Why Biotech AMAG Pharma Is Worth $80 Now

In a report published Tuesday, Jefferies analyst Eun K. Yang upgraded the rating on

from Restricted to Buy, while setting the price target at $80. The analyst believes that the acquisition of Cord Blood Registry (CBR) not only helps diversify AMAG Pharmaceuticals' revenue base, it also offers robust support to the stock. "While AMAG continues to rely on acquisitions for expansion/further growth, we view management's timely execution, as it has been, to provide meaningful upside from its inexpensive current valuation," Yang stated. The company closed the CBR acquisition on August 17, 2015, for cash worth $700 million, funding it via a mix of existing cash and new capital. The analyst expects CBR's revenue to grow at a CAGR of about 9 percent during 2014-2019, with the acquisition being immediately accretive to AMAG Pharmaceuticals' earnings. Given that CBR has penetrated less 5 percent of the cord blood banking market, the analyst believes that the revenue growth estimate would be easily achievable, while reaching peak annual revenue of about $300 million in 2024. "In addition, commercial synergies between Makena and CBR business could potentially provide upside to our current estimates," according to the Jefferies report. The non-GAAP EPS estimates for 2015-2019 have been raised.