UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

OR

Commission File #0-14732

AMAG PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

(617) 498-3300

(Registrant’s Telephone Number, Including Area Code)

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of May 1, 2008 there were 16,993,687 shares of the registrant’s Common Stock, par value $.01 per share, outstanding.

Table of Contents

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Item 1. Financial Statements.

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AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2008 AND DECEMBER 31, 2007

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED

MARCH 31, 2008 AND 2007

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED

MARCH 31, 2008 AND 2007

(IN THOUSANDS)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED

MARCH 31, 2008 AND 2007

(IN THOUSANDS)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AMAG PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

(Unaudited)

AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981.  We are a biopharmaceutical company that utilizes our proprietary nanoparticle technology for the development and commercialization of therapeutic iron compounds to treat anemia and novel imaging agents to aid in the diagnosis of cancer and cardiovascular disease.  We have two approved products, Feridex I.V.® and GastroMARK®, and we have two product candidates, ferumoxytol and Combidex®.  Ferumoxytol, our key product candidate, is being developed for use as an intravenous, or IV, iron replacement therapeutic agent for the treatment of iron deficiency anemia in patients with chronic kidney disease, or CKD.  Combidex is our investigational functional molecular imaging agent consisting of iron oxide nanoparticles for use in conjunction with magnetic resonance imaging, or MRI, to aid in the differentiation of cancerous from normal lymph nodes.  Feridex I.V., our liver contrast agent, is approved and marketed in the U.S., Europe and other countries.  GastroMARK, our oral contrast agent used for delineating the bowel in MRI, is approved and marketed in the U.S., Europe and other countries.  Throughout this Quarterly Report on Form 10-Q, AMAG Pharmaceuticals, Inc. and our consolidated subsidiary are collectively referred to as the Company.

Basis of Presentation

These condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments necessary for a fair statement of such interim financial statements.  Such adjustments consisted only of normal recurring items.  The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

In accordance with accounting principles generally accepted in the United States of America for interim financial reports and the instructions for Form 10-Q and the rules of the Securities and Exchange Commission, or the SEC, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted.  Our accounting policies are described in the Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2007.  Interim results are not necessarily indicative of the results of operations for the full year.  These interim financial statements should be read in conjunction with our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Use of Estimates and Assumptions

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period.  The most significant estimates and assumptions are used in, but not limited to, assessing investments and long-lived assets for potential impairment, and determining values of investments, accrued expenses, income taxes and stock-based compensation expense.  Actual results could differ from those estimates.

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Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of AMAG Pharmaceuticals, Inc. and its wholly-owned subsidiary, AMAG Securities Corporation.  All significant intercompany account balances and transactions between the companies have been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents consist principally of cash held in commercial bank accounts, money market funds and U.S. Treasury securities having an original maturity of less than three months.  At March 31, 2008 and December 31, 2007, substantially all of our cash and cash equivalents were held in either commercial banks or money market accounts.

Investments

We account for and classify our investments as either “available-for-sale,” “trading,” or “held-to-maturity,” in accordance with the guidance outlined in Statement of Financial Accounting Standards, or SFAS, No. 115 “Accounting for Certain Investments in Debt and Equity Securities,” or SFAS 115.  The determination of the appropriate classification by us is based on a variety of factors, including management’s intent at the time of purchase.  As of March 31, 2008 and December 31, 2007, all of our investments were classified as available-for-sale securities.

Available-for-sale securities are those securities which we view as available for use in current operations, if needed.  Accordingly, with the exception of certain auction rate securities, or ARSs, that have not been called by the issuer or have not had a successful auction since March 31, 2008, we have classified all of 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 investments are stated at fair value with their unrealized gains and losses included as a separate component of stockholders’ equity entitled “Accumulated other comprehensive (loss) income,” until such gains and losses are realized.

Fair Value of Financial Instruments

As of January 1, 2008, we partially adopted the provisions of SFAS No. 157, “Fair Value Measurements,” or SFAS 157, for financial assets and liabilities recognized at fair value on a recurring basis.  SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.  The provisions of SFAS 157 related to other nonfinancial assets and liabilities will be effective for us on January 1, 2009, and will be applied prospectively.

