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Executives

Kristen Galfetti - Director of IR

David Arkowitz - CFO and CBO

Brian Pereira - President and CEO

Analysts

Mark Schoenebaum - Bear Stearns

Adam Walsh - Jefferies & Company

Chris Raymond - Robert W. Baird

Marshall Urist - Morgan Stanley

Andrew Berens - Merrill Lynch

Adam Walsh - Jefferies & Company

AMAG Pharmaceuticals Inc. (AMAG) Q4 2007 Earnings Call February 21, 2008 4:30 PM ET

Operator

Good afternoon. My name is Heather and I will be your conference operator today. At this time, I would like to welcome everyone to the AMAG Pharmaceuticals Incorporated fourth quarter financial results conference call. (Operator Instructions)

Thank you, Ms. Galfetti. You may begin your conference.

Kristen Galfetti

Thank you, Heather. Good afternoon. I would like to welcome you to our quarter and year, ending December 31, 2007, earnings results conference call. We have several topics to discuss with you today, including our financial results, corporate highlights, and upcoming events. Our call today will reference the press release we issued this afternoon, which is posted on our website at www.amagpharma.com.

David Arkowitz, our Chief Financial Officer and Chief Business Officer, will discuss our financial results for the quarter and year which ended December 31, 2007. Our President and CEO, Dr. Brian Pereira, will then follow with a brief discussion of the company's accomplishments to-date, and steps that we are taking to become a fully integrated biopharmaceutical company. This will be followed by a question-and-answer period.

Before proceeding with this call, please be reminded that any statements we make during the course of this conference call that are other than historical facts, including statements regarding our financial conditions, cash positions, liquidity development programs and commercial plans, are forward-looking statements made 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.

Such risks and uncertainties include the possibility that we may not be able to obtain the necessary regulatory approvals in order to market and sell ferumoxytol, or we may not obtain such approvals in a timely manner; the fact that we have limited sales and marketing expertise; uncertainties regarding our ability to successfully compete in the intravenous iron replacement market; uncertainties regarding our ability to obtain favorable coverage, pricing and reimbursement for ferumoxytol, if approved; uncertainties regarding our ability to manufacture sufficient quantities of ferumoxytol to meet demand, if approved; uncertainties relating to our patents and proprietary rights; and other risks identified in our Securities and Exchange Commission filings.

Any forward-looking statements that we make today must be considered in light of these factors. The assumptions on which we base any forward-looking statements, and our perception of the factors influencing those assumptions, are highly likely to change over time. However, our company policy is to provide forward-looking statements only at certain points in a year, such as during calls like this one. We do not plan to otherwise update such statements and actual results may differ materially.

I will now turn the call over to our Chief Financial Officer and Chief Business Officer, David Arkowitz.

David Arkowitz

Thank you, Kristen, and good afternoon, everyone. Today we reported unaudited consolidated financial results for the quarter and year which ended December 31, 2007. For the quarter ended December 31, 2007, we reported total revenues of $0.4 million as compared with total revenues of $0.6 million in the same period in 2006.

Total operating costs and expenses for the quarter ended December 31, 2007 were $13.9 million, an increase of $5 million compared to the same period in 2006. The increase quarter-over-quarter was primarily due to increased selling, general and administrative expenses associated with building our commercial operations function, and increased cost associated with preparation and submission of the ferumoxytol NDA.

We reported a net loss of $9.7 million, or $0.57 per basic and diluted share, for the quarter ended December 31, 2007 compared to a net loss of $7.4 million, or $0.60 per basic and diluted share, for the same period in 2006.

Revenues for each of the 12-month periods ended December 31, 2006 and 2007 were approximately the same at $2.6 million. Total operating costs and expenses for the 12 months ended December 31, 2007 were $44 million as compared to $33.4 million for the same period in 2006.

This $11.6 million increase in operating costs and expenses was primarily due to increased selling, general, and administrative expenses associated with establishing our commercial operations functions, and the expansion of our general administrative infrastructure.

