Image source: AMAG Pharmaceuticals.
What:Shares of AMAGPharmaceuticals(NASDAQ: AMAG), abiopharmaceuticalcompany primarily focused on maternal health, fell more than 11% as of 3:30 p.m. EDT after the company reported second-quarter earnings.
So what:On a GAAP basis, revenue came in at $127.4 million, up slightly from the $123.8 million that was recorded in the year-ago period. However, the second quarter last year included a $33.6 million one-time revenue bump from terminating its marketing agreement with Takeda Pharmaceuticals. Reported non-GAAP revenue excludes that gain, and came in at $132.5 million for the quarter, which was up 48% when compared to the year-ago period. That number compares favorably to the$128.5 million in revenue that Wall Street had projected.
Fully appreciating the company's bottom line requires some adjusting. On a GAAP basis, AMAG reported a loss of $596,000, or $0.02 per share, compared to a profit of $33.26 million, or $0.82 per share, in the year-ago period. However, using non-GAAP numbers, net income wouldhave been $50.3 million, or $1.45 per share, up 29% over the $1.12 recorded in the previous year. That number blew past the $1.20 that analysts projected.
The good news wasn't just limited to the headline numbers, either. Here's a quick rundown of other positive developments from the quarter.
- Sales of Makena, AMAG's top-selling drug, designed to prevent preterm birth, grew 23%, to $78.4 million, on the back of volume gains. Market share for the drug is now 37%, up 400 basis points over last quarter.
- Feraheme sales grew 18%, toa record $24.3 million.
- AMAG recently received approval from the FDA in July 2016 for an additional source of supply for its new single-dose, preservative-free formulation of Makena.
- The company repurchased $20 million worth of its stock, and repaid $8.8 million in debt.
Management even reaffirmed its full-year guidance, which calls for non-GAAP revenue between $520 million to $570 million, and net income of $195 million to $225 million, or $5.64 to $6.50 per share.
Yet, despite all of that, shares stillsold off, even though they are trading for less than four times next year's earnings estimates.
Now what:AMAG's share price shows that Wall Street doesn't have a lot of faith in the company's ability to continue to grow from here. In fact, analysts are currently projecting AMAG's profits will decline by almost 2% annually over the next five years. That could be because of AMAG's heavy reliance on Makena for the bulk of its revenue, which could prove to be a headwind if generic competition starts to eat away market share.
AMAG is certainly aware of that risk, which is why it is pushing for new formulations of Makena to help protect market share. In fact, the company completed a pilot pharmacokinetic study during the quarter for its new Makena subcutaneous auto-injector device. The goal is to win orphan-drug exclusivity for the drug/device combination, which could provide it with seven years of market exclusivity. AMAG plans on having the filing in the FDA's hands by the second quarter of 2017.
Given the sell-off today and the company's low valuation, it's obvious that Wall Street doesn't like the company's chances of success. It might make sense for risk-tolerant investors who feel otherwise to use this sell-off as a chance to open a position, or add to one that's already been started.
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Brian Feroldi has no position in any stocks mentioned.Like this article? Follow him onTwitter where he goes by the handle@Longtermmindsetor connect with him on LinkedIn to see more articles like this.
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