What happened

After the company reported third-quarter financial results that failed to impress, shares in AMAG Pharmaceuticals (NASDAQ:AMAG) lost 12.7% of their value on Thursday.

So what

AMAG Pharmaceuticals has a problem on its hands. Its best-selling drug, Makena, has lost exclusivity; generic alternatives are starting to cut away at its sales, despite the company's efforts to move patients to a new subcutaneous auto-injector.

A man slapping his forehead, in front of a chart of a declining share price


In the third quarter, management reported revenue of $122.2 million, down from $124.3 million in the third quarter of last year because Makena revenue declined 18% to $80.2 million. The company was able to offset some of Makena's weakness with sales growth for its other drugs, Feraheme and MuGard; their combined revenue grew 41% to $37.1 million. Sales of Intrarosa, which launched in Q3 2017, were $4.9 million in the period.

The revenue failed to overcome $141.6 million in operating expenses in the quarter, so the company reported a net loss of $64.7 million.

Now what

AMAG Pharmaceuticals did make some progress on its balance sheet in the quarter, but it still owes a lot of money. This summer, it sold its Cord Blood Registry business for $530 million, which it used to pay off $475 million of high-yield debt. That move eliminates about $40 million in annual interest expense.

Nevertheless, AMAG Pharmaceuticals still has $341 million in total short- and long-term debt -- and that debt, plus ongoing losses, makes the $427.5 million in cash on its books less compelling. The company is guiding for full-year 2018 revenue of $470 million to $490 million, and an operating loss of $62 million to $72 million.

Until we get more insight into how 2019 sales will shape up, given the risk to Makena's sales, I'd wait on the sidelines on this stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.