Four More Biotech Stocks for the Watchlist

Because ferumoxytol raises a patient's iron stores, and because that in turn raises hemoglobin levels, Amag could also stand to benefit from the fallout over the safety and excessive use of erythropoietin-stimulating agents (ESAs) such as Amgen's(AMGN Quote - Cramer on AMGN - Stock Picks) Aranesp and Epogen or Johnson & Johnson's(JNJ Quote - Cramer on JNJ - Stock Picks) Procrit.

These drugs are mainstays in treating kidney disease and cancer, but ferumoxytol could be less expensive way for doctors to raise a patient's hemoglobin level.

One risk for Amag is that the FDA's concern about ESA safety could pinch intravenous iron-replacement therapies such as ferumoxytol and delay approval. Pereira said Tuesday that the FDA hasn't indicated that it's having second thoughts about iron-replacement therapies.

Ferumoxytol also faces some competition, although the therapeutic profile of these products isn't entirely clear.

Amag owns 100% of ferumoxytol rights, and this puts the company in a strong position to partner the product or to be courted and acquired by a larger, more experienced company with an existing kidney disease franchise -- Amgen, Roche, Shire(SHPGY Quote - Cramer on SHPGY - Stock Picks) or Genzyme(GENZ Quote - Cramer on GENZ - Stock Picks) come to mind.

At about $55, Amag shares are down 10% this year (and down 23% from the highs of April) after a very strong performance in 2006. The pullback makes the stock compelling for new investors.

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Sangamo BioSciences(SGMO Quote - Cramer on SGMO - Stock Picks) has a neat story to tell: The company is engineering protein "switches" called zinc fingers that can turn genes on or off.

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