Updated with new information. LEXINGTON, Mass. ( TheStreet) --Hedge fund manager Martin Shkreli has taken a 5.8% ownership stake in Amag Pharmaceuticals ( AMAG), an escalation of his effort to wrest control of the struggling drug maker and stop a planned merger with Allos Therapeutics ( ALTH). Shkreli must still demonstrate that he has the funds necessary to make good on his previously announced $18-a-share offer for Amag. But Shkreli's purchase of 1.25 million Amag shares -- disclosed for the first time in a regulatory filing Friday night -- may persuade on-the-fence shareholders to accept his proposals and reject Amag's plans to merge with Allos. Amag is fighting a two-front war at the moment. First, it must secure the support of a majority of its shareholders at an Oct. 21 vote to complete the Allos merger. Second, Amag is being force to fend off Shkreli's activism, including a proposal seeking shareholder approval to remove six of the seven directors on Amag's board and replace them with five MSMB nominees who would put a stop to the Allos merger. Adage Capital Management and Palo Alto Investors, owners of 17.5% and 15% of Amag, respectively, are still said to be opposing the Allos merger because of concerns about the financial and strategic rationale behind the deal, according to sources familiar with the situation. Amag will have a very difficult time completing the Allos merger without the support of Adage and Palo Alto. Whether the two largest Amag shareholders also support Shkreli's efforts to shake up Amag's board is not clear, but killing off the Allos merger will almost certainly provoke significant changes at Amag. "Voting no on the Allos deal is a referendum against Amag's management team," said an Amag shareholder who asked not be identified but is voting to stop the Allos merger. If the current Amag board survives, directors will face tremendous pressure to fire Amag CEO Brian Pereira and put the company up for sale. For all intent and purpose, a sale of Amag will really be a simple auction of the company's only asset Feraheme, an injectable iron replacement therapy for anemia in patients with chronic kidney disease.