Medarex Inc. said Monday it has received a clean bill of healthfrom its own investigation of anonymous charges, which lastweek derailed a $6.8 million stock offering on the day it wasto close.
"They (the allegations) were patently untrue on their face,"Donald L. Drakeman, Medarex's president and chief executiveofficer, said Monday. The company's inquiry, conducted byresearch scientists, independent auditors and legal counsel,found the charges "to be totally without merit," according tothe company's statement.
The allegations, which the company described only in generalterms as being related to business and scientific issues, weremade in an anonymous letter sent to officials of DartmouthCollege. Dartmouth is a 9 percent owner of Medarex, and itsmedical school is the source of key technology coveringbispecific monoclonal antibodies that was exclusively licensedto the Princeton, N.J.-based company. The college's owninvestigation, which was required under its policies, iscontinuing.
"We're extremely confident they'll reach the same conclusionthat we did," Drakeman said. He said he knows of no otherformal investigation into the allegations, although it seemedthat "everyone is interested in this."
That's how it appeared on Monday, as Medarex's early morningpress conference in New York attracted a level of mediaattention seldom showered on a company of its small size.Drakeman estimated that at least a couple of dozen newsorganizations were represented in person or by telephone.
After the conference, Medarex's stock (NASDAQ:MEDX),reopened for trading. It had been halted last Thursdayafternoon just before the offering was cancelled. The stockclosed Monday at $6.75 a share, down 13 cents from its lasttrade on Thursday, on relatively heavy volume of 574,900shares.
Company officials will be meeting over the next few days withinvestment bankers and attorneys to consider financingoptions, although they are under no pressure to move quickly,Drakeman said.
"We've got $10 million in cash and one of the lowest burn ratesin the industry," he said. If Medarex chooses to wait it out, ithas "the flexibility to do so."
Drakeman said he was unsure about the possibility ofattempting to put the cancelled public offering back on thetrack, or even how that could be done. "I'm not sure anyoneknows," he said. "This was unprecedented in NASD (NationalAssociation of Securities Dealers) history."
No NASDAQ-listed company is believed to have scrapped astock offering after it had been declared effective by thefederal Securities and Exchange Commission. NASD said lateFriday that it would not cancel any secondary trades inMedarex stock between Aug. 20 and 26.
If the company had not been in registration for a stockoffering, it is likely the allegations and resultinginvestigation would not have been disclosed, Drakeman said.Who should be told of the specific allegations of the letterisan "an ongoing concern," he said. Specifically, Drakeman said hedid not think that any of the company's findings on allegationsrelated to scientific issues would need to be reported to theFood and Drug Administration.
"To answer any of these questions, in the positive or negative,would require us to report ... the actual allegations," some ofwhich were potentially libelous, he said.
Medarex said its inquiry included:
-- A full review of by the law firm of Satterlee StephensBurke & Burke of "all legal allegations set forth in theanonymous letter."
-- An analysis by Medarex's independent auditor, Ernst & Young,of charges "regarding the company's financial reporting."
-- A review by independent scientists at four researchinstitutions, including Cornell University Medical College andUniversity College in London, who "validated the scientificmethodology and corroborated the potential therapeutic use" ofthe company's Bispecific monoclonal antibody technology.
-- Ray Potter Senior Editor
(c) 1997 American Health Consultants. All rights reserved.