Medarex, Inc.

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Medarex, Inc.

707 State Road
Princeton, New Jersey 08540-1437
Telephone: (609) 430-2880
Fax: (609) 430-2850
Web site:

Public Company
Incorporated: 1987
Employees: 461
Sales: $51.5 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: MDEX
NAIC: 325414 Biological Product (Except Diagnostic) Manufacturing

Medarex, Inc., is a Princeton, New Jersey-based biopharmaceutical company that employs monoclonal antibody-based therapeutics to create treatments for cancer and AIDS patients as well as those suffering from rheumatoid arthritis. While the company has yet to see any of its drugs reach the market, it has a number of them in human clinical trials. Nevertheless, Medarex has had little difficulty in attracting corporate collaborators in the development of human antibody products. Medarex also licenses its UltiMAb Human Antibody Development System and provides the transgenic mice that produce the antibodies of the system, perceived by the body to be fully human. The use of fully human monoclonal antibodies, researchers believe, can speed up drug development and reduce the cost. Moreover, the company maintains that monoclonal antibodies may prove to be more effective than chemical drugs in the treatment of cancer and other serious diseases because they contain less toxic, natural proteins that the body is more likely to accept. UltiMAb licensees include such pharmaceutical giants as Pfizer, Bristol-Myers Squibb, Abbott Laboratories, Schering AG, Schering Plough Corporation, and Eli Lilly & Company. Medarex is a public company listed on the NASDAQ.


Monoclonal antibody technology was in vogue during the late 1970s and early 1980s, but after it failed to produce quick results it fell out of favor before companies including Medarex refined and revived the approach. Dr. Cesar Milstein and Dr. Georges Kohler first developed the technique in Cambridge, England, in 1975, when they produced monoclonal antibodies in mice in their laboratory, work that a decade later won them the Nobel Prize in Medicine. According to the Wall Street Journal, "Monoclonal antibodies are the products of hybridomas, the fusion of fast-growing cancer with an antibody-producing cell. The antibody produced is free of impurities that could confuse its natural radar system. At least in theory, it can be armed with therapeutic agents and aimed." The human body, as well as cancer, were not so easily fooled, however. Drugs using mouse proteins were treated as invaders by the body and were unable to penetrate tumors to reach their target proteins. However, as the Wall Street Journal further reported, "The specificity of the antibodies in seeking out a single protein made them immediately useful in diagnostics." For several years it was the diagnostics market to which monoclonal antibody technology would be applied.

At Dartmouth College in the 1980s a group of immunologistsDr. Michael W. Fanger, Dr. Paul M. Guyre, and Dr. Edward D. Balldeveloped their own approach to the monoclonal antibody "magic bullet" theory, wherein the engineered antibody cells would attach themselves to both tumor cells and human macrophages that could be triggered to release so-called killer cells that destroyed disease cells. Unlike other researchers who focused on a single application, Fanger, Guyre, and Ball hoped to develop "magic bullet" antibodies that could attack a variety of diseases. In 1987 Dartmouth and Essex Chemical Company, through its venture capital arm Essex Vencap, teamed up to create Medarex. The cofounders were Fanger, Guyre, and Ball, along with Essex's Charles Schaller and Donald L. Drakeman. It was Drakeman, a Dartmouth graduate, who brought the parties together and would serve as the company's chief executive officer.

Drakeman was born and raised in New Jersey, the son of an RCA plant manager. He received his undergraduate degree from Dartmouth in 1975 and four years later earned his law degree from Columbia University and went to work for a Wall Street law firm. He became general counsel for Essex in 1982. Drakeman was a man with varied interests, eventually earning a Ph.D. in religious history at Princeton University, where periodically he would teach a seminar on civil liberties. While at Dartmouth, Drakeman had been a member of the marching band, and it was a band reunion that brought him back to his undergraduate school, where he became reacquainted with a former roommate and fellow band member who was now a professor at the medical school. Through him Drakeman was introduced to Fanger, Guyre, and Ball, and Essex came to join forces with Dartmouth to form Medarex as a joint venture. Rather than license the technology, the school took an equity position in the new company.

