Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________ ______
FORM 10-K
(Mark One)
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2018
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-10865
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12749450&doc=16
AMAG PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
04-2742593
(I.R.S. Employer
Identification No.)
1100 Winter Street
Waltham, Massachusetts
(Address of Principal Executive Offices)
02451
(Zip Code)
(617) 498-3300
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
 
 
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
Preferred Share Purchase Rights
 
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨ 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x 
The aggregate market value of the registrant’s voting stock held by non-affiliates as of June 29, 2018 was approximately $664.2 million based on the closing price of $19.50 of the Common Stock of the registrant as reported on the NASDAQ Global Select Market on such date. As of February 25, 2019, there were 34,713,130 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed in connection with the solicitation of proxies for the Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.



AMAG PHARMACEUTICALS, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2018
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

PART I

Except for the historical information contained herein, the matters discussed in this Annual Report on Form 10-K may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Annual Report on Form 10-K terminology such as “may,” “will,” “could,” “should,” “would,” “expect,” “anticipate,” “continue,” “believe,” “plan,” “estimate,” “intend” or other similar words and expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Examples of forward-looking statements contained in this report include, without limitation, statements regarding the following:
our plans regarding the growth potential of our portfolio and our ability to identify additional product candidates;
beliefs regarding the expenses, challenges and timing of our preclinical studies and clinical trials, including expectations regarding the clinical trial results for ciraparantag;
beliefs regarding our commercial strategies, including the impact of our efforts to convert current Makena IM prescribers to the Makena auto-injector and the timing of the commercial launch of Vyleesi;
our estimates and beliefs regarding the market opportunities for each of our products and product candidates;
beliefs about and expectations for our commercialization, marketing and manufacturing of our products and product candidates (which may be conducted by third parties), if approved, including plans to raise awareness and education of dyspareunia, VVA and HSDD and the results of such efforts;
the timing and amounts of milestone and royalty payments;
expectations and plans as to recent and upcoming regulatory and commercial developments and activities, including requirements and initiatives for clinical trials and post-approval commitments for our products and product candidates, and their impact on our business and competition;
expectations for our intellectual property rights covering our product candidates and technology and the impact of generics and other competition could have on each of our products and our business generally, including the timing and number of generic entrants;
developments relating to our competitors and our industry, including the impact of government regulation;
expectations regarding third-party reimbursement and the behaviors of payers, healthcare providers, patients and other industry participants, including with respect to product price increases and volume-based and other rebates and incentives;
plans regarding our sales and marketing initiatives, including our contracting, pricing and discounting strategies and efforts to increase patient compliance and access;
expectations regarding the contribution of revenues from our products to the funding of our on-going operations and costs to be incurred in connection with revenue sources to fund our future operations;
expectations regarding customer returns and other revenue-related reserves and accruals;
expectations as to the manufacture of drug substances, drug and biological products and key materials for our products and product candidates;
the expected impact of recent tax reform legislation and estimates regarding our effective tax rate and our ability to realize our net operating loss carryforwards and other tax attributes;
the impact of accounting pronouncements;
expectations regarding our financial performance and our ability to implement our strategic plans for our business;
estimates and beliefs related to our 2022 Convertible Notes and the manner in which we intend or are required to settle the 2022 Convertible Notes;
estimates, beliefs and judgments related to the valuation of certain intangible assets, goodwill, contingent consideration, debt and other assets and liabilities, including our impairment analysis and our methodology and assumptions regarding fair value measurements; and
beliefs regarding the impact of our recent restructuring initiative, including the impact of the combination of our women’s and maternal health sales forces and the related reduction in head count.

Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated or indicated in any forward-looking statements. Any forward-looking statement should be considered in light of the factors discussed in Part I, Item 1A below under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the U.S. Securities and Exchange Commission, to publicly update or revise any such statements to reflect any change in company expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

AMAG Pharmaceuticals® and Feraheme® are registered trademark of AMAG Pharmaceuticals, Inc. VyleesiTM is a trademark of AMAG Pharmaceuticals, Inc. MuGard® is a registered trademark of Abeona Therapeutics, Inc. Makena® is a registered trademark of AMAG Pharma USA, Inc. Intrarosa® is a registered trademark of Endoceutics, Inc. Other trademarks referred in this report are the property of their respective owners.



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ITEM 1. BUSINESS:
Overview

AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a pharmaceutical company focused on bringing innovative products to patients with unmet medical needs by leveraging our development and commercial expertise to invest in and grow our pharmaceutical products across a range of therapeutic areas. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia management and cancer supportive care, including Feraheme® (ferumoxytol injection) for intravenous (“IV”) use, Makena® (hydroxyprogesterone caproate injection), Intrarosa® (prasterone) vaginal inserts and MuGard® Mucoadhesive Oral Wound Rinse. In addition to our marketed products, our portfolio includes three product candidates, Vyleesi™ (bremelanotide), which is being developed for the treatment of hypoactive sexual desire disorder (“HSDD”) in pre-menopausal women, AMAG-423 (digoxin immune fab (ovine)), which is being studied for the treatment of severe preeclampsia, and ciraparantag, which is being studied as an anticoagulant reversal agent.
On January 16, 2019, we acquired ciraparantag with our acquisition of Perosphere Pharmaceuticals Inc. (“Perosphere”), a privately-held biopharmaceutical company pursuant to an Agreement and Plan of Merger (the “Perosphere Agreement”). Ciraparantag is an anticoagulant reversal agent in development for patients treated with novel oral anticoagulants (“NOACs”) or low molecular weight heparin (“LMWH”) when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. For additional information, see below under the heading “Collaboration, License and Other Strategic Agreements - Ciraparantag.

On August 6, 2018, we completed the sale of our wholly-owned subsidiary, CBR Acquisition Holdings Corp, and the Cord Blood Registry® (“CBR”) business to GI Partners (“GI”), a private equity investment firm, pursuant to the June 14, 2018 Stock Purchase Agreement between us and affiliates of GI. We received $519.3 million in cash at closing and recognized a gain of $87.1 million on the sale during the year ended December 31, 2018. Since August 2015, we had provided services related to the preservation of umbilical cord blood stem cell and cord tissue units operated through CBR. For additional information, see Note C, “Discontinued Operations and Held for Sale, to our consolidated financial statements included in this Annual Report on Form 10-K.

We intend to continue to expand the impact of our current and future products for patients by delivering on our growth strategy, which includes collaborating on and acquiring promising therapies at various stages of development, and advancing them through the clinical and regulatory process to deliver new treatment options to patients. Our primary sources of revenue are from sales of Makena, Feraheme and Intrarosa.

Our common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol “AMAG.”

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Products and Product Candidates

The following table summarizes the current uses and, subject to regulatory approval, potential uses of the products and product candidates we own or to which we have rights, their current regulatory status and the nature of our rights. Currently, we market and sell our pharmaceutical products solely in the U.S.
Products and Product Candidates
 
Uses and Potential Uses
 
Regulatory Status
 
Nature of Rights
Feraheme®
(ferumoxytol injection)
 
IV iron replacement therapeutic agent for the treatment of iron deficiency anemia (“IDA”) in adult patients (a) who have intolerance to oral iron or have had unsatisfactory response to oral iron or (b) who have chronic kidney disease (“CKD”).
 
Approved and marketed.
 
Own worldwide rights.
 
 
 
 
 
 
 
Makena®
(hydroxyprogesterone caproate injection)
(Intramuscular presentations (5 mL multi-dose vial and 1 mL single-dose preservative-free vial) and auto-injector presentation)

 
A progestin indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a history of singleton spontaneous preterm birth.
 
Approved and marketed.
 
Exclusively license rights to auto-injector device for use in the Makena subcutaneous auto-injector presentation (the “Makena auto-injector”) from Antares Pharma, Inc. (“Antares”).

Granted Prasco, LLC ("Prasco") an exclusive, non-sublicensable, nontranferable license to purchase, distribute and sell a generic version of Makena in the U.S. (“the Makena authorized generic”).
 
 
 
 
 
 
 
Intrarosa®(prasterone) vaginal inserts
 
A steroid indicated for the treatment of moderate to severe dyspareunia, a symptom of vulvar and vaginal atrophy (“VVA”), due to menopause.
 
Approved and marketed.
 
Exclusively license rights to develop and commercialize Intrarosa in the U.S. for the treatment of VVA and female sexual dysfunction (“FSD”) from Endoceutics, Inc. (“Endoceutics”), subject to certain rights retained by Endoceutics.
 
 
 
 
 
 
 
MuGard® Mucoadhesive Oral Wound Rinse
 
Management of oral mucositis/stomatitis and all types of oral wounds.
 
Cleared and marketed.
 
Exclusively license rights to develop and sell MuGard in the U.S. from Abeona Therapeutics, Inc. (“Abeona”).
 
 
 
 
 
 
 
Vyleesi™ (bremelanotide)
(Auto-injector device)
 
An investigational product designed to be an on demand therapy for the treatment of HSDD in pre-menopausal women.
 
New Drug Application (“NDA”) accepted in June 2018. Prescription Drug User Fee Act (“PDUFA”) date is June 23, 2019.
 
Exclusively license rights to research, develop and sell Vyleesi in North America from Palatin Technologies, Inc. (“Palatin”).
 
 
 
 
 
 
 
AMAG-423 (digoxin immune fab (ovine))
 
A polyclonal antibody in development for the treatment of severe preeclampsia in pregnant women.
 
Phase 2b/3a trial ongoing. Received Fast Track and orphan drug designations.
 
Own worldwide rights.
 
 
 
 
 
 
 
Ciraparantag
 
A small molecule anticoagulant in development as a reversal agent for patients treated with NOACs or LMWH when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding.
 
Finalizing Phase 2 trials and plan to initiate Phase 3a trial in the second half of 2019. Received Fast Track designation.
 
Own worldwide rights.



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Feraheme

Overview

Feraheme received approval from the U.S. Food and Drug Administration (the “FDA”) in June 2009 for the treatment of IDA in adult patients with CKD. In February 2018, the FDA approved the supplemental New Drug Application (“sNDA”) to expand the label to include all eligible adult IDA patients who have intolerance to oral iron or have had unsatisfactory response to oral iron in addition to patients who have CKD. With the expanded Feraheme label, we have seen and expect to continue to see increased utilization within hematology and oncology clinics and hospitals, and may also see incremental usage within gynecologists and gastroenterologists. In 2018, sales of Feraheme accounted for approximately 28% of our total net revenues.

The expanded Feraheme label was supported by two positive pivotal Phase 3 trials, which evaluated Feraheme versus iron sucrose or placebo in a broad population of patients with IDA and positive results from a third Phase 3 randomized, double-blind non-inferiority trial that evaluated the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension with Feraheme compared to Injectafer® (ferric carboxymaltose injection) (the “Feraheme comparator trial”). The Feraheme comparator trial demonstrated comparability to Injectafer® based on the primary composite endpoint of the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension (Feraheme incidence 0.6%; Injectafer® incidence 0.7%). Adverse event rates were similar across both treatment groups; however, the incidence of severe hypophosphatemia (defined by blood phosphorous of <0.2 mg/dl at week 2) was less in the patients receiving Feraheme (0.9% of patients) compared to those receiving Injectafer® (50.8% of patients).

Iron Deficiency Anemia

Currently there are two common methods of iron therapy used to treat IDA: oral iron supplements and IV iron. Oral iron is the first-line iron replacement therapy for most physicians. However, oral iron supplements are poorly absorbed and not well tolerated by some patients, which may adversely impact their effectiveness, and are associated with certain side effects, such as constipation, diarrhea, and cramping, that may adversely affect patient compliance in using such products. In addition, it can take an extended time for hemoglobin levels to improve following the initiation of oral iron treatment, and even then the targeted hemoglobin levels may not be reached. Conversely, iron given intravenously allows larger amounts of iron to be delivered to patients in a shorter time frame while avoiding many of the side effects and treatment compliance issues associated with oral iron, and can result in faster rises in hemoglobin levels. We believe that IV iron is underutilized in IDA patients, and thus a significant opportunity remains to grow the market for IV iron in this patient population.
IDA is prevalent in many different patient populations. For many of these patients, treatment with oral iron is unsatisfactory or is not tolerated. It is estimated that approximately five million people in the U.S. have IDA and we estimate that a small fraction of the patients who are diagnosed with IDA regardless of the underlying cause are currently being treated with IV iron. We estimate that the size of the total 2018 U.S. non-dialysis IV iron replacement therapy market was approximately 1.3 million grams, including patients with IDA due to CKD, gastrointestinal diseases or disorders, inflammatory diseases, chemotherapy-induced anemia and abnormal uterine bleeding (“AUB”).

Chronic Kidney Disease: CKD is a progressive condition that leads to chronic and permanent loss of kidney function. It contributes to the development of many complications, including anemia, hypertension, fluid and electrolyte imbalances, acid/base abnormalities, bone disease and cardiovascular disease. Anemia, a common condition among CKD patients, is associated with cardiovascular complications, decreased quality of life, hospitalizations, and increased mortality. Anemia can develop early during the course of CKD and worsens with advancing kidney disease.

Gastrointestinal Disease: It is estimated that among IDA patients referred to gastroenterologists, the rate of gastrointestinal pathology was found to be approximately 40% - 80%. IDA in patients with gastrointestinal diseases is likely caused by blood loss and/or the inadequate intake or absorption of iron. Oral iron has been used to treat IDA in patients with gastrointestinal diseases, but its efficacy is variable due to inconsistent bioavailability and absorption, the high incidence of gastrointestinal side effects and patient noncompliance.

Cancer and chemotherapy-induced anemia: IDA is also common in patients with cancer, and it is estimated that 32% - 60% of cancer patients have iron deficiency, most of whom are anemic. Iron supplementation through both oral and IV administration plays an important role in treating anemia in cancer patients. While there may be some differences in the underlying causes of anemia and iron deficiency in cancer patients who are receiving chemotherapy and those who are not, patients in both categories may develop IDA due to blood loss and/or the inadequate intake or absorption of iron. Oral iron has been used to treat IDA in cancer patients, but its efficacy is variable due to inconsistent bioavailability and absorption, a high incidence of gastrointestinal side effects, potential interactions with other

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treatments, and patient noncompliance. IV iron has been shown in clinical trials to be well tolerated in the cancer patient population in both patients who are receiving chemotherapy and those who are not.

Abnormal Uterine Bleeding: IDA is commonly associated with AUB, which is defined as menstrual flow outside of normal volume, duration, regularity, or frequency. AUB can result from multiple underlying causes, including uterine abnormalities, blood disorders, pregnancy, intrauterine devices, and certain medications. IDA in patients with AUB, regardless of the cause, requires treatment with iron supplementation, either by oral or IV administration.

Post-Approval Commitments for Feraheme

As part of our post-approval Pediatric Research Equity Act (“PREA”) requirement to support pediatric labeling of Feraheme for the treatment of CKD, we had initiated a randomized, active-controlled pediatric study of Feraheme for the treatment of IDA in pediatric CKD patients. During 2015, we suspended this trial due to difficulty in enrollment. In December 2016, we met with the FDA to advance the development of a plan in order to satisfy this post-approval commitment for Feraheme and following continued interactions with the FDA regarding the adequacy of our proposed protocol, we amended the protocol and initiated a new pediatric study in 2018. Further, as part of our post-approval PREA requirement to support pediatric labeling of Feraheme for the treatment of IDA for the broader label, we submitted a final protocol to the FDA in mid-2018 with the final report submission due to the FDA in November 2022.
Makena

Overview
Makena is indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a history of singleton spontaneous preterm birth. We acquired the rights to Makena in connection with our acquisition of Lumara Health Inc. (“Lumara Health”) in November 2014.
Makena was approved by the FDA in February 2011 as an intramuscular (“IM”) injection (the “Makena IM product”) packaged in a multi-dose vial and in February 2016 as a single-dose preservative-free vial. The orphan drug exclusivity period that was granted to the Makena IM product in 2011 expired in February 2018. In February 2018, the Makena auto-injector was approved by the FDA for administration via a pre-filled subcutaneous auto-injector, a drug-device combination product. The Makena auto-injector offers an alternative administration option for patients and providers and was designed with features, such as a shorter, thinner, non-visible needle compared to the Makena IM product, to help address some of the known barriers to treatment of recurrent preterm birth, including the lack of patient acceptance and adherence. Our commercial strategy for Makena currently focuses on driving awareness of the availability and attributes of the Makena auto-injector and converting current IM prescribers to the Makena auto-injector.
In July 2018, simultaneously with the launch of the first generic competitor to Makena, we launched our own authorized generic of both the single- and multi-dose vials through our generic partner, Prasco. As a result of this partnership, we are able to provide patients and healthcare providers with access to therapeutically equivalent versions of the branded Makena IM injection. Currently, there are two generic competitors in the market in addition to the Makena authorized generic product, and we expect additional generic entrants to enter the market in 2019 to compete against both the 1ml and 5ml presentations.
Makena is administered weekly by a healthcare professional with treatment beginning between 16 weeks and 20 weeks and six days of gestation and continuing until 36 weeks and six days of gestation or delivery, whichever happens first. The most common side effects of Makena IM product include injection site reactions (pain, swelling, itching, bruising, or a hard bump), hives, itching, nausea, and diarrhea. The most common side effect reported after a single dose of the Makena auto-injector in healthy post-menopausal women was injection site pain. We currently sell Makena primarily to specialty pharmacies, specialty distributors, and pharmacies which, in turn, sell Makena to healthcare providers, hospitals, government agencies and integrated delivery networks. In 2018, sales of Makena, including the Makena authorized generic, accounted for approximately 68% of our total net revenues.
Preterm Birth
Makena is a progestin whose active ingredient is hydroxyprogesterone caproate (“HPC”), which is a synthetic chemical structurally related to progesterone. Progestins, such as HPC, and progesterone belong to a class of drugs called progestogens. Progestogens have been studied to reduce preterm birth and have shown varying results depending upon the subjects enrolled. The Society for Maternal Fetal Medicine (the “SMFM”) Publications Committee published clinical guidelines for the use of progestogens to reduce the risk of preterm birth in the American Journal of Obstetrics and Gynecology in May 2012, and which

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were reaffirmed in January 2017. The SMFM Clinical Guidelines recommend the use of an IM HPC injection to reduce the risk of recurrent preterm birth for clinically indicated patients. Further, in its January 2017 reaffirmation of the 2012 SMFM Clinical Guidelines, the SMFM stated that vaginal progesterone should not be considered a substitute for HPC in women with a history of spontaneous preterm birth.
Preterm birth is defined as a birth prior to 37 weeks of pregnancy. According to the Centers of Disease Control and Prevention (the “CDC”), preterm birth affected nearly 400,000 babies born in the U.S. in 2016, or one of every ten infants, with approximately 70% considered late preterm births. In the CDC’s September 2017 National Center for Health Statistics Report, it noted that the preterm birth rate rose in 2016 for the second straight year and attributed the rise primarily to an increase in late preterm births, defined as a birth between 34 and 36 weeks of pregnancy. Although the causes of preterm birth are not fully understood, certain women are at a greater risk for preterm birth, including those who have had a previous preterm birth, are pregnant with multiples or have certain uterine or cervical problems. High blood pressure, pregnancy complications (such as placental problems) and certain other health or lifestyle factors may also be contributing factors. Makena is indicated only for use in women who have a history of singleton spontaneous preterm birth who are pregnant with a single baby, which accounts for approximately 140,000 pregnancies annually in the U.S.

Preterm birth can increase the risk of infant death and can also result in serious long-term health issues for the child, including respiratory problems, gastrointestinal conditions, cerebral palsy, developmental delays, and vision and hearing impairments. According to a 2007 report by the Institute of Medicine (US) Committee on Understanding Premature Birth and Assuring Healthy Outcome, the annual societal economic cost associated with preterm birth is at least $26.2 billion and includes medical and healthcare costs for the baby, labor and delivery costs for the mother, early intervention and special education services, and costs associated with lost work and pay.

Post-Approval Commitments for Makena

Makena was approved under the provisions of the FDA’s “Subpart H” Accelerated Approval regulations. The Subpart H regulations allow certain drugs, for serious or life-threatening conditions, to be approved on the basis of surrogate endpoints or clinical endpoints other than survival or irreversible morbidity. As a condition of approval under Subpart H, the FDA required that Makena’s sponsor perform certain adequate and well-controlled post-approval clinical studies to verify and describe the clinical benefit of Makena as well as fulfill certain other post-approval commitments. We have recently completed enrollment and follow up of the confirmatory clinical study of Makena and expect to release the data by the end of the first quarter of 2019. A follow-up study of the babies born to mothers from the efficacy and safety clinical study is currently ongoing. We expect to complete the follow up study by July 2020.

Intrarosa

Overview

In February 2017, we entered into a license agreement (the “Endoceutics License Agreement”) with Endoceutics pursuant to which Endoceutics granted us the U.S. rights to Intrarosa, an FDA-approved product for the treatment of moderate to severe dyspareunia (pain during sexual intercourse), a symptom of VVA, due to menopause. Intrarosa was approved by the FDA in November 2016 and was launched commercially in July 2017.

Intrarosa is the only FDA-approved vaginal non-estrogen treatment indicated for the treatment of moderate to severe dyspareunia, a symptom of VVA, due to menopause. Intrarosa contains prasterone, a synthetic form of dehydroepiandrosterone (“DHEA”), which is an inactive endogenous (i.e. occurring in the body) sex steroid. Prasterone is converted by enzymes in the body into androgens and estrogens to help restore the vaginal tissue as indicated by improvements in the percentage of superficial cells, parabasal cells, and pH. The mechanism of action of Intrarosa is not fully established. The effectiveness of Intrarosa on moderate to severe dyspareunia in post-menopausal women was examined in two primary 12-week placebo-controlled efficacy trials. Women who used Intrarosa in these trials experienced a significant reduction in moderate to severe dyspareunia, as well as statistically significant improvements in the percentage of vaginal superficial cells, parabasal cells and vaginal pH. In these trials, vaginal discharge and atypical pap smears were the most common adverse reactions. Intrarosa is contraindicated in women with undiagnosed abnormal genital bleeding. The label for Intrarosa contains a precaution that it has not been studied in women with a history of breast cancer.


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Vulvar and Vaginal Atrophy and Dyspareunia

In the U.S., there are an estimated 64 million post-menopausal women, with approximately half, or 32 million, of those women suffering from symptoms of VVA. Of the 32 million women who suffer from symptoms of VVA, we estimate there are approximately 20 million women in the U.S. who suffer from dyspareunia, a symptom of VVA, the majority of which we believe suffer from moderate to severe dyspareunia. We estimate that of those women, only 1.7 million are currently being treated with prescription therapy. The Women’s Health Initiative, a long-term national health study, which focused on strategies related to estrogen replacement therapy in post-menopausal women, led to class labeling for all estrogen-containing products, including a boxed safety warning. Intrarosa is not subject to a boxed warning nor any limitations to duration of use as are all other currently approved prescription products to treat VVA.

Vyleesi

Overview

In January 2017, we entered into a license agreement (the “Palatin License Agreement”) with Palatin pursuant to which we acquired Vyleesi, an investigational product designed to treat acquired generalized HSDD in pre-menopausal women. In June 2018, the FDA accepted the Vyleesi NDA. The current PDUFA date for completion of FDA review of the Vyleesi NDA is June 23, 2019, and if approved on that date, we expect to launch Vyleesi in the second half of 2019. In November 2018, as part of our discussions with the FDA regarding its review of the NDA submission for Vyleesi, the FDA requested additional data assessing 24-hour ambulatory blood pressure with short-term daily use of Vyleesi. This Phase 1 study is ongoing and is being conducted in premenopausal healthy volunteers. We believe that this study can be conducted and data submitted prior to the June 23, 2019 PDUFA date.

Vyleesi, a melanocortin 4 receptor agonist is designed to be an on demand therapy used in anticipation of sexual activity and self-administered by premenopausal women with HSDD in the thigh or abdomen via a single-use subcutaneous auto-injector. Two identically-designed Phase 3 studies evaluating the safety and efficacy of Vyleesi compared to placebo were conducted by Palatin for the treatment of HSDD in pre-menopausal women. Both trials consisted of a 24-week double-blind, placebo-controlled, randomized parallel group core study phase, comparing a subcutaneous dose of 1.75 mg Vyleesi versus placebo, self-administered via an auto-injector, on demand, and patients were equally randomized (1:1 ratio) to either Vyleesi or placebo. The co-primary endpoints for these trials were evaluated using patient self-reported scores from Question One and Two of the Female Sexual Function Index: Desire Domain (“FSFI-D”) and Question 13 from the Female Sexual Distress Scale-Desires/Arousal/Orgasm (“FSDS-DAO”). Women who completed the randomized control core study phase of either study had the option to continue in an ongoing open-label safety extension phase of the study for an additional 52 weeks, which gathered additional data on the safety of long-term and repeated use of Vyleesi. Nearly 80% of patients who completed the randomized portion of the study elected to remain in the open-label portion of the study. All of the patients in the extension study received Vyleesi.
Both studies met the pre-specified co-primary efficacy endpoints of improvement in low sexual desire and decrease in related distress as measured using validated patient-reported outcome instruments. For women taking Vyleesi compared to placebo, the change from baseline in low sexual desire, as measured by the FSFI-D, showed statistically significant improvement with Vyleesi in both median and mean measures of desire in both Phase 3 studies. The median change from baseline was 0.60 vs. 0.00 for both studies, and the mean change from baseline was 0.54 vs. 0.24 (p=0.0002) for one study and 0.63 vs. 0.21 (p<0.0001) for the other study. Likewise, for women taking Vyleesi compared to placebo, the change from baseline in related distress, as measured by the FSDS-DAO Question 13, also demonstrated statistically significant improvement with Vyleesi in both median and mean measures of desire in both Phase 3 studies. The median change from baseline was -1.0 vs. 0.0 for both studies, and the mean change from baseline was -0.7 vs. -0.4 for both studies, with pValues of <0.0001for one study and 0.0053 for the other study. The change in the number of satisfying sexual events, a key secondary endpoint, was not significantly different from placebo in either clinical trial.
In the Phase 3 clinical trials, the most frequent adverse events were nausea, flushing, injection site reactions and headache, which were generally mild-to-moderate in severity and were transient. Approximately 18% of patients discontinued participation in the Vyleesi arm due to adverse events in both studies versus 2% in placebo. The adverse events in the extension portion of the study were consistent with that of the controlled studies described above.

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Female Sexual Dysfunction and Hypoactive Sexual Desire Disorder

FSD is defined as persistent or recurring problems during one or more of the stages of a woman’s sexual response. It is multi-dimensional and can be caused by physiological, psychological, emotional and/or relational factors. FSD can also have a major impact on a woman’s sexual relationships, interpersonal relationships, quality of life, and even their general well-being. HSDD is the most common type of FSD and is characterized by a lack of sexual thoughts and desire for sexual activity, which causes a woman distress or puts a strain on the relationship with her partner, and cannot be accounted for by another medical, physical or psychiatric condition, co-morbidity of another condition or the effects of a medication. Studies suggest that approximately 15 million women in the U.S. are affected by HSDD and approximately 5.8 million of these women are pre-menopausal and have a primary diagnosis of HSDD. Despite one FDA-approved HSDD therapy on the market today for pre-menopausal women, we believe that patient awareness and understanding of the condition is extremely low, and that few women currently seek treatment. HSDD may go undiagnosed due to various factors such as embarrassment or stigma, lack of awareness of low sexual desire as a medical condition or attribution to other external factors, such as stress or fatigue. Market research commissioned by Palatin indicates that 95% of pre-menopausal women suffering from low desire with associated distress are unaware that HSDD is a treatable medical condition. As a result, assuming FDA approval of our NDA for Vyleesi, we expect that the initial focus of our Vyleesi commercialization efforts will be raising awareness and education about the disease for both healthcare professionals and patients with this disorder. During 2018, we launched an unbranded initiative to bring awareness of the HSDD condition to healthcare professionals. We are also working with and funding the Alliance for Advancing Women’s Health, an organization seeking to improve outcomes for women’s sexual health.

AMAG-423

Overview

In September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 (the “Velo Agreement”) with Velo Bio, LLC, a privately-held life sciences company (“Velo”). AMAG-423 is a polyvalent antibody currently in development for the treatment of severe preeclampsia in pregnant women and has been granted both orphan drug and Fast Track designations by the FDA. AMAG-423 is intended to bind to endogenous digitalis-like factors (“EDLFs”) and remove them from the circulation. EDLFs appear to be elevated in preeclampsia and may play an important role in the pathogenesis of preeclampsia. By decreasing EDLFs, AMAG-423 is believed to improve vascular endothelial function and lead to better post-delivery outcomes in affected mothers and their babies.

We have assumed responsibility to complete the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of the future clinical, regulatory and other costs required to pursue FDA approval. Approximately 200 antepartum women with severe preeclampsia between 23 and 32 weeks gestation will be enrolled in the multi-center, randomized, double-blind, placebo-controlled, parallel-group Phase 2b/3a study. We have re-initiated the study as the sponsor, and have begun reactivating the current sites, seeking new sites and, as of January 2019, enrolling new patients. Participants in the study receive either AMAG-423 or placebo intravenously four times a day over a maximum of four days. The study’s primary endpoint is to demonstrate a reduction in the percentage of babies who develop severe intraventricular hemorrhage (bleeding in the brain), necrotizing enterocolitis (severe inflammation of the infant bowels) or death by 36 weeks corrected gestational age between the AMAG-423 and placebo arms. Secondary endpoints include the change from baseline in maternal creatinine clearance, maternal incidence of pulmonary edema during treatment and the period of time between treatment and delivery. In an effort to accelerate enrollment, we intend to increase the number of trial sites, including potentially initiating sites outside of the U.S., and are targeting to complete enrollment of the Phase 2b/3a study by the end of 2019.

Preeclampsia

Preeclampsia is a multi-system disorder that occurs only during pregnancy and the postpartum period and affects both the mother and baby. Preeclampsia is the leading cause of maternal morbidity and mortality and typically develops in women after 20 weeks of pregnancy and is characterized by elevated blood pressure, as well as vascular abnormalities, that can lead to end organ damage, intrauterine growth restriction and premature delivery. Premature delivery can lead to a number of serious health consequences for the infant, including intraventricular hemorrhage or necrotizing enterocolitis. Approximately 140,000 pregnant women in the U.S. are affected by preeclampsia, with approximately 50,000 impacted by severe preeclampsia, a more serious form of the condition that can be life threatening to both the mother and the baby. Severe preeclampsia can result in acute, as well as long-term, complications and a progressive deterioration in the clinical presentation for both the mother and the baby. There are currently no effective or FDA-approved treatments that address the underlying pathophysiology of preeclampsia or severe preeclampsia. The management of severe preeclampsia is focused on medications to address the symptoms, such as antihypertensives for the urgent control of severe hypertension and magnesium sulfate for the prevention of seizures as well as early delivery of the baby.

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Ciraparantag

In January 2019, we acquired Perosphere, a privately-held biopharmaceutical company focused on developing ciraparantag, a small molecule anticoagulant reversal agent in development as a single dose solution that is delivered intravenously to reverse the effects of certain NOACs (Xarelto®(rivaroxaban), Eliquis®(apixaban), and Savaysa®(edoxaban), as well as Lovenox® (enoxaparin sodium injection), a LMWH), when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. Ciraparantag has been granted Fast Track designation by the FDA and we intend to seek orphan drug designation and Breakthrough Therapy designation in 2019.

Warfarin, a vitamin K antagonist, was the first FDA-approved oral anticoagulant and for over 60 years was the only oral anticoagulant used in the U.S. Although warfarin is effective in the prevention of thromboembolism, its use necessitates frequent blood monitoring, dose adjustments and dietary restrictions. The first FDA-approved NOAC was Pradaxa®(dabigatran), which was introduced to the U.S. market in 2010. Since then Xarelto®, Eliquis® and Savaysa® were approved by the FDA as an alternative mechanism of action to warfarin in inhibiting the body’s ability to form blood clots. These NOACs offer similar efficacy to warfarin in reducing thromboembolism but are notably safer with respect to serious bleeding events and do not require monitoring for effectiveness.