Fair value is defined under SFAS 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value under SFAS 157 must maximize the use of observable inputs and minimize the use of unobservable inputs.  The standard describes a fair value hierarchy to measure fair value which is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

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As of March 31, 2008, we held certain assets that are required to be measured at fair value on a recurring basis, including our cash equivalents, and short- and long-term investments.  In accordance with SFAS 157, the following table represents the fair value hierarchy for our financial assets measured at fair value on a recurring basis as of March 31, 2008 (in thousands):

With the exception of our ARSs, which are valued using Level 3 inputs, as discussed below, the fair value of our investments is generally determined from quoted market prices received from pricing services based upon either quoted prices from active markets or other significant observable market transactions at fair value.

At March 31, 2008, all of our ARSs were municipal bonds with an auction reset feature, which were AAA-rated by at least one of the major securities rating agencies.  Most of these ARSs were collateralized by student loans guaranteed by the U.S. government under the Federal Family Education Loan Program and with the majority of remaining securities being backed by monoline bond insurance companies.  We have traditionally recorded these investments at cost, which approximated fair market value due to their variable interest rates, which typically reset through an auction process every 7 or 28 days.  This auction mechanism generally allowed existing investors to roll over their holdings and continue to own their securities or liquidate their holdings by selling their securities at par value.  In mid-February 2008, our ARSs began to experience failed auctions, and we have continued to experience failed auctions since then.  As a result, as of March 31, 2008, we changed our valuation methodology for these securities to a discounted cash flow analysis.  Accordingly, these securities changed from Level 2 to Level 3 within SFAS 157’s hierarchy since our initial adoption of SFAS 157 at January 1, 2008.  Our valuation analyses consider, among other items, assumptions that market participants would use in their estimates of fair value, such as the collateral underlying the security, the creditworthiness of the issuer and any associated guarantees, the timing of expected future cash flows, and the expectation of the next time the security will have a successful auction or when callability features may be exercised by the issuer.  These securities were also compared, when possible, to other observable market data with similar characteristics to the securities held by us.  Based upon this methodology, we have recorded an unrealized loss related to our ARSs of approximately $3.6 million to accumulated other comprehensive (loss)

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income as of March 31, 2008.  We believe that the temporary impairment related to our ARSs of approximately $3.6 million is primarily attributable to the limited liquidity of these investments.  As of March 31, 2008, we continue to earn interest on all of our ARSs.  Any future fluctuation in fair value related to these instruments that we deem to be temporary, including any recoveries of previous write-downs, would be recorded to accumulated other comprehensive (loss) income.  If we determine that any future valuation adjustment is other than temporary, we will record a charge to earnings as appropriate.

The following table presents our ARS assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in SFAS 157 as of March 31, 2008:

Investments are considered to be impaired when a decline in fair value below cost basis is determined to be other than temporary.  We periodically evaluate whether a decline in fair value below cost basis is other than temporary and consider available evidence regarding our investments.  In the event that the cost basis of a security significantly exceeds its fair value, we evaluate, among other factors, the duration of the period that, and extent to which, the fair value is less than cost basis; the financial health of and business outlook for the issuer, including industry and sector performance, and operational and financing cash flow factors, overall market conditions and trends, and our intent and ability to hold the investment.  We also consider credit ratings with respect to our investments provided by investments ratings agencies.  All of our investments, including our ARSs, are classified as available-for-sale securities and are reflected at fair value.  If a decline in fair value is determined to be other than temporary, we will record a write-down in our Condensed Consolidated Statement of Operations and a new cost basis in the security will be established.

There were no unrealized losses in our investments which were deemed to be other than temporary at March 31, 2008 and December 31, 2007.  Realized gains and losses are determined on the specific identification method and are included in interest income in our Condensed Consolidated Statements of Operations.  Interest income is accrued as earned.

Equity-Based Compensation

We account for our stock-based compensation arrangements with our employees and certain directors, including options granted under our Employee Stock Purchase Plan, under SFAS No. 123R, “Share-Based Payment,” or SFAS 123R, and its related implementation guidance as promulgated by both the Financial Accounting Standards Board, or the FASB, and the SEC Staff Accounting Bulletin 107.  Under these pronouncements, equity-based compensation cost is required to be measured at the grant date (based upon an estimate of the fair value of the compensation granted) and recorded to expense over the requisite service period, which generally is the vesting period.  Because stock-based compensation expense is based on awards ultimately expected to vest, we must make certain judgments about whether employees and directors will complete the requisite service period.  Accordingly, we have reduced the

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compensation expense being recognized for estimated forfeitures.  SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  Forfeitures are estimated based on historical experience.  In addition, for awards that contain performance conditions, compensation cost will only be recognized if the performance condition is considered probable of being achieved.  Management must make judgments and estimates about the probability that the performance condition will be achieved based on a number of factors, both internally and externally.  If factors change and we employ different assumptions in the application of SFAS 123R in future periods, the compensation expense that we record under SFAS 123R may differ significantly from what we have recorded in the current period.

