Player Avatar ETFinnovators (< 20) Submitted: 12/15/2008 5:39:19 PM : Outperform Start Price: $32.55 AMAG Score: -161.43

An A-List of Stock Buys: Altria and AMAG Pharma

On my stock A-List of stock buys today are defensive picks from tobacco and healthcare, including Altria (MO) and AMAG Pharma (AMAG).

Altria was well on its way to 16 bucks today on an analyst upgrade until the Supreme Court ruled that tobacco companies could be sued for deceptive marketing practices for light cigarettes. Altria believes the litigation is manageable and the Company noted that the ruling today simply allows the lawsuits to proceed and does not reflect a decision of liability against MO in the cases.

I bought more shares of Altria today at 15 bucks with an 8.5% dividend yield and with the potential for legislation [web link to full text of H.R. 1108] next year which would place tobacco products under FDA regulation. Regulation by the FDA would ensure the following bullish conditions for MO, which already dominates the U.S. market for tobacco products and will close on its acquisition of smokeless tobacco maker UST Inc. (UST) early next year: cigarettes would never be banned, new tobacco products would likely never be approved, advertising would be further restricted, and the FDA would take a tougher stance on the sale of counterfeit tobacco products.

I also bought AMAG Pharma today at 32 bucks ahead of an expected FDA decision before year-end with a PDUFA date of 12/30/08 for the Company's pending new drug application for ferumoxytol as a treatment for iron-deficiency anemia in patients with chronic kidney disease. In mid-November, AMAG bounced nicely off its 52-week lows in the high teens back to the thirties on word that the FDA accepted its complete response for the drug and designated the submission for a Class I review of 60 days.

The Class I designation by the FDA removed any risk of costly and time-consuming delays for AMAG to conduct additional clinical trials and improves the odds for approval by the agency. With AMAG still down by about 50% in the past year, over 14 bucks per share in cash + investments ($241M), zero debt, and only 17M shares outstanding; the stock is poised for a major pop if it gets the FDA okay for ferumoxytol.

AMAG is ready to launch the drug quickly in 1Q09 if it is approved and will be working closely with dialysis providers such as DaVita (DVA) as a major source of patients with chronic kidney disease who would be candidates for ferumoxytol. AMAG could easily return to the sixties with a clean, on-time FDA approval before year-end, which is around consensus analyst price targets and the 52-week high of just under 67 bucks.

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