On November 2, 2017 AMAG Pharmaceuticals, Inc. (NASDAQ: AMAG) reported unaudited consolidated financial results for the quarter ended September 30, 2017 and updated its full year 2017 financial guidance (Press release, AMAG Pharmaceuticals, NOV 2, 2017, View Source [SID1234521471]).
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Total GAAP revenue for the third quarter of 2017 increased to $153.7 million, 7% higher than the same period last year. The year-over-year increase was driven by sales growth across the product portfolio, including strong performance from Feraheme (ferumoxytol), which grew 17%. While third quarter sales of Makena (hydroxyprogesterone caproate) grew 5% versus the same quarter of last year, ex-factory sales were lower than anticipated due to slower-than-expected growth in underlying demand and a reduction in channel inventory. The company reported an operating loss of $249.7 million in the third quarter of 2017 due to a $319.2 million non-cash accounting charge related to the impairment of an intangible asset. This compares with operating income of $38.8 million in the same period last year. Non-GAAP adjusted EBITDA totaled $56.7 million in the third quarter of 2017, compared with $76.2 million in the third quarter of 2016.1
“Third quarter sales of Makena grew slower than forecasted, and we have updated our full year expectations accordingly. Feraheme and CBR are both on a steady growth track, and we are confirming our previous full year expectations for these products,” said William Heiden, AMAG’s president and chief executive officer. “Looking ahead, we are preparing for the potential February 2018 approval of our next generation Makena subcutaneous auto-injector and for the broader Feraheme label. We also continue to invest in the growth of our new products, and are pleased with early physician and patient response to Intrarosa and the trajectory of the launch. In addition, we are preparing to submit our NDA for bremelanotide early next year.”
Third Quarter 2017 and Recent Business Highlights:
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Launched Intrarosa, the first and only FDA-approved locally administered non-estrogen2 product for the treatment of moderate to severe dyspareunia (pain during intercourse), a symptom of vulvar and vaginal atrophy (VVA), due to menopause:
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Made significant formulary progress with commercial insurers and are on track to achieve 65% unrestricted coverage by year end;
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Visited 19,000 healthcare providers at least once since launch;
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Broadly distributed patient copay savings cards to OB/GYN offices (also available at www.intrarosa.com); and
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More than 6,000 prescriptions written in the first 100 days;
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AMAG’s partner, Endoceutics, Inc., initiated a Phase 3 study to assess the effectiveness of Intrarosa for the treatment of hypoactive sexual desire disorder (HSDD) in post-menopausal women;
1 See summaries of GAAP to non-GAAP adjustments at the conclusion of this press release.
2 Intrarosa is converted by enzymes in the body into androgens and estrogens, though the mechanism of action is not fully established.
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Received U.S. Food and Drug Administration (FDA) acceptance for review of the Feraheme submission to broaden the current label to include the treatment of all adults with iron deficiency anemia (IDA) with a PDUFA date of February 2, 2018;
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Feraheme abstracts selected for:
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November 3 podium presentation (Phase 3 hypophosphatemia data) at the 2017 American Society of Nephrology (ASN) Annual Meeting in New Orleans;
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December 11 poster presentation (Phase 3 safety and efficacy data) at the 2017 American Society of Hematology (ASH) (Free ASH Whitepaper) (ASH ) Annual Meeting in Atlanta;
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Grew Makena market share to 50%;
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Reached 700,000 units stored at Cord Blood Registry;
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Held a productive pre-New Drug Application (NDA) meeting with the FDA and expect to submit the NDA for bremelanotide in the first quarter of 2018;
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Continued balance sheet optimization by reducing debt by approximately $45 million during the third quarter of 2017 and subsequent period; and
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Ended the quarter with $394.1 million of cash and investments.
Intrarosa Launch Update
Since AMAG launched Intrarosa on July 24, the product has been prescribed by nearly 2,000 healthcare providers (HCPs), and the number of HCPs gaining clinical experience with Intrarosa is growing rapidly. During the third quarter, AMAG implemented a comprehensive copay savings program that helps ensure access to any commercially insured patient who receives an Intrarosa prescription. The program has been successful in driving rapid patient uptake regardless of formulary status. The near-term negative impact of the program on net revenue per prescription and total Intrarosa revenues (updated 2017 Intrarosa revenue guidance to between $1 million and $3 million) is anticipated to improve significantly as commercial formulary coverage continues to expand. AMAG’s current efforts focus on expanding physician awareness and education of Intrarosa, and the company expects to initiate a broad digital and social media patient engagement program in early 2018. This program will help the many women suffering from dyspareunia who are currently untreated to understand the benefits of a non-estrogen therapy and the importance of talking to their physician about their symptoms and treatment options.