The use of NOAC therapy represents the fastest-growing segment of the anticoagulant market in the U.S. with approximately six million patients in the U.S. and nine million patients in certain ex-U.S. countries currently on NOAC and LMWH therapy. In January 2019, the American Heart Association released updated guidelines recommending the use of NOACs over warfarin in the majority of patients with atrial fibrillation. Bleeding is the major complication of anticoagulant treatment, particularly for those patients coming in for emergency surgery or other urgent procedures. Approximately 1.5% to 2.0% of patients on NOACs are at risk for serious bleeding complications each year. Prior to 2015, there were no FDA-approved reversal agents for these anticoagulants. Currently, Praxbind®(idarucizumab) is approved for the reversal of Pradaxa® and AndexXa® (coagulation factor Xa (recombinant), inactivated-zhzo) is approved for the reversal of Eliquis® and Xarelto® and is also in development for the reversal of Savaysa® and Lovenox®.

Ciraparantag has been evaluated in more than 250 healthy volunteers across seven clinical trials. A first in human Phase 1 study evaluated the safety, tolerability, pharmacokinetic, and pharmacodynamic effects of ciraparantag alone and following a single dose of Savaysa®, and another Phase 1 study evaluated the overall metabolism of the drug. Two Phase 1/2 studies evaluated the safety, tolerability, pharmacokinetic, and pharmacodynamic effects related to the reversal of unfractionated heparin and Lovenox® and three Phase 2b randomized, single-blind, placebo-controlled dose-ranging studies evaluated the reversal of Savaysa®, Eliquis®, and Xarelto® to assess the safety and efficacy of ciraparantag, each of which included 12 subjects dosed with ciraparantag. The Phase 2b studies to reverse Xarelto® and Eliquis® are currently ongoing; however, both studies are approximately two-thirds complete, with the low dose cohort expected to finish in the first half of 2019. In these Phase 2b clinical trials, ciraparantag or placebo was administered to healthy volunteers in a blinded fashion after achieving steady blood concentrations of the respective anticoagulant. Pharmacodynamic assessments of whole blood clotting time (“WBCT”), an important laboratory measure of clotting capacity, were sampled frequently for the first hour post study drug dose, and then periodically thereafter out to 24 hours post administration of study drug. Key endpoints in the Phase 2 trials included mean change from baseline in WBCT and the proportion of subjects that returned to within 10% of their baseline WBCT. Subjects in these studies experienced a rapid and statistically significant (p<0.001) reduction in WBCT compared to placebo as early as 15 minutes after the administration of ciraparantag in each of the four studies and the effect was sustained for 24 hours. Moreover, in both the Eliquis® and Xarelto® studies, 100% of subjects in the highest dose cohorts (180 mg of ciraparantag) were responders, as defined by a return to within 10% of baseline WBCT within 30 minutes and sustained for at least six hours. Ciraparantag has been well tolerated in clinical trials, with the most common related adverse events to date being mild sensations of coolness, warmth or tingling, skin flushing, and alterations in taste. There have been no drug-related serious adverse events to date.

Following the completion of the Phase 2b studies, we plan to conduct an End of Phase 2 meeting with the FDA to confirm the design of our Phase 3a trials in healthy volunteers, designed to determine the lowest effective dose of ciraparantag. We expect the Phase 3a program will include one Phase 3a trial for each of the four anticoagulants under investigation for ciraparantag reversal in which healthy volunteers will be brought to steady state on each of the anticoagulant (Xarelto®, Savaysa®, Eliquis®, and Lovenox®), and then administered ciraparantag. We expect the effects will be measured frequently by measuring WBCT using an automated coagulometer. The primary endpoint for the study is expected to be the proportion of subjects who return to within 10% of their baseline WBCT as well as safety outcomes. We intend to initiate the Phase 3a trials in the second half of 2019.


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The Phase 3a trials are expected to be followed by a Phase 3b/4 trial in patients who are currently taking Eliquis®, Xarelto®, Savaysa® or Lovenox® and experience life-threatening or uncontrolled bleeding or require an urgent procedure or surgery that necessitates rapid reversal of their anticoagulant. This trial is expected to evaluate the safety and effectiveness of ciraparantag in the target patient population focusing on the proportion of patients returning to normal WBCT and have evidence of hemostasis as determined by an adjudicated clinical evaluation. Based on previous precedent, we expect the trial to be an open label study with approximately 250 patients and believe that only a portion of the patients in the Phase 3b/4 trial will be required to complete the study at the time of our NDA submission. It is expected that the remainder of the study will be completed as a post-marketing commitment.
 
In addition, we have contracted with Perosphere Technologies Inc. (“Perosphere Technologies”), an independent company, which is developing an automated coagulometer designed to rapidly and accurately measure WBCT. Due to the variability of measuring WBCT manually, the coagulometer will be used in our Phase 3a and 3b/4 trials to measure WBCT, which is being used as a surrogate marker to demonstrate reversal of anticoagulation following ciraparantag administration. Prior to its use in our Phase 3a trial, Perosphere Technologies will be required to obtain an Investigational Device Exemption (“IDE”) approval for its coagulometer, which will require Perosphere Technologies to show that the device is safe and effective to use in our clinical trials.

Perosphere is a party to a clinical trial collaboration agreement with a global pharmaceutical company under which Perosphere agreed to use commercially reasonable efforts to develop and commercialize ciraparantag for use as an anticoagulant reversal agent to reverse the effects of Savaysa®(edoxaban) and LMWH in the U.S. and the European Union (“EU”). Pursuant to this agreement, we have established a joint study management team to oversee studies and regulatory activities under the agreement and we are entitled to receive research and development milestone payments, anticipated in 2019 and 2020, if we complete certain clinical trial deliverables and for so long as we do not prioritize other specified development programs, or otherwise delay or hinder our efforts with Savaysa®. While this pharmaceutical company does not have any current commercial rights to ciraparantag, at its request, we are required to negotiate in good faith for the U.S. or EU. commercialization rights for ciraparantag if we have not otherwise entered into a licensing agreement or other arrangement.
MuGard

MuGard is indicated for the management of oral mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oral wounds (mouth sores and injuries), including certain ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces. We acquired the U.S. commercial rights to MuGard under a June 2013 license agreement with Abeona (the “MuGard Rights”). MuGard was launched in the U.S. by Abeona in 2010 after receiving 510(k) clearance from the FDA.

Collaboration, License and Other Strategic Agreements

Our commercial strategy includes expanding our portfolio through the in-license or acquisition of additional pharmaceutical products or companies, including revenue-generating commercial products and assets in various stages of development. We are currently a party to the following collaborations and other arrangements:

Endoceutics

In February 2017, we entered into the Endoceutics License Agreement with Endoceutics to obtain an exclusive right to commercialize Intrarosa for the treatment of VVA and FSD in the U.S. We have agreed to use commercially reasonable efforts to market, promote and otherwise commercialize Intrarosa for the treatment of VVA and, if approved, FSD in the U.S. Endoceutics has the right to directly conduct additional commercialization activities for Intrarosa for the treatment of VVA and FSD in the U.S. and has the right to conduct activities related generally to the field of intracrinology, in each case, subject to our review and approval and our right to withhold approval in certain instances. Each party’s commercialization activities and budget are described in a commercialization plan, which is updated annually.

Under the terms of the Endoceutics License Agreement, we made an upfront payment of $50.0 million and issued 600,000 shares of unregistered common stock to Endoceutics, which had a value of $13.5 million, as measured on April 3, 2017, the date of closing. In addition, we paid Endoceutics $10.0 million in 2017 upon the delivery by Endoceutics of Intrarosa launch quantities and $10.0 million in 2018 following the first anniversary of the closing. Endoceutics is also eligible to receive certain sales milestone payments, including a first sales milestone payment of $15.0 million, which would be triggered when annual net U.S. sales of Intrarosa exceed $150.0 million, and a second milestone payment of $30.0 million, which would be triggered when annual net U.S. sales of Intrarosa exceed $300.0 million. If annual net U.S. sales of Intrarosa exceed $500.0 million, there are additional sales milestone payments totaling up to $850.0 million, which would be triggered at various sales thresholds. In

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addition, we pay tiered royalties to Endoceutics equal to a percentage of net sales of Intrarosa in the U.S. ranging from mid-teens for calendar year net sales up to $150.0 million to mid twenty percent for any calendar year net sales that exceed $1.0 billion (such royalty rate to be dependent on the aggregate annual net sales of Intrarosa in the U.S.) for the commercial life of Intrarosa, subject to certain deductions.

In the third quarter of 2017, Endoceutics initiated a clinical study with Intrarosa for the treatment of HSDD in post-menopausal women, which is now fully enrolled. Upon review of the full data set, it will be determined whether to continue to pursue an additional clinical trial to support an eventual filing with the FDA for an HSDD indication. We have agreed to share the direct costs related to such studies based upon a negotiated allocation with us funding up to $20.0 million, of which we have paid approximately $6.0 million.

The Endoceutics License Agreement grants us the right to develop and commercialize pharmaceutical products containing DHEA, including Intrarosa, at dosage strengths of 13 mg or less per dose and formulated for intravaginal delivery, excluding any combinations with other active pharmaceutical ingredients, in the U.S. for the treatment of VVA and FSD. Under the Endoceutics License Agreement, except for any compounds or products affecting the melanocortin receptor pathway, including without limitation, Vyleesi (collectively, “Excluded Products”), we are not permitted to research, develop, manufacture, or commercialize (a) DHEA for delivery by any route of administration anywhere in world, (b) any compound (including DHEA) or product for use in VVA anywhere in the world, or (c) commencing on the date of an approval of Intrarosa for the treatment of FSD in the U.S. and continuing for the remainder of the term of the Endoceutics License Agreement, any compound (including DHEA) for use in FSD (each, a “Competing Product”). Any compound or product for use in FSD that would be a Competing Product in the U.S. but that (a) does not contain DHEA and (b) was acquired or licensed or for which the research, development, manufacture or commercialization of such compound or product is initiated by us or our affiliates, in each case, prior to the date of an approval of Intrarosa for the treatment of FSD in the U.S., will be an Excluded Product and will not be subject to the exclusivity obligations under the Endoceutics License Agreement for the treatment of FSD, subject to certain restrictions in the Endoceutics License Agreement. These noncompete restrictions are subject to certain exclusions relating to the acquisition of competing programs.

The Endoceutics License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated, including by either party for material breach that is uncured after a 90-day notice period (subject to certain extensions and dispute resolutions provisions). Either party may terminate under certain situations relating to the bankruptcy or insolvency of the other party. We may terminate the Endoceutics License Agreement for a valid business reason upon 365 days prior written notice to Endoceutics; or upon 60 days written notice in the event we reasonably determine in good faith, after due inquiry and after discussions with Endoceutics, that we cannot reasonably continue to develop or commercialize the product as a result of a safety issue regarding the use of Intrarosa. We may also terminate the Endoceutics License Agreement upon 180 days’ notice if there is a change of control of AMAG and the acquiring entity (alone or with its affiliates) is engaged in a competing program (as defined in the Endoceutics License Agreement) in the U.S. or in at least three countries within the EU.

In April 2017, we entered into an exclusive commercial supply agreement with Endoceutics pursuant to which Endoceutics, itself or through affiliates or contract manufacturers, agreed to manufacture and supply Intrarosa to us (the “Endoceutics Supply Agreement”) and is our exclusive supplier of Intrarosa in the U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of a cessation notice or supply failure (as such terms are defined in the Endoceutics Supply Agreement). Under the Endoceutics Supply Agreement, Endoceutics has agreed to maintain at all times a second source supplier for the manufacture of DHEA and the drug product and to identify, validate and transfer manufacturing intellectual property to the second source supplier by April 2019. The Endoceutics Supply Agreement will generally remain in effect until the termination of the Endoceutics License Agreement.

Palatin

In January 2017, we entered into the Palatin License Agreement with Palatin under which we acquired (a) an exclusive license in all countries of North America (the “Palatin Territory”), with the right to grant sub-licenses, to research, develop and commercialize Vyleesi and any other products containing bremelanotide (collectively, the “Vyleesi Products”), (b) a worldwide non-exclusive license, with the right to grant sub-licenses, to manufacture the Vyleesi Products, and (c) a non-exclusive license in all countries outside the Palatin Territory, with the right to grant sub-licenses, to research and develop (but not commercialize) the Vyleesi Products.

Under the terms of the Palatin License Agreement, we made an upfront payment to Palatin of $60.0 million in February 2017 and subject to agreed-upon deductions, we reimbursed Palatin approximately $25.0 million for reasonable, documented, out-of-pocket expenses incurred by Palatin in connection with the development and regulatory activities necessary to submit an NDA in the U.S. for Vyleesi for the treatment of acquired HSDD in pre-menopausal women. In June 2018, our NDA

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submission to the FDA for Vyleesi was accepted, which triggered a $20.0 million milestone payment, which we paid to Palatin in the second quarter of 2018. In addition, the Palatin License Agreement requires us to make contingent payments of (a) $60.0 million upon FDA approval of Vyleesi, and (b) up to $300.0 million of aggregate sales milestone payments upon the achievement of certain annual net sales milestones over the course of the license. The first sales milestone payment of $25.0 million will be triggered when Vyleesi annual net sales exceed $250.0 million. We are also obligated to pay Palatin tiered royalties on annual net sales in North America of the Vyleesi Products, on a product-by-product basis, in the Palatin Territory ranging from the high-single digits to the low double-digits. The royalties will expire on a product-by-product and country-by-country basis upon the latest to occur of (a) the earliest date on which there are no valid claims of Palatin patent rights covering such Vyleesi Product in such country, (b) the expiration of the regulatory exclusivity period for such Vyleesi Product in such country and (c) ten years following the first commercial sale of such Vyleesi Product in such country. These royalties are subject to reduction in the event that: (x) we must license additional third-party intellectual property in order to develop, manufacture or commercialize a Vyleesi Product or (y) generic competition occurs with respect to a Vyleesi Product in a given country, subject to an aggregate cap on such deductions of royalties otherwise payable to Palatin. After the expiration of the applicable royalties for any Vyleesi Product in a given country, the license for such Vyleesi Product in such country would become a fully paid-up, royalty-free, perpetual and irrevocable license.

The Palatin License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordance with the agreement. In addition, we have the right to terminate the Palatin License Agreement without cause, in its entirety or on a product-by-product and country-by-country basis upon at least 180 days’ prior written notice to Palatin. Either party may terminate the Palatin License Agreement for cause if the other party materially breaches or defaults in the performance of its obligations, and, if curable, such material breach remains uncured for 90 days.

Velo

In September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 with Velo, the terms of which were amended at the time of exercise. In connection with the exercise of the option and consummation of the acquisition, we have assumed responsibility to complete the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of the clinical, regulatory and other costs required to pursue FDA approval. As part of the acquisition, in September 2018 we paid Velo an upfront option exercise fee of $12.5 million. We are obligated to pay Velo a $30.0 million milestone payment upon FDA approval of AMAG-423. In addition, we are obligated to pay sales milestone payments to Velo of up to $240.0 million in the aggregate, triggered at various annual net sales thresholds between $300.0 million and $900.0 million and low-single digit royalties based on net sales. Further, we have assumed additional obligations under a previous agreement entered into by Velo with a third-party, including a $5.0 million milestone payment upon regulatory approval and $10.0 million following the first commercial sale of AMAG-423, payable in quarterly installments as a percentage of quarterly gross commercial sales until the obligation is met. We are also obligated to pay the third-party low-single digit royalties based on net sales.

Perosphere

On January 16, 2019, we acquired Perosphere, a privately-held biopharmaceutical company focused on developing ciraparantag, a small molecule anticoagulant reversal agent. Pursuant to the Perosphere Agreement, in January 2019, we paid approximately $50.0 million, subject to adjustments for working capital, cash, transaction expenses and specified indebtedness, approximately $40.0 million of which was funded from our available cash and approximately $10.0 million of which was deemed paid in connection with the cancellation of a convertible note in the principal amount of $10.0 million issued to us by Perosphere in October 2018. The purchase price is subject to customary post-closing adjustments under the Perosphere Agreement. In addition, we used available cash to repay $12.0 million of Perosphere’s term loan indebtedness and assumed approximately $6.2 million of Perosphere’s other liabilities. We are obligated to pay future contingent consideration of up to an aggregate of $365.0 million (the “Milestone Payments”), including (a) up to an aggregate of $140.0 million that becomes payable upon the achievement of specified regulatory milestones for ciraparantag (the “Regulatory Milestone Payments”), including a $40.0 million milestone payment upon approval of ciraparantag by the European Medicines Agency and (b) up to an aggregate of $225.0 million that becomes payable conditioned upon the achievement of specified sales milestones (the “Sales Milestone Payments”). If the final label approved for ciraparantag in the U.S. includes a boxed warning, the Regulatory Milestone Payments shall no longer be payable, and any previously paid Regulatory Milestone Payments shall be credited against 50% of any future Milestone Payments that otherwise becomes payable. The first Sales Milestone Payment of $20.0 million will be payable upon annual net sales of ciraparantag of at least $100.0 million. Additional details regarding the Perosphere Agreement can be found in Note W, “Subsequent Events,” to our consolidated financial statements included in this Annual Report on Form-10-K.


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Prasco

In December 2017, we entered into a Distribution and Supply Agreement (the “Prasco Agreement”) with Prasco, under which Prasco was granted an exclusive, non-sublicensable, nontranferable license to purchase, distribute and sell a generic version of Makena in the U.S. In July 2018, Prasco launched the Makena authorized generic of both the single-dose and multi-dose intramuscular injections. Under the Prasco Agreement, we are responsible for the manufacture and supply of the Makena authorized generic to be sold to Prasco at a predetermined supply price. Prasco is also required to pay us a certain percentage of the net distributable profits from the sale of the Makena authorized generic. Pursuant to the terms of the Prasco Agreement, in certain circumstances we have reimbursed and may be required to reimburse additional charges incurred by Prasco if we are unable to supply a certain percentage of product ordered by Prasco in a prespecified timeframe. The Prasco Agreement expires on July 2, 2022, which term will be automatically extended thereafter for additional one year periods, unless canceled by us or Prasco within an agreed-upon notice period. The Prasco Agreement is subject to early termination by us for convenience after a certain period of time or if Prasco is subject to a change of control or by either party for, among other things, uncured breach by or bankruptcy of the other party, lack of commercial viability or FDA notice, or by mutual agreement.

Antares

In connection with a development and license agreement (the “Antares License Agreement”) with Antares we have an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to certain intellectual property rights, including know-how, patents and trademarks, to develop, use, sell, offer for sale and import and export the Makena auto-injector. Under the terms of the Antares License Agreement, as amended in March 2018, we are responsible for the clinical development and preparation, submission and maintenance of all regulatory applications in each country where we desire to market and sell the Makena auto-injector, including the U.S. We are required to pay royalties to Antares on net sales of the Makena auto-injector for the Antares Royalty Term. The royalty rates range from high single digit to low double digits and are tiered based on levels of net sales of the Makena auto-injector and decrease after the expiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in a particular country. In addition, we are required to pay Antares sales milestone payments upon the achievement of certain annual net sales. The Antares License Agreement terminates at the end of the Antares Royalty Term, but is subject to early termination by us for convenience and by either party upon an uncured breach by or bankruptcy of the other party. See below under “Manufacturing” for a description of the manufacturing agreement entered into with Antares in March 2018.

Abeona

In June 2013, we entered into a license agreement (the “MuGard License Agreement”) with Abeona under which Abeona granted us an exclusive, royalty-bearing license, with the right to grant sublicenses, to certain intellectual property rights, including know-how, patents and trademarks, to use, import, offer for sale, sell, manufacture and commercialize MuGard in the U.S. and its territories and possessions (the “MuGard Territory”) for the management of oral mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oral wounds (mouth sores and injuries), including certain ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces.

In consideration for the license, we paid Abeona an upfront license fee of $3.3 million in June 2013. We are required to pay royalties to Abeona on net sales of MuGard in the MuGard Territory until the later of (a) the expiration of the licensed patents or (b) the tenth anniversary of the first commercial sale of MuGard in the MuGard Territory (the “MuGard Royalty Term”). These tiered, double-digit royalty rates decrease after the expiration of the licensed patents. After the expiration of the MuGard Royalty Term, the license shall become a fully paid-up, royalty-free and perpetual license in the MuGard Territory. Abeona remains responsible for the manufacture of MuGard and we have entered into a quality agreement and a supply agreement under which we purchase MuGard inventory from them. Abeona is responsible for maintenance of the licensed patents at its own expense, and we retain the first right to enforce any licensed patent against third-party infringement. The MuGard License Agreement terminates at the end of the MuGard Royalty Term, but is subject to early termination by us for convenience and by either party upon an uncured breach by or bankruptcy of the other party.

Manufacturing

Overview

We do not own or operate facilities for the manufacture of our commercially distributed products or for our product candidates. We rely solely on third-party contract manufacturers and our licensors (who, in turn, may also rely on third-party contract manufacturers) to manufacture our products for our commercial and clinical use. Our third-party drug product contract manufacturing facilities, and those of our licensors, are subject to current good manufacturing practices (“cGMP”) and

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regulations enforced by the FDA through periodic inspections to confirm such compliance. We target to maintain, where possible, second source suppliers and/or sufficient inventory levels throughout our supply chain to meet our projected near-term demand for all of our products in order to minimize risks of supply disruption. We intend to continue to outsource the manufacture and distribution of our products for the foreseeable future, and we believe this manufacturing strategy will enable us to direct more of our financial resources to the commercialization and development of our products and product candidates.

To support the commercialization and development of our products, we have developed a fully integrated manufacturing support system, including quality assurance, quality control, regulatory affairs and inventory control policies and procedures. These support systems are intended to enable us to maintain high standards of quality for our products.

In connection with the acquisition of Perosphere, we assumed the lease on a development facility, which is not currently being utilized.

Feraheme

We are party to a Commercial Supply Agreement with Sigma-Aldrich, Inc. (“SAFC”) pursuant to which SAFC agreed to manufacture and we agreed to purchase the API for use in the finished drug product of ferumoxytol for commercial sale as well as for use in clinical trials (as amended, the “SAFC Agreement”). Subject to certain conditions, the SAFC Agreement provides that we purchase all of our API from SAFC. The SAFC Agreement has an initial term that ends December 31, 2020, which may be automatically extended thereafter for additional two year periods, unless canceled by us or SAFC within an agreed-upon notice period.

We are party to a Pharmaceutical Manufacturing and Supply Agreement with Patheon, Inc. (“Patheon”) pursuant to which Patheon agreed to manufacture ferumoxytol finished drug product for commercial sale and for use in clinical trials (as amended, the “Patheon Agreement”). The Patheon Agreement will continue in force until December 31, 2020. The Patheon Agreement may be terminated at any time upon mutual written agreement by us and Patheon or at any time by us subject to certain notice requirements and early termination fees. In addition, the Patheon Agreement may be terminated by either us or Patheon in the event of a material breach of the agreement by the other party provided that the breaching party fails to cure such breach within an agreed-upon notice period.

We have also entered into a manufacturing and supply agreement with a second source supplier to produce ferumoxytol finished drug product in addition to Patheon, which second source supplier was approved by the FDA in 2019.

Makena

The Makena drug product for our commercial and clinical use is currently manufactured by Pfizer Inc. (“Pfizer”) (McPherson facility, formerly Hospira, Inc.) under a Development and Supply Agreement (as amended and restated, the “Pfizer Agreement”). The Pfizer Agreement requires that we satisfy certain minimum purchase requirements and expires on December 31, 2022, which term will be automatically extended thereafter for additional 18 month periods, unless canceled by us or Pfizer within an agreed-upon notice period. Due to continued manufacturing issues at the Pfizer McPherson manufacturing facility, we are currently experiencing a supply disruption of our Makena IM products, which has resulted in both our single-dose and multi-dose branded Makena vials being out-of-stock, as well as periodic supply disruptions and loss of market share for the authorized generic. We also have an agreement with a second source manufacturer for the Makena 1 mL drug product with Piramal Pharma Solutions (formerly Coldstream Laboratories, Inc.).

In June 2018, we entered into a commercial supply agreement with SAFC, Inc. (“SAFC Makena”) to supply us with API for use in the finished Makena product (the “SAFC Makena Agreement”). The SAFC Makena Agreement requires that we satisfy certain minimum purchase requirements, but we are not obligated to use SAFC Makena as our sole supplier of Makena API. The SAFC Makena Agreement expires on June 4, 2021, which term will be automatically extended thereafter for additional two year periods, unless canceled by us or SAFC Makena within an agreed-upon notice period. The SAFC Makena Agreement may be terminated by either us or SAFC Makena in the event of a material breach of the agreement by the other party provided that the breaching party fails to cure such breach within an agreed-upon notice period or insolvency by either party.

In June 2017, we entered into a product supply agreement with Pfizer (Kalamazoo facility) to supply us with the API for use in the finished Makena product (the “Pfizer API Agreement”). The Pfizer API Agreement requires that we satisfy certain minimum purchase requirements. The Pfizer API Agreement expires on June 1, 2020, which term will be automatically extended thereafter for additional one year periods, unless canceled by us or Pfizer within an agreed-upon notice period. The

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Pfizer API Agreement may be terminated by either us or Pfizer in the event of an uncured material breach by or insolvency of the other party.

Antares is the exclusive supplier for the auto-injection devices needed for the Makena auto-injector. In March 2018, we entered into the Antares Manufacturing Agreement that sets forth the terms and conditions pursuant to which Antares agreed to sell to us on an exclusive basis, and we agreed to purchase, the fully packaged Makena auto-injector for commercial distribution. Antares is responsible for the manufacture and supply of the device components and assembly of the Makena auto-injector and we are responsible for the supply of the Makena drug substance in pre-filled syringes to be used in the assembly of the finished auto-injector product. The Antares Manufacturing Agreement terminates at the expiration or earlier termination of the Antares License Agreement, but is subject to early termination by us for certain supply failure situations, and by either party upon an uncured breach by or bankruptcy of the other party or our permanent cessation of commercialization of the Makena auto-injector for efficacy or safety reasons.

In September 2018, we entered into a contract manufacturing agreement with Fresenius Kabi Austria GmbH (“Fresenius”) to manufacture the pre-filled syringes used in the Makena auto-injector product (the “Fresenius Agreement”). The Fresenius Agreement requires that we satisfy certain minimum purchase requirements, but we are not obligated to use Fresenius as our sole supplier of pre-filled syringes. The Fresenius Agreement will continue for a set period of time, including mutually agreed to additional renewals, but may be terminated by either us or Fresenius in the event of an uncured material breach by or insolvency of the other party, by Fresenius if we undergo a change of control to a competitor of Fresenius or by us if Fresenius fails to obtain or maintain any material government licenses or approvals.

Intrarosa

Under the terms of the Endoceutics Supply Agreement, Endoceutics, itself or through affiliates or contract manufacturers, agreed to manufacture and supply Intrarosa to us and is our exclusive supplier of Intrarosa in the U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of a cessation notice or supply failure. Endoceutics is developing internal manufacturing capabilities for Intrarosa, for which it expects to obtain approval in 2019, which would give them additional manufacturing capacity. The Endoceutics Supply Agreement will generally remain in effect until the termination of the Endoceutics License Agreement.

MuGard

Under the terms of the MuGard License Agreement, Abeona is responsible for all aspects of manufacturing MuGard. We have entered into a supply agreement with Abeona under which we purchase MuGard inventory from Abeona. Our inventory purchases are at the price actually paid by Abeona to purchase it from a third-party plus a mark-up to cover administration, handling and overhead.

Products in Development

Under the Palatin License Agreement, we assumed a long-term commercial supply agreement with Catalent Belgium S.A. for drug product manufacture and packaging services for Vyleesi. In June 2018, we entered into a commercial supply agreement with Lonza Ltd. to supply us with the API for use in the finished Vyleesi product. In addition, in December 2018, we entered into a commercial supply agreement with Ypsomed AG to supply us with the device components of the auto-injector for use in the finished Vyleesi product. All of these agreements have certain minimum purchase requirements.

We have recently entered into an exclusive agreement with Protherics UK Ltd, a subsidiary of BTG plc (“BTG”), for the manufacture of AMAG-423 drug substance for use in the AMAG-423 commercial product (the “BTG Agreement”). BTG has also agreed to supply drug product for our current ongoing clinical trial. BTG owns the rights to digoxin immune fab (ovine), the active ingredient of AMAG-423, which has been marketed in the U.S. for many years as an FDA-approved treatment for patients with life-threatening or potentially life-threatening digoxin toxicity or overdose. Under the terms of the BTG Agreement, we are required to differentiate our product from their product, DigiFab®, including without limitation, via labeling, dosage and/or formulation and if we are unable to show differentiation, we may be in breach of the agreement and be subject to penalties. In addition, the BTG Agreement provides that we satisfy certain minimum purchase requirements. We will need to enter into an additional agreement to manufacture AMAG-423 drug product, especially if it is approved and we need to meet commercial demand.

We have also assumed a commercial supply agreement with PolyPeptide Group for the supply of ciraparantag drug substance. We will need to enter into an additional agreement to manufacture ciraparantag drug product, especially if it is approved and we need to meet commercial demand.

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Raw Materials

We, our licensors and our respective third-party manufacturers currently purchase certain raw and other materials used to manufacture our products from third-party suppliers and, at present, do not have long-term supply contracts with most of these third parties. Although certain of our raw or other materials are readily available, others may be obtained only from qualified suppliers. The qualification of an alternative source may require repeated testing of the new materials and generate greater expenses to us or our licensors if materials that we test do not perform in an acceptable manner. In addition, we, our licensors or our respective third-party manufacturers sometimes obtain raw or other materials from one vendor only, even where multiple sources are available, to maintain quality control and enhance working relationships with suppliers, which could make us susceptible to price inflation by the sole supplier, thereby increasing our production costs. As a result of the high-quality standards imposed on our raw or other materials, we, our licensors or our respective third-party manufacturers may not be able to obtain such materials of the quality required to manufacture our products from an alternative source on commercially reasonable terms, or in a timely manner, if at all.

Patents, Trademarks and Trade Secrets

We consider the protection of our technology to be material to our business. Because of the substantial length of time and expense associated with bringing new products through development and regulatory approval to the marketplace, we place considerable importance on obtaining patent protection and maintaining trade secret protection for our products and product candidates. Our success depends, in large part, on our ability, and the ability of our licensors, collaborators and other business partners to maintain the proprietary nature of our technology and other trade secrets. To do so, we must prosecute and maintain existing patents, obtain new patents and ensure trade secret protection. We must also operate without infringing the proprietary rights of third parties or allowing third parties to infringe our rights. Our policy is to aggressively protect our competitive technology position by a variety of means, including applying for or obtaining rights to patents in the U.S. and in foreign countries.

One of our U.S. Feraheme patents received a patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, (the “Hatch-Waxman Act”) and will expire in June 2023, and the other U.S. patents relating to Feraheme will expire in 2020. In addition, in March 2018, we and Sandoz Inc. (“Sandoz”) entered a stipulation of dismissal pursuant to a settlement agreement that dismissed and resolved a patent infringement suit regarding an ANDA submitted to the FDA by Sandoz. According to the terms of the settlement, if Sandoz receives FDA approval of its ANDA by a certain date, Sandoz may launch its generic version of Feraheme on July 15, 2021, or earlier under certain circumstances customary for settlement agreements of this nature. Sandoz will pay a royalty on the sales of its generic version of Feraheme to us until the expiration of the last Feraheme patent listed in the Orange Book. If Sandoz is unable to secure approval by such date, Sandoz will launch an authorized generic version of Feraheme supplied by us on July 15, 2022 for up to 12 months. Sandoz’s right to distribute, and our obligation to supply, the authorized generic product shall be in accordance with standard commercial terms and profit splits.
 
Our U.S. patent related to the Makena auto-injector product will expire in 2036, and we have a pending patent application related to the Makena auto-injector product. In addition, we have a license to several U.S. patents and patent applications from Antares related to the Makena auto-injector device and drug-device combination with expiration dates between 2019 and 2034. Our issued patent and Antares’ eligible patents are listed in the Orange Book for the Makena auto-injector product. There are no issued patents covering the Makena IM product.