We reported a net loss of $33.9 million, or $2.15 per basic and diluted share, for the 12 months ended December 31, 2007 as compared to a net loss of $28.6 million, or $2.47 per basic and diluted share, for the same period in 2006.

As of December 31, 2007 our cash, cash equivalents, and investments totaled approximately $286.8 million- which is a decrease of approximately $5 million from our September 30, 2007 balance.

Excluding stock option proceeds, our cash burn for the quarter was approximately $7 million. For the year, our cash burn was approximately $29 million when stock option proceeds are excluded.

I would now like to spend a little time reviewing our cash and investments and in particular our auction rate securities. In the fall of last year we modified our investment policy to, among other things, limit our investments in auction rate securities to just those that are the direct obligations of municipalities. As a result of this change and the continued management of our investment portfolio, our December 31, 2007, auction rate securities balance was a $105 million and consisted solely of municipal issues.

As of February 19, 2008, just a few days ago, our auction rate securities balance was approximately $81 million and we had over $200 million in cash and other investments held primarily in the form of U.S. government debt, corporate debt, commercial paper and money market funds.

Several of our auction rate securities, similar to our peers, have experienced failed auctions over the past few weeks. We, together with our investment managers, continue to closely monitor this situation. At this juncture, the auction failures that we've experienced are primarily liquidity events and not credit events. We remain comfortable with the credit worthiness of our auction rate securities and believe that it is probable that we will be able to liquidate these holdings without any material losses in the future. However, as we can all appreciate, the situation is evolving on a daily basis.

Again, I want to point out that our current $81 million of auction rate securities are not structured investment vehicles, they are not mortgage-backed securities, collateralized debt obligations or any other esoteric structured products, but it instead held in the form of bonds issued by municipal authorities established by state and local governments.

Given our auction rate securities balance of approximately $81 million and our cash and other investments in excess of $200 million, we do not expect that the current liquidity challenges with our auction rate securities will materially impact our ability to fund our operations and execute our business plans.

I will now turn the call over to Brian for his comments.

Brian Pereira

Thank you, David. During the past several months, AMAG Pharmaceuticals has been focused on preparing our NDA submission for ferumoxytol. We were very pleased to announce the filing of the NDA on December 19th and the subsequent acceptance for filing of the NDA earlier this week. This is a great achievement for AMAG and reflective of the hours of hard work that went into this undertaking. It also demonstrates our ability to execute on the demanding timelines we set for ourselves. We feel we are well positioned for growth, exactly where we want to be at this time.

To highlight a couple of accomplishments, in December we presented positive Phase III ferumoxytol results at the American Society of Hematology meeting. The poster presented pooled results from a total of 885 dialysis dependent and non-dialysis dependent patients with CKD across the company's three open-label, multi-center, randomized Phase III efficacy and safety clinical studies. These were stratified by age group. The results demonstrated a statistically significant achievement of the primary endpoint, which was the mean change in hemoglobin, from baseline, at Day 35 in patients receiving ferumoxytol compared to patients receiving oral iron across all age categories.

In preparing for launch we have also submitted several manuscripts, containing clinical trial data, to professional journals and look forward to sharing published articles with you in the near future. In January, we released supplemental information from the third ferumoxytol clinical development program regarding mortality rates which showed that of the 31 deaths observed among a total of 2,074 subjects in the ferumoxytol clinical development program, none were considered to be related to ferumoxytol.

In addition, the incidence of deaths following ferumoxytol was lower than following oral iron. Furthermore, in the company's three open-label, multi-center, randomized Phase III efficacy and safety clinical trials, the overall incidences of adverse events and serious adverse events occurring after study treatments were both lower following ferumoxytol treatment than following oral iron treatment.

