The higher quarterly net loss is attributable to a 39% increase in year-over-year operating expenses. Research and development expenses rose 43% as the company is working on expanding its manufacturing capabilities and development infrastructure. Selling, general and administrative expenses also increased 37% for commercialization of anti-anemia drug candidate, Feraheme.

Since Feraheme is a very important product for the company, we expect investor focus to remain on the initial sales ramp of the product.

As a reminder, the US Food and Drug Administration (FDA) granted marketing approval to Feraheme injection on June 30. AMAG officially launched Feraheme in the U.S. on July 13. It is an intravenous iron-replacement therapy used to fight anemia in patients with chronic kidney disease. The drug can be used by patients irrespective of dialysis.

Wholesalers and specialty distributors will primarily distribute Feraheme in the U.S. AMAG will use its commercial organization, consisting of approximately 150 seasoned professionals which includes an 80-person specialized sales force, to market the drug. For every 510 mg vial, the wholesale acquisition cost (WAC) of Feraheme is $396.78.

Iron deficiency anemia is a significant problem in patients with chronic kidney disease and often goes undiagnosed and undertreated. We believe peak sales of Feraheme could reach $500 million.

Although we are pleased to hear about Feraheme’s approval and subsequent launch, stiff competition awaits AMAG’s drug in the IV iron replacement therapy market. Fresenius Medical Care AG & Co.’s (FMS) Venofer and Watson Pharmaceuticals Inc. (WPI)-Sanofi-Aventis’ (SNY) Ferrlecit are AMAG’s main competitors in this market.

We believe that Feraheme's safety and efficacy profile should help it gain share in the market and advice investors to Buy the stock at the current price.

As a reminder, in the month of June, a study by the European Association for the Study of Diabetes observed that Lantus (generic name insulin glargine) increases the risk of cancer in diabetics taking the drug. The study, carried out on 127,000 patients in four European countries found that out of every 100 patients using Lantus for about 1 1/2 years, one additional person developed cancer.

But the FDA was not convinced with the study as patients were not studied long enough to substantiate the risk. Accordingly, it planned to review the safety data of Lantus including the new study. The FDA has declared that it will continue its discussions with the company to decide the requirement of any additional safety and effectiveness trial. Sanofi, on its part decided to extend any kind of help to the FDA to resolve this issue. The recommendation of the experts all the more emphasizes FDA’s viewpoint that no definite conclusion can be drawn from the studies.

Lantus is an important product for Sanofi, its third-best-selling drug and a key growth driver as its other key drugs, blood thinners Plavix and Lovenox are likely to face possible generic competition. Lantus recorded revenue of $3.5 billion in 2008, an increase of 28% over last year.

Earlier this month, Sanofi announced the result of a 5 year study (on 1024 patients) of Lantus versus NPH insulin on progression of retinopathy (a major cause of blindness among diabetic patients) in patients with type 2 diabetes. According to the study, overall survival along with the effect of retinopathy was similar in both the groups.

Adverse publicity for Lantus could turn away patients to other drugs such as Novo Nordisk’s (NVO) long-acting insulin Levemir, Amylin’s (AMLN) Byetta and Merck’s (MRK) Januvia and Janumet hitting its topline.  We have a Hold recommendation on Sanofi.

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Here are highlights from Wednesday's Analyst Blog:

Glaxo's Avandia Issue Priced-In

Sales of Avandia have been significantly negatively impacted due to safety concerns, but it appears they have recently stabilized. We believe that sales are now at, or very near, their bottom. While sales of Avandia have been cut in half from their peak level reached in 2006, it remains a very important product to GlaxoSmithKline plc (GSK), and stabilizing sales would be very good news.

Other than the Avandia issue, Glaxo still has to deal with generic erosion of a number of drugs, including Coreg IR, Flonase, Wellbutrin XR, Lamictal, Requip, Valtrex and Imitrex. On the positive front, we continue to be impressed by the vaccine franchise and look forward to the contribution from Rotarix, Promacta and Synflorix. And although we were disappointed by the recent delay with Cervarix, we remain confident that it will eventually be a big growth driver for the vaccine business. Advair sales should see some incremental revenue growth from the recent launch in Japan.

General Growth Rallies Again

Shares of General Growth Properties (GGP) were up 8% yesterday, after jumping 35% Monday, despite two down days for the sector. Volumes have spiked as well, 46 million shares were traded yesterday and 25 million today, vs. three months daily average of about 8 million shares.

GGP issued a statement after an inquiry from the NYSE which stated that the company is "unaware of any corporate developments that might explain the unusual market activity." GGP has been in continuous negotiations with bond holders and lenders to try to extend debt maturities and modify payments. Deadlines continue to be extended as not all bondholders have agreed to the company's proposed modifications.

Agria Sales to Fall

Agria Corp's (GRO) financial performance through the first nine months has been hampered by significantly lower seed prices and a disruption in production of sheep-breeding products. We would not categorize the cause of either to be inherent fundamental issues that would be expected to affect sales for the long-term.

Sheep-breeding revenue should continue to rebound in the fourth quarter and into 2009. While corn seed prices will likely remain depressed until the excess inventory in the market is consumed, we do not expect this to be a protracted event.

Regis Corp. Not Cutting It

Sell-rated Regis Corporation (RGS), the largest beauty salon company in the country, announced this morning that third quarter revenues declined 2.5% versus the prior year. Excluding the deconsolidation of its European salon operations, revenues would have been down 1.7%.

More importantly, in our opinion, is the fact that same-store-sales decreased 4.5% year-over-year.

With more than 12,800 system-wide locations throughout the world, Regis is substantially larger than peers such as Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA). The company has interests in a wide range of salon concepts, including higher-end salons such as the Regis brand, which has an average ticket of $37, and lower-cost brands such as MasterCuts and Supercuts, which have average tickets of $17 and $14, respectively.

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