<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C.  20549

                                   FORM 10-K

                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 1997        Commission File No. 0-19312
                          -----------------                            -------


                                 MEDAREX, INC.
                                 -------------
             (Exact name of registrant as specified in its charter)

New Jersey                                      22-2822175
----------                                      ----------
(State or other jurisdiction of              (IRS Employer
incorporation or organization)              Identification No.)

1545 Route 22 East, Annandale, New Jersey          08801-0953
-----------------------------------------          ----------
(Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code:    (908) 713-6001
                                                       --------------

Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:

     Title of each class             Name of each exchange on which registered
     -------------------             -----------------------------------------

Common Stock ($0.01 par value)       The Nasdaq Stock Market under symbol MEDX
Redeemable Warrants to purchase      The Nasdaq Stock Market under
Common Stock                         symbol MEDXW


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                        Yes [ X ]      No


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
                         [X]


As of December 31, 1997, the registrant had outstanding 21,922,186 shares of
Common Stock, $0.01 par value ("Common Stock"), which is registrant's only class
of Common Stock.

The aggregate market value of registrant's Common Stock held by non-affiliates
based on the closing price of $4.969 per share on March 26, 1998 was
approximately $96,380,000.

                      DOCUMENTS INCORPORATED BY REFERENCE
 (Specific pages incorporated are identified under the applicable item herein)

Portions of the registrant's definitive Proxy Statement for the annual meeting
of stockholders to be held on May 21, 1998 (the "Proxy Statement") are
incorporated by reference in Part III of this Report.  Other documents
incorporated by reference in this report are listed in the Exhibit Index.
<PAGE>

                                     PART I


  This Annual Report for Medarex, Inc. ("Medarex" or the "Company") contains
forward-looking statements which involve risk and uncertainties.  The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements.  Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" as well as those discussed elsewhere in this document.  Actual events
or results may differ materially from those discussed in this Annual Report.

ITEM 1.  BUSINESS

GENERAL
-------

  Medarex is engaged in the discovery and development of novel therapeutics to
treat cancer, autoimmune diseases and other life threatening diseases based on
its expertise in monoclonal antibodies and immunology. Virtually all of the
Company's products are designed either to enhance and direct a specific immune
response or to block or diminish an undesired immunological activity. The
Company's broad technology platform has led to five products in clinical trials
and seven strategic alliances and includes: (i) bispecific antibodies that are
designed to attach to both disease targets and immune system killer cells
simultaneously; (ii) with the acquisition of Houston Biotechnology Incorporated
("HBI"), immunoconjugates, a monoclonal antibody linked to a toxin; (iii)
monoclonal antibodies; and (iv) with the acquisition of GenPharm International,
Inc. ("GenPharm"), the ability to create fully human monoclonal antibodies for
itself and for potential partners. See "1997 Acquisitions".

        The Company has strategic alliances with Novartis Pharma AG, of Basel,
Switzerland ("Novartis"), Merck KGaA of Darmstadt, Germany ("E. Merck"),
Centeon, L.L.C., of King of Prussia, Pennsylvania ("Centeon"), Santen
Pharmaceutical Co., Ltd., of Osaka, Japan ("Santen"), Eisai Co., Ltd., of Tokyo,
Japan ("Eisai"), Centocor, Inc., of Malvern, Pennsylvania ("Centocor") and
LeukoSite, Inc., of Cambridge, Massachusetts ("LeukoSite"). These products,
their indications; clinical status, collaborative agreements and commercial
rights are outlined in the table below.

<TABLE>
<CAPTION>

Product                                              Indication          Status      Partner           Commercial Rights
-------                                          -------------------  ------------  ---------  ---------------------------
<S>                                              <C>                  <C>           <C>        <C>
Bispecific Antibodies
MDX-210                                                Cancer           Phase II    Novartis   Novartis - Worldwide
MDX-447                                                Cancer          Phase I/II   E. Merck   Medarex - United States
                                                                                               E. Merck - Europe
                                                                                               Medarex/E. Merck - Rest of World
MDX-220                                                Cancer         Pre-Clinical    None     Medarex - Worldwide

Immunoconjugates
MDX-RA                                           Secondary Cataracts   Phase III     Santen    Medarex - Worldwide, Except Japan
                                                                                               Santen - Japan
MDX-33RA                                         Psoriasis             Pre-Cinical   None      Medarex - Worldwide

Monoclonal Antibodies
MDX-33                                           Autoimmune Disease     Phase I      Centeon   Centeon - Worldwide

MDX-22                                           Acute Myeloid Leukemia Phase II     None      Medarex - Worldwide

Human Monoclonal Antibodies
MDX-CD4                                          Autoimmune Disease   Pre-Clinical    Eisai    Eisai - Europe and Asia
                                                                                               Medarex - Rest of World
(HuMAb- MouseTM antibodies)                      Autoimmune Disease   Pre-Clinical  LeukoSite  Medarex/LeukoSite - Worldwide
(HuMAb- MouseTM antibodies)                          Undisclosed      Pre-Clinical  Centocor   Centocor - Worldwide
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

BISPECIFIC ANTIBODIES -- TRIGGERING THE IMMUNE SYSTEM

  The Company's bispecific technology provides a dual binding capability for
monoclonal antibodies and is essentially a target-trigger combination in which
one portion of the product binds to a trigger molecule on immune system killer
cells and the other binds to the tumor cell or infectious agent to be
eliminated.  After joining the killer cell and the tumor cell or pathogen, the
bispecific triggers the killer cell's destruction of the target.  Based on
clinical trial results to date, management believes that its bispecifics have
the potential to cause the destruction of tumors and pathogens that ordinarily
might escape detection by the body's immune system.  The trigger portion of the
Company's bispecific products may be linked to a variety of different targeting
mechanisms, such a recombinant proteins, single chain antibodies and antibody
fragments.  For this reason, the Company believes that its bispecifics may be
designed for the treatment of a wide range of cancers, viruses, bacteria and
parasites.  The Company has patented the trigger molecule and has obtained
licenses to a number of targeting mechanisms.

  The Company's bispecific products include: (i) MDX-210, a bispecific for the
treatment of cancers overexpressing an antigen known as HER-2, is currently in
Phase II clinical trials for the treatments of prostate, colon and kidney
cancers and is expected to enter Phase III clinical trials in 1998. This product
is partnered with Novartis on a worldwide basis. (ii) MDX-447, a bispecific for
the treatment of cancers overexpressing an antigen known as the epidermal growth
factor receptor ("EGF-R"), is currently in Phase I/II clinical trials for the
treatment of head and neck, kidney and other tumors and is expected to enter
Phase II clinical trials in 1998. This product was developed in collaboration
with E. Merck. The Company has exclusive commercialization rights in the United
States, E. Merck has exclusive rights in Europe, and the companies share the
rights in the rest of the world. (iii) MDX-220, a bispecific therapeutic for
tumors that express an antigen known as TAG-72, including colon and prostate
cancer. MDX-220 is in pre-clinical development and the Company has retained
worldwide rights to this product. The Company expects to file an IND for MDX-220
in the second quarter of 1998.

IMMUNOCONJUGATES -- DELIVERY ACTIVE AGENTS

  The Company's primary immunoconjugate product is MDX-RA, an immunotoxin used
to prevent secondary cataracts.  This immunotoxin is a type of monoclonal
antibody linked to a cellular toxin, which is injected into the eye during
primary cataract surgery after the insertion of a new intraocular lens.  This
immunotoxin is used to destroy residual lens epithelial cells, which, if left to
grow, could cause opacification of the new intraocular lens resulting in the
need for secondary cataract surgery.  In 1995 there were approximately 2.2
million\1\ primary cataract surgeries and approximately 0.8 million\1\ secondary
cataract surgeries.  A Phase I/II placebo-controlled clinical trial has been
completed that demonstrated that MDX-RA inhibits the development of
opacification of new intraocular lenses following primary cataract surgery.  A
Phase III placebo controlled clinical trial of MDX-RA began in December 1997.
MDX-33RA, an immunoconjugate for the treatment of psoriasis, is in pre-clinical
development.


MONOCLONAL ANTIBODIES -- BLOCKING THE IMMUNE SYSTEM

  The Company is developing a therapeutic product, MDX-33, for the treatment of
ITP, an autoimmune condition in which patients' platelets are destroyed by their
own immune systems.  Conventional treatments include steroids, removal of the
spleen and high doses of intravenous IgG.  The Company believes that intravenous
IgG creates an antibody blockade by overwhelming Fc receptors on immune system
killer cells with extremely large quantities of antibodies, thus minimizing the
effects of the auto-antibodies. MDX-33 is designed to reduce the number of Fc
receptors and the Company believes that MDX-33 may achieve the same therapeutic
results as large doses of IgG. MDX-33, which has completed Phase Ia clinical
trials, is the subject of a worldwide collaboration with Centeon.

  The Company's product, MDX-22, for Acute Myeloid Leukemia ("AML"), is
currently in Phase II clinical trials. Results of these trials indicate that
this product continues to promote long term disease free survival for patients
with AML.

\1\ Source:  The Office of Clinical Standards and Quality Control Coverage and
    Analysis Group of the Health Care Financing Administration (HCFA) Statistics
    for 1995.
<PAGE>

FULLY HUMAN MONOCLONAL ANTIBODIES-HUMAB-MOUSE(TM)

  Through the acquisition of GenPharm, the Company acquired the ability to
create fully human monoclonal antibodies through its patented HuMAb-Mouse
technology.  The HuMAb-Mouse is a transgenic mouse engineered so that its mouse
genes for creating antibodies have been inactivated and have been replaced by
human antibody genes.  The Company has combined mice having different genetic
backgrounds by cross-breeding and other techniques and has demonstrated that the
resulting cross-bred, transgenic mice and their offspring are capable of
generating a wide range of human sequence antibodies to various antigens,
including human antigens.  Generally, within 10-14 weeks of selection of a
target antigen, GenPharm's proprietary technology can develop hybridomas
(immortalized monoclonal antibody secreting cells) that produce clones to
multiple epitopes on each antigen.

  The Company believes the combinatorial biology technology, provided by the
HuMAb-Mouse, is analogous to combinatorial chemistry and allows for rapid
screening of multiple antibodies for "hits" to many different biological
targets. This combinatorial biology provides Medarex with a drug discovery
capability which leverages the Company's monoclonal antibody manufacturing and
clinical development capabilities and is complimentary to its existing portfolio
of monoclonal antibody therapeutic agents. The acquisition of GenPharm's
transgenic mouse technologies has provided Medarex with monoclonal antibody drug
discovery and development capabilities that range from concept through the
clinic and which can be exploited across multiple targets and partners.  See
"Risk Factors".

  The Company is currently offering a range of HuMAb-Mouse services, including:
access to the HuMAb-Mouse, custom creation of monoclonal antibodies and the
scale up and production of such antibodies in its manufacturing facilities.
While no assurance can be given, management believes that it will enter into
multiple partnerships relating to the HuMAb-Mouse technology during 1998. See
"Risk Factors".

  The Company is developing MDX-CD4, a HuMAb-Mouse fully human antibody,
for the treatment of rheumatoid arthritis and other autoimmune disorders. MDX-
CD4 binds to human CD4, which is present on the surface of certain T-cells in
the human immune system.  By binding to such T-cells, MDX-CD4 is designed to
inactivate or reduce the ability of these cells to mediate the persistent
inflammation characteristics of such autoimmune diseases.  The Company expects
to file an IND and commence Phase I clinical trials of MDX-CD4 in 1998.  This
development project is being carried out in conjunction with Eisai.  In
addition, the Company also has partnerships with LeukoSite and Centocor
regarding its HuMAb-Mouse technology.


1997 ACQUISITIONS
-----------------

  On February 28, 1997, the Company completed its acquisition of HBI, a
biotechnology company located in Houston, Texas, involved in the development of
monoclonal antibody and other biopharmaceutical products to prevent secondary
cataracts and to treat glaucoma, disorders that impair or destroy human vision.
The purchase price consisted of 1,026,245 shares of Medarex common stock (valued
at $7.375 per share), the assumption of certain HBI options and warrants, the
assumption of certain liabilities in excess of tangible assets acquired,
forgiveness of indebtedness and transaction and other costs. In connection with
the acquisition, in-process research and development costs of $10,385,565 were
immediately written-off and included in the Company's results of operations as a
non-recurring charge for the year ended December 31, 1997. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

  On October 21, 1997, the Company acquired all of the assets and liabilities of
GenPharm, a privately held biopharmaceutical company located in Palo Alto,
California, engaged in the development of transgenic mice for the creation of
fully human monoclonal antibodies (the "GenPharm Merger"). Pursuant to the
GenPharm Merger, the Company will issue shares of its Common Stock having a
value of up to $62,725,000 (the "Purchase Price"), subject to adjustment in
exchange for all of the outstanding shares of GenPharm capital stock. During
1997 the Company issued 3,250,000 shares of its Common Stock as payment of
$17,793,750 of the Purchase Price. The Company will issue additional shares (the
"Additional Shares") of its Common Stock during 1998 (and, possibly, to some
extent in 1999) having a then current fair market value sufficient to satisfy
the balance of the Purchase Price. Since the number of Additional Shares to be
issued in connection with the GenPharm Merger will be determined at future dates
based on the then current fair market value of the Company's Common Stock and
the amount of the Purchase Price, as adjusted, the maximum number of Additional
Shares to be issued in connection with the GenPharm Merger cannot be determined
at this time. See "Risk Factors." In connection with the acquisition, in-process
research and development costs of $29,930,649 were immediately written-off and
included in the results of operations as a non-recurring charge for the year
ended December 31, 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

TECHNOLOGY OVERVIEW
-------------------

MONOCLONAL ANTIBODIES

  One of the body's natural defenses against disease is the creation of
antibodies by the immune system.  Based on immune responses over one's lifetime
either to infections or vaccinations, adults typically have a large number of
antibodies (exceeding 10E20) present in their bodies.  These antibodies are
proteins that seek out, recognize and bind to a
<PAGE>

particular site on cells, viruses and other organisms (each, an "antigen") in a
highly specific manner, one that can be likened to a key fitting into a lock.
Each antibody detects and binds to a particular antigen. It is this specificity
that makes antibodies potentially useful in various therapeutic applications.

  A monoclonal antibody is a type of antibody produced from a single cell known
as a hybridoma.  The growth of a hybridoma allows the continuous production of a
single type of monoclonal antibody over an indefinite period of time.  All
antibodies produced by the same hybridoma are identical; they bind to the same
antigen in exactly the same way.  The advent of monoclonal antibodies in 1975
created interest among scientists and physicians who believed that this new
development could be used to treat cancer and other illnesses by directing
therapy to tumor cells as well as viruses, bacteria and parasites.  Since that
time, scientists have attempted to design therapeutic products based upon
monoclonal antibodies, and researchers have produced a number of these
monoclonal antibodies that bind to tumors or pathogens.

THERAPEUTIC USES OF MONOCLONAL ANTIBODIES
-----------------------------------------

  There are three main approaches to the use of monoclonal antibodies to treat
disease, and the Company has assembled proprietary technology and expertise in
each area.  This technology and expertise will also be made available to its
partners for the HuMAb-Mouse.  These approaches are:

     Triggering the Immune System -- One goal of monoclonal antibody development
     is to direct the immune system to attack a target, such as a tumor cell.
     The Company believes that its bispecific antibody technology represents an
     efficient method of recruiting killer cells and antigen presenting cells to
     destroy tumors or infectious agents. The Company's MDX-210, MDX-447 and
     MDX-220 products are designed to employ this bispecific technology, which
     is covered by numerous patents issued or assigned to the Company.

     Blocking Immune Functions -- Monoclonal antibodies can be used in vivo to
     interfere with an immune activity that causes, for example, organ
     transplant rejection or autoimmune disease.  The Company's MDX-CD4 and MDX-
     33 products are designed to act in this manner.

     Delivering Active Agents -- Monoclonal antibodies can be used effectively
     for their "targeting" abilities, i.e., their ability in vivo to locate and
     bind to a particular target, such as a tumor. By linking a toxin or
     radioisotope to the antibody, the target can be destroyed by the "toxic
     payload" attached to the antibody. The Company's MDX-RA product functions
     in this manner.

BISPECIFIC TECHNOLOGY

  TRIGGERING THE IMMUNE SYSTEM -- BISPECIFIC TECHNOLOGY.  To create a
therapeutic effect by triggering the immune system, an antibody must not only
attach itself to a tumor cell or pathogen but must also stimulate a response by
other components of the immune system to kill the tumor cell or pathogen.
Typically, this occurs when the antibodies attract the attention of killer cells
- white blood cells such as macrophages, monocytes and neutrophils
(collectively, "macrophages").  Macrophages are natural immune cells of the body
whose normal role is the elimination of foreign pathogens such as viruses and
bacteria.  To signal a macrophage to kill a particular target, an antibody must
not only attach to its target, but must also bind to a trigger molecule on the
surface of the macrophage.  This trigger molecule is known as an Fc receptor.
Fc receptors are involved in clearance of antibody bound pathogens and target
cells.  Three different classes of human Fc receptors which bind human
immunoglobulin (IgG) have been defined, utilizing antibody subtypes that are
specific for each.  The type I Fc receptor is highly expressed on monocytes and
macrophages and binds IgG with high affinity.  The type I Fc receptor is the
only Fc receptor that binds IgG and has been demonstrated to mediate killing of
tumor cell targets in vitro by all cells on which it is found in the body.
Throughout this document, unless otherwise indicated the use of the word "Fc
receptor" refers only to the type I Fc receptor. It is only when the antibody
binds simultaneously both to its target and to an Fc receptor on a macrophage
that the macrophage responds by destroying the target.
<PAGE>

  The Fc receptor is found on large numbers of killer cells such as macrophages
and monocytes and can be activated on neutrophils and dendritic cells.  The Fc
receptor is a trigger molecule that can initiate an immunological chain reaction
leading to various activities, including specific target cell killing,
phagocytosis, release of cytokines and antigen presentation.  These activities
involve not only the Fc receptor-bearing killer cells, but also through their
actions, helper T cells, cytotoxic (killer) T cells, B cells and antibody
production.  Phagocytosis involves internalizing the pathogen and breaking it
down into fragments, which are then transported to the surface of the killer
cell and "presented" to helper T cells and B cells.  This process, known as
antigen presentation, can lead to the production of cytotoxic T cells and
antibodies specific to the pathogen.  Conventional vaccines typically employ
this process to induce protective immunity against a wide variety of diseases.

  The Company believes that only one antibody at a time can bind at the normal
binding site of an Fc receptor, and normally all Fc receptors are fully occupied
by circulating antibodies (most of which are not attached to any pathogen).
Monoclonal antibodies that are given to a patient for the treatment of a
disease, may therefore compete with the vast number of normal antibodies present
in the body, many of which are capable of attaching themselves to a triggering
Fc receptor. The Company believes that this "antibody-blockade" has impeded
monoclonal antibodies from being therapeutically effective. Furthermore, many of
the monoclonal antibodies that have been used for therapy are rapidly cleared
from the body because they appear as foreign substances to the immune system,
and thus have only a short time in which to attach to Fc receptors. Finally many
of the earliest murine (i.e., mouse derived) monoclonals interacted poorly, if
at all, with human Fc receptors. Human and humanized antibodies were designed to
overcome the deficiencies of murine antibodies. They are capable of binding to
and triggering Fc receptors, but that binding may be inefficient because the
monoclonals must compete with the antibody-blockade.

  Medarex's bispecifics typically consist of two antibody fragments, each of
which is specific for a different site, that are fused into one "bispecific"
antibody.  The "trigger" fragment, which is a humanized antibody fragment
proprietary to Medarex, is specific for the Fc receptor, and consequently is
capable of binding to and triggering a macrophage.  The "target" fragment, which
has in the past been licensed to Medarex by a third party and may now be created
using the HuMAb-Mouse system, is specific for a particular antigen on a tumor
cell or pathogen, depending on the target fragment utilized.  The Company's
bispecifics, therefore, are designed to bind to a specific type of tumor cell or
pathogen and to a killer cell, triggering the destruction by the killer cell of
the target.  See "Risk Factors".

  Based on clinical trial results, the Company believes that its bispecific
technology differs from conventional antibody technology in that it involves an
approach that circumvents the antibody-blockade.  Medarex's bispecific products
can attach directly to Fc receptors without competition from natural antibodies
because they bind at a site that is separate from the normal binding site.  Data
from clinical trials has shown that a large percentage of the patient's
monocytes can be "armed" with thousands of bispecifics within minutes after the
infusion of a few milligrams of the product.  When the targeting component of
the bispecific binds to a tumor or pathogen, the killer cell may be triggered to
destroy the target and to commence the process of antigen presentation.  The
bispecific products may thus combine the potential for cell killing
(cytotoxicity) with antigen presentation (in a sense, vaccinating the patients
against their own disease). By their potential ability to combine targeted cell
killing with antigen presentation, bispecifics are designed to be more efficient
than monoclonal antibodies and to have a more comprehensive and enduring effect
than other therapeutic agents designed only to destroy tumor cells or pathogens.
See "Risk Factors".

  The Company believes its anti-tumor therapeutic products may also be employed
as therapeutic vaccines.  Based on clinical trial results, management believes
that these products may cause the presentation of tumor-associated antigens that
are different from the originally targeted antigen.  This same approach may be
employed in developing therapeutic vaccines for infectious diseases, and it may
also be used to induce the presentation of antigens that are normally difficult
to present when conventional adjuvants are used.  See "Risk Factors."
<PAGE>

  The Company announced in December 1997 a potential new approach to using
monoclonal antibodies for the treatment of infectious diseases. In new
scientific studies, a team of academic and Medarex scientists demonstrated that
antibodies that bind to the IgA receptor recruit neutrophils to attack
infectious fungi and tumor cells. Since neutrophils, the most populous white
blood cells in the body, are the main natural defense against invading fungi,
these findings may lead to the development of products for the treatment of
infectious diseases. Like Medarex's existing bispecifics that recruit killer
cells via other receptors, IgA receptor bispecifics are a target-trigger
combination that are designed to enhance and direct the body's own immune
system. One arm of the bispecific attaches to the disease target while the other
binds to the IgA receptor on neutrophils and other killer white blood cells.
Medarex has applied for patent protection on this additional trigger technology.

OTHER MONOCLONAL ANTIBODY TECHNOLOGY

  BLOCKING THE IMMUNE SYSTEM -- MONOCLONAL ANTIBODIES.  The first monoclonal
antibody product approved by the FDA for therapeutic use was OKT-3, which was
designed to block the immune system's T cells from rejecting transplanted
organs.  More recently, the FDA approved the sale of ReoPro(R) (ReoPro(R) is a
registered trademark of Centocor, Inc.), an antibody fragment designed to block
the GPIIBIIIA receptor on platelets.  These monoclonal antibody products do not
rely on activating the immune system; instead, they seek to bind to a particular
receptor or cell in a way that will hinder the immune system from carrying out
an undesired action.  Such products may consist of antibody fragments, which
principally contain the antigen binding region of the antibody, or fully intact
monoclonal antibodies.