Our future plans include continued preparation for the U.S. ferumoxytol launch, expected to take place during the first quarter of 2009. These preparations include initiations of additional clinical trials of ferumoxytol in new indications, and evaluating ex-U.S. ferumoxytol opportunities. Our active in-licensing efforts are ongoing. Our manufacturing efforts are focused on scaling up operations and we continue to build our internal infrastructure in support of all activities. Beyond CKD, we anticipate initiating additional clinical trials in iron deficient patients in May 2008.

We believe a significant number of patients experienced iron deficiency anemia who suffer from many debilitating conditions. Iron deficiency anemia product lines are under development and we will share additional details with you once they are finalized.

On the commercial front we are building our infrastructure as we continue our transition to a fully integrated biopharmaceutical company.

The leadership growth of all key functions in our commercial group are fully staffed. We intend to hire a sales force of approximately 80 members during the second half of this year. Concurrently, our medical affairs team will be building up its senior staffing requirements as well.

On the manufacturing front, we have begun commercial scale production of ferumoxytol and we are building inventory in anticipation of the planned product launch in the U.S. in the first quarter of 2009. We are also working to establish second source manufacturing to augment our existing GMP production facility.

We believe the activities I have discussed here today, along with our topnotch management team and strong cash balance, position us well for future plans. We will continue to work hard to execute on our deadlines and deliver on our promises. We are focused on positioning our company for success and look forward to sharing these successes with you. We hope to see many of you at several of the investor conferences we will be attending in 2008.

And as a reminder, we are planning to hold an analyst and investor day during the second quarter of 2008. We look forward to updating you throughout the year on our key 2008 activities. This completes my prepared comments. We'll now turn the call back to the operator to conduct the question-and-answer session of this call. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Mark Schoenebaum with Bear Stearns.

Mark Schoenebaum - Bear Stearns

Hey David, how are you?

David Arkowitz

Good. How are you?

Mark Schoenebaum - Bear Stearns

Okay, good. Thanks. Hey, I just want to make sure I get this auction rate stuff correct. I am looking at your 10-Q from the third quarter and I have got Ann (inaudible). I'm looking at your 10-Q, and I'm reading it as $224.85 million under the auction rate securities on page 11 of the 10-Q at the end of 3Q. I think you gave out a number close to a $100 million. Can you help me understand the difference there, what I'm doing wrong?

David Arkowitz

Yeah, sure. So the 9/30/07 number, as you said, is approximately $225 million. The number that you see in our 10-K for 12/31/07 is going to be $105 million, and it's going to be municipal auction rate securities only. And then a snapshot of where we were two days ago is $81 million.

Mark Schoenebaum - Bear Stearns

Okay. I understand. I just misheard. Okay, that's great, that's fantastic. Can you educate us on the accounting rules around when you may have to take a write-down? Like what would actually have to happen on the remaining securities for you to have to take that write-down? Sort of an accounting education for those of us that are sort of biotech analysts?

David Arkowitz

Yes, so to take a write-down would require that the fair value of those securities has suffered other than temporary diminishing in value. So there are agencies out there, Bloomberg and Reuters, our companies out there that will actually price the securities. In the absence of any changes in the pricing by those agencies, we and others may look to the third-party valuation groups to look if there has been any diminishing in value.

So it becomes an evaluation of the fair value of those instruments. But I can also perhaps give you some additional comfort. As of 12/30/07, we did not have any write-downs associated with any of our investments. So it's just something that we are going to keep a close eye on.

Mark Schoenebaum - Bear Stearns

Okay. That's great. [Ann], do you have any other questions on this topic?

Unidentified Analyst

Yeah. Just one quick follow-up question. Since the meltdown in the auction rate securities, well not the meltdown, but freezing at the market, occurred just over the last two weeks, is there a possibility that you could give us some color as to what happened to the mark-to-market value of your portfolio? And also how you've been exiting these positions so rapidly? Did you sell in the secondary market? Or, I mean, what happened there?

David Arkowitz

Sure, maybe take the second part first. When we modified our policy back in September, we actually concerted effort. We did a number of things. We modified our investment policy. We changed the restrictions on our investments, such that we would only allow municipal auction rate securities.

