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Enzon and NPS: One Brings the Bread, the Other Brings Wine

The financial markets are having a tough time understanding the combination of biotech companies Enzon and NPS Pharmaceuticals, perhaps because it doesn't follow the typical rationale for intra-biotech mergers. That is, it doesn't join competitors working with similar technologies or disease states. Rather, the companies have little overlap, an attraction they argue will result in a balanced, somewhat synergistic product portfolio. Still, they face the challenge of convincing divergent investor groups--earnings-oriented shareholders of Enzon and growth-chasing investors in NPS--that the resulting new company wo'n't be a hodge-podge of diverse technologies.

Top tier biotech companies are made, not born. That seems to be the message of Enzon Pharmaceuticals Inc. and NPS Pharmaceuticals Inc. , which agreed in late February to combine in a stock-swap transaction valued at approximately $1.6 billion [See Deal]. NPS is the actual acquirer, from an accounting standpoint, but the deal has been variously described as "a merger of equals," "a merger of rivals" and "a merger of opposites."

If the financial markets are having a difficult time understanding the combination—shares of both companies are down about 8% since...

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