TECHNOLOGY FOR HUMAN AND HUMANIZED ANTIBODIES

  Beginning in the 1980's, a number of mouse monoclonal antibodies were employed
in clinical trials of patients with cancer, infectious diseases and other life
threatening conditions.  Some of these trials did not show significant levels of
therapeutic activity as a result of the monoclonal antibody treatment, and
researchers subsequently discovered that: (1) many mouse monoclonal antibodies
are not capable of efficiently activating the human immune system, (2) mouse
antibodies are recognized as foreign by the human body, typically resulting in
rapid clearance, especially upon re-treatment, and (3) some people may develop
an allergic reaction to the mouse proteins contained in the antibodies.

  Because monoclonal antibodies continue to have considerable promise as
therapeutic agents, several techniques have been developed to eliminate or
reduce these problems associated with the murine (mouse-derived) nature of the
antibodies. The Company believes that its HuMAb-Mouse provides a rapid and
effective method of creating completely human monoclonal antibodies. See "Risk
Factors".

  HUMANIZED ANTIBODIES.  A number of companies and academic research
institutions have developed techniques for creating humanized monoclonal
antibodies. The goal of these approaches has been to remove approximately 90% of
the mouse antibody and replace those parts with the equivalent portions of human
antibodies. The remaining portions of the antibody (i.e., those that are
important for binding to the desired antigen), continue to be murine. This
process of humanizing an antibody takes several months to complete after the
initial mouse monoclonal antibody has been created. The humanization process may
also cause a decrease in the affinity of the antibody (i.e., the strength of its
binding to the antigen). Various entities have publicly announced that they hold
patents covering the humanization of monoclonal antibodies; these entities
include Protein Design Labs, Inc., Genentech, Inc. and the Medical Research
Council.

  PHAGE DISPLAY TECHNOLOGY.  One approach to creating human monoclonal
antibodies has been the establishment of "phage libraries," essentially large
pools of potential binding sites for a particular antigen that have been
synthesized.  According to the scientific literature, a number of phage-derived
monoclonal antibodies have been created that are completely human. It is not
clear, however, whether these synthetic libraries will be able to duplicate the
diversity of antibodies available through
<PAGE>

the immunization of mice. Additionally, phage-derived antibodies may have low
binding affinity and require further engineering. Several companies and
academic institutions have developed phage libraries for the creation of
monoclonal antibodies, and at least two companies have announced that they have
received patents that may apply to the creation of phage-derived monoclonal
antibodies. Licenses for these patents may require license fees and substantial
royalties.

  HUMAB-MOUSE - FULLY HUMAN ANTIBODIES.  The Company, through its acquisition of
GenPharm, has acquired the ability to make fully human monoclonal antibodies in
transgenic mice, thus avoiding the need to humanize murine monoclonal
antibodies. The Company has created essentially "humanized" mice, a "HuMAb-
Mouse" -- that is, the mouse genes for creating antibodies have been inactivated
and have been replaced by human antibody genes. As a result, these transgenic
mice produce completely human monoclonal antibodies when they are immunized. The
creation of these new monoclonal antibodies takes approximately the same amount
of time as the immunization of normal, wild-mice, i.e., approximately three to
six months, and the monoclonal antibodies derived from the HuMAb-Mouse have
binding constants as high as or higher than antibodies obtained from normal
mice, reaching in some cases, 10E-11 and 10E-12. The antibodies from the HuMAb-
Mouse technology are 100% human and do not require any humanization or
maturation engineering. The Company is not aware of any licenses required to
create these human antibodies except under patents owned or licensed by the
Company. See "Risk Factors".
<PAGE>

  Medarex is currently in discussions with numerous potential partners for its
HuMAb-Mouse technology and several potential partners for its therapeutic
products.  While no assurance can be given, management believes that it will
enter into several partnerships relating to the HuMAb-Mouse technology in 1998.
See "Risk Factor".

MEDAREX'S PLATFORMS AND PRODUCTS
--------------------------------

PROPRIETARY PRODUCTS

  The following discussion outlines the Company's products and current
development status.

  CANCER PRODUCTS.

  Each of the Company's bispecific therapeutic products for cancer targets a
different antigen.  MDX-210, MDX-447 and MDX-220 are all antigen-specific
products and may be useful in the treatment of the various forms of cancer in
which their specific antigen targets are highly expressed.

  MDX-210: HER-2 Overexpressing Tumors

  The Company is developing MDX-210, a bispecific product designed to treat
tumors that overexpress the antigen HER-2.  MDX-210 combines the Company's
proprietary trigger antibody fragment with a targeting antibody fragment
specific for the HER-2 antigen.  Researchers have discovered that HER-2 is
overexpressed in prostate, colon, renal, breast, ovarian and other cancers.  In
May 1995, the Company entered into a collaborative agreement with Novartis
providing for the development and commercialization of MDX-210.  Pursuant to
this collaboration, the Company has granted Novartis worldwide marketing rights.
During 1995 Novartis purchased 899,888 shares of Medarex Common Stock at $4.445
per share, for an aggregate purchase price of $4,000,000, a $1,140,000 premium
over the then market price for the Company's Common Stock as an initial
licensing fee.  Further payments in the form of equity purchases, milestone
payments and research and development payments could be paid to the Company by
Novartis upon the achievement of certain milestones.  The targeting component
used in this product is licensed to the Company by Chiron Corporation.

  During 1994, a Phase I/II clinical trial for MDX-210 was completed at
Dartmouth Medical School ("Dartmouth Medical") pursuant to an investigator-
sponsored IND application.  These results, published in the Journal of Clinical
Oncology in September, 1995, indicated that MDX-210 was well tolerated, had
bound to macrophages in vivo, had induced an immune response at all dose levels
as measured by the binding of MDX-210 to white blood cells and the release of
biologically significant quantities of cytokines and had induced certain tumor
shrinkage or other clinical responses in two of the ten patients with measurable
tumors.  Based on the results of this early clinical trial, the Company launched
six additional Phase I/II MDX-210 trials alone or in combination with cytokines.

  In the fourth quarter of 1996, three Phase II clinical trials of MDX-210 were
launched and included patients with late stage or refractory prostate, colon and
renal cancers.  There are over 15 centers participating in these trials in the
United States and Europe.  In June 1997 the Company announced MDX-210 had shown
anti-tumor activity in interim results of two Phase II clinical studies.  In a
study of kidney patients who had advanced, metastatic disease, two of four
patients treated had achieved tumor shrinkage. In another trial, a prostate
cancer patient with advanced metastatic disease experienced a drop in his serum
prostate specific antigen measurement by over 90%.

  The Company's MDX-210 bispecific currently undergoing clinical trials consists
of a humanized trigger component and a murine target component.  The Company is
currently creating a "second generation" version of this product employing the
HuMAb-Mouse technology.  While no assurance can be given, the Company expects
MDX-210 to enter Phase III clinical trials in 1998.  See "Risk Factors".
<PAGE>

  MDX-447: Head and Neck and other EGF-R Expressing Cancers.

  MDX-447 is a bispecific product for the treatment of cancers that overexpress
the antigen EGF-R.  The trigger and target components of MDX-447 are both
humanized.  This development project is being conducted pursuant to a
collaborative arrangement with E. Merck.  MDX-447 is designed to induce tumor
cell killing by simultaneously binding to a protein known as EGF-R found on the
surface of various types of tumors and to Fc receptors on macrophages and other
white blood cells.  EGF-R has been found to be overexpressed in a significant
percentage of head and neck, breast, brain, non-small cell lung and bladder
tumors.  The EGF-R targeting component was contributed to the collaboration by
E. Merck.

  A Phase I/II clinical trial of MDX-447 to treat cancers that overexpress EGF-
R, particularly head and neck cancers, is underway at the Memorial Sloan-
Kettering Cancer Center, Hershey Medical Center and several other centers. MDX-
447 has demonstrated that it is immunologically active at all doses in the Phase
I/II clinical trial.

  MDX-220:  Colon and Prostate

  The Company is developing a bispecific therapeutic product, designated MDX-
220, that targets TAG-72, an antigen found to be overexpressed in a significant
percentage of colon, prostate and certain other tumors.  The targeting component
for this product, known as CC-49, has been licensed from the National Cancer
Institute. While no assurance can be given, the Company anticipates the
initiation of Phase I/II clinical trials of this product for hormone refractory
prostate cancer in 1998.  See "Risk Factors".

  MDX-22:  Acute Myeloid Leukemia  (AML)

  MDX-22, a monoclonal antibody therapeutic product, is being developed for the
treatment of AML, a usually fatal form of leukemia.  Some cancers, including
AML, spread to the bone marrow and become extremely difficult to treat
successfully.  If the marrow is subjected to high doses of conventional
therapies such as chemotherapy or radiation, the marrow's vital stem cells,
necessary and responsible for immune cell regeneration, will often be
eliminated, and the patient may suffer a life-threatening immune deficiency.
Yet, if the cancer cells in the bone marrow are left untreated, the cancer is
likely to recur.

  MDX-22 activates the complement cascade which consists of a series of protein
factors and enzymes that can attack certain diseased cells.  MDX-22 has been
tested in clinical trials under an investigator-sponsored IND at Dartmouth
Medical and other institutions since 1983.  The treatment involves removing a
patient's bone marrow and purging it of cancer cells by exposing it to MDX-22.
After the patient has received high levels of conventional chemotherapy and, in
certain circumstances, radiation therapy, the purged bone marrow is reintroduced
to the body in an effort to re-establish the patient's immune system.  The use
of the patient's own marrow eliminates the difficulty of finding an
appropriately matched donor and the complications frequently associated with use
of donated marrow, such as graft-versus-host disease.

  Phase II clinical trials of MDX-22 are in progress.  The results from the
first 138 patients indicated a significant improvement in the proportion of
patients surviving long-term when compared to conventional chemotherapeutic
regimens in the absence of bone marrow transplantation.  In 1990 the Company was
granted orphan drug designation for MDX-22 for the treatment of AML.

  Tumor Vaccines

  Results of recent clinical trials have suggested that Medarex's bispecifics
have stimulated antigen presentation and an endogenous anti-tumor response in
some of the patients.  Recent studies in transgenic mice that express the human
Fc receptor have also shown that antigen presentation via the Fc receptor can
induce an immune response to the antigen.  Several tumor-associated antigens
have been identified, and the Company is now making genetically constructed
bispecific fusion proteins which may be employed as therapeutic vaccines for
cancer patients.
<PAGE>

Autoimmune Disease Products

  MDX-33: Idiopathic Thrombocytopenia Purpura ("ITP")

  MDX-33 is a monoclonal antibody therapeutic product under development for the
treatment of ITP, an autoimmune condition in which patients' platelets are
destroyed by their own immune systems.  Conventional treatment includes
steroids, removal of the spleen and high doses of intravenous IgG.  The Company
believes that intravenous IgG creates an antibody blockade by overwhelming the
Fc receptors with extremely large quantities of antibodies, thus minimizing the
effects of the auto-antibodies.

  MDX-33 may diminish the ability of various killer cells to phagocytose and
destroy platelets by binding to Fc receptors in such a way as to temporarily
remove many of the Fc receptors from the surface of the macrophage.  By reducing
the number of Fc receptors, MDX-33 is designed to achieve the same therapeutic
result as provided by large quantities of intravenous IgG, and might eliminate
or reduce the need for the human blood-derived products in the treatment of ITP.
The Company is developing MDX-33 in collaboration with Centeon for autoimmune
hematological disorders.  A Phase I trial with MDX-33 in ITP commenced in 1996.

  MDX-CD4:

  The Company is developing MDX-CD4, a fully human monoclonal antibody, for the
treatment of rheumatoid arthritis and other autoimmune disorders.  This
development project is being carried out as part of a collaboration with Eisai,
a leading Japanese pharmaceutical firm.  MDX-CD4 binds to human CD4, which is
present on the surface of certain T-cells in the human immune system.  By
binding to such T-cells, MDX-CD4 is designed to inactivate or reduce the ability
of these cells to mediate the persistent inflammation characteristic of such
autoimmune diseases.  The Company is planning on filing an IND in 1998 to allow
human clinical testing of MDX-CD4.  See "Risk Factors".

INFECTIOUS DISEASE PRODUCTS

  Anti-Fungal Bispecific Antibody:  Candida

  The Company is developing a bispecific antibody therapeutic product for the
treatment of Candidiasis, which is a broad range of clinically important fungal
infections. The product will be composed of the Company's trigger molecule and a
targeting antibody to Candida, now being developed through the use of the HuMAb-
Mouse technology.

OPHTHALMOLOGICAL PRODUCTS.

  MDX-RA: Secondary Cataracts

  MDX-RA is a monoclonal antibody conjugated to a plant derived toxin known as
ricin and is designed to be used during primary cataract surgery to prevent the
occurrence of secondary cataracts. A Phase I/II placebo-controlled clinical
trial has been completed which indicated MDX-RA inhibits the development of
opacification of new intraocular lenses following primary cataract surgery
caused by the overgrowth of residual lens epithelial cells.  A Phase III
clinical trial is currently underway.

  The Company has a strategic alliance with Santen for the development of MDX-
RA.  Pursuant to the collaboration, Santen has obtained the exclusive marketing
rights of MDX-RA in Japan.

  THE HUMAB-MOUSE PRODUCTS.

  Monoclonal antibodies represent the single largest category of biotechnology
products in clinical trials, according to a 1996 survey by the Pharmaceutical
Research and Manufacturers of America as reported in Biotechnology Medicines in
Development.  Medarex believes that monoclonal antibodies will continue to be an
important technology for pharmaceutical product development and that fully human
monoclonal antibodies, such as those obtained via its HuMAb-Mouse, will play a
significant role in this development.  Medarex's GenPharm subsidiary is
currently offering to such potential partners a range of services, including
access to the HuMAb-Mouse, custom creation of monoclonal antibodies, and the
scale up and production of such antibodies in its manufacturing
<PAGE>

facilities. While no assurance can be given, management believes that it will
enter into several partnerships relating to the HuMAb-Mouse technology in 1998,
and expects to receive license fees, milestone payments and royalties in
connection with such partnerships. See "Risk Factors".

  Monoclonal antibodies created by the HuMAb-Mouse are not only fully human but
do not fall under the claims of patents relating either to humanizing mouse
antibodies or to producing human antibodies via "phage" or similar mechanisms.
Medarex's GenPharm subsidiary has been issued numerous patents for its HuMAb-
Mouse.  A number of these patents are the subject of a Cross Licensing Agreement
with Cell Genesys, Inc., Abgenix, Inc., Xenotech, L.P. and Japan Tobacco, Inc.
(the "Xenotech Group") pursuant to which the Xenotech Group paid to GenPharm $15
million in 1997 and is expected to pay up to an additional $23.0 million in
1998.

  HUMAB-MOUSE PARTNERING STRATEGY.  The ability of the HuMAb-Mouse to rapidly
generate 100% human monoclonal antibodies to a wide range of antigens is a
potentially attractive product development tool for many pharmaceutical and
biotechnology companies.  The Company is offering these potential partners a
flexible "menu" of ways to access the HuMAb-Mouse technology, including:

  .  The option to use the HuMAb-Mouse at a company's facilities.

  .  The creation of the antibodies by Medarex.

  .  Accessing the Company's expertise in the scale-up and production of
     monoclonal antibodies.

  .  Accessing the Company's proprietary bispecific and antibody engineering
     technology.

At present, the Company has three partners for its HuMAb-Mouse technology
including Centocor, Eisai and LeukoSite, representing a spectrum of potential
collaborations.  In conjunction with these partnerships the Company may receive
license fees, research fees, milestone payments and product royalties.
See "-- Corporate Collaborations" and "Risk Factors".

  MONOCLONAL ANTIBODY PRODUCTION AND SCALE-UP.  Once a monoclonal antibody has
been created, it must be produced in substantial quantities under the FDA's Good
Manufacturing Practices (cGMP) requirements.  Medarex has considerable
experience in producing antibodies for clinical trials under such rigorous
conditions, and it is currently doing so in a 53,000 sq.ft. facility for its
five antibody-based products now in clinical trials. Management believes that
the capacity of Medarex's production facility is sufficiently large to allow
Medarex to produce additional monoclonal antibodies for itself and for its
partners. See "Risk Factors".

MARKET OVERVIEW
---------------

  CANCER.  The Company has targeted the following cancer indications for
treatment with its therapeutic products.

  Prostate Cancer.  The American Cancer Society ("ACS"\2\) estimated that
approximately 210,000 new cases of prostate cancer would be diagnosed in the
United States in 1997.  Current treatment options include surgery, radiation
and/or hormones and anti-cancer drugs.  Prostate cancer is the second leading
cause of cancer death in men, resulting in an estimated 41,800 deaths in 1997 in
the United States.

  Colon Cancer.  The ACS estimated that approximately 131,200 new cases of colon
cancer would be diagnosed in the United States in 1997.  Five-year survival, if
detected early, is 91%.  After the cancer has spread locally, the survival rate
decreases to 63%, and patients with distant metastases have less that a 7%
chance of survival.

  Gastric, Lung, Head and Neck, Kidney and Bladder Cancer.  The ACS estimated
that approximately 22,400 new cases of gastric cancer, 178,100 of lung cancer
(of which non-small cell lung cancer is a subset), 41,650 of head and neck
cancers, 28,800 of kidney cancers and 54,500 of bladder cancers would be
diagnosed in the United States in 1997.

----------------
\2\ Source: "American Cancer Society Facts and Figures-1997."
<PAGE>

  Ovarian Cancer.  The ACS estimated that approximately 26,800 new cases of
ovarian cancer would be diagnosed in the United States in 1997.  Current
treatments include surgical removal of one or both ovaries, the uterus and the
fallopian tubes as well as radiation and drug therapy.  According to the ACS,
ovarian cancer is the leading cause of death for cancers of the female
reproductive system, and the overall five-year survival rate is 46%.

  Breast Cancer.  The ACS estimated that approximately 180,200 new cases of
breast cancer would be diagnosed in the United States in 1997. Current
treatments have extended the five-year survival rate for localized breast cancer
to 97%.  If the breast cancer has spread regionally, however, the five-year
survival rate is 76% and for persons with distant metastases, the five-year
survival rate is 20%, according to the ACS.

  Leukemia.  The ACS estimated that approximately 9,200 AML patients would be
diagnosed in the United States in 1997.  The disease spreads rapidly and median
survival with conventional therapy is approximately one year.  AML is a cancer
affecting certain white blood cells.

  INFECTIOUS AND AUTOIMMUNE DISEASES.  The Company has targeted the following
infectious and autoimmune diseases for treatment with its therapeutic products.

  Idiopathic Thrombocytopenia Purpura.  According to Department of Health and
Human Services, there were approximately 150,000 primary, secondary and other
unspecified thrombocytopenias in the United States in 1992.  ITP is an
autoimmune condition in which a patient's platelets are destroyed by the
patient's own immune system.

  Rheumatoid Arthritis.  In 1996, there were approximately 2.5 million\3\ people
in the United States suffering from Rheumatoid Arthritis ("RA").  RA is a
debilitating disease marked by progressive erosion of bone and cartilage in the
joints and decalcifications of joint bones.  Researchers theorize that it is
either an inflammatory or immune response to certain antigens in the body.


  OPHTHALMIC DISEASES.

  Cataracts.  The American Academy of Ophthalmology estimates that there were
approximately 2,200,000 primary cataract surgeries reimbursed by Medicare and
approximately 830,000 secondary cataract surgeries reimbursed by Medicare in the
United States during 1996.  Secondary cataracts are the result of lens
epithelial cells growing over and opacifying an intraocular lens implanted
during primary cataract surgery.  Secondary cataracts represent the second
largest Medicare reimbursement expense, after primary cataract surgery.

CORPORATE COLLABORATIONS
------------------------

  Medarex is actively pursuing the establishment of strategic alliances with
major biotechnology and pharmaceutical companies.  See "Risk Factors."

  Merck KGaA.  Under the terms of the E. Merck collaboration (the
"Collaboration"), E. Merck's EGF-R targeting mechanism has been combined with
the Company's trigger mechanism to form MDX-447, a bispecific product for the
treatment of head, neck and other EGF-R overexpressing cancers. In 1994, E.
Merck purchased 450,000 shares of Common Stock at $7.00 per share for an
aggregate purchase price of $3.15 million in lieu of research and development
funding.  E. Merck may also provide up to $1.25 million to fund further clinical
trials.  Upon the achievement of certain milestones, E. Merck may provide the
Company with up to $25 million (the "Additional Funding") to fund Phase III
clinical trials.  E. Merck has the option, upon the commencement of the
Additional Funding, to purchase 1.0 million shares of the Company's Common Stock
at a price of $12.50 per share for an aggregate purchase price of $12.5 million
to satisfy half of its Additional Funding obligation.  E. Merck has certain
additional rights to purchase the Company's Common Stock at a price of $15.00
per share to obtain an ownership interest of up to 10% of the Company's Common
Stock on a fully diluted basis.  After E. Merck's funding of $29 million of the
Collaboration, the parties will share future development costs equally.  There
can be no assurance that the applicable milestones will be achieved or that
additional funding will be received from E. Merck.  See "Risk Factors."


------------------
\3\ Source "Rheumatoid Arthritis", Arthritis Foundation, Atlanta Georgia - 1996
<PAGE>

  The Company has the exclusive commercialization rights in the United States,
subject to royalties payable to E. Merck, for the EGF-R bispecific and any other
bispecific developed by this Collaboration.  E. Merck has exclusive
commercialization rights in Europe, subject to royalties payable to the Company,
and the two companies jointly hold commercialization rights for the rest of the
world.  In addition to the EGF-R bispecific, other products covered by the
Collaboration are a bispecific for the treatment of other tumors employing a
different E. Merck targeting molecule and proprietary bispecific technology
developed by E. Merck capable of triggering the killing of tumors by T cells.
The Collaboration does not cover any other of the Company's products.

  Novartis Pharma AG.  The terms of the Novartis collaboration provides for the
joint development of MDX-210 by the two companies.  Medarex is primarily
responsible for Phase II clinical trials; thereafter, Novartis is primarily
responsible for Phase III clinical trials, regulatory approvals and commercial
launch.  Under the terms of the arrangement, on June 28, 1995, the Company sold
899,888 shares of Common Stock to Novartis for an aggregate purchase price of
$4,000,000.  The Company also granted Novartis worldwide exclusive rights to
MDX-210 subject to Novartis' election to purchase additional equity in the
amount of $4,000,000, make milestone and research and development payments of up
to $31 million and pay royalties on product sales.  In such event, Novartis
would be responsible for all Phase III clinical trial and market launch costs of
MDX-210.  The Company has certain rights with respect to the manufacture of the
product.  There can be no assurances that additional funding will be received
from Novartis.

