Why AMAG Pharmaceuticals, Inc. Shares Slumped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of AMAG Pharmaceuticals (NASDAQ: AMAG  ) , a biopharmaceutical company focused on developing therapies to treat iron deficiency anemia, or IDA, fell as much as 15% in very early trading after announcing the receipt of a complete response letter from the Food and Drug Administration for its supplemental new drug application for Feraheme.

So what: AMAG's goal had been to expand the proposed indications of Feraheme from chronic kidney disease to all adult iron deficiency anemia patients, but the FDA's CRL put a stop to that. According to the press release, the FDA noted that there is not currently enough trial information to determine the safety and efficacy of the proposed new indication of treating all adult IDA. The FDA suggested AMAG run additional trials if it wishes to gain this additional indication with a focus on testing for hypersensitivity/anaphylaxis and cardiovascular events to determine safety, and evaluating different dosing options and/or administration options, as well. AMAG plans to have further discussions with the FDA to determine its next step forward with Feraheme.

Now what: This is certainly not good news for AMAG, but it's also not a death blow, either, since it already has Feraheme on the market for the CKD indication, and that alone could affect as many as 20 million adults in the U.S. Clearly, an all-IDA indication would be more favorable, because you're talking about a much broader treatment audience, but the solution of running additional trials to resolve the FDA's curiosity seems well attainable. It could be a while before AMAG lives up to its current $446 million valuation (as of this writing), but tight cost controls, and steadily growing Feraheme sales, make this a watchlist-worthy company.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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