So from the period 9/30/07 to year-end '07, we were ratcheting down our auction rate securities just as we modified our policy in just as prudent management and oversight. And then from year end '07 until now, we went from a $105 million to $81 million, and it's really just been working with our investment managers to exit those positions wherever possible.

Unidentified Analyst

Okay, were there any losses associated with the exit of the last few weeks?

David Arkowitz

As of 12/31/07 we have not had any losses associated with that. In other words, when we've unwound, and even two days ago, basically we sell those securities or we settled during the auctions and they are settled at par.

Unidentified Analyst

Okay, great. Thank you.

Mark Schoenebaum - Bear Stearns

Okay. Then I will get back in the queue. Let me ask one question for Brian, maybe. Brian, can you just give us your thoughts on the bundling, the CMS paper on bundling. Can we expect you to clearly outline your plans for additional indications at the analyst meeting in 2Q and then I will get back in? Thanks for taking all these.

Brian Pereira

Mark, thank you, the feeling’s sort of left out. But the CMS finally released its report to Congress, the much awaited report to Congress. A couple of points I want to make. One is the report issued last night suggests that it would take at least 2 to 3 years from the date of enactment to implement its bundle, without a statutorily required demonstration project. That's very interesting because the math would suggest that, if Congress by the end of this year enacts what CMS recommended, 2 to 3 years tacked onto that, we'd look at 2011, 2012 implementation.

Now this is later than what many of us had suspected early on. But, if the statutorily required demonstration project is conducted, then we are looking at a timeframe beyond 2013. And as the report itself says, that will take more than five years. Now as you are well aware, several patients, physicians, and minority organizations have voiced concerns about the implementation of a bundle without an implementation, without a demonstration project. We will have to watch this closely as to how this will play out.

Now the question is what happens under a bundle. The impact for a dialysis organization under the bundle is to deliver the mandated quality of care at a lower cost. As you've seen in the report, approximately 40% of bundle spending is separately billable drugs, of which 62% is ESA alone.

Consequently, dialysis providers will look to lower ESA cost. It's well known that patients in whom IV iron therapies are optimized require lower ESA doses. Consequently, optimizing IV iron therapy will not only be a clinical imperative, but now an economic imperative as well. Interestingly, what you've seen in this report is that CMS was able to capture 2006 data in the 2007 analysis presented.

This is significant progress by CMS in its ability to collect and analyze data. This suggests that a new drug that is launched in the 12 to 24 months before the implementation of the bundle would now be included in the payment calculation. As you would now read between the lines, this should make early adoption of ferumoxytol even more attractive to dialysis providers.

Finally, we believe bundle payment would drive greater efficiency in ESRD care, and ferumoxytol's unique characteristics can improve dialysis operation efficiency. But more importantly, we think the bundle will drive adoption of home dialysis modality, a segment which is tailor-made for ferumoxytol. I hope that's a long-winded answer.

Mark Schoenebaum - Bear Stearns

Can I just push on one point, Brian? I understand your point about how more iron reduces EPO needs. But if you are going talk about dialysis population, how many of those patients are still iron depleted. I mean my understanding is mostly these patients are fairly iron replete. But correct me if I am wrong? So I'm just trying to understand how much additional iron can be thrown at the dialysis population. You have to answer my second question. I would replace with that and get back in queue.

Brian Pereira

Well, as a doctor, you would realize that we don't overdose or throw iron dialysis patients. What we're trying to do is optimize our iron therapy and Mark, as you know, there is an issue of functional iron deficiency and iron deficiency which you see in most healthy people which is absolute iron deficiency. Many studies have shown that in people who are "iron replete" and have been given an additional gram of iron, their hemoglobin goes up and their ESA requirement goes down.

Now on a macro level, you'll realize that, if you look at the landscape in the U.S., you'll see that units that use more iron tend to achieve the same or better hemoglobin levels with lower ESA levels. So the proof of the concept already exists in the market today.