  Centeon L.L.C.  On April 26, 1996, the Company announced a collaborative
arrangement with Centeon L.L.C. to jointly develop MDX-33, a humanized
monoclonal antibody for the treatment of a variety of autoimmune hematological
disorders.  Under the terms of the agreement, Centeon will finance product
development through Phase II clinical trials up to a maximum of $20 million.
Upon successful completion of previous clinical trials, Centeon will also fund
Phase III clinical, regulatory approvals and commercial launch costs.  In
addition, Centeon paid Medarex a $1 million up-front fee and will pay
approximately $1 million in research and development funding for manufacturing
improvements.  Subject to the terms of the agreement, Centeon will pay Medarex
approximately $10 million for the achievement of specific milestones.  Upon
commercialization, Centeon will have exclusive worldwide marketing rights to
MDX-33 for autoimmune hematological disorders, and Medarex will be entitled to
royalty payments and may also manufacture the product for Centeon.  There can be
no assurance that the additional funding will be received from Centeon.

  Santen Pharmaceutical Co., Ltd.  Effective December 29, 1995, the Company's
HBI subsidiary and Santen entered into a Co-development and License Agreement
(the "Santen License") covering the marketing in Japan of MDX-RA.  To maintain
exclusive marketing rights, Santen is required to provide $5,000,000 over the
next four years to support the development of MDX-RA.  Santen may elect not to
make any payment, but in such event, the license may be made non-exclusive or
terminated by the Company.  Santen is obligated to seek regulatory approval for
the product in Japan and is responsible for the development cost associated with
these efforts.  Upon the commencement of commercial sales by Santen in Japan,
Santen will pay the Company earned royalties based on net sales.  Commencing six
months after approval of MDX-RA by Japanese regulatory authorities, Santen is
required to pay minimum royalties.  The Company retains all other marketing
rights and Santen is required to purchase MDX-RA from the Company.  Amounts paid
by Santen to the Company, except those amounts related to the purchase of MDX-
RA, are subject to a 10% withholding tax imposed by the Japanese government. The
Company has reached an understanding with Santen regarding certain modifications
to the Santen License whereby the Company will obtain, among other things,
revisions in the manufacturing and royalty provisions as well as an option,
subject to certain rights of Santen, to reacquire commercial rights to the MDX-
RA product for the Japanese market.  In return, the Company allowed Santen to
issue a note in the amount of $1,000,000 for the milestone payment which was due
in January 1998 relating to the initiation of Phase III clinical trials of MDX-
RA in the United States.  The Company receives U.S. income tax credits equal to
the amounts withheld, but the Company is not currently able to utilize such
credits.  There can be no assurances that additional financing will be received
from Santen.

  Eisai Co., Ltd.   GenPharm, which was acquired by the Company on October
21, 1997, had entered into a collaborative agreement with Eisai, a leading
Japanese healthcare company, to fund the development and initial manufacturing
of a human antibody product to a specific antigen (the "Eisai Agreement").  The
Eisai Agreement and subsequent amendments provide for $12 million of research
payments to GenPharm, as well as a further $18.5 million of milestone and other
payments.  To date, GenPharm has received research and milestone payments
totaling $12.8 million.  GenPharm expects to file an IND with the FDA in 1998
for the first of the HuMAb-Mouse products developed
<PAGE>

through this collaboration. Eisai has exclusive marketing rights for Japan and
for countries in Asia and Europe. GenPharm has retained marketing rights for
North America and the remaining parts of the world. GenPharm will receive
royalty payments on Eisai sales as well as payments for providing bulk product
to Eisai.

  Centocor, Inc.  In February 1997, GenPharm entered into a Research and
Commercialization Agreement (the "Centocor Agreement") with Centocor.  The
collaboration is focused on developing completely human antibodies to four
unnamed antigens.  The Centocor Agreement provides for research payments to be
paid to GenPharm, as well as two equity investments totaling $4 million.  In
addition, GenPharm will receive up to $4 million upon the exercise of Centocor's
option for commercial rights to such antibodies together with up to a further
$48 million upon the achievement of various clinical milestones with respect to
these antibodies.  In turn, Centocor will have worldwide marketing and
manufacturing rights to any resulting antibodies for which they have exercised
their option for commercial rights, subject to the payment of royalties to
GenPharm.

  LeukoSite, Inc.  In January 1995, GenPharm entered into a collaboration with
LeukoSite, Inc. ("LeukoSite") to produce human antibodies from GenPharm's HuMAb-
Mouse against specified antigens (the "LeukoSite Agreement").  The term of the
LeukoSite Agreement and the research program to be conducted thereunder (the
"Research Program") were extended pursuant to certain amendments executed in
1996.  Each party is responsible for their own costs of work to be performed and
materials to be supplied under the Research Program.  The companies will share
worldwide commercial rights for human antibodies which result from the
collaboration.  The first human antibodies from the collaboration are in the
preclinical phase.

CONTRACT AND LICENSE REVENUES
-----------------------------

  In 1995, 45% of the Company's total revenues were derived from E. Merck.  Such
revenues were derived from a collaborative arrangement with E. Merck dated March
30, 1994, pursuant to which the Company sold 450,000 shares of Common Stock to
E. Merck at $7.00 per share, for an aggregate purchase price of $3,150,000.  The
sale of Common Stock was in lieu of research and development funding.  The
purchase price represented a premium of approximately $1,000,000 over the then
fair market value of the Company's Common Stock.  This premium represents
consideration paid for clinical trial and research activities performed by the
Company and has been amortized into income as the clinical trial and research
activities were performed. In 1994 and 1995, $200,000 and $800,000,
respectively, was recognized as contract revenue.

  In 1995 and 1996, respectively, 37% and 25% of the Company's total revenues
were derived from Novartis.  This revenue was the result of an arrangement made
on June 28, 1995 where the Company sold 899,888 shares of Common Stock to
Novartis at $4.445 per share, for an aggregate purchase price of $4,000,000.
The purchase price represented a premium of approximately $1,140,000 over the
then fair market value of the Company's Common Stock.  This premium represents
consideration paid for research activities performed by the Company and was
amortized into income as the clinical trial and research activities were
performed.  As of December 31, 1995, $666,667 had been recognized as contract
revenues and $476,191 was recognized as contract revenue in 1996.

  In 1996, 61% of the Company's total revenue was derived from Centeon.  Such
revenues were derived from a collaborative arrangement with Centeon dated April
26, 1996.  Included in revenue was $1,150,000 representing an up-front payment
of $1,000,000 and $150,000 of research and development payments.

  In 1997, 26% or $865,000 of the Company's revenues were derived from Santen
for research funding, 23% or $742,800 were from Centeon for research funding and
milestone payments and 12% were from Eisai for research funding.

    No other single source accounted for more than 10% of the Company's total
revenues for 1995, 1996 and 1997.


RESEARCH COLLABORATIONS
-----------------------

  Dartmouth Medical.  The Company has obtained from Dartmouth Medical the
exclusive worldwide rights (on a royalty-free basis) to the trigger component of
its bispecific products.  The Company also actively pursues opportunities to
evaluate and possibly acquire from other companies and academic institutions
targeting mechanisms that may be used in bispecific therapeutic products.
<PAGE>

  Chiron Corporation,  The Company has a license agreement with Chiron
Corporation pursuant to which the Company obtained a license to two targeting
molecules to HER-2 expressing tumors.  The Company's  obligation to pay
royalties expires on the 10th anniversary of the first sale of licensed products
thereunder.  Additional targeting molecules have been licensed to the Company
and others are currently under evaluation.

  Immuno-Designed Molecules, S.A.  In addition, under the terms of a certain
Financing Agreement dated December 1, 1993 ("Financing Agreement") and amended
on January 17, 1995 and further amended on December 19, 1996, by and among the
Company, Immuno-Designed Molecules, S.A. ("IDM"), a biotechnology company based
in France, and G. Musuri S.A., an investment and consulting company based in
Spain, the Company has acquired an option to purchase the exclusive United
States rights to a cellular therapy known as macrophage activated killer cells
(MAK(TM))\4\ when used in conjunction with bispecifics or other protein-based
targeting devices (Targeted Immuno-therapy) from IDM.


  MAK technology is designed to increase the therapeutic capacity of a patient's
own white blood cells.  MAKs have numerous potential applications, including
possible use as cancer therapeutics in conjunction with the Company's
bispecifics.

  MAK therapy was well tolerated in Phase I clinical trials conducted by IDM in
Europe for the treatment of cancer and is currently being used in a Phase II
trial in Europe for the treatment of cancer.  IDM is currently developing
additional protocols for Phase II clinical trials to be conducted in Europe.

  Under the terms of the amended option agreement, Medarex's option will not
expire until three months after the receipt of final data from two separate
clinical trials one of which Medarex will fund up to $200,000 and the second of
which Medarex and IDM will jointly fund.  The trials will be conducted utilizing
the combination of MAK and bispecifics.  The Company can exercise its option for
$600,000. The Company has also appointed a representative to the IDM Board of
Directors.

  Payment of the option fee may be made at the Company's option in cash or by
the delivery of the Company's registered Common Stock having a fair market value
equal to the amount of the option fee or any combination thereof and will be
made in six equal monthly installments following the exercise of the option by
the Company.  The Company is also required to pay to IDM royalties on the sales
of any of the Company's products based on the IDM technology.

  Utrecht University.  Medarex Europe B.V. ("Medarex Europe"), a wholly-owned
subsidiary of the Company, has established an alliance with Utrecht University,
the largest research university in the Netherlands.  New research will be
conducted with Medarex's core technology and with the HuMAb-Mouse technology and
will expand into related areas of immunotherapy.

MARKETING, MANUFACTURING AND FACILITIES

  The Company's products fall into two groups: those intended to be marketed and
sold by the Company and those expected to be marketed by licensees or
distributors.  The Company currently intends to market its MDX-447 product for
EGF-R expressing cancers in the United States.  The advanced stages of these
diseases are treated primarily at Comprehensive Cancer Centers, 21 institutions
specifically recognized by the National Cancer Institute with an especially
broad approach to the treatment of cancer.  The Company believes that a small
sales force can successfully introduce and detail its products in this
concentrated marketplace.  Currently, the Company has no such sales force.  The
Company intends to develop its internal sales capacity as its first products
progress toward commercialization.

  Medarex acknowledges that the successful manufacturing and marketing of some
of its products is beyond the capabilities of all but the largest pharmaceutical
organizations.  For this reason, the Company plans to license to major
pharmaceutical companies individual products serving very large markets or those
that will be widely distributed geographically, if the products are approved by
the FDA. The Company's MDX-210, which has been licensed to Novartis and MDX-33,
which has been licensed to Centeon fall into this category.

-------------------------
\4\  MAK(TM) is a trademark of IDM.
<PAGE>

  The Company's product licensing strategy is to require its licensees to fund
the Company's later stage development work on the licensed products.  In
addition to receiving royalties on sales, the Company may retain manufacturing
and co-marketing or co-promotion rights to these products.

  The Company has leased approximately 53,000 square feet of laboratory,
clinical trial production and office space in a modern facility on a research
campus in Annandale, New Jersey, that was developed by Exxon Research and
Engineering Company as its corporate research headquarters. Management believes
that this facility is well suited for clinical-grade production of bispecific
and monoclonal antibodies as it has in place most utilities required for
clinical-grade production of such antibodies, including a production unit
designed to meet cGMP standards. By leasing this facility and spending modestly
to adapt it, management believes that the Company has preserved a considerable
amount of capital that might otherwise have been used to build a
biopharmaceutical production facility. The initial term of the lease was for
five years and three months, and the Company has elected to renew the lease for
another five years.

  Additionally, as a result of the GenPharm Merger, the Company assumed the
lease of GenPharm's facilities located in Palo Alto, California.  The lease
expired on December 31, 1997.  In January, 1998 the Company secured
approximately 10,000 square feet of a modern facility located in San Jose,
California, owned by Becton Dickinson Corporation.  This space includes an
animal facility to house GenPharm's HuMAb-Mouse, research and development
laboratories and administrative offices.

  The combined minimum annual lease commitments for both facilities range
between approximately $1,400,000 to $2,100,000, and the aggregate future minimum
lease commitments over the remainder of the lease terms are approximately
$11,500,000. The Company believes that its existing facilities are adequate for
the production of materials for clinical trials of its products and for
providing the services it offers in connection with its HuMAb-Mouse technology.
However, the Company does not currently have the capability to manufacture its
products under development in large commercial quantities and has no experience
in commercial-scale manufacturing.

RESEARCH REAGENT PRODUCTS

  Since 1988, the Company has sold certain of its research reagents to
universities, hospitals and research institutes for use in laboratory research.
These research products are sold through advertisements in scientific journals
and through distributors.  The Company plans to continue these sales of research
reagents as an adjunct to its continuing emphasis on its research and
development of therapeutic products.

COMPETITION

  The areas of product development on which the Company has focused are
intensely competitive.  The Company's competitors include major pharmaceutical
and chemical companies, specialized biotechnology firms, universities and
research institutions.  In addition, many specialized biotechnology firms have
formed collaborations with large, established companies to support research,
development and commercialization of products that may be competitive with those
of the Company.  Medarex depends upon its proprietary core technology, including
its patented trigger molecule and HuMAb-Mouse, to compete in the therapeutic
product market.  The Company's competitive position also depends on its ability
to attract and retain qualified personnel, develop effective proprietary
products, implement production and marketing plans, obtain patent protection and
secure sufficient capital resources.

  Technologies other than those involving bispecifics can also be applied to the
treatment of the diseases that the Company's products are designed to treat.
For example, immunoconjugates, monoclonal antibodies linked to toxins or
radioactive isotopes, are being developed by others.  In addition, the
application of recombinant DNA technology to develop potential products
consisting of proteins (cytokines) that occur normally in the body in small
amounts has been underway for some time.  Included in this group are
Interleukin-2, interferons alpha, beta and gamma, tumor necrosis factor ("TNF"),
colony stimulating factors and a number of other biological response modifiers.

  Continuing development of conventional chemotherapies and other drugs by large
pharmaceutical companies carries with it the potential for discovery of an agent
active against various solid tumor cancers, AML, ITP, rheumatoid arthritis and
secondary cataracts, the markets upon which the Company has focused.  The
development of new treatment methods, whether based on monoclonal antibodies or
on other technologies, could render the Company's
<PAGE>

technology and products under development uncompetitive or obsolete. In
particular, the Company is aware that Genentech, Inc. and Chiron Corporation
have published reports indicating that they are developing monoclonal antibody-
based products targeting HER-2 that may be competitive with MDX-210. The Company
is also aware that ImClone Systems, Inc. has published reports indicating that
it is developing monoclonal antibody-based products targeting EGF-R that may be
competitive with MDX-447. ITP is currently being treated with WinRho SDFTM sold
by Nabi(R), IVIgG and steroids all of which have limited success. Rheumatoid
arthritis is currently being treated with a number of compounds and a number of
monoclonal antibodies, including antibodies against TNF and CD4. TNF and CD4 are
being developed by a number of companies including Centocor, Inc., Idec
Pharmaceuticals, SmithKline Beecham and others.

  Significant  competitors in the development and marketing of ophthalmic
pharmaceuticals include companies such as:  Alcon Laboratories, Inc. (a division
of Nestle, S.A.), Allergen Inc., Merck & Co., Novartis Vision Ophthalmics (a
division of Novartis), Chiron Vision (a division of Bausch & Lomb, Inc.),
Pharmacia & Upjohn, Inc., along with other smaller companies.

  With respect to the prevention of secondary cataract, the Company is not aware
of any commercial  competitor with a competing product on the market.  Prizm
Pharmaceuticals, Inc. ("Prizm") has announced plans to develop a macromolecular
protein-toxin conjugate (fibroblast growth factor-asporin conjugate).  Prizm has
been informed that if they commercialize such conjugate, it would infringe
certain of the Company's patent rights.  Pharmacia & Upjohn, Inc. has a
research-stage project related to the reduction of secondary cataract.  Efforts
of other competitors with respect to secondary cataract have been primarily
directed toward enhanced surgical techniques, alternative intraocular lens
designs and certain pharmacologic approaches.  However, there can be no
assurance that methods of preventing primary cataract or that other methods of
preventing secondary cataract will not be developed, or that such methods would
not prove to be more cost effective than MDX-RA.

  The Company's principal competitor for the HuMAb-Mouse technology is Abgenix,
Inc. ("Abgenix"), a privately held company and an affiliate of Cell Genesys,
Inc.  As a result of certain Cross Licensing Agreement with the Company, Abgenix
may be able to offer to potential partners the use of its transgenic mice known
as Xenomice(TM)\5\, that, according to Abgenix, may be capable of generating
human monoclonal antibodies.


  Numerous companies have expertise in the realm of humanization technology,
such as Genentech, Inc., Protein Design Labs, Inc. and others and with phage
display technology such as Cambridge Antibody Technology PLC, Dyax Corp. and
MorphoSys GmbH.

PATENTS, TRADEMARKS, TRADE SECRETS AND LICENSES

  General.  Proprietary protection for the Company's products, processes and
know-how is important to the Company's business.  The Company's policy is to
file patent applications to protect technology, inventions, and improvements
that are considered important to the development of its business.  The Company
also relies upon trade secrets, know-how, and continuing technological
innovation to develop and maintain its competitive position.  The Company plans
to aggressively prosecute and defend its patents and proprietary technology.
The Company has obtained patents from the United States patent office, the
European patent office and the patent offices of Australia, Canada, New Zealand
and Israel, covering the Company's bispecific products.  The opposition period
for the granted European patent, in general, expired on January 5, 1996.  These
patents have expiration dates from 2007-2014.  Additional patent applications
are pending throughout the world.  The Company has obtained a number of patents
from the United States patent office covering the Company's HuMAb-Mouse
technology, and in September 1997, the European patent office issued a patent
covering the Company's HuMAb-Mouse technology.  These patents have expiration
dates from 2011-2014.  Additional patent applications are pending throughout the
world.

  The Company is prosecuting its applications with the United States Patent and
Trademark Office, but the Company does not know whether any of its applications
will result in the issuance of any patents or trademarks or, if any patents are
issued, whether any issued patent or trademark will provide significant
proprietary protection or will be circumvented or invalidated.  The Company
intends to file additional patent and trademark applications, when appropriate,
relating to improvements in its technologies and other specific products.

--------------------------
\5\  Xenomice is a trademark of Abgenix
<PAGE>

  The patent positions of biopharmaceutical and biotechnology firms, including
Medarex, are generally uncertain and involve complex legal and factual
questions.  No assurance can be given regarding the breadth or enforceability of
claims allowed in these types of patents.

  Competitors or potential competitors have filed applications for, or have been
issued, patents and may obtain additional patents and proprietary rights
relating to materials or processes competitive with those of the Company.
Accordingly, there can be no assurance that the Company's patent applications
will result in patents being issued or that, if issued, the patents will afford
protection against competitors with similar technology; nor can there be any
assurance that others will not obtain patents which the Company would need to
license or circumvent.

  The Company also relies upon unpatented trade secrets, and no assurance can be
given that others will not independently develop substantially equivalent
proprietary information and techniques, or otherwise gain access to the
Company's trade secrets or disclose such technology, or that the Company can
meaningfully protect its rights to its unpatented trade secrets.

  Medarex typically requires its employees, consultants, outside scientific
collaborators and sponsored researchers to execute confidentiality agreements
upon the commencement of employment or consulting relationships with the
Company.  These agreements provide that all confidential information developed
or made known to the individual during the course of the relationship is to be
kept confidential and not disclosed to third parties except in specific
circumstances.  In the case of employees, the agreements provide that all
inventions conceived by the individual shall be the exclusive property of the
Company.  There can be no assurance, however, that these agreements will provide
meaningful protection for the Company's trade secrets in the event of
unauthorized use or disclosure of such information.

  Agreements with the Trustees of Dartmouth College ("Dartmouth").  Pursuant to
a joint venture agreement with Dartmouth ("the Joint Venture"), the Company was
formed to develop and commercialize certain technology originally developed over
several years by the Company's founders and other scientists at Dartmouth
Medical.  Under the Joint Venture, the Company holds the rights to this
technology together with any modifications or improvements to this technology
made either by the Company or at Dartmouth Medical.  The Company also has
several agreements with Dartmouth which provide Medarex with rights to numerous
trigger and targeting mechanisms.  The duration of these agreements with
Dartmouth is perpetual.  In particular, the Company has received from Dartmouth
assignments of several trigger mechanisms as well as certain targeting
mechanisms for AML and other tumors.  In return for the rights granted by
Dartmouth to the Company in 1987, Dartmouth received 420,000 shares of Common
Stock.

REGULATORY ISSUES

  General.  The production and marketing of the Company's products and its
research and development activities are subject to regulation for safety,
efficacy and quality by numerous governmental authorities in the United States
and other countries.  In the United States, drugs and biologics are subject to
rigorous federal regulation and, to the lesser extent, state regulation.  The
Federal Food, Drug and Cosmetic Act and the Public Health Service Act both, as
amended, and the regulations promulgated thereunder, and other federal and state
statutes, and regulations govern, among other things, the testing, manufacture,
safety, efficacy, labeling, storage, record keeping, approval, advertising and
promotion of the Company's products.  Product development and approval within
this regulatory scheme, if successful, will take a number of years and involve
the expenditure of substantial resources.

  The Company's products and activities in the United States are regulated by
the FDA in accordance with the Federal Food, Drug and Cosmetic Act, the Public
Health Service Act, and other laws. The standard process required by the FDA
before a therapeutic drug or biological agent may be marketed in the United
States includes (i) preclinical laboratory and animal tests; (ii) submission to
the FDA of an application for an IND, which must become effective before human
clinical trails may commence; (iii) preliminary human clinical studies to
evaluate the drug and its manner of use; and (iv) adequate and well-controlled
human clinical trials to establish the safety and effectiveness of the drug
(and, in the case of a biologic, its potency as well) for its intended
indication.  See "Research, Development and the Clinical Trials Process".  If
the product is regulated as a drug, the FDA Center for Drug Evaluation and
Review ("CDER") will require the submission and approval of a New Drug
Application ("NDA") before commercial marketing may begin.  If the product is
regulated as a biologic, the FDA Center for Biologics Evaluation and Research
<PAGE>

("CBER") will require the submission and approval of a Biologic License
Application ("BLA") before commercial marketing may begin.  As part of the NDA
or BLA processes, the manufacturer is required to accumulate, and submit to the
FDA for review and approval, a significant amount of data concerning the safety
and effectiveness (and, in the case of a biologic, potency) from
laboratory/animal testing and clinical studies, manufacturing, product stability
and other studies.  Each domestic and foreign biopharmaceutical manufacturing
establishment including contract manufacturers for the Company must also be
registered with the FDA and pass an inspection by the FDA prior to approval for
commercial distribution.

