What do you get when you combine one unprofitable biotech, AMAG Pharmaceuticals (Nasdaq: AMAG), with another unprofitable biotech, Allos Therapeutics (Nasdaq: ALTH)? A slightly larger biotech that's still unprofitable.

And a bunch of cranky investors. Allos' shareholders will receive 0.128 shares of AMAG in the all-stock merger, which valued Allos about 18% higher than the closing price on Tuesday. But AMAG's investors weren't impressed, sending shares down more than 14% yesterday. That dragged down Allos, which lost all its premium and an additional 6% of its value.

I wouldn't say this is the worst biotech merger ever. That distinction is still held by cancer-drug expert OSI Pharmaceuticals' purchase of Eyetech. The unnecessary acquisition didn't have any obvious synergies and seemed highly overpriced.

AMAG and Allos certainly have the necessity one covered. Both AMAG's Feraheme and Allos' Folotyn have been utter disappointments, as evidenced by the fact that both companies are trading well off the highs set after the drugs were approved in 2009.

The synergies are somewhat limited. There's the elimination of management positions and buildings, which should save the company between $55 million and $60 million per year.

The drugs themselves are an OK fit. Feraheme treats patients with low iron levels, and Folotyn treats a type of lymphoma. AMAG estimates that 30% of Feraheme usage last year was in the hematology oncology space, which has jumped to 50% this year. That's not as good as combining two blood-cancer drugs, but at least there's a little overlap.

When might the combined company be profitable? Management isn't saying. Best we got is that the company has more than $370 million in cash and equivalents, which management says should be enough to get to profitability. Since there will be between $35 million and $38 million in one-time costs cost to achieve the projected synergies, we can assume that profitability in 2012 might be a stretch.

At this point, the best outcome for AMAG-Allos might be to hope that the combined company is a more attractive takeover target than each one is individually. Blood-cancer specialist Celgene (Nasdaq: CELG) would be a good fit, but it sells a drug that competes with Folotyn. A spec pharma acquirer such as Spectrum Pharmaceuticals (Nasdaq: SPPI) could be an option, although it tends to avoid overpaying.

Can one and one equal more than two? If so, it's going to take a while to see those kinds of results with AMAG-Allos.

Interested in small companies? Grab this free report from Motley Fool analysts: "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke."