AMAG to Merge with Allos - Analyst Blog
21 Julho 2011 - 9:00AM
Zacks
Lexington, Massachusetts (MA) based AMAG
Pharmaceuticals (AMAG) and Westminster, Colorado based
Allos Therapeutics (ALTH) have agreed to merge in
an all stock deal that has a total equity value of $686
million.
The merger has been approved by the boards of both companies.
Following the deal, AMAG shareholders will own approximately 61% of
the combined company while Allos shareholders will own roughly 39%.
The transaction is expected to close by the end of this year and
will involve a one-time cost in the range of $35 million to $38
million. The merged entity will be headquartered in Lexington,
Massachusetts.
The deal will bring together AMAG’s and Allos’ sole marketed
products, Feraheme and Folotyn, respectively. Folotyn is marketed
for the treatment of patients with relapsed or refractory
peripheral T-cell lymphoma (PTCL) while Feraheme is marketed for
use as an intravenous (IV) iron replacement therapy for the
treatment of iron deficiency anemia (IDA) in chronic kidney disease
(CKD) patients. Both the products focus on high potential
markets.
These two companies have had their share of problems. AMAG’s
Feraheme has been struggling since the past few quarters due to
decline in sales in the dialysis segment following changes in
dialysis reimbursement effective from January 2011. AMAG had
reduced its workforce by 24% in 2010 to counter lost sales in the
dialysis setting, being unable to offset it with a concomitant rise
in Feraheme sales in the non-dialysis CKD indication. Similarly
Allos Therapeutics had also announced a workforce reduction of
approximately 13% in January 2011.
The merger is expected to benefit both companies. The combined
company is expected to generate annual cost synergies in the range
of $55 million and $60 million by eliminating certain costs, most
of which will be realized in the first year after the merger. The
merged entity will also benefit from a strong balance sheet which
will enable it to diversify its product portfolio and enter into
business reinvestments.
Our Recommendation
We have a Neutral stance on AMAG Pharmaceuticals. The stock
carries a Zacks #3 Rank (Hold rating) in the short run. We have a
similar stance on Allos Therapeutics.
ALLOS THERAPEUT (ALTH): Free Stock Analysis Report
AMAG PHARMA INC (AMAG): Free Stock Analysis Report
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