Mark Schoenebaum - Bear Stearns

Okay. I really appreciate. Thank you very much guys.

Operator

Your next question comes from the line of Adam Walsh with Jefferies & Company.

Adam Walsh - Jefferies & Company

Hi. Thanks for taking my question. My first one is a follow-up for Mark's question. And Brian, can you just give us an update on what your understanding is of the state of potential generic intravenous iron coming to market, dialysis and possibly elsewhere? Thanks.

Brian Pereira

Adam, the threat of generics creating pricing pressure in the friendly environment is a fair question. However, we believe that the FDA is aware that the safety profile of a generic drug can vary considerably from its predicate drug due to manufacturing and formulation differences. And consequently, I think it will require substantial safety trials before approval.

The recent FDA safety panel on a new iron, which many of you watch, is an important case in point. So, we don't believe that a generic IV iron is likely to get a free pass like some of its oral formulations, because here manufacturing a formulation is the critical determinant of the safety of the drug.

Adam Walsh - Jefferies & Company

Great. And just quickly, on the panel that you just referenced, the FDA said a couple of times that the agency had initially rejected injector for, in part because they lacked repeat dosing studies. Are you talking about this in the prior conference call, that you in fact have some repeat dosing data rolled into your new drug applications?

And in addition, if you think about it, by the nature of ferumoxytol, you do give two doses within one week. I am not sure if that's considered repeat dosing or not. Brian, can you describe the FDA position on repeat dosing of intravenous irons as you currently understand it? Thanks.

Brian Pereira

Thank you, Adam. Well, we have, in our clinical development program, exploded a wide range of repeat dosing in terms of doses, as well as repeat courses. We've given patients eight doses of 128 milligrams. We have given patients four doses of 255 milligram. We have given patients two doses of 510 and some patients a single dose of 510.

In addition, in all of our Phase III safety and efficacy trials, patients who continue to be anemic due to iron deficiency at the end of the trial were allowed to come into the trial, and received a second course of two times 510 milligrams of ferumoxytol. So we believe we've submitted to the FDA a package that had from 2 to 8 doses in the first round, and a fair number of patients who have received a second course of ferumoxytol.

Adam Walsh - Jefferies & Company

That's great. I will jump back in the queue. Thank you.

Operator

Your next question comes from the line of Chris Raymond with Robert W. Baird.

Chris Raymond - Robert W. Baird

Thanks for taking the question. Brian, you mentioned something in answering one of the other questions. I just wanted to make sure I understand. I think it's related to the CMS report specifically, in regards to drugs that are launched within I think you said 18 to 24 months or something like that, but before bundling structures are put in place. Could you just walk through the mechanism of that? And why that is a good thing for ferumoxytol release from an economic standpoint?

Brian Pereira

Well, the reality is that, if that is a 2011 launch, the CMS will be able to calculate what the bundle payment will be, based on drugs that were on the market in 2009. If that is a 2012 bundle launch, CMS will be able to calculate the payment based on drugs that are available in 2009 and 2010.

As we have publicly stated, we expect that ferumoxytol will come in at a premium to the current irons. Consequently, the launch of ferumoxytol will raise the price of the ultimate bundle as opposed to if ferumoxytol was not in the market. And CMS, in its report, has exclusively stated that that is one of the thing that it will adjust for in the bundle, both at the time of the bundle launch as well as in subsequent years.

Chris Raymond - Robert W. Baird

Okay, great. And then one more question here. We picked up a good bit of anticipation among some of the doctors we talked to about the pending publication of DRIVE II. Can you talk to how important do you think that is for the market, and in general for IV irons, and what does it means for you? Certainly as you prepare for launch, I know you are dealing with lot of ferumoxytol-specific manuscripts and another marketing literature data, but how does DRIVE II sort of play into what you are trying to do?

