme, so this could be a differentiating feature for us to show similar changes in hemoglobin with the smaller overall iron load. Previously, we have projected filing in late 2017 with approval in late 2018. With the trial fast-driven projected, we may be able to file and launch earlier than originally forecasted. We'll keep you updated on enrollment and timelines as the trial progresses.

I'd now like to turn it over to Ted for the financial update.

Ted Myles

Thank you, Julie. Let's begin with our GAAP results. Slide 18 presents two graphs that illustrate our total GAAP revenue and total GAAP operating income. These results are compared on a year-over-year basis. We also presented the first quarter of 2016 so you can have review of our sequential trends.

On a GAAP basis our total revenue for the second quarter of 2016 was $127 million, as compared to $124 million in the second quarter of 2015. Still note the great fortune of the Q2 2015 bar graph as illustrates a $39 million of collaboration revenue that was recognized in connection with the 2015 terminations of our ex-U.S. marketing partnership. We're moving this onetime item from the comparison and you can see the growth in our product portfolio which included record sales of both Makena and Feraheme. The pink bar is Makena, you'll note an increase of approximately 23% versus the prior year period; and green is Feraheme which contributed another record quarter representing an 18% increase over the prior year period.

We recognized $24 million in GAAP service revenue from our CBR business. As Nick explained earlier CBR's contribution continues to improve, primarily because our previously stated strategy to reduce the level of discounting has begun to result in higher net pricing for our CBR services.

Turning your attention to the right side of the slide, you'll note that our GAAP operating income was approximately $18 million in the second quarter of two 2016. As I mentioned a moment ago, the prior year period included $39 million of collaboration revenue depicted in light gray on the Q2 2015 bar graph. On a sequential basis compared to the first quarter of this year, we achieved a higher level of GAAP operating income, primarily because of our increase in revenue and continued strong gross margins.

Turning to Slide 19, you'll see a summary of our results for the second quarter of 2016 on a GAAP and non-GAAP basis. We show non-GAAP to give readers a better picture of our result after adjusting several non-cash items. Starting with revenue, we show $132 million of non-GAAP revenue for the second quarter of 2016. The only adjustment between GAAP and non-GAAP was an advance for certain CBR revenue that was previously written-down through purchase accounting adjustments at the close of the acquisition.

Moving down the table to cost of revenue, total cost of revenue for the second quarter of 2016 on a GAAP basis was $27 million. The adjustments totaling $18 million included the removal of amortization expense backing out the period impact of non-cash inventory step up adjustments that we recorded at the time of our acquisitions. These adjustments leave us with $123 million of gross profit on a non-GAAP basis translating into a gross margin of 93% in the second quarter of this year. A number of adjustments are required to get to our non-GAAP operating expenses of $59 million. Adjustments include non-cash items such as the $16 million charge associated with our impairment of newgard [ph] partially offset by a $5 million reduction of the related contingent liability, as well as depreciation, amortization, contingent consideration and stock-based compensation.

Our non-GAAP operating expenses were $59 million in the second quarter of 2016 as compared to $35 million in the second quarter of 2015 or an increase of approximately $24 million. The increase related to additional expenses incurred to run the CBR business that we acquired in third quarter of 2015. Additional expenses to support the launch of the single-dose vial of Makena and increased research and development expense [ph] associated with our next-generation development programs, namely the Makena subcutaneous auto-injector program, and Feraheme IDA trial. Adjusted EBITDA for the second quarter was approximately $65 million, an increase of 24% as compared to the prior year period. Cash interest expense was $14 million and should remain relatively constant for the remainder of the year.

Finally, non-GAAP net income was $50 million for the second quarter resulting in a $1.45 per diluted share on non-GAAP earnings. The weighted average share count of 34.6 million shares does not include the impact of our convertible debt.

Now that we've illustrated the adjustments made to get from GAAP to non-GAAP we can provide a clear comparison of our financial performance in the year-over-year and sequential quarter-over-quarter basis. The left side Slide 20 illustrates revenue for our products and services on a non-GAAP basis. Across our entire portfolio, we grew revenues by nearly 50% on a year-over-year basis and more than 13% sequentially. As you look to the right side of the slide, you'll see how this increase in total revenue and strong gross margins resulted in increasing non-GAAP adjusted EBITDA of approximately 24% over the prior year quarter and 36% on a sequential basis.