Under the Palatin License Agreement, we have exclusive rights to a number of U.S. and foreign patents and applications related to Vyleesi that are owned by Palatin. Certain of Palatin’s patents include claims directed to the Vyleesi drug composition of matter and methods of use thereof with terms expiring in 2020, and other patents include claims directed to methods of treating FSD by subcutaneous administration of compositions that include Vyleesi with terms expiring in 2033. Any one of the issued U.S. patents may be granted up to five years of patent term extension (up to a maximum patent term of 14 years after regulatory approval) pursuant to the Hatch-Waxman Act. Whether any of these U.S. patents will be granted patent term extension under the Hatch-Waxman Act and the length of any such extension cannot be determined until a product covered by such patents receives FDA approval.

Under the terms of the Endoceutics License Agreement, we received rights to U.S. patents and applications related to Intrarosa that are controlled by Endoceutics. One issued patent includes drug product claims with a term that expires in 2031. Two additional issued patents include method of use claims and pharmaceutical dosage form claims with terms that expire in 2028, either of which may be granted up to five years of patent term extension (up to a maximum patent term of 14 years after regulatory approval pursuant to the Hatch-Waxman Act). However, there is no guarantee that the FDA will grant such an

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extension.

Under the Abeona License Agreement, we have exclusive rights to two U.S. patents related to MuGard that are owned by Abeona. These Abeona patents include liquid composition claims and will expire in 2022.

Under the terms of the Velo Agreement, we obtained four issued U.S. patents covering methods of using AMAG-423 to treat women exhibiting symptoms of preeclampsia or eclampsia, each of which expires in November 2022, and several corresponding foreign patents that expire in 2023. Digoxin immune fab (ovine), the active ingredient of AMAG-423, has been approved and marketed in the U.S. for many years for a different indication and no longer has composition of matter patent protection. Accordingly, we do not have and will not be able to obtain composition of matter patent protection for AMAG-423. AMAG-423 has been granted orphan drug designation by the FDA and, if approved, we expect it to receive seven years of marketing exclusivity.

Additionally, under the terms of the Perosphere Agreement, we obtained two issued U.S. patents and several foreign patents related to ciraparantag. One U.S. patent includes claims directed to the ciraparantag drug composition of matter with a term that expires in 2034, and the other U.S. patent includes claims directed to methods of using ciraparantag to reverse the anticoagulation effect of certain coagulation inhibitors with a term that expires in 2032. All of the foreign patents expire in 2032. Either of the issued U.S. patents may be granted up to five years of patent term extension (up to a maximum patent term of 14 years after regulatory approval) pursuant to the Hatch-Waxman Act. Whether either of these U.S. patents will be granted patent term extension under the Hatch-Waxman Act and the length of any such extension cannot be determined until a product covered by such patents receives FDA approval.

With regard to pending patent applications we own or have rights to, even though further patents may be issued on such applications, we cannot be sure that any such patents will be issued on a timely basis, if at all, or with a scope that provides our products with additional protection. The claims of issued patents related to any of our products may not provide meaningful protection for the product, and third parties may challenge the validity or scope of any such issued patents. Additionally, the claims of our issued patents may be narrowed or invalidated by administrative proceedings, such as interference or derivation, inter partes review, post grant review or reexamination proceedings before the United States Patent and Trademark Office. In addition, existing or future patents of third parties may limit our ability to commercialize our products.

We also have numerous U.S. and foreign trademark registrations directed to our corporate and affiliate names, as well as our products and compliance programs. These marks help to further distinguish our products and enhance our overall intellectual property position.

Competition
The pharmaceutical industry is intensely competitive and subject to rapid technological change. Our existing or potential competitors for all our products have or may develop products that are more widely accepted than ours, are viewed as more safe, effective, convenient or easier to administer, have been on the market longer and have stronger patient/provider loyalty, have been approved for a larger patient population, are less expensive or offer more attractive insurance coverage, discounts, reimbursements, incentives or rebates and may have or receive patent protection that dominates, blocks, makes obsolete or adversely affects our product development or business.
Feraheme

Many of our competitors for Feraheme are large, well-known pharmaceutical companies and may benefit from significantly greater financial, sales and marketing capabilities, greater technological or competitive advantages, and other resources.

Feraheme currently competes primarily with the following IV iron replacement therapies for the treatment of IDA:

Venofer®, an iron sucrose complex, which is approved for use in hemodialysis, peritoneal dialysis, non-dialysis dependent CKD patients and pediatric CKD patients and is marketed in the U.S. by Fresenius Medical Care North America and American Regent, Inc. (“American Regent”), a subsidiary of Luitpold Pharmaceuticals, Inc. (a business unit of Daiichi Sankyo Group);

Injectafer®, a ferric carboxymaltose injection, which is approved to treat IDA in adult patients who have intolerance to oral iron or have had unsatisfactory response to oral iron. Injectafer® is also indicated for IDA in adult patients with

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non-dialysis dependent CKD. Injectafer® is marketed in the U.S. by American Regent, the same distributor of Venofer®;

Ferrlecit®, a sodium ferric gluconate, which is marketed by Sanofi-Aventis U.S. LLC, is approved for use only in hemodialysis patients;

A generic version of Ferrlecit® marketed by Teva Pharmaceuticals, Inc.;

INFeD®, an iron dextran product marketed by Allergan, Inc. which is approved in the U.S. for the treatment of patients with documented iron deficiency in whom oral iron administration is unsatisfactory or impossible; and

Auryxia® (ferric citrate), an oral phosphate binder, which is marketed by Keryx Biopharmaceuticals, Inc. (which recently merged with Akebia Therapeutics, Inc.), and which approved in the U.S. for the treatment of IDA in adult patients with CKD not on dialysis.

In addition to the currently marketed products described above, in the future Feraheme may also compete with Monoferric™ (iron isomaltoside 1000 for injection) (global brand name Monofer®), which is manufactured by Pharmacosmos A/S in over 30 countries outside the U.S., including Canada. Monoferric™ is under development in the U.S. and has completed its Phase III trials in which Monofer® was administered as a single 1,000 mg dose, which, if approved, may offer an alternative for patients. In addition, there are several hypoxia inducible factor stabilizers in various stages of development to treat anemia related to CKD that could potentially compete with Feraheme in the future, a number of which are currently in Phase III trials.

We may face challenges retaining our existing Feraheme customers, gaining sales to new customers and gaining market share despite the February 2018 approval of Feraheme’s broader label. For example, since Injectafer® was approved in 2013 with a broader indication than the original Feraheme indication, physicians may have increased their use of Injectafer® and other physicians may have begun to use Injectafer®, making it more difficult for us to cause these physicians to use Feraheme in the future. In addition, manufacturers of Injectafer® may have entered into commercial contracts with key customers or group purchasing organizations (“GPOs”), which would limit our ability to enter into favorable contractual arrangements. Further, Daiichi Sankyo Group has a substantially larger sales force to market Injectafer® than we do to market Feraheme, which allows them to reach a broader group of healthcare professionals.

Companies that manufacture generic products typically invest far fewer resources in research and development than the manufacturers of branded products and can therefore price their products significantly lower than those branded products already on the market. Therefore, competition from generic IV iron products could limit our sales. Feraheme may face future competition from generic IV iron replacement therapy products. For example, under our settlement agreement with Sandoz, if Sandoz receives FDA approval by a certain date, Sandoz may launch its generic version of Feraheme on July 15, 2021, or earlier under certain circumstances customary for settlement agreements of this nature. If Sandoz is unable to secure approval by such date, Sandoz may launch an authorized generic version of Feraheme on July 15, 2022 for up to twelve months. 
Based on sales data provided to us by IQVIA Holdings Inc. (“IQVIA”), we estimate that the size of the total 2018 U.S. non-dialysis IV iron replacement therapy market was approximately 1.3 million grams, which represents an increase of approximately 8.5% over 2017. During 2017 (and until February 2018), Feraheme competed exclusively in the CKD portion of this market, which we estimate is approximately half of the total market. Based on this IQVIA data, the following represents the 2018 and 2017 U.S. market share allocation of the total non-dialysis IV iron market based on the volume of IV iron administered:
 
2018 U.S. Non-dialysis IV Iron Market
 
2017 U.S. Non-dialysis IV Iron Market
 
 
 
(1.3 million grams)
 
(1.2 million grams)
Venofer®
35%
 
35%
Injectafer®
33%
 
26%
Feraheme
15%
 
12%
INFeD®
6%
 
15%
Generic sodium ferric gluconate
9%
 
9%
Ferrlecit®
2%
 
3%
The market share data listed in the table above is not necessarily indicative of the market shares in dollars due to the variations in selling prices among the IV iron products.

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Makena

Makena competition currently comes mainly from generic formulations of HPC injections as well as from pharmacies that compound a non-FDA approved version of Makena, both of which are sold at a much lower list price than our branded products. In early 2018, Makena’s exclusivity period ended and since then two generic competitors have entered the market in addition to the Makena authorized generic product, marketed by Prasco. Currently, American Regent and Slayback Pharma LLC (“Slayback”) sell generic versions of the Makena 1ml presentation and 5 ml presentations, respectively, and we expect additional generic entrants to enter the market as early as March 2019 to compete against both the 1ml and 5ml presentations.

The long-term success of the Makena franchise is highly dependent on our ability to maintain and grow the market share for the Makena auto-injector, which was approved for commercialization in February 2018, and which is intended to provide us with an alternative treatment method to the Makena IM product. Although there is no direct competition with the Makena auto-injector, the auto-injector competes for the same patients as generic versions of the Makena IM product, including the Makena authorized generic. We may not be able to continue to convince healthcare providers to use or to switch from using the IM method of administration to the auto-injector, including if healthcare providers are hesitant or apprehensive to use an auto-injector product due to perceptions regarding lack of improvement in safety, efficacy or pain associated with the Makena auto-injector or if the auto-injector is not priced competitively or is not provided comparable insurance coverage to the Makena IM product.

We also expect to continue to face competition for Makena from future generic products as well as products currently in development which offer additional formulations or routes of administration that doctors believe may reduce or prevent preterm birth, such as an oral HPC product, which is currently in development and has completed its End-of-Phase 2 meeting with the FDA.

Based on IQVIA data and internal analytics, we estimate that in the fourth quarter of 2018, the Makena branded products and the Makena authorized generic made up approximately 56% and 22% of the total prescriptions written for all FDA-approved HPC products, respectively. We also estimate that the generic marketed by American Regent generated approximately 22% of the total prescriptions written for all FDA-approved HPC products in the fourth quarter of 2018. In addition to FDA-approved products for the approved indication, other at-risk patients are treated with compounded formulations of HPC or other therapies, such as vaginal progesterone, that are not approved for women pregnant with a single baby with a prior history of singleton spontaneous preterm birth.

Intrarosa

Intrarosa faces competition from the following approved products:

Estrace® Cream (Estradiol vaginal cream, USP 0.01%) (“Estrace”), a vaginal cream for the treatment of VVA marketed by Allergan PLC;

Estradiol® Vaginal Cream USP, 0.01% (generic version of Estrace®), including a generic marketed by Mylan N.V., which was launched in December 2017, a generic marketed by Teva Pharmaceuticals USA, Inc., a subsidiary of Teva Pharmaceutical Industries Ltd. (“Teva”), which was launched in early 2018, a generic marketed by Impax Laboratories, Inc., which was launched in mid-2018, and a generic marketed by Alvogen Inc., which was launched in mid-2018;

Vagifem® (estradiol vaginal inserts) (“Vagifem”), a suppository marketed by Novo Nordisk A/S for the treatment of VVA;

Estradiol vaginal inserts USP (generic versions of Vagifem®), including Yuvafem, which is marketed by Amneal Pharmaceuticals LLC, a generic marketed by Teva and a generic marketed by Glenmark Pharmaceuticals Inc.;

Premarin Vaginal Cream®, a vaginal cream for the treatment of VVA marketed by Pfizer;

Estring®(estradiol vaginal ring), a vaginal ring marketed by Pfizer for the treatment of VVA due to menopause;

Osphena®, an oral therapy marketed by Duchesnay Inc. for the treatment of moderate to severe dyspareunia due to menopause;


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IMVEXXY® (estradiol vaginal inserts), an estrogen indicated for the treatment of moderate to severe dyspareunia due to menopause, which was launched in mid-2018 and is marketed by TherapeuticsMD, Inc.; and

Over the counter and compounded remedies that are marketed for dyspareunia and over the counter and compounded products that contain DHEA.

The actual market size and market dynamics for moderate to severe dyspareunia due to menopause is uncertain. While we believe that Intrarosa, as the only FDA-approved, non-estrogen-containing vaginal insert to treat moderate to severe dyspareunia, has competitive advantages compared to estrogen-containing therapies, we may not be able to realize this perceived advantage in the market. Our commercial opportunity could be reduced if physicians or patients perceive that other products are more effective, or convenient or safer than Intrarosa, or if they are less expensive than Intrarosa.

In addition, our ability to compete may be affected by the extent and scope of third-party reimbursement for products treating dyspareunia. Some of the products that Intrarosa competes with have a broader indication for VVA and receive reimbursement from governmental healthcare programs. Although we have been able to gain coverage for Intrarosa with commercial health plans, given the increasing number of generic competitors, payers may choose to selectively implement utilization management policies on Intrarosa. Intrarosa is covered as non-preferred and is one of many drugs available. As a result, patients do not receive full reimbursement by third-party commercial payers and may not receive any reimbursement from governmental healthcare programs. Many patients are therefore subject to substantial out-of-pocket costs.

In May 2018, Center for Medicare & Medicaid Services (“CMS”) issued guidelines clarifying the statutory intent of its prior policy to state that drugs for the treatment of moderate to severe dyspareunia due to menopause are not excluded from Medicare Part D coverage when used consistent with this labeling. Medicare formularies are highly cost sensitive, have long decision cycles, and tend to be limited in the number of products that are offered. Therefore, Medicare coverage for Intrarosa may continue to be limited. Less than full reimbursement by governmental and other third-party payers may adversely affect the market acceptance of Intrarosa and put it at a competitive disadvantage to some of the competing products, including generic versions of estrogens and compounded products, which are often priced lower than branded products.

MuGard

There are currently few effective treatments for the treatment or management of oral mucositis. The market for treating oral mucositis is driven primarily by convenience, price and reimbursement and the products in this market remain mostly undifferentiated. There are a number of approaches used to treat or manage oral mucositis that compete with MuGard, including the use of ice chips during chemotherapy treatments, various medicinal mouthwashes, topical anesthetics and analgesics, and oral gel treatments. For example, many physicians use what is commonly known as “magic mouthwash”, which may currently be the most commonly prescribed medication to manage oral mucositis. Magic mouthwash is a combination of generic ingredients which are typically compounded in a pharmacy and is preferred by many physicians because of the availability of less expensive generic ingredients used to formulate the mouthwash.

Vyleesi

If Vyleesi is approved for marketing by the FDA and if we are successful in launching and commercializing it, we expect Vyleesi will face competition. Addyi® (flibanserin) was introduced into the market in October 2015 for the treatment of HSDD in pre-menopausal women and is marketed by Sprout2 Inc. (“Sprout”). Addyi® is only available through a risk evaluation and mitigation strategy (“REMS”) program because of an increased risk of severe hypotension and syncope due to the interaction between Addyi® and alcohol. In addition, Addyi® was approved with a boxed warning to highlight the risks of severe hypotension and syncope in patients who drink alcohol during treatment with Addyi®, in patients who use Addyi® with moderate or strong CYP3A4 inhibitors, or in patients who have liver impairment.

We are not aware of any company actively developing another melanocortin receptor agonist drug for the treatment of HSDD. However, we are aware of several other drugs at various stages of development, most of which are being developed to be taken on a chronic, typically once-daily, basis. Emotional Brain BV, a Netherlands company, is developing two different oral fixed-dose, on-demand combination drugs, one a combination of sildenafil (the active ingredient in Viagra) and testosterone and the other a combination of testosterone and buspirone hydrochloride, and has conducted Phase 2b studies. There may be other companies developing new drugs for FSD indications, some of which may be in clinical trials in the U.S. or elsewhere, or other companies which may sell their products off-label for indications other than FSD.

While we believe that Vyleesi will have competitive advantages for treating HSDD, such as on demand use and length of the therapeutic effect compared to chronic or daily use hormones and other drugs, we may not be able to realize these perceived

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advantages in the market, in part because Vyleesi is administered by subcutaneous auto-injection. While the single-use, disposable auto-injector format is designed to maximize market acceptability, apprehension associated with an injectable drug or certain side effects that were observed in the Phase 3 studies, such as nausea, may impact Vyleesi’s ability to achieve significant market acceptance, especially if an oral therapy is available as an alternative.

Ciraparantag

Currently, we expect ciraparantag, if approved, will compete primarily with AndexXa® (coagulation factor Xa (recombinant), inactivated-zhzo) (“Andexxa”), which was approved in 2018 for the reversal of Eliquis® and Xarelto® for patients treated with Eliquis® and Xarelto®, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. AndexXa® is also in development for the reversal of Savaysa® and Lovenox®. We are seeking approval of ciraparantag to reverse the effects of Eliquis®, Xarelto®, Savaysa® and Lovenox®. Based on clinical data to date, we expect that ciraparantag will be a ready-to-use product with the potential to be stored at room temperature and to be effective at a fixed dose for the NOACs and LMWH being studied.

Sales, Marketing and Distribution

Women’s and Maternal Health Products

Following our February 2019 combination of our women's and maternal health sales forces, we will have one integrated sales team, which will now promote Intrarosa, Makena and Vyleesi, if approved, in order to provide healthcare professionals with one commercial point of contact and seeks to maximize efficiency and effectiveness for the promotion of our commercial products. We expect this unified sales force to call on approximately 17,000 obstetricians and gynecologists and other prescribers.

Makena

Makena prescriptions are dispensed via the payer-preferred pharmacy or purchased directly by hospitals, government agencies and integrated delivery networks. Our sales and marketing teams use a variety of strategies and focused, multi-channel methods to promote Makena, including dedicating a managed care team to focus on health plans, including commercial payers, pharmacy benefit managers, and managed Medicaid plans as well as fee-for-service Medicaid programs. In addition, we have partnered with a leading provider of home nursing services (which had previously utilized compounded HPC) pursuant to which the provider performs at-home administration of Makena and co-promotes Makena to certain healthcare providers.

In addition, we offer customer support through the Makena Care Connection, which is designed to help the prescriber and patient navigate each individual patient’s needs throughout the Makena prescription process, including confirming insurance coverage, providing education and support on prior authorizations (when applicable), and working in collaboration with a payer-preferred pharmacy and home health agency to help ensure timely initiation of therapy. The Makena Care Connection also screens eligible patients for and enrolls eligible patients in financial assistance programs including (a) our copay savings program, which helps lower the out-of-pocket cost for commercially insured patients whose plan covers Makena, and (b) our patient assistance program, which provides a full course of therapy at no cost to eligible uninsured and commercially underinsured patients. Additionally, the Makena Care Connection offers education and adherence support to eligible patients to assist with increasing patient compliance by encouraging adherence to the weekly Makena injection schedule. 

Prasco has an exclusive license to purchase, distribute and sell the Makena authorized generic and has agreed to use commercially reasonable efforts to market, distribute and sell the Makena authorized generic during the term of the agreement. 

Intrarosa

In July 2017, Intrarosa became available for healthcare provider prescribing and can be ordered through wholesalers and retail pharmacies. As part of our continued launch strategy, and critical to the commercial success of Intrarosa, we are executing an integrated marketing plan designed to drive awareness of dyspareunia and the potential benefits of Intrarosa to increase the likelihood that healthcare providers and patients will view Intrarosa as an accessible and viable treatment option. Despite significant marketing and educational efforts by industry participants intended to spread awareness of the condition and its treatment, studies suggest that women often do not recognize dyspareunia, a symptom of VVA, as a treatable medical condition and are often not aware of treatment options. We have and plan to continue to undertake informational and educational programs such as speaker programs to help spread awareness of dyspareunia and VVA and the benefits of Intrarosa for the conditions indicated. In addition, we have implemented a sampling program, which makes samples of Intrarosa available to healthcare providers through our sales representatives or via our website to areas where we do not have sales representatives.

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We also currently offer a comprehensive copay savings program to patients and have implemented patient-specific marketing programs around the condition of dyspareunia and Intrarosa utilizing digital marketing, print and social media platforms.

Vyleesi

If Vyleesi is approved by the FDA, we expect that it will be distributed nationally through select specialty pharmacies. The initial focus of our Vyleesi commercialization efforts will be to continue to raise awareness and education about HSDD for both healthcare professionals and patients with this disorder, such as our 2018 unbranded condition awareness to healthcare professionals. Additionally, our launch strategy will focus on establishing Vyleesi as the preferred option for women and healthcare providers seeking a treatment for HSDD through media such as direct-to-consumer marketing in lifestyle and social media channels. We also intend to focus our Vyleesi marketing efforts, if approved, towards healthcare professionals, who we expect will play a significant role in increasing HSDD and Vyleesi awareness among their patients, primarily by leveraging our newly combined women’s health sales force and through digital media. In order to minimize cost and injection barriers to treatment, we anticipate implementing a competitive copay savings program and injection training to healthcare professionals upon commercial launch of Vyleesi.
Hematology/Oncology Products

Feraheme

We sell Feraheme to authorized wholesalers and specialty distributors who, in turn, sell Feraheme to healthcare providers who administer Feraheme primarily within hospitals and hematology and oncology clinics. Since many hospitals and hematology and oncology practices are members of GPOs, which leverage the purchasing power of a group of entities to obtain discounts based on the collective bargaining power of the group, we also routinely enter into pricing agreements with GPOs in these markets so the members of the GPOs have access to Feraheme and to the related discounts or rebates.

Our sales and marketing organization uses a variety of common pharmaceutical marketing strategies and methods to promote Feraheme, including sales calls to purchasing entities, such as hospitals and hematology and oncology clinics, in addition to individual physicians or other healthcare professionals, medical education symposia, promotional materials, local and national educational programs, and scientific meetings and conferences. In addition, through AMAG Assist®, we provide customer service and other related programs for Feraheme, including prescription coverage information support services, a patient assistance program for eligible uninsured or functionally under-insured patients and a customer service call center.

The label expansion for Feraheme to include all eligible IDA patients in the U.S. doubled the size of the addressable patient population for Feraheme, which has allowed for increased penetration in existing accounts and has broadened the number of customers utilizing Feraheme within the IV iron marketplace. Additionally, with the expanded label, Feraheme may be promoted as an option for patients who have intolerance to oral iron or have unsatisfactory response to oral iron therapy that are in treatment settings where we already have sales teams, such as obstetricians and gynecologists in connection with AUB. We believe this segment of patients is under-diagnosed and under-treated, and there is a significant opportunity in this market to provide IV iron to such patients. Other categories of potential patients with IDA include those with inflammatory bowel disease treated by gastroenterologists. Our sales teams are working to educate healthcare providers who manage adult IDA patients to expand the IV iron use in physicians’ offices, clinics, and hospitals where eligible IDA patients are treated.

MuGard

Our commercial team uses a variety of common pharmaceutical marketing strategies and methods to promote MuGard, including sales calls to providing entities, such as hematology and oncology clinics and hospitals. In addition, other marketing programs may include promotional materials to individual physicians or other healthcare professionals.

We market and sell MuGard to wholesalers and specialty pharmacies. Patients primarily receive MuGard through specialty pharmacies, which receive prescriptions from physicians directly or from AMAG Assist, which acts as our MuGard patient reimbursement and support center. We utilize AMAG Assist as a centralized patient intake and referral management center to process insurance coverage issues and administer our patient assistance program. In order to make MuGard available to patients as soon as possible, we provide a starter kit to clinicians, including a sample bottle and all pertinent information that the patient or caregiver needs to immediately begin MuGard therapy.


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Product Supply Chain
We outsource a number of our product supply chain services for our products to third-party logistics providers, including services related to warehousing and inventory management, distribution, chargeback processing, accounts receivable management, sample distribution to our sales force and customer service call center management.
Major Customers
The following table sets forth customers who represented 10% or more of our total revenues for 2018, 2017 and 2016.
 
Years Ended December 31,
 
2018
 
2017
 
2016
AmerisourceBergen Drug Corporation
27
%
 
26
%
 
27
%
McKesson Corporation
26
%
 
24
%
 
14
%
Caremark, LLC
< 10%

 
< 10%

 
10
%

The loss of the above customers would have a material adverse effect on our business.

Government Regulation
Overview
Our activities are subject to extensive regulation by numerous governmental authorities in the U.S. The FDC Act and other federal and state statutes and regulations govern, among other things, the research and development, manufacturing, quality control, labeling, recordkeeping, approval, storage, distribution, and advertising, promotion and post-approval monitoring and reporting of pharmaceutical and biological products and medical devices.
Failure to comply with any of the applicable U.S. requirements may result in a variety of administrative or judicially imposed sanctions including, among other things, the regulatory agency’s refusal to approve pending applications, suspension, variations or withdrawals of approval, clinical holds, warning letters, product recalls, product seizures, total or partial suspension of operations, injunctions, fines, civil penalties, or criminal prosecution.
Product Development and Approval Process
Clinical Development
Before we may market a new product, we must obtain FDA approval of an NDA for a drug product or a Biologics License Application (“BLA”) for a biologic, such as AMAG-423. The FDA may approve an NDA or BLA if, among other requirements, the safety and efficacy of the drug candidate can be established based on the results of preclinical and clinical studies.
Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including good laboratory practice regulations.
Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with good clinical practices (“GCPs”), which include the requirement that all research subjects provide their informed consent for their participation in any clinical testing. Prior to beginning a clinical trial, an IND - a request for authorization from the FDA to administer an investigational new drug to humans in clinical trials - must be submitted to FDA and must become effective. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial site’s institutional review board (“IRB”), before any trials may be initiated, and the IRB must monitor the trial until completed. Additional ongoing regulatory requirements apply throughout the course of a clinical trial, including requirements governing the reporting of certain ongoing clinical trials and clinical trial results to public registries.

Clinical testing typically proceeds in three phases, which may overlap or be combined. Phase 1 trials seek to collect initial data about safety, tolerability, and optimal dosing of the investigational product in healthy human subjects or, less commonly, in patients with the target disease or condition. The goal of Phase 2 trials is to provide preliminary evidence about the desired therapeutic efficacy of the investigational product in limited studies with small numbers of carefully selected subjects with the target disease or condition. Phase 3 trials generally consist of expanded, large-scale, randomized, double-blind, multi-center

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studies of the safety and efficacy of the product in the target patient population and are used as the primary basis for regulatory approval.

Submission and FDA Review of NDAs, sNDAs and BLAs

Following the successful completion of clinical trials, the sponsor submits the results to the FDA as part of an NDA or BLA. The NDA or BLA must also include the results of preclinical tests and studies, as the FDA requires submission of all relevant data available from pertinent nonclinical studies and clinical trials, as well as, among other required information, information related to the preparation and manufacturing of the drug or biologic candidate, analytical methods, and proposed packaging and labeling. Pursuant to agreements reached during reauthorization of PDUFA, the FDA has a goal of acting on most original NDAs within six months or ten months of the application submission or filing date (the FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing), depending on the nature of the drug. Once the NDA submission has been accepted for filing (60 days post receipt of the application by the FDA, if at all), the FDA typically takes ten months to review the application and respond to the applicant. The review process may be extended by FDA requests for additional information or clarification. The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

The FDA may also refer the application to an advisory committee for review, evaluation, and recommendation as to whether the application should be approved. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

If the FDA’s evaluations of the NDA or BLA and of the sponsor’s manufacturing facilities are favorable, the FDA will issue an approval letter, and the sponsor may begin marketing the drug for the approved indications, subject to any post-approval requirements, described further below. If the FDA determines it cannot approve the NDA or BLA in its current form, it will issue a complete response letter indicating that the application will not be approved in its current form. The complete response letter usually describes the specific deficiencies that the FDA identified in the application and may require additional clinical or other data or impose other conditions that must be met in order to obtain approval of the NDA of BLA. Addressing the deficiencies noted by the FDA could be impractical, and it is possible that the sponsor could withdraw its application or approval may not be obtained or may be costly and may result in significant delays prior to approval.

Where a sponsor wishes to expand the originally approved prescribing information, such as adding a new indication, it must submit and obtain approval of an sNDA. Changes to an indication generally require additional clinical studies, which can be time-consuming and require the expenditure of substantial additional resources. Under PDUFA, the target timeframe for the review of an sNDA to add a new clinical indication is six or ten months from the receipt date, depending on whether or not the sNDA has priority review. As with an NDA or BLA, if the FDA determines that it cannot approve an sNDA in its current form, it will issue a complete response letter as discussed above.

Fast Track, Breakthrough Therapy and Priority Review Designations

The FDA has a number of programs intended to help expedite testing, review, and approval of drug candidates that meet the applicable eligibility criteria such as Fast Track designation, Breakthrough Designation, priority review and accelerated approval. Specifically, new drugs and biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. For a fast track product, the FDA may consider review of completed sections of an NDA or BLA on a rolling basis provided the sponsor provides, and the FDA accepts, a schedule for the submission of the completed sections of the NDA or BLA. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

A drug may be eligible for Breakthrough Designation if the drug is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies. Breakthrough Designation provides for frequent meetings between the sponsor and the FDA, involving senior and experienced review staff, as appropriate, in a collaborative, cross-functional review and the assignment of an FDA project lead to facilitate efficient review of the development program and serve as a scientific liaison with the sponsor.


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A Fast Track or Breakthrough designated drug candidate may also qualify for priority review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness, under which the FDA reviews the NDA or BLA in a total of six months rather than ten months after it is accepted for filing.

In addition, under the provisions of the FDA’s Subpart H Accelerated Approval regulations, accelerated approval may be permitted based on an appropriate surrogate endpoint for a new drug that is intended to treat a serious or life-threatening disease or condition and that provides a meaningful therapeutic benefit over existing treatments.

The 21st Century Cures Act

The 21st Century Cures Act, which was signed into law in December 2016, requires the FDA to establish a process for the qualification of drug development tools that may be used to support or obtain licensure of a biological product or support of the investigational use of a biological product. A drug development tool includes a biomarker, a clinical outcome assessment, and any other method, material, or measure that the FDA determines aids drug development and regulatory review. A biomarker is a characteristic, such as a physiologic, pathologic, or anatomic characteristic or measurement, that is objectively measured and evaluated as an indicator of normal biological processes, pathologic processes, or biological responses to a therapeutic intervention and includes a surrogate endpoint. A clinical outcome assessment is a measurement of a patient’s symptoms, overall mental state, or the effects of a disease or condition on how the patient functions and includes a patient-reported outcome.

The 21st Century Cures Act also requires that, for approval of any BLAs submitted after June 12, 2017, the FDA shall make public a brief statement regarding the patient experience data and related information, if any, submitted and reviewed as part of the application. Patient experience data includes data that are collected by any persons, including patients, family members and caregivers of patients, patient advocacy organizations, disease research foundations, researchers and drug manufacturers, and are intended to provide information about patients’ experiences with a disease or condition, including the impact of such disease or condition, or a related therapy, on patients’ lives and patient preferences with respect to treatment of such disease or condition.

Abbreviated New Drug Application

The Hatch-Waxman Act created the ANDA pathway, which allows companies to seek approval for generic versions of brand-name drugs previously approved under an NDA and listed in the Orange Book. Rather than directly demonstrating the product’s safety and efficacy, as is required of an NDA, an ANDA must show that the proposed generic product is the same as the previously approved product in terms of active ingredient(s), strength, dosage form and route of administration. In addition, with certain exceptions, the generic product must have the same labeling as the product to which it refers. At the same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to the previously approved product if, in relevant part, “the rate and extent of absorption of the [generic] drug do not show a significant difference from the rate and extent of absorption of the listed drug.”