David Arkowitz

That's an important question and that's part of what Mark asked in his previous call. The reality is that ferritin levels, and this is also a question Andy Berens has raised in the past, we know that in you and me and in healthy individuals, serum ferritin is a reasonably good reflector of iron deficiency. In hemodialysis patients, and CKD and other patients who have chronic diseases, ferritin is a poor marker of iron deficiency.

So consequently you can have patients with high ferritin levels who are iron deficient. Now traditionally when ferritin levels have been above 500, 600, 700, nephrologists have been reluctant to treat patients with additional IV iron, despite the fact that the more robust index of iron deficiency, which is transferred in saturation, shows iron deficiency.

But the DRIVE II has challenged that traditional concept and given these patients an additional gram of iron and shown that their hemoglobins respond very nicely, and that their ESA levels are dropped by about 25%. Now this actual clinical trial has played out even in epidemiological data collected by the U.S. RDS. The U.S. RDS very nicely shows that a dialysis unit that uses more iron tends to achieve higher hemoglobins, and used lower ESA dose.

So what this trial has done is validated the proof of concept scene in epidemiological data in a randomized clinical trial.

Chris Raymond - Robert W. Baird

Okay, great. Thank you.

Operator

Your next question comes from the line of Marshall Urist with Morgan Stanley.

Marshall Urist - Morgan Stanley

Hey guys. So Brian, another question on the bundling issue. Just wanted to get your thoughts on, first of all, was bundling in your base case for your commercial launch in planning assumptions, and did these timelines at all change how you guys are thinking about launching the drug? And the second thing would be, on the whole pricing front, regardless of generics, do you think this is going at all impact your ability to introduce or maintain a premium priced iron?

Brian Pereira

So the first, Marshall, is that we have been aware and closely watching the evolution of bundling. Our original expectation was that bundling was likely to be a 2010 or beyond. We then began to believe that it's more likely to be a 2011 or beyond. And the more recent report suggest that it clearly is a 2011 and beyond, and possibly a 2012 and beyond.

Now with respect to our premium price, one would look at the evolution of pricing strategies in three buckets. To some extent, this is what the company does and to some extent, it's what the purchaser benefit.

There is the first two quarters plus or minus, the time less than the launch quarter wherein the providers get reimbursed [VAC+VI], then comes the time after those two or three quarters wherein the providers get reimbursed at [ASP+VI], and then there is the bundle.

Our intent to price it at premium serves all constituents well, because this provides additional advantages over the existing irons. We believe that this price is something that CMS and other payers will accept as fair trade-off for the additional value that ferumoxytol brings.

This will serve providers well both in the [VAC+VI] as well as the [ASP+VI] environment, have the transition to bundling. We will have to evaluate our position closer to the time when we get visibility, but this will be a dynamic process. As I said earlier, we have built our commercial team with functional heads, all of whom have several years and in depth experience, both in the injectable and in the nephrology business. So we think we are well positioned to manage the transitions in the different payment systems that will evolve.

Marshall Urist - Morgan Stanley

All right. Thanks.

Operator

Your next question comes from the line of Andrew Berens with Merrill Lynch.

Andrew Berens - Merrill Lynch

Hi guys. Thanks for taking the question. I have got another bundling question for Brian. What is your read on how the pharmaceutical market basket will be rebased, and specifically how it's going to be adjusted for the product mix as that changes after it's been introduced?

Brian Pereira

Well, our belief and the reports say that the CMS has included in its projections an annual adjustment, both for the label component as well as the pharmaceutical market basket. By CMS's own ambition, the adjustment for labor wage index will be relatively easier, but it will endeavor to adjust that for the pharmaceutical-based index basket. The reason is that CMS wants to make sure that dialysis providers are provided with adequate margin to remain in this business, both the large and small dialysis change, both the rural and the urban providers. So, a lot of thought has gone into this CMS bundle as you see it's taken a four or five years to get to this place.

And I believe that the dialysis community which has now a good track record of working collaboratively between pharmaceutical manufacturers, dialysis providers, and patient and physician organizations that the right thing will happen to improve patient outcomes.

