AMAG Pharmaceuticals: A Maternal Choice

01/03/2017 7:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

This new buy recommendation focuses on products for maternal health, anemia management, and cancer, notes Richard Moroney in his small and mid-cap focused advisory, Upside Stocks.

Makena is the flagship drug from AMAG Pharmaceuticals (AMAG); the drug helps reduce the risk of preterm birth.

The company’s blood registry preserves newborn stem cells used to treat blood and immune disorders.

Key risks include a concentrated revenue stream and potential pricing pressure, which could weigh on profit margins.

In the September quarter, sales of Makena jumped 43% and represented 65% of total revenue. Feraheme, used to treat iron deficiency, accounted for 16% of sales.

Looking at our proprietary quantitative ranking system, AMAG's Quadrix Overall score of 98 is supported by four category scores above 80, including 92 in Momentum and 85 in Value.

For 2016, rising analyst estimates call for per-share profit growth of 36%, to $6.02, on a revenue increase of 32%. Three months ago the consensus was $5.43. For 2017, the consensus is $6.99, up 16%.

Sales are expected to advance 15%. September-quarter earnings topped Wall Street expectations by 19%, while June-quarter profits beat by 21%.

Considering AMAG’s profit momentum, the stock looks unduly cheap relative to other S&P 1500 health-care stocks.

At seven times trailing earnings, the stock trades 67% below its sector median. AMAG is being initiated as a Buy.

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