Our Buy call is based on the prospects of the company's key drug candidate Ferumoxytol. Ferumoxytol is safe and efficacious for the treatment of anemia in patients with chronic kidney disorders. We expect the drug to receive FDA approval in late October 2008. The fact that patients using Ferumoxytol had a lower heart problem and cardiac-related death than patients using oral iron drug further supports the drug's approval.
We remind investors that the FDA rejected Daiichi Sankyo's Injectafer in February 2008 on grounds of higher heart problems and cardiac-related deaths when compared to an oral iron drug. The company has over $270 million in cash and cash equivalents and hence, we are not concerned with the company's cash burn at the moment.
Additionally, the company will initiate further phase III trials of Ferumoxytol for the treatment of iron deficiency anemia (IDA) in patients with abnormal uterine bleeding (AUB) and other diseases like cancer in the second half of 2008.
The share price of AMAG has declined sharply in recent times due to the broad market environment. We believe that the current valuation is attractive and represents a good entry point for investors.
Play Enterprise for Natural Gas
Enterprise Products Partners, L.P. (EPD) first-quarter 2008 earnings more than doubled from last year, reflecting exceptional performance from each of its business segments. Importantly, the partnership announced a 6.8% year-over-year increase in quarterly distribution to the annualized run rate of $2.03 per unit. Quarterly distributable cash flows provided a very comfortable, 1.6x coverage to cash distributions to limited partners.
Our continued favorable view of EPD units reflects the partnership's diversified asset base, strong distribution-growth prospects, and attractive valuation. We have raised our earnings estimates to reflect the continued strength in NGL prices and contributions from recent project completions.
On April 28, Enterprise reported better-than-expected first-quarter 2008 recurring earnings of $0.51 per unit (our estimate was for $0.32 per unit), compared to $0.20 per unit in the year-earlier quarter. The year-over-year positive comparison reflects increased demand for NGLs, natural gas and crude oil and the company's midstream infrastructure services. This led to improved performance from each of its business segments.
Our new full-year 2008 and 2009 EPU estimates are $1.66 and $1.77, up from $1.45 and $1.55 before, respectively. Importantly, the partnership raised its regular quarterly distribution to $0.5075 per unit (or $2.03 per unit annualized), from $0.50 per unit (or $2 per unit annualized), a 6.8% year-over-year increase. The new distribution is payable on May 7 to unit-holders of record on April 30, 2008.
During the quarter, the partnership generated distributable cash flows (DCF) of $383 million, up from $222 million in the first quarter of 2007, providing 1.6x distribution coverage. All considered, we rate the stock Buy with a target price of $33.
