A biotechnology company has dropped a racketeering suit against Bermuda-based Lines Overseas Management (LOM).

GeneMax Corporation, a Nevada-based company, alleged in May that LOM and at least a dozen other brokerage houses illegally shorted GeneMax stock, causing its share price to decline. But the lawsuit against LOM was dismissed in Nevada federal court after LOM threatened to file a motion under a law intended to thwart frivolous lawsuits.

GeneMax?s suit named two LOM companies and Brian Lines, the firm?s president, and demanded more than $10 million in damages.

According to Scott Hill, LOM?s executive vice president for compliance, GeneMax claimed that ?there was some kind of conspiracy against them to drive their stock price down by selling it short.? The suit alleged that defendants such as LOM were selling short GeneMax stock without attempting to borrow it or determining that it can be borrowed, as is required when brokers sell short.

The scheme, according to GeneMax?s suit, ?destroyed the integrity of the trading market for (GeneMax) stock because it allows more shares to trade than were ever issued?.

Mr. Hill called the allegations ?totally false and frivolous?.

?Neither LOM nor its customers sold short any shares of GeneMax,? he said.

GeneMax closed yesterday at $1.12, off a 52-week high of $10.25. ?Their stock was flying high,? Mr. Hill said. ?They are probably looking for an excuse as to why their stock is down.?

GeneMax?s lawyer was unavailable for comment yesterday.