We also looked at the first two quarters of the year on a cumulative basis for actually $48 million for the first quarter, $65 million for the second quarter for a total of approximately $112 million of non-GAAP Adjusted EBITDA. You can see that our business continues to generate very strong cash flow.

Turning to the balance sheet, we'll illustrate how this cash generation from the business can further fuel our portfolio expansion strategy. As noted in the prior slide, our businesses generated significant cash during the first half of 2016. This this illustration of key line items on our balance sheet as compared to December 31, 2015 shows that our cash and investments increased by approximately $80 million. This is net of $20 million deployed to repurchase approximately 832,000 shares of our common stock and approximately $8.8 million of mandatory principal payments on our term loan facility.

As you can see, our financial performance has had a meaningful impact on our net debt ratio driving the ratio down from 2.7 times last 12 months adjusted EBITDA as of the end of 2015 to 2.2 times as of June 30, 2016. We believe this puts us in a more favorable position as we continue to pursue business development opportunities that can further enhance our product portfolio.

Due to the success we've achieved during the first half of the year in executing on our business plan, we are reconfirming our guidance for the full year. This is a big year for revenue with a guidance range of $520 million to $570 million but we're confident that we're on-track to meet or beat our financial guidance.

I will now turn the call over to Frank for a final remarks. Frank?

Frank Thomas

Thanks, Ted. While we don't have a transaction to announce today, I want to reiterate that expanding our product portfolio continues to be an important corporate objective.

This is a slide that we've used in the past that I think nicely depicts our endeavors to continue to add to our portfolio, either products in our current therapeutic areas such as maternal health in pink, or hematology and hospital in green, or products in adjacent areas shown in orange. So for example, women's health maybe an interesting adjacency to our maternal health business. We are looking for currently marketed products, as well as late-stage development opportunities across our therapeutic areas of interest. We will be aggressive but disciplined will only acquire products that we believe offer significant advantages for patients and have the potential for growth and profitability for our shareholders.

With half of the year now behind us, we're well on our way to achieving our 2016 key milestones. We successfully launched the single-dose preservative-free formulation of Makena, we made further progress with our subcutaneous auto-injector program, and are moving forward to start the definitive PK and comparative pain studies. For Feraheme, our label expansion study is actively enrolling patients and is already 25% enrolled, well ahead of our initial enrollment projections.

On our financial goals, strong sales growth in the first half for Makena and Feraheme along with the addition of CBR that put us on a solid project to meet our products sales growth objective of more than 40% over last year which will drive achievement of more than $255 million in adjusted EBITDA in 2016. As reportedly, we initiated a stock purchase plan and have already repurchased $20 million worth of stock in the first half. And finally, we continue to work on expanding our portfolio through the acquisition of marketed or late-stage development products which will accelerate our future growth and continue to diversify our revenue mix.

So with that we will conclude our prepared remarks and open the call for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Bill Tanner with Guggenheim Securities. Your line is open, please go ahead.

Bill Tanner

Thanks for taking the question. Julie, I had a couple of questions for you on the auto-injector. And I'm wondering just on the trial design you talked about it being parallel designed and if you could just maybe explain why that would be better than a crossover would seem like maybe having a patient service around control would be -- might be a way to go, just a little help there.

Julie Krop

Yes, sure, thanks for the question. Our drug is unique and that is has a very long half-life, a half-life around nine days, and because of that it makes doing a process [ph] study very, very difficult. Not only with the patients have to be first on one therapy for six weeks, then they have to be made for -- yes, to follow that to the end of our follow-up cycle around 42 days. Then they have to be washed out for about six weeks and then we restarted on the new therapies. So by that time not only the significant time delay but it's also -- you lose a lot of patients along the way, so it's just not an ideal design, most PK studies that would -- for most drugs that would be, I agree.

Bill Tanner

I mean, I guess the contemplation is that the delta and the pain between the auto-injector and the injection would be sizeable enough that you'd see a difference even if it wasn't being tested?

