FDA review of troubled drug could hobble AMAG in proxy fight with activist investor

Amid a proxy fight with an activist investor in the ranks, AMAG has a message for its shareholders: Don’t worry, we’ve got a plan. But with the FDA potentially pulling a hoped-for prospect off the market, mark another notch in the activists’ belt.

On Oct. 29, an FDA advisory committee will review AMAG’s marketing application for premature birth med Makena after the drugmaker’s confirmatory trial showed the drug did not significantly reduce the risk of recurrent preterm birth or improve neonatal mortality over placebo.

The review for Makena, which AMAG picked up in 2014 as part of a $675 million deal with Lumara Health, could be the first step in pulling the drug off the market after its initial approval in 2011.

Makena, initially developed by KV Pharmaceuticals, is no stranger to controversy. Prior to its accelerated approval by the FDA in 2011, the drug was sold for under $20 through compounding pharmacists, which also make the drug’s progesterone treatment competitors.

After approval—when compounding was no longer allowed by the FDA—KV listed Makena at $1,500 per injection. The public outrage that followed pushed the FDA to allow compounded competitors of the drug on the market to keep prices low. Makena was eventually sold off to Lumara after KV filed for Chapter 11 in 2012 following an unsuccessful suit against the FDA to block its rivals.

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The FDA review is bad news for Makena’s chances, but it could prove catastrophic to the status quo at AMAG as activist investor Caligan Partners seeks shareholder support to take over four seats on the company’s board.

On Monday, AMAG asked investors to spurn Caligan’s “self-serving and reckless” attempt to place its handpicked nominees on the board—including the firm’s cofounder, David Johnson. In its shareholder letter, AMAG said Caligan’s vote of no confidence in the board stemmed from bad math on the drugmaker’s performance and a misunderstanding of its five-year strategic plan.

“Caligan’s suggestions represent a dramatic and fundamental misunderstanding of how value is created in the pharmaceutical industry and the value in AMAG’s business model and strategic plan,” the company said in an SEC filing.

Caligan—which acquired 10.3% of AMAG’s shares in early August—aimed to push the company to find an international marketing partner for its iron deficiency med Feraheme and investigate opportunities for its women’s health business. Earlier this month, Caligan also floated the idea of splitting up the drugmaker.

In a Thursday response to AMAG’s shareholder letter, Johnson cited its loss of $1.1 billion in shareholder value over the last seven years as a sign that AMAG’s current leadership was out of touch with its investors.

“The only constituency that has the right to be upset in this story are the long-suffering shareholders, for whom this Board has no apparent regard,” Johnson wrote. “This board believes shareholders should be patient and quiet. For exactly how long does the Board expect its shareholders to remain silent?”