Amag Pharmaceuticals CEO Brian Pereira recently told Xconomy he was shopping for acquisitions to round out the Lexington, MA-based company’s pipeline. Today Amag (NASDAQ: [[ticker:AMAG]]) delivered on that vow by announcing it would merge with Allos Therapeutics (NASDAQ: [[ticker:ALTH]]) in an all-stock deal worth $686 million. Allos, based in Westminster, CO, makes pralatrexate injection (Folotyn), a product to treat T-cell lymphoma. Amag makes ferumoxytol injection (Feraheme) to treat iron-deficiency anemia. Pereira believes the companies will achieve cost synergies of $55 to $60 million a year.
Wall Street isn’t buying it. Amag’s stock—which had been on the rebound after a host of safety questions depressed sales of its drug—fell 13 percent in morning trading to $16.55. Allos shares dipped a half-percent to $2.05.
What’s the problem? Both are single-product companies, and frankly neither one of them could be called a huge success. Amag is expected to sell about $55 million worth of ferumoxytol this year—about as much as it sold last year. In May, Allos said it expected sales of about $48 million to $55 million this year. Analysts had been hoping for $62 million.
Whether two struggling companies can be stronger as a united front is an open question. Said TheStreet.com’s Adam Feuerstein in a brief post today, “It’s just two disparate and under-performing biotech companies getting hitched to, at best, save some money.” He called it the “worst bio-merger in history.” Amag did not immediately respond to a request for comment.
Indeed, if Amag’s goal is to build a pipeline, it may need to keep shopping for acquisitions. Amag doesn’t have its own research program. As for Allos, its entire R&D plan appears to be centered around the already approved pralatrexate. The company is currently conducting about eight additional trials of the drug in a range of cancers, including non-Hodgkin’s lymphoma, bladder cancer, and breast cancer.