We estimate the fair value of equity-based compensation involving stock options based on the Black-Scholes option pricing model.  This model requires the input of several factors such as expected risk-free interest rate over the expected option term, expected volatility of our stock price over the expected option term, the expected option term, and the expected dividend yield over the expected option term and is subject to various assumptions.  We believe our valuation methodology is appropriate for estimating the fair value of stock options we grant to employees and directors which are subject to SFAS 123R requirements.  Our stock option valuations are estimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients of these grants.  These amounts, and the amounts applicable to future quarters, are also subject to future quarterly adjustments based upon a variety of factors, which include, but are not limited to, changes in estimated forfeiture rates and the issuance of new options and other stock awards.  The fair value of restricted stock units granted to employees and directors is determined based upon the quoted closing market price per share on the date of grant.  As with any accounting policy that applies judgments and estimates, actual results could significantly differ from those estimates and as a result, our financial results could be materially and adversely impacted.

Comprehensive Loss

SFAS No. 130, “Reporting Comprehensive Income,” requires us to display comprehensive loss and its components as part of our condensed consolidated financial statements.  Comprehensive loss consists of net loss and other comprehensive (loss) income.  Other comprehensive (loss) income includes changes in equity that are excluded from net loss, which for all periods presented relates to unrealized holding gains and losses on available-for-sale investments.

Reclassifications

Certain amounts from the prior fiscal quarter have been reclassified to conform to the current quarter’s presentation.

At March 31, 2008 and December 31, 2007, our short- and long-term investments totaled $223.5 million and $258.6 million, respectively, and consisted solely of securities classified as available-for-sale.

The following is a summary of our available-for-sale securities at March 31, 2008 and December 31, 2007 (in thousands):

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At March 31, 2008, we held $68.8 million (par value of $72.3 million) of municipal bond ARSs, rated AAA by at least one of the major securities rating agents, most of which were collateralized by student loans guaranteed by the U.S. government under the Federal Family Education Loan Program and with the majority of remaining securities being backed by monoline bond insurance companies.  We have traditionally recorded these investments  at cost, which approximated fair market value due to their variable interest rates, which typically reset through an auction process every 7 or 28 days.  This auction mechanism generally allowed existing investors to roll over their holdings and continue to own their securities or liquidate their holdings by selling their securities at par value.  In mid-February 2008, our ARSs began to experience failed auctions and we have continued to experience failed auctions since then.  As a result, as of March 31, 2008 we changed our valuation methodology for these securities to a discounted cash flow analysis.  Our valuation analyses consider, among other items, assumptions that market participants would use in their estimates of fair value such as the collateral underlying the security, the creditworthiness of the issuer and any associated guarantees, the timing of expected future cash flows, and the expectation of the next time the security will have a successful auction or when callability features may be exercised by the issuer.  These securities were also compared, when possible, to other observable market data with similar characteristics to the securities held by us.  Based upon this methodology, we have recorded an unrealized loss related to our ARSs of approximately $3.6 million to accumulated other comprehensive (loss) income as of March 31, 2008.

Due to our belief that the market for ARSs may take in excess of twelve months to fully recover, we have classified those ARSs which have not been subsequently called by the issuers or had successful

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auctions as noncurrent and have included securities totaling approximately $66.4 million in long-term investments on our Condensed Consolidated Balance Sheet at March 31, 2008.  The remainder of our ARSs, totaling approximately $2.4 million, has been subsequently called by the issuers at face value or is in investments for which the market has recently had a number of successful auctions, and accordingly, we have classified those securities as short-term investments on our Condensed Consolidated Balance Sheet at March 31, 2008.