At first, Drakeman did not join Medarex on a full-time basis. In 1988 he became president of Essex Medical Products, a subsidiary that invested in other biopharmaceutical companies. During that same year, Essex Chemical had to contend with a hostile takeover bid from a Swiss company, Gerit-Heberlein A.G. Dow Chemical Company subsequently stepped in as a "white knight" and bought Essex. Drakeman then led a group that included the researchers and bought out Medarex's parent, Essex Medical Products. In 1989 he quit Essex to take full charge of Medarex and subsequently moved its headquarters to Princeton, where he lived with his wife and children. With only three employees, Drakeman enlisted the help of his wife, Lisa, who had just been hired as a lecturer in Princeton's religion department. She worked part-time, handling a wide variety of tasks, such as finding and equipping a New Hampshire production facility. After two years she, too, went to work full-time at Medarex, serving as the head of business development.


Medarex generated a modest income from the sale of reagents to universities, hospitals, and research institutes for use in laboratory research. However, mostly what the company had to sell at this point was promise. On that basis it was taken public in 1991 with an initial public offering (IPO) of stock completed in June of that year. Early in 1992 the company's first monoclonal antibody-based drug, aimed at treating a form of leukemia, began clinical trials at the University of Pittsburgh's medical school. A $7 million secondary offering of stock in the summer of 1992 was then initiated but interrupted when Dartmouth received an unsigned letter that made contentious charges regarding Medarex's financial controls, compliance with certain laws, as well as the effectiveness of its technology. Displaying an abundance of caution, Drakeman suspended trading of the stock until a Dartmouth investigation of the allegations could be launched. Trading resumed in a few days and four months later the school concluded the anonymous charges were unfounded.


Medarex is committed to building value by developing a diverse pipeline of antibody products to address the world's unmet healthcare needs.

While none of its early drug candidates received approval from the Food and Drug Administration (FDA), Medarex made news in the financial arena, successfully selling stock or arranging collaboration agreements that resulted in partners paying for a stake in the business. In July 1994 another public offering was made, raising about $3.2 million. Also in that year, Medarex forged a collaborative arrangement with E. Merck, which also bought $3.15 million in stock. An October 1994 private placement of stock netted another $2 million. Novartis teamed up with Medarex in 1995 and paid $4 million to acquire nearly 900,000 shares of stock, a price that was more than $1.1 million higher than the fair market value of the stock. The premium represented the research activities performed by Medarex on behalf of Novartis. In November 1995 Medarex netted another $9.65 million in private stock sales to institutional investors. Drakeman did a good job of husbanding the company's cash, affording Medarex the luxury of not having to sell itself to a larger company in order to survive. Drakeman preferred instead to partner with a number of large pharmaceuticals.

Drakeman also used some of Medarex's stock to make acquisitions. In February 1997 Medarex acquired Houston Biotechnology Inc., a Houston-based company that developed monoclonal antibodies and other products to treat secondary cataract formation. It was an important deal at the time because Houston Biotechnology provided Medarex with its first product in Phase III clinical trials. Unfortunately some of the patients in the trials experienced adverse reactions and the trials had to be suspended in November 1998.

Another 1997 acquisition, one more beneficial in the long-term health of Medarex, was the $62.7 million stock purchase of San Jose, California-based GenPharm International, Inc. The deal brought bioengineered mice to the company, a new source of revenue in the sale of mice and the licensing of the technology behind them, and a way to expand its product pipeline into new areas. The man behind the transgenic mice was Nils Lonberg, a Harvard trained molecular biologist. While employed at Biogen Inc. in 1984 he and colleague Harry M. Meade, while working on a blood clot treatment, conceived of a way to introduce human genes into the DNA of animals, the milk of which would contain human proteins and could be used in drug development. Their colleagues thought the idea to be utterly preposterous, but undaunted Lonberg continued to pursue the idea at New York's Memorial Sloan-Kettering Cancer Center, often aided by a visiting Meade.

