A group of Medco Research Inc. stockholders are balking at the proposed financial terms of the merger between MRE and Repligen Corp. As a result, the companies announced on Friday that they are negotiating a valuation for RGEN below the $51.5 million proposed in the nonbinding letter of intent signed in May.

The investors, led by Fred Greenberg of the New York-based EGS fund, are objecting to the dilution under the proposed deal, as well as to the proposed premium over RGEN's stock price, according to several sources close to the deal who asked not to be named. EGS holds a 4.7 percent stake in MRE. Greenberg couldn't be reached for comment.