We believe that the temporary impairment related to our ARSs of approximately $3.6 million is primarily attributable to the limited liquidity of these investments, and we have no reason to believe that any of the underlying issuers of our ARSs are presently at risk of default.  As of May 1, 2008, approximately $69.1 million of our investments were municipal ARSs, and we continue to earn the contracted interest rate on all of our ARSs.  Any future fluctuation in fair value related to these instruments that we deem to be temporary, including any recoveries of previous write-downs, would be recorded to accumulated other comprehensive (loss) income.  If we determine that any future valuation adjustment is other than temporary, we will record a charge to earnings as appropriate.  In the event that we need to access our investments in these securities, we will not be able to do so until a future auction is successful, the issuer calls the security pursuant to a mandatory tender or redemption prior to maturity, a buyer is found outside the auction process, or the securities mature.  For all of our ARSs, the underlying maturity date is in excess of one year and can be as far as 40 years in the future.  We believe we will ultimately be able to liquidate our investments without significant loss primarily due to the collateral securing most of the ARSs. However, it could take until final maturity of the ARSs to realize our investments’ par value.

The following is a summary of the gross unrealized losses and fair value of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2008 and December 31, 2007 (in thousands):

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With the exception of the ARSs as discussed above, the unrealized losses on our investments at March 31, 2008 and December 31, 2007 were primarily caused by interest rate increases and demand by marketplace participants for increased risk premiums.  Since the decline in market value is primarily attributable to changes in these factors, and we have the ability and intent to hold these investments until a recovery of fair value, we do not consider these investments to be other-than-temporarily impaired at March 31, 2008.

D.            Inventories

The major classes of inventories were as follows at March 31, 2008 and December 31, 2007 (in thousands):

E.            Income Taxes

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates.  A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized.

There were no significant income tax provisions or benefits for the three months ended March 31, 2008 and 2007.  Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, we have recorded a full valuation allowance against our otherwise recognizable net deferred tax assets.

F.            Net Loss per Share

We compute basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the relevant period.  We did not include the following potential common shares issuable upon the exercise of outstanding options and restricted stock units (prior to consideration of the treasury stock method) in our computation of diluted net loss per share because such options and restricted stock units were anti-dilutive due to a net loss in the relevant periods (in thousands):

The components of basic and diluted net loss per share were as follows (in thousands, except per share data):

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G.            Equity-Based Compensation

We maintain several equity compensation plans, including our 2007 Equity Incentive Plan, or 2007 Plan, our Amended and Restated 2000 Stock Plan, or 2000 Plan, and our 2006 Employee Stock Purchase Plan.

Under our 2007 Plan, which was approved by our stockholders in November 2007, as of March 31, 2008 we have granted options covering 493,046 shares of common stock of which 5,400 stock options have expired or terminated, and none of which have been exercised.  The number of options outstanding under this plan as of March 31, 2008 was 487,646.  The remaining number of shares available for future grants as of March 31, 2008 was 1,540,979, not including shares subject to outstanding awards under the 2000 Plan, which will be added to the total number of shares available for issuance under the 2007 Plan to the extent that such awards expire or terminate for any reason prior to exercise.

All outstanding options granted have an exercise price equal to the closing price of our common stock on the grant date and substantially all outstanding options have a ten-year term.  During the three months ended March 31, 2008, we awarded a 100,000 share performance-based option to our Chief Executive Officer at an exercise price of $47.08.  This option will vest in equal annual installments over a three year period but will only begin vesting upon the achievement of a performance target with respect to our commercial sale of ferumoxytol by the end of the first quarter of 2009.  We have also previously granted 110,000 performance-based option awards with a weighted average exercise price of $63.00.  These performance options will vest if, and only if, our NDA for ferumoxytol is approved by the FDA on or prior to December 31, 2008.  For awards that contain performance conditions, compensation cost is only recognized if the performance conditions are considered probable of being achieved.

Under our 2000 Plan, as of March 31, 2008, we granted options and restricted stock units covering 2,182,700 shares of common stock of which 210,575 stock options and 750 restricted stock units have expired or terminated, and of which stock options and restricted stock units covering 681,195 and 14,500 shares of common stock, respectively, have been exercised.  The remaining number of shares underlying outstanding options and restricted stock units pursuant to our 2000 Plan as of March 31, 2008 was 1,246,930 and 28,750, respectively.  All outstanding options granted under the 2000 Plan have an exercise price equal to the closing price of our common stock on the grant date.  On November 27, 2007, the 2000 Plan was succeeded by our 2007 Plan and, accordingly, no further grants may be made under this plan.  Any shares that remained available for issuance under the 2000 Plan as of the date of adoption of the 2007 Plan are included in the number of shares that may be issued under the 2007 Plan.  Any shares subject to outstanding awards granted under the 2000 Plan that expire or terminate for any reason prior to exercise will be added to the total number of shares available for issuance under the 2007 Plan.

