AMAG Pharmaceuticals, Inc. AMAG was down 4.6% after the company announced that it has entered into a definitive agreement to acquire the leading global stem cell collection and storage company, Cord Blood Registry. The transaction is valued at $700 million and is expected to close in the third quarter of 2015.
Is Cord Blood Registry Worth it?
According to Cord Blood Registry, it stores more than half of all privately stored cord units in the U.S. i.e. more than 600,000 preserved umbilical cord blood and tissue stem cell units. The company has collaborations with leading academic institutions to develop treatments for several indications including autism, cerebral palsy and pediatric stroke.
Cord Blood Registry generated pro forma revenues of approximately $126 million in 2014 out of which approximately 50% comprised storage fees. AMAG expects 2015 pro forma revenues to be in line with or slightly above 2014 levels.
The acquisition of Cord Blood Registry would expand AMAG's portfolio of maternal health offerings which include Makena (reduces the risk of premature birth). Cord Blood Registry, a high-margin business, also possesses attractive future growth opportunities.
The transaction is expected to be accretive to AMAG's earnings immediately. The company also expects to realize expense synergies of approximately $15 million annually.
Our Take
We believe that that Cord Blood Registry deal is in line with AMAG's strategy of focusing on the maternal health business. Late last year, AMAG acquired privately held Lumara Health Inc. adding Makena and Lumara's maternal health business to its portfolio. We expect to see more such deals at AMAG.
AMAG carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Valeant Pharmaceuticals International, Inc. VRX, AmerisourceBergen Corporation ABC and Acorda Therapeutics, Inc. ACOR. While Valeant carries a Zacks Rank #1 (Strong Buy), AmerisourceBergen and Acorda hold a Zacks Rank #2 (Buy).
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