Makena Intramuscular (IM) Formulation Update
While third quarter sales of Makena increased 5% year-over-year, they were lower than second quarter 2017 sales. This sequential quarter decrease was the result of a reduction in inventory related to a late second quarter inventory build, as well as slower growth in underlying demand, due in part to the adverse impact of the hurricanes in Florida and Texas. The company anticipates sales of Makena in the fourth quarter of 2017 to be lower than previously expected due to the continued impact of the reduced number of patients initiating therapy in the third quarter. Based on third quarter results and fourth quarter expectations, the company has updated 2017 Makena revenue guidance to between $385 million and $395 million.
During the third quarter of 2017, AMAG updated its long-range revenue forecast to reflect new information received from a variety of sources related to potential generic competitors to the intramuscular formulation (IM) of Makena. Based on revised long-range projections, the company determined that the current fair market value of the Makena IM intangible asset was less than its net book value, and therefore recorded a non-cash impairment charge of $319.2 million. The company also determined that the current fair value of the Makena subcutaneous auto-injector (currently under review with the FDA) was greater than its carrying value and, therefore, was not impaired.
“We believe the long-term value of the Makena franchise resides in the next generation Makena subcutaneous auto-injector,” commented Mr. Heiden. “We continue to believe that generic entry to Makena IM will likely occur in the second half of 2018, and we are prepared to implement our generic strategy earlier if necessary.”
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Third Quarter Ended September 30, 2017 (unaudited)
Financial Results (GAAP Basis)
Total revenues for the third quarter of 2017 increased 7% to $153.7 million, compared with $143.8 million in the third quarter of 2016. Net product sales of Makena increased 5% to $97.6 million in the third quarter of 2017, compared with $93.4 million in the same period last year. Sales of Feraheme and MuGard increased 18% to $26.3 million in the third quarter of 2017, compared with $22.4 million in the third quarter of 2016. Service revenue from CBR increased 5% to $29.4 million in the third quarter of 2017, compared with $28.0 million in the same period last year.
Costs and expenses, including costs of product sales and services, totaled $403.5 million in the third quarter of 2017, compared with $105.0 million for the same period in 2016. This increase was primarily due to the $319.2 million Makena-related non-cash impairment charge, partially offset by an adjustment to contingent consideration of $49.9 million. Excluding these two accounting items, total costs and expenses increased to $134.2 million from $105.0 million in the prior year period. The increase is consistent with our previously stated plans to invest in the commercial launch of Intrarosa, including the company’s newly hired women’s health sales force and marketing programs to help drive awareness of Intrarosa. Research and development expenses decreased slightly versus the third quarter of last year. This decrease was primarily related to the completion of both the Feraheme study in support of the broader label and the Makena pharmacokinetic study for subcutaneous administration, partially offset by increased pre-NDA bremelanotide-related costs.
The impact of the non-cash impairment charge in the third quarter of 2017 contributed to an operating loss of $249.7 million in the third quarter of 2017, as compared to operating income of $38.8 million for the same period last year. The company reported a net loss of $152.1 million, or ($4.31) per basic and diluted share, for the third quarter of 2017, compared with net income of $16.2 million, or $0.47 per basic share and $0.43 per diluted share, for the same period in 2016.
Financial Results (Non-GAAP Basis)1
Non-GAAP revenue totaled $155.1 million in the third quarter of 2017, up from $145.8 million in the third quarter of 2016.
Total costs and expenses on a non-GAAP basis totaled $98.4 million in the third quarter of 2017, compared with $69.6 million in the third quarter of 2016. This increase primarily related to investments the company has made to support the commercialization of Intrarosa.
Non-GAAP adjusted EBITDA for the third quarter of 2017 was $56.7 million, resulting in an adjusted EBITDA margin of 37%. This compares to non-GAAP adjusted EBITDA of $76.2 million in the third quarter of 2016. The decline in adjusted EBITDA for the third quarter of 2017 was in line with the company’s expectations and previously stated plans to invest in the continued development and commercialization of its newer products to create long-term shareholder value.
Balance Sheet Highlights
As of September 30, 2017, the company’s cash and investments totaled $394.1 million and total debt (principal amount outstanding) was $841.4 million, net of approximately $20 million in repurchases of its convertible senior notes due in 2019. In addition, in October the company repurchased $25 million of the company’s 7.875% senior notes due in 2023.
Updated 2017 Financial Guidance
“As part of our revised full year financial guidance, we expect to mitigate the impact of reduced revenue expectations on adjusted EBITDA through disciplined expense management,” said Ted Myles, AMAG’s chief financial officer. “The company’s strong liquidity, which includes nearly $400 million of cash on hand, extended debt maturities and continued EBITDA generation, positions us well for future investment in our existing product base and additional business development to further expand our portfolio.