The Meat of a One-Drug Wonder

The Meat of a One-Drug Wonder

By Brian Orelli
July 1, 2009

Stock Advisor

It's official. AMAG Pharmaceuticals (Nasdaq: AMAG) is a one-drug wonder. The company announced last night that its iron replacement, Feraheme, was approved by the Food and Drug Administration.

The drug's advantage isn't so much its effectiveness, but its convenience. Feraheme can be administered through an intravenous push in two injections that takes just seconds to administer compared to current intravenous iron products that require longer infusions. The drug will also indirectly compete with Amgen's (Nasdaq: AMGN) Epogen or Johnson & Johnson's (NYSE: JNJ) Procrit, which help anemia patients by boosting the number of red blood cells, which carry iron.

AMAG is hitting the ground running and plans to launch later this month. Since it got a complete response letter from the FDA asking for additional information late last year, the company has had time to set up a sales force.

While patients in dialysis centers like those run by DaVita (NYSE: DVA) and Fresenius Medical Care (NYSE: FMS) will be the first target, I'm not sure that it's the key for growth of Feraheme sales. Dialysis patients are used to going into the clinic regularly and sitting there doing nothing while the dialysis machine is clearing the blood.

The key to getting decent sales out of Feraheme is going to be in the outpatient doctors' offices where pre-dialysis chronic-kidney-disease patients are treated. Many mildly anemic patients are probably going untreated in this setting because of the cumbersome requirements for drugs like Venofer, which needs to be administered five times over a two week period. By only requiring two trips, Ferheme may be able to grab patients that are currently going untreated.

The other place that Feraheme should be able to increases sales is internationally. AMAG is working on an approval in Europe, which may involve a partnership, and it's already licensed the drug to Rule Breakers pick 3SBio (Nasdaq: SSRX) in China.

Like any good one-drug wonder, AMAG plans to milk Feraheme for all its worth. There's potential to sell the drug as an imaging agent and for anemic patients that aren't suffering from chronic kidney disease, but it'll need to complete clinical trials first. For now, hitting the chronic-kidney-disease market is the only song in its playbook.

http://www.fool.com/investing/high-growth/2009/07/01/the-meat-of-a-one-drug-wonder.aspx