  If other companies are responsible for any portion of the manufacturing
process for the Company's products, the Company's ability to manufacture and
market such products will be dependent on those companies' ability to properly
carry out the portion of the manufacturing process they are expected to perform.
The Company's ability to continue to manufacture and market such products will
be dependent on those companies' continuing ability to perform the parts of the
manufacturing process for which they are responsible.  There can be no assurance
that the Company, or any other companies involved in the manufacture of the
Company's products, will be able to obtain or maintain the necessary FDA
approvals or capacity to supply and manufacture such products. If these other
companies are unable to perform, then the Company will have to find new
companies to perform these functions, as well as possibly perform new clinical
studies with the final products manufactured by these new companies.  There can
be no assurance that the manufacturing services of these other companies could
be replaced.

  Domestic and foreign manufacturing establishments are subject to inspections
by the FDA and by other federal agencies and by state and local agencies, and
must comply with cGMP regulations as appropriate for production.  If violations
of applicable requirements are noted by the FDA or other agencies during an
inspection, distribution of clinical materials for investigational use or
production lots for commercial use may be halted and, possibly, other sanctions
imposed. Commercial marketing of the Company's products may occur only after
approval of NDAs or BLAs following the submission of a complete application.
The NDA or BLA internal review process frequently takes two to four years to
complete, or longer.  There can be no assurance of FDA approval at the end of
such time, or ever.  The FDA may require the Company to perform additional
studies to gain approval which may take several years to complete.

  Under the Prescription Drug User Fee Act, the Company must pay FDA certain
fees for reviewing a BLA or NDA or supplement thereto, for each commercial
manufacturing establishment it controls, and for each product it manufactures.
These fees can be significant; the NDA or BLA review fee can, by itself, exceed
$200,000, although certain deferrals, waivers and reductions may be available.
While user fees can be significant, they are not a significant expense in the
overall cost of product development and the regulatory process.  In addition,
under that law and FDA regulations, each NDA, BLA, or PLA/ELA submitted for FDA
approval is reviewed usually within the 45 to 60 days following submission of
the application for administrative completeness and reviewability.  FDA can
refuse to file any NDA, BLA, or PLA/ELA that it deems incomplete or not easily
reviewable.  If FDA refuses to file an application, FDA will retain 25% percent
of the user fee as a penalty.  The Company may then resubmit the application,
after incorporating the additional information or changes demanded by FDA, or
request that the application be filed for substantive review over protest.  In
either case, the Company will be required to pay a new NDA or BLA review fee.
There can be no assurances that any application submitted by the Company will be
filed by FDA, and if filed will be approved.

  Moreover, the Company is, or may become, subject to various federal, state and
local laws, regulations and recommendations relating to safe working conditions,
laboratory and manufacturing practices, the experimental use of animals and the
use, storage and disposal of waste and hazardous substances, including
radioactive and toxic materials and infectious disease agents used in
conjunction with the Company's research work.  Certain of the Company's products
and technology are subject to export controls which may affect operations,
technology transfer and employment of non U.S. citizens and consultants.  The
failure to comply with various federal, state and local laws governing these
matters could adversely affect the Company.

  Certain issues that have potential impact on future marketing of Medarex
products are summarized in the following paragraphs.

  Research, Development and the Clinical Trials Process.  The production of
therapeutic products generally involves research, development and human clinical
trials.
<PAGE>

  Research refers to the discovery or identification of potential product
candidates, initial work on new applications of technology and other associated
discovery research.

  Development involves the further evaluation of biological functions, testing
in pre-clinical models, improvement of laboratory scale production methods, and
the performance of other work necessary to optimize product performance prior to
the commencement of clinical testing in humans.

  Before a therapeutic product may be sold in the United States and other
countries, clinical trials of the product must be conducted and the results
submitted to the appropriate regulatory agencies for approval.  In the United
States, these clinical trial programs generally involve a three-phase process.
Typically, Phase I studies are conducted in healthy volunteers or, on occasion,
in patients afflicted with the target disease, to determine the early side
effect profile and the pattern of drug pharmacokinetics distribution and
metabolism.  In Phase II, studies are conducted in groups of patients afflicted
with the target disease to determine preliminary efficacy, optimal dosages and
expanded evidence of the safety profile.  In Phase III, large-scale clinical
trials are conducted in patients with the target disease to provide sufficient
data for the statistical proof of efficacy and safety required by federal
regulatory agencies.  Such Phase III trials must be well-controlled, and success
of such trials often depends on the ability of the Company to ensure the
required level of control is maintained.  Maintenance of such control is very
difficult, and there can be no assurance that the Company will be able to do so.
The clinical trial process may take three to six years or more to complete and
there can be no assurance that the data collected will demonstrate the product
to be safe or effective, or will support FDA approval of the product.

  In the case of drugs for cancer and certain other diseases, the initial human
testing may be done in patients rather than in healthy volunteers.  Because
these patients are already afflicted with the target disease, it is possible
that such studies will provide results traditionally obtained in Phase II
studies.  These studies are referred to as "Phase I/II" studies.
Notwithstanding the foregoing, even if patients are used in initial human
testing and a "Phase I/II" study carried out, the sponsor is still responsible
for obtaining all the data usually obtained in both Phase I and Phase II
studies.

  The Company also will be subject to widely varying foreign regulations
governing clinical trials and pharmaceutical sales.  Whether or not FDA approval
has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must be obtained  prior to the commencement of
marketing of the product in these countries.  The approval process varies from
country to country and the time may be longer or shorter than that required for
FDA approval.  The Company intends, to the extent possible, to rely on foreign
licensees to obtain regulatory approval for marketing the Company's products in
foreign countries.  There is no assurance that such approvals will be obtained.
In addition, under current law, there are significant restrictions on the export
of products not approved by the FDA.  There can be no assurance that the Company
will be able to obtain the approvals necessary to export its products to other
countries for commercial distribution.

  Regulatory approval to market a biologic or a new drug often takes a number of
years and involves the expenditure of substantial resources.  Approval time also
depends on a number of factors, including the severity of the disease in
question, the availability of alternative treatments, the availability of
clinical investigators and eligible patients, the code of enrollment of patients
in clinical trials and the risks and benefits demonstrated in the clinical
trials.

  Currently, the Company has one product in Phase III clinical trials, MDX-RA
for the prevention of secondary cataract, and none of Company's products have
been approved by the FDA for sale.  Any such products will be subject to the
requisite regulatory requirements prior to their commercial sale, which may take
two to four years or more and may never be obtained.

  The Company has experienced operating losses in each year since its inception
and expects its operating expenses to increase at an accelerating rate over the
next several years as the Company expands and accelerates its clinical trials
and product development efforts.

  Orphan Drug Designation.  The Orphan Drug Act provides incentives to
manufacturers to undertake development and marketing of products to treat
relatively rare diseases or conditions.  Biological products targeted for
affected patients populations in the United States of fewer than 200,000 persons
may be eligible for orphan drug
<PAGE>

designations. Medarex seeks orphan drug designation for all qualified products
as they enter clinical trials. The FDA granted requests for orphan drug
designation for MDX-22 for the treatment of AML in 1990. A request for orphan
drug designation for MDX-210 for the treatment of ovarian cancer was granted in
October 1993. There can be no assurance that orphan drug designation will be
accorded to other products developed by the Company. Orphan drug designation
does not convey any advantage in, or shorten the duration of, the regulatory
process. However, the Orphan Drug Act offers, among other things, the
opportunity to receive funding for qualified clinical trials via a grant
approval process. The sponsor who obtains the first marketing approval for a
designated orphan drug for a given indication is eligible to receive seven years
of United States marketing exclusivity for that drug for that indication subject
to certain limitations. There can be no assurance that the Company will obtain
marketing approval for any of its orphan drug products. There can be no
assurance that the benefits of the existing statute will remain in effect, or
that the Company will be able to maintain exclusivity for its products, if
obtained at all. There also can be no assurances with respect to the scope of
the Company's orphan exclusivity, if any, or that the Company's BLA or NDA, if
any, will not be precluded from approval by the orphan exclusivity held by
another entity.

  Treatment IND Status.  The Company may also file treatment protocols and INDs.
The FDA may allow such protocols or products for patients with serious or life-
threatening diseases.  The purpose of these regulations is to facilitate the
availability of new products to desperately ill patients before general
marketing begins and to allow for collection of additional safety and limited
effectiveness data.  Medarex may be able to recover some of the costs of
production manufacture, research, development and handling prior to market
approval if the Company is allowed to charge patients for the product used in
such studies.  Notwithstanding the foregoing, there are specific conditions
which must be met before a sponsor may charge reimbursement costs for an IND
product, including notifying the FDA in writing in advance.  The FDA may notify
the sponsor that it is not authorized to charge for the products.  No assurance
can be given that the Company will be able to recover any of its costs prior to
market approval.

  Drug and Biologics for Serious Or Life-Threatening Illnesses.  The Federal
Food, Drug and Cosmetic Act and FDA regulations provide certain mechanisms for
an accelerated or conditional approval for products intended for treating
serious or life-threatening conditions, which have been studied for safety and
effectiveness, and which provide a meaningful benefit over existing therapies.
The procedures permit early consultation and commitment from the FDA regarding
pre-clinical and clinical studies necessary to gain marketing approval.
Provisions of this regulatory framework also permit in certain cases BLAs to be
approved on the basis of Phase II clinical study results or on the basis of
valid surrogate markers of product effectiveness, thus accelerating the normal
approval process.  The Company believes that certain of its products might
qualify for this regulatory procedure although there can be no assurance the FDA
will agree.  Notwithstanding the foregoing, approval may be denied by the FDA or
Phase III studies may be required.  The FDA may also seek the Company's
agreement to perform post-approval Phase IV studies, as a condition of such
early approval.

EMPLOYEES

  As of December 31, 1997, the Company had 64 full-time employees, 42% of whom
hold advanced degrees.  None of the Company's employees is covered by collective
bargaining agreements.  The Company has entered into employment contracts with
certain of its executive officers. The Company considers relations with its
employees to be satisfactory.  In the next 12 months, the Company anticipates
hiring up to 20 additional employees skilled in clinical testing, regulatory
processes and manufacturing.

RISK FACTORS

  This Annual Report contains forward-looking statements within the meaning of
Sections 27A and 21E of the Securities Exchange Act of 1934, as amended,
including statements regarding Medarex's expectations, beliefs, intentions, or
strategies regarding the future.  Forward-looking statements include, without
limitation, statements in "Risk Factors", "Business" and elsewhere in this
Annual Report regarding, among other things, uncertainties relating to the
technological approach; history of operating losses and anticipation of future
losses; uncertainty of product development; need for additional capital and
uncertainty of change; uncertainty of patent and proprietary rights; risks
associated with the acquisition of GenPharm; uncertainties related to the
receipt of the Third Party Payments by GenPharm; management of growth, and risks
of acquiring new technologies; uncertainties related to clinical trials;
government regulation and uncertainty of obtaining regulatory approval;
dependence on key personnel; dependence on research collaborators and scientific
advisors; uncertainty of health care reform measures and third-party
reimbursement and risk of product liability.  All forward-looking statements
included in this Annual Report are based on
<PAGE>

information available to the Company, as of the date hereof, and the Company
does not assume any obligation to update any such forward-looking statements. It
is important to note that the Company's actual results may differ materially
from the results discussed in the forward-looking statements. Among the factors
that could cause actual results to differ materially are the factors detailed in
"Risk Factors" below. Accordingly, in addition to the other information in this
Annual Report, the following factors should be considered carefully. References
to the products, business, financial results or financial condition of Medarex
should be considered to refer to Medarex and its subsidiaries unless the context
otherwise requires.

  EARLY STAGE OF PRODUCT DEVELOPMENT. The Company's therapeutic products are
under development and no revenues have been generated from the sale thereof.  In
addition, the Company has generated only minimal revenues from the sales or
licensing of its research products.  As of the date of this Annual Report, the
Company has only one product in Phase III clinical trials and none of the
products under development by the Company has been approved by the FDA or
foreign agency for sale.  If the Company's products in preclinical studies
advance to the clinical stage, there can be no assurance that any positive
therapeutic effects of these products will be demonstrated in clinical trials or
that toxic side effects will not occur.  With respect to those products which
the Company currently has in various phases of clinical studies, there can be no
assurance that these products will prove to be effective or that significant
toxic side effects will not occur negating the therapeutic utility, if any, of
the product.  Furthermore, any products which are successfully developed will be
subject to various FDA and foreign agency regulatory requirements including, but
not limited to, FDA and foreign agency approval prior to their commercial
distribution.  Such approval may take two to four years, or more, following
submission of the requisite marketing application, if it is complete, and may
never be obtained.  Generally, only a small percentage of new therapeutic
products developed in the laboratory is eventually approved by the FDA or
foreign agency for commercial sale.  No assurance can be given that the Company
will succeed in the development and marketing of any therapeutic products.

  HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT.  The Company has
experienced operating losses in each year since its inception and, as of
December 31, 1997, had an accumulated deficit of $86,868,643. The Company
expects its operating losses to increase at an accelerating rate over the next
several years as the Company expands and accelerates its clinical trials and
product development efforts.  In prior years, a significant portion of the
Company's revenues was generated from collaborative development agreements.  The
Company currently has six such revenue-producing agreements, and its operating
results may be adversely affected if it does not meet certain milestones
required by such agreements.  No assurance can be given that the Company will be
able to meet such milestones.  The Company's ability to achieve a profitable
level of operations is dependent in large part on obtaining regulatory approvals
for its products, entering into agreements for product development and
commercialization and making the transition to a manufacturing and marketing
company.  There can be no assurance that the Company will ever achieve product
approvals or a profitable level of operations.

  ADDITIONAL FINANCING REQUIREMENTS AND ACCESS TO CAPITAL FUNDING.  The
operation of the Company's business requires substantial capital resources.  It
is anticipated that the Company's current sources of liquidity will be
sufficient to meet the capital requirements of the Company for a period of at
least 24 months from the date of this Annual Report.  The acceleration of the
development of the Company's products will result in an increase in the rate at
which the Company uses capital and in the Company's rate of losses.  During such
period and thereafter, the Company will continue to spend substantial funds to
complete research and development of its products.  The Company is likely to
require additional funds for these purposes.  If additional funds are raised
through the issuance of equity, further dilution to stockholders may result.
The Company has no established bank lines of credit or other arrangements
through which it can obtain financing.  No assurance can be given that
additional funds will be available for the Company to finance its development on
acceptable terms, if at all.  If adequate funds are not available from
operations or additional sources of financing, the Company's business will be
materially adversely affected.

  DEPENDENCE ON STRATEGIC ALLIANCES. The Company has entered into strategic
alliances relating to the research and development and sales, marketing and co-
promotion of several of the Company's potential products.  Under these
arrangements, the Company has granted to its corporate partners license rights
in and to certain of the Company's potential products in exchange for the
payment of license fees and commitments for additional funding in the form of
additional equity purchases, research and development payments and milestone
fees.  Most of these payments are subject to the Company's achieving certain
milestones or to the satisfaction of the Company's collaborators with testing
results of the related product.  In particular, the Company has entered into
strategic alliances with Novartis, E. Merck, Centeon, Santen, Eisai and Centocor
to develop and market the Company's MDX-210, MDX-447, MDX-33, MDX-RA and to
develop human antibody to a specific antigen.  The Company relies on the
payments made under these
<PAGE>

strategic alliances to further the development of these products and its
operating results may be adversely affected if it is unable to meet certain
milestones required by such agreement. Should these arrangements be terminated,
the Company may be required to seek additional funding from other sources in
order to develop and market these products. If such funding is not available,
its research and product development efforts would be adversely affected. No
assurance can be given that additional funds will be available on acceptable
terms, if at all. If adequate funds are not available, the Company's business
will be materially adversely affected.

  In addition, the Company granted to its collaborative partners certain rights
to commercialize the products covered by these collaborative agreements.  In
some cases, the Company is relying on its collaborative partners to conduct
clinical trials, to compile and analyze the data received from such trials, to
obtain regulatory approvals and, if approved, to manufacture and market these
licensed products.

  Suspension or termination of certain of the Company's current collaborative
research agreements could have a material adverse effect on the Company's
operations and could significantly delay the development of the affected
products.  Continued funding and participation by collaborative partners will
depend not only on the timely achievement of research and development objectives
by the Company and the successful achievement of clinical trial goals, neither
of which can be assured, but also on each collaborative partner's own financial,
competitive, marketing and strategic considerations.  Such considerations
include, among other things, the commitment of management of the collaborative
partners to the continued development of the licensed products, the
relationships among the individuals responsible for the implementation and
maintenance of the collaborative efforts, the relative advantages of alternative
products being marketed or developed by the collaborators or by others,
including their relative patent and proprietary technology positions, and their
ability to manufacture potential products successfully.

  In addition, certain collaborative partners have developed and may be
developing competitive products that may result in delay or a relatively smaller
resource commitment to product launch and support efforts than might otherwise
be obtained if the potentially competitive product were not under development or
being marketed.

  GOVERNMENT REGULATION. The research and development activities of the Company
as well as the investigation, manufacture, labeling, distribution, marketing and
sale of therapeutic products are subject to extensive and rigorous regulation,
including pre-market approval, by the FDA, and other state and foreign agencies.
The process of obtaining FDA and other approvals is costly and time-consuming,
and there can be no assurance that any product that the Company may develop will
be deemed to be safe and effective by the FDA or foreign agencies and granted
marketing approval.  Even if marketing approvals are obtained, a product and its
manufacturer are subject to continuing review, and later discovery of previously
unknown problems with a product or its manufacturer may result in the imposition
of restrictions on or actions against the product or its manufacturer, including
withdrawal of products from the market and other enforcement actions.  Delays in
obtaining regulatory approvals may adversely affect the marketing of any
products developed by the Company and the ability of the Company to receive
product revenues and royalties.  In light of the limited regulatory history of
bispecific therapeutics based on the Company's technology, there can be no
assurance that regulatory approvals for the Company's products will be obtained
without lengthy delays, if at all. In addition, the Company cannot predict the
extent to which changes to existing governmental regulations might have an
adverse effect on the Company. In 1990 and 1991, the Company received orphan
drug designations for MDX-22 for the treatment of AML. In October 1993, the
Company received an orphan drug designation for MDX-210 for the treatment of
ovarian cancer. There can be no assurance that the Company will ever receive FDA
approval to market these products, or that the Company will be the first sponsor
to receive FDA approval to market these products and thus receive orphan drug
marketing exclusivity or that its rights to market MDX-22 or MDX-210 will not
be preempted by orphan exclusivity held by another company.

  GOVERNMENTAL REFORMS.  Health care reform is an area of increasing national
and international attention and a priority of many elected officials.  Several
proposals to modify the current health care system in the United States to
improve access and control costs are currently being considered by both federal
and state governments.  Any such reform measures could adversely affect the
amount of reimbursement available from governmental or private payers or could
affect the ability to set prices for newly approved therapeutic products.
Similar proposals are being considered by governmental officials in other
significant pharmaceutical markets, including Europe.  It is uncertain what
proposals will be adopted or what actions governmental or private payers for
health care goods and services may take in response to proposed or actual
legislation in the United States or other important markets.  The Company
<PAGE>

cannot predict the outcome of heath care reform proposals or the effect any such
reforms may have on the Company's business. Any such proposals, if adopted,
could have a material adverse effect on the Company.

  NO ASSURANCE OF ADEQUATE REIMBURSEMENT.  The success of the Company's products
in the United States and other significant markets will depend in part upon the
extent to which a consumer will be able to obtain reimbursement for the cost of
such products from government health administration authorities, private health
insurers and other organizations.  Uncertainty exists as to the reimbursement
status of any newly approved therapeutic product.  There also can be no
assurance that adequate third party reimbursement by private insurers will be
available for such products.  Even if approved for marketing, there can be no
assurance that patients will have sufficient resources to pay for the therapy or
that governmental or private payers will provide reimbursement for such therapy.
There can be no assurance that the Company's products will be considered cost-
effective, that reimbursement will be available or, if available, that the
payer's reimbursement policies will not adversely affect the Company's ability
to sell its products on a profitable basis.

  TECHNOLOGICAL CHANGE AND COMPETITION.  The biotechnology industry is subject
to rapid and significant technological change.  Competitors of the Company
engaged in all areas of biotechnology in the United States and abroad are
numerous and include, among others, major pharmaceutical and chemical companies,
specialized biotechnology firms, universities and other research institutions.
There can be no assurance that the Company's competitors will not succeed in
developing technologies and products that are more effective than any which are
being developed by the Company or which would render the Company's technology
and products obsolete or non-competitive.  Many of these competitors have
substantially greater financial and technical resources and production and
marketing capabilities than the Company.  In addition, many of the Company's
competitors have significantly greater experience than the Company in
undertaking preclinical testing and clinical trials of new or improved
therapeutic products and obtaining FDA and other regulatory approvals of
products for use in health care.  Accordingly, the Company's competitors may
succeed in obtaining FDA and other regulatory approval for products more rapidly
than the Company.

  PATENTS AND PROPRIETARY RIGHTS.  Certain of the processes by which the Company
is able to produce its products are proprietary; some of these technologies are
legally owned by the Company and some are legally owned by others and licensed,
either on an exclusive or a non-exclusive basis, to the Company.  The Company
believes that patent protection of materials or processes it develops and any
products that may result from the Company's and licensors' research and
development efforts are important to the possible commercialization of the
Company's products.  The patent position of biotechnology firms generally is
highly uncertain and involves complex legal and factual questions.  To date, no
consistent policy has emerged regarding the breadth of claims allowed in
biotechnology patents. Accordingly, there can be no assurance that patent
applications relating to the Company's products or technology will result in
patents being issued or that, if issued, the patents will afford protection
against competitors with similar technology.  It is possible that patents issued
to the Company will be successfully challenged.  In addition, companies that
obtain patents claiming products or processes that are necessary for or useful
to the development of the Company's products or otherwise covering aspects of
the Company's technology can bring legal actions against the Company claiming
infringement.  Litigations to establish the validity of patents, to defend
against infringement claims or to assert infringement claims against others, if
required, can be lengthy and expensive.  There can be no assurance that the
Company will have the financial resources necessary to enforce any patent rights
it may hold. The Company may be required to obtain licenses from others to
develop, manufacture or market its products.  There can be no assurance that the
Company will be able to obtain such licenses on commercially reasonable terms or
that the patents underlying the licenses will be valid and enforceable.

  The Company also relies upon unpatented proprietary technology, and no
assurance can be given that others will not independently develop substantially
equivalent proprietary information or techniques or otherwise gain access to the
Company's proprietary technology or disclose such technology or that the Company
can meaningfully protect its rights in such unpatented proprietary technology.

