AMAG and Allos to merge, readying the budget axe

AMAG Pharmaceuticals ($AMAG) and Allos Therapeutics ($ALTH) struck a deal to merge in an all-stock transaction valued at $686 million. And the two developers have already identified $55 million to $60 million in "synergies" that they plan to quickly carve out after the merger is completed.

Once the deal is done, the biotechs say that AMAG's shareholders will hold 61% of the shares, with Allos shareholders getting the rest. AMAG CEO Brian J.G. Pereira will keep the helm at the combined operation.

AMAG has had more than its share of problems to deal with over the past year. Concerns about the safety of the iron deficiency drug Feraheme forced a label update on anaphylactic-type reactions and abnormal drops in blood-pressure, which sparked a steep drop in its share price. Sales of Feraheme have been hampered by the changes.

Allos has had its troubles as well, disappointing analysts with its sales of the cancer drug Folotyn. Last May it struck a $360 million licensing pact--$50 million upfront--with Mundipharma on rights to the drug outside the U.S. and Canada. Allos laid off 13% of its staff at the beginning of the year.

- here's the AMAG/Allos release