Medarex Corp. pulled the rug out on what was to be a $6.5million public stock offering on the day it was to close, citingcharges raised in an anonymous letter sent to officials ofDartmouth College, one of the company's largest shareholders.

In announcing the rare cancellation of an offering at such a latehour, the Princeton, N.J.-based company said it would conductan independent inquiry into the charges, which it said wererelated to business and scientific issues. The company did notdisclose any specific allegations.

Dartmouth announced plans to separately look into theallegations, as required under its policies. Medarex knows of noother investigation and no issue of alleged criminal activity hasbeen raised, according to Michael A. Applebaum, the company'schief financial officer.

"We're going to be completely vindicated, and we've gonethrough hell for no reason," Applebaum said. The letter was "atissue of lies."

The decision to scrap the offering, made after a meeting ofcompany officials, underwriters and legal staff, will costMedarex an estimated $350,000 in fees related to the offering,which will be charged during the current quarter. The companyexpected to receive about $5.6 million in net proceeds that theoffering.

"We are confident that the inquiries will show that all of theanonymous charges are wholly without merit," Donald L.Drakeman, Medarex's president and chief executive officer, wasquoted as saying in a brief press release on Friday. Drakemanwas traveling and was unavailable for comment. "We atMedarex are outraged that an anonymous letter that appears tobe completely groundless has forced us to terminate theoffering."

Trading in Medarex stock (NASDAQ:MEDX) was halted Thursdayafternoon when it last traded at $6.88 a share. It has traded ina 52-week range of $6.50 and $17.25 after going public in July1991.

The National Association of Securities Dealers (NASD) issued astatement late Friday that trading in Medarex shares wouldresume Monday.

Because a NASDAQ-listed company had never before cancelledan offering between the effective date and closing date, NASDhad to rule on trades in Medarex stock between Aug. 20 and26. The Washington, D.C.-based association said Friday that itwould not order cancellation of any secondary market trades ofMedarex stock during that period. That means that someinvestors who purchased shares in the now cancelled offeringand then sold them will need to buy Medarex shares to makegood on the sale, which might spur some buying today.

Medarex announced last March plans for a 2.3-million-shareoffering, which was subsequently reduced to 1 million sharesas the new issue market cooled in late spring.

Medarex is developing its Bispecific monoclonal antibodytechnology as the basis for potential cancer therapeutics. Thetechnology combines two MAbs, one that mimics naturalantibodies in targeting foreign organisms or cancers andMedarex's patented Trigger antibody that binds key receptorsof the immune system, such as macrophages. The firstBispecific products are expected to enter clinical trials nextyear.

Medarex licensed rights to the technology underlying theTrigger MAb from Dartmouth, which owns a 9 percent interestin the company.

-- Ray Potter Senior Editor

(c) 1997 American Health Consultants. All rights reserved.