Exactly two years ago, Lexington, MA-based Amag Pharmaceuticals (NASDAQ: AMAG) took a giant step forward in its effort to morph from a manufacturer of diagnostic-imaging products to a developer of cutting-edge drugs. The company introduced its first therapeutic product, ferumoxytol (Feraheme), an intravenous injection to treat iron deficiency in patients with chronic kidney disease. Investors rejoiced, pushing the company’s shares from $25 in March 2009 to well beyond $50, as the product approached its July launch that year.
Then the FDA received reports of side effects from Amag’s new product, and the tiny company—which had nothing else in the pipeline—took a thrashing on Wall Street. “We met with the FDA to ask what they were seeing, and we provided [safety] data to them,” recalls Amag’s CEO, Brian Pereira, a trained nephrologist who invited Xconomy to breakfast in New York last month, along with Amag’s chief commercial officer, Gary Zieziula. “Nonetheless, we were required to update the label.” The updates, which included bolded warnings about anaphylactic-type reactions and abnormal blood-pressure drops, appeared last November. By late that month, Amag’s stock had dropped below $14.
Now, as it prepares to release its second-quarter earnings report, Amag seems firmly ensconced in an upswing. So far, the company is standing by its prediction that it will generate $55 million to $60 million from ferumoxytol sales this year—about even with last year, despite the safety concerns. On May 31, influential biotech analyst Christopher Raymond of Robert W. Baird & Co., declared that the product had turned a corner and the company’s shares had bottomed. The stock rose 10 percent to $18.46 on quadruple its previous sales volume. And on June 21, Amag announced that the FDA would allow it to tone down some of the safety language on the ferumoxytol label, and drop the recommended time that physicians keep a watch on patients after they administer the drug from 60 to 30 minutes. By July 8, the stock had edged up to $19.30.
The turnaround has been far from easy for Amag. When the company first boosted the safety language on the new drug’s label, Zieziula recalls, it blasted its physician and hospital customers with faxes and mailings describing the change. Then its 70-plus salespeople fanned out and visited all their customers personally, to answer questions and soothe frayed nerves. Now, says Zieziula, “We’re back on track in terms of confidence.”
Pereira believes Amag’s iron product offers advantages that will allow it to continue to build traction in the market. Amag’s core technology is a coating made of a complex carbohydrate, which binds the iron so the body can more effectively absorb the mineral. Its dosing regimen—two treatments over the course of a week, each lasting 17 seconds—is simpler than that of competing products, which require five to 10 treatments over a month, each lasting 15 minutes to an hour. “It’s also more convenient for payers, because they don’t have to pay for five to 10 infusions,” Pereira says.
Amag has partnered with Japanese drug giant Takeda to take ferumoxytol into Canada, Europe, and other overseas markets. And it has started a trial aimed at expanding the product’s U.S. label to include all patients with iron deficiency, regardless of the cause. “The big opportunity is the broad market—women with heavy menstrual bleeding or post-pregnancy anemia, cancer patients, and so on,” Pereira says. The company believes the product could ultimately help 4 million patients in the United States alone.
Amag, which was originally called Advanced Magnetics, developed the science behind ferumoxytol two decades ago to help make contrasting agents for magnetic resonance imaging (MRI) procedures. “Unfortunately for us—but fortunately for science—the quality of imaging got so good that such contrasting agents were not as necessary,” Pereira says. In the early 2000s, the company started to look for ways to convert the technology into a therapeutic tool.
Pereira, who was on the company’s board, was named president in November 2005 and CEO a year later. His only management experience had come from serving as CEO of the physicians’ group at Tufts New England Medical Center, but he knew what Amag needed to do to position itself as a drug developer.
At the time, Amag’s corporate offices were inside its manufacturing facility near the Cambridge transfer station, or as Pereira puts it, “not a very hospitable part of town.” So the day he joined the company, he started to look for new office space. He interviewed potential job candidates at Starbuck’s, so they wouldn’t be put off by the company’s down-market headquarters. The company soon moved to a biotech park in Lexington, now home to a host of pharmaceutical firms, including Endo Pharmaceuticals, Cubist Pharmaceuticals, and a U.S. office of Shire.
“Aesthetics are important,” Pereira says. “Our stock went up threefold. It was easier to attract talent. It’s like everything else in life: success begets success.”
With its product now on the market and the safety saga a near memory, Amag is now shopping for other molecules to bolster its pipeline. To do so, it has adopted an increasingly popular strategy: It wants to acquire new drugs rather than develop them from scratch. “We think the interests of our company are best served by being a clinical-development and commercial organization rather than investing in research,” he says.
Pereira declines to specify what types of drugs Amag is looking to acquire or what its timeline for such a move might be, except to say “We are looking at candidates right now.” The basic idea, he says, is to bring in products that Amag could ultimately market with its existing salesforce, which calls on physicians in nephrology, hematology, and oncology.
Baird analyst Raymond said in his report that he suspects Amag itself may become an acquisition target. Zieziula responds by pointing out that like any publicly held company, Amag is beholden to its shareholders and would have to seriously consider any buyout offers. But that’s not management’s priority right now, Zieziula says. “We believe we’re well-equipped to optimize the value of [ferumoxytol] in the marketplace,” he says. “We work very diligently to do that.”