NDA applicants and holders must provide certain information about patents related to the branded drug for listing in the Orange Book. When an ANDA application is submitted, it must contain one of several possible certifications regarding each of the patents listed in the Orange Book for the branded product that is the reference listed drug. A certification that a listed patent is invalid, unenforceable, or will not be infringed by the sale of the proposed product is called a Paragraph IV certification. If the applicant has provided a Paragraph IV certification to the FDA, the applicant must also send appropriate notice of the Paragraph IV certification to the NDA and patent holders within 20 days of the ANDA or 505(b)(2) application (a marketing application in which sponsors may rely on investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted) being accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) application until the earlier of expiration of the patent, a decision in the infringement case that is favorable to the ANDA or 505(b)(2) applicant, or 30 months after the receipt of the Paragraph IV notice (which can be extended if the reference product has 5-year exclusivity and the ANDA or 505(b)(2) application is submitted between four and five years after approval of the reference product).

The Hatch-Watchman Act also provides for a 180-day period of generic product exclusivity for the first generic applicant to submit an ANDA with a paragraph IV certification for a generic version of an NDA-approved drug. Generic pharmaceutical products that are introduced by innovator companies, either directly or through partnering arrangements with other generic companies are known as authorized generics. Authorized generics are equivalent to the innovator companies' brand name drugs but are sold at relatively lower prices than the brand name drugs. An authorized generic product may be marketed during the

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180-day exclusivity period granted to the first manufacturer to submit an ANDA with a Paragraph IV certification for a generic version of the brand product.

Adverse Event Reporting

The FDA requires a sponsor to submit reports of certain information on side effects and adverse events associated with its products that occur either during clinical trials or after marketing approval. These requirements include specific and timely notification of certain serious, unexpected and/or frequent adverse events, as well as regular periodic reports summarizing adverse drug experiences. Failure to comply with these FDA safety reporting requirements may result in FDA regulatory action that may include civil action or criminal penalties. In addition, as a result of these reports, the FDA could create a Tracked Safety Issue for a product in the FDA’s Document Archiving, Reporting and Regulatory Tracking System, place additional limitations on an approved product’s use, such as through labeling changes, or, potentially, could require withdrawal or suspension of the product from the market. In addition, FDA could require post-approval studies or impose distribution and use restrictions and other requirements via a REMS based upon new safety information obtained through adverse event reporting (discussed further below).

FDA Post-Approval Requirements

Even if initial approval of an NDA, sNDA or BLA is granted, such approval may be subject to post-approval regulatory requirements, any or all of which may adversely impact a sponsor’s ability to effectively market and sell the approved product. The FDA may require the sponsor to conduct Phase 4 clinical trials, also known as post-marketing requirements, to provide additional information on safety and efficacy. In addition, the FDA and the sponsor may agree to the conduct of certain post-market studies, known as post-marketing commitments, to further obtain safety and efficacy information. The results of such post-marketing requirement or commitment studies may be negative and could lead to limitations on the further marketing of a product, including safety labeling changes. Also, under PREA, the FDA may require pediatric assessment of certain drugs unless waived or deferred due to the fact that necessary studies are impossible or highly impractical to conduct in the specified age group or where the drug is not likely to be used in a substantial number of pediatric patients in that age group. In addition, the FDA may require a sponsor to implement a REMS, which may include distribution or use restrictions to manage a known or potential serious risk associated with the product. Failure to comply with REMS requirements may result in civil penalties. Further, if an approved product encounters any safety or efficacy issues, including drug interaction problems, the FDA has broad authority to require the sponsor to take any number of actions, including, but not limited to, undertaking post-approval clinical studies, implementing labeling changes, adopting a REMS, issuing Dear Health Care Provider letters, or removing the product from the market.

FDA Regulation of our Products
FDA Regulation of Product Marketing and Promotion
The FDA also regulates all advertising and promotional activities for prescription drugs, both prior to and after approval. Approved pharmaceutical products must be promoted in a manner consistent with their terms and conditions of approval, including the scope of their approved use. The FDA may take enforcement action against a company for promoting unapproved uses of a product (“off-label promotion”) or for other violations of its advertising and labeling laws and regulations. Failure to comply with these requirements could lead to, among other things, adverse publicity, product seizures, civil or criminal penalties, or regulatory letters, which may include warnings and require corrective advertising or other corrective communications to healthcare professionals.
Promotional labeling and advertising materials for all prescription pharmaceutical products must be submitted to the FDA’s Office of Promotional Drug Products (“OPDP”) at the time of initial dissemination or publication. However, under the Subpart H regulations, until the Makena confirmatory post-approval clinical trial is completed, we are subject to the requirement that all Makena promotional materials be submitted for review to the OPDP at least 30 days prior to the intended time of initial dissemination of the promotional labeling or initial publication of the advertisement. This extra requirement means that there is a longer lead time before we are able to introduce new promotional material to the market for Makena and we are subject to increased scrutiny prior to using promotional pieces to ensure fair balance.

FDA Regulation of Manufacturing Facilities
Manufacturing procedures and quality control for approved drugs must conform to cGMP. Domestic manufacturing establishments must follow cGMP at all times, and are subject to periodic inspections by the FDA in order to assess, among other things, cGMP compliance. In addition, prior to approval of an NDA, sNDA or BLA, the FDA will often perform a pre-

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approval inspection of the sponsor’s manufacturing facility, including its equipment, facilities, laboratories and processes, to determine the facility’s compliance with cGMP and other rules and regulations. Vendors that supply finished products or components to the sponsor that are used to manufacture, package, and label products are subject to similar regulation and periodic inspections. If the FDA identifies deficiencies during an inspection, it may issue a formal notice, which may be followed by a warning letter if observations are not addressed satisfactorily. FDA guidelines specify that a warning letter should be issued for violations of “regulatory significance” for which the failure to adequately and promptly achieve correction may result in agency consideration of an enforcement action.
Product approval may be delayed or denied due to cGMP non-compliance or other issues at the sponsor’s manufacturing facilities or contractor sites or suppliers included in the NDA, sNDA or BLA, and the complete resolution of these inspectional findings may be beyond the sponsor’s control. If the FDA determines that the sponsor’s equipment, facilities, laboratories or processes do not comply with applicable FDA regulations and conditions of product approval, the FDA may seek civil, criminal or administrative sanctions and/or remedies against the sponsor, including suspension of its manufacturing operations.

Orphan Drug Exclusivity

Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000. The company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application for the same drug for the same orphan indication during the exclusivity period, except in very limited circumstances. A designated orphan drug may not receive orphan drug exclusivity for an approved indication if that indication is for the treatment of a condition broader than that for which it received orphan drug designation. In addition, orphan drug exclusivity marketing rights may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. Finally, the FDA may approve a subsequent drug that is otherwise the same as a currently approved orphan drug for the same orphan indication during the exclusivity period if the sponsor of the subsequent drug can demonstrate that the drug is clinically superior to the already approved drug. According to the FDA, clinical superiority may be demonstrated by showing that a drug is more effective in a clinical trial, safer in a substantial portion of the target population, or provides a major contribution to patient care relative to the currently approved drug.

Fraud and Abuse Regulation

Our general operations, and the research, development, manufacture, sale, and marketing of our products, are subject to extensive federal and state regulation, including, but not limited to, FDA regulations, the Federal Anti-Kickback Statute (“AKS”), the Federal False Claims Act (“FCA”), and the Foreign Corrupt Practices Act (“FCPA”), and their state analogues, and similar laws in countries outside of the U.S., laws governing sampling and distribution of products and government price reporting laws.

The AKS makes it illegal for any person, including a prescription drug or medical device manufacturer, to knowingly and willfully solicit, offer, receive, or pay any remuneration, directly or indirectly, in cash or in kind, in exchange for, or to intended to induce, purchasing, ordering, arranging for, or recommending the purchase or order of any item or service, including the purchase or prescription of a particular drug, for which payment may be made by a federal healthcare program. Liability may be established without proving actual knowledge of the statute or specific intent to violate it. In addition, federal law now provides that the government may assert that a claim including items resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA, described below. Violations of the AKS carry potentially significant civil and criminal penalties, including imprisonment, fines, administrative civil monetary penalties and exclusion from participation in federal healthcare programs. Many states have enacted similar anti-kickback laws, including in laws that prohibit paying or receiving remuneration to induce a referral or recommendation of an item or service reimbursed by any payer, including private payers.

The FCA imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities (including manufacturers) for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for reimbursement of drugs for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government. The FCA also prohibits knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim or having possession, custody, or control of property or money used, or to be used, by the federal government and knowingly delivering or causing to be delivered, less than all of that money or property. The government may deem manufacturers to have “caused” the submission of false or fraudulent

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claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Claims which include items resulting from a violation of the federal Anti-Kickback Statute are false or fraudulent claims for purposes of the FCA. The FCA permits a private individual acting as a “whistleblower” to bring an action on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. Government enforcement agencies and private whistleblowers have asserted liability under the FCA for, among other things, claims for items not provided as claimed or for medically unnecessary items, kickbacks, promotion of off-label uses, and misreporting of drug prices to federal agencies. Many states have enacted similar false claims laws, including in some cases laws that apply where a claim is submitted to any third-party payer, not just government programs.

The Health Insurance Portability and Accountability Act of 1996, (“HIPAA”) as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, which imposes criminal and civil liability for knowingly and willfully executing a scheme, or attempting to execute a scheme, to defraud any healthcare benefit program, including private payers, or falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

The Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “ACA”), which imposed new annual reporting requirements for certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, for certain payments and “transfers of value” provided to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Many states have enacted legislation requiring pharmaceutical companies to, among other things, establish marketing compliance programs, file periodic reports with the state and make periodic public disclosure on sales and marketing activities and prohibiting certain other sales and marketing practices. If we fail to track and report as required by these laws, we could be subject to state and federal penalty provisions.

The FCPA prohibits U.S. publicly-traded companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment and requires companies to maintain accurate books and records, as well as an adequate system of internal accounting controls. If we violate the FCPA, we could be subject to substantial civil and criminal penalties.

Our activities relating to the sale and marketing of our products may be subject to scrutiny under the above referenced laws. Federal and state authorities continue to devote significant attention and resources to enforcement of these laws within the pharmaceutical industry, and private individuals have been active in bringing lawsuits on behalf of the government under the FCA. We have developed and implemented a corporate compliance program based on what we believe are current best practices in the pharmaceutical industry; however, these laws are broad in scope and there may not be regulations, guidance, or court decisions that definitively interpret these laws in the context of particular industry practices. We cannot guarantee that we, our employees, our consultants, or our contractors are or will be in compliance will all federal, state, and foreign regulations. If we or our representatives fail to comply with any of these laws or regulations, a range of fines, penalties, and/or other sanctions could be imposed on us, including, but not limited to, restrictions on how we market and sell our products, significant fines, exclusions from government healthcare programs, including Medicare and Medicaid, litigation, or other sanctions. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could also have an adverse effect on our business, financial condition and results of operations. Such investigations or suits may also result in related shareholder lawsuits, which can also have an adverse effect on our business.
Our activities are also subject to regulation by numerous regulatory authorities including CMS, other divisions of the Department of Health and Human Services, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission (the “FTC”), the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.

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Other Regulatory Requirements

Several states have enacted legislation requiring manufacturers operating within the state to establish marketing and promotional compliance programs or codes of conduct and/or file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities. In addition, as discussed above, as part of the ACA, certain manufacturers of drugs and medical devices are required to publicly report gifts and other payments or transfers of value made to U.S. physicians and teaching hospitals. Several states have also adopted laws that prohibit certain marketing-related activities, including the provision of gifts, meals or other items to certain healthcare providers. Many of these requirements are new and uncertain, and the likely extent of future enforcement for failure to comply with these requirements is unclear. Compliance with these laws is difficult, time-consuming, and costly, and if we are found not to be in full compliance with these laws, we may face enforcement actions, fines, and other penalties, and we could receive adverse publicity which could have an adverse effect on our business, financial condition, and results of operations.

We are also subject to data protection laws and regulations (i.e., laws and regulations that address privacy and data security). The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues. In the U.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which will come into effect on January 1, 2020 and provides new data privacy rights for consumers and new operational requirements for companies, which may increase our compliance costs and potential liability. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

In addition, as discussed above, in the course of our business, we may obtain health information from third parties (i.e., healthcare providers who prescribe our products) that are subject to privacy and security requirements under HIPAA. HIPAA imposes, among other things, specified requirements on covered entities and their business associates relating to the privacy and security of individually identifiable health information including mandatory contractual terms and required implementation of technical safeguards of such information. Although we are not directly subject to HIPAA (other than potentially with respect to providing certain employee benefits) we could be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA/HITECH. We are also subject to laws and regulations covering data privacy and the protection of health-related and other personal information. We obtain patient health information from most healthcare providers who prescribe our products and research institutions we collaborate with, and they are subject to privacy and security requirements that may affect us.

Outside the U.S., we are impacted by the privacy and data security requirements at the international, national and regional level, and on an industry specific basis. Legal requirements in the countries in which we do business relating to the collection, storage, handling and transfer of personal data and potentially intellectual property continue to evolve with increasingly strict enforcement regimes. More privacy and security laws and regulations are being adopted, and more are being enforced, with potential for significant financial penalties. In the E.U., the General Data Protection Regulation (“GDPR”) took effect in May 2018 and imposes increasingly stringent data protection and privacy rules. The GDPR extends the geographical scope of EU data protection law to non-EU entities under certain conditions, tightens existing EU data protection principles and creates new obligations for companies and new rights for individuals. The GDPR is new and therefore guidance, interpretation and enforcement under the GDPR are still developing. The GDPR may increase our responsibility and potential liability in relation to personal data that we process, expose us to substantial potential fines and increase our compliance costs. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

Failure to comply with data protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.


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U. S. Healthcare Reform

Our revenue and operations could be affected by changes in healthcare spending and policy in the U.S. We operate in a highly regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to health care availability, the method of delivery or payment for health care products could negatively impact our business, operations and financial condition. The U.S. Congress and state legislatures from time to time propose and adopt initiatives aimed at cost containment, which could impact our ability to sell our products profitably. For example, the ACA substantially changed the way healthcare is financed by both governmental and private insurers. Since its enactment, however, there have been modifications and challenges to numerous aspects of the ACA. In 2019, litigation, regulation, and legislation related to the ACA are likely to continue, with unpredictable and uncertain results. The full impact of the ACA, any law repealing. replacing, and/or modifying elements of it, and the political uncertainty surrounding any repeal or replacement legislation on our business remains unclear.

Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. In addition, the U.S. government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs to limit the growth of government paid healthcare costs. Individual states in the U.S. have passed legislation and implemented regulations requiring reporting related to notification of certain price increases and submissions on justifications for certain price increases. The enforcement of individual state requirements is uncertain, but failure to comply could expose us to substantial financial penalties and the potential for adverse publicity. The number of states establishing requirements to report pricing or otherwise designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing is likely to continue to increase, creating a regulatory landscape of substantial complexity. The pace of change and varying demand of individual state requirements may make it very difficult to comply.

Drug-Device Combination Regulation

Combination products are defined by the FDA to include products composed of two or more regulated components (e.g., a drug and a device). Drugs and devices each have their own regulatory requirements, and combination products may have additional requirements. The Makena auto-injector and the Vyleesi product, if approved, are considered drug-device combination products and are regulated under this framework.

Medical Device Regulation

All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE, regulations that among other things, govern investigational device labeling, prohibit promotion of the investigational device, and specify recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. The IDE application must become effective prior to commencing human clinical trials. The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies the application or notifies the company that the investigation is on hold and may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE that requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.

Medical devices, such as MuGard, are similarly subject to FDA clearance or approval and extensive post-approval regulation under the FDC Act. Authorization to commercially distribute a new medical device in the U.S. is generally received in one of two ways. The first, known as premarket notification (the “510(k) process”), requires a sponsor to obtain 510(k) clearance by demonstrating that the new medical device is substantially equivalent to a legally marketed medical device that is not subject to premarket approval. The second, more rigorous process, known as premarket approval, requires a sponsor to independently demonstrate that the new medical device is safe and effective.

Both before and after a device is commercially released, there are ongoing responsibilities under FDA regulations. For example, the FDA requires that device manufacturers maintain particular reviews design and manufacturing practices, labeling and record keeping, and manufacturers’ required reports of adverse experiences and other information to identify potential problems with marketed medical devices. If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could, depending on the FDA’s specific findings, require us to notify healthcare professionals and others that the devices present unreasonable risks

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of substantial harm to the public health, order a recall, repair, replacement, or refund of such devices, detain or seize adulterated or misbranded medical devices, or ban such medical devices. The FDA may also impose operating restrictions, enjoin and/or restrain certain conduct resulting in violations of applicable law pertaining to medical devices and assess civil or criminal penalties against our officers, employees, or us.

Pharmaceutical Pricing and Reimbursement

Our ability to successfully commercialize our products is dependent, in significant part, on the extent to which coverage and reimbursement for these products and related treatments is available from third-party payers, including state and federal governmental payers, such as Medicare and Medicaid, managed care organizations, private health insurers and other organizations.

Coverage by third-party payers depends on a number of factors, including the third-party’s determination that the product is clinically and cost effective both individually and within its therapeutic class. Third-party payers are increasingly challenging the prices charged for pharmaceutical products (including combination products), and continue to institute cost containment measures to control or influence the purchase of pharmaceutical products, such as through the use of prior authorizations and step therapy. There is a continued scrutiny, intensifying criticism and political focus on pharmaceutical pricing practices at both national and regional levels. Especially in the U.S., state legislators are implementing a variety of regulations intended to increase the transparency of bio-pharmaceutical pricing, which may lead to future price control regulations at state levels. Federally, multiple price control mechanisms have been suggested in the recent past, and bi-partisan focus on the issues remains a high priority. Consolidation of pharmacy benefit managers and managed care organizations is also increasing the price pressure in the private sector. If these third-party payers provide an insufficient level of coverage and reimbursement for our products, physicians and other healthcare providers may choose to prescribe alternative products, including generics, which would have an adverse effect on our ability to generate revenues.

Medicaid is a joint federal and state health insurance program that is administered by the states for low-income children, families, pregnant women, and other individuals with disabilities. Under the Medicaid Drug Rebate program established by the ACA, we are required to pay a rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program. The amount of the rebate is determined by law and will be adjusted upward if average manufacture price (“AMP”) increases more than inflation as measured by the Consumer Price Index - Urban. Each quarter, the rebate amount is calculated based on our report of current AMP and best price for each of our products to CMS. The requirements for calculating AMP and best price are complex. We are required to report revisions to AMP or best price previously reported within a certain period, which revisions could affect our rebate liability for prior quarters. Further, changes to the Medicaid Drug Rebate Program, effective as of April 2016, require state Medicaid programs to reimburse certain brand name covered outpatient drugs at actual acquisition cost plus a dispensing fee. If we fail to provide information timely or we are found to have knowingly submitted false information to the government, the statute governing the Medicaid Drug Rebate program provides for civil monetary penalties.

Medicare is a federal health insurance program, administered by CMS, for people who are 65 or older, and certain people with disabilities or certain conditions, irrespective of their age. Medicare Part B covers (a) products administered by physicians or other healthcare practitioners, (b) products provided in connection with certain durable medical equipment, (c) certain oral anti-cancer and immunosuppressive drugs. We are required to provide average sales price (“ASP”) information to CMS on a quarterly basis. The submitted information is used to calculate a Medicare payment rate using ASP plus a specified percentage. These rates are adjusted periodically. If we fail to provide information timely or we are found to have knowingly submitted false information to the government, the governing statutes provide for civil monetary penalties.

Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e. drugs that do not need to be injected or otherwise administered by a physician), including combination products. Medicare Part D is a voluntary prescription drug benefit, administered by private prescription drug plan sponsors approved by the U.S. government. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs; and each drug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time to time. The prescription drug plans negotiate pricing with the manufacturers and may condition formulary placement on the availability of manufacturer discounts. Manufacturers, including us, are required to provide a 50% discount on brand name prescription drugs utilized by Medicare Part D beneficiaries when those beneficiaries reach the coverage gap in their drug benefits.

Effective January 2018, CMS adopted a policy to pay for separately payable, non-pass-through drugs and biologicals other than vaccines purchased through the 340B Drug Pricing Program under the Public Health Services Act (the “340B Program”), with certain exceptions, at the ASP minus 22.5% rather than ASP plus 6%. Drugs not purchased under the 340B Program will

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continue to be paid for at a rate of ASP plus 6%. There has been significant increases in budget pressure, which may adversely impact premium priced agents, such as Feraheme and Makena.

Our products are available for purchase by authorized users of the Federal Supply Schedule (“FSS”), pursuant to a contract with the Department of Veterans Affairs (“VA”), in which we are required to offer deeply discounted pricing to four federal agencies: VA; Department of Defense (“DOD”); the Coast Guard; and Public Health Services (“PHS”) (including the Indian Health Service) (together the “Big Four”). Coverage under Medicaid, Medicare and the PHS pharmaceutical pricing program is conditioned upon FSS participation. FSS pricing is not to exceed the price we charge our most-favored non-federal customer for a product. In addition, prices for drugs purchased by the Big Four (including products purchased by military personnel and dependents through the TRICARE retail pharmacy program), are subject to a cap on pricing equal to 76% of the non-federal average manufacturer price (non-FAMP). An additional discount applies if the non-FAMP increases more than inflation, as measured by the Consumer Price Index - Urban. If we fail to provide information timely or we are found to have knowingly submitted false information, the governing statute provides for civil monetary penalties.

Federal law requires that any company participating in the Medicaid Drug Rebate program also participate in the PHS’s 340B Program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B Program requires participating manufacturers to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the PHS, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is calculated using a statutory formula, which is based on AMP and rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate program. In addition, we may, but are not required to, offer these covered entities a price lower than the 340B ceiling price. The ACA also obligates the Health Resources and Services Administration (the “HRSA”), the agency which administers the 340B Program, to promulgate various regulations and implement processes to improve the integrity of the 340B Program.

Federal, state and local governments continue to consider legislation to limit the growth of healthcare costs, including the cost of prescription drugs and combination products. In 2017, we saw several states and local government either implement or consider implementing price transparency legislation that may prevent or limit our ability to take price increases at certain rates or frequencies. For example, in 2017, California enacted a new law, that went into effect on January 1, 2018 with initial reporting requirements in effect as of January 1, 2019, to facilitate greater transparency in brand-name and generic drug pricing through the implementation of specific price reporting requirements for pharmaceutical manufacturers. The extent and timing of these changes are not known, but future legislation could limit the price and/or payment for prescription drugs. If adequate reimbursement levels are not maintained by government and other third-party payers for our products, our ability to sell our products may be limited and/or our ability to establish acceptable pricing levels may be impaired, thereby reducing anticipated revenues and profitability.

Success of any products we may ultimately seek approval to commercialize outside of the U.S. will depend largely on obtaining and maintaining governmental coverage, as governmental healthcare programs tend to be the dominant third party payers. Products that are not covered and funded by government entities are unlikely to be used in these markets. We cannot be certain we can obtain coverage and reimbursement for our product in markets outside the U.S. Additionally, ability to market our products on a profitable basis may be limited, given governments control prices of prescription medicines though mechanisms such as, but not limited to, international price referencing, therapeutic price reference, price cuts, rebates, revenue related taxes, and profit controls. In markets outside the U.S., the price of the prescriptions medicines tend to decline over the life of the medicine and/or as the volume increases, making it difficult to achieve expected growth in revenue.

Backlog

We had a $9.1 million and $7.6 million sales backlog as of December 31, 2018 and 2017, respectively. We expect to recognize the $9.1 million in the first quarter of 2019, net of any applicable rebates or credits. These backlogs were largely due to timing of orders received from our third-party logistics providers. Generally, product orders from our customers are fulfilled within a relatively short time of receipt of a customer order.


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Employees

As of February 25, 2019, we had 467 employees. This number reflects the impact of approximately110 employees who were displaced in our recently completed restructuring effort, which combined our women’s health and maternal health sales forces into one integrated sales team. We utilize consultants and independent contractors on a regular basis to assist in the development and commercialization of our products. Our success depends to a significant extent on our ability to continue to attract, retain and motivate qualified sales, technical operations, managerial, scientific and medical personnel of all levels. Although we believe we have been relatively successful to date in obtaining and retaining such personnel, we may not be successful in the future.

None of our employees are represented by a labor union, and we consider our relationship with our employees to be good.

Foreign Operations

We have no foreign operations. We did not have material revenues from customers outside of the U.S. in 2018 and 2017.

Code of Ethics

Our Board of Directors has adopted a code of ethics that applies to our officers, directors and employees. We have posted the text of our code of ethics on our website at http://www.amagpharma.com in the “Investors” section. We will provide to any person without charge a copy of such code of ethics, upon request in writing to Investor Relations, AMAG Pharmaceuticals, Inc., 1100 Winter Street, Waltham, MA 02451. In addition, should any changes be made to our code of ethics, we intend to disclose within four business days on our website (or in any other medium required by law or the NASDAQ): (a) the date and nature of any amendment to our code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (b) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver, and the date of the waiver.

Available Information

We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, under which we file periodic reports, proxy and information statements and other information with the U.S. Securities and Exchange Commission (the “SEC”). Copies of these reports may be examined by the public without charge on the Internet at http://www. sec.gov. Our internet website address is http://www.amagpharma.com. Through our website, we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and registration statements, and all of our insider Section 16 reports (and any amendments to such filings), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. These SEC reports can be accessed through the “Investors” section of our website. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC. Paper copies of our SEC reports are available free of charge upon request in writing to Investor Relations, AMAG Pharmaceuticals, Inc., 1100 Winter Street, Waltham, MA 02451. The content on any website referred to in this Form 10-K is not incorporated by reference into this Form 10-K unless expressly noted.


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ITEM 1A. RISK FACTORS:
The following information sets forth material risks and uncertainties that may affect our business, including our future financial and operational results and could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report on Form 10-K and elsewhere as discussed in the introduction to Part I above. You should carefully consider the risks described below, in addition to the other information in this Annual Report on Form 10-K, before making an investment decision. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or other factors not perceived by us to present material risks to our business at this time also may impair our business operations.

Risks Related to Our Business and Industry

Our ability to successfully commercialize our products or product candidates, if approved, including our ability to achieve their widespread market acceptance, is critical to the success of our business.

We dedicate a substantial amount of our resources to the commercialization of our products and in preparation for the commercialization of our product candidates, including Vyleesi, which is in development for the treatment of hypoactive sexual desire disorder (“HSDD”). Our ability to generate revenue in the near-term will depend almost entirely on our ability to execute on our commercialization plans and the level of market adoption for, and the continued use of, our products (and, if approved, our product candidates) by physicians, hospitals, patients, and/or healthcare payers, including government payers, consumers, managed care organizations, and retail and specialty pharmacies. If we are not successful in commercializing our products, including achieving and maintaining an adequate level of market adoption, our profitability and our future business prospects will be adversely impacted.

The degree of commercial success and market acceptance of our products and product candidates will depend on a number of factors, including, but not limited to, the following:

The competitive landscape for our products, including the timing of new competing products (including generics) entering the market, and the level and speed at which competing products (current or new) experience market acceptance;

The effectiveness of our marketing, sales and distribution strategies and operations and our ability to leverage our established relationships in the medical community and expand our access through contracting strategies;

Actual or perceived advantages or disadvantages of our products or product candidates as compared to alternative treatments, including their respective safety and efficacy profiles, the potential convenience and ease of administration or cost effectiveness;

The size of the patient population for our products and our ability to retain or grow our customer base and maintain and efficiently deploy our sales force and commercialization team to compete in the market, especially given the diverse nature of our product portfolio;

Our ability to supply sufficient inventory of our products for commercial sale, including maintaining commercially viable manufacturing processes that are compliant with applicable laws and regulations (including current good manufacturing practices (“cGMP”));

The success and timing of regulatory approval and launch for our product candidates, including our ability to obtain regulatory approval for Vyleesi in the U.S. and whether the U.S. Food and Drug Administration (the “FDA”) imposes any restrictions on its use or distribution;

Our ability to engage with and educate healthcare providers and patients to increase awareness and understanding of the underlying disease states that our products treat or the value of the underlying purpose of our products, including moderate to severe dyspareunia and HSDD;

New safety or drug interaction issues that could arise as our products are used or studied over longer periods of time or used by a wider group of patients, some of whom may be taking other medicines or have additional underlying health problems;


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Current and future restrictions or limitations on our approved or future indications and patient populations or other adverse regulatory actions;
 
The relative price, constraints on pricing and the impact of price increases on our products, including the financial impact of certain programs we may implement such as the Intrarosa comprehensive copay savings program and sample program;

Our ability to secure and maintain adequate reimbursement from government and third-party payers to optimize patient access and the willingness and ability of patients to pay for our products, including the willingness of healthcare providers to prescribe our products if more economical options are available;

The performance of our manufacturers, license partners, distributors, providers and other business partners, over which we have limited control;

Our ability to maintain compliance with all applicable FDA regulations;

Any significant misestimations of the size of the market and market potential for any of our products or product candidates; and

Our and our partners’ ability to enforce intellectual property rights in and to our products to prohibit a third-party from marketing a competing product (including a generic product) and our ability to avoid third-party patent interference or intellectual property infringement claims.
 
We have limited experience with development stage products and cannot ensure that we will be successful in gaining approval of our product candidates, including Vyleesi, AMAG-423 and ciraparantag, on a timely basis, or at all, and even if approved, we may not be successful in commercializing such products. Additionally, any approvals that we do obtain may contain unexpected FDA-imposed restrictions on the use or distribution of such products, which could adversely and materially affect our long term success.

Our long-term success and revenue growth depends upon our ability to continue to successfully develop new products. Drug development is inherently risky, time consuming and unpredictable. The FDA imposes substantial requirements on the development of such candidates to become eligible for marketing approval and has substantial discretion in the approval process.

We currently have three product candidates in our pipeline. Vyleesi, an investigational product designed to be an on demand therapy for the treatment of HSDD in pre-menopausal women, for which we were granted a Prescription Drug User Fee Act (“PDUFA”) date by the FDA of June 23, 2019. In addition, during 2018 and early 2019, we acquired two development-stage products, AMAG-423, which is in development for the treatment of severe preeclampsia, and ciraparantag, which is in development for patients treated with novel oral anticoagulants or low molecular weight heparin when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding.

The approval of our current or future product candidates for commercial sale in the U.S. could be delayed, limited or denied or we may be required to conduct additional studies for a number of reasons, including, but not limited to, that:

The FDA may determine that our product candidates do not demonstrate safety and efficacy in accordance with regulatory agency standards based on a number of considerations, including adverse medical events that are reported during the trials, such as increases in blood pressure and a serious adverse event of hepatitis of unknown etiology noted in prior Vyleesi clinical trials;

The FDA could analyze and/or interpret data from clinical trials and preclinical testing in different ways than we or our partners interpret them and determine that our data is insufficient for approval;

The FDA may require more information, including additional preclinical or clinical data or trials, to support approval, such as the recent request by the FDA for additional data assessing 24-hour ambulatory blood pressure with short-term daily use of Vyleesi;


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Devices we may use in combination with our products may not be adequate or may not be considered adequate by the FDA, such as the auto-injector device that we plan to use to administer Vyleesi and the coagulometer we intend to use in the Phase 3 clinical program for ciraparantag;

The FDA could determine that our manufacturing processes are not properly designed, are not conducted in accordance with federal laws or otherwise not properly managed and we may be unable to establish, and obtain FDA approval for, a commercially viable manufacturing process for our product candidates in a timely manner, or at all;

The supply or quality of our product candidates for our clinical trials may be insufficient, inadequate or delayed, particularly with respect to AMAG-423, which is a biologic and involves a time intensive, complex manufacturing process;

The size of the patient population required to establish the efficacy of our product candidates to the satisfaction of the FDA may be larger than we anticipated;

The failure of clinical investigational sites and the records kept at such sites, including the clinical trial data, to be in compliance with the FDA’s current good clinical practices regulations (“cGCP”), including the failure to pass FDA inspections of clinical trial sites;

The FDA may change their approval policies or adopt new regulations;

The FDA may not be able to undertake reviews or approval processes in a timely fashion, including as a result of government shutdowns, which have become more frequent and lengthy in recent administrations;

The results of the earlier clinical trials may not be representative of our future, larger trials, particularly since the presumed mechanism of action for certain of our products is not known or understood; for instance ciraparantag has only been studied in a small number of healthy volunteers;

The FDA may not agree with our regulatory approval strategies or components of our regulatory filings, such as the design or implementation of our clinical trials; for instance, we are relying on precedent to estimate the number of patients required in our Phase 3b ciraparantag trial prior to filing the New Drug Application (“NDA”) and the FDA may not agree with our approach and our other expectations for these clinical trials may not ultimately be approved by the FDA; or

A product may not be approved for the indications that we request.

