Setting the table for better deal economics down the road, Dyax Corp. is netting $30 million through a discounted common stock sale announced Thursday.
In the public offering, the Cambridge, Mass.-based company agreed to sell 5.5 million shares at $5.65 apiece, and certainly some of the proceeds will be directed toward its lead product candidate, DX-88, a recombinant small protein scheduled to soon move into a Phase IIb trial for the prevention of blood loss during coronary artery bypass graft (CABG) surgery. To date, Dyax has independently advanced DX-88 in that indication, although various deal scenarios have been in the works.
"They’re still engaged in partnering discussions," said Katherine Xu, an analyst with Pacific Growth Equities LLC in San Francisco. But she told BioWorld Today that the company is putting itself in a better bargaining position.
That point was echoed by fellow analyst Paul Keough with Susquehanna International Group LLP in Bala Cynwyd, Pa. "The financing means it can hold out with better leverage for future negotiations regarding a potential partner in CABG," he told BioWorld Today.
So with the added capital, Dyax can fund Phase IIb unaided and then seek a partner with newer data in hand, rather than the Phase I/II findings from the past. And the company can do so unencumbered by time constraints in the wake of a recent New England Journal of Medicine story that debunked the primary product sold in the space, Trasylol (aprotinin, from Bayer AG).
Keough noted that Trasylol’s nature as a nonspecific protease inhibitor could induce more side effects than the more targeted therapy DX-88, which has been shown in vitro to be 1,000 times more potent than Trasylol as an inhibitor of plasma kallikrein. Also possibly gone by the wayside is pexelizumab (from Alexion Pharmaceuticals Inc.), which had a Phase III failure in CABG patients last fall. (See BioWorld Today, Nov. 28. 2005.)
Additional companies developing products to reduce complications associated with cardiopulmonary bypass procedures include Avant Immunotherapeutics Inc., of Needham, Mass; Zymogenetics Inc., of Seattle; Millennium Pharmaceuticals Inc., also of Cambridge; and XOMA Ltd., of Berkeley, Calif.
"Everybody knows that DX-88’s mechanism of action works," Xu said, later adding that now "its market estimate is potentially much bigger."
She said the Phase IIb study is expected to begin next quarter, and forecast data to be available by the middle of next year.
Those future data, Keough said, would provide the company "more leverage in negotiating with potential partners," and he added that Dyax has estimated the trial would cost between $3 million and $5 million, a fraction of the estimated $30 million financing.
The product is partnered in another indication, hereditary angioedema, in which it has orphan drug designation in the U.S. and Europe, as well as fast-track designation in the U.S. Recently released top-line data showed that DX-88 provided numerous therapeutic benefits in hereditary angioedema patients who experienced acute attacks, including life-threatening laryngeal attacks. Clinical response, defined as beginning of improvement of symptoms within four hours of dosing, was observed at all dose levels. For intravenous dosing, response rates ranged from 86 percent to 100 percent while subcutaneous delivery showed a 100 percent response rate. The overall median time to onset of improvement was 28 minutes.
In that indication, DX-88 is being developed in collaboration with Genzyme Corp., also of Cambridge, and a pivotal Phase III trial is ongoing. Xu predicted those data would come out at mid-year, and Dyax has indicated it would begin filing a biologics license application in the second half of the year.
In the financing, the per-share price reflects a 9 percent markdown from Wednesday’s closing value of $6.20, and equals the 20-day volume adjusted weighted average price.
On Thursday, the stock (NASDAQ:DYAX) lost 62 cents to close at $5.58, a 10 percent drop that Keough characterized "an efficient response" in reflecting dilution in Dyax. Had the stock dropped lower, or swung way higher, he would have been surprised.
"From a valuation perspective," Xu said, "there’s a lot of growth opportunity in the stock."
Dyax recently reported a $5.6 million net loss for the quarter ended Dec. 31, at which time there were about 38 million shares outstanding, and its balance sheet showed $50.7 million in cash, cash equivalents and short-term investments. Upon publicizing those financials, Dyax officials said the firm would consume about $35 million this year.
With its fiscal reserves now further supplemented, the company also plans to direct other proceeds from its financing toward general corporate purposes and for additional research and development efforts.
In addition to DX-88, its portfolio includes a partnered compound for cystic fibrosis, DX-890. An inhibitor of neutrophil elastase, the compound is moving through Phase II in collaboration with Debiopharm SA, of Lausanne, Switzerland. Also in Dyax’s pipeline is a fully human monoclonal antibody, DX-2240, that has moved into formal preclinical development. The product targets the Tie-1 receptor and has a new way to attack tumor growth, which the company believes has potential applications for various types of cancer.
Relative to the financing, which was priced pursuant to an August shelf registration for 9 million shares, Dyax granted a 30-day, 825,000-share overallotment option to the offering’s sole underwriter, Deutsche Bank Securities Inc. in New York. The placement is expected to close on or about March 14.