  The Company attempts and will continue to attempt to protect its proprietary
materials and processes by relying on trade secret laws and nondisclosure and
confidentiality agreements and exclusive licensing arrangements with its
employees and certain other persons who have access to its proprietary materials
or processes or who have licensing or research arrangements exclusive to the
Company, including the Company's Scientific Founders (as defined herein).
Despite these protections, no assurance can be given that others will not
independently develop or obtain
<PAGE>

access to such materials or processes or that the Company's competitive position
will not be adversely affected thereby. The Company does not have
confidentiality agreements with the Company's Scientific Advisors (as defined
herein). To the extent members of the Company's Scientific Advisory Board have
consulting arrangements with or are employed by a competitor of the Company, the
Company could be materially adversely affected by the disclosure of the
Company's confidential information by such Scientific Advisors.

  DILUTION. In connection with the GenPharm Merger, during 1997 the Company
issued 3,250,000 shares of its Common Stock as payment of $17,793,750 of the
Purchase Price. The Company will issue Additional Shares in 1998 (and possibly
to some extent in 1999) having a then current fair market value sufficient to
satisfy the remaining balance of the Purchase Price. Since the number of
Additional Shares to be issued in connection with the GenPharm Merger will be
determined at future dates based on the then fair market value of the Company's
Common stock and the amount of the Purchase Price as adjusted, the maximum
number of Additional Shares to be issued in connection with the GenPharm Merger
cannot be determined as of the date of this Annual Report. A significant
decrease in the fair market value of the Company's Common Stock would result in
a significant increase in the number of shares issuable in connection with the
GenPharm Merger. Similarly, a significant increase in the fair market value of
the Company's Common Stock or a significant reduction in the Purchase Price
would result in a significant decrease in the number of shares issuable in
connection with the GenPharm Merger.

  As of the date of this Annual Report, there were outstanding (a) 2,593,932
shares of Medarex Common Stock reserved for issuance pursuant to options and
warrants exercisable by 72 individuals who are present or former employees,
officers, directors and consultants of Medarex, at a weighted average exercise
price of $4.17 per share; (b) 109,200 shares of Medarex Common Stock issuable
upon the exercise of certain additional warrants at a weighted average exercise
price of $4.12 per share; and (c) 822,924 shares of Medarex Common Stock
issuable upon the exercise of certain warrants assumed by the Company in
connection with its acquisition of HBI on February 28, 1997 at an exercise price
of $51.54 per share.

  In addition, certain of the Company corporate partners have the right to
purchase shares of Common Stock.  The maximum number of shares cannot be
determined at this time.  The exercise of all or a portion of the outstanding
options and warrants may result in a significant increase in the number of
shares of Medarex Common Stock that will be subject to trading on The Nasdaq
National Market, and the issuance and sale of the shares of Medarex Common Stock
upon the exercise thereof may have an adverse effect on the price of the Medarex
Common Stock.  See "Possible Volatility of Securities Prices" and "Description
of Securities."

  POSSIBLE VOLATILITY OF SECURITIES PRICES. There has been significant
volatility in the market prices of securities of biotechnology companies,
including those of the Company.  Various factors and events, including
announcements by the Company or its competitors concerning testing results, the
achievement of or failure to achieve certain milestones, patents, regulatory
approvals, proprietary rights, arrangements with collaborative partners,
technological innovations or new commercial products, as well as public concern
about the safety of biotechnology in general, may have a significant impact on
the Company's business.  The trading prices of the Company's securities are
subject to wide fluctuations in response to these factors, as well as to the
sale or attempted sale of a large amount of Common Stock into the market.

  MANUFACTURING AND MARKETING. The Company has not yet commercially introduced
any products, except for sales of research products to scientists.  To be
successful, the Company's therapeutic products must be manufactured in
commercial quantities in compliance with regulatory requirements and at
acceptable costs.  While the Company believes its current facilities are
adequate for the production of its proposed products for clinical trials, such
facilities are not yet adequate for the production of any products for
commercial sale.  In order to manufacture its products for such purposes, the
Company will have to enhance its existing facilities and obtain requisite
consents or acquire new facilities, which will require additional funds and
inspection and a form of approval by the FDA and other regulatory agencies.  The
Company has no experience in large-scale manufacturing, and no assurance can be
given that the Company will be able to make the transition to commercial
production successfully or achieve profitability.  Although the Company intends
to market certain of its products through a direct sales force, if and when
regulatory approval is obtained, it currently has no marketing or sales staff.
To the extent that the Company determines not to, or is unable to, arrange third
party distribution for its products, significant additional expenditures,
management resources and time will be required to develop a sales force.  There
can be no assurance that the Company will be able to establish such a sales
force or be successful in gaining market acceptance for its products.
<PAGE>

  PRODUCT LIABILITY.  The clinical investigation, marketing and sale of human
health care products entail an inherent risk of allegations of product
liability, and there can be no assurance that product liability claims will not
be asserted against the Company.  The Company currently has product liability
insurance coverage in the amount of $5,000,000 for use of its investigational
products during human clinical studies.  The Company expects to seek to obtain
product liability insurance if and when its products are commercialized;
however, there can be no assurance that adequate insurance coverage will be
available at acceptable costs, if at all, or that a product liability claim
would not materially adversely affect the business or financial condition of the
Company.  Some media centers will not participate in FDA-approved clinical
studies unless a company has adequate product liability insurance.

  DEPENDENCE ON KEY PERSONNEL AND ATTRACTION OF KEY EMPLOYEES AND CONSULTANTS.
The Company's success is dependent on certain key management and scientific
personnel.  Competition for qualified employees among biotechnology companies is
intense, and the loss of key personnel, or the inability to attract and retain
the additional highly skilled employees required for the expansion of the
Company's activities, could adversely affect its business.  In the near future,
the Company will also need to hire additional personnel skilled in the clinical
testing and regulatory process as it develops products with commercial
potential.  There can be no assurance that the Company will be able to attract
or retain such personnel.  The Company has obtained insurance on the lives of
each of Donald L. Drakeman, President and Chief Executive Officer, and Michael
A. Appelbaum, Executive Vice President - Finance and Administration, Secretary,
Treasurer and Chief Financial Officer and President and Chief Operating Officer
of GenPharm, of which the Company is the sole beneficiary in the amount of
$2,000,000 for Dr. Drakeman and $1,000,000 for Mr. Appelbaum.  Dr. Drakeman and
Mr. Appelbaum are subject to certain restrictions set forth in their respective
employment agreements.  The Company has experienced and expects to continue to
experience a period of significant growth in the number of new employees
necessary to support the Company's business operations.  The Company's need to
manage growth effectively will also require it to continue to implement and
improve its operational, financial and management information systems and to
train, motivate and manage its employees.  The Company's failure to manage
growth effectively would have a material adverse effect on the Company's results
of operations and its ability to execute business strategy.

  CONFLICTS OF INTEREST. The Company relies on members of its Scientific
Advisory Board (the "Scientific Advisors"), which includes distinguished
scientists with a wide range of experience in the research and development of
biopharmaceutical products, to assist the Company in formulating its research
and development strategy.  All of the members of the Scientific Advisory Board
are employed other than by the Company and may have commitments to or consulting
or advisory contracts with other entities that may limit their availability to
the Company.

ITEM 2. PROPERTIES


     The Company has leased approximately 53,000 square feet of laboratory,
clinical trial production and office space in a modern facility on a research
campus in Annandale, New Jersey, that was developed by Exxon Research and
Engineering Company as its corporate research headquarters. Management believes
that this facility is well suited for clinical-grade production of bispecific
and monoclonal antibodies as it has in place most utilities required for
clinical-grade production of such antibodies, including a production unit
designed to meet cGMP standards. By leasing this facility and spending modestly
to adapt it, management believes that the Company has preserved a considerable
amount of capital that might otherwise have been used to build a
biopharmaceutical production facility. The initial term of the lease was five
years and three months, and the Company has elected to renew the lease for
another five years.

  Additionally, as a result of the GenPharm Merger, the Company assumed the
lease of GenPharm's facilities located in Palo Alto, California.  The lease
expired on December 31, 1997.  In January, 1998 the Company secured
approximately 10,000 square feet of a modern facility located in San Jose,
California, owned by Becton Dickinson Corporation.  This space includes an
animal facility to house GenPharm's HuMAb-Mouse, research and development
laboratories and administrative offices.

  The combined minimum annual lease commitments for both facilities range
between approximately $1,400,000 to $2,100,000, and the aggregate future minimum
lease commitments over the remainder of the lease terms are approximately
$11,500,000.

  As a result of the HBI acquisition, on February 28, 1997 the Company assumed
the lease of HBI's facilities located in The Woodlands, Texas.  The lease
expires on February 28, 1999 and includes approximately 20,000 square
<PAGE>

feet of space, including approximately 16,000 square feet of research and
development laboratories and manufacturing facilities. The Company subleases
this space to other companies.

  The Company is currently producing materials for its clinical trials in its
existing facilities.

ITEM 3. LEGAL PROCEEDINGS

  There are no legal proceedings pending against the Company.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  There were no matters submitted to a vote of security holders during the last
quarter of the fiscal year ended December 31, 1997 through the solicitation of
proxies or otherwise.
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


  The Company's Common Stock is traded in the over-the-counter market and
included in the Nasdaq National Market under the symbol MEDX.  On March 10, 1998
there were approximately 621 holders of record (which includes individual
holders) and as of February 12, 1998, the date of the last shareholders'
meeting, there were over 7,400 beneficial shareholders of the Company's Common
Stock.

  The following table sets forth for the periods indicated the high and low
sales prices for the Common Stock for the fiscal years ended December 31, 1996
and 1997 as reported by the Nasdaq National Market.

Fiscal Year                      Common Stock
-----------                      ------------

1996                           High           Low
----                           ----           ---
First Quarter                 $ 8.00         $5.75
Second Quarter                $12.25         $6.25
Third Quarter                 $ 9.00         $5.38
Fourth Quarter                $ 9.00         $6.25

1997                           High           Low
----                           ----           ---
First Quarter                 $10.00         $6.63
Second Quarter                $ 8.75         $5.88
Third Quarter                 $ 6.81         $4.13
Fourth Quarter                $ 7.06         $4.75


  The Board of Directors will review the Company's dividend policy from time to
time to determine the feasibility and desirability of paying dividends, after
giving consideration to the Company's earnings, financial condition, capital
requirements and other factors as the Board of Directors deems relevant. The
Company has not paid any dividends on its Common Stock and does not anticipate
paying dividends in the foreseeable future.  The Company intends to retain any
earnings to finance its growth.
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                        ----------------------------------------------------------------
                                                           1993         1994         1995          1996         1997
                                                        ----------  ------------  -----------  ------------  -----------
<S>                                                     <C>         <C>           <C>          <C>           <C>
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
Statement of Operations Data:
Revenues:
     Sales............................................   $    406      $    378     $    312      $    255     $    221
   Grants, Contract and license revenues..............         --           200        1,467         1,626        3,011
                                                         --------      --------     --------      --------     --------
     Total revenues...................................        406           578        1,778         1,881        3,232
Costs and expenses:
  Cost of sales.......................................         82            91          123           132          150
  Research and development............................      3,797         5,905        6,442         7,596       14,100
  General and administrative..........................      2,361         2,154        2,275         2,558        3,644
  Stock bonus to GenPharm International, Inc.
     employees........................................         --            --           --            --        2,275
  Acquisition of in-process technology................         --            --           --            --       40,316
                                                         --------      --------     --------      --------     --------
     Total costs and expenses.........................      6,240         8,150        8,840        10,286       60,486
        Operating loss................................     (5,834)       (7,573)      (7,062)       (8,405)     (57,254)
     Interest and dividend income.....................        419           337          553         1,537        1,876
                                                         --------      --------     --------      --------     --------
        Net loss......................................   $ (5,415)     $ (7,236)    $ (6,509)     $ (6,868)    $(55,377)
                                                         ========      ========     ========      ========     ========
Basic and diluted net loss per share(1)...............     $(0.86)       $(1.00)      $(0.69)       $(0.45)      $(2.93)
Weighted average common shares outstanding(1).........      6,304         7,269        9,457        15,289       18,871

                                                                                 December 31,
                                                         --------------------------------------------------------------
                                                             1993          1995         1995          1996         1997
                                                         --------      --------     --------      --------     --------
                                                                                (IN THOUSANDS)
Balance Sheet Data:
Cash, cash equivalents and marketable securities         $  9,687      $  9,434     $ 15,729      $ 31,463     $ 28,444
Working capital.......................................      8,330         8,017       14,549        31,259        1,647
Total assets..........................................     12,640        13,017       19,240        36,044       48,695
Long-term obligations.................................         78            60           40           110          107
Cash dividends declared per common share..............         --            --           --            --           --
Accumulated deficit...................................    (10,877)      (18,113)     (24,623)      (31,491)     (86,869)
Total stockholders' equity............................     10,943        11,097       17,375        34,648        5,681
</TABLE>

__________
(1) Computed on the basis described for net loss per share in Note 2 to the
    Consolidated Financial Statements.
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

  The Company is primarily engaged in research and development.  Through March,
1996, the Company was in the development stage.  The Company has started
receiving and expects to receive revenue from research and development
agreements.  As a result, the Company is no longer considered to be in the
development stage.  Included in accumulated deficit is $26,308,655 accumulated
during the development stage.

  Through its recent acquisition of GenPharm International, Inc. ("GenPharm"),
the Company has expanded its business to include the HuMAb-Mouse technology that
rapidly creates fully human antibodies in about three to six months.  Not only
can the Company create new proprietary products, but this technology gives
Medarex the possibility of new partnering.  While no assurance can be given, the
Company anticipates that it will enter into several new partnerships relating to
the HuMAb-Mouse(TM) technology during 1998 and expects to receive license fees,
milestone payments and royalties from such partnerships.  In addition, as part
of the acquisition, the Company anticipates that it will receive more than
$30,000,000 in cash by the end of 1998 through a combination of certain Third
Party Payments ($7 million was received in December 1997, a $15 million note
plus interest is due in September 1998 and $7 million for patent approval is
expected at the end of 1998) and GenPharm cash and cash equivalents as of
December 31, 1997. While no assurance can be given, Management believes that the
Company's acquisition of GenPharm and its expansion into the HuMAb-Mouse
business will provide the Company with significant additional sources of
revenue.

RESULTS OF OPERATIONS

Years ended December 31, 1995, 1996 and 1997

  Revenues for 1995, 1996 and 1997 were principally derived from contract and
licensing activities.  Total revenues in 1995 were $1,778,400 including
$1,466,667 in contract and license revenues, $800,000 of which relates to a
collaborative arrangement with Merck KGaA of Darmstadt, Germany ("E. Merck") and
$666,667 of which relates to a collaborative arrangement with Novartis Pharma AG
of Basel, Switzerland ("Novartis").  Total revenues in 1996 of $1,881,408
increased 6% over 1995 revenues and included contract and license revenues of
$1,150,000 from Centeon L.L.C. ("Centeon"), a Delaware limited liability company
formed through a joint venture of Hoechst AG and Rhone-Poulenc Rorer, Inc. and
$476,191 from Novartis.  Total revenues in 1997 of $3,232,169  increased 72%
over 1996 and included $865,000 of contract revenue received from Santen
Pharmaceutical Co., Ltd. of Osaka, Japan, ("Santen"), $742,800 from Centeon,
$377,000 from Eisai Co., Ltd. of Tokyo, Japan, ("Eisai") and $268,686 in
Small Business Innovation Research ("SBIR") grants.

  The Company's cost of sales increased by $8,155 in 1996, a 7% increase over
1995 and $18,856 in 1997, a 14% increase over 1996.  The increases were
principally due to increased shipping, depreciation and raw material costs in
1996 and 1997.

  Research and development expenses increased $1,154,114 in 1996, an 18%
increase from 1995.  The 1996 increase was principally due to activity
associated with human clinical trials in the Company's two lead oncology
bispecific products, MDX-210 and MDX-447.  In 1997, research and development
expense increased $6,504,182, an 86% increase from 1996.  The 1997 increase was
primarily attributable to increased research and development activity as a
result of the acquisition of Houston Biotechnology Incorporated ("HBI") and
GenPharm increased activities and facility upgrades associated with human
clinical trials. Additionally, sponsored research increased with the creation of
Medarex Europe B.V. in late 1996. Research and development costs are expected to
increase at an accelerated rate as the Company's products progress through the
regulatory approval process.

  General and administrative expenses increased $283,704 in 1996, a 12% increase
over 1995.  In 1996, additional personnel costs, partially offset by lower rent
expense and consulting fees, contributed to this increase.  In 1997, general and
administrative expenses increased $1,085,041, a 42% increase over 1996.  The
increase is primarily attributable to higher personnel costs, travel expenses
and consulting expenses.  These expenses are expected to increase significantly
as the Company's products are developed and it expands its operations.
<PAGE>

  Acquisition of in-process technology charges of $40,316,214 in 1997 relates to
the February 28, 1997 acquisition of HBI ($10,385,565) and the October 21, 1997
acquisition of GenPharm ($29,930,649).

  Interest and dividend income increased by $983,782 in 1996, a 178% increase
from the same period in 1995, reflecting a higher average cash balance,
primarily as the result of proceeds received from the exercise of the Company's
public Redeemable Warrants pursuant to a Warrant Reduction Offer (as defined
herein) which was completed on May 15, 1996.  Interest and dividend income
increased by $339,645 in 1997, a 22% increase over 1996.  The increase reflected
a higher  average cash balance.

  The Company does not believe that inflation has had a material impact on its
results of operations.

  In 1997, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. SFAS No.
128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. The effect of
adoption of SFAS No. 128 had no financial impact, and accordingly, no
restatement of loss per share for prior years was necessary. SFAS No.

  In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements and applies to all enterprises. SFAS No. 130 is effective
for financial statements for fiscal years beginning after December 15, 1997. The
adoption of SFAS No. 130 will have no impact on the Company's consolidated
results of operations, financial position or cash flows but will affect the
disclosure of stockholder equity changes such as the unrealized gains (losses)
of available-for-sale securities.

  In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information , which is effective for years beginning
after December 15, 1997. SFAS No. 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company will adopt the new
requirements retroactively in 1998. Management is currently evaluating SFAS No.
131 and does not anticipate that the adoption of this statement will have
significant effect on the Company's financial reporting.
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

  The Company has financed its operations since inception primarily through
private placements and public sales of its securities, contract and license
revenues and research product sales.  Through December 31, 1997, the Company and
its subsidiaries raised $66,200,000 from sales of securities.

  The Company had $31,463,334 and $28,444,015 in cash, cash equivalents and
marketable securities as of December 31, 1996 and 1997, respectively.  Operating
activities consumed $6,233,272, $7,342,371 and $11,894,346 of cash for the years
ended December 31, 1995, 1996 and 1997, respectively.

  Through December 31, 1997, the Company had invested $5,431,249 in property and
equipment.

  The Company has incurred and will continue to incur significant costs in the
area of research and development, including pre-clinical and clinical trials, as
its products develop.  Administrative costs are also expected to increase with
the increase of administrative activities and the creation of a marketing
organization. See "Risk Factors."

  In connection with the merger of Essex Medical Products ("EMP") and Medarex,
Medarex issued promissory notes to Essex Chemical Corporation ("Essex") in the
principal amount of $100,000 and committed to pay 20% of the Company's net
after-tax income until a total of $1,000,000 has been paid, contingent upon the
occurrence of certain events.  At the Company's option, this contingent
obligation may be satisfied by the payment of shares of the Company's Common
Stock having a fair market value equal to the amount owed, provided such shares
are registered for sale with the Securities and Exchange Commission.  Amounts up
to $1,000,000 will be payable to Essex, based solely on the earnings of the
Company, by March 31 of each year, to the extent of 20% of net after-tax
earnings of the Company realized during the preceding fiscal year.  On June 6,
1991, the Company repaid the $100,000 of notes, plus accrued interest to Essex.

  On May 17, 1995, the Company announced a collaborative arrangement with
Novartis. Under the terms of the arrangement, on June 28, 1995, the Company sold
899,888 shares of Common Stock to Novartis at $4.445 per share, for an aggregate
purchase price of $4,000,000. The purchase price represented a premium of
approximately $1,140,000 over the then fair market value of the Company's Common
Stock. This premium represents consideration paid for research activities
performed by the Company and was amortized into income as the clinical trial and
research activities were performed.

  On November 8, 1995, the Company sold 2,190,000 shares of Common Stock in a
placement to selected institutional investors for $5.00 per share (the "1995
Placement").  The Company realized net proceeds of approximately $9,650,000.

  On April 18, 1996, the Company commenced its offer to reduce temporarily the
exercise price of each of its Redeemable Warrants from $6.17 to $5.55 per
Redeemable Warrant (the "Warrant Reduction Offer").  Pursuant to the Warrant
Reduction Offer, which was completed on May 15, 1996, the holders of 3,882,022
Redeemable Warrants (approximately 97% of the maximum number of Redeemable
Warrants that could have been exercised) exercised their warrants to purchase
approximately 4,534,202 shares of Common Stock, resulting in proceeds of
$21,545,222 to the Company before deducting expenses incurred in connection with
the offering.  Including exercises prior and subsequent to the Warrant Reduction
Offer, warrantholders purchased approximately 5,031,910 shares of Common Stock
resulting in total gross proceeds to the Company of approximately $24,174,401
from the exercise of the Redeemable Warrants.

  On April 26, 1996, the Company announced that it had entered into a
collaborative arrangement with Centeon to develop and market MDX-33.  This
collaboration provides for the joint development of MDX-33 by the Company and
Centeon.  Subject to the terms of the arrangement, the Company is primarily
responsible for product development, clinical testing through Phase II trials
and the manufacture of all product used in clinical trials.  Centeon will be
primarily responsible for the payment of all expenses associated with Phase I
and Phase II clinical trials of MDX-33 to be conducted by the Company, up to a
maximum of $20,000,000.  If such trials are successfully completed, Centeon will
be primarily responsible for Phase III clinical trials, regulatory approvals,
product commercialization and the costs
<PAGE>

associated therewith. In addition, under the terms of the arrangement, Centeon
paid to the Company an up-front fee of $1,000,000 which was included in contract
and license revenue in 1996 and will pay research and development funding of
$900,000 over three years. Centeon may also provide the Company with up to
$10,000,000 of additional funding upon the achievement of certain milestones.
See "Risk Factors."

  Under the terms of the arrangement, Centeon has an option (the "Option") to
purchase shares of  Common Stock of the Company in an amount equal to
$2,000,000, at a premium over the market price for the Common Stock on the
Nasdaq National Market for the three day period commencing one business day
prior to the Company's public announcement that certain milestones have been
achieved.  If such milestones have been achieved and Centeon does not elect to
exercise the Option, then Centeon will be required to pay $2,000,000 to the
Company. See "Risk Factors -- Dilution."