Further, we have identified the following risks, which are specific to a particular development program:

Vyleesi

The FDA may determine that the magnitude of efficacy demonstrated in the Vyleesi studies does not amount to a clinically meaningful benefit to pre-menopausal women with HSDD and thus may not approve Vyleesi despite statistically significant efficacy results; and

Although we believe that the frequent dosing study for Vyleesi can be conducted and with data submitted prior to the June 23, 2019 Vyleesi PDUFA date, if we are not able to submit the results of this study on time or if the study results are unacceptable to the FDA, the FDA may request additional studies and/or we may receive a Complete Response letter to our NDA submission for Vyleesi.

AMAG-423

AMAG-423 is produced through a time intensive, complex process and there is currently only one third-party that can manufacture it, as further discussed below;

The Phase 2b/3a trial may produce negative or inconclusive results or may not demonstrate to the FDA’s satisfaction that AMAG-423 is safe and effective, particularly in light of the limited amount of data to date demonstrating that AMAG-423 effectively treats severe preeclampsia in this patient population;


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Patient enrollment may be slower than expected as severe preeclampsia can be a difficult patient population to enroll and enrollment of the study to date has been very slow. For example, although we are in the process of expanding the trial sites to accelerate enrollment, enrollment may be slower for any number of factors, including failure of our third-party vendors (including our CROs) to effectively perform their obligations to us in a timely manner, a lack of patients who meet the enrollment criteria, our inability to establish sufficient trial sites, including outside of the U.S., in a timely manner, or our inability to secure sufficient supply of drug product to meet the accelerated clinical timeline;

Under our agreement with BTG plc, we are required to differentiate our product from their product DigiFab® including without limitation, via labeling, dosage and/or formulation and if we are unable to show differentiation, we may be in breach of the agreement and be subject to penalties; and

There is no FDA-approved treatment for severe preeclampsia and accordingly, there is not an established regulatory pathway, which may require us to conduct additional trials or otherwise delay the approval of AMAG-423.
 
Ciraparantag

Since the coagulometer that we intend to use in the ciraparantag Phase 3a trials has not yet been fully validated or tested on a large scale, the FDA may (i) determine that the device is not effective in measuring whole blood clotting time, and/or (ii) not grant the Investigational Device Exception, which is necessary prior to the use of the coagulometer in our clinical trials; in such circumstances, ciraparantag may not receive regulatory approval or its approval would be delayed. Moreover, the FDA may only approve ciraparantag in conjunction with the use of the coagulometer (i.e. as a companion diagnostic), which would affect the commercial viability of ciraparantag.
 
In addition, AMAG-423 has received orphan drug designation from the FDA and we expect to request orphan drug designation for ciraparantag. Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000. The company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years. We cannot guarantee that our clinical data or other information that we generate or submit will be adequate for AMAG-423 or ciraparantag to receive orphan drug exclusivity. Even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In addition, orphan drug exclusivity marketing rights may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. If we do not receive orphan drug designation, or if the FDA approves another drug for the same indication, we may have limited market exclusivity for our products.
 
Any failure, delay or setback in obtaining regulatory approval for our product candidates could adversely affect our ability to grow our business and leverage our product portfolio and the future prospects of our business could be materially adversely affected. In addition, share prices have declined significantly in certain instances where companies have failed to obtain FDA approval of a product or where the timing of FDA approval is delayed. If we are required to conduct additional studies, our share price could decline significantly. Further, the market for products that address unmet medical needs is highly speculative and if we have over-estimated the market opportunity for any of our products or product candidates, or if we are unsuccessful in gaining market share, then our business and results of operations could be materially and adversely affected.

Even if regulatory approval is granted by the FDA to market our current or future product candidates, the FDA may impose limitations on the indicated use for which the drug product may be marketed or require additional post-approval clinical trials or other requirements with which we would need to comply in order to maintain approval of these products. The occurrence of any of these scenarios could materially harm the commercial prospects of our product candidates and our business could be seriously harmed. For additional post-approval risks see Risk Factor below entitled “We are subject to ongoing regulatory obligations and oversight of our products, and any failure by us to maintain compliance with applicable regulations may result in several adverse consequences including the suspension of the manufacturing, marketing and sale of our respective products, the incurrence of significant additional expense and other limitations on our ability to commercialize our respective products.


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Clinical product development involves a lengthy and expensive process, with uncertain timelines and outcomes. Any failure or delay in our clinical development programs could severely harm our business.

Clinical testing is expensive, difficult to design and implement, can take multiple years to complete and is inherently uncertain as to the ultimate timelines and outcomes. The results of preclinical testing or human clinical studies may not be predictive of the results of later-stage clinical trials and failure can occur at any stage of the clinical development process. We are currently conducting a Phase 2b/3a multi-center, randomized, double-blind, placebo-controlled, parallel group study for AMAG-423, for which we are targeting to complete enrollment by the end of 2019. We are also in the process of completing a Phase 2a study for ciraparantag and expect to initiate our Phase 3 clinical development program in the second half of 2019. We may experience delays in these ongoing studies or any future clinical studies we or our partners conduct.

Clinical trials can be delayed, suspended or terminated for a variety of reasons, including, but not limited to, the following:

Delay or failure to reach agreement with the FDA on a trial design, particularly with product candidates, such as AMAG-423, where there is no current FDA-approved treatment and the endpoints in our ongoing Phase 2b/3a trial have not been used in prior studies;

Delay or failure to reach agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites, failure by such CROs and trial sites to comply with regulatory requirements or study protocols, or clinical trial sites dropping out of the trial;

Our inability to manufacture, or obtain from third parties, adequate supply of drug product and substance sufficient to complete our clinical studies;

Delay or failure in obtaining the necessary approvals from regulators or institutional review boards (“IRBs”), including comparable foreign reviewing entities, in order to commence a clinical trial at a prospective trial site, or their suspension or termination of a clinical trial once commenced;

Imposition of a clinical hold for safety reasons or following an inspection of our or our partners’ clinical trial operations or trial sites by the FDA or other regulatory authorities;

Slower than expected rate of patient enrollment or difficulty maintaining patients who have initiated participation in a clinical trial or for any post-treatment follow-up;

Problems with drug product or drug substance storage and distribution;

Difficultly adding new clinical trial sites on a timely basis, or at all:

Governmental or regulatory delays and changes in regulatory requirements, policy and guidelines, including guidelines specifically addressing requirements for the development of treatments for our product candidates;

Ambiguous or negative interim results, or results that are inconsistent with earlier results or that indicate unforeseen safety or efficacy issues; and

Feedback from the FDA, an IRB or other entity that requires modification of the study protocol.

If we or our partners terminate or experience delays in the completion of any of our ongoing or future clinical trials, our development costs may increase, our regulatory approval process could be delayed and our ability to commercialize and commence sales of our product candidates may be harmed, which could have a material adverse effect on our business. Our inability to successfully complete clinical studies or trials of our product candidates and demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business prospects, financial condition and results of operations. In addition, many of the reasons that cause or lead to a delay in the commencement or completion of our clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.


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Our revenues for the Makena franchise may continue to be negatively impacted by recent and future generic entries into the market and the supply disruption of certain of our Makena products.

Our ability to continue to successfully commercialize Makena is dependent upon a number of factors, including our ability to differentiate Makena from other treatment options, especially now that two independent generic competitors have entered the market. Although our partner, Prasco, LLC (“Prasco”) markets a generic version of Makena in the U.S. (“the Makena authorized generic”) to mitigate the decrease in Makena revenue as generic entrants gain market share, our Makena products will continue to experience pricing and supply chain pressure and as a result, our Makena revenues may fall below expectations which could cause our financial condition and results of operations to be adversely impacted.

The long-term success of the Makena franchise is highly dependent on our ability to successfully commercialize the pre-filled subcutaneous auto-injector (the “Makena auto-injector”), which was approved for commercialization in February 2018, and which provides us with an alternative treatment method to the intramuscular (“IM”) formulation of Makena (the “Makena IM product”). Although there is no direct competition with the Makena auto-injector, the auto-injector competes for the same patients as generic versions of the Makena IM product, including Makena authorized generic. We may not be able to convince patients or healthcare providers to use or to switch from using the IM method of administration to the auto-injector, including if patients or healthcare providers are hesitant or apprehensive to use an auto-injector product due to perceptions regarding safety, efficacy or pain associated with the Makena auto-injector, or if the auto-injector is not priced competitively or is not provided comparable insurance coverage.

In addition, we have lost and could lose additional market share if we continue to not be able to deliver sufficient quantities of Makena inventory to meet demand. Due to continued manufacturing issues at our primary third-party manufacturer, we are currently experiencing a supply disruption of our Makena IM products, which has resulted in both our single-dose and multi-dose branded Makena vials being out-of-stock as well as periodic disruptions to our authorized generic supply. Although we are attempting to mitigate this supply issue by manufacturing at our secondary supplier, we can make no guarantees that additional supply will be available in a timely manner and we anticipate that our revenues for the IM products could continue to be adversely impacted. We are currently working with the FDA, healthcare providers, distribution partners and our manufacturers to minimize the impact of the current supply disruption of the IM products, including by encouraging healthcare providers to support new patient starts on the auto-injector. However, due to increased demand of the auto-injector product, we could face supply issues for that product as well. These supply issues have caused and will continue to cause a disruption in our ability to meet commercial demand of Makena more generally, which has and could continue to negatively impact revenues.

Further, we rely on Prasco for our successful commercialization of the Makena authorized generic. We have limited experience working with a generic vendor and selling products under terms customary in the generic marketplace. We are responsible for supplying product to Prasco, and due to the problems with our supply chain, revenues with respect to the Makena authorized generic have been and could continue to be adversely affected and we could be subject to certain charges, which could be substantial. For example, we were required to reimburse Prasco for certain charges it incurred in 2018 due to our inability to supply them with sufficient product to meet their contractual obligations with customers.

If we and Prasco are not able to capture or maintain sufficient market share, if generics are sold at a significant discount to Makena’s price, if we continue to experience supply disruptions related to our Makena IM products or if we become unable to meet commercial demand for our Makena auto-injector or Makena authorized generic, our Makena revenues could be materially and adversely affected and, ultimately, could negatively impact our stock price and results of operations.

We are completely dependent on third parties to manufacture our products and any difficulties, disruptions, delays or unexpected costs, or the need to find alternative sources, could adversely affect our profitability and future business prospects.

We do not own or operate facilities for the manufacture of our commercially distributed products. We rely solely on third-party contract manufacturing organizations (“CMOs”) and our licensors (who, in turn, may also rely on CMOs) to manufacture our products for our commercial and clinical use. We or our licensors may not be able to enter into agreements with manufacturers or second source manufacturers whose facilities and procedures comply with cGMP regulations and other regulatory requirements on a timely basis and with terms that are favorable to us, if at all. Further, our ability to have our products manufactured in sufficient quantities and at acceptable costs to meet our commercial demand and clinical development needs is dependent on the uninterrupted and efficient operation of our CMO’s and our licensors’ manufacturing facilities. For example, as discussed above, Pfizer, our primary drug product manufacturer of the Makena IM Products, is experiencing manufacturing issues and as a result, we have been and may be unable to meet the demand for both our branded Makena products and the Makena authorized generic. We currently remain out-of-stock of our branded single dose and multi dose vials of Makena product. Any further or other difficulties, disruptions, or delays in the manufacturing process or supply chain could

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result in product defects, shipment delays, suspension of manufacturing of, sale of or clinical development for the product, recall or withdrawal of product previously shipped for commercial or clinical purposes, inventory write-offs, additional supply failure charges to Prasco, or the inability to meet commercial or clinical demand in a timely and cost-effective manner.
In some cases we rely on single source manufacturers without a qualified alternative manufacturer. For example, we only have one manufacturing source for Vyleesi. Securing additional third-party contract manufacturers will require significant time for validating the necessary manufacturing processes, gaining regulatory approval, and implementing the appropriate oversight and may increase the risk of certain problems, including cost overruns, process reproducibility, stability issues, the inability to deliver required quantities of product that conform to specifications in a timely manner, or the inability to manufacture our products in accordance with cGMP. Furthermore, none of our or our licensors’ current third-party drug product manufacturers licenses to us exclusively and as such they may exhaust some or all of their resources meeting the demand of other parties or themselves.
Additionally, in early 2018 we received approval for the Makena auto-injector and may encounter difficulties in the production of the Makena auto-injector, including problems involving quality control, assurance and product reliability. For instance, we have received certain complaints regarding auto-injector malfunction. These issues as well as potential issues regarding scale-up, yields, and manufacturing costs, could result in significant delays in production or our inability to meet our demand for the auto-injector product. In addition, we do not currently have back-up suppliers for the Makena auto-injector manufacturers. Establishing an alternative or replacement supplier for the auto-injector device is a long and costly process and may not be successful. While we take precautions to mitigate potential interruptions, any failure at our manufacturers could result in a shortage of our Makena auto-injector inventory.
Further, we are dependent upon Endoceutics, Inc. (“Endoceutics”) to manufacture commercial supply of Intrarosa, who in turn relies on a single CMO for such supply. Endoceutics has limited experience overseeing CMOs for products at commercial scale, which imposes significant and complex regulatory and compliance obligations. Endoceutics has and may continue to face challenges and difficulties with its CMO in satisfying such obligations, particularly since such CMO has limited experience manufacturing prescription drugs.
AMAG-423 is a polyclonal antibody that is produced through a time intensive, complex process in which immunogens consisting of an analog of digoxin medication are produced in a laboratory and used to immunize sheep, which sheep then produce certain antibodies. These antibodies are collected, separated, purified, and formulated into digoxin immune fab (ovine). As discussed above, there is only one third-party that can manufacture AMAG-423 and which utilizes its own flock of sheep located entirely in Australia for the production of the antibodies used to produce AMAG-423. We currently have a commercial supply agreement to manufacture AMAG-423 drug substance and since there would only be one source of supply, if there are any disruptions to any part of the supply chain process, including the ability to obtain the ovum serum and other raw materials or any issues with the sheep used to produce the antibodies, such as diseases or natural disasters, our ability to complete the Phase 2b/3a trial or commercialize AMAG-423, if approved, would be adversely affected.
We currently do not have a commercial drug product supply agreement to manufacture ciraparantag and may not be able to enter into such agreement on acceptable terms, if at all. In addition, even if we enter into such agreement, since there would only be one source of supply, if there are any disruptions to any part of the supply chain process, including the ability to obtain certain raw materials, our ability to complete our planned clinical trials or commercialize ciraparantag, if approved, would be adversely affected.
Further, we, our licensors and our respective CMOs currently purchase certain raw and other materials used to manufacture our products from third-party suppliers. At present, we do not have long-term supply contracts with most of these third parties. These third-party suppliers may cease to produce the raw or other materials used in our products or as part of the administration of our products or otherwise fail to supply these materials to us, our licensors or our respective third-party manufacturers, or fail to supply sufficient quantities of these materials or supply materials that do not conform to specifications to us, our licensors or our respective third-party manufacturers in a timely manner for a number of reasons, including, but not limited to, the following:
Adverse financial developments at or affecting the supplier;

Unexpected demand for or shortage of raw or other materials;

Regulatory requirements or action;

An inability to provide timely scheduling and/or sufficient capacity;

Manufacturing difficulties;

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Changes to the specifications of the materials such that they no longer meet our standards;

Lack of sufficient quantities or profit on the production of materials to interest suppliers;

Labor disputes or shortages;

Failure to comply with environmental regulations, such as rules and regulations relating to the handling, storage and discharge of hazardous waste;

Changes in material hazard classification, which could require changes to our manufacturing processes, which, in turn, could require regulatory approval;

Disruption due to natural disasters; or

Import or export problems.

In addition, we, our licensors or our respective third-party manufacturers sometimes obtain raw or other materials from one vendor only, even where multiple sources are available, to maintain quality control and enhance working relationships with suppliers, which could make us susceptible to price inflation by the sole supplier, thereby increasing our production costs. As a result of the high-quality standards imposed on our raw or other materials, we, our licensors or our respective third-party manufacturers may not be able to obtain such materials of the quality required to manufacture our products from an alternative source on commercially reasonable terms, or in a timely manner, if at all.

If, because of the factors discussed above, we are unable to have our products manufactured on a timely or sufficient basis, we may not be able to meet commercial demand or our clinical development needs for our products or product candidates or we may not be able to manufacture our products in a cost-effective manner. As a result, we may lose sales, fail to generate projected revenues or suffer development or regulatory setbacks, any of which could have an adverse impact on our profitability and future business prospects.

Competition in the pharmaceutical and biopharmaceutical industries, including from companies marketing generic products, is intense. If we fail to compete effectively, our business and market position will suffer.

The pharmaceutical industry is intensely competitive and subject to rapid technological change. Our existing or potential competitors have or may develop products that are more widely accepted than ours, are viewed as more safe, effective, convenient or easier to administer, have been on the market longer and have stronger patient/provider loyalty, have been approved for a larger patient population, are less expensive or offer more attractive insurance coverage, discounts, reimbursements, incentives or rebates and may have or receive patent protection that dominates, blocks, makes obsolete or adversely affects our product development or business. Any such advantages enjoyed by our competitors could reduce our revenues and the value of our commercialization and product development efforts.

Makena competition currently comes mainly from two independent generic formulations of hydroxyprogesterone caproate (“HPC”) injections, which were approved in 2018, as well as from pharmacies that compound a non-FDA approved version of Makena, all of which are sold at much lower list prices than our branded products. We also expect to continue to face competition for Makena from future generic products as well as products currently in development which offer additional formulations or routes of administration that doctors believe may reduce or prevent preterm birth, such as an oral HPC product, which is currently in development and has completed its End-of-Phase 2 meeting with the FDA.

Many of our competitors for Feraheme and Intrarosa are large, well-known pharmaceutical companies and may benefit from significantly greater financial, sales and marketing capabilities, greater technological or competitive advantages, and other resources. Feraheme competes primarily with Injectafer®, a ferric carboxymaltose injection, Venofer®, an iron sucrose complex, and INFeD®, an iron dextran product and there are a number of oral iron replacement therapies either approved, such as Auryxia® (ferric citrate), an oral phosphate binder, or in development, such as Monofer® (iron isomaltoside), and hypoxia inducible factor stabilizers.

Intrarosa faces competition primarily from (a) Estrace® Cream (Estradiol vaginal cream, USP 0.01%), a vaginal cream for the treatment of vulvar and vaginal atrophy (“VVA”), (b) Vagifem® (estradiol vaginal inserts), a suppository for the treatment of VVA, (c) Premarin Vaginal Cream®, a vaginal cream for the treatment of VVA, (d) IMVEXXY® (estradiol vaginal inserts), an estrogen indicated for the treatment of moderate to severe dyspareunia due to menopause, (e) Estring®(estradiol vaginal ring), a

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vaginal ring marketed by Pfizer for the treatment of VVA due to menopause, (f) Osphena®, an oral therapy marketed by Duchesnay Inc. for the treatment of moderate to severe dyspareunia due to menopause, and (g) generic versions of certain of these products and over the counter and compounded remedies to treat VVA and dyspareunia.

We also expect to face competition for Vyleesi, if approved, including from Addyi®, an FDA-approved product for treatment of HSDD in pre-menopausal women as a daily-use oral drug. In addition, we are aware of several other drugs at various stages of development, most of which are being developed to be taken on a chronic, typically once-daily, basis. Emotional Brain BV, a Netherlands company, is developing two different oral fixed-dose, on-demand combination drugs, one a combination of sildenafil (the active ingredient in Viagra) and testosterone and the other a combination of testosterone and buspirone hydrochloride, and has conducted Phase 2b studies. There may be other companies developing new drugs for female sexual dysfunction (“FSD”) indications, some of which may be in clinical trials in the U.S. or elsewhere, or other companies which may sell their products off-label for indications other than FSD.

Currently, the primary pharmaceutical competitor we expect ciraparantag, if approved, to compete with is AndexXa® (coagulation factor Xa (recombinant), inactivated-zhzo) (“Andexxa”), which was approved in 2018 for the reversal of Xarelto®(rivaroxaban) and Eliquis®(apixaban), when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. AndexXa® is also in development for the reversal of Savaysa®(edoxaban) and Lovenox® (enoxaparin sodium injection).
 
If we are unable to compete effectively against existing and future competitors, our business, financial condition and results of operations may be materially adversely affected. For further details on our competition, please see Item I, “Business - Competition.

The success of our products depends on our ability to maintain the proprietary nature of our technology.

We rely on a combination of patents, trademarks and trade secrets in the conduct of our business. The patent positions of pharmaceutical and biopharmaceutical firms are generally uncertain and involve complex legal and factual questions. We may not be successful or timely in obtaining any patents for which we submit applications or the breadth of the claims obtained in our patents may not provide sufficient protection for our technology. The degree of protection afforded by patents for proprietary or licensed technologies or for future discoveries may not be adequate to preserve our ability to protect or commercially exploit those technologies or discoveries or to prevent others from doing so. The issuance of a patent is not conclusive as to its scope, validity or enforceability, and our owned or licensed patents may be challenged in the courts or patent offices in the U.S. or abroad. Such challenges may result in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technologies and products, or limit the duration of the patent protection of our technology and products. In addition, our owned or licensed intellectual property might be subject to liens or encumbrances, which, as a result, may not provide us with sufficient rights to exclude others from developing and commercializing products similar or identical to ours. Therefore, the degree of protection afforded by our intellectual property may provide us with little or no competitive advantage. For example, digoxin immune fab (ovine), the active ingredient of AMAG-423, has been approved and marketed in the U.S. for many years for a different indication and accordingly, no longer has composition of matter patent protection. If possible, we plan to seek additional patent protection for AMAG-423 through patent applications; however, we may not be able to obtain additional patent protection that would provide us with a competitive advantage.

We currently hold a number of U.S. and foreign patents for our development and commercial products, including the following:

One U.S. patent related to Feraheme that will expire in June 2023 and other U.S. patents related to Feraheme that expire in 2020;
 
One U.S. patent related to the Makena auto-injector product that will expire in 2036;

Four U.S. patents related to AMAG-423 that will expire in 2022, and several foreign patents that will expire in 2023; and

Two U.S. patents related to ciraparantag that expire in 2032 and 2034, and several foreign patents that will expire in 2032.

We also rely on licensed patents for the protection of the products we are developing and commercializing. Under our current license agreements we have rights to a number of U.S. and foreign patents and applications, including the following:

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U.S. and foreign patents and applications licensed from Palatin Technologies, Inc. (“Palatin”) related to Vyleesi that expire in 2020 and 2033 (one of which may be extended by up to five years under the Hatch-Waxman Act in the U.S);

U.S. patents licensed from Endoceutics related to Intrarosa that expire in 2028 and 2031 (one of which may be extended by up to five years under the Hatch-Waxman Act);

U.S. patents licensed from Antares Pharma, Inc. related to the Makena auto-injector product that expire between 2019 and 2034; and

U.S. patents licensed from Abeona Therapeutics, Inc. related to MuGard that expire in 2022.

These and any other patents owned by or licensed to us may be contested in litigation or reexamined or reviewed by the United States Patent and Trademark Office (the “USPTO”). Even if we come to a mutually acceptable settlement arrangement with an adverse party, we or they may become subject to increased regulatory scrutiny or be subject to formal or informal requests or investigations, including by the FDA, the Department of Justice or the Federal Trade Commission. If any present or future patents relied on for the development or commercialization of our products are narrowed, invalidated or held unenforceable, this could have an adverse effect on our business and financial results.

In addition, although we believe that the patents related to each of our products or product candidates were rightfully issued and the respective portfolios give us sufficient freedom to operate, a third-party could assert that the development, manufacture or commercialization of any of our products or product candidates infringes its patents or other proprietary rights, potentially resulting in harm to our business and financial results. Further, the intellectual property rights that we own or license might be subject to liens or other encumbrances. If we are required to defend against such claims or to protect our own or our licensed proprietary rights against others, it could result in substantial financial and business costs as well as the distraction of our management. An adverse ruling in any litigation or administrative proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, result in monetary damages, injunctive relief or otherwise harm our competitive position, including by limiting our marketing and selling activities, increasing the risk for generic competition, limiting our development and commercialization activities or requiring us to obtain licenses to use the relevant technology (which licenses may not be available on commercially reasonable terms, if at all).

There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. We may become a party to intellectual property litigation or administrative proceedings, including interference or derivation, inter partes review, post grant review or reexamination proceedings before the USPTO. In addition, generic entrants could file an Abbreviated New Drug Application (“ANDA”) to seek approval of a generic form of one or more of our products. If an ANDA filer is ultimately successful in patent litigation against us, meets the requirements for a generic version of our branded product to the satisfaction of the FDA under its ANDA, and is able to supply the product in significant commercial quantities, the generic company could introduce a generic version to the market. For example, pursuant to a settlement agreement entered into with Sandoz in March 2018, Sandoz could introduce a generic version of ferumoxytol to the market earlier than the expiration of our patents. Such a market entry would likely limit our Feraheme sales, which would have an adverse impact on our business and results of operations. Further, we may face similar suits in the future, including for our other products, which will be expensive and will consume considerable time and other resources, which could materially and adversely impact our business, especially if we have to divert resources from our commercialization or business development efforts.

We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our corporate licensees, collaborators, contract manufacturers, employees and consultants. However, these agreements may be breached and we may not have adequate remedies for any such breaches, and our trade secrets and other confidential information might become known. In addition, we cannot be certain that others will not independently develop substantially equivalent or superseding proprietary technology, or that an equivalent product will not be marketed in competition with our products, thereby substantially reducing the value of our proprietary rights.

We depend, to a significant degree, on the availability and extent of reimbursement from third-party payers for the use of our products, and a reduction in the availability or extent of reimbursement, especially in light of generic competition, could adversely affect our revenues and results of operations.

Our ability to successfully commercialize our products is dependent, in significant part, on the availability and level of coverage and reimbursement from third-party payers, including governmental payers, private health insurers and other

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organizations. Coverage by third-party payers depends on a number of factors, including the third-party’s determination a products’ clinical and cost effectiveness, both individually and within their therapeutic class.

There is a continued scrutiny, intensifying criticism and political focus on pharmaceutical pricing practices at both national and regional levels. U.S. state legislators are implementing a variety of regulations intended to increase the transparency of pharmaceutical pricing, which may lead to future price control regulations at state levels. Federally, multiple price control mechanisms have been suggested in the recent past, and bi-partisan focus on the issues remains a high priority. Consolidation of pharmacy benefit managers and managed care organizations is also increasing the price pressure in the private sector. Certain specialty pharmaceuticals, pharmaceutical companies and pricing strategies have been the subject of increased scrutiny and criticism by politicians and the media, which could also increase pricing pressure throughout the industry, or lead to new legislation that may limit our pricing flexibility or subject us to criticism and reputational harm in response to any price increases. Congress and the current presidential administration have each indicated that they will continue to pursue new legislative and/or administrative measures to control drug costs. The current presidential administration released a “Blueprint,” which contains certain measures that the U.S. Department of Health and Human Services is already working to implement, focusing in part on the cost of drugs. For example, on October 25, 2018, the Centers for Medicare & Medicaid Services (“CMS”) issued an Advanced Notice of Proposed Rulemaking (“ANPRM”), indicating it is considering issuing a proposed rule in the spring of 2019 on a model called the International Pricing Index. This model would utilize a basket of other countries’ prices as a reference for the Medicare program to use in reimbursing for drugs covered under Part B. The ANPRM also included an updated version of the Competitive Acquisition Program as an alternative to current “buy and bill” payment methods for Part B drugs. If third-party payers provide an insufficient level of coverage and reimbursement for our products, physicians and other healthcare providers may choose to prescribe alternative products, including generics, which would have an adverse effect on our ability to generate revenues.
In addition, federal budgetary concerns could result in the implementation of significant federal spending cuts or regulatory changes, including cuts in Medicare and other health-related spending in the near-term or changes to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”). For example, the Bipartisan Budget Act of 2018, among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”, which will shift cost for name brand drugs away from Part D participants back to the manufacturers, which could have a negative effect on our profits. Further, on June 14, 2018 the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12.0 billion in ACA risk corridor payments to third-party payors. These efforts could mean that third party payors will not have the levels of funding historically available for coverage and reimbursement of our products, and the effects and risks to our business are not yet fully known. Further, the reimbursement and health care regulatory landscape have continued to evolve rapidly over recent months, including as a result of recent court decisions, making the healthcare landscape (and its impact on third-party payors, providers and our business, and on the viability of the ACA itself) unpredictable. In 2019, litigation, regulation, and legislation related to the ACA are likely to continue, with unpredictable and uncertain results. The extent, timing and details of the changes are not currently known, but the federally funded healthcare landscape could face significant changes during the current presidential administration, including in the near-term, and could impact state and local healthcare programs, including Medicaid and Medicare, which could also have a negative impact on our future operating results. The magnitude of the impact of these laws and developments on our business is uncertain. Medicare payment policy, in time, can also influence pricing and reimbursement in the non-Medicare markets, as private third-party payers and state Medicaid plans frequently adopt Medicare principles in setting reimbursement methodologies. These and any future changes in government regulation or private third-party payers’ reimbursement policies may reduce the extent of reimbursement for our products and adversely affect our future operating results.

The introduction of generic competition in a therapeutic category where our products are used may also affect the reimbursement policies of government authorities and third-party payers. Many generic first regulations, as well as policies and practices promoting use of low cost alternatives, can place significant downward pressure on the use of our branded products. Additionally, clinical and cost effectiveness reviews of previously established coverage decisions post generic entry, may further limit coverage and the amount of reimbursement for branded medications when there is a generic available. Reimbursement levels or the lack of reimbursement may impact the demand for, or the price of, our branded products. In the U.S, continued increase in patient cost sharing, in the form of higher deductibles, copay and coinsurance levels, have led to patients being burdened with substantial out-of-pocket costs. New measures such as copay aggregators where the manufacturer’s payment assistance, such as copay and insurance cards, no longer count toward a patient’s deductible or out-of-pocket maximum, limit the overall benefit a manufacture can offer the patient. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our products, and/or our financial results from the sale of related products could be negatively and materially impacted.


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Intrarosa is dependent on third-party reimbursement to reach its market potential. Payers frequently employ a tiered system in reimbursing end-users for pharmaceutical products, with tier designation affecting copay or deductible amounts. While some of the products that Intrarosa competes with receive reimbursement from governmental healthcare programs, Intrarosa is generally classified as a Tier 3 drug, and therefore patients are unlikely to receive full reimbursement by third-party commercial payers and may not receive any reimbursement from governmental healthcare programs. As a result, patients may be subject to substantial copays or deductible requirements. Less than full reimbursement by governmental and other third-party payers may adversely affect the market acceptance of Intrarosa and put it at a competitive disadvantage to some of the competing products, including generic versions, which are often priced lower than brand name products. In addition, given the increasing number of generic competitors entering the VVA and dyspareunia market, payers may choose to implement step edits or prior authorizations prior to Intrarosa use, which could adversely impact our Intrarosa revenues and profitability. If Intrarosa does not receive adequate reimbursement coverage, the growth in Intrarosa sales may not meet our expectations or receive more favorable third-party reimbursement than its competitors, and our business, financial condition and results of operations may be materially adversely affected.