Lonberg went to work at GenPharm which, like other monoclonal antibody companies, was using mice to produce antibodies and had encountered the same problem of mouse proteins causing adverse side effects. Lonberg tackled the problems by creating one set of mice incapable of producing its own antibodies and another with genes responsible for making human antibodies. Bred together these mice produced offspring that were more human in genetic terms than regular mice, thus capable of eliminating the troublesome mouse proteins that plagued monoclonal antibodies. While other researchers attempted to engineer mice antibodies, Lonberg had simply engineered the mice themselves. After showing off his mice at a conference in 1993, GenPharm was quickly embroiled in a patent infringement suit with a rival biotech. The matter was resolved three years later when the two parties elected to cross-license one another's technology, clearing the way for Medarex to acquire GenPharm and gain control of Lonberg's mice and his services as science director. The transgenic mice provided Medarex with a tool that allowed it to expeditiously identify and generate promising molecules for drug development.

After falling out of favor for the past decade, monoclonal antibody technology, refined in its approach, was making a strong comeback as scientists learned how to use the proteins in the development of new drugs. Half a dozen monoclonals gained FDA approval and hundreds of other drugs using the technology were on the drawing board. Following the acquisition of GenP-harm, Medarex was uniquely positioned to benefit from the renewed interest. In 1998 the company entered into collaboration agreements with seven corporations, including Bristol-Myers Squibb Co., Novartis Pharma AG, and Schering AG. It received more than $31 million in payments on its transgenic mouse technology. The company maintained mouse colonies and provided transgenic mice to its research partners. "Our basic strategy," Drakeman told Princeton's U.S. 1 Newspaper, "is breed them, feed them, and mail them." In addition, Bay City Capital, a San Francisco-based merchant bank, paid $27 million to take a 12 percent interest in Medarex. The momentum continued in 1999 as the price of Medarex stock soared, increasing by 1,000 percent over the course of the year.


Medarex is formed by Dartmouth College and Essex Chemical Company.
Management buys company.
Initial public offering of stock is completed.
GenPharm International, Inc., is acquired.
Secondary stock offering raises $388 million.
Medarex forges partnerships with Pfizer and Bristol-Myers Squibb.


In 2000 Medarex again tapped the public market, this time netting $388 million in a stock offering managed by Morgan Stanley Dean Witter, Chase H&Q, Dain Rauscher Wessels, and Warburg Dillon Read LLC. Moreover, a partner company in Denmark, Genmab AS, in which Medarex held a one-third stake, also went public, raising another $250 million. Medarex had formed Genmab in February 1999 to spin off some of its technology to develop human antibody therapeutics products, and to in effect serve as Medarex's European distribution arm. Some Danish venture capitalists agreed to provide funding and worked with Lisa Drakeman in developing the business plan. Rather than hire a Danish chief executive, however, they asked her to serve as head of the venture. The money Medarex raised allowed the company to open a new research and development facility in California as well as a new development center in New Jersey.

In the early 2000s, more than 150 products derived from the company's technology, either by Medarex itself or by its corporate partners, were beginning clinical trials and a number began human testing. Medarex continued to sign new collaboration agreements, over a dozen in 2003. In 2004 Pfizer, Inc., signed a ten-year agreement to work with Medarex, a deal that could mean $500 million plus royalties. Less than two weeks later, Medarex reached an agreement on its experimental treatment for metastatic melanoma with Bristol-Myers Squibb Company, an arrangement that called for $530 million in cash, royalties, and milestone payments. In addition, Bristol-Myers took a $25 million stake in Medarex. The treatment commenced Phase III trials in 2004.

Excitement about Medarex's potential continued to grow with investors. The price of the company's stock increased 60 percent in 2003 and another 70 percent in 2004. More Medarex-based products entered human trials in 2005, bringing the total to 31 potential new medicines. Some of the company's partners indicated that they would be seeking FDA approval on several of these candidates in 2007. Should they pass muster, Medarex would finally see some of its products finally make their way to market.

Ed Dinger


GenPharm International, Inc.


Amgen Inc.; Genentech, Inc.; PDL BioPharma, Inc.


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