Dyax Corp.

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Dyax Corp.

300 Technology Square
Cambridge, Massachusetts 02139
U.S.A.
Telephone: (617) 225-2500
Fax: (617) 225-2501
Web site: http://www.dyax.com

Public Company
Incorporated: 1989 as Biotage, Inc.
Employees: 161
Sales: $12.8 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: DYAX
NAIC: 541710 Research and Development in the Physical, Engineering, and Life Sciences.

COMPANY FOUNDING: 1989

PURCHASE OF TARGET QUEST: 1999

PUBLIC OFFERING IN 2000

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

COMPANY FOUNDING: 1989

Dyax was cofounded in 1989 as Biotage, Inc. by Henry E. Blair and Sheridan G. Snyder in Charlottesville, Virginia. It was not the first time the two men had worked together to start a company. In 1981 they launched one of the pioneers of biotechnology, Genzyme Corporation. At that time Blair was a Tufts University professor doing research in Massachusetts on a National Institutes of Health contract. To expand his research capabilities he decided to form a company and secured financial backing from entrepreneur Snyder. After earning a degree in French from the University of Virginia in 1958, Snyder made his fortune in the packaging industry. Together Blair and Snyder grew Genzyme, which focused on enzyme deficiency diseases. Snyder left Genzyme in 1988 and returned to Charlottesville to form a new company with Blair that was in effect a spinoff of the Aluminum Co. of America, which had developed chromatography systems that could be used by pharmaceutical and biochemical companies but ultimately concluded that the technology could be better commercialized by an independent company.

In 1995 Biotage merged with Protein Engineering Corporation (PEC), changed its name to Dyax Corp. and moved its headquarters to Cambridge, Massachusetts, where PEC was located. Blair became president and chairman of the board and two years later was named chief executive officer as well. It was PEC researchers in the 1980s who developed phage display technology, for which the company received a patent in 1993. It was considered a major development for biotechnology, whose drugs relied on the manipulation of naturally occurring proteins informed by DNA. The phage display method streamlined the protein-discovery process. According to the New York Times, “It is a sort of a molecular Darwinism in which scientists, over the course of months, can engineer mutations that would have taken millennia to occur in nature and even then might have disappeared shortly after they appeared.”

The PEC technology was clearly the growth engine for Dyax, and the primary purpose of the Biotage business was to provide a revenue stream while the phage display technology was commercialized. However, the Biotage division was also involved in helping to improve the drug development process, working with San Diego biotech firm CombiChem Inc. to create an automated parallel purification system for a combinatorial library. Biotage’s role was to develop a method for parallel separations, which CombiChem could then integrate with its parallel synthesis instrumentation. Purification was important because it played a key role in making organic compounds suitable for biological assay, a further way to speed up the drug development process. Dyax’s phage display technology also offered another approach to purification, creating compounds more directly and in a purer state.

From the outset, Dyax was established to use its proprietary technology to develop drugs. While this effort got off the ground, Dyax was able to generate income through the sale of Biotage products and the licensing of phage display technology and the libraries generated from it. Within two years the company had signed up more than 20 licensees, including Genzyme, Glaxo Wellcome, Merck, and Monsanto. Although the up-front fees were modest, Dyax looked for greater payoffs down the road through milestone payments and royalties on resulting products. Revenues totaled $9.3 million in 1997 and increased to $14.3 million in 1998. During this period the company posted net losses of about $13 million.

PURCHASE OF TARGET QUEST: 1999

Dyax added to its biopharmaceutical discovery capabilities in 1999 through the acquisition of Target Quest B.V., a Dutch company that brought with it human antibody libraries and product leads, as well as valuable scientists. When the year came to a close, revenues increased to $16.8 million but so too did the company’s net loss, which grew to nearly $13.2 million.

Nevertheless, Dyax’s prospects looked promising enough that it was able to prepare to go public in 2000. The company had developed a pair of protein indications, for cystic fibrosis (DX-890) and hereditary angioedema (DX-88), which had entered phase I trials, the first step in gaining U.S. Food and Drug Administration (FDA) approval. Dyax was ready to take the next step in its plan to become a biopharmaceutical product development company, launching new discovery programs and bringing new products to market with larger partners. The company’s partner on DX-88 was Genzyme, which agreed to market and distribute the final product while Dyax managed the clinical trials and refined the manufacturing processes. Swiss pharmaceutical company Debiopharm S.A. was Dyax’s collaborator on DX-890. In this case, Debiopharm took responsibility for the clinical trials, and if the drug was successful, Dyax would manage manufacturing. Aside from lining up development partners, Dyax did not lose sight that it still needed to invest in research to maintain its edge in phage display technology by creating libraries and improving its patent position.

COMPANY PERSPECTIVES

Dyax’s mission is to discover, develop, and commercialize innovative biopharmaceuticals for unmet medical needs, while delivering outstanding value to patients and stockholders.

PUBLIC OFFERING IN 2000

To help raise the funds needed to achieve these goals, Dyax made an initial public offering (IPO) of stock in August 2000, netting the company $69 million. The company also had little trouble finding additional partners. In 2000 it signed a collaboration agreement with Human Genome Sciences, Inc. (HGSI), for the discovery of human therapeutics, and with Italy’s Bracco Group for a new generation of diagnostic imaging.

