Event - Amag needs to find fresh blood for Feraheme

Following its break up with Allos Therapeutics last year Amag Pharmaceuticals now finds itself in a very interesting position in that all its strategic options rest firmly on its ability to revive the fortunes of its only product, Feraheme (Allos and Amag go separate ways into uncertain future, October 25, 2011).

The iron replacement product is up for European approval in iron deficiency in chronic kidney disease in the next few months and securing approval would not only add to much needed sales - it could also reignite outside interest in the company. Conversely, success in a trial due to report before mid-year seeking to extend the drug’s use into more general iron deficiency anaemia could be a signal that the new management team have a chance to reinvigorate the product, and an independent future could beckon.

Company AMAG Pharmaceuticals Takeda
Product Feraheme
Market cap $366m $33.8bn
Product NPV $259m $752m
% of market cap 71% 2%
Event type EMA decision date
Date H1 2012

Either way 2012 is certain to be a definitive year for the company and the fate of drug and company now hinges on growing Feraheme sales in the US in new indications including; post birth anaemia, cancer and inflammatory bowel disease and also expanding into new countries. Currently 2016 sales forecasts stand at $105m for 2016.

Unique selling point

On the surface the dosing benefits of Feraheme should make it a no-brainer for use in iron deficiency across a range of disorders. The drug has an infusion time of 17 seconds compared with 15-30 minutes for other competing IV iron formulations. It also only requires two infusions to complete treatment in chronic kidney disease anaemia against 8-10 doses for other products.

This ease of use has been reflected in the price of the product. But this in turn has meant that the door has been slammed for Feraheme’s use in dialysis, the biggest part of the IV iron market. Changes in dialysis reimbursement have favoured the rise of lower-priced, but less efficient, products.

Lack of payer support, coupled with some of the label restrictions placed on the product by the FDA is one of the major reasons why the drug has struggled to perform. Therefore finding new markets and indications is vital.

Merger talk

Some of the underperformance of Feraheme, however, can be blamed on the distraction caused by Amag’s ill-fated merger attempt with Allos, which proved universally unpopular with shareholders and culminated in the replacement of the group’s chief executive.

Since the end of merger talks most of the talk surrounding Amag has been whether another bidder will emerge. A positive result in Europe, following a recent approval in Canada, should help.

Takeda has rights to the drug outside of the US and approval in Europe and Switzerland would trigger a $30m milestone payment to Amag. Add this to Amag’s already impressive cash pile of $225m and the company could be attractive given that some analysts have calculated a possible take out at $480m.

The next catalyst

However, what might prove even better than European approval at flushing out new interest will be the pivotal results from iron deficiency anaemia (IDA), due in the early part of the second quarter.

A subsequent filing of the product in this new broader indication is expected by the end of the year and would give the drug access to 50% of the US non-dialysis IV iron replacement market according to analysts at JP Morgan.

But there is a fine balancing act for Amag to perform if Feraheme sales, which have been stabilising, start to decline before the new various approvals are sought. This would diminish the value of Amag and its chances of finding a new buyer.

It would also make the task of remaining solo harder, despite the group’s cash. The general anaemia market is firmly in the primary care space, one that Amag is not familiar with and where it would have to find a partner. Weak Feraheme sales would leave it in an equally weak bargaining position.

As such it is vital that the new management team at Amag negotiate the coming months carefully, ensuring that current Feraheme sales do not dip again and that the drug stays on all its regulatory paths. 

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