There is also significant uncertainty concerning the extent and scope of third-party reimbursement for products treating HSDD. Because Addyi® is currently the only FDA-approved therapy to treat HSDD, there is little precedent on which to base expectations as to third-party reimbursement opportunities for Vyleesi, if approved. We believe reimbursement for Vyleesi and other products for the treatment of HSDD will be similar to approved products treating erectile dysfunction and products treating women’s health conditions. If this is the case, we expect that commercial payers will likely cover Vyleesi as a non-preferred product, which normally requires a higher copay or deductible than preferred drugs. As a result, patients would be unlikely to receive full reimbursement by third-party commercial payers and may not receive any reimbursement from governmental healthcare programs. Therefore, patients may be subject to substantial copays or deductible requirements. Less than full reimbursement by governmental and other third-party payers may adversely affect the market acceptance of Vyleesi. If Vyleesi does not receive adequate reimbursement coverage, our business, financial condition and results of operations may be materially adversely affected. Further, the market for products for the treatment of HSDD may be particularly vulnerable to unfavorable economic conditions and demand for Vyleesi may be tied to discretionary spending levels of the targeted patient population. Thus, any downturn in the economy could result in weakened demand for Vyleesi.

We may not be able to further expand our portfolio by entering into additional business development transactions, such as in-licensing arrangements, acquisitions, or collaborations or, if such arrangements are entered into, we may not realize the anticipated benefits and they could disrupt our business, decrease our profitability, result in dilution to our stockholders or cause us to incur significant additional debt or expense.

As part of our business strategy to expand our portfolio, we are seeking to in-license or acquire additional pharmaceutical products or companies that leverage our corporate infrastructure and commercial expertise, such as our recent acquisitions of AMAG-423 and Perosphere and our license agreements with Palatin and Endoceutics. There are limited opportunities available that align with our business strategy and there can be no assurance that we will be able to identify or complete any additional transactions in a timely manner, on a cost-effective basis, or at all, or that such transactions will be successfully integrated into our business.

Further, the valuation methods that we use for any acquired or licensed product or business require significant judgment and assumptions. Actual results and performance of the products or businesses that we may acquire, including anticipated synergies, regulatory outcomes, economies of scale and other financial benefits, could differ significantly from our original assumptions, especially during the periods immediately following the closing of the transaction. For example, if the timing of FDA approval for our product candidates, the market for our product candidates or the cost of goods for our product candidates is different from what we predicted in our models, we may not achieve the anticipated financial benefits from our investment in our development products. In addition, acquisitions may cause significant changes to our current organization and operations, may subject us to more rigid or constraining regulations or government oversight and may have negative tax and accounting consequences. These results could have a negative impact on our financial position or results of operations and result in significant charges in future periods.

In addition, proposing, negotiating and implementing collaborations, in-licensing arrangements or acquisition agreements is a lengthy, complex, time-consuming and expensive process and such transactions are often subject to increasing regulatory oversight. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for these arrangements, and we may not be able to enter into such arrangements on acceptable terms or at all. Further, any such strategic transactions by us could result in write-offs or impairments, which may be larger than anticipated or impact our financial statements more quickly than anticipated. Such transactions may also require us to incur additional and significant debt and contingent liabilities, or we may become liable under the target’s contracts, any of which may contain restrictive

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covenants or burdensome obligations that could adversely impact or limit our ability to grow our business, enter into new agreements, undertake our commercialization and development initiatives and adversely affect our operating results.

In addition, our cash and investments may not be sufficient to finance any additional strategic transactions, and we may choose to issue shares of our common or preferred stock as consideration. Alternatively, it may be necessary for us to raise additional funds through public or private financings, and such additional funds may not be available on terms that are favorable to us, if at all. If we are unable to successfully obtain rights to suitable products or if any acquisition or in-license arrangement we make is not successful, our business, financial condition and prospects for growth could suffer. Further, any equity or equity-linked issuance, whether as consideration for a strategic transaction or in a financing transaction, could cause our stockholders to experience significant dilution.

Even if we do acquire or license additional products or businesses, the management of a license arrangement, collaboration, or other strategic arrangement and/or integration of an acquired asset or company may disrupt our ongoing business and require management resources that otherwise would be available for ongoing commercialization efforts and development of our existing enterprise. The integration of the operations of such acquired products or businesses requires significant efforts, including the coordination of information technologies, sales and marketing, operations, manufacturing, safety and pharmacovigilance, medical, finance and business systems and processes. These efforts result in additional expenses and involve significant amounts of management’s time. Our future success will significantly depend upon our ability to manage our expanded enterprise and various-staged products, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.

If we cannot successfully integrate businesses or products we may acquire or in-license into our company, we may experience material negative consequences to our business, financial condition or results of operations. For example, different skills and training are required for the promotion of various therapeutic products. Our revenues and profitability could suffer if we do not successfully expand our sales and commercial expertise into new areas, such as HSDD, preeclampsia and anticoagulant reversal products and our sales force is unable to successfully promote a portfolio of products.

Failure to obtain or maintain regulatory approval in international jurisdictions or to establish a commercialization organization, , or partner with a third party, could prevent us from marketing certain of our products abroad and could limit the growth of our business.

We may attempt to market certain of our existing and future products, product candidates or certain indications outside of the U.S. In order to market our products in the European Union (“EU”) and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. Approval by the FDA does not ensure approval by foreign regulatory authorities and the approval procedures in foreign jurisdictions can vary widely and can involve additional clinical trials and data review beyond that required by the FDA. In addition, we have limited experience in preparing, filing and executing the applications necessary to gain foreign regulatory approvals or commercializing products outside of the U.S. and may need to rely on third-parties, including potential collaborators, to assist us with these processes. We may not be able to enter into agreements with third-parties on acceptable terms, if at all. If we pursue regulatory approval outside of the U.S., we may not obtain approval on a timely basis, or at all, and therefore we may be unable to successfully commercialize our products internationally. Additionally, even if we obtain regulatory approval, we will need to establish a commercial organization, or partner with a third party, to commercialize our products in other territories. If we are unable to successfully establish a commercialization infrastructure or enter into an agreement with a third-party on acceptable terms, or at all, the growth of our business would be limited.

We have significantly expanded the size of our product portfolio and we may experience difficulties in managing this or future expansion.

In recent years, we have considerably expanded our product portfolio with the addition of AMAG-423 and ciraparantag and by obtaining certain development and commercialization rights to Vyleesi and Intrarosa. Management, personnel, systems and facilities that we currently have in place may not be adequate to support this recent growth, and we may not be able to retain or recruit qualified personnel in the future in this competitive environment to adequately support our organization and diversified portfolio. To manage this and any future growth effectively, we will be required to continue to manage the sales and marketing efforts for our existing products and the development of our product candidates while continuing to identify and acquire attractive additions to our portfolio, develop our oversight and collaboration efforts for our licensed products, including development-staged products, enhance our operational, financial and management controls, reporting systems and procedures, maintain benefit plans, and establish and increase our access to commercial supplies of our products, which will be challenging and for which we might not be successful. We will be required to expand and maintain our facilities and equipment and manage our internal development efforts effectively while complying with our contractual obligations to licensors, licensees,

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contractors, collaborators, distributors and other third parties. In addition, management may have to divert a disproportionate amount of its attention away from day-to-day activities and towards managing these growth activities, which could be disruptive to our business. Our future financial performance and our ability to execute on our business plan will depend, in part, on our ability to effectively manage our recent and future growth. For example, although we believe the recent combination of our women’s and maternal health sales forces will allow us to maximize the efficiency and effectiveness of our commercial organization to promote our products, the resulting reduction of our workforce needed to restructure our commercial organization may not yield the anticipated improvements in our ability to successfully commercialize our products. If we experience difficulties or are unsuccessful in managing our expanded portfolio including the impacts of our restructured commercial organization, our results of operations and business prospects will be negatively impacted.

Further, if we add additional products to our portfolio through licenses or acquisitions, we may face legal, regulatory, and compliance scrutiny or increased expenses as a result of the target’s or licensor’s pre-acquisition or pre-license business practices, including if such targets or licensors were alleged to have violated any privacy, data security, or other healthcare compliance laws, or failed to comply with all applicable FDA laws and requirements, regardless of whether such allegations have merit. Our recourse for such risks may be limited depending upon the remedies we are able to negotiate in the relevant transaction agreements. If any issues arise, we may not be entitled to sufficient, or any, indemnification or recourse from the licensor or the acquired company, which could have a materially adverse impact on our business and results of operations.

An adverse determination in any current or future lawsuits in which we are a defendant could have a material adverse effect on us.

The administration of our products to, or the use of our products by, humans may expose us to liability claims, whether or not our products are actually at fault for causing any harm or injury. As Feraheme is used over longer periods of time by a wider group of patients taking numerous other medicines or by patients with additional underlying health problems, the likelihood of adverse drug reactions or unintended side effects, including death, may increase. While these adverse events are rare, all IV irons, including Feraheme, can cause patients to experience serious hypersensitivity reactions, including anaphylactic-type reactions, some of which have been life-threatening and/or fatal. Makena is a prescription hormone medicine (progestin) used to lower the risk of preterm birth in women who are pregnant and who have previously delivered preterm in the past. It is not known if Makena is safe and effective in women who have other risk factors for preterm birth and in one clinical study, certain complications or events associated with pregnancy occurred more often in women who received Makena, including miscarriage (pregnancy loss before 20 weeks of pregnancy), hospital admission for preterm labor, preeclampsia, gestational hypertension and gestational diabetes. In addition, other hormones administered during pregnancy have in the past been shown to cross the placenta and have negative effects on the offspring. Similarly, as Intrarosa becomes more widely used and if Vyleesi, if approved, and our other product candidates are introduced to the market, more serious adverse reactions than those reported during clinical trials could arise. Although we maintain product liability insurance coverage for claims arising from the use of our products in clinical trials and commercial use, liability insurance coverage claims may be denied in whole or in part, coverage is expensive, and we may not be able to maintain sufficient insurance at a reasonable cost, if at all. Product liability claims and any resulting litigation, whether or not they have merit, may generate negative publicity and could decrease demand for our products, cause other parties to submit claims or demands, subject us to product recalls, harm our reputation, cause us to incur substantial costs, and divert management’s time and attention.

We may also be the target of claims asserting violations of securities and fraud and abuse laws and derivative actions or other litigation. Any such litigation could result in substantial costs and divert our management’s attention and resources, which could cause serious harm to our business, operating results and financial condition. Further, we may not be successful in defending ourselves in a litigation and, as a result, our business could be materially harmed and, as with any product liability litigation, regardless of the outcome, these claims or suits may generate negative publicity, cause other parties to submit claims or demands, harm our reputation and divert management’s time and attention. These lawsuits may also result in large judgments or settlements against us, any of which could have a negative effect on our financial condition and business if in excess of our insurance coverage. Though we maintain liability insurance, if any costs or expenses associated with litigation exceed our insurance coverage or insurance coverage is denied, we may be forced to bear some or all of these costs and expenses directly, which could be substantial.


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We must work effectively and collaboratively with our licensors to develop, market and/or sell certain products in our portfolio.
 
We have limited experience commercializing licensed products, and the addition of Intrarosa and Vyleesi to our product portfolio means that our future revenues are more dependent upon our ability to work effectively and collaboratively with our licensors to develop, market and/or sell the licensed products in our portfolio, including to obtain or maintain regulatory approval. Our arrangements with licensors is critical to successfully bringing our licensed products to market and successfully commercializing them. We rely on our licensors in various respects, including undertaking research and development programs and conducting clinical trials for our licensed products, managing or assisting with the regulatory filings and obtaining approval and maintaining and/or assisting with our commercialization efforts. We do not control our licensors, some of whom may be inexperienced, have a limited operating history, face financial and business hardships (including solvency issues), have limited operations or financial or other resources or have limited or no experience with commercialization activities; therefore, we cannot ensure that these third parties will adequately and timely perform all of their obligations to us. For example, we are dependent upon the contributions of Endoceutics, a small company, to exclusively provide us with all commercial supply and conduct certain clinical and commercialization activities. We cannot guarantee the satisfactory performance of any of our licensors and if any of our licensors breach or terminate their agreements with us, we may not be able to successfully commercialize the licensed product, which could materially and adversely affect our business, financial condition, cash flows and results of operations.

Further, even if contractual safeguards are in place in our licensing arrangements, our licensors may use their own or other technology to develop an alternative product and withdraw their support of the licensed product, or compete with the licensed product. Our licensing arrangements could also limit our activities, including our ability to compete with our licensors in certain geographic or therapeutic areas. For example, Endoceutics’ assets, including the intellectual property licensed to us, are subject to a security interest held by a third-party lender, and therefore our rights and remedies under the license agreement may be impaired or inadequate. Disputes may arise between us and a licensor and may involve the ownership of technology developed under a license or other issues arising out of collaborative agreements. In addition, we must work collaboratively with our partners to conduct various activities and if we cannot do so effectively, disagreements could arise. Such disagreements could delay the related program or result in distraction or expensive arbitration or litigation, which may not be resolved in our favor.

Our license and purchase agreements contain complex provisions and impose various milestone payment, royalty, insurance, diligence, reporting and other obligations on us. If we fail to comply with our obligations, our partners may have the right to terminate the license agreement, in which event we would not be able to continue developing or commercializing the licensed products, or we may incur additional costs or may be required to litigate any disputes. If our partners allege that we have breached our obligations under such arrangements, even if such allegations are without merit, defending such allegations, including complying with any audit, reporting or dispute resolution provisions of such agreement, or conducting any investigations, can be expensive and utilize considerable amounts of management’s time and efforts. For example, under the terms of our agreement with Lumara Health, the former shareholders of Lumara Health through its shareholder representatives can exercise a right to review our books and records related to the calculation of revenue which trigger the milestone payments owed to Lumara Health. Termination of a license agreement or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms, and, if we lose rights to the licensed products it could materially and adversely affect our business.

We rely on third parties in the conduct of our business, including our clinical trials and product distribution, and if they fail to fulfill their obligations, our commercialization and development plans may be adversely affected.

We rely on and intend to continue to rely on third parties, including licensors, CROs, healthcare providers, third-party logistics providers, packaging, storage and labeling providers, wholesale distributors and certain other important vendors and consultants in the conduct of our business. For example, we or our partners contract with, and plan to continue to contract with, certain CROs to provide clinical trial services for the development of our product candidates or expansion of product indications, including site selection, enrollment, monitoring, data management and other services, in connection with the conduct of our clinical trials and the preparation and filing of our regulatory applications.
 
Although we depend heavily on these parties, we do not control them and, therefore, we cannot ensure that these third parties will adequately and timely perform all of their obligations to us. If our third-party service providers cannot adequately fulfill their obligations to us or our licensors in a timely and satisfactory manner, if the quality and accuracy of our clinical trial data or our regulatory submissions are compromised due to poor quality or failure to adhere to our protocols or regulatory requirements, or if such third parties otherwise fail to adequately discharge their responsibilities or meet deadlines, our current and future development plans and regulatory submissions, or our commercialization efforts in current indications, may be

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delayed, terminated, limited or subject us to additional expense or regulatory action, which would adversely impact our ability to generate revenues.

Further, in many cases, we do not currently have back-up providers to perform these tasks. If any of these third parties experience significant difficulties in their respective processes, fail to maintain compliance with applicable legal or regulatory requirements, fail to meet expected deadlines or otherwise do not carry out their contractual duties to us or our licensors, or encounter physical or natural damages at their facilities, our ability to deliver our products to meet commercial demand could be significantly impaired. The loss of any third-party provider, especially if compounded by a delay or inability to secure an alternate distribution source for end-users in a timely manner, could cause the distribution of our products to be delayed or interrupted, which would have an adverse effect on our business, financial condition and results of operations.

Additionally, we have limited experience independently commercializing multiple pharmaceutical products and collaborating with partners to commercialize multiple licensed products, including managing and maintaining a supply chain and distribution network for multiple products, and we are placing substantial reliance on licensors and other third parties to perform this expanded network of supply chain and distribution services for us. For example, we rely on may have to rely on other parties with whom we may enter into future agreements, to perform or oversee certain functions, such as supply, research and development, or the regulatory process for the product we license from them, and any failure of such party to perform these functions for any reason, including ceasing doing business, could have a material effect on our ability to commercialize the product.

Our success depends on our ability to attract and retain key employees, and any failure to do so may be disruptive to our operations.

We are a pharmaceutical company focused on marketing our commercial products and developing our product candidates. We plan to continue to expand our portfolio, including through the addition of commercial or development-stage products through acquisitions and in-licensing; thus, the range of skills of our executive officers and management needs to be broad and deep. If we are not able to hire and retain talent to drive commercialization and the expansion of our portfolio, we will be unlikely to maintain or increase our profitability. Because of the specialized and broad nature of our business, including both commercialized and development-stage products (some of which are licensed to us), our success depends to a significant extent on our ability to continue to attract, retain and motivate qualified sales, technical operations, managerial, scientific, regulatory compliance and medical personnel of all levels. The loss of key personnel or our inability to hire and retain personnel who have such sales, technical operations, managerial, scientific, regulatory compliance and medical backgrounds could materially adversely affect our business (including research and development efforts). For example, in February 2019, we implemented a workforce reduction in connection with the combination of our women’s and maternal health sales forces into one integrated sales team. As a result, our workforce was reduced by approximately 110 employees, approximately 100 of whom were part of our field-based commercial organization with the remainder coming from our general and administrative functions. This workforce reduction may be disruptive to our operations, including by distracting management from our core business and affecting employee productivity and moral.

Risks Related to Regulatory Matters

There have been, and we expect there will continue to be, a number of federal and state legislative initiatives implemented to reform the U.S. healthcare system in ways that could adversely impact our business and our ability to sell our products profitably.

We expect that the ACA, as currently enacted or as it may be amended in the future, the 21st Century Cures Act, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase our sales. These changes might impact existing government healthcare programs and may result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program. Changes that may affect our business include, but are not limited to, those governing enrollment in federal healthcare programs, reimbursement changes, rules regarding prescription drug benefits under the health insurance exchanges, expansion of the Medicaid Drug Rebate Program, Medicare, the 340B Drug Pricing Program under the Public Health Services Act (the “340B Program”), and fraud and abuse enforcement. For example, beginning April 1, 2013, Medicare payments for all items under Parts A and B, including drugs and biologics, and most payments to plans under Medicare Part D were reduced by 2% under the sequestration (i.e., automatic spending reductions) required by the Budget Control Act of 2011 (the “BCA”) as amended by the American Taxpayer Relief Act of 2012. The BCA requires sequestration for most federal programs, excluding Medicaid, Social Security, and certain other programs. The BCA caps the cuts to Medicare payments for items at 2% and subsequent legislation extended the 2% reduction, on average, to 2027.


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We cannot predict the impact that newly enacted laws or any future legislation or regulation will have on us. We expect that there will continue to be a number of U.S. federal and state proposals to implement governmental pricing controls and limit the growth of healthcare costs. These efforts could adversely affect our business by, among other things, limiting the prices that can be charged for our products, or the amount of reimbursement rates and terms available from governmental agencies or third-party payers, limiting the profitability of our products, increasing our rebate liability or limiting the commercial opportunities for our products, including acceptance by healthcare payers, or increasing scrutiny for announced price increases.

Our partners, including our licensors, are subject to similar requirements and thus the attendant risks and uncertainties. If our partners, including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted, which could have a material and adverse impact on our revenues.

If our products are marketed or distributed in a manner that violates federal or state healthcare fraud and abuse laws, marketing disclosure laws or other federal or state laws and regulations, we may be subject to civil or criminal penalties.

In addition to FDA and related regulatory requirements, our general operations, and the research, development, manufacture, sale and marketing of our products, are subject to extensive additional federal and state healthcare regulation, including the Federal Anti-Kickback Statute and the Federal False Claims Act (“FCA”) (and their state analogues), as discussed above in Item 1 under the heading “Government Regulation - Fraud and Abuse Regulation.” If we or our partners, such as licensors, fail to comply with any federal and state laws or regulations governing our industry, we could be subject to criminal and civil penalties and a range of regulatory actions that could adversely affect our ability to commercialize our products, harm or prevent sales of our products, or substantially increase the costs and expenses of commercializing and marketing our products, all of which could have a material adverse effect on our business, financial condition and results of operations.

Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws, and private individuals have been active in bringing lawsuits on behalf of the government under the FCA and similar regulations in other countries. In addition, incentives exist under applicable U.S. law that encourage employees and physicians to report violations of rules governing promotional activities for pharmaceutical products. These incentives could lead to so-called whistleblower lawsuits as part of which such persons seek to collect a portion of moneys allegedly overbilled to government agencies as a result of, for example, promotion of pharmaceutical products beyond labeled claims. For example, federal enforcement agencies recently have showed interest in pharmaceutical companies’ product and patient assistance programs, including manufacturer reimbursement support services and relationships with specialty pharmacies. Some of these investigations have resulted in government enforcement authorities intervening in related whistleblower lawsuits and obtaining significant civil and criminal settlements. Such lawsuits, whether with or without merit, are typically time-consuming and costly to defend. Such suits may also result in related shareholder lawsuits, which are also costly to defend.

Further, the FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. For drug products like Makena that are approved by the FDA under the FDA’s accelerated approval regulations, unless otherwise informed by the FDA, the sponsor must submit promotional materials at least 30 days prior to the intended time of initial dissemination of the promotional materials, which delays and may negatively impact our commercial team’s ability to implement changes to Makena’s marketing materials, thereby negatively impacting revenues. Moreover, under the provisions of the FDA’s “Subpart H” Accelerated Approval regulations, the FDA may also withdraw approval of Makena if, among other things, the promotional materials are false or misleading, or other evidence demonstrates that Makena is not shown to be safe or effective under its conditions of use.

In recent years, several states have enacted legislation requiring pharmaceutical companies to establish marketing and promotional compliance programs or codes of conduct and/or to file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, and other activities. Several states have also adopted laws that prohibit certain marketing-related activities, including the provision of gifts, meals or other items to certain healthcare providers.

We have developed and implemented a corporate compliance program based on what we believe are current best practices in the pharmaceutical industry; however, relevant compliance laws are broad in scope and there may not be regulations, guidance or court decisions that definitively interpret these laws in the context of particular industry practices. We cannot guarantee that we, our employees, our partners, our consultants or our contractors are or will be in compliance with all federal and state regulations. If we, our partners, or our representatives fail to comply with any of these laws or regulations, a range of fines, penalties and/or other sanctions could be imposed on us, including, but not limited to, restrictions on how we market and sell our products, significant fines, exclusions from government healthcare programs, including Medicare and Medicaid, litigation, or other sanctions. Even if we are not determined to have violated these laws, government investigations into these

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issues typically require the expenditure of significant resources and generate negative publicity, which could also have an adverse effect on our business, financial condition and results of operations. Such investigations or suits may also result in related shareholder lawsuits, which can also have an adverse effect on our business.

Our partners, including our licensors, are subject to similar requirements and obligations as well as the attendant risks and uncertainties. If our partners, including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted, which could have a material and adverse impact on our revenues.

If we fail to comply with our reporting and payment obligations under governmental pricing programs, we could be required to reimburse government programs for underpayments and could pay penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition and results of operations.

As a condition of reimbursement by various federal and state health insurance programs, we are required to calculate and report certain pricing information to federal and state agencies. Please see our discussion above in Item 1 under the heading, “Pharmaceutical Pricing and Reimbursement” for more information regarding price reporting obligations under the 340B Program and the Department of Veterans Affairs Federal Supply Schedule (the “FSS”) program.

The regulations governing the calculations, price reporting and payment obligations are complex and subject to interpretation by various government and regulatory agencies, as well as the courts. Reasonable assumptions have been made where there is lack of regulations or clear guidance and such assumptions involve subjective decisions and estimates. We are required to report any revisions to our calculations, price reporting and payment obligations previously reported or paid. Such revisions could affect our liability to federal and state payers and also adversely impact our reported financial results of operations in the period of such restatement.

Uncertainty exists as new laws, regulations, judicial decisions, or new interpretations of existing laws, or regulations related to our calculations, price reporting or payments obligations increases the chances of a legal challenge, restatement or investigation. If we become subject to investigations, restatements, or other inquiries concerning our compliance with price reporting laws and regulations, we could be required to pay or be subject to additional reimbursements, penalties, sanctions or fines, which could have a material adverse effect on our business, financial condition and results of operations. In addition, it is possible that future healthcare reform measures could be adopted which could result in increased pressure on pricing and reimbursement of our products and thus have an adverse impact on our financial position or business operations.

Further, state Medicaid programs may be slow to invoice pharmaceutical companies for calculated rebates resulting in a significant lag between the time a sale is recorded and the time the rebate is paid. This results in us having to carry a significant liability on our consolidated balance sheets for the estimate of rebate claims expected for Medicaid patients. For example, almost half of branded Makena sales are reimbursed through state Medicaid programs and are subject to the statutory Medicaid rebate, and in some cases, supplemental rebates offered by us. If actual claims are higher than current estimates, our financial position and results of operations could be adversely affected.

In addition to retroactive rebates and the potential for 340B Program refunds, if we are found to have knowingly submitted any false price information related to the Medicaid Drug Rebate Program to CMS, we may be liable for civil monetary penalties. Such failure could also be grounds for CMS to terminate our Medicaid drug rebate agreement, pursuant to which we participate in the Medicaid program. In the event that CMS terminates our rebate agreement, federal payments may not be available under government programs, including Medicaid or Medicare Part B, for our covered outpatient drugs.

Additionally, if we overcharge the government in connection with the FSS program or Tricare Retail Pharmacy Program, whether due to a misstated Federal Ceiling Price or otherwise, we are required to refund any overpayment to the government. Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the FCA and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our partners, including our licensors, are subject to similar requirements and thus the attendant risks and uncertainties. If our partners, including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted, which could have a material and adverse impact on our revenues.


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We are subject to ongoing regulatory obligations and oversight of our products, and any failure by us to maintain compliance with applicable regulations may result in several adverse consequences including the suspension of the manufacturing, marketing and sale of our respective products, the incurrence of significant additional expense and other limitations on our ability to commercialize our respective products.

We are subject to ongoing regulatory requirements and review, including periodic audits pertaining to the development, manufacture, labeling, packaging, adverse event reporting, distribution, storage, marketing, promotion, record keeping and export of our respective products. Failure to comply with such regulatory requirements or the later discovery of previously unknown problems with the manufacture, distributions and storage of our products, or our third-party contract manufacturing facilities or processes by which we manufacture our products may result in restrictions on our ability to manufacture, market, distribute or sell our products, including potential withdrawal of our products from the market. Any such restrictions could result in a decrease in sales, damage to our reputation or the initiation of lawsuits against us and/or our third-party contract manufacturers. We may also be subject to additional sanctions, including, but not limited, to the following:

Warning letters, public warnings and untitled letters;

Court-ordered seizures or injunctions;

Civil or criminal penalties, or criminal prosecutions;

Variation, suspension or withdrawal of regulatory approvals for our products;

Changes to the package insert of our products, such as additional warnings regarding potential side effects or potential limitations on the current dosage or administration;

Requirements to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, or other issues involving our products;

Implementation of risk mitigation programs and post-approval obligations;

Restrictions on our continued manufacturing, marketing, distribution or sale of our products;

Temporary or permanent closing of the facilities of our third-party contract manufacturers;

Interruption or suspension of clinical trials; and

Refusal by regulators to consider or approve applications for additional indications.

Any of the above sanctions could have a material adverse impact on our revenues and profitability or the value of our brand, and cause us to incur significant additional expenses.

In addition, if our products face any safety or efficacy issues, including drug interaction problems, under the FDC Act, the FDA has broad authority to force us to take any number of actions, including, but not limited to, the following:

Requiring us to conduct post-approval clinical studies to assess known risks or new signals of serious risks, or to evaluate unexpected serious risks;

Mandating changes to a product’s label;

Requiring us to implement a risk evaluation and mitigation strategy where necessary to assure safe use of the drug; or

Removing an already approved product from the market.

Further, our partners, including our licensors, are subject to similar requirements and obligations as well as the attendant risks and uncertainties. If our partners, including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted, which could have a material and adverse impact on our revenues.


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Regulators could determine that our clinical trials and/or our manufacturing processes, and/or our storage or those of our third parties, were not properly designed or are not properly operated, which could cause significant costs or setbacks for approval of our product candidates or our commercialization activities.

We are obligated to conduct, and are in the process of conducting, clinical trials for certain of our products and product candidates and certain post-approval clinical trials and we may be required to conduct additional clinical trials, including if we pursue approval of additional indications, new formulations or methods of administration for our products, seek commercialization in other jurisdictions, or in support of our current indications. Similarly, our licensors are conducting certain clinical trials to gain approval in various indications for drug product candidates. The FDA could determine that our clinical trials, or those of our licensors, and/or our or their manufacturing processes were not properly designed, did not include enough patients or appropriate administration, were not conducted in accordance with applicable laws and regulations, or were otherwise not properly managed. In addition, according to cGCP we and/or our licensors are responsible for conducting, recording and reporting the results of clinical trials to ensure that the data and results are credible and accurate and that the trial participants are adequately protected. The FDA may conduct inspections of clinical investigator sites which are involved in clinical development programs for our proprietary or licensed products to ensure their compliance with cGCP regulations. If the FDA determines that we, our licensors, our respective CROs or our respective study sites fail to comply with applicable cGCP regulations, the FDA may deem the clinical data generated in such clinical trials to be unreliable and may disqualify certain data generated from those sites or require us and/or our licensors to perform additional clinical trials. For example, many of the clinical trials for our development programs that we have acquired or in-licensed were conducted by small companies that might have had fewer controls or oversight related to their clinical programs. Clinical trials and manufacturing processes are subject to similar risks and uncertainties outside of the U.S. Any such deficiency in the design, implementation or oversight of clinical development programs or post-approval clinical studies could cause us to incur significant additional costs, experience delays or prevent us from commercializing our approved products in their current indications, or obtaining marketing approval for additional indications or for our product candidates, including Vyleesi, AMAG-423 and ciraparantag.

Further, our third-party contract manufacturing facilities and those of our licensors are subject to cGMP regulations enforced by the FDA and equivalent foreign regulations and regulatory agencies through periodic inspections to confirm such compliance. Contract manufacturers must continually expend time, money and effort in production, record-keeping and quality assurance and control to ensure that these manufacturing facilities meet applicable regulatory requirements. Failure to maintain ongoing compliance with cGMP or similar foreign regulations and other applicable manufacturing requirements of various U.S. or foreign regulatory agencies could result in, among other things, the issuance of warning letters, fines, the withdrawal or recall of our products from the marketplace, failure to approve product candidates for commercialization, total or partial suspension of product production, the loss of inventory, suspension of the review of our or our licensors’ current or future NDAs or equivalent foreign filings, enforcement actions, injunctions or criminal prosecution and suspension of manufacturing authorizations. For example, in early 2017, our primary third-party manufacturer of Makena received a warning letter from the FDA, which has resulted in supply disruptions of our Makena IM products that led to our current out-of-stock situation for both our single-dose and multi-dose branded Makena vials as well as periodic disruptions to our authorized generic supply. A government-mandated recall or a voluntary recall could divert managerial and financial resources, could be difficult and costly to correct, could result in the suspension of sales of our products and reputational harm, and could have a severe adverse impact on our profitability and the future prospects of our business. If any regulatory agency inspects any of these manufacturing facilities and determines that they are not in compliance with cGMP or similar regulations or our contract manufacturers otherwise determine that they are not in compliance with these regulations, as applicable, such contract manufacturers could experience an inability to manufacture sufficient quantities of product to meet demand or incur unanticipated compliance expenditures.

We and our licensors have also established certain testing and release specifications with the FDA. This release testing must be performed in order to allow products to be used for commercial sale. If a product does not meet these release specifications or if the release testing is variable, we may not be able to supply product to meet our projected demand. We monitor annual batches of our products for ongoing stability after it has been released for commercial sale. If a particular batch of product exhibits variations in its stability or begins to generate test results that demonstrate an adverse trend against our specifications, we may need to conduct an investigation into the test results, quarantine the product to prevent further use, destroy existing inventory no longer acceptable for commercial sale, or recall the batch or batches. If we or our licensors are unable to develop, validate, transfer or gain regulatory approval for the new release test, our ability to supply product will be adversely affected. Such setbacks could have an adverse impact on our revenues, our profitability and the future prospects of our business.