More partners signed up in 2001 as Dyax filled its research pipeline with several new discovery programs. In January alone, a collaboration agreement was reached with Abgenix to develop human mouse technology; HGSI acquired a license to purify its B-lymphocyte stimulator protein, a naturally occurring protein that stimulates the production of antibodies, using Dyax technology; and XTL agreed to work with Dyax to combine phage display and human mouse technology. As Dyax expanded, it outgrew its 25,000-square-foot facility, and in 2001 moved to new accommodations in Cambridge, taking advantage of a slumping real estate market to sign a lease for more than 91,000 square feet on four floors at 300 Technology Square, an ideal location for attracting the kind of quality employees the company needed to maintain growth.

The road ahead was not lacking in obstacles, however. Clinical trials on the company’s lead drug candidates, DX-88 and DX-890, did not proceed as quickly as desired, and the price of Dyax stock was fickle, albeit the stock market in general was experiencing a difficult stretch. Revenues increased 31 percent to $33 million in 2001, and Dyax posted a net loss of $17 million after losing $15 million the previous year. Yet with more than $50 million in cash on hand, the company was able to maintain its aggressive drive to fill out its drug development pipeline.

Dyax enjoyed success on a number of fronts in 2002. Both DX-88 and DX-890 reached important milestones in their phase II clinical trials. With another 14 disease targets in the pipeline, the company also added new disease targets, acquiring the exclusive rights to an inflammation target from the Center for Blood Research, and an oncology target from the University of Arizona. Furthermore, Dyax entered into cross-licensing agreements with Biosite, Genentech, XOMA, and Cambridge Antibody Technology; and signed collaborative agreements with AstraZeneca, Thios, and Amershal Biosciences. Revenues in 2002 improved 23.8 percent to $40.9 million, but Dyax experienced a net loss of $26.8 million. With only $28.2 million left in the bank, Dyax was forced to husband its resources.

Although the Biotage unit was a well-run company that had established its chromatography separations technology in the pharmaceutical industry, its operations no longer meshed with the new biopharmaceutical model of Dyax. Needing cash to pursue its drug development strategy, management elected to divest Biotage. It found a buyer in a Swedish company, Pyrosequencing AG. The $35 million sale added $28 million to the Dyax coffers while reducing revenues to $16.9 million in 2003, down from the $17.8 million generated by continuing operations in 2002. The money from the sale of Biotage helped to cover the $24.5 million net loss recorded in 2003. Dyax also replenished its coffers through a secondary stock sale that fetched $50 million. Development continued on the two lead drug candidates; in the meantime, research collaborations were signed with Alnis BioSciences and Baxter Health-care Corporation, and library and patent licensing agreements were also reached with ImClone Systems, Med-Immune Inc., Cambridge Antibody Technologies, and Affimed AG.

While revenues essentially held even in 2004, totaling $16.6 million from continuing operations, and the company lost $33.1 million on the year, Dyax was pleased with the progress made during the year. In particular, DX-88 received positive phase II clinical reports for the treatment of hereditary angioedema. Although DX-890 still showed promise, the trials were proceeding far slower than expected, and in 2004 an arrangement was reached with partner Debiopharm SA, allowing it to independently continue development of DX-890 for treating cystic fibrosis, while Dyax pursued other uses for a different version of the molecule. On another front, the first antibodies and peptides from the company’s libraries were put into phase I clinical trials by collaborators. ImClone proceeded with two monoclonal antibodies, and Amgen Inc. and EPIX Pharmaceuticals each entered a peptide from Dyax libraries into phase I trials. Dyax also inked several more collaboration deals in 2004, including agreements with Biogen, Amgen, Baxter Healthcare, Genzyme, Inhibitex, and Tanox.

KEY DATES

1989:: Biotage is formed.
1995:: Biotage and Protein Engineering Corporation merge to form Dyax Corp.
1999:: Target Quest B.V. is acquired.
2000:: Company is taken public.
2003:: Biotage is divested.

Dyax continued to burn cash in 2005, when revenues approached $20 million but the net loss totaled $31 million. The following year revenues fell to $12.8 million and the net loss jumped to $50.3 million. The lead drug candidate, DX-88, continued to offer promise as a treatment for hereditary angioedema, although its progress through the regulatory process was slow, delayed in part because it was reassigned to a new FDA review group. In addition, DX-88’s second indication, to prevent blood loss during on-pump coronary artery bypass graft surgery, appeared to have a much larger target-patient population and the clinical trials added patients to cover the broader on-pump cardiothoracic surgery market. Dyax terminated its agreement with Genzyme in February 2007. Dyax received complete ownership of DX-88 as well as a $17 million payment from Genzyme, which in exchange received 4.4 million shares of Dyax stock.

Dyax had another 14 drug candidates in its development pipeline, but it was clear that the company was banking on DX-88 finally gaining FDA approval and generating significant revenues, enough perhaps to allow Dyax to finally turn a profit. In the meantime, the company continued to find ways to raise money. In 2006, for example, it was able to raise $30 million by monetizing a portion of future revenues through an agreement with a unit of Paul Capital Partners.

Ed Dinger