A magnet for investors
No one will confuse Advanced Magnetics Inc. of Cambridge as the new new thing of the medical business. Investors could tell very different stories about the company, depending on when they got in and out of its roller coaster stock over the past two decades.
Some facts of business life at Advanced Magnetics would have made you think hard about buying the stock this year. Revenue has dwindled, down nearly 80 percent from 16 years ago, and losses have gotten steeper.
But then there is this: Advanced Magnetics shares have soared 430 percent, from $11.08 to $59.54 so far this year, making it the most successful Massachusetts stock of 2006. Earlier this month, the company was able to raise $130 million by selling new shares, more than all its business revenue since going public in 1986.
Investors who bid up Advanced Magnetics are looking forward. They see two new products under development at a company known for its contrast agents used in medical imaging. In particular, investors are watching a new product that crosses over from diagnostics to therapy, a treatment to replace iron in the blood of patients with chronic kidney disease.
Founder Jerry Goldstein was a scientist out of MIT with an expertise in iron oxide technology when he opened the doors at Advanced Magnetics in 1981. The company sold contrast agents that improved the images produced by relatively new MRI equipment. Two boom-and-bust stock cycles followed over the years, but Advanced Magnetics shares languished for most of this decade, as imaging technology improvements cut demand for contrast agents.
Fortunately for Advanced Magnetics, something else happened in 2000. Medical reimbursement rates for iron replacement treatments went up dramatically, to $400 per gram. Patients with chronic kidney disease may need about 3 grams per year, creating a market analysts estimate at about $500 million a year.
Advanced Magnetics went down a technical path that led to two new products. One was another diagnostic agent focused on lymph nodes to detect cancer. The other was a product called ferumoxytol , an iron replacement therapy the company hopes will compete with two existing treatments.
More recently, Advanced Magnetics installed a new chief executive, Brian Pereira , a doctor with business experience leading a large physician group at Tufts-New England Medical Center and a medical background in kidney research. Goldstein remained at the company as executive chairman.
Ferumoxytol is completing a series of phase 3 clinical trials, and Advanced Magnetics expects to submit a new-drug application to the FDA in the second half of next year. It hopes to launch the product in 2008.
Investors buying Advanced Magnetics stock think ferumoxytol will clobber the competition, if and when it gets on the market. Adam Walsh , an analyst who follows the company for Jeffries & Co. , thinks ferumoxytol sales could peak at $300 million or more.
Here's why: Ferumoxytol can deliver as much as a half-gram of iron in a single injection that takes 17 seconds. Pereira says competing treatments must be delivered intravenously, taking 15 minutes to a half-hour, and are limited to a tenth of one gram of iron. That's a big difference for a patient who needs 3 grams of iron every year.
Pereira thinks the market for ferumoxytol will expand far beyond kidney patients, once the treatment becomes more convenient. Even if true, that day is well into the future.
Meanwhile, analysts speculate the company may become an acquisition target, and Walsh estimates its value at perhaps $92 per share in a deal if ferumoxytol stays on track. Advanced Magnetics has an engaging story, but a boom-and-bust stock history. Investors buying today must pay for a good deal of success up front.
Steven Syre is a Globe columnist. He can be reached at syre@globe.com. 