Andrew Berens - Merrill Lynch

Right. But as I understand it, the use of the PPI increased the rate of payment, but what about if the product mix changes, i.e., if the ESA's usage goes down or a generic product comes into the market and that starts to be used. Is the payment going to go down to the dialysis centers?

Brian Pereira

I believe that the report has clearly stated that if there is an oral replacement for what is a currently intravenous drug, or if the use of an intravenous drug changes significantly, or the price changes significantly, they will reevaluate the price of the bundle.

So, we have to remember this bundle is not going to be one way adjustment. If price has changed, in terms of the total input cost drop, CMS will seek to get a check of the savings. If input prices go up, CMS will be fair in increasing the price of the bundle.

Andrew Berens - Merrill Lynch

Okay. And do you have any sense how often that might happen?

Brian Pereira

This will happen on an annual basis. I don't believe that CMS has a track record of, or intent of, doing this more than on an annual basis. And again Andy just to extend, that keeps all players in this on notice suggesting that squeezing any one component to garner abnormal profits could hurt in the long run.

Andrew Berens - Merrill Lynch

Right. Okay, thanks. I appreciate it, Brian.

Operator

(Operator Instructions). Your next question comes from the line of Adam Walsh with Jefferies & Company.

Adam Walsh - Jefferies & Company

Thanks for taking my follow-up. I've a couple of quick ones here for David. David, I'm just curious, I understand your cash position is in excess of $200 million clearly with your burn, you are not in any liquidity crisis for any stretch. Just curious on the $81 million of remaining auction rate securities, what are you seeing there in that market and what is the Plan B for those securities, if you would? Thanks.

David Arkowitz

Yeah, thanks Adam. I mean as I think everybody appreciates this as it’s evolving. So we're looking to redeem the $81 million of auction rate securities as rapidly as possible, there is auctions occurring on a daily basis. And to the extent to those who're successful, we're successful in redeeming our holdings in terms of what happens one to two to three months down the road it's really hard to say Adam.

And I think if you’re also looking in some of the popular business press, you can see many articles on auction rate securities, and some of the things that are emerging, such as hedge funds and mutual funds looking to actually purchase these because once they failed to have reset rates or penalty rates that can be quite high in terms of interest payments as high as 10% to 15%, even 20%.

The flip side of this is that you've got the municipalities that have issued these auction rate securities now burdened with a much higher interest payment, and they are looking to float new debt, new notes to be able to redeem the existing auction rate securities. So, a lot of the dust will settle we believe over the next few months.

Adam Walsh - Jefferies & Company

Fair enough. Thank you. And then David really quickly you said your fourth quarter cash burn was $7 million. Did you give burn guidance for 2008? I didn't hear it, wasn't sure if I missed it. Thanks.

David Arkowitz

We did not. Adam, we have not historically given guidance. What we can say is, just directionally, that we do expect a significant step up in our burn in 2008, given all the things that we've been talking about. The hiring of the sales reps continue to build out of our commercial operations. The initiations of additional clinical trials, the building of ferumoxytol inventory in anticipation of the launch and just the overall growth in the general administrative aspect of AMAG.

So, as I said, the burn will go up substantially from the $29 million that we burned in 2007, but I think it's also important to note as I had mentioned, we've got over $280 million in cash, cash equivalents and investments, $81 of that is auction rate securities that we hope to unwind shortly and the other $200 million plus provides us with a substantial runway.

Adam Walsh - Jefferies & Company

Thanks a lot.

David Arkowitz

Sure.

Operator

There are no further questions at this time.

Brian Pereira

Well, I believe there are no further questions. We'd like to thank all the participants for joining us on this call. We look forward to seeing you at several of the investor meetings that we will be at. And have a good evening. Thank you.

Operator

Thank you. This concludes today's AMAG Pharmaceuticals Incorporated fourth quarter financial results conference call. You may now disconnect.

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