Dyax: A Cinderella Story Ends in a Fall

The good news for Dyax (Nasdaq: DYAX  ) was that it only had to wait three days after its PDUFA date to get an answer from the Food and Drug Administration about its marketing application. I'll bet Eli Lilly (NYSE: LLY  ) is jealous; it's still waiting for a decision about prasugrel. 

The bad news is that it wasn't the decision the company was looking for.

The FDA sent Dyax a complete response letter for DX-88, its hereditary angioedema (HAE) treatment. Like recent complete response letters to Genzyme (Nasdaq: GENZ  ) and Theravance (Nasdaq: THRX  ) , the agency wants to see a Risk Evaluation and Mitigation Strategy (REMS) to make sure that the drug won't be used inappropriately. It also wants the company to clear up some manufacturing issues, but no additional trials are required.

Doesn't sound so bad, does it? No, but it's not going to be a cake walk either.

Neither the REMS nor the manufacturing issue should be a major issue to overcome -- although some companies like Discovery Labs (Nasdaq: DSCO  ) have had trouble satisfying the FDA's manufacturing requirements -- but any delay is still a blow to Dyax. The company had less than $60 million available at the end of the year and Dyax just took out a $15 million loan at a whopping 21.5% interest rate. Yikes! A class two response from the FDA could delay the launch by six months plus however long it takes the company to submit the application. The FDA could classify it as a class one response, which could add as little as two months, but I wouldn't count on it.

In addition to the money issues, DX-88 has a lot of potential competition. ViroPharma (Nasdaq: VPHM  ) already has a drug, Cinryze, approved as a prophylactic for HAE, and both Cinryze and CSL Behring's Berinert-P, which is already approved in other countries, are up for review at the FDA for treating acute episodes of HAE. The delay is only going to help the competition.

Dyax had the potential to be the Cinderella story of the March FDA decisions, but like all Cinderella stories, it was a long shot. Investors' best hope at this point is that the drug is on the market before the tournament starts next year.

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