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The FDA has required post-approval studies to verify and describe the clinical benefit of Makena, and the FDA may limit further marketing of the product based on the results of these post-approval studies, failure to complete these trials in a timely manner or evidence of safety risks or lack of efficacy.

Makena was approved by the FDA in February 2011 under Subpart H. As a condition of approval under Subpart H, the FDA required that Makena’s sponsor perform certain adequate and well-controlled post-approval clinical studies to verify and describe the clinical benefits of Makena as well as fulfill certain other post-approval commitments. We have recently completed enrollment of the confirmatory clinical study of Makena and expect to release the data by the end of the first quarter of 2019. Furthermore, a follow-up study of the babies born to mothers from the efficacy and safety clinical study is currently ongoing and is expected to be completed by July 2020. If the required post-approval studies fail to verify the clinical benefits of the drug or if we fail to perform the required post-approval studies with due diligence, the FDA has the authority to withdraw approval of the drug following a hearing conducted under the FDA’s regulations, which would have a materially adverse impact on our business. We cannot be certain of the results of the confirmatory clinical studies or what action the FDA may take if the results of those studies are not as expected based on clinical data that FDA has already reviewed.

Our failure to comply with data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.

We are subject to complex laws and regulations that address privacy and data security. The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues. In the U.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which will come into effect on January 1, 2020 and provides new data privacy rights for consumers and new operational requirements for companies, which may increase our compliance costs and potential liability. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.
In addition, in the course of our business, we may obtain health information from third parties (e.g., healthcare providers who prescribe our products) that is subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”). Although we are not directly subject to HIPAA (other than potentially with respect to providing certain employee benefits) we could be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA/HITECH.
We could also be negatively impacted by existing and proposed laws and regulations, as well as government policies and practices related to cybersecurity, data privacy, data localization and data protection outside of the U.S., such as the General Data Protection Regulation (“GDPR”), which took effect in the EU in May 2018. The GDPR extends the geographical scope of EU data protection law to non-EU entities under certain conditions, tightens existing EU data protection principles and creates new obligations for companies and new rights for individuals. Although we believe we are in compliance the applicable provisions of the GDPR, the GDPR is new and therefore guidance, interpretation and enforcement under the GDPR are still developing. The GDPR may increase our responsibility and potential liability in relation to personal data that we process, expose us to substantial potential fines and increase our compliance costs. Notably, on January 21, 2019, Google was fined nearly $57.0 million by French regulators for violating GDPR. The GDPR could also cause our development costs to increase in connection with clinical trials we are currently conducting and may conduct in the future in the EU for our products and product candidates.
Failure to comply with data protection laws and regulations both within and outside of the U.S. could result in government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.
Significant disruptions of information technology systems or security breaches could adversely affect our business.
We are increasingly dependent upon information technology systems, infrastructure, and data to operate our business. In the ordinary course of business, we collect, store, and transmit large amounts of confidential information (including, but not limited to, intellectual property, proprietary business information, and personal information). It is critical that we do so in a

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secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access to our confidential information. The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, and the large amounts of confidential information stored on those systems, make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors, and/or business partners, or from cyber-attacks by malicious third parties. Cyber-attacks are increasing in their frequency, sophistication, and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information. Significant disruptions of our information technology systems or security breaches could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including, but not limited to, trade secrets or other intellectual property, proprietary business information, and personal information), and could result in financial, legal, business, and reputational harm to us. For example, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our patients or employees, could harm our reputation, require us to comply with federal and/or state breach notification laws and foreign law equivalents, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information. Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business.
Risks Related to our Financial Condition and Results

We may not be able to generate sufficient revenues to achieve and maintain profitability in the future.

In recent years, we have focused on developing a broad product portfolio, including through acquisitions and in-licensing arrangements. The additions to our product portfolio include both commercial products, such as Makena and Intrarosa, which require significant resources to commercialize and product candidates, such as Vyleesi, AMAG-423 and ciraparantag, which require substantial development time and resources before they might generate revenues, if at all. Investment in our development and commercialization efforts often requires significant up-front costs and our products may fail to achieve or maintain commercial success or our product candidates may never receive approval. We expect to continue to incur significant expenses as we continue to commercialize Feraheme, Makena, Intrarosa and Vyleesi, if approved, and develop AMAG-423 and ciraparantag. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. As a result of the substantial expenditures required to support our products and product candidates, we will need to generate sufficient revenues in future periods to achieve and maintain profitability and positive cash flows. In recent years, our profitability was based primarily on our Makena revenues. However, during 2018, we lost market exclusivity for Makena and generic competition commenced in mid-2018. We expect that revenues from sales of Makena will continue to decline in future years due to increased generic competition, including other generic versions of Makena which have been and may be approved by the FDA. There is no guarantee that we will generate sufficient revenues to support our business, or that we will be able to achieve profitability or maintain profitability, if achieved, and there is no guarantee that we will be able to maintain positive cash flow from operations. In the past, we have financed our operations primarily from the issuance of debt and equity, cash from products sales and cash generated by our investing activities. As of December 31, 2018, we incurred an operating loss of $47.0 million, contributing to an accumulated deficit of approximately $542.4 million.

Due to the numerous risks and uncertainties associated with developing and commercializing pharmaceutical products, as well as those related to our expectations for our products and other commercial activities, we are unable to predict with certainty the extent of any future losses. Our ability to achieve sustained profitability in the future depends, in large part, on our ability to:

Obtain regulatory approval for our current product candidates, particularly Vyleesi, or any future product candidates;

Generate revenues from our product candidates, if approved, and continue to grow revenues from our approved products;

Successfully commercialize our existing products, including the costs of and success of our marketing and awareness campaigns for Intrarosa and Vyleesi, if approved;

Enter into and maintain agreements to develop our product candidates and commercialize our products;


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Manufacture our products in sufficient quantities to meet demand;

Obtain adequate reimbursement coverage for our products from insurance companies, government programs and other third-party payors;

Progress our clinical development programs in a timely and cost-effective manner, including our ongoing clinical trials for AMAG-423 and ciraparantag; and

Identify, assess and consummate potential product acquisitions in a cost-effective manner and successfully develop any products we acquire.

If we are not successful in marketing and selling our products, if revenues grow more slowly than we anticipate, if our product candidates are not approved, or if our operating expenses exceed our expectations, or if we are otherwise unable to achieve, maintain or increase profitability on a quarterly or annual basis, our business, results of operations and financial condition could be materially adversely affected and the market price of our common stock may decline.

We may not be able to generate sufficient cash flow to service all of our indebtedness and other obligations.

As of December 31, 2018, we had approximately $341.4 million of total debt outstanding, including $320.0 million aggregate principal amount of our convertible notes due June 1, 2022 bearing interest at 3.25% annually (the “2022 Convertible Notes”) issued in May 2017.

Our ability to make scheduled payments of the principal of, or to pay interest on the 2022 Convertible Notes depends on our future performance, which is subject to economic, financial, competitive and other factors that may be beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and support our growth strategies. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to repay our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including under our 2022 Convertible Notes obligations. In addition, if for any reason we are unable to meet our debt service and repayment obligations, we could be in default under the terms of the agreements governing our indebtedness, which could allow our creditors at that time to declare all outstanding indebtedness to be due and payable. Under these circumstances, we may not have sufficient funds to satisfy our debt obligations.

Further, holders of the 2022 Convertible Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change (which includes certain change of control transactions, stockholder-approved liquidations and dissolutions and certain stock exchange delisting events) at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. Upon conversion of the 2022 Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the notes being converted. We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the 2022 Convertible Notes upon an occurrence of a fundamental change. Further, because the indentures governing the 2022 Convertible Notes require that we elect the method by which we will settle conversions significantly in advance of when we are required to deliver the conversion consideration, we may not have sufficient cash available or be able to obtain financing at the time we are ultimately required to settle the 2022 Convertible Notes. Our failure to repurchase the 2022 Convertible Notes at a time when the repurchase is required by the indenture or to pay any cash payable on future conversions of the 2022 Convertible Notes would constitute an event of default.

We may need additional capital to achieve our business objectives and make contingent payments that may become due under our strategic transaction arrangements, which could cause significant dilution to our stockholders.

We may require additional funds or need to establish additional alternative strategic arrangements to execute a business development transaction. We have expended and continue to expend substantial costs associated with the clinical development of our product candidates, including AMAG-423 and ciraparantag, the continued commercialization of our products, our debt obligations and certain milestone payments to our partners. We may at any time seek funding through additional arrangements with collaborators through public or private equity or debt financings, which could result in dilution to our stockholders or increased fix payment obligations. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. The conditions of the credit and capital markets can be volatile, unpredictable and inconsistent and we may not be able to obtain financing or to secure

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alternative strategic arrangements on acceptable terms or within an acceptable timeframe, if at all, which would limit our ability to execute on our strategic plans. Moreover, we may experience a reduction in value or loss of liquidity with respect to our investments, which would put further strain on our cash resources.

Our current level of cash on hand may limit our ability to take advantage of attractive business development opportunities and execute on our strategic plans. In addition, our cash on hand may not be sufficient to make any cash milestone payments to our partners upon the achievement of sales or regulatory milestones. Our ability to make these required payments could be adversely affected if we do not achieve expected revenue and cash flow forecasts, or if we are unable to find other sources of cash in the future. We may also suffer reputational harm and be viewed as an undesirable acquiror or business development partner if we are unable to make the required payments under our strategic transaction arrangements. In addition, if equity or debt investors perceive that our debt levels are too high relative to our profit, our stock price could be negatively affected and/or our ability to raise new equity or debt capital could be limited.

We have in the past, and may in the future, enter into term loans and credit facilities with various banking institutions. Our ability and the terms on which we can borrow will be subject to the state of our operations and the debt market, which is unpredictable and beyond the scope of our control. We may not be able to borrow required amounts on favorable terms, including favorable interest rates, or at all. Further, borrowings under such facilities may bear interest at variable rates exposing us to interest rate risk.

Our long-term capital requirements will depend on many other factors, including, but not limited to:

The commercial success of our products and costs associated with the commercialization of our products, including marketing, sales and distribution costs;

The outcome, timing and costs associated with development and regulatory approval of our product candidates, including conducting clinical trials;

Our obligations to make milestone payments, royalty payments or both under our in-licensing arrangements;

Our ability to realize synergies and opportunities in connection with our acquisitions and portfolio expansion;

The outcome of and costs associated with any material litigation or patent challenges to which we may become a party;

The costs of manufacturing our products and product candidates, including the timing and magnitude of costs associated with qualifying additional manufacturing capacities and alternative suppliers; and

Our ability to raise additional capital on terms and within a timeframe acceptable to us, if necessary.

Additional funds may not be available to us if and when we need them, on terms that are acceptable to us, or at all. If we are unable to raise additional funds, if needed, we may have to delay, scale back or discontinue the development or commercialization of one or more of our products or product candidates and/or other areas of our business.

Our ability to use net operating loss carryforwards and tax credit carryforwards is dependent on generating future taxable income and may be limited, including as a result of future transactions involving our common stock.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses and certain other tax assets to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period, which is generally three years. An ownership change could limit our ability to utilize our net operating loss and tax credit carryforwards for taxable years including or following such “ownership change” by allowing us to utilize only a portion of the net operating losses and tax credits that would otherwise be available but for such ownership change. Limitations imposed on the ability to use net operating losses and tax credits to offset future taxable income or the failure to generate sufficient taxable income could require us to pay more U.S. federal income taxes than we have estimated and could cause such net operating losses and tax credits to expire unused, in each case reducing or eliminating the benefit of such net operating losses and tax credits and potentially adversely affecting our financial position, including our after-tax net income. Similar rules and limitations may apply for state income tax purposes.


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There can be no assurance that we will not undergo an ownership change and even minor accumulations by certain of our stockholders could result in triggering an ownership change under Section 382. If such an ownership change were to occur, we expect that our net operating losses could become limited; however, the amount of the limitation would depend on a number of factors including our market value at the time of the ownership change.

In addition, we are potentially subject to ongoing and periodic tax examinations and audits in various jurisdictions, including with respect to the amount of our net operating losses and any limitation thereon. An adjustment to such net operating loss carryforwards, including an adjustment from a taxing authority, could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition, results of operations or cash flows.

If we identify a material weakness in our internal controls over financial reporting, our ability to meet our reporting obligations and the trading price of our stock could be negatively affected.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, a material weakness increases the risk that the financial information we report contains material errors.

We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. If we, or our independent registered public accounting firm, determine that our internal controls over our financial reporting are not effective, or we discover areas that need improvement in the future, or we experience high turnover of our personnel in our financial reporting functions, these shortcomings could have an adverse effect on our business and financial results, and the price of our common stock could be negatively affected.

If we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements could subject us to sanctions and/or investigations by the U.S. Securities and Exchange Commission, NASDAQ or other regulatory authorities.

If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements and/or our projected guidance prove inaccurate, our actual results may vary from those reflected in our projections and accruals.

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of our assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, our management evaluates our critical and other significant estimates and assumptions, including among others those associated with revenue recognition related to sales; sales allowances and accruals; allowance for doubtful accounts, marketable securities; inventory; acquisition date fair value and subsequent fair value estimates used to assess impairment of long-lived assets, including goodwill, in-process research and development and other intangible assets; contingent consideration; debt obligations; certain accrued liabilities, including clinical trial accruals; income taxes, including valuation allowances, and equity-based compensation expense. We base our estimates on market data, our observance of trends in our industry, and various other assumptions that we believe to be reasonable under the circumstances. If actual results differ from these estimates, there could be a material adverse effect on our financial results and the performance of our stock.

Further, in January 2019, we issued financial guidance, including expected 2019 total revenue and profitability metrics, which is likewise based on estimates and the judgment of management. If, for any reason, we are unable to achieve our projected 2019 revenue or profitability, we may not realize our publicly announced financial guidance. If we fail to realize, or if we change or update any element of, our publicly disclosed financial guidance or other expectations about our business, our stock price could decline in value.

As part of our revenue recognition policy, our estimates of product returns, rebates and chargebacks, accounts receivable, fees and other discounts require subjective and complex judgments due to the need to make estimates about matters that are inherently uncertain. Any significant differences between our actual results and our estimates could materially adversely affect our financial position and results of operations.

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In addition, to determine the required quantities of our products and their related manufacturing schedules, we also need to make significant judgments and estimates based on inventory levels, current market trends, anticipated sales, forecasts and other factors. Because of the inherent nature of estimates, there could be significant differences between our estimates and the actual amount of product need. For example, the level of our access to wholesaler and distributor inventory levels and sales data, which varies based on the wholesaler, distributor, clinic or hospital, affects our ability to accurately estimate certain reserves included in our financial statements. Any difference between our estimates and the actual amount of product demand could result in unmet demand or excess inventory, each of which would adversely impact our financial results and results of operations.

We have significant goodwill and other intangible assets. Consequently, potential impairment of goodwill and other intangibles may significantly impact our profitability.

Goodwill and other intangibles represent a significant portion of our assets. As of December 31, 2018 and 2017, goodwill and other net intangibles comprised approximately 54% and 42%, respectively, of our total assets. Goodwill and other intangible assets are subject to an impairment analysis, which involves judgment and assumptions, at least annually or whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. For example, we recorded intangible asset impairment charges of $319.2 million during 2017. The procedures, judgments and assumptions used in our goodwill and intangible assets impairment testing, and the results of our testing, are discussed in Item 7 of this report “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the captions “Critical Accounting Policies” and “Results of Operations.” Events giving rise to impairment of goodwill or intangible assets are an inherent risk in the pharmaceutical industry and often cannot be predicted. As a result of the significance of goodwill and other intangible assets, our results of operations and financial position in a future period could be negatively impacted should additional impairments of our goodwill or other intangible assets occur.

Our operating results will likely fluctuate, including as a result of wholesaler, distributor and customer buying patterns, as such you should not rely on the results of any single quarter to predict how we will perform over time.

Our future operating results will likely vary from quarter to quarter depending on a number of factors, including, but not limited to, the factors described in these Risk Factors, many of which we cannot control, as well as the timing and magnitude, as applicable, of:

Product revenues, including the decline in Makena sales and the extent to which sales of the Makena auto-injector and the Makena authorized generic are able to offset the decrease in sales of Makena;

Regulatory approval of our product candidates, including Vyleesi, AMAG-423 and ciraparantag;

Costs associated with manufacturing batch failures or inventory write-offs due to out-of-specification release testing or ongoing stability testing that results in a batch no longer meeting specifications;

The loss of a key customer or group purchasing organizations (“GPOs”);

The timing of costs and liabilities incurred in connection with our clinical trials and other product development and commercialization efforts, business development activities or business development transactions into which we may enter;

Milestone payments we may be required to pay pursuant to contractual obligations;

Costs associated with the manufacture of our products, including costs of raw and other materials and costs associated with maintaining commercial and clinical inventory and qualifying additional manufacturing capacities and alternative suppliers;

Any changes to the mix of our business;

Any adverse impact on our financial results stemming from our recent corporate restructuring;

Changes in accounting estimates related to reserves on revenue, returns, contingent consideration, impairment of long-lived or intangible assets or goodwill or other accruals or changes in the timing and availability of government or customer discounts, rebates and incentives;

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The implementation of new or revised accounting or tax rules or policies; and

The recognition of deferred tax assets during periods in which we generate taxable income and our ability to preserve our net operating loss carryforwards and other tax assets.

Our results of operations, including, in particular, product revenues, may also vary from period to period due to the buying patterns of our wholesalers, distributors, pharmacies, clinics or hospitals, specialty pharmacies and physicians (“Customers”). Further, our contracts with GPOs often require certain performance from the members of the GPOs on an individual account level or group level such as growth over prior periods or certain market share attainment goals in order to qualify for discounts off the list price of our products, and a GPO may be able to influence the demand for our products from its members in a particular quarter through communications they make to their members. In the event the Customers with whom we do business determine to limit their purchases of our products, our product revenues could be adversely affected. Also, in the event the Customers purchase increased quantities of our products to take advantage of volume discounts or similar benefits, our quarterly results will fluctuate as re-orders become less frequent, and our overall net pricing may decrease as a result of such discounts and similar benefits. In addition, these contracts are often cancellable at any time by our customers, often without notice, and are non-exclusive agreements within the Feraheme iron deficiency anemia market. While these contracts are intended to support the use of our products, our competitors could offer better pricing, incentives, higher rebates or exclusive relationships.

Our contracting strategies can also have an impact on the timing of certain purchases causing product revenues to vary from quarter to quarter. For example, in advance of an anticipated or rumored price increase, including following the publication of our quarterly ASP, which affects the rate at which Feraheme is reimbursed, or a reduction in expected rebates or discounts for one of our products, customers may order our products in larger than normal quantities, which could cause sales to be lower in subsequent quarters than they would have been otherwise. Further, any changes in purchasing patterns or inventory levels, changes to our contracting strategies, increases in product returns, delays in purchasing products or delays in payment for products by one of our distributors or GPOs could also have a negative impact on our revenue and results of operations.

As a result of these and other factors, our quarterly operating results could fluctuate, and this fluctuation could cause the market price of our common stock to decline. Results from one quarter should not be used as an indication of future performance.

Risks Related to Our Common Stock

Our stock price has been and may continue to be volatile, and your investment in our stock could decline in value or fluctuate significantly, including as a result of analysts’ activities.

The market price of our common stock has been, and may continue to be, volatile, and your investment in our stock could decline in value or fluctuate significantly. Our stock price has ranged between $14.35 and $26.10 in the fifty-two week period through February 25, 2019. The stock market has from time to time experienced extreme price and volume fluctuations, particularly in the biotechnology and pharmaceuticals sectors, which have often been unrelated to the operating performance of particular companies. Various factors and events, including the factors and events described in these Risk Factors, many of which are beyond our control, may have a significant impact on the market price of our common stock. Our stock price could also be subject to fluctuations as a result of general market conditions, shareholder activism and attempts to disrupt our strategy by activist investors, sales of large blocks of our common stock, the impact of our stock repurchase program or the dilutive effect of our 2022 Convertible Notes, other equity or equity-linked financings, or alternative strategic arrangements that we may pursue.

Our future operating results are subject to substantial uncertainty, and our stock price could decline significantly if we fail to meet or exceed analysts’ forecasts and expectations. If any of the analysts who cover us downgrade our stock, lower their price target or issue commentary or observations about us or our stock that are perceived by the market as negative, our stock price would likely decline rapidly. In addition, if these analysts cease coverage of our company, we could lose visibility in the market, which in turn could also cause our stock price to decline.


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Certain provisions in our charter and by-laws, certain provisions of our 2022 Convertible Notes, certain contractual relationships and certain Delaware law provisions could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove the current members of our Board.

Certain provisions in our certificate of incorporation and our by-laws may discourage, delay or prevent a change of control or takeover attempt of our company by a third-party as well as substantially impede the ability of our stockholders to benefit from a change of control or effect a change in management and our Board. These provisions include:

The ability of our Board to increase or decrease the size of the Board without stockholder approval;

Advance notice requirements for the nomination of candidates for election to our Board and for proposals to be brought before our annual meeting of stockholders;

The authority of our Board to designate the terms of and issue new series of preferred stock without stockholder approval;

Non-cumulative voting for directors; and

Limitations on the ability of our stockholders to call special meetings of stockholders.

As a Delaware corporation, we are subject to the provisions of Section 203 of the Delaware General Corporation Law (“Section 203”), which prevents us from engaging in any business combination with any “interested stockholder,” which is defined generally as a person that acquires 15% or more of a corporation’s outstanding voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in the manner prescribed in Section 203. These provisions could have the effect of delaying or preventing a change of control, whether or not it is desired by, or beneficial to, our stockholders.

In addition to the above factors, an acquisition of our company could be viewed by a potential acquiror as costly in light of the employment agreements we have in place with our executive officers, as well as a company-wide change of control policy, which provide for severance benefits as well as the full acceleration of vesting of any outstanding options or restricted stock units in the event of a change of control and subsequent termination of employment. Further, our Fourth Amended and Restated 2007 Equity Incentive Plan generally permits our Board to provide for the acceleration of vesting of options granted under that plan in the event of certain transactions that result in a change of control.

Furthermore, holders of the 2022 Convertible Notes have the right to require us to repurchase their notes at a price equal to 100% of the principal amount thereof and the conversion rate for the 2022 Convertible Notes may be increased as described in the indenture, in each case, upon the occurrence of certain change of control transactions, which could have the effect of preventing a change of control, whether or not it is desired by, or beneficial to, our stockholders, or may result in the acquisition of us being on terms less favorable to our stockholders than it would otherwise be.

ITEM 1B. UNRESOLVED STAFF COMMENTS:
None.
ITEM 2. PROPERTIES:
In June 2013, we entered into a lease agreement with BP Bay Colony LLC (the “Landlord”) for the lease of certain real property located at 1100 Winter Street, Waltham, Massachusetts for use as our principal executive offices. The initial term of the lease was five years and two months with one five-year extension term at our option. We have entered into several amendments to the original lease to add additional space and to extend the term of the original lease to April 2021. In addition to base rent, we are also required to pay a proportionate share of the Landlord’s operating costs.

See Note P, “Commitments and Contingencies,” to our consolidated financial statements included in this Annual Report on Form 10‑K for additional information.


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ITEM 3. LEGAL PROCEEDINGS
We accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. We review these accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For certain matters, the liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. In addition, in accordance with the relevant authoritative guidance, for any matters in which the likelihood of material loss is at least reasonably possible, we will provide disclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, we will provide disclosure to that effect. See Note P, “Commitments and Contingencies,” to our consolidated financial statements included in this Annual Report on Form 10-K for a description of our legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.

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PART II
 
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES:
Market Information
Our common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol “AMAG.” On February 25, 2019, the closing price of our common stock, as reported on the NASDAQ, was $15.57 per share.
Stockholders

On February 25, 2019, we had approximately 90 stockholders of record of our common stock, and we believe that the number of beneficial holders of our common stock was approximately 8,000 based on responses from brokers to a search conducted by Broadridge Financial Solutions, Inc. on our behalf.

Repurchases of Equity Securities

The following table provides certain information with respect to our purchases of shares of our stock during the three months ended December 31, 2018.
Period
 
Total Number
of Shares
Purchased
(1)
 
Average Price
Paid Per Share
 
Total Number of 
Shares Purchased 
as Part of Publicly Announced Plans or Programs
(2)
 
Maximum Number 
of Shares (or approximate dollar value) That May Yet Be Purchased Under the Plans or Programs
 (2)
October 1, 2018 through October 31, 2018
 
266

 
$
21.28

 

 
953,788

November 1, 2018 through November 30, 2018
 
263

 
18.18

 

 
1,136,091

December 1, 2018 through December 31, 2018
 
2,264

 
17.58

 

 
1,349,996

Total
 
2,793

 
$
17.99

 

 
 
________________________

(1) 
Represents the surrender of shares of our common stock withheld by us to satisfy the minimum tax withholding obligations in connection with the vesting of restricted stock units held by our employees.

(2) 
We did not repurchase shares of our common stock during the fourth quarter of 2018. We have repurchased and retired $39.5 million cumulatively of our common stock under our share repurchase program to date. These shares were purchased pursuant to a repurchase program authorized by our Board of Directors that was announced in January 2016 to repurchase up to $60.0 million of our common stock, of which $20.5 million remains outstanding as of December 31, 2018. The repurchase program does not have an expiration date and may be suspended for periods or discontinued at any time.

Securities Authorized for Issuance Under Equity Compensation Plans
See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans. Such information is incorporated by reference to our definitive proxy statement pursuant to Regulation 14A, which we intend to file with the U.S. Securities and Exchange Commission (the “SEC”) not later than 120 days after the close of our year ended December 31, 2018.

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Five‑Year Comparative Stock Performance
The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock with the cumulative total return on the NASDAQ Global Select Market Index and the NASDAQ Biotechnology Index over the past five years. The comparisons assume $100 was invested on December 31, 2013 in our common stock, the NASDAQ Global Select Market Index and the NASDAQ Biotechnology Index, and assumes reinvestment of dividends, if any.
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12749450&doc=17
 
12/31/2013
 
12/31/2014
 
12/31/2015
 
12/31/2016
 
12/31/2017
 
12/31/2018
AMAG Pharmaceuticals, Inc.
100.00
 
175.54
 
124.34
 
143.33
 
54.57
 
62.56
NASDAQ Global Select Market Index
100.00
 
116.05
 
121.
 
131.51
 
170.67
 
163.02
NASDAQ Biotechnology Index
100.00
 
131.71
 
140.56
 
112.25
 
133.67
 
121.24

The stock price performance shown in this performance graph is not indicative of future price performance. Information used in the graph was obtained from Research Data Group, Inc., a source we believe is reliable.
The material in this section captioned Five-Year Comparative Stock Performance is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall the material in this section be deemed to be incorporated by reference in any registration statement or other document filed with the SEC under the Securities Act of 1933, except to the extent we specifically and expressly incorporate it by reference into such filing.


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ITEM 6. SELECTED FINANCIAL DATA:
The following table sets forth selected financial data as of and for the years ended December 31, 2018, 2017, 2016, 2015 and 2014. The selected financial data set forth below has been derived from our audited financial statements. This information should be read in conjunction with the financial statements and the related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this Annual Report on Form 10-K.
 
Years Ended December 31,
 
2018
 
2017
 
2016
 
2015
 
2014
 
(in thousands, except per share data)
Statements of Operations Data
 
 
 
 
 
 
 
 
 
Continuing Operations:
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
Product sales, net
$
473,852

 
$
495,645

 
$
432,170

 
$
341,816

 
$
109,998

Other revenues (1)
150

 
124

 
317

 
52,328

 
14,386

Total revenues
474,002

 
495,769

 
432,487

 
394,144

 
124,384

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of product sales (2)
215,892

 
161,349

 
96,314

 
78,509

 
20,306

Research and development expenses
44,846

 
75,017

 
65,561

 
42,710

 
24,160

Acquired in-process research and development (3)
32,500

 
65,845

 

 

 

Selling, general and administrative expenses (4)
227,810

 
178,151

 
169,468

 
131,127

 
72,254

Impairment of intangible assets (5)

 
319,246

 
15,724

 

 

Acquisition-related costs

 

 

 
11,232

 
9,478

Restructuring expenses

 

 
341

 
2,274

 
2,023

Total costs and expenses
521,048

 
799,608

 
347,408

 
265,852

 
128,221

Operating (loss) income
(47,046
)
 
(303,839
)
 
85,079

 
128,292

 
(3,837
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense
(51,971
)
 
(68,382
)
 
(73,153
)
 
(53,251
)
 
(14,697
)
Loss on debt extinguishment (6)
(35,922
)
 
(10,926
)
 

 
(10,449
)
 

Interest and dividend income
5,328

 
2,810

 
3,149

 
1,501

 
975

Other (expense) income
(74
)
 
(70
)
 
189

 
(9,173
)
 
217

Total other expense
(82,639
)
 
(76,568
)
 
(69,815
)
 
(71,372
)
 
(13,505
)
(Loss) income from continuing operations before income taxes
(129,685
)
 
(380,407
)
 
15,264

 
56,920

 
(17,342
)
Income tax expense (benefit) (7)
39,654

 
(175,254
)
 
13,171

 
12,764

 
(153,159
)
Net (loss) income from continuing operations
$
(169,339
)
 
$
(205,153
)
 
$
2,093

 
$
44,156

 
$
135,817

 
 
 
 
 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
 
 
 
 
Income (loss) from discontinued operations
$
18,873

 
$
10,313

 
$
(6,209
)
 
$
(17,076
)
 
$

Gain on sale of CBR business
87,076

 

 

 

 

Income tax expense (benefit)
2,371

 
4,388

 
(1,633
)
 
(5,699
)
 

Net income (loss) from discontinued operations
103,578

 
5,925

 
(4,576
)
 
(11,377
)
 

Net (loss) income
$
(65,761
)
 
$
(199,228
)
 
$
(2,483
)
 
$
32,779

 
$
135,817

 
 
 
 
 
 
 
 
 
 
Basic net (loss) income per share:
 

 
 

 
 

 
 
 
 
(Loss) income from continuing operations
$
(4.92
)
 
$
(5.88
)
 
$
0.06

 
$
1.40

 
$
6.06

Income (loss) from discontinued operations
3.01

 
0.17

 
(0.13
)
 
(0.36
)
 

Total
$
(1.91
)
 
$
(5.71
)
 
$
(0.07
)
 
$
1.04

 
$
6.06


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Diluted net (loss) income per share:
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(4.92
)
 
$
(5.88
)
 
$
0.06

 
$
1.25

 
$
5.45

Income (loss) from discontinued operations
3.01

 
0.17

 
(0.13
)
 
(0.32
)
 

Total
$
(1.91
)
 
$
(5.71
)
 
$
(0.07
)
 
$
0.93

 
$
5.45

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding used to compute net (loss) income per share:
 

 
 

 
 

 
 

 
 
Basic
34,394

 
34,907

 
34,346

 
31,471

 
22,416

Diluted
34,394

 
34,907

 
34,833

 
35,308

 
25,225

 
As of December 31,
 
2018
 
2017
 
2016
 
2015
 
2014
Balance Sheet Data
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and investments
$
394,171

 
$
299,448

 
$
527,130

 
$
456,359

 
$
144,186

Working capital (current assets less current liabilities)
$
359,726

 
$
204,150

 
$
405,681

 
$
360,753

 
$
107,548

Total assets (8)
$
1,175,459

 
$
1,900,356

 
$
2,478,426

 
$
2,476,210

 
$
1,388,933

Long-term liabilities (9)
$
263,360

 
$
832,394

 
$
1,231,160

 
$
1,298,025

 
$
762,492

Stockholders’ equity
$
746,655

 
$
790,244

 
$
934,389

 
$
932,264

 
$
459,953

________________________

(1) 
In 2015, we recognized $44.4 million in revenues associated with the amortization of the remaining deferred revenue balance as a result of the termination of a license, development and commercialization agreement (the “Takeda Termination Agreement) with Takeda Pharmaceutical Company Limited (“Takeda) and $6.7 million of additional revenues related to payments made by Takeda upon the final termination date under the terms of the Takeda Termination Agreement.