Stock-based compensation expense as reflected in our Condensed Consolidated Statements of Operations was approximately as follows (in thousands):

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Stock-based compensation expense for the three months ended March 31, 2008 and 2007 included approximately $0.7 million and $0.4 million, respectively, in stock-based compensation expense associated with performance grants.

At March 31, 2008, the amount of unrecorded stock-based compensation expense for stock options attributable to future periods was approximately $30.5 million, of which $29.6 million was associated with stock options and $0.9 million was associated with restricted stock units.  Such amounts will be amortized, in varying amounts, primarily to research and development or selling, general and administrative expense, on a straight line basis over a weighted average amortization period of approximately 3.2 years.  These future estimates are subject to change based upon a variety of future events which include, but are not limited to, changes in estimated forfeiture rates, changes in whether a performance condition is considered probable, and the issuance of new options and other stock awards.

H.            Concentration of Credit Risk

Our operations are located solely within the U.S.  We are focused principally on developing and manufacturing IV iron replacement therapeutic and contrast agents for use in MRI.  We perform ongoing credit evaluations of our customers and generally do not require collateral.  The following table sets forth customers who represented 10% or more of our revenues for the three months ended March 31, 2008 and 2007.  No other company accounted for more than 10% of our total revenues for the three months ended March 31, 2008 and 2007.

All of the revenue attributable to Cytogen Corporation, or Cytogen, and a large portion of the revenue attributable to Bayer Healthcare Pharmaceuticals, or Bayer, in both periods was the result of previously deferred revenue related to up-front license fees that were either amortized into revenue on a straight-line basis or amortized over the period of the estimated performance obligation.

Revenues from customers outside of the U.S., principally in Europe, amounted to 64% and 26% of our total revenues for the three months ended March 31, 2008 and 2007, respectively.

I.             Recently Issued and Proposed Accounting Pronouncements

In September 2006, the FASB issued SFAS 157.  This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute.  Accordingly, SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting policies.  SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  In February 2008, the FASB issued FASB FSP 157-2

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which delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years.  These nonfinancial items include assets and liabilities such as reporting units measured at fair value in a goodwill impairment test and nonfinancial assets acquired and liabilities assumed in a business combination.  Effective January 1, 2008, we partially adopted SFAS 157 for financial assets and liabilities recognized at fair value on a recurring basis.  The partial adoption of SFAS 157 for financial assets and liabilities did not have a material impact on our condensed consolidated financial statements.  The provisions of SFAS 157 related to other nonfinancial assets and liabilities will be effective for us on January 1, 2009, and will be applied prospectively.  We are currently evaluating the impact that these additional SFAS 157 provisions will have on our consolidated financial statements.

Effective January 1, 2008, we adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115,” or SFAS 159.  SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, thereby providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  The amendment to SFAS 115 applies to all entities with available-for-sale and trading securities.  We did not elect to adopt the fair value option under this statement.

Effective January 1, 2008, we adopted EITF 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities,” or EITF 07-3.  EITF 07-3 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed.  The adoption of EITF 07-03 did not have a material impact on our condensed consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133.”  SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows.  Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.  It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged.  Accordingly, we are in the process of evaluating the impact of SFAS 161, but we do not expect it to have a significant impact on our condensed consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” or SFAS 141R.  SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired.  SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.  SFAS 141R is effective for financial statements issued for years beginning after December 15, 2008.  Accordingly, we are in the process of evaluating the impact of SFAS 141R.

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J.            Commitments and Contingencies

Legal Proceedings

On January 25, 2006, Cytogen filed a lawsuit against us in Massachusetts Superior Court in connection with a license and marketing agreement entered into in August 2000 between us and Cytogen.  We filed an answer to the complaint asserting numerous counterclaims.  On February 15, 2007, we settled the lawsuit with Cytogen.  As a result, on February 15, 2007, each party dropped all claims against the other, and all agreements between the parties were terminated.  With the termination of our agreements with Cytogen, we re-acquired the U.S. marketing rights to Combidex as well as the U.S. marketing rights to ferumoxytol for oncology imaging applications.  Under the terms of the settlement, we paid Cytogen $4.0 million in cash and released to Cytogen 50,000 shares of Cytogen common stock held in escrow under the terms of the original license and marketing agreement.  We recorded the $4.0 million payment as a non-operating expense during the first quarter of 2007.

