Updated with more deal information.

LEXINGTON, Mass. ( TheStreet) -- Amag Pharmaceuticals ( AMAG) is merging with Allos Therapeutics ( ALTH) in what might be the nuttiest, most nonsensical business combination in biotech history.

The only thing Amag and Allos have in common is that they've largely failed initial efforts to sell their respective drugs, neither of which have anything to do with each other.

Amag's commercial launch of Feraheme, an injectable iron replacement therapy for anemia in patients with chronic kidney disease, has been a major disappointment. The same can be said for Allos' lymphoma cancer drug Folotyn.

Ideally, mergers bring together two companies that can capitalize on their respective strengths to make the sum better, stronger, more capable than the individual parts. Wednesday's merger of Amag and Allos does no such thing. It's just two disparate and under-performing biotech companies getting hitched to, at best, save some money.

"We are very excited about this merger as it creates a combined company with an enhanced commercial presence in attractive market segments supported by a more efficient organizational structure," said Brian Pereira, CEO of Amag in a statement that fails on so many levels to rationalize this deal.

Pereira, by the way, will retain the CEO title in the as-yet-unnamed combined company.

Under terms of the deal, Allos shareholders will receive a fixed ratio of 0.128 shares of Amag common stock for each share of Allos common stock they own. At Amag's Tuesday closing price of $19.07, the deal values Allos at $2.44 a share, or $260 million total.

Allos shares closed Tuesday at $2.06 a share.

Allos received U.S. approval for Folotyn in September 2009. At that time, Allos shares traded for around $8 a share. That was basically the high point for Allos's stock price.

Amag's Feraheme was approved in the U.S. in July 2009 when Amag shares traded around $56 a share. Like Allos, Amag' stock price never saw brighter days. The stock fell steadily as Feraheme sales lagged expectations.

The merger of Amag and Allos: Not exactly a match made in heaven.

--Written by Adam Feuerstein in Boston.

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