Julie Krop

Absolutely, I'm sorry, I thought you were referring to the bioequivalence study but actually as well as for the pain study, we're doing four weekly injections, we believe we will show a substantial amount of difference with just a parallel design that we will need to do it.

Bill Tanner

Okay. And then just on the orphan exclusivity, if you could maybe explain what that actually means in terms of blocking development of maybe other auto-injectors, is it going to speak to the needle size or we think there is more than one way to skin a cat as it relates to what an auto injector actually is. So maybe a little bit of color there?

Julie Krop

Yes, it actually -- the additional seven years of exclusivity would be on the combination of the drug and the auto-injector, so not a specific auto injector but the combination of drug device itself. So any other auto injector would not be allowed if we received exclusivity of those seven years.

Bill Tanner

Okay, alright, thanks very much.

Operator

Your next question comes from the line of Joseph Shortz from Leerink Partners. Your line is open. Please go ahead.

Brett Larson

Thank you. Good morning, everyone. This is Brett Larson dialing in for Joe. A quick follow-up question on the auto-injector study; where will the sites of injection be for the study? And will they be rotating or not? And really confirm that this is healthcare professional administered versus self-administered?

Julie Krop

Yes, sure, let me just clarify. So we're not going to be disclosing the location of the injection at this point just for competitive reasons. But you are correct, that the -- your second question, I'm sorry, was around the -- its indeed, it will be healthcare administered, the study -- in the study it will be administered by a healthcare provider, yes, and there will be rotation of sites as we typically do with Makena.

Brett Larson

Okay, great, that was helpful. And coming back, and other questions on Makena. I'm curious if you can identify -- give a little more color around relative sources of growth that you're seeing now, whether it's in certain states or distribution channels or any other initiatives that are ongoing, ultimately where the growth is now and you see it going forward? And conversely, there is any places where you have identified relative underperforming segments that you're looking to bring up in the coming quarters?

Nick Grund

Brett, this is Nick, thanks for the question. Really, when you think about Makena prior to the launch of the single-dose preserved, we were growing -- let's call it 8% to 10% in market demand Q4 to Q1 of 2016. And really the single-dose vial has facilitated lot for accelerated growth, particularly in our Makena at-home segment. Obviously, that includes a portion of the business which is the optimum home health business with the contract we signed with them in the beginning of Q2 but we're also seeing nice gains in all segments, we've recently -- in last year we're signing a number of state Medicaid agreements and those continue to accelerate in Q1 and Q2. And then we anticipate going forward, we'll be able to continue to take share from compounders as the risk profile with the single-dose vial has changed, that risk profile for compounders, now they are making an exact copy. So what we've been hearing in the marketplace is, physicians and healthcare professionals are having trouble sourcing compounded product, part of that is due to their own risk profile changing and choosing not to compound but also we are continuing to sign up compounders to be part of our distribution network which allows them to become distributors of Makena.

Brett Larson

Great, that's helpful, that was my next question. So understanding that availability of compound products used to be declining. And lastly, the -- ANI Pharmaceuticals announced their exclusive distribution of supply agreements with global for APC-VAC [ph] in May. Have your field reps seen any impact at all from that agreement or is that -- the developments there for planning to commercialize APC in the near-term?

Bill Heiden

So, if you recall at the end of June there was a press release that announced that ANI was making it commercially available. Since that time and a couple of things to recall is, generic dilatant actually is not the same as the FDA approved Makena, it has a different indication, in fact it's not indicated for use in pregnant women, and certainly not indicated for use in reducing pre-term birth for moms that risk of pre-term birth. Additionally, we believe that our current product profile creates natural barriers and we believe that the healthcare professionals, patients, and payers had substantial interest in those additional services that we offer through Makena care connection, our Makena at home could drive compliance and other initiatives we have. So when we look at their launch, frankly, we haven't heard much. And we have -- it has no impact on our business thus far, and we've seen no payer actions related to prioritizing generic dilatant over Makena in pre-term birth.

Brett Larson

Okay, fantastic. Thank you very much.

Bill Heiden

Thanks, Brett.

Operator

Your next question comes from the line of Jessica Fye from JP Morgan. Your line is open, please go ahead.