  On February 28, 1997, the Company completed its acquisition of HBI, a
biotechnology company located in Houston, Texas, involved in the development of
monoclonal antibody and other biopharmaceutical products to prevent secondary
cataracts and to treat glaucoma, disorders that impair or destroy human vision.
The purchase price consisted of 1,026,245 shares of Medarex common stock (valued
at $7.375 per share), the assumption of certain HBI options and warrants, the
assumption of certain liabilities in excess of assets acquired and transaction
costs. The transaction was treated as a purchase for accounting purposes and the
Company charged $10,385,565 to operations during the first quarter of 1997 which
reflected the write-off of the in-process technology acquired. HBI's lead
product, MDX-RA, is a monoclonal antibody conjugated to a toxin known as ricin.
This product, which is in Phase III clinical trials, is used during primary
cataract surgery to prevent the occurrence of secondary cataracts. In addition
to MDX-RA, HBI is also developing other products including a product for the
treatment of glaucoma. The glaucoma product and the other products in the HBI
portfolio other than MDX-RA are in the preclinical or research and development
stage.

  On October 21, 1997, the Company consummated the acquisition of GenPharm,
resulting in GenPharm becoming a wholly-owned subsidiary of the Company (the
"Merger").  Pursuant to the Merger, the Company will issue shares of its Common
Stock having a value of up to $62,725,000, subject to adjustment (the "Purchase
Price") in exchange for all of the outstanding shares of GenPharm capital stock.
The transaction was treated as a purchase for accounting purposes, and the
Company charged $29,930,649 to operations during the last quarter of 1997 which,
along with HBI, was reflected in the write-off of in-process technology
acquired.

  During 1997 the Company issued 3,250,000 shares of its Common Stock as payment
of $17,793,750 of the Purchase Price.  The Company will issue additional shares
of its Common Stock (the "Additional Shares") in 1998 (and possibly to some
extent in 1999) having a then current fair market value sufficient to satisfy
the balance of the Purchase Price, as adjusted.  Since the number of Additional
Shares to be issued in connection with the Merger will be determined at future
dates based on the then fair market value of the Company's Common Stock and the
amount of the Purchase Price as adjusted, the maximum number of Additional
Shares to be issued in connection with the Merger cannot be determined at this
time.  A significant decrease in the fair market value of the Company's Common
Stock would result in a significant increase in the number of shares issuable in
connection with the Merger.  Similarly, a significant increase in the fair
market value or a significant reduction in the Purchase Price would result in a
significant decrease in the number of shares issuable in connection with the
Merger See "Risk Factors."

  At December 31, 1997 the Company has federal net operating loss ("NOL")
carryforwards of approximately $41,760,000. The NOL carryforwards for the
Company expire in 2002 ($45,000), 2003 ($196,000), 2004 ($524,000), 2006
($863,000), 2007 ($3,985,000), 2008 ($5,533,000), 2009 ($7,592,000), 2010
($6,395,000), 2011 ($7,028,000) and 2012 ($9,599,000). The Company has not
performed a detailed analysis to determine whether an ownership change under
Section 382 of the Internal Revenue Code of 1986, as amended occurred, but
believes that it is very likely that such a change occurred during 1996 or 1997.
The effect of an ownership change would be the imposition of an annual
limitation on the use of NOL carryforwards attributable to periods before
change. If the change occurred in late 1997, substantially all of the NOL
carryforwards would be subject to the limitation. The amount of the annual
limitation depends upon the value of the Company immediately before the change,
changes to the Company's capital during a specified period prior to the change,
and an interest rate which is published monthly. Due to uncertainty as to the
date of an ownership change during 1996 or 1997, the Company has not determined
the amount of the potential limitation. At December 31, 1997 the Company has
provided a valuation reserve to fully offset the benefit of its net operating
loss carryforwards. See Note 5.
<PAGE>

     The Company has leased approximately 53,000 square feet of laboratory,
clinical trial production and office space in a modern facility on a research
campus in Annandale, New Jersey, that was developed by Exxon Research and
Engineering Company as its corporate research headquarters. Management believes
that this facility is well suited for clinical-grade production of bispecific
and monoclonal antibodies as it has in place most utilities required for
clinical-grade production of such antibodies, including a production unit
designed to meet cGMP standards. By leasing this facility and spending modestly
to adapt it, management believes that the Company has preserved a considerable
amount of capital that might otherwise have been used to build a
biopharmaceutical production facility. The initial term of the lease is five
years and three months, and the Company has elected to renew the lease for
another five years. On January 8, 1998, the Company signed a lease for
laboratory and office space in San Jose, California.  This lease runs through
December 2001. The minimum combined annual lease commitments for both facilities
range between approximately $1,400,000 to $2,100,000, and the aggregate future
minimum lease commitments over the remainder of the lease terms are
approximately $11,500,000. As of December 31, 1997, the Company had commitments
for approximately $725,000 of capital expenditures. See "Risk Factors."

     The Company is currently producing materials for its clinical trials in its
existing facilities.

  To date, the Company's sources of cash have been the proceeds from the sale of
its securities through public and private placements, sales of it products for
research purposes and technology transfer and license fees.

  The Company's current sources of liquidity are its cash, cash equivalents and
marketable securities, interest and dividends earned on such cash, cash
equivalents and marketable securities, sales of its products for research and
contract and licensing revenues.  Management believes that under existing
operating plans its current sources of liquidity will be sufficient to meet
anticipated cash requirements for at least the next 24 months.  See "Risk
Factors."

  Upon exhaustion of its current cash reserves, the Company's continued
operations will depend on its ability to raise additional funds through equity
or debt financing and/or enter into licensing or joint development agreements,
including collaborative research and development arrangements with large
pharmaceutical companies pursuant to which certain costs associated with the
regulatory approval process for certain of its products would be borne by the
licensees or joint developers.  There can be no assurance that these sales or
financing activities will be successful.  See "Risk Factors."

READINESS FOR YEAR 2000

  The Company has conducted a review of its computer systems to identify the
systems that could be affected by the "Year 2000" issue. The Year 2000 problem
is the result of computer programs being written using two digits (rather than
four) to define the applicable year.  Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000.  This could result in a major system failure or
miscalculations.  The Company presently believes that the Year 2000 problem will
not pose significant operational problems for the Company's computer systems.
Additionally, the cost of the Year 2000 problem will have no material impact
 on the operations of the Company.
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                         REPORT OF INDEPENDENT AUDITORS



The Board of Directors and Shareholders
Medarex, Inc.

  We have audited the accompanying consolidated balance sheets of Medarex, Inc.
and Subsidiaries as of December 31, 1996 and 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1997.  These financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

  In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Medarex, Inc. and
Subsidiaries at December 31, 1996 and 1997 and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.


                                                          Ernst & Young LLP


Princeton, New Jersey
January 20, 1998,
  except for Note 13 as
  to which the date is
  February 12, 1998
<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                          December 31,
                                                                                      --------------------------------------------
                                                                                                   1996                  1997
<S>                                                                                    <C>                    <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                           $         4,958,065    $         6,723,447
   Marketable securities                                                                        26,505,269             21,720,568
   Note receivable                                                                                       -             15,000,000
   Trade accounts receivable, less allowance for doubtful
      accounts of $5,000                                                                            22,677                 24,562
   Inventory                                                                                        46,232                 43,575
   Prepaid expenses and other current assets                                                     1,012,001              1,042,354
                                                                                      ---------------------  ---------------------

         Total current assets                                                                   32,544,244             44,554,506

 Property and equipment:
   Machinery and equipment                                                                       2,374,996              3,190,857
   Furniture and fixtures                                                                          164,316                209,933
   Leasehold improvements                                                                          557,996              2,030,459
                                                                                      ---------------------  ---------------------
                                                                                                 3,097,308              5,431,249

   Less accumulated depreciation and amortization                                               (1,866,470)            (2,573,262)
                                                                                      ---------------------  ---------------------
                                                                                                 1,230,838              2,857,987

Investments in, and advances to affiliate                                                          414,777                414,777
Segregated cash                                                                                  1,260,000                315,000
Patents rights and other assets                                                                    594,223                552,994
                                                                                      =====================  =====================
     Total assets                                                                      $        36,044,082   $         48,695,264
                                                                                      =====================  =====================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Trade accounts payable                                                              $           170,588    $           382,311
   Accrued liabilities                                                                           1,114,598              8,100,774
   GenPharm acquisition liability                                                                        -             34,423,987
                                                                                      ---------------------  ---------------------
      Total current liabilities                                                                  1,285,186             42,907,072

 Long-term obligations                                                                             110,404                107,225

Commitments                                                                                              -                      -

Stockholders' equity:
   Preferred stock, $1.00 par value, 2,000,000 shares authorized;
      none issued and outstanding                                                                        -                      -
   Common stock, $.01 par value; 40,000,000 shares authorized;
       17,592,992 and 21,922,186 shares issued and outstanding,
      respectively                                                                                 175,931                219,222
   Capital in excess of par value                                                               65,947,081             92,142,138
   Unrealized gain on securities                                                                    16,743                188,250
   Accumulated deficit                                                                         (31,491,263)           (86,868,643)
                                                                                      ---------------------  ---------------------

         Total stockholders' equity                                                             34,648,492              5,680,967
                                                                                      =====================  =====================
         Total liabilities and stockholders' equity                                    $        36,044,082    $        48,695,264
                                                                                      =====================  =====================
</TABLE>
See notes to consolidated  financial statements.

<PAGE>
                        MEDAREX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                For the Year Ended December 31,
                                                                      ----------------------------------------------------
                                                                      1995                   1996                     1997
                                                           ---------------------   --------------------    ---------------------
<S>                                                           <C>                    <C>                       <C>
Sales                                                                 $ 311,733              $ 255,217                $ 220,837
Grants, contract and license revenues                                 1,466,667              1,626,191                3,011,332
                                                           ---------------------   --------------------    ---------------------
      Total revenues                                                  1,778,400              1,881,408                3,232,169

Costs and expenses:
      Cost of sales                                                     123,421                131,576                  150,432
      Research and development                                        6,442,159              7,596,273               14,100,455
      General and administrative                                      2,274,892              2,558,596                3,643,637
      Bonus to GenPharm International, Inc.employees                          -                      -                2,275,000
      Acquisitions of in-process technology                                   -                      -               40,316,214
                                                           ---------------------   --------------------    ---------------------
          Operating loss                                             (7,062,072)            (8,405,037)             (57,253,569)

Interest and dividend income                                            552,762              1,536,544                1,876,189


                                                           ---------------------   --------------------    ---------------------
          Net loss                                                 $ (6,509,310)          $ (6,868,493)           $ (55,377,380)
                                                           =====================   ====================    =====================
Basic and diluted net loss per share                                     ($0.69)                ($0.45)                  ($2.93)
                                                           =====================   ====================    =====================
</TABLE>

See notes to consolidated financial statements.
<PAGE>
                        MEDAREX, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                Common stock
                                      ------------------------     Capital         Unrealized                             Total
                                       Number of                  in excess      gain (loss) on       Accumulated     stockholders'
                                        shares      Amount       of par value      securities           deficit           equity
                                        ------      ------       ------------      ----------          ---------      -------------
<S>                                   <C>          <C>          <C>              <C>                <C>              <C>

Balance at January 1, 1995             8,713,738     $87,138     $29,122,871                          $(18,113,460)     $11,096,549
                                     -----------------------------------------------------------------------------------------------

Issuance of common stock in
   public offering                     2,190,000      21,900       9,628,488                                              9,650,388
Issuance of common stock in
   private placements                    899,888       8,999       2,839,644                                              2,848,643
Issuance of common stock for
   exercise of options and  grant
   of restricted shares                   55,000         550         223,200                                                223,750
Unrealized gain on securities                                                            $65,064                             65,064
Net loss                                                                                                (6,509,310)      (6,509,310)
                                     -----------------------------------------------------------------------------------------------

Balance at December 31, 1995          11,858,626    $118,587     $41,814,203             $65,064      $(24,622,770)     $17,375,084
                                     -----------------------------------------------------------------------------------------------

Issuance of common stock in
   exchange for patent rights             70,000         700         607,012                                                607,712
Issuance of common stock for
   exercise of options                    71,250         713         302,756                                                303,469
Issuance of common stock for
   exercise of warrants                5,593,116      55,931      23,223,110                                             23,279,041
Unrealized loss on securities                                                            (48,321)                           (48,321)
Net loss                                                                                                (6,868,493)      (6,868,493)
                                     -----------------------------------------------------------------------------------------------

Balance at December 31, 1996          17,592,992    $175,931     $65,947,081             $16,743      $(31,491,263)     $34,648,492
                                     -----------------------------------------------------------------------------------------------

Issuance of common stock, options
  and warrants inexchange for Houston
  Biotechnology Incorporated stock     1,026,245      10,262       8,108,295                                              8,118,557
Issuance of common stock, options
  and warrants in as a portion of
  proceeds for GenPharm
  International, Inc. stock            3,250,000      32,500      17,793,000                                             17,825,500
Issuance of common stock for
   exercise of options                    32,469         324         144,797                                                145,121
Issuance of common stock for
   exercise of warrants                   20,480         205          54,975                                                 55,180
Options issued to non-employees                                       93,990                                                 93,990
Unrealized gain on securities                                                            171,507                            171,507
Net loss                                                                                               (55,377,380)     (55,377,380)
                                     -----------------------------------------------------------------------------------------------
Balance at December 31, 1997          21,922,186    $219,222     $92,142,138            $188,250      $(86,868,643)      $5,680,967
                                     ===============================================================================================
</TABLE>
See notes to consolidated financial statements.

<PAGE>
                        MEDAREX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                  For the Year Ended December 31,
                                                                                  ------------------------------

                                                                       1995                     1996                     1997
                                                                       ----                     ----                     ----
<S>                                                                <C>                     <C>                     <C>
Operating activities:
   Net loss                                                        $ (6,509,310)            $ (6,868,493)           $(55,377,380)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
         Depreciation                                                   373,125                  360,837                 537,920
         Amortization                                                   140,176                  160,480                 225,079
         Gain on sale of equipment                                            -                        -                    (215)
         Write-off of in-process technology                                   -                        -              40,316,214
         Stock bonus to GenPharm International, Inc.employees                 -                        -               2,275,000
         Value of stock options to non-employees                              -                        -                  68,400
Changes in operating assets and liabilities, net of acquisition:
   Decrease (increase) in trade accounts receivable, net                  8,368                   36,899                  (1,885)
   Decrease in inventory                                                 13,381                    3,262                   2,657
   Decrease (increase) in prepaid expenses and other
      current assets                                                   (223,818)                (475,645)                155,823
   Increase (decrease) in trade accounts payable                        (62,841)                  27,061                (310,723)
   Increase (decrease) in accrued liabilities                           351,456                 (110,581)                214,764
   Decrease in deferred contract revenue                               (323,809)                (476,191)                      -
                                                                   ------------             ------------           -------------
        Net cash used in operating activities                        (6,233,272)              (7,342,371)            (11,894,346)

Investing activities:
   Purchase of property and equipment                                  (239,828)                (342,280)             (1,957,428)
   Purchase of Houston Biotechnology Incorporated,
       net of cash acquired                                                   -                        -              (1,006,940)
   Purchase of GenPharm International, Inc.,
       net of cash acquired                                                   -                        -               6,054,280
   Decrease in segregated cash and other assets                               -                        -                 952,407
   Increase in advances to affiliate                                          -                  (90,293)                      -
   Proceeds from sale of equipment                                            -                        -                   5,000
   Purchase of marketable securities                                 (6,997,352)             (14,365,654)                      -
   Sales of marketable securities                                             -                        -               9,507,038
                                                                   ------------             ------------           -------------
       Net cash (used in) provided by investing activities           (7,237,180)             (14,798,227)             13,554,357

Financing activities:
   Cash received from sales of stock, net                            12,722,781               23,577,722                 191,692
   Incease in long term obligations                                           -                        -                  15,365
   Principal payments under debt obligations                            (19,832)                 (19,818)               (101,686)
                                                                   ------------             ------------           -------------
       Net cash provided by  financing activities                    12,702,949               23,557,904                 105,371
                                                                   ------------             ------------           -------------
       Net increase (decrease) in cash and cash equivalents            (767,503)               1,417,306               1,765,382
Cash and cash equivalents at beginning of period                      4,308,262                3,540,759               4,958,065
                                                                   ------------             ------------           -------------
Cash and cash equivalents at end of period                          $ 3,540,759              $ 4,958,065             $ 6,723,447
                                                                   ============             ============           =============
Non-cash investing and financing activities:
         Issue of common stock for technology                       $         -              $   612,500             $         -
         Acquisition of equipment under financing agreement                   -                  110,160                       -
                                                                   ============             ============           =============
Supplemental disclosures of cash flow information
   Cash paid during period for:
      Income taxes                                                  $         -              $         -             $         -
                                                                   ============             ============           =============
      Interest                                                      $     8,128              $     5,088             $    19,470
                                                                   ------------             ------------           -------------
</TABLE>

See notes to consolidated financial statements.
<PAGE>

1.  Nature of Operations
    --------------------

          Medarex, Inc. ("Medarex" or the "Company"), incorporated in July 1987,
is a biotechnology company developing therapeutic products for cancer,
autoimmune disease, prevention of secondary cataracts and other life-threatening
diseases based on proprietary technology in the field of immunology.  The
Company has three wholly-owned subsidiaries.  Medarex Europe B.V. which was
incorporated in the Netherlands on October 31, 1996, Houston Biotechnology
Incorporated ("HBI") which was acquired on February 28, 1997 (See Note 12) and
GenPharm International, Inc. ("GenPharm") which was acquired on October 21, 1997
(See Note 12).  The Company's therapeutic products are currently under
development and will need approval of the U.S. Food and Drug Administration
("FDA") prior to commercial distribution.  The Company's operations constitute
one business segment.  All significant intercompany balances and transactions
have been eliminated in consolidation.

2.  Significant Accounting Policies
    -------------------------------

          Cash Equivalents
          ----------------

          The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.  The Company invests its cash in
deposits with major financial institutions, money market funds and notes issued
by the U. S. government.

          Marketable Securities
          ---------------------

          Marketable securities consist of fixed income investments with a
maturity of greater than three months and U.S. stock funds both of which can be
readily purchased or sold using established markets.  Such securities, which are
classified as available-for-sale, are carried at market with unrealized gains
and losses reported as a separate component of stockholders' equity.

          Inventory
          ---------

          Inventory consists primarily of antibodies to be sold to the research
community and is stated at the lower of cost or market with cost determined on a
first-in, first-out basis.

          Property and Equipment
          ----------------------

          Property and equipment is stated at cost.  Depreciation is provided
over five years using the straight-line method.  Leasehold improvements are
amortized over the estimated useful lives of the assets or the related lease
terms, whichever is shorter.

          Revenue Recognition
          -------------------

          The Company sells antibodies primarily to research institutions in the
United States and overseas.  Revenue from these sales is recognized when the
products are shipped.  Research and development contract revenues are recognized
as the services are performed and as milestones are attained and collection is
assured.  Amounts received in advance of services to be performed are recorded
as deferred revenue.

          Research and Development
          ------------------------

          Research and development costs are expensed as incurred.

          Use of Estimates
          ----------------

          The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.
<PAGE>

2.  Significant Accounting Policies (con't)
    ---------------------------------------

          Stock Based Compensation
          ------------------------

          The Company has adopted Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"). In accordance
with the provisions of SFAS No. 123, the Company applies Accounting Principles
Board Opinion 25 and related interpretations in accounting for its stock option
plans and, accordingly, does not recognize compensation expense for stock
options granted at fair market value. Note 8 to the consolidated financial
statements contains a summary of the pro forma effects to reported net loss and
loss per share for 1995, 1996 and 1997 as if the Company had elected to
recognize compensation expense based on the fair value of the options granted at
grant date as prescribed by SFAS No. 123.

          Net Loss Per Share
          ------------------

          In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, Earnings per Share. SFAS No. 128 replaced the previously reported
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. Basic net loss per share is based upon the weighted average
Common Stock outstanding during each year. Common Stock equivalents are not
included as their effect is antidilutive. Shares used in computing loss per
share were 9,456,763, 15,288,754 and 18,871,316 in 1995, 1996 and 1997,
respectively. The effect of adoption of SFAS No. 128 had no financial impact,
and accordingly, no restatement of loss per share for prior years was necessary.

     Impact of Recently Issued Accounting Standards
     ----------------------------------------------

          In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements and applies to all enterprises. SFAS No. 130 is effective
for financial statements for fiscal years beginning after December 15, 1997. The
adoption of SFAS No. 130 will have no impact on the Company's consolidated
results of operations, financial position or cash flows but will affect the
disclosure of stockholder equity changes such as the unrealized gains (losses)
of available-for-sale securities.

          In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, which is effective for years beginning
after December 15, 1997. SFAS No. 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company will adopt the new
requirements retroactively in 1998. Management is currently evaluating SFAS No.
131 and does not anticipate that the adoption of this statement will have
significant effect on the Company's financial reporting.

     Reclassifications
     -----------------

          Certain December 31, 1995 and 1996 balances have been reclassified to
conform with the December 31, 1997 presentation.
<PAGE>

3.  Marketable Securities
    ---------------------

       Marketable securities consist of the following as of December 31:

<TABLE>
<CAPTION>
                                                          1996                                        1997
                                      --------------------------------------------  ---------------------------------------
                                                       Unrealized     Estimated                    Unrealized   Estimated
                                            Cost      Gain (Loss)   Fair Value         Cost         Gain      Fair Value

<S>                                     <C>           <C>            <C>             <C>           <C>         <C>
US Treasury Obligations                  $11,082,374      $(19,566)   $11,062,808     $ 4,969,991    $ 35,241   $ 5,005,232
US Corporate Debt Securities              13,206,152        36,309     13,242,461       3,641,130     153,009     3,794,139
US Stock Funds                             2,200,000            --      2,200,000      12,921,197          --    12,921,197

                                      --------------------------------------------  ---------------------------------------
                                         $26,488,526      $ 16,743    $26,505,269     $21,532,318    $188,250   $21,720,568
                                      --------------------------------------------  ---------------------------------------
</TABLE>

4.  Leases
    ------

          The Company leases laboratory, production and office space in
Annandale, New Jersey and San Jose, California.  The initial term of the
Annandale lease, which commenced on July 15, 1993, was for five years and three
months.  The Company has elected to renew this lease for an additional five-year
term. The San Jose lease was signed on January 8, 1998 and runs through December
2001.  The Company incurred rent expense of $1,782,004 in 1995, $1,819,533 in
1996 and $2,063,353 in 1997.

          The Company has secured a bank letter of credit pursuant to the
requirements of its Annandale, New Jersey lease.  This letter of credit in the
amount of $315,000 is fully cash collateralized and the cash is categorized as
segregated cash in the balance sheet.

          Future minimum lease commitments are as follows:

        1998                   $  2,096,000
        1999                      2,130,000
        2000                      2,106,000
        2001                      2,106,000
        2002                      1,736,000
        Remainder                 1,374,000
                               ------------
                               $ 11,548,000
                               ============

5.  Taxes
    -----

 Income tax expense is determined using the liability method.

 Due to operating losses, the Company has no federal income tax liability
 for 1996 or 1997.