We may periodically become subject to legal proceedings and claims arising in connection with on-going business activities, including being subject to claims or disputes related to patents that have been issued or are pending in the field of research on which we are focused.  We are not aware of any material claims against us at March 31, 2008.

K.            Subsequent Events

At our Annual Meeting of Stockholders held on May 6, 2008, a proposal to amend our Certificate of Incorporation, as amended, to increase the number of shares of our common stock authorized thereunder from 25,000,000 to 58,750,000, was approved by a vote of our stockholders.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007.

Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, words such as “may,” “will,” “expect,” “intend,” and similar 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 statements regarding the following: the progress of our intended development and commercialization of ferumoxytol and Combidex, the potential clinical trials of ferumoxytol we may initiate in indications other than chronic kidney disease, the potential approval and launch of ferumoxytol and our other product candidates in areas in the U.S. and outside the U.S., our intent to secure second source manufacturing facilities, future revenues, expected research and development expenses and sales, general and administrative expenses, our expectations regarding our short- and long-term liquidity and capital requirements and our ability to finance our operations, our belief that the impairment in the value of our auction rate securities is temporary and that we will ultimately be able to liquidate our auction rate security investments without significant loss, and information with respect to any other plans and strategies for our business.  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 factors discussed elsewhere in this Quarterly Report on Form 10-Q and those risks identified in our other SEC filings, including but not limited to our Annual Report on Form 10-K for the year ended December 31, 2007.  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 SEC, to publicly update or revise any such statements to reflect any change in our 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.

Overview

AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981.  We are a biopharmaceutical company that utilizes our proprietary nanoparticle technology for the development and commercialization of therapeutic iron compounds to treat anemia and novel imaging agents to aid in the diagnosis of cancer and cardiovascular disease.  We have two approved products, Feridex I.V. and GastroMARK, and two product candidates, ferumoxytol and Combidex.

Ferumoxytol, our key product candidate, is being developed for use as an IV iron replacement therapeutic agent for the treatment of iron deficiency anemia in CKD patients.  In December 2007, we submitted a New Drug Application, or NDA, to the U.S. Food and Drug Administration, or FDA, seeking marketing approval for ferumoxytol as an IV iron replacement therapeutic agent in CKD patients, including both dialysis dependent and non-dialysis dependent patients.  Our NDA was accepted for standard review by the FDA and we expect a decision from the FDA in late October 2008.  In late February 2008, we held a New Drug Application Orientation presentation with the FDA where we were

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given the opportunity to meet with the FDA and highlight key aspects of our NDA filing.  Our NDA is supported by data from three open-label, multi-center, randomized Phase III efficacy and safety clinical studies and a fourth Phase III safety study.  The three efficacy and safety studies demonstrated a statistically significant achievement of all primary and secondary endpoints.  In total, over 1,700 patients and healthy volunteers were treated with ferumoxytol in eleven clinical studies.  We have released data on all four of our planned Phase III clinical trials of ferumoxytol as an IV iron replacement therapeutic agent in patients with CKD.

In 2008 we intend to initiate additional Phase II and/or Phase III studies in patient populations other than CKD patients.  Iron deficiency anemia is widely prevalent in many different patient populations, including elderly patients and women, and disease states including cancer and gastrointestinal diseases, as well as patients undergoing various surgical procedures.  Ferumoxytol may also be useful as a vascular enhancing agent in MRI.  We believe the product characteristics of ferumoxytol could support clinical development in additional indications.

We are currently in the process of building our own internal sales and marketing function, including a direct sales force, in preparation for the expected commercial launch of ferumoxytol as an IV iron replacement therapeutic agent in CKD patients in the U.S. in the first quarter of 2009.

We are also currently evaluating our strategy for seeking approval for ferumoxytol as an IV iron replacement therapeutic agent in countries outside the U.S.  The commercial opportunity for ferumoxytol as an IV iron replacement therapeutic agent varies from country to country, and in determining which markets outside the U.S. we intend to enter, we are assessing factors such as potential pricing and reimbursement, patient access to dialysis and the role of iron in medical treatment protocols in each country.  We are also currently evaluating possible strategic alliances and partnerships to assist us in entering attractive foreign markets.