(2) 
Cost of product sales in 2018, 2017, 2016, 2015, and 2014 included approximately $158.4 million, $130.4 million, $77.8 million, $63.3 million, and $6.1 million of non-cash expense related to the amortization of intangible assets and the step-up of Lumara Health’s inventories at the acquisition date, respectively.

(3) 
2018 reflects $12.5 million paid in connection with our acquisition of AMAG-423 and $20.0 million paid to Palatin Technologies, Inc. upon FDA acceptance of the Vyleesi NDA. 2017 reflects $65.8 million related to a $60.0 million one-time upfront payment under the terms of the Palatin License Agreement and $5.8 million, which represented a portion of the consideration recorded in 2017 under the terms of the Endoceutics License Agreement.

(4) 
2018 and 2017 reflect increases driven by organizational growth associated with significant launch activities for multiple products and costs related to the commercialization of Intrarosa. 2016 reflects an increase in the Makena-related contingent consideration based on the expected timing of milestone payments. In addition, 2015 reflects a full year recognition of Makena-related selling, general and administrative expenses compared to a partial period in 2014 following our November 2014 acquisition of Lumara Health.

(5) 
In 2017, we recognized a $319.2 million impairment charge related to the Makena base technology intangible asset. In 2016, we recognized $15.7 million of charges related to the impairment of the remaining net intangible asset for the MuGard Rights.

(6) 
Reflects $35.9 million, $10.9 million and $10.4 million loss on debt extinguishment in 2018, 2017 and 2015, respectively, due to the early redemption of a $500.0 million aggregate principal amount of 7.875% Senior Notes due 2023 (the “2023 Senior Notes”), the early repayment of a 2015 term loan facility and the early repayment of a 2014 term loan facility, respectively.

(7) 
The $175.3 million income tax benefit in 2017 was primarily driven by the deferred tax benefit related to the Makena base technology intangible asset impairment and amortization. The $153.2 million income tax benefit in 2014 reflects a $132.9 million decrease in our valuation allowance due to taxable temporary differences available as a source of income to

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realize the benefit of certain of our pre-existing deferred tax assets as a result of the acquisition of Lumara Health.

(8) 
Reflects the acquisition of CBR during 2015, the recognition of a $319.2 million impairment charge related to the Makena base technology intangible asset in 2017 and the sale of the CBR business in 2018.

(9) 
Long-term liabilities increased in 2015 as a result of the borrowing against the 2023 Senior Notes and decreased in 2017 and 2018 primarily due to the repayment of our term loan facilities and the 2023 Senior Notes, respectively.





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ITEM 7.  
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:

Overview

AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a pharmaceutical company focused on bringing innovative products to patients with unmet medical needs by leveraging our development and commercial expertise to invest in and grow our pharmaceutical products across a range of therapeutic areas. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia management and cancer supportive care, including Feraheme® (ferumoxytol injection) for intravenous (“IV”) use, Makena® (hydroxyprogesterone caproate injection), Intrarosa® (prasterone) vaginal inserts and MuGard® Mucoadhesive Oral Wound Rinse. In addition to our marketed products, our portfolio includes three product candidates, Vyleesi™ (bremelanotide), which is being developed for the treatment of hypoactive sexual desire disorder (“HSDD”) in pre-menopausal women, AMAG-423 (digoxin immune fab (ovine)), which is being studied for the treatment of severe preeclampsia, and ciraparantag, which is being studied as an anticoagulant reversal agent.

On February 7, 2019, we announced that we combined our women's and maternal health sales forces into one integrated sales team. This combined sales force will promote both Intrarosa and Makena and will provide healthcare professionals with one commercial point of contact and seeks to maximize efficiency and effectiveness for the promotion of our commercial products. As a result, we reduced our overall headcount by approximately 110 employees, approximately 100 of whom were part of our field-based commercial organization with the remainder coming from our general and administrative functions. We expect to record a one-time restructuring charge of approximately $6.0 million, primarily related to severance and related benefits, in the first quarter of 2019.

On January 16, 2019, we acquired ciraparantag with our acquisition of Perosphere Pharmaceuticals Inc. (“Perosphere”), a privately-held biopharmaceutical company pursuant to an Agreement and Plan of Merger. Ciraparantag is an anticoagulant reversal agent in development for patients treated with novel oral anticoagulants (“NOACs”) or low molecular weight heparin (“LMWH”) when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. For additional information on the Perosphere acquisition, see Note W, “Subsequent Events,” to our consolidated financial statements included in this Annual Report on Form-10-K.

We intend to continue to expand the impact of our current and future products for patients by delivering on our growth strategy, which includes collaborating on and acquiring promising therapies at various stages of development, and advancing them through the clinical and regulatory process to deliver new treatment options to patients. Our primary sources of revenue are from sales of Makena, Feraheme and Intrarosa. Except as otherwise stated below, the following discussions of our results of operations reflect the results of our continuing operations, excluding the results related to the CBR business, which we sold in August 2018. The CBR business has been separated from continuing operations and reflected as a discontinued operation. See Note C, “Discontinued Operations and Held for Sale,” to our consolidated financial statements included in this Annual Report on Form 10-K.

AMAG’s Portfolio of Products and Product Candidates

Feraheme

Feraheme received approval from the U.S. Food and Drug Administration (the “FDA”) in June 2009 for the treatment of iron deficiency anemia (“IDA”) in adult patients with chronic kidney disease (“CKD”). In February 2018, the FDA approved the supplemental New Drug Application to expand the label to include all eligible adult IDA patients who have intolerance to oral iron or have had unsatisfactory response to oral iron in addition to patients who have CKD. IDA is prevalent in many different patient populations, such as patients with CKD, gastrointestinal diseases or disorders, inflammatory diseases, chemotherapy-induced anemia and abnormal uterine bleeding. For many of these patients, treatment with oral iron is unsatisfactory or is not tolerated. It is estimated that approximately five million people in the U.S. have IDA and we estimate that a small fraction of the patients who are diagnosed with IDA regardless of the underlying cause are currently being treated with IV iron.

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The expanded Feraheme label was supported by two positive pivotal Phase 3 trials, which evaluated Feraheme versus iron sucrose or placebo in a broad population of patients with IDA and positive results from a third Phase 3 randomized, double-blind non-inferiority trial that evaluated the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension with Feraheme compared to Injectafer® (ferric carboxymaltose injection) (the “Feraheme comparator trial”). The Feraheme comparator trial demonstrated comparability to Injectafer® based on the primary composite endpoint of the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension (Feraheme incidence 0.6%; Injectafer® incidence 0.7%). Adverse event rates were similar across both treatment groups; however, the incidence of severe hypophosphatemia (defined by blood phosphorous of <0.2 mg/dl at week 2) was less in the patients receiving Feraheme (0.9% of patients) compared to those receiving Injectafer® (50.8% of patients).

Makena

Makena is indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a history of singleton spontaneous preterm birth. We acquired the rights to Makena in connection with our acquisition of Lumara Health Inc. (“Lumara Health”) in November 2014.

Makena was approved by the FDA in February 2011 as an intramuscular (“IM”) injection (the “Makena IM product”) packaged in a multi-dose vial and in February 2016 as a single-dose preservative-free vial. The orphan drug exclusivity period that was granted to the Makena IM product in 2011 expired in February 2018. In February 2018, the Makena auto-injector was approved by the FDA for administration via a pre-filled subcutaneous auto-injector, a drug-device combination product (the “Makena auto-injector”). The Makena auto-injector offers an alternative administration option for patients and providers and was designed with features, such as a shorter, thinner, non-visible needle compared to the Makena IM product, to help address some of the known barriers to treatment of recurrent preterm birth, including the lack of patient acceptance and adherence. Our commercial strategy for Makena currently focuses on driving awareness of the availability and attributes of the Makena auto-injector and converting current IM prescribers to the Makena auto-injector.

In July 2018, simultaneously with the launch of the first generic competitor to Makena, we launched our own authorized generic of both the single- and multi-dose vials through our generic partner, Prasco, LLC (the “Makena authorized generic”). As a result of this partnership, we are able to provide patients and healthcare providers with access to therapeutically equivalent versions of the branded Makena IM injection. Currently, there are two generic competitors in the market in addition to the Makena authorized generic product, and we expect additional generic entrants to enter the market in 2019 to compete against both the 1ml and 5ml presentations.

Intrarosa

In February 2017, we entered into a license agreement (the “Endoceutics License Agreement”) with Endoceutics, Inc. (“Endoceutics”) pursuant to which Endoceutics granted us the U.S. rights to Intrarosa, an FDA-approved product for the treatment of moderate to severe dyspareunia (pain during sexual intercourse), a symptom of vulvar and vaginal atrophy (“VVA”), due to menopause. Intrarosa was approved by the FDA in November 2016 and was launched commercially in July 2017.

Intrarosa is the only FDA-approved vaginal non-estrogen treatment indicated for the treatment of moderate to severe dyspareunia, a symptom of VVA, due to menopause. Intrarosa contains prasterone, a synthetic form of dehydroepiandrosterone, which is an inactive endogenous (i.e. occurring in the body) sex steroid. Prasterone is converted by enzymes in the body into androgens and estrogens to help restore the vaginal tissue as indicated by improvements in the percentage of superficial cells, parabasal cells, and pH. The mechanism of action of Intrarosa is not fully established. The effectiveness of Intrarosa on moderate to severe dyspareunia in post-menopausal women was examined in two primary 12-week placebo-controlled efficacy trials. Women who used Intrarosa in these trials experienced a significant reduction in moderate to severe dyspareunia, as well as statistically significant improvements in the percentage of vaginal superficial cells, parabasal cells and vaginal pH. In these trials, vaginal discharge and atypical pap smears were the most common adverse reactions. Intrarosa is contraindicated in women with undiagnosed abnormal genital bleeding. The label for Intrarosa contains a precaution that it has not been studied in women with a history of breast cancer.

In the third quarter of 2017, Endoceutics initiated a clinical study with Intrarosa for the treatment of HSDD in post-menopausal women, which is now fully enrolled. Upon review of the full data set, it will be determined whether to continue to pursue an additional clinical trial to support an eventual filing with the FDA for an HSDD indication. We have agreed to share the direct costs related to such studies based upon a negotiated allocation with us funding up to $20.0 million, of which we have paid approximately $6.0 million. Additional details regarding the Endoceutics License Agreement can be found in Note Q,

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Collaboration, License and Other Strategic Agreements,” to our consolidated financial statements included in this Annual Report on Form 10-K.

Vyleesi

In January 2017, we entered into a license agreement (the “Palatin License Agreement”) with Palatin Technologies, Inc. (“Palatin”) pursuant to which we acquired Vyleesi, an investigational product designed to treat acquired generalized HSDD in pre-menopausal women. In June 2018, the FDA accepted the Vyleesi NDA. The Prescription Drug User Fee Act (“PDUFA”) date for completion of FDA review of the Vyleesi NDA is June 23, 2019, and if approved on that date, we expect to launch Vyleesi in the second half of 2019. In November 2018, as part of our discussions with the FDA regarding its review of the NDA submission for Vyleesi, the FDA requested additional data assessing 24-hour ambulatory blood pressure with short-term daily use of Vyleesi. This Phase 1 study is ongoing and is being conducted in premenopausal healthy volunteers. We believe that this study can be conducted and data submitted prior to the June 23, 2019 PDUFA date.

Vyleesi, a melanocortin 4 receptor agonist is designed to be an on demand therapy used in anticipation of sexual activity and self-administered by premenopausal women with HSDD in the thigh or abdomen via a single-use subcutaneous auto-injector. Two identically-designed Phase 3 studies evaluating the safety and efficacy of Vyleesi compared to placebo were conducted by Palatin for the treatment of HSDD in pre-menopausal women. Both trials consisted of a 24-week double-blind, placebo-controlled, randomized parallel group core study phase, comparing a subcutaneous dose of 1.75 mg Vyleesi versus placebo, self-administered via an auto-injector, on demand, and patients were equally randomized (1:1 ratio) to either Vyleesi or placebo. The co-primary endpoints for these trials were evaluated using patient self-reported scores from Question One and Two of the Female Sexual Function Index: Desire Domain (“FSFI-D”) and Question 13 from the Female Sexual Distress Scale-Desires/Arousal/Orgasm (“FSDS-DAO”). Women who completed the randomized control core study phase of either study had the option to continue in an ongoing open-label safety extension phase of the study for an additional 52 weeks, which gathered additional data on the safety of long-term and repeated use of Vyleesi. Nearly 80% of patients who completed the randomized portion of the study elected to remain in the open-label portion of the study. All of the patients in the extension study received Vyleesi.

Both studies met the pre-specified co-primary efficacy endpoints of improvement in low sexual desire and decrease in related distress as measured using validated patient-reported outcome instruments. For women taking Vyleesi compared to placebo, the change from baseline in low sexual desire, as measured by the FSFI-D, showed statistically significant improvement with Vyleesi in both median and mean measures of desire in both Phase 3 studies. The median change from baseline was 0.60 vs. 0.00 for both studies, and the mean change from baseline was 0.54 vs. 0.24 (p=0.0002) for one study and 0.63 vs. 0.21 (p<0.0001) for the other study. Likewise, for women taking Vyleesi compared to placebo, the change from baseline in related distress, as measured by the FSDS-DAO Question 13, also demonstrated statistically significant improvement with Vyleesi in both median and mean measures of desire in both Phase 3 studies. The median change from baseline was -1.0 vs. 0.0 for both studies, and the mean change from baseline was -0.7 vs. -0.4 for both studies, with pValues of <0.0001for one study and 0.0053 for the other study. The change in the number of satisfying sexual events, a key secondary endpoint, was not significantly different from placebo in either clinical trial.

In the Phase 3 clinical trials, the most frequent adverse events were nausea, flushing, injection site reactions and headache, which were generally mild-to-moderate in severity and were transient. Approximately 18% of patients discontinued participation in the Vyleesi arm due to adverse events in both studies versus 2% in placebo. The adverse events in the extension portion of the study were consistent with that of the controlled studies described above.
AMAG-423

In September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 with Velo Bio, LLC, a privately-held life sciences company (“Velo”). AMAG-423 is a polyvalent antibody currently in development for the treatment of severe preeclampsia in pregnant women and has been granted both orphan drug and Fast Track designations by the FDA. AMAG-423 is intended to bind to endogenous digitalis-like factors (“EDLFs”) and remove them from the circulation. EDLFs appear to be elevated in preeclampsia and may play an important role in the pathogenesis of preeclampsia. By decreasing EDLFs, AMAG-423 is believed to improve vascular endothelial function and lead to better post-delivery outcomes in affected mothers and their babies.

In connection with the exercise of the option and the consummation of the acquisition, we paid Velo an upfront option exercise fee of $12.5 million in September 2018. We are obligated to pay Velo a $30.0 million milestone payment upon FDA approval of the product. In addition, we are obligated to pay sales milestone payments to Velo of up to $240.0 million in the aggregate, triggered at various annual net sales thresholds between $300.0 million and $900.0 million and low-single digit

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royalties based on net sales. Further, we have assumed additional obligations under a previous agreement entered into by Velo with a third-party, including a $5.0 million milestone payment upon regulatory approval and $10.0 million following the first commercial sale of AMAG-423, payable in quarterly installments as a percentage of quarterly gross commercial sales until the obligation is met. We are also obligated to pay the third-party low-single digit royalties based on net sales. See Note P, “Commitments and Contingencies,” to our consolidated financial statements included in this Annual Report on Form 10-K for more information on the AMAG-423 acquisition.

We have assumed responsibility to complete the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of the future clinical, regulatory and other costs required to pursue FDA approval. Approximately 200 antepartum women with severe preeclampsia between 23 and 32 weeks gestation will be enrolled in the multi-center, randomized, double-blind, placebo-controlled, parallel-group Phase 2b/3a study. We have re-initiated the study as the sponsor, and have begun reactivating the current sites, seeking new sites and, as of January 2019, enrolling new patients. Participants in the study receive either AMAG-423 or placebo intravenously four times a day over a maximum of four days. The study’s primary endpoint is to demonstrate a reduction in the percentage of babies who develop severe intraventricular hemorrhage (bleeding in the brain), necrotizing enterocolitis (severe inflammation of the infant bowels) or death by 36 weeks corrected gestational age between the AMAG-423 and placebo arms. Secondary endpoints include the change from baseline in maternal creatinine clearance, maternal incidence of pulmonary edema during treatment and the period of time between treatment and delivery. In an effort to accelerate enrollment, we intend to increase the number of trial sites, including potentially initiating sites outside of the U.S., and are targeting to complete enrollment of the Phase 2b/3a study by the end of 2019.
 
Ciraparantag
 
In January 2019, we acquired Perosphere, a privately-held biopharmaceutical company focused on developing ciraparantag, a small molecule anticoagulant reversal agent in development as a single dose solution that is delivered intravenously to reverse the effects of certain NOACs (Xarelto®(rivaroxaban), Eliquis®(apixaban), and Savaysa®(edoxaban), as well as Lovenox® (enoxaparin sodium injection), a LMWH), when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. Ciraparantag has been granted Fast Track designation by the FDA and we intend to seek orphan drug designation and Breakthrough Therapy designation in 2019. See Note W, “Subsequent Events,” to our consolidated financial statements included in this Annual Report on Form 10-K for additional information.

Ciraparantag has been evaluated in more than 250 healthy volunteers across seven clinical trials. A first in human Phase 1 study evaluated the safety, tolerability, pharmacokinetic, and pharmacodynamic effects of ciraparantag alone and following a single dose of Savaysa®, and another Phase 1 study evaluated the overall metabolism of the drug. Two Phase 1/2 studies evaluated the safety, tolerability, pharmacokinetic, and pharmacodynamic effects related to the reversal of unfractionated heparin and Lovenox® and three Phase 2b randomized, single-blind, placebo-controlled dose-ranging studies evaluated the reversal of Savaysa®, Eliquis®, and Xarelto® to assess the safety and efficacy of ciraparantag, each of which included 12 subjects dosed with ciraparantag. The Phase 2b studies to reverse Xarelto® and Eliquis® are currently ongoing; however, both studies are approximately two-thirds complete, with the low dose cohort expected to finish in the first half of 2019. In these Phase 2b clinical trials, ciraparantag or placebo was administered to healthy volunteers in a blinded fashion after achieving steady blood concentrations of the respective anticoagulant. Pharmacodynamic assessments of whole blood clotting time (“WBCT”), an important laboratory measure of clotting capacity, were sampled frequently for the first hour post study drug dose, and then periodically thereafter out to 24 hours post administration of study drug. Key endpoints in the Phase 2 trials included mean change from baseline in WBCT and the proportion of subjects that returned to within 10% of their baseline WBCT. Subjects in these studies experienced a rapid and statistically significant (p<0.001) reduction in WBCT compared to placebo as early as 15 minutes after the administration of ciraparantag in each of the four studies and the effect was sustained for 24 hours. Moreover, in both the Eliquis® and Xarelto® studies, 100% of subjects in the highest dose cohorts (180 mg of ciraparantag) were responders, as defined by a return to within 10% of baseline WBCT within 30 minutes and sustained for at least six hours. Ciraparantag has been well tolerated in clinical trials, with the most common related adverse events to date being mild sensations of coolness, warmth or tingling, skin flushing, and alterations in taste. There have been no drug-related serious adverse events to date. Following the completion of the Phase 2b studies, we plan to conduct an End of Phase 2 meeting with the FDA to confirm the design of our Phase 3a trials in healthy volunteers, designed to determine the lowest effective dose of ciraparantag.We intend to initiate the Phase 3a trials in the second half of 2019.

MuGard

MuGard is indicated for the management of oral mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oral wounds (mouth sores and injuries), including certain ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces. We acquired the U.S. commercial rights

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to MuGard under a June 2013 license agreement with Abeona Therapeutics, Inc. (“Abeona”) (the “MuGard Rights”). MuGard was launched in the U.S. by Abeona in 2010 after receiving 510(k) clearance from the FDA.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these financial statements requires management to make certain estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates. Management employs the following critical accounting policies affecting our most significant estimates and assumptions: revenue recognition and related sales allowances and accruals; valuation of marketable securities; business combinations and asset acquisitions, including acquisition-related contingent consideration; goodwill; intangible assets; equity-based compensation; and income taxes.

Revenue and Allowances

On January 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) applying the modified retrospective transition method to all contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for prior periods. The adoption of ASC 606 did not have an impact on the pattern or timing of recognition of our product revenue, as the majority of our product revenue continues to be recognized when the customer takes control of our product.
Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

a.Identify the contract(s) with a customer;
b.Identify the performance obligations in the contract;
c.Determine the transaction price;
d.Allocate the transaction price to the performance obligations in the contract; and
e.Recognize revenue when (or as) the performance obligations are satisfied.

We only apply the five step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, if the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Our major sources of revenue during the reporting periods were product revenues from Makena (including both our branded and unbranded products), Feraheme and Intrarosa. The adoption of ASC 606 did not have an impact on our product revenue.

We receive payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional.

Performance Obligations and Product Revenue

At contract inception, we assess the goods promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a good (or bundle of goods) that is distinct. To identify the performance obligations, we consider all of the goods promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. We determined that the following distinct goods represent separate performance obligations:

Supply of Makena (branded and unbranded) product
Supply of Feraheme product
Supply of Intrarosa product

We principally sell our products to wholesalers, specialty distributors, specialty pharmacies and other customers, including our authorized generic partner (collectively, “Customers”), who purchase products directly from us. Our Customers

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subsequently resell the products to healthcare providers and patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payers that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of our products.

For the majority of our Customers, we transfer control at the point in time when the goods are delivered. In instances when we perform shipping and handling activities, these are considered fulfillment activities, and accordingly, the costs are accrued when the related revenue is recognized. Taxes collected from Customers and remitted to governmental authorities are excluded from revenues.

Variable Consideration
Under ASC 606, we are required to make estimates of the net sales price, including estimates of variable consideration (such as rebates, chargebacks, discounts, copay assistance and other deductions), and recognize the estimated amount as revenue, when we transfer control of the product to our customers. In addition, we estimate variable consideration related to our share of net distributable profits from our authorized generic partner. Variable consideration must be determined using either an “expected value” or a “most likely amount” method.

We record product revenues net of certain allowances and accruals in our consolidated statements of operations. Product sales allowances and accruals are primarily comprised of both direct and indirect fees, discounts and rebates and provisions for estimated product returns. Direct fees, discounts and rebates are contractual fees and price adjustments payable to Customers that purchase products directly from us. Indirect fees, discounts and rebates are contractual price adjustments payable to healthcare providers and organizations, such as certain physicians, clinics, hospitals, group purchasing organizations (“GPOs”), and dialysis organizations that typically do not purchase products directly from us but rather from wholesalers and specialty distributors. Consideration payable to a Customer, or other parties that purchase goods from a Customer, are considered to be a reduction of the transaction price, and therefore, of revenue.

Product sales allowances and accruals are based on definitive contractual agreements or legal requirements (such as laws and regulations to provide mandatory discounts for sales to government entities) related to the purchase and/or utilization of the product by these entities and are recorded in the same period that the related revenue is recognized. We use the expected value method for estimating variable consideration. We estimate product sales allowances and accruals using either historical, actual and/or other data, including estimated patient usage, applicable contractual rebate rates, contract performance by the benefit providers, other current contractual and statutory requirements, historical market data based upon experience of our products and other products similar to them, specific known market events and trends such as competitive pricing and new product introductions, current and forecasted Customer buying patterns and inventory levels, and the shelf life of our products. As part of this evaluation, we also review changes to federal and other legislation, changes to rebate contracts, changes in the level of discounts, and changes in product sales trends. Although allowances and accruals are recorded at the time of product sale, rebates are typically paid out in arrears, one month to three months months after the sale. 

The estimate of variable consideration, which is included in the transaction price, may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved in a future period. Estimating variable consideration and the related constraint requires the use of significant management judgment and actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Discounts

We typically offer a 2% prompt payment discount to certain customers as an incentive to remit payment in accordance with the stated terms of the invoice, generally 30 days. Because we anticipate that those customers who are offered this discount will take advantage of the discount, 100% of the prompt payment discount at the time of sale is accrued for eligible customers, based on the gross amount of each invoice. We adjust the accrual quarterly to reflect actual experience.


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Chargebacks

Chargeback reserves represent the estimated obligations resulting from the difference between the prices at which we sell our products to wholesalers and the sales price ultimately paid to wholesalers under fixed price contracts by third-party payers, including governmental agencies. The chargeback estimates are determined based on actual product sales data and forecasted customer buying patterns. Actual chargeback amounts are determined at the time of resale to the qualified healthcare provider, and we generally issue credits for such amounts within several weeks of receiving notification from the wholesaler. Estimated chargeback amounts are recorded at the time of sale and adjusted quarterly to reflect actual experience.

Distributor/Wholesaler and Group Purchasing Organization Fees

Fees under arrangements with distributors and wholesalers are usually based upon units of product purchased during the prior month or quarter and are usually paid by us within several weeks of the receipt of an invoice from the wholesaler or distributor, as the case may be. Fees under arrangements with GPOs are usually based upon member purchases during the prior quarter and are generally billed by the GPO within 30 days after period end. In accordance with ASC 606, since the consideration given to the Customer is not for a distinct good or service, the consideration is a reduction of the transaction price of the vendor’s products or services. We generally pay such amounts within several weeks of the receipt of an invoice from the distributor, wholesaler or GPO. Accordingly, we accrue the estimated fee due at the time of sale, based on the contracted price invoiced to the Customer. We adjust the accrual quarterly to reflect actual experience.

Product Returns

Consistent with industry practice, we generally offer wholesalers, specialty distributors and other customers a limited right to return our products based on the product’s expiration date. The current shelf-lives or time between manufacture and expiration for products in our portfolio range from three years to five years. Product returns are estimated based on the historical return patterns and known or expected changes in the marketplace. We track actual returns by individual production lots. Returns on lots eligible for credits under our returned goods policy are monitored and compared with historical return trends and rates. We expect that wholesalers and healthcare providers will not stock significant inventory due to the cost of the product, the expense to store our products, and/or that our products are readily available for distribution. We record an estimate of returns at the time of sale. If necessary, our estimated rate of returns may be adjusted for actual return experience as it becomes available and for known or expected changes in the marketplace. There were no material adjustments to our reserve for product returns during the years ended December 31, 2018, 2017 or 2016. To date, our product returns have been relatively limited; however, returns experience may change over time. We may be required to make future adjustments to our product returns estimate, which would result in a corresponding change to our net product sales in the period of adjustment and could be significant.

Sales Rebates

We contract with various private payer organizations, primarily pharmacy benefit managers, for the payment of rebates with respect to utilization of our products. We determine our estimates for rebates, if applicable, based on actual product sales data and our historical product claims experience. Rebate amounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks of notification by the provider. We regularly assess our reserve balance and the rate at which we accrue for claims against product sales. If we determine in future periods that our actual rebate experience is not indicative of expected claims, if actual claims experience changes, or if other factors affect estimated claims rates, we may be required to adjust our current accumulated reserve estimate, which would affect net product sales in the period of the adjustment and could be significant.

Governmental Rebates

Governmental rebates relate to our reimbursement arrangements with state Medicaid programs. We determine our estimates for Medicaid rebates, if applicable, based on actual product sales data and our historical product claims experience. In estimating these reserves, we provide for a Medicaid rebate associated with both those expected instances where Medicaid will act as the primary insurer as well as in those instances where we expect Medicaid will act as the secondary insurer. Rebate amounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks of notification by the Medicaid or provider entity. We regularly assess our Medicaid reserve balance and the rate at which we accrue for claims against product sales. If we determine in future periods that our actual rebate experience is not indicative of expected claims, if actual claims experience changes, or if other factors affect estimated claims rates, we may be required to adjust our current Medicaid accumulated reserve estimate, which would affect net product sales in the period of the adjustment and could be significant.

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Other Discounts
Other discounts which we offer include voluntary patient assistance programs, such as copay assistance programs, which are intended to provide financial assistance to qualified commercially insured patients with prescription drug copayments required by payers. The calculation of the accrual for copay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue.

Marketable Securities

We account for and classify our marketable securities as either “available-for-sale,” “held-to-maturity,” or “trading debt securities,” in accordance with the accounting guidance related to the accounting and classification of certain investments in marketable securities. The determination of the appropriate classification by us is based primarily on management’s ability and intent to sell the debt security at the time of purchase. As of December 31, 2018 and 2017, all of our marketable securities were classified as available-for-sale.

Available-for-sale securities are those securities which we view as available for use in current operations, if needed. We generally classify our available-for-sale securities as short-term investments, even though the stated maturity date may be one year or more beyond the current balance sheet date. Available-for-sale marketable securities are stated at fair value with their unrealized gains and losses included in accumulated other comprehensive income (loss) within the consolidated statements of stockholders’ equity, until such gains and losses are realized in other income (expense) within the consolidated statements of operations or until an unrealized loss is considered other-than-temporary.

We recognize other-than-temporary impairments of our marketable securities when there is a decline in fair value below the amortized cost basis and if (a) we have the intent to sell the security or (b) it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis. If either of these conditions is met, we recognize the difference between the amortized cost basis of the security and its fair value at the impairment measurement date in our consolidated statements of operations. If neither of these conditions is met, we must perform additional analysis to evaluate whether the unrealized loss is associated with the creditworthiness of the issuer of the security rather than other factors, such as interest rates or market factors. If we determine from this analysis that we do not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, the impairment is considered other-than-temporary and is recognized in our consolidated statements of operations.

Business Combinations and Asset Acquisitions

The purchase price allocation for business combinations requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Under Accounting Standards Update (“ASU”) No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business, we first determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the single asset or group of assets, as applicable, is not a business.

We account for acquired businesses using the acquisition method of accounting, under which the total purchase price of an acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.

The purchase price allocations are initially prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. Any adjustments to the purchase price allocations are made as soon as practicable but no later than one year from the acquisition date.

Acquired inventory is recorded at its fair value, which may require a step-up adjustment to recognize the inventory at its expected net realizable value. The inventory step-up is recorded to cost of product sales in our consolidated statements of operations when related inventory is sold, and we record step-up costs associated with clinical trial material as research and development expense.

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Acquisition-Related Contingent Consideration

Contingent consideration arising from a business combination is included as part of the purchase price and is recognized at its estimated fair value as of the acquisition date. Subsequent to the acquisition date, we measure contingent consideration arrangements at fair value for each period until the contingency is resolved. These changes in fair value are recognized in selling, general and administrative expenses in our consolidated statements of operations. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time. For asset acquisitions, we record contingent consideration for obligations we consider to be probable and estimable and these liabilities are not adjusted to fair value.

Goodwill

We test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action or assessment by a regulator. Our annual impairment test date is October 31. We have determined that we operate in a single operating segment and have a single reporting unit.

In performing our goodwill impairment tests during 2018 and 2017, we utilized the approach prescribed under ASC 350, as amended by ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which requires that an entity perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

When we perform any goodwill impairment test, the estimated fair value of our reporting unit is determined using an income approach that utilizes a discounted cash flow (“DCF”) model or, a market approach, when appropriate, which assesses our market capitalization as adjusted for a control premium, or a combination thereof. The DCF model is based upon expected future after-tax operating cash flows of the reporting unit discounted to a present value using a risk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning (i) future operating performance, including future sales, long-term growth rates, operating margins, variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows (ii) the probability of regulatory approvals, and (iii) future economic conditions, all of which may differ from actual future cash flows. These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. The discount rate, which is intended to reflect the risks inherent in future cash flow projections, used in the DCF model, is based on estimates of the weighted average cost of capital (“WACC”) of market participants relative to our reporting unit. Financial and credit market volatility can directly impact certain inputs and assumptions used to develop the WACC. Any changes in these assumptions may affect our fair value estimate and the result of an impairment test. We believe