The Chambers Street office of Medarex is getting back to normal after its frenzied moment in the spotlight two weeks ago on Wall Street. As a result of an anonymous letter Medarex had halted its second NASDAQ public offering in midstream.
Calling off a stock offering because of market conditions is not unusual — indeed, Medarex had called off a 2 million share offering just before an April 15, 1992, issue date. What was unusual about this one, though, is that Medarex stopped selling the shares after the offering had begun.
One million shares had gone on the market on August 20, at $6.75, and meanwhile the NASDAQ market had closed the day before at $7 per share.
On August 22 Medarex received a copy of a letter sent to Dartmouth College raising questions about the integrity of Medarex research. The firm’s technology had been developed by researchers at the college and Dartmouth now owns just over nine percent of the stock.
"When someone writes an anonymous letter I think it is very very unfortunate," says Ta Yuan Chang, a professor of biochemistry at Dartmouth who does research on atherosclerosis, one of the areas that Medarex technology can address. "This is not scientific, this could happen to anybody; it’s scary," says Chang. Though he is not using the Medarex technology himself, he admires its innovative approach for reducing cholesterol.
Michael Applebaum, chief financial officer, says that because Medarex has more than $9 million in the bank, research on current projects can continue as usual. "Our burn rate is relatively low," he says. The firm is waiting for Dartmouth to complete its investigation; no decision has been made as to — if the stock offering is reissued — what the procedures will be.
"The law firm of Saterlee Stephens Burke & Burke has completed a full review of all legal questions set forth in the anonymous letter," says Donald Drakeman, president and chief executive officer, "and our independent auditors, Ernst and Young, have completed an analysis of the allegations regarding the company’s financial reporting. We have received a clean bill of health." Scientific reviewers have contributed to Medarex’s defense as well.
"Right now it is business as usual," says Applebaum. "Everyone we’ve heard from has been unanimous in their regrets that this happened to Medarex."
The August 22 letter precipitated a two-week siege for Drakeman, Applebaum, and their legal and medical counsel. They issued an initial press release on Thursday, August 27, and then conferred through the weekend — polishing the second press release until 4 a.m. Monday morning at the Vista Hotel in New York — to prepare for a Monday morning press conference.
"We are going to move forward with our capacity expansion, with our clinical trials, as if we had done this deal, because it is not going to impact us in the short term," says Applebaum. "Our goals haven’t changed at this point."