Jessica Fye

Thanks for taking my questions. First one is, it's just coming back to auto-injector and the filing timeline. It seems clear that including that pain data is important for you to get orphan, but it might also based on the 10-month review clock push you into an approval slightly after the expiration of orphan for the current version on Makena. So it seems like there is sort of two risk you're trading-off, so it does not have more for next-gen and potentially additional complexity that comes with switching post exploration of orphan for the original version; can you talk about how you kind of weighed those factors in the decision making process? And then I have one follow up. Thanks.

Bill Heiden

So I wanted to get started, thanks Jess, it's Bill. So the first is when we think about filing the orphan exclusivity is important to us as Julie indicated, it's not just for the specific product that actually covers the category, Makena in a drug device combination. And so we think that's very potent in addition to the patents that have issued and the patents that are on file. And we balance that by thinking about orphan exclusivity and we think about if generic or generics have filed, when they might file, if they'll get approval, and when -- if they do get approved, when they might launch. So there is a lot of if, if, if, and so unbalanced because of the importance of orphan exclusivity we made the decision to run the comparative pain study in tandem with the PK study, and Julie's team has done a great job of getting this done very quickly so we're confident we're going to be able to run those concomitantly and it won't affect these filing timeline.

And maybe Nick can talk about that what we've thought about in terms of a commercial strategy and launched in potentially 2018.

Nick Grund

Yes, so as Bill suggested, the first question is will there be a generic on the marketplace prior to us launching subq. And if that does occur, at least our assumption is as the most likely formulation of that will be a 5 ML or multi-dose vial that contains preservative, one of the reasons we want to single-dose preservative is because we've heard from healthcare professionals, as well as patients that it was a preferred formulation versus a preservative-free multi-dose vial. So as we think about launching, obviously we will accelerate if there is a generic on the market or near-term, our own launch, by doing things like packaging and labeling at rest, etcetera, etcetera. We had the conversation if you recall, Jessica, at Analyst Day, where we talked about analogs and though analog is perfect but what they said was after about a year you'll see about 30% reduction in total revenue of the branded product. Given that the subq launching in Q1 of 2018, we're anticipating at most a very small timeframe between the launch of a generic and the launch of our subq auto-injector. We anticipate that any market share loss we may see as the entire market are substantially all of the market at that time will be single-dose preservative-free, we'll be able to regroup through the exclusivity and the subcutaneous auto-injector and the advantages that it has in the marketplace with patients and physicians.

Jessica Fye

Okay, got it thank you. And the other one was just on -- paid injections for patient picked up this quarter, and I think the NOS meeting you sort of suggested that the 65/75/85/95 Makena guidance did not bake in and increased in injection per patient. I guess first am I remembering that correctly? And second, can you talk about your outlook for the remainder of the year with increasing the number of transactions?

Nick Grund

Good question, Jessica, it's Nick again. So at the end of state, you're right, we put that guidance up and obviously that's a trend in where we're heading trying to get -- give you guys some perspective on where this market might go, given the dramatic change in the business and enrollments in quarter two. But as we think about the number of paid injections, optimally, we'd like to see a between 16 and 8 injections per year. And right now we have a slight increase, 13.7% to 14%, a lot of that coming through the Makena at home initiatives, as well as our contract with the Optimal Health Group. so that drove that upto 14%. We really believe to see a significant difference in that number -- we're going to need to see things like the subq auto-injector which will help the women with pain, and then hopefully facilitate better compliance rates. So we're anticipating that it continues to move up slightly, however that ends the year -- I think it would be wrong for me to guess at this point.

Bill Heiden

And the nice thing is Jess that we saw in Q2, partially I think because of the launch of the single-dose and we've got about 30% more doctors now, than we had in Q1 and they are using the Makena Care Connection, so we've got more than 60% of our business going through the Makena Care Connection. I think that not only helps in terms of enhancing compliance but importantly, long-term, we control the script that doctors have been trained to send us the script as soon as they -- when they write it. And so I think in the face of future potential competitors, that's going to give us an interesting advantage to maintain this business and across the bridge to get us the subcutaneous auto-injector.

