(Adds detail on stock price, Caligan's demands, Caligan's history)
By Svea Herbst-Bayliss and Saumya Joseph
Oct 8 (Reuters) - Amag Pharmaceuticals Inc, whose shares have tumbled more than 45% in the past year, on Tuesday agreed to add two directors proposed by Caligan Partners after the hedge fund pressured the drugmaker to conduct a strategic business review.
Amag, which won U.S. approval for a female libido drug in June, said it will expand its board to 11 people, making room for Caligan Partners' founder David Johnson and Paul Fonteyne, a former head of Boehringer Ingelheim USA.
The hedge fund, which owns a 10.3% stake in Amag, had for months been pressing for changes ranging from cost cuts to possibly splitting up the company or finding partnerships, and had proposed adding four new directors to the board.
Camber Capital Management, Amag's second largest shareholder, also pushed for new board members. Camber did not immediately comment on the settlement.
"As part of Amag's commitment to good corporate governance and ongoing board refreshment, we are pleased to have reached an agreement with Caligan that is in the best interests of all shareholders," Gino Santini, chairman of the board, said in a statement on Tuesday.
A Caligan spokesman had no further comment.
Amag shares trimmed some of their losses in early trading after the settlement was announced. Since January its stock price has fallen 22% and was trading at $11.88 on Tuesday, off about 1.6%.
Amag, which has a market value of $410 million, now offers Vyleesi, the only injectable drug on the market for hypoactive sexual desire disorder in women. But the company lowered its full-year revenue forecast, hurt by dismal sales in its women's health segment.
For Caligan Partners, a New York hedge fund co-founded two years ago by Johnson, a former executive at The Carlyle Group, and Samuel Merksamer, who worked for legendary activist investor Carl Icahn, the settlement marks the second activist win this year.
In May, the Knowles Corporation settled with Caligan and two other investment managers and added one director to its board.
Companies have tended to try and settle with activist hedge funds, often offering them a few board seats, to avoid the cost and distraction of going to a vote in the proxy contest, academic research has shown.
Reporting by Svea Herbst-Bayliss in Boston and Saumya Sibi Joseph and Shariq Khan in Bengaluru; Editing by Maju Samuel and Bill Berkrot