The last few days have been pretty big in the development stage biotechnology space for a number of companies that have just announced mergers or acquisitions. Here is a look at two of those companies, with an analysis of what each merger means for the company in question and its shareholders and, in turn, what to look for going forward.

The two companies in our crosshairs for today are Impax Laboratories, Inc. (NASDAQ:IPXL) and Neothetics, Inc. (NASDAQ:NEOT).

Let’s kick things off with Impax.

This one is a pretty unusual situation. On Tuesday, the company announced that it intends to merge with a privately held entity called Amneal Pharmaceuticals. At the close of the deal, Amneal shareholders will own 75% of the new company while Impax shareholders will own the remaining 25%.

There are a number of benefits to this sort of merger for both companies (and their respective shareholders) but the company is trading down on the news. At close on Tuesday, Impax shares went for a 4% discount to the close on Monday. As the news hit, however, and heading into the open yesterday, this discount was far more severe, coming in at around 14% before recovering into the just mentioned close.

So what’s going on?

First, let’s look at why this is a good move, then we’ll speculate as to why markets are trading down on the company.

According to management, the merger will make the new entity the fifth largest generic drug maker in the US. Further, it will result in annualized cost savings of more than $200 million within three years and the transaction will provide the newly created entity with enough cash flow to allow for debt reduction and investments in future growth.

Additionally, Impax’s CEO Paul Bisaro will take the top chair at the newly formed company.

That’s the good news.

The bad news is that, as mentioned, Impax shareholders will only represent 25% of the company and, to add insult to injury, there is quite a lot of dilution (and discounted issue) associated with the transaction. Amneal’s members have signed an agreement with a few institutional investors to sell 46.8 million unregistered common shares at $18.25 per share in a private placement. That’s a couple of dollars below the open market price at which the company traded preannouncement.

With these negatives in consideration, however, this move is probably, long-term, a good one for all involved. Consolidation (through mergers) can be a great way to establish strength in this market and, as competition ramps up over the coming years, the ability to save on costs through economies of scale should translate to longer-term steady growth.

Moving on, Neothetics.

This one is almost the complete opposite situation from the Impax arrangement. Well, in response, that is.

The company announced on Tuesday that it intends to conduct a reverse merger with a company called Evofem Biosciences, Inc. According to reports, $171.4m of Neothetics common stock will be issued to the Evofem Biosciences stockholders, with $28.6m of common stock being retained by the Neothetics stockholders. The new entity will be a women’s health company (which is in line with the operations of Evofem pre-merger) and the lead product will be an asset called Amphora, which is currently under investigation as a potential vaginal contraceptive.

Markets responded much more favorably to this deal, trading Neothetics up to the tune of 231% in the back of the announcement.

So why the difference in response?

Well, because while Neothetics stockholders are, once again, only going to be getting 25% of the new entity, this 25% is representative of 1/4 holding in the above-mentioned Amphora, which is a phase 3 asset that is currently in an ongoing pivotal trial.

The vaginal contraceptive market is very large but there is a considerable unmet need in it right now and if the combined entity can get Amphora to market, it could be a blockbuster (i.e. more than $1 billion in revenues annually) asset.

The ongoing phase 3 trial is set to complete during the first quarter of 2019, with an NDA submission to the FDA slated for a few weeks later during the second quarter of that year. This paints the potential for approval late 2019 and brings with it a whole host of relatively near-term catalysts that could serve to push Neothetics (in its revised form) higher over the coming 18 months.