Jessica Fye

Okay, can I just taking one more question. Just curious about your view of IMS capture rate on Makena lately, it looks like the data has been much stronger over the past sort of a month or two, and wondering if that is -- should we think that is real or is that a change in capture with the other deal? How do we interpret those numbers?

Bill Heiden

And things remembered as IMS they are obviously tracking these prescriptions and obviously the length of time a patient is on Makena can be hopefully upto 20 weeks of therapy, so it will span multiple quarters. If you recall at Analyst Day, we tried to lay out a picture where if someone has prescribed Makena in one quarter on average, that quarter revenue is only about one-third of that quarter's revenue as represented by prescriptions in that quarter. About 50% to 60% of the revenue is actually from enrollments or prescriptions in prior quarters. So when we think about that mix, there has been an increase in prescriptions and acceleration in what we call enrollment, and that should translate to increased revenue as we've guided towards in Q3 and Q4.

Nick Grund

I think, yet, direction when people have asked us the same question about Symphony; in seems as though directionally I think our investments with Symphony are getting better but I don't know that they are yet accurate.

Jessica Fye

Okay, got it. Thank you.

Operator

Your next question comes from the line of Chris Raymond from Raymond James. Your line is open. Please go ahead.

Chris Raymond

Thank you. Just a couple questions on Makena; just curious if you could clarify as you talk to the FDA about this decision to include the pain data, was the option to file without pain -- without the pain trial and forgoing orphan drug and still having that six month review cycle; was that still on the table or was there -- did the FDA say look, we need to see this pain data regardless. Can you just clarify that?

Julie Krop

Hi Chris, this is Julie. Yes, definitely it's still an option to us, it was still an option in the FDA side that we could choose not to, except that they were very clear that it we did not submit the pain data at the same time would not be able to submit it subsequently or orphan exclusivity.

Chris Raymond

Okay, thanks. And then with respect to launching post-generic entry; I know you guys raised a bunch of analogs on your Analyst Day, I remember those analogs but can you maybe talk about one of the pushbacks we get from folks is that -- this is a little bit of a special situation and that you have a sizeable Medicaid reimbursement structure with -- arguably a more sort of price conscious payer there. Can you can you sort of talk about that dynamic and the applicability of these analogs going forward?

Nick Grund

I think you're right, Chris. I think analogs are only as good as the specific circumstance and every one of those has a little bit of a new ones that would make it different from one another. So overall, the composite is where we're coming from but when you look at the percentage of our business that's Medicaid, it's roughly 50-50. And in money of those, most cost conscious areas like the Medicaid population, I think we are certainly competitively priced in those areas. So when I think about those analogs and it's applicability, some have a large Medicaid portion, some do not but right now our best estimate is kind of that composite analogs.

Bill Heiden

The other thing I would say Chris, it's Bill, it's -- we have relationships with those Medicaid offices today because we've contracted with them. And you can imagine a scenario where subcutaneous auto-injectors filed and we're weeks away. There is obviously an opportunity for us to go in and start negotiating around the subcutaneous auto-injector and if Medicaid office were to continue to work with us, hand-in-hand, and bridge over to the subcutaneous auto-injector, that would be good for us and good for them and good for their patients because we believe more patients will go on therapy and there will be less pre-term birth and if those patients will also stay on therapy longer so we'll have more healthy babies and that's good for moms, it's good for Medicaid as well. So I think there is an opportunity to work hand-in-hand with those Medicaid offices.

Nick Grund

And maybe Chris, the last point of note in that is the -- with our single-dose launch, we've seen that physicians are extremely reluctant to switch the well-controlled patients. So if they've started on a multi-dose, they are continuing on a multi-dose; so that switching rate is lower than you'd see in most other areas. Therefore, when generic launches, we're anticipating those physicians also won't want to switch to well-controlled patient off of Makena single-dose preservative-free to a multi-dose preservative-free, I mean, preservative full, we call it [ph], product.

Chris Raymond

Okay, great. And then one final question, and I apologize if you guys already covered this. I thought I heard in the in prepared comments that you have a dose that you've chosen with the Antares program; can you confirm that? And maybe also just talk about what are the -- the gating factors here for first patient in the PK study? And would you announce -- I guess also when you dose the first patient?