Combidex, our other product under development, is an investigational functional molecular imaging agent consisting of iron oxide nanoparticles for use in conjunction with MRI to aid in the differentiation of cancerous from normal lymph nodes.  In March 2005, we received an approvable letter from the FDA with respect to Combidex, subject to certain conditions.  In December 2006, Guerbet S.A., or Guerbet, our partner, submitted a marketing authorization application, the European equivalent of an NDA, to the European Agency for the Evaluation of Medicinal Products, or the EMEA, seeking approval for Combidex under the tradename Sinerem® as an aid in the differentiation of lymph nodes in patients with pelvic cancers, including prostate, bladder, cervical and uterine cancer.  In December 2007 Guerbet withdrew its EMEA application for Sinerem® after the Committee for Medicinal Products for Human Use indicated that the data submitted by Guerbet did not provide sufficient statistical demonstration of the efficacy of Sinerem®.  Based on our review of the data from the Guerbet trial, it appears unlikely that the data from that trial will be sufficient to address the concerns raised by the FDA in the 2005 approvable letter, which means we may have to sponsor one or more additional clinical trials to obtain marketing approval for Combidex.  We do not currently have plans to sponsor additional clinical studies of Combidex.

Feridex I.V., our liver contrast agent, is approved and marketed in the U.S., Europe and other countries. GastroMARK, our oral contrast agent used for delineating the bowel in MRI, is approved and marketed in the U.S., Europe, and other countries.

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Results of Operations for the Three Months Ended March 31, 2008 as Compared to the Three Months Ended March 31, 2007

Revenues

Total revenues were $0.6 million and $0.9 million for the three months ended March 31, 2008 and 2007, respectively, representing a decrease of approximately 33%.  The decrease in revenues was the result of a decrease in the recognition of deferred license fee revenues following the February 2007 termination of our license and marketing agreement with Cytogen covering Combidex and a decrease in royalty revenues, partially offset by an increase in product sales.

Our revenues for the three months ended March 31, 2008 and 2007 consisted of the following (in thousands):

The following table sets forth customers who represented 10% or more of our revenues for the three months ended March 31, 2008 and 2007.  No other company accounted for more than 10% of our total revenues in either period.

License Fee Revenues

All of our license fee revenues for the three months ended March 31, 2008 consisted of deferred license fee revenues associated with a license and marketing agreement with Bayer.  Our license fee revenues for the three months ended March 31, 2007 consisted of deferred license fee revenues related to a license and marketing agreement with Cytogen and deferred license fee revenues associated with our license and marketing agreement with Bayer.

In August 2000, we entered into a license and marketing agreement with Cytogen in which, among other things, we granted Cytogen exclusive U.S. marketing rights to Combidex.  At the time of signing that agreement, we received shares of common stock of Cytogen with a market value of approximately $13.5 million as a non-refundable licensing fee.  This fee was being recognized as revenue over the development period of the products subject to the agreement based upon costs incurred and expected remaining expenditures related to the agreement.  The entire amount of the license fee was recorded as deferred revenues upon signing the agreement.  In February 2007, as part of the settlement of a lawsuit with Cytogen,

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we paid Cytogen $4.0 million in cash.  In addition, the license and marketing agreement with Cytogen was terminated and the remainder of the deferred revenues associated with this agreement, $0.4 million, was recognized in February 2007 as there were no additional performance obligations under the license agreement due to its termination.

In February 1995, we entered into a license and marketing agreement and a supply agreement with Bayer, granting Bayer a product license and exclusive marketing rights to Feridex I.V. in the U.S. and Canada. In 1996, the parties agreed to remove Canada from the territories subject to the agreement.  Bayer paid us non-refundable license fees and other fees in connection with the agreements.  We account for the revenues associated with this agreement on a straight-line basis over the 15 year term of the agreement due to the existence of an established contract period.  The agreement expires in 2010 but can be terminated earlier upon the occurrence of certain specified events.

Total license fee revenues for the three months ended March 31, 2008 and 2007 were recognized as follows (in thousands):

Product Sale Revenues

Product sale revenues for the three months ended March 31, 2008 and 2007 consisted of the following (in thousands):