 The components of the net deferred tax asset consists of the following as of
 December 31:

                                                1996          1997
                                              -------        -------
 Deferred Tax Assets:
  Research credit                         $    850,000   $  1,802,000
  Net operating loss carryforward           12,652,000     18,480,000
  R&D capitalized for tax purposes                          4,661,000
  Other                                                     1,031,000
  Deferred tax asset valuation reserve     (13,502,000)   (25,974,000)
                                          ------------   ------------

    Net Deferred Tax Asset                        ----           ----
                                          ============   ============
<PAGE>

5.  Taxes (con't)
    -------------

     At December 31, 1997 the Company has federal net operating loss ("NOL")
carryforwards of approximately $41,760,000. The NOL carryforwards for the
Company expire in 2002 ($45,000), 2003 ($196,000), 2004 ($524,000), 2006
($863,000), 2007 ($3,985,000), 2008 ($5,533,000), 2009 ($7,592,000), 2010
($6,395,000), 2011 ($7,028,000) and 2012 ($9,599,000). The Company has not
performed a detailed analysis to determine whether an ownership change under
Section 382 of the Internal Revenue Code of 1986, as amended, occurred, but
believes that it is very likely that such a change occurred during 1996 or 1997.
The effect of an ownership change would be the imposition of an annual
limitation on the use of NOL carryforwards attributable to periods before
change. If the change occurred in late 1997, substantially all of the NOL
carryforwards would be subject to the limitation. The amount of the annual
limitation depends upon the value of the Company immediately before the change,
changes to the Company's capital during a specified period prior to the change,
and an interest rate which is published monthly. Due to uncertainty as to the
date of an ownership change during 1996 or 1997, the Company has not determined
the amount of the potential limitation.

     The Company has research tax credit carryforwards at December 31, 1997 of
approximately $791,000 which expire between 2005 and 2011. If an ownership
change under Section 382 occurred during 1996 or 1997, the use of these
carryforwards also would be subject to the aforementioned limitation.

     At December 31, 1997, the Company has state NOL and research credit
carryforwards of approximately $42,923,000 and $513,000, respectively. The state
NOL carryforwards expire as follows: ($876,000) in 1999, ($3,997,000) in 2000,
($5,399,000) in 2001, ($7,453,000) in 2002, ($6,316,000) in 2003, ($6,965,000)
in 2004 and ($11,917,000) in 2005. The credit carryforwards expire in 2002
($164,000), 2003 ($149,000) and 2004 ($200,000).

     As a result of the acquisition of HBI (See Note 12), the Company has
additional federal NOL carryforwards at December 31, 1997 of approximately
$4,722,000. The NOL carryforwards expire as follows: 2001 ($145,000), 2002
($900,000), 2003 ($1,038,000), 2005 ($295,000), 2006 ($783,000), 2007
($666,000), 2008 ($781,000) and 2009 ($114,000). The Company also has research
credit carryforwards of approximately $672,000 which expire between 2005 and
2010. The use of the NOL and credit carryforwards are subject to an annual
limitation under Section 382. The Company has not determined the amount of the
limitation.

     As a result of the acquisition of GenPharm (See Note 12), the Company has
additional federal NOL carryforwards at December 31, 1997 of approximately
$372,000. This carryforward can only be used against the income of GenPharm and
expires in 2009.

     At December 31, 1997 the deferred tax assets related to the federal and
state NOL and credit carryforwards, and other temporary differences have been
fully offset by a valuation reserve.

6.  Accrued Liabilities
    -------------------

    Accrued liabilities consist of the following as of December 31:


<TABLE>
<CAPTION>
                                                            1996                         1997
                                                         ----------                 -----------
<S>                                                     <C>                      <C>
             Accrued stock bonus                        $        --              $    2,275,000
             Accrued acquisition costs                           --                   1,191,855
             Accrued professional fees                      134,642                   1,031,687
             Accrued clinical trials expense                139,068                     932,248
             Accrued compensation                           477,202                     802,023
             Accrued rent                                    80,600                     411,666
             Other                                          283,086                   1,456,295
                                                         ----------              --------------
                                                         $1,114,598              $    8,100,774
                                                         ==========              ==============
</TABLE>
<PAGE>

7.  Stockholders' Equity
    --------------------

          On May 17, 1995, the Company announced a collaborative arrangement
with Novartis Pharma AG of Basel, Switzerland ("Novartis").  Under the terms of
the arrangement, on June 28, 1995, the Company sold 899,888 shares of Common
Stock to Novartis at $4.445 per share, for an aggregate purchase price of
$4,000,000.  The purchase price represented a premium of approximately
$1,140,000 over the then fair market value of the Company's Common Stock.  This
premium represents consideration paid for research activities performed by the
Company and was amortized into income as the clinical trial and research
activities were performed.

          On November 8, 1995, the Company sold 2,190,000 shares of Common Stock
in a placement to selected institutional investors for $5.00 per share (the
"1995 Placement").  The Company realized net proceeds of approximately
$9,650,000.

          On February 28, 1997, the Company completed its acquisition of HBI.
The purchase price consisted of 1,026,245 shares of Medarex common stock (valued
at $7.375 per share), the assumption of HBI's outstanding options and warrants,
the assumption of certain liabilities in excess of assets acquired and
transaction costs.

          On October 21, 1997, the Company consummated the acquisition of
GenPharm resulting in GenPharm becoming a wholly-owned subsidiary of the
Company.  Pursuant to the Merger, the Company will issue shares of its Common
Stock having a value of up to $62,725,000 (the "Purchase Price"), subject to
adjustment in exchange for all of the outstanding shares of GenPharm capital
stock.  During 1997 the Company issued 3,250,000 shares of its Common Stock as
payment of $17,793,750 of the Purchase Price (See Note 12).

8.  Stock Options
    -------------

     The Company has nine Stock Option Plans (the "Plans").  The purchase price
of stock options under the Plans is determined by the Stock Option Committee of
the Board of Directors of the Company (the "Committee") but cannot be less than
100% of the fair market value of the stock on the date of grant.  The term is
fixed by the Committee, but no incentive stock option is exercisable after 10
years from the date of grant. As a result of the HBI acquisition, outstanding
HBI options were converted to 187,471 Medarex options. At December 31, 1997, a
total of 323,450 shares were available for future grants under the Plans.

     A summary of the Company's stock option activity and related information
for the years ended December 31, 1995, 1996 and 1997 follows:

<TABLE>
<CAPTION>
                                                 1995                       1996                       1997
                                      -------------------------    -----------------------    ----------------------
                                                      Weighted                   Weighted                   Weighted
                                          Common       Average       Common       Average       Common       Average
                                          Stock       Exercise       Stock       Exercise       Stock       Exercise
                                         Options        Price       Options        Price       Options        Price
                                        ----------    ---------    ----------    ---------    ----------    ---------

<S>                                     <C>           <C>          <C>           <C>          <C>           <C>
Outstanding at beginning of year        1,245,400       $ 2.03     1,456,750       $ 2.44     1,808,600       $ 3.62
     Granted                              269,025         4.70       443,200         7.56       861,671         5.44
     Exercised                            (55,000)       (4.25)      (71,250)       (4.26)      (32,469)       (4.47)
     Canceled                              (2,675)       (4.34)      (20,100)       (3.60)       (3,350)       (9.20)
                                      -----------                 ----------                  ---------
Outstanding at end of year              1,456,750         2.44     1,808,600         3.62     2,634,452         4.20
                                      ===========                 ==========                  =========
Exercisable at end of year              1,232,862                  1,613,759                  1,953,522
                                      ===========                 ==========                  =========
Weighted average fair value of                          $ 1.59                     $ 2.84                     $ 2.31
Options granted during the year
</TABLE>
<PAGE>

8.  Stock Options (con't)
    ---------------------

Stock options outstanding at December 31, 1997 are summarized as follows:

<TABLE>
<CAPTION>
                                                              Weighted Average
   Range of               Outstanding Options at                 Remaining         Weighted Average
Exercise Price              December 31, 1997                 Contractual Life     Exercise Price
--------------              ----------------                 -----------------     --------------
<S>                          <C>                           <C>                     <C>
$0.10 to $2.86                     679,150                          1.52              $    0.21
$4.25 to $8.63                     644,225                          6.25              $    4.47
$4.50                              599,000                          9.68              $    4.50
$5.28 to $10.63                    527,700                          8.49              $    7.31
$3.09 to $54.95                    184,377                          5.82              $    8.00
                                 ---------
$0.10 to $54.95                  2,634,452                          6.23              $    4.20
                                 =========
</TABLE>

          The Company has adopted the disclosure-only provisions of SFAS No.
123,  Accounting for Stock-Based Compensation, but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its Plans.
If the Company had elected to recognize compensation expense based on fair value
of the options granted at grant date as prescribed by SFAS No. 123, net loss and
loss per share would have been increased to the pro forma amounts indicated in
the table below.

<TABLE>
<CAPTION>
                                            1995                         1996                       1997
                                     ----------------              --------------          -------------------
        <S>                            <C>                           <C>                     <C>
        Net loss - as reported            $(6,509,310)                $(6,868,493)                $(55,377,380)
        Net loss - pro forma              $(6,857,366)                $(8,446,044)                $(56,821,541)
        Loss per share - as reported           $(0.69)                     $(0.45)                      $(2.93)
        Loss per share - pro forma             $(0.73)                     $(0.55)                      $(3.01)
</TABLE>

          The fair value of each option grant is estimated on the date of grant
using the Black Scholes option-pricing model with the following assumptions:

                                                      1995 & 1996   1997
                                                      -----------   -----
                   Expected dividend yield                0%          0%
                   Expected stock price volatility     60.2%       59.0%
                   Risk-free interest rate              5.9%        5.8%
                   Expected life of options             5 yrs.      5 yrs.

9.  Warrants
    --------

          On April 18, 1996, the Company commenced its offer to reduce
temporarily the exercise price of each of its Redeemable Warrants which had been
issued pursuant to its initial public offering in June, 1991 (the "IPO"), and as
part of a series of private placements in December, 1992, the ("Placements"),
from $6.17 to $5.55 per Redeemable Warrant (the "Warrant Reduction Offer").
Pursuant to the Warrant Reduction Offer, which was completed on May 15, 1996,
the holders of 3,882,022 Redeemable Warrants (approximately 97% of the maximum
number of Redeemable Warrants that could have been exercised) exercised their
Redeemable Warrants to purchase approximately 4,534,202 shares of Common Stock,
resulting in proceeds of $21,545,222 to the Company before deducting expenses
incurred in connection with the offering.  Including exercises prior and
subsequent to the Warrant Reduction Offer, warrantholders purchased
approximately 5,031,910 shares of Common Stock resulting in total gross proceeds
to the Company of approximately $24,174,401 from the exercise of the Redeemable
Warrants.

          Certain warrants (the "Representative's Warrants") which had been
issued to an underwriter and placement agent pursuant to the IPO and the
Placements were initially exercisable at prices of $9.90, subsequently adjusted
to $7.20, per share of Common Stock for a period of four years from June 20,
1992.  The Representative's Warrants contained provisions for adjustment to the
exercise prices and the number and type of securities issuable upon the exercise
of the Representative's Warrants upon the occurrence of certain events including
the issuance of any Common Stock or other securities convertible into or
exercisable for Common Stock, or in the event of any recapitalization,
reclassification, stock dividend, stock split, stock combination or similar
transaction.  The Representative's Warrants granted to the holders thereof
certain demand and piggyback registration rights for the securities issuable
upon exercise thereof.
<PAGE>

9.  Warrants (con't)
    ----------------

          On June 18, 1996 the Company extended the expiration date of the
356,767 outstanding Representative's Warrants from June 19, 1996 to December 19,
1997 and the exercise price was adjusted to a range of $0.63 to $2.68 per share
of Common Stock.  In addition, the number of shares issued upon the exercise of
the Representative's Warrants was increased to 581,678.  During 1996, holders of
Representative's Warrants purchased approximately 561,204 shares of Common Stock
resulting in total gross proceeds to the Company of approximately $352,428 as of
December 1996.  During 1997, the balance of the outstanding Representative's
Warrants were exercised resulting in total gross proceeds of $54,870.

          On July 1, 1994, pursuant to a secondary offering, the underwriter was
issued warrants ("New Warrants") to purchase 100,000 shares of Common Stock.
Under the terms of the New Warrants, each New Warrant holder is entitled to
purchase one share of Common Stock at a price of $4.50 per share commencing July
1, 1995 until June 30, 1999. The New Warrants contain provisions for adjustment
to the exercise prices and the number and type of securities issuable upon the
exercise of the New Warrants upon the occurrence of certain events including any
recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction.  The New Warrants grant the holders thereof
certain demand and piggyback registration rights for the securities issuable
upon exercise thereof.  As of December 31, 1997, 100,000 New Warrants were
outstanding.

          On February 28, 1997, the Company completed its acquisition of HBI
(see note 12).  As a result of this purchase, the Company assumed HBI
outstanding warrants which can be converted to purchase 822,924 shares of Common
Stock at $51.54 per share until June 30, 1998.  As of December 31, 1997, 822,918
HBI warrants were outstanding.

          On October 21, 1997, the Company acquired GenPharm (see note 12).  As
a result of this purchase, the Company assumed GenPharm's outstanding warrants
which, when converted, can purchase 25,000 shares of Common Stock at $6.00 per
share until June 30, 1999.  As of December 31, 1997, 25,000 GenPharm warrants
were outstanding.

10.  Research and Development Agreements
     -----------------------------------

          On May 17, 1995, the Company announced a collaborative arrangement
with Novartis.  Under the terms of the arrangement, on June 28, 1995, the
Company sold 899,888 shares of Common Stock to Novartis at $4.445 per share, for
an aggregate purchase price of $4,000,000.  The purchase price represented a
premium of approximately $1,140,000 over the then fair market value of the
Company's Common Stock.  This premium represents consideration paid for research
activities performed by the Company and was amortized into income as the
clinical trial and research activities were performed.  As of December 31, 1995,
$666,667 was recognized as contract revenues and $476,191 was included in the
balance sheet as deferred contract revenue.  During 1996, the remaining $476,191
of deferred contract revenues was amortized into income.

     On April 26, 1996, the Company announced that it had entered into a
collaborative arrangement with Centeon L.L.C. ("Centeon"), a Delaware limited
liability company formed through a joint venture of Hoechst AG and Rhne-Poulenc
Rorer, Inc.,  to develop and market MDX-33.  This collaboration provides for the
joint development of MDX-33 by the Company and Centeon.  Subject to the terms of
the arrangement, the Company is primarily responsible for product development,
clinical testing through Phase II trials and the manufacture of all product used
in clinical trials.  Centeon will be primarily responsible for the payment of
all expenses associated with Phase I and Phase II clinical trials of MDX-33 to
be conducted by the Company, up to a maximum of $20,000,000.  If such trials are
successfully completed, Centeon will be primarily responsible for Phase III
clinical trials, regulatory approvals, product commercialization and the costs
associated therewith.  In addition, under the terms of the arrangement, Centeon
paid to the Company an up-front fee of $1,000,000 which is included in contract
and license revenue and will pay research and development funding of $900,000
over three years.  Centeon may also provide the Company with up to $10,000,000
of additional funding upon the achievement of certain milestones.  During 1997,
the Company recognized $1,042,800 in contract revenue from Centeon.
<PAGE>

10.  Research and Development Agreements (con't)
     -------------------------------------------

          Under the terms of the arrangement, Centeon has an option (the
"Option") to purchase shares of  Common Stock of the Company in an amount equal
to $2,000,000, at a premium over the market price for the Common Stock on the
Nasdaq National Market for the three day period commencing one business day
prior to the Company's public announcement that certain milestones have been
achieved, subject to a maximum of 20% of the shares of the Common Stock or
voting power outstanding prior to such issuance.  If such milestones have been
achieved and Centeon does not elect to exercise the Option, then Centeon will be
required to pay $2,000,000 to the Company.

          HBI, which was acquired by the Company on February 28, 1997, had
entered into an exclusive license agreement with Baylor College of Medicine
("Baylor") to market, manufacture, grant sublicenses and sell HBI's 4197X-RA
Immunotoxin ( also known as MDX-RA).  Baylor may terminate this license
agreement if a Product License Application is not filed with the U.S. Food and
Drug Administration ("FDA") by December 31, 2000.  Pursuant to this agreement,
the Company is obligated to pay Baylor a royalty equal to a maximum of 10% of
the net sales of the product until $5 million in royalties are paid and 5% of
net sales thereafter (5% and 2.5% in certain instances).  No royalties have yet
been paid under this agreement.

          Effective December 29, 1995, HBI and Santen Pharmaceutical Co., Ltd.
("Santen") entered into a Codevelopment and License Agreement (the "Santen
License") covering the marketing in Japan of MDX-RA.  To maintain exclusive
marketing rights, Santen is required to provide $7,750,000 over the next six
years to support the Company's development of MDX-RA.  At Santen's option,
Santen may elect not to make any payment, but in such event, the license may be
made non-exclusive or terminated by the Company.  Santen is obligated to seek
regulatory approval for the product in Japan and is responsible for the
development cost associated with these efforts.  Upon the commencement of
commercial sales by Santen in Japan, Santen will pay the Company earned
royalties based on net sales.  Commencing six months after approval of MDX-RA by
Japanese regulatory authorities, Santen is required to pay minimum royalties.
Amounts paid by Santen to the Company, except those amounts related to the
purchase of the MDX-RA, are subject to a 10% withholding tax imposed by the
Japanese government.  The Company receives U.S. income tax credits equal to the
amounts withheld, but the Company is not currently able to utilize such credits.
During 1997, the Company recognized $865,000 in contract revenue from Santen.

         The Company has reached an understanding with Santen regarding certain
modifications to the Santen License whereby the Company will obtain, among other
things, revisions in the manufacturing and royalty provisions as well as an
option, subject to certain rights of Santen, to reacquire commercial rights to
the MDX-RA product for the Japanese market.  In return, the Company has agreed
that Santen may issue a note in the amount of $1,000,000 for the milestone
payment which was due in January 1998 relating to the initiation of Phase III
clinical trials of MDX-RA in the United States.

          The Company holds a non-exclusive license from Sanofi, S.A.,
("Sanofi") a French pharmaceutical company, to use its patented method for
conjugating antibodies involving the particular toxin and linker used by the
Company in the manufacture of MDX-RA.  A royalty of $1.00 per treatment unit of
MDX-RA is payable to Sanofi for sales in countries where Sanofi has patent
rights until royalties of $1 million are paid, after which the royalty rate is
reduced to $.75 per treatment unit.  The license provides for minimum annual
royalties of $137,500 for 1996 and thereafter, with the last payment due in
March 1999.  During 1997, the Company paid a minimum fee for 10 months of
$114,583.

          In May, 1993 GenPharm, which was acquired by the Company on October
21, 1997, had entered into a collaboration with Eisai Co., Ltd. ("Eisai") to
fund the development and initial manufacturing of a specific human antibody
product.  This agreement was subsequently amended to provide for further
research and development funding through December 31, 1997.  Revenue recognized
in 1997 by the Company under this research agreement,  as amended,  was
$377,000.  Research and development costs incurred under this agreement, to
date, have approximated revenues.
<PAGE>

10.  Research and Development Agreements (con't)
     -------------------------------------------

          In February 1997, GenPharm entered into a Research and
Commercialization Agreement with Centocor, Inc. ("Centocor").  This agreement
provides Centocor with a research license in return for annual license fees.
Further, Centocor is granted an option to obtain exclusive worldwide marketing
and manufacturing rights to any antibodies which are developed under the terms
of the agreement contingent upon Centocor making equity investments in GenPharm
(now the Company).  Upon exercise of the option, the agreement provides for
benchmark payments on the achievement of certain milestones and royalty payments
on product sales.

          The Company spent $6,442,159, $7,596,273 and $14,100,455 during the
years ended December 31, 1995, 1996 and 1997, respectively, on activities
relating to development of new products, services or techniques or the
improvement of existing products, services or techniques. In 1995, approximately
12% of the Company's research and development was funded by Merck KGaA of
Darmstadt, Germany,  ("E. Merck") and in 1995 and 1996 approximately 10% and 6%
was funded by Novartis and in 1996 and 1997 15% and 7% was funded by Centeon and
in 1997 6% was funded by Santen.

11.  Commitments
     -----------

          The Company is a party to a number of license agreements which call
for royalties to be paid by the Company if and when the Company commercializes
products utilizing the licensed technology.

          The Company has a contingent commitment to pay $1,000,000 to Essex
Chemical Corporation ("Essex") without interest in installments equal to 20% of
net after tax earnings of the Company in future years. The Company's contingent
commitment, as amended, to pay up to $1,000,000 out of future earnings may be
satisfied, at the Company's option, through the payment of cash or shares of the
Company's Common Stock having a fair market value equal to the amount owed,
provided that such shares are registered with the Securities and Exchange
Commission.

12. Acquisitions
    ------------


         On February 28, 1997, the Company completed its acquisition of HBI, a
biotechnology company located in Houston, Texas, involved in the development of
monoclonal antibody and other biopharmaceutical products to prevent secondary
cataracts and to treat glaucoma, disorders that impair or destroy human vision.
The purchase price consisted of 1,026,245 shares of Medarex common stock (valued
at $7.375 per share), the assumption of HBI's outstanding options and warrants
(valued at $550,000), the assumption of certain liabilities in excess of
tangible assets acquired of $878,968, forgiveness of indebtedness of $750,000
and transaction and other costs of approximately $638,000. The transaction was
treated as a purchase for accounting purposes, and accordingly, the assets and
liabilities assumed have been recorded at their estimated fair market values at
the date of acquisition. Since technological feasibility of the in-process
research and development costs have not yet been established and the technology
had no alternative future use at the acquisition date, the in-process research
and development costs of $10,385,565 were immediately written-off and included
in the results of operations as a non-recurring charge for the year ended
December 31, 1997.

        On October 21, 1997, the Company acquired all of the assets and
liabilities of GenPharm, a privately held biopharmaceutical company located in
Palo Alto, California, engaged in the development of transgenic mice for the
creation of fully human monoclonal antibodies. Medarex agreed to pay GenPharm
shareholders up to $62,725,000 (the "Purchase Price"), payable in shares of
Medarex Common Stock. The cost of the acquisition is anticipated to be
approximately $55,225,000 ($52,736,000 on a present value basis) and excludes
$7,500,000 of contingent Purchase Price which is based upon certain conditions
related to the receipt by GenPharm of its first relevant patent and the related
cash receipt of $7,500,000 from a third party (offset by $400,000 of related
contingent legal fees). The acquired assets and liabilities assumed have been
recorded at their estimated fair market values at the date of acquisition,
including tangible assets acquired of $27,345,749 (primarily cash and marketable
securities of $12,000,000 and a note receivable from Cell Genesys, Inc. of
$15,000,000), liabilities assumed of $2,447,912, in-process research and
development of $29,930,649 and transaction costs and other costs of $2,092,000.
The transaction was treated as a purchase for accounting purposes and since the
technological feasibility of the in-process research and development costs have
not yet been established and the technology had no alternative future use at the
acquisition date, the in-process research and development costs of $29,930,649
were immediately written
<PAGE>

12.  Acquisitions (con't)
     --------------------

off and included in the results of operations as a non-recurring charge for the
year ended December 31, 1997. In addition, Medarex agreed to pay a stock bonus
to certain employees of GenPharm in an amount up to $2,275,000 payable in Common
Stock.