Julie Krop

Okay, so let me just take the first question. Yes, we have sorted a dose and we said final product and installed the dose. And we -- right now that dating not -- it's actually getting started, it's a lot of parallel to the activities that are going on at this time to get the auto-injector ready, the drug ready; obviously, gets the sites up and running. So all of that is really what remaining now getting started at this point.

Chris Raymond

And you will announce the first patient in?

Julie Krop

No, we have not said that we would announce first patient.

Chris Raymond

Okay, got it. Thanks.

Bill Heiden

I appreciate the question Chris, I think that's the kind of -- why we are all pretty excited here today, we are announcing that we have finished filing cases studies, we have selected a product and we will take board into the definitive PK studies, kind of a big milestone that we're thrilled to have gone through.

Chris Raymond

Thanks.

Operator

Your next question comes from the line of David [ph] from Northland Capital Markets. Your line is open. Please go ahead.

Unidentified Analyst

Yes, thanks for taking the question, just a couple ones. First one for Bill, can you talk a little bit about the markets that you have for your own single-dose preservative-free and where you would expect that to be as we enter 2017? If you have a successful launch and I hope you continue your successful launch. And then secondly, or Nick Grund, if you could talk a little bit about what the price realization actually was for CBR from the change in discounting? And what the expectation embed us for the remainder of 2016? Thanks.

Nick Grund

I'll take both of those David and I'll ask Bill to jump in if he has other additional point. So first when I think about single-dose share which is the first part of your question, we have seen about 30% as I said in the script, about 30% single-dose vials in Q1. So far in July that's upto over 40% of our total ex-factory sales of our single-dose which makes sense given the number of patients that started the quarter already being prescribed a multi-dose. So we believe that all of the patients that were on multi-dose would have washed through the system, and we'll have a very, very high percentage of patients on single-dose as we end the year 2016. But we're not going to put a number on it, that number is higher than where we are today, much higher with a significant portion the market being switched.

The second part of your question is on the price realization in CBR, when we look at the business model we have obviously enrollments that occurred in our business and then when that woman -- whether it's three months or six months later gives birth, that sample has been processed and then we record the revenue at the time of processing from a price realization and the claw back of discounting, our enrollment price has increased versus Q1 into Q2 of roughly 5% to 10% depending on whether it's cord blood, cord tissue or a combination of the two. So we're seeing nice gains in pricing on our enrollment data and obviously given the lag between enrollment and processing, not a flow-through our revenue in the second half of the year.

Bill Heiden

And the other important point to point out Dave is that, not only have we been able to increase price but we've been able to stabilize new enrollments. And so you can imagine in a market where you're basically raising price, sometimes that negatively impacts volumes; so we're really pleased to see that we've stabilized volumes and been able to ratchet up price. So we're -- I think we're on a good track here for the remainder of '16.

Unidentified Analyst

Great, thank you.

Operator

Your next question comes from the line of Greg Fraser from Deutsche Bank. Your line is open, please go ahead.

Greg Fraser

Good morning, guys, thanks for taking the questions, it's Greg Fraser on for Greg Gilbert. A couple of questions on Makena; how does the conversion to the single-dose vials compare with your expectations prior to launch? Is the conversion going faster or slower than you expected? And can you just remind us what your plans are with respect to the multi-dose vials and whether you intend to keep those on the market?

Nick Grund

Greg, this is Nick. So the first of your question, is it going -- it's going according to plan, as we've kind of always talked about 30% or 35% of any revenue in any given quarter is from a moments in that quarter and since we just launched the single-dose file at the beginning of Q2, seeing about 30% thirty percent of our prescriptions, slightly higher 30% of our ex-factor being single-dose mile, makes sense to us. So as those multi-dose patients wash through the system and they are replaced by single-dose, we anticipate that that will continue to drive conversions, so on-track to what we anticipated. The only other part is -- additionally, we've seen some payers actually remove multi-dose entirely from their formulary and going with single-dose exclusively. So that should also help drive conversion to single-dose.

Bill Heiden

And longer term, I would envision that there will be a point in time where there simply won't be any utilization of the multi-dose vial at that point in time. We may determine just to remove from the market and stay with the single-dose preservative-free.

