Bristol-Myers Squibb announced on July 22 that it will buy State Road-based biopharma firm Medarex for $2.4 billion, in a deal that nearly doubles the value of the latter’s shares.

Medarex, begun in 1987 to develop medicines to combat debilitating diseases by conducting research on transgenic mice, was trading at $8.40 a share when the market closed on July 22. Shortly thereafter BMS, the world’s 15th largest pharmaceutical seller, announced that it would buy Medarex for $16 a share. Medarex’s projected $300 million in net cash and marketable securities at closing would be an asset acquired by Bristol-Myers Squibb, effectively making the purchase price approximately $2.1 billion.

BMS tendered its cash offer on July 27 that will expire on Monday, August 24.

According to the Wall Street Journal, Medarex’s CEO, Howard Pien, passed up a $250,000 payout on the deal by selling 34,000 shares of Medarex — through a trading plan he began a year ago — a week before the BMS offer doubled his company’s per-share value. A loophole in trading laws would have allowed Pien to cancel that plan and cash in.

While Pien declined to be interviewed, his actions could signal Medarex’s desire to create a positive ethical buzz just a few years after the company’s original — and longtime — CEO, Donald Drakeman, and CFO Michael Appelbaum resigned amid an investigation into stock options.

According to Medarex’s April statement, Pien owned more than 435,000 shares then and sold a small percentage of those before the BMS deal. According to BNet, the business blog of CBS News, Pien will receive a bonus of $4.2 million and a 10 percent raise as a result of the sale. The site also states that the deal will quell the $1 billion deficit to shareholders incurred by Medarex in recent years.

The two companies had been working on the development of cancer drug ipilimumab, a Phase III research drug aimed at skin cancer. For BMS the deal could re-establish the drug maker as a preeminent source of anti-cancer medications.

According to the Wall Street Journal, the deal comes on the cusp of BMS divesting itself of non-pharmaceutical assets, such as wound care, in favor of fortifying its portfolio of specialty drugs. The deal also comes at a fortuitous time for BMS, as large biopharmas worldwide are losing patent protections. Smaller firms, concentrating on more focused areas, have made advances large firms have been unable to match in recent years, and working with smaller firms has been good for both sides. Larger firms get access to specialty drugs, and small firms get the backing of research dollars.

BMS used this dynamic in defending the cost of the buyout, when in a statement it announced, “Medarex represents what we’re looking for in terms of our ‘string of pearls’ strategy. This acquisition is another important step in our biopharma transformation.”

According to a statement by Medarex, Bristol-Myers Squibb gains Medarex’s UltiMAb Human Antibody Development System, which produces fully human antibodies for multiple therapeutic areas, including immunology and oncology; Medarex’s next-generation antibody-drug conjugate technology, a proprietary platform that could open new fields in oncology drug development; the rights to seven antibodies in clinical trials under Medarex’s sole sponsorship and three other antibodies being co-developed with other partners; the rights to pre-clinical assets in various stages of development by Medarex, particularly monoclonal antibodies focused on oncology and immunology; full ownership of ipilimumab; and royalties based on sales of drugs Simponi, Stelara and Ilaris.

The exorbitant price of the deal has stirred media outlets and industry watchdogs to claim how desperate large pharma is for new specialty drug pipelines. In favoring growth through acquisition, big pharma has sacrificed developing its own lines of specialty drugs. In the void, smaller, boutique-style firms have made significant headway into this kind of research in the past several years.

The deal comes on the heels of Medarex’s announcement that the company would receive “a milestone payment of an undisclosed amount” from a licensing partner in connection with clinical trials for a diabetes and advanced kidney disease medicine.

Whether the company will move from 707 State Road or whether there will be layoffs is not yet known.

Medarex was started in 1987 as an attempt to drum up new business for Clifton-based Essex Chemical Corporation, where a young attorney named Donald Drakeman served as general counsel. Drakeman and some Dartmouth researchers with whom he worked at the project bought Medarex for an undisclosed sum after Dow acquired Essex Chemical in a hostile takeover. In 1989 Drakeman fully left Essex for Medarex, then ran the company for nearly 20 years, building it into a healthy company known for its research with transgenic mice able to create fully human antibodies.

The company’s basic technology enhances the body’s normal immune response to the pathogens that cause cancer, AIDS, and hepatitis. The technology, called “bispecific monoclonal antibodies,” did not introduce foreign substances into the body, but instead ramped up the body’s own ability to fight back.

Drakeman graduated from Dartmouth in 1975 and earned his law degree from Columbia in 1979. Later Drakeman earned a Ph.D. in religion from Princeton University, all while running what started as a one-man operation at 20 Nassau Street. He attributed his broad range to a fondness for what he called “the interdisciplinary approach to things.”

Drakeman had been a history major at Dartmouth before turning to law on Wall Street. He left Millbank Tweed, “the stuffiest law firm on the street,” in 1982 to join Essex, where he took the opportunity to see how to run a company from the inside. This was the same year in which he started his religion doctorate, which he continued pursuing full-time until 1989, when he left Essex Chemical.

In 1991 Medarex emerged from “the quiet period” required by the Securities Exchange Commission and made its $12 million initial public offering of 2.3 million shares. The company continued to enjoy a spotless reputation until about three years ago, when Drakeman resigned from Medarex after an internal investigation into stock options practices dating back to 1996. Board member Michael Appelbaum, a former CFO at Medarex who also was one of the original Dartmouth researchers, also stepped down. Medarex has maintained that the company found no specific wrongdoing, and Drakeman and Appelbaum reportedly left of their own volition. Drakeman was succeeded by Irwin Lerner, the company’s chairman, who acted as interim CEO until Howard Pien was named to that post in 2007.

Drakeman’s wife, Lisa Drakeman, who also holds a doctorate in religious history from Princeton, is CEO of Genmab on North Harrison Street. The biotech began as a sister company to Medarex, based in Denmark, but is mostly unaffiliated. Medarex still owns 5 percent of GenMab, but GenMab does not benefit from the BMS deal.

Both Drakemans declined to be interviewed.

—Scott Morgan

Medarex (MEDX), 707 State Road, Princeton 08540; 609-430-2880; fax, 609-430-2850. Howard H. Pien, president and CEO. Home page:

Genmab Inc. (GEN), 457 North Harrison Street, Princeton 08540; 609-430-2481; fax, 609-430-2482. Lisa Drakeman PhD CEO Home page:

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