     As payment of a portion of the Purchase Price of the acquisition, Medarex
issued 3.25 million shares of its Common Stock (valued at $5.475 per share) to
GenPharm's shareholders in 1997 as payment of $17,793,750 of the Purchase Price.
During 1998, Medarex is contractually obligated to issue additional shares
("Additional Shares") of Common Stock or cash to cover any remaining balance of
the Purchase Price.  The Company has the option to pay all or a portion of the
Purchase Price in cash at any time if the fair market value of its Common Stock
is $5.00 or less.  Since the number of Additional Shares to be issued in
connection with the Merger will be determined at future dates based on the then
fair market value of the Company's Common Stock and the amount of the Purchase
Price as adjusted, the maximum number of Additional Shares to be issued in
connection with the Merger cannot be determined at this time.  At December 31,
1997, the Company has recorded a liability (at its net present value) for the
balance of the Purchase Price yet to be paid.  Additional consideration will be
due to the extent that GenPharm receives certain patent license fees and related
payments due from third parties.

     The results of operations for the HBI and GenPharm acquisitions are
included in the 1997 statement of operations from the respective dates of
acquisition.

     The pro-forma unaudited results of operations for the years ended December
31, 1996 and 1997, assuming the acquisitions of HBI and GenPharm took place at
the beginning of years presented, are as follows:

                                               Years Ended
                                              December 31,

                                      1996                   1997
                                  -----------            -------------
   Total revenue                  $ 9,360,946            $  5,976,560
   Net loss                        (5,522,475)            (13,411,605)
   Basic net loss per share       $     (0.28)           $      (0.61)

     The pro-forma information for the year ended December 31, 1997 does not
include cross license settlement income of $22,500,000, related litigation fees
and expenses of $4,726,933, the write-off of in-process technology of
$40,316,214 and $2,275,000 of stock bonus paid to GenPharm employees which are
not expected to recur in the future.  The pro-forma unaudited financial results
are not necessarily indicative of the results of operations that would have
occurred had the HBI and GenPharm acquisitions taken place at the beginning of
the periods presented nor are they intended to be indicative of results that may
occur in the future.

13.  Subsequent Event
     ----------------

     On February 12, 1998 at a Special Meeting of Shareholders, the shareholders
ratified the GenPharm Merger and approved the issuance of Additional Shares of
the Company's Common Stock as payment of a portion of the Purchase Price in
connection with the Merger (See Note 12).
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS  ON ACCOUNTING AND
-------------------------------------------------------------------------
FINANCIAL DISCLOSURES
---------------------

  None.

PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  The information required herein will be reported in the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on May 21,
1998, which will be filed on or before April 16, 1997, and is incorporated
herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

  The information required herein will be reported in the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on May 21,
1998, which will be filed on or before April 16, 1997, and is incorporated
herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  The information required herein will be reported in the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on May 21,
1998, which will be filed on or before April 16, 1997 and is incorporated herein
by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  The information required herein will be incorporated in the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
May 21, 1998, which will be filed on or before April 16, 1997, and is
incorporated herein by reference.
<PAGE>

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

<TABLE>
<CAPTION>

ITEM NUMBER
-----------
<S>                        <C>
        (a).1.              Financial Statements

                            Report of Independent Auditors.

                            Consolidated Balance Sheets as of December 31, 1996 and 1997.

                            Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and 1997.

                            Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1996 and
                            1997.

                            Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997.

                            Notes to Consolidated Financial Statements

        (a).2.              Financial Statement Schedules

                            All Financial Statement schedules for which provision is made in the applicable accounting regulations
                            of the Securities and Exchange Commission are either not required under the related instructions or are
                            inapplicable because the required information is included in the consolidated financial statements or
                            related notes thereto.

         (a).3.             Exhibits

         2.1(1)             Certificate of Merger, dated June 15, 1989, including Plan of Merger.

         2.2(18)            Agreement and Plan of Merger among Medarex, Inc., Medarex Acquisition Corp.
                            and Houston Biotechnology Incorporated dated December 18, 1996, together with
                            the exhibits thereto.

         2.3(28)            Amended and Restated Agreement and Plan of Reorganization among the Registant,
                            Medarex Acquistion Corp. and GenPharm International Inc., dated as of May 5, 1997
                            together with Exhibits thereto.

         3.1(16)            Restated Certificate of Incorporation of the Registrant.

         3.2(1)             Amended and Restated By-laws of the Registrant.

         4.1(1)             Form of Specimen of Common Stock Certificate.

         4.2(19)            Form of Warrant Agreement between Houston Biotechnology Incorporated and
                            Mellon Securities Trust Company.

         4.3                Form of Specimen of Warrant Certificate (included as Exhibit A to Warrant Agreement
                            filed as Exhibit 4.2).

         10.1(4)            Lease of the Registrant's executive offices dated August 1, 1992.

         10.2(1)            Lease of the Registrant's laboratory facilities (West Lebanon, New Hampshire).

         10.3(1)            1991 Employee Stock Option Plan.

         10.4(1)            Letter of Intent dated April 25, 1991 between Lower Pyne Associates, L.P. and Medarex,
                            Inc.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

ITEM NUMBER
-----------
<S>                         <C>

         10.5(1)            Joint Venture Agreement by and among Trustees of Dartmouth College, Essex Medical
                            Products, Inc. and the Registrant, dated as of July 15, 1987.


         10.6(1)            Exclusive License Agreement by and between Trustees of Dartmouth College and the
                            Registrant, dated July 15, 1987.


         10.7(1)            Non-Exclusive License Agreement by and between Trustees of Dartmouth College and the
                            Registrant, dated July 15, 1987.


         10.8(1)            Assignment Agreement by and between the Registrant and Michael W. Fanger, dated July
                            15, 1987.

         10.9(1)            Consulting Agreement between the Registrant and Michael W. Fanger, dated as of July 15,
                            1987.


         10.10(1)           Assignment Agreement by and between the Registrant and Paul M. Guyre, dated July 15,
                            1987.


        10.11(1)            Consulting Agreement between the Registrant and Paul M. Guyre, dated as of July 15, 1987.

        10.12(1)            Assignment Agreement by and between the Registrant and Edward Ball, dated July 15, 1987.

        10.13(1)            Consulting Agreement between the Registrant and Edward Ball, dated as of July 15, 1987.


        10.14(1)            Stock Purchase Agreement among Essex Vencap, Inc. and Medarex Founders and the
                            Registrant, dated as of June 15, 1989.


        10.15(1)            Amended and Restated Research and Development and Umbrella Agreement between
                            Fondation Nationale de Transfusion Sanguine and the Registrant, dated March 7, 1991.


        10.16(1)            AML/SCCL License Agreement between Fondation Nationale de Transfusion Sanguine
                            and the Registrant, dated February 13, 1990.


        10.17(1)            HIV License Agreement between Fondation Nationale de Transfusion Sanguine and the
                            Registrant, dated February 13, 1990.

        10.18(1)            HIV Targeting Antibody License Agreement between Fondation Nationale de Transfusion
                            Sanguine and the Registrant, dated February 13, 1990.

        10.18A(1)           Amendment to AML/SCCL License Agreement, the HIV License Agreement and the HIV
                            Targeting Antibody License Agreement dated March 7, 1991.

        10.19(1)            Medarex Targeted Immunostimulation License Agreement between the Registrant and
                            Fondation Nationale de Transfusion Sanguine, dated March 7, 1991.

        10.20(1)            FNTS Targeted Immunostimulation License Agreement between Fondation Nationale de
                            Transfusion Sanguine and the Registrant, dated March 7, 1991.

        10.21(1)            Agreement of SmithKline Beecham Pharmaceuticals and the Registrant with respect to
                            Research Collaboration, dated February 1, 1990.

        10.21A(1)           Amendment to Agreement of SmithKline Beecham Pharmaceuticals and the Registrant with respect to
                            Research Collaboration dated July 5, 1990.

        10.22(1)            Research Agreement between the Registrant and The Upjohn Company, dated October 18,
                            1990.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

ITEM NUMBER
-----------

<S>                         <C>
10.23(1)                    Agreement dated as of May 16, 1991 by and among Trustees of Dartmouth College and the
                            Registrant relating to the assignment of certain patents and the modification of the Joint
                            Venture Agreement.

10.24(1)                    Assignment of certain patent rights by Trustees of Dartmouth College to the Registrant dated May
                            16, 1991.

10.25(1)                    Loan Agreement by and between Dr. Edward Ball, Dr. Paul Guyre, Dr. Donald Drakeman,
                            Dr. Michael Fanger, and First New Hampshire Bank of Lebanon, dated October 25, 1990.

10.26(1)                    Security Agreement between the Registrant and First New Hampshire Bank of Lebanon,
                            dated October 25, 1990.

10.27(1)                    Distribution Agreement between the Registrant and Funakoshi Pharmaceutical Co., Ltd.,
                            dated as of June 1, 1989, expiring May 31, 1990.     110.28 Employment Agreement by and
                            between the Registrant and Dr. Donald Drakeman, dated as of April 1, 1991, as amended.

10.29(1)                    Employment Agreement by and between the Registrant and Dr. Nathan B. Dinces, dated
                            as of April 1, 1991, as amended.

10.30(1)                    Form of Financial Advisory and Investment Banking Agreement between the Registrant and
                            Josephthal Lyon & Ross Incorporated.

10.31(1)                    License Agreement between the Registrant and Chiron Corporation (formerly Cetus
                            Corporation) dated as of February 19, 1991.

10.32(1)                    Form of invention and confidential information agreement between registrant and its
                            employees.

10.33(1)                    Stock Purchase Plan.

10.34(1)                    Settlement Agreement by and between the Registrant and Fondation Nationale de
                            Transfusion Sanguine, dated December 9, 1991.

10.35(1)                    Amended and Restated HIV Targeting Antibody License Agreement by and between the
                            Registrant and Fondation Nationale de Transfusion Sanguine, dated December 9, 1991.

10.36(2)                    HBV Cell Line License Agreement by and between the Registrant and Fondation
                            Nationale de Transfusion Sanguine, dated December 9, 1991.

10.37(3)                    Employment Agreement by and between the Registrant and Michael A. Appelbaum,
                            dated as of July 29, 1991.

10.38(4)                    Agreement dated November 28, 1991 between Scotgen Limited and the Company
                            pertaining to the genetic engineering of one of the Company's antibodies.

10.39(5)                    Amended and Restated 1987 Stock Option Plan.

10.40(6)                    Letter of Intent between Registrant and The Bayson Company dated March 16, 1992.

10.41(6)                    Form of Consulting Agreement between the Registrant and Paul M. Guyre, dated as of
                            March 17, 1992.

10.42(6)                    Form of Consulting Agreement between the Registrant and Edward Ball, dated as of
                            March 17, 1992.
10.43(6)                    Form of Consulting Agreement between the Registrant and Michael W. Fanger, dated
                            as of March 17, 1992.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

   ITEM NUMBER
-----------------
<S>                     <C>
10.44(6)                Agreement In Principle dated as of July 10, 1992 between the Registrant and Dr. Daniel
                        Beck of Centre Hospitalier Universiter Vaudrois.

10.45(6)                Agreement In Principle dated as of July 23, 1992 by and among Institut Curie, Immuno-
                        Designed Molecules, SARL and the Registrant.

10.46(7)                Underwriting Agreement by and between the Registrant and Rosenkrantz Lyon & Ross
                        Incorporated as Representative of the Several Underwriters, dated June 20, 1991.

10.47(9)                Placement Agent Agreement between the Registrant and Josephthal Lyon & Ross
                        Incorporated, dated as of November 13, 1992.

10.48(9)                Placement Agent Warrant Agreement between the Registrant and Josephthal Lyon & Ross
                        Incorporated, dated as of December 14, 1992.  Placement Agent Agreement between
                        the Registrant and Josephthal Lyon & Ross Incorporated, dated as of December 17, 1992.

10.50(9)                Placement Agent Warrant Agreement between the Registrant and Josephthal Lyon & Ross
                        Incorporated, dated as of December 18, 1992.

10.51(8)                1992 Employee Stock Option Plan.

10.52(10)               Lease of Registrant's Laboratory Facility (Annandale, New Jersey).

10.53(11)               Amendment to Lease of Registrant's Laboratory Facility (Annandale, New Jersey).

10.54(11)               Employment Agreement by and between the Registrant and Yashwant M. Deo, dated as of
                        July 8, 1993.

10.55(12)               Financing Agreement dated as of December 1, 1993 by and among the Registrant, G. Musuri
                        S.A. and IDM S.A.

10.56(12)               Consulting Agreement dated February 10, 1994 by and between the Registrant and
                        Dr. Julius A. Vida.

10.57(13)**             Letter of Intent dated March 30, 1994 between the Registrant and E. Merck.

10.58(14)               Sublease of Registrant's Laboratory Facility (W. Lebanon, New Hampshire).

10.59(14)               Sublease of Registrant's Executive Office (Princeton, New Jersey).

10.60(15)               Sublease of the Company's New Hampshire Facility dated May 25, 1994.

10.61 (9)               1995 Stock Option Plan

10.61A(17)              Amendment to the Financing and Option Agreement of December 1, 1993 by and among
                        the Registrant, G. Musuri S.A. and IDM S. A.

10.62(9)                Stock Purchase Agreement dated May 16, 1995 between the Registrant and Novartis Inc.

10.63(9)**              Development and Commercialization Agreement dated May 16, 1995 between the
                        Registrant and Novartis Inc.

10.64(9)                Registration Rights Agreement dated May 16, 1995 between the Registrant and
                        Novartis Inc.

10.65(13)               Letter to Josephthal Lyon & Ross Incorporated dated April 12, 1996.

10.66 (20)              Convertible Note dated December 18, 1996 executed by Houston Biotechnology
                        Incorporated in favor of the Registrant.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

ITEM NUMBER
-----------
<S>                     <C>
10.67(21)               License Agreement effective December 18, 1996 between Houston Biotechnology
                        Incorporated and the Registrant.

10.68(22)               Escrow Agreement dated as of December 18, 1996 among Houston Biotechnology
                        Incorporated, the Registrant and Satterlee Stephens Burke & Burke LLP, as escrow
                        agent.

10.69(19)               Convertible Note dated January 15, 1997 executed by Houston Biotechnology
                        Incorporated in favor of the Registrant.

10.70* (29)             Cooperative Research and Development Agreement made May 31, 1993 between Eisai Co., Ltd.
                        and GenPharm International, Inc. together with Amendment No. 1 thereto effective as of October
                        10, 1995, and Amendment No. 2 thereto effective as of April 26, 1996.

10.71* (29)             Cooperative Research Agreement made effective as of January 1, 1995, between LeukoSite, Inc.
                        and GenPharm International, Inc., together Amendment No. 1 thereto effective as of January
                        1, 1996, Amendment No. 2 thereto made effective as of December 1, 1996, and an Acknowledgement
                        Relating thereto made effective March 24, 1997.

10.72*  (29)            Research and Commercialization Agreement made February 24, 1997 between Centocor, Inc.
                        and GenPharm International, Inc.

10.73**(23)             Release and Settlement Agreement, dated March 26, 1997, among cell Genesys, Inc., Abgenix,
                        Inc., Xenotech, L.P., Japan Tobacco, Inc. and GenPharm International, Inc.

10.74**(24)             Cross License Agreement, effective as of March 26, 1997, among Cell Genesys, Inc., Abgenix,
                        Inc., Xenotech, L.P., Japan Tobacco, Inc. and GenPharm International, Inc.

10.75**(25)             Interference Settlement Procedure Agreement, effective as of March 26, 1997, among Cell
                        Genesys, Inc., Abgenix, Inc., Xenotech, L.P.,  Japan Tobacco, Inc. and GenPharm
                        International, Inc.

10.76(26)               Convertible Note Purchase Agreement, dated as of March 26, 1997, between Cell Genesys,
                        Inc. and GenPharm International, Inc.

10.77(27)               Convertible Subordinated Promissory Note, dated March 26, 1997, made by Cell Genesys,
                        Inc. to the order of GenPharm International, Inc.

10.78* (30)             Development and Licensing Agreement between the Registrant and Centeon L.L.C. dated
                        April 24, 1996.

10.79* (31)             Research and Licensing Agreement between The Registrant and E. Merck KGaA dated June 26, 1996.

21                      Subsidiaries of the Registrant.

23.1                    Consent of Ernst & Young LLP.

27                      Financial Data Schedule.
</TABLE>


(1) Incorporated by reference to the identically numbered exhibit to the
    Registrant's Registration Statement on Form S-1 (File No. 33-39956) filed on
    April 12, 1991.
(2) Incorporated by reference to the identically numbered exhibit to the
    Registrant's Current Report on Form 8-K dated December 20, 1991.
(3) Incorporated by reference to exhibit number 10.33 to the Registrant's
    Current Report on Form 8-K dated August 9, 1991.
(4) Incorporated by reference to the identically numbered exhibit to the
    Registrant's Annual Report on Form 10-K filed on March 6, 1992.
(5) Incorporated by reference to exhibit number 4 to the Registrant's
    Registration Statement on Form S-8 (File No. 33-44276) filed on November 29,
    1991.
<PAGE>

(6)  Incorporated by reference to the identically numbered exhibit to the
     Registrant's Registration Statement on Form S-1 (File No. 33-46509) filed
     on March 18, 1992.
(7)  Incorporated by reference to the exhibit number 1.1 to the Registrant's
     Registration Statement on Form S-1 (File No. 33-39956) filed on April 12,
     1991.
(8)  Incorporated by reference to the identically numbered exhibit to the
     Registrant's Annual Report on Form 10-K filed on March 15, 1993.
(9)  Incorporated by reference to the identically numbered exhibit to the
     Registrant's Post-Effective Amendment No. 5 to Registration Statement on
     Form S-1 (File No. 33-57366) filed on September 15, 1995.
(10) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Quarterly Report on Form 10-Q filed on May 14, 1993.
(11) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Quarterly Report on Form 10-Q filed on August 16, 1993.
(12) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Annual Report on Form 10-K filed on February 15, 1994.
(13) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Registration Statement on Form S-1 (File No. 33-75324) filed
     on June 28, 1994.
(14) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Quarterly Report on Form 10-Q filed on May 13, 1994.
(15) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Quarterly Report on Form 10-Q filed on August 12, 1994.
(16) Incorporated by reference to the identically numbered exhibits to the
     Registrant's Registration Statement on Form S-1 (File No. 33-98244)
     filed on July 26, 1995.
(17) Incorporated by reference to the identically numbered exhibits to the
     Registrant's Quarterly Report on Form 10-Q filed on May 11, 1995.
(18) Incorporated by reference to Exhibit 2.1 of the Registrant's Registration
     Statement on Form S-4 (File No. 333-20119) filed on January 22, 1997.
(19) Incorporated by reference to the identically number exhibit to the
     Registrant's Registration Statement on Form S-4 (File No. 333-20119)
     filed on January 22, 1997.
(20) Incorporated by reference to Exhibit Number 99.2 to the Registrant's
     Current Report on Form 8-K filed on January 2, 1997.
(21) Incorporated by reference to Exhibit Number 99.3 to the Registrant's
     Current Report on Form 8-K filed on January 2, 1997.
(22) Incorporated by reference to Exhibit Number 99.4 to the Registrant's
     Current Report on Form 8-K filed on January 2, 1997.
(23) Incorporated by reference to Exhibit Number 10.44 to Cell Genesys, Inc.'s
     Annual Report on Form 10-K/A filed on May 1, 1997.
(24) Incorporated by reference to Exhibit Number 10.45 to Cell Genesys, Inc.'s
     Annual Report on Form 10-K/A filed on May 1, 1997.
(25) Incorporated by reference to Exhibit Number 10.46 to Cell Genesys, Inc.'s
     Annual Report on Form 10-K/A filed on May 1, 1997.
(26) Incorporated by reference to Exhibit Number 10.47 to Cell Genesys, Inc.'s
     Annual Report on Form 10-K/A filed on May 1, 1997.
(27) Incorporated by reference to Exhibit Number 10.48 to Cell Genesys, Inc.'s
     Annual Report on Form 10-K/A filed on May 1, 1997.

(28) Incorporated by reference to Exhibit Number 2.1 to The Registrant's
     Registration Statement on Form S-4 (File No. 333-29953) filed on June 25,
     1997.

(29) Incorporated by reference to identically numbered to The Registrant's
     Current Report on Form 8-K filed on March 31, 1998.

(30) Incorporated by reference to Exhibit Number 10.74 to The Registrant's
     Current Report on Form 8-K filed on March 31, 1998.

(31) Incorporated by reference to Exhibit Number 10.73 to The Registrant's
     Current Report on Form 8-K filed on March 31, 1998.

   (b) Reports on Form 8-K

       Form 8-K filed on October 28, 1997 relates to the completion of
       Registrant's acquisition of GenPharm International, Inc.

*  Confidential treatment has been requested with respect to specified portions
   of this exhibit.

** Confidential treatment has been granted with respect to specified portions
   of this exhibit.
<PAGE>

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 27, 1998.


                                 MEDAREX, INC.

                                 By:  /s/ Donald L. Drakeman
                                      ----------------------
                                          Donald L. Drakeman
                                          President and Chief Executive Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated and on the dates indicated.


PRINCIPAL EXECUTIVE OFFICER AND
DIRECTOR:                            /s/ Donald L. Drakeman    March 27, 1998
                                     -----------------------
   Director, President and               Donald L. Drakeman
   Chief Executive Officer


PRINCIPAL FINANCIAL OFFICER,
ACCOUNTING OFFICER AND DIRECTOR:     /s/ Michael A. Appelbaum  March 27, 1998
                                     ------------------------
Director, Executive Vice President       Michael A. Appelbaum
   and Chief Financial Officer


DIRECTORS:

/s/ Irwin Lerner                      March 27, 1998
------------------------------------
   Irwin Lerner
   Chairman of the Board

/s/ Michael W. Fanger                 March 27, 1998
------------------------------------
   Michael W. Fanger

/s/ Robert Iggulden                   March 27, 1998
------------------------------------
   Robert Iggulden

/s/ Charles Schaller                  March 27, 1998
------------------------------------
   Charles Schaller

/s/ Leigh Thompson                    March 27, 1998
------------------------------------
   Leigh Thompson

/s/ Julius A. Vida                    March 27, 1998
------------------------------------
   Julius A. Vida