BEAVERTON, Ore. -- Epitope Inc. on Monday blamed falserumors for a steep slide in its stock price last Friday, when itshed $2.63 a share to close at $16.

Some investors see a darker culprit in a large overhang of shortselling involving Epitope stock. Short selling involves atemporary loan of stock that is sold on the hopes that the stockprice will drift lower so that the replacement stock can bepurchased later at a lower price. "They're stuck in the stock,"Robert Lempert, an investor from Cherry Hill, N.J., said ofshort-sellers "They're trying to do anything to discredit thecompany."

Epitope stock (ASE:EPT) closed Monday at $17 a share, up $1.

But at least one stock broker, Todd Tumbleson of George K.Baum in Kansas City, Mo., said Epitope must take some of theblame. He said the company should have publicly disclosed anFDA report indicating problems for the company's pre-marketapproval (PMA) application for OraSure, the company's oralspecimen collection device. "My point is that it should havebeen disclosed to the public," Tumbleson said.

"We didn't make it public because we were under theimpression it was confidential information," said Mary Hagen,Epitope's investor relations coordinator. She said the reportcited by Tumbleson was outdated and that it referred toproblems raised by the FDA last November that were sincecorrected. Hagen said that a new PMA, filed on April 17,corrected the problems cited in the November report and isnow under review by the FDA.

Tumbleson said he obtained a copy of the FDA report under aFreedom of Information (FOI) Act request.

In addition to the information contained in the FDA report,Epitope said its stock price was hurt last week by otherunfounded rumors, including one that the company would bethe subject of a negative article in this week's edition ofBarron's this week -- it wasn't; that a 500,000-share block ofstock was up for sale at $15 per share; and that, because of theprevious problems, the stock could end the week as low as $10per share.

"This was the word on the street last week," Hagen said. Shesaid she heard the news from stock brokers who called thecompany last week to check out the rumors. "All of it isuntrue." She said Epitope did not know the source of therumors.

Ted Melcher, owner of SGA Goldstar Research, a Brentwood,Tenn., company that compiles and sells information aboutpublicly held companies to investors, agreed Epitope is a victimof the rumor mill. "There is definitely a very organized groupout there trying to drive the stock down." Melcher blamed alarge number of short-sellers of Epitope stock, who stand tobenefit from a decline in the company's share price.

Mike Moore, a stockbroker with Interstate-Johnson Lane ofAthens, Ga., said he felt that the stock's price decline could becompletely attributed to rumors.

"It's an unbelievable situation Epitope is in," he said. "The stockwas driven down by fear and rumor."

Moore said it is not the first time Epitope has been victimizedby rumor, and that one of the reasons is that a large percentageof its stock is short. Epitope reported that of its nearly 8.5million shares outstanding, more than 1.3 million are short.

-- Steve Payne BioWorld Staff

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