Greg Fraser

Got it. Was there any stocking impact in 2Q from the single-dose launch or should we think of the $70 million as a pure demand?

Bill Heiden

Great question. I would say as majority peer demand, we did see inventory levels in terms of weeks on hand go down slightly. So substantially all of the increase is demand driven.

Greg Fraser

Okay. And then last question is -- and I'm not sure if you touched on this but the $16 million impairment charge in the quarter; can you just comment on what that was related to?

Ted Myles

Sure. This is Ted speaking, so that was a decision that we took to impair the goodwill related to that asset based on not receiving broad CMS coverage. And when we look at it, with that new input, the DCF didn't hold up so we took the conservative accounting view and wrote down the asset, also partly offset by a reduction in contingent liability associated with royalties on the same product. So answers your question?

Greg Fraser

Yes, thank you.

Operator

Your next question comes from the line of Kyle Smith from Jefferies. Your line is open. Please go ahead.

Kyle Smith

Hi, good morning and congratulations on a really solid quarter here. I had a question about the optimum contract. If you could give us a sense of roughly how much of the market that represents and also how it plays into the numbers. I imagine it's not a light switch that there is a phase in, people don't switch patients, it's just new patients that would transition over to Makena and when that started? That would be very helpful.

Bill Heiden

Yes, first, we're not going to comment specifically on our partners business nor the size of their business but they did represent one of the largest use of compounded product in the marketplace today. As far as your second point, I think Kyle, you're exactly right, it's not a late switch that turns on all the patients switch, there are a number of patients there are already on the product beforehand and will continue with a compounded therapy through the course of treatment. But new patients are exclusively using Makena through the optimum health services network.

Nick Grund

And Kyle, it's Nick. These patients are new patients for experimental phases overtime. I also think that optim [ph] has been more with their former customers or there has been some changes in their business model little bit. So that will phase in, but you're right, it's new patients.

Kyle Smith

And that started in early?

Bill Heiden

Yes, it began in April, April 4, I think is when we actually started.

Kyle Smith

Okay, great, wonderful to see that flow over this this quarter and next. And then do you know with the pain study being accelerated forward, I see that you've maintained your EBITDA guidance but I imagine there is some expense with respect to that pain study, can you roughly ballpark that because that implies to me that your underlying earnings expectation is actually improved somewhat, just now offset by the added expense of that trial.

Ted Myles

Yes, thanks for the question Kyle, this is Ted. I'll just comment, we won't quantify the study, we'll just make it clear that it's not a big impact to the bottom line, and with the strong revenue that Nick and his team are delivering, we've got the margins to absorb that increase in the budget.

Kyle Smith

Okay. And then my last question here is on the business development side. Commentary from some other companies in spec-pharma space suggests that maybe seller expectations have gotten a bit more realistic off late, and that transactions might be getting closer to imminent. Can you comment that what you're seeing out there conforms to that view that sellers of assets are starting to come down to reality and maybe we might start hearing some announcements of transactions in the near future?

Frank Thomas

Sure. Kyle, it's Frank. We've definitely seen, I think a couple of things happening over the course of the summer. We've definitely seen the pipeline of interesting opportunities I think continue to grow, so excited about the -- sort of inventory of things that we're looking at and how that pipeline looks. And as used to that, valuations I think are still reasonable and very affordable for us, and obviously the company with over $500 million in cash, we've got a nice capacity to be able to get deals done. But valuations aren't solo now to discourage activity, so I do think that sellers are coming around on valuation and they we're encouraged about the prospects for the second half of this year.

Kyle Smith

Okay, great. Thanks for taking my questions, and congratulations again, everything seems to be clicking in place for you.

Operator

As there are no further questions on the phone line, I would now like to turn the call over to Mr. Bill Heiden for closing remarks.

Bill Heiden

Thanks, Shannon. So look in summary, I am really pleased with the progress that we made in the first half of the year. There is still plenty of work ahead. I'd like to take this opportunity to thank my colleagues here at AMAG for all the hard work that's led to the achievements that we've reported here this morning. And I'd also like to thank all of you on the phone for your support and for attending today's call. And this concludes our call. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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