Dyax Corp (NASDAQ: DYAX) reported earnings and clinical updates yesterday after the bell yesterday in a very interesting call that displayed how the company is rapidly working to diversify. Four updates were particularly interesting for investors -- and I've ranked them below in order of increasing importance. Quotes are courtesy of a transcript provided by S&P Capital IQ.
1. Big DX-2930 news
DX-2930 is easily the most important part of the Dyax portfolio, given that analysts estimate the drug could bring in between $400 million and $500 million in peak annual sales -- or roughly quadruple the company's current annual revenue run rate for 2015 -- and we now have the broad sketches of a timeline for its future development. After conversations with the FDA, Dyax plans to initiate phase 3 trials later this year. While trial design is still an ongoing conversation with the FDA, Chief Medical Officer Burt Adelman expects to have the details ironed out "in the next month or two." More to come soon.
Incidentally, Dyax management is sufficiently confident in DX-2930 to start studying the drug in diabetic macular edema as well, with studies intended to commence in 2016. That'll further concentrate Dyax's risk and expense in DX-2930, but it could also expand the drug's moneymaking potential if it clears trials and makes it to market.
2. Expanding the wholly owned portfolio
The big clinical story for the company has been DX-2930 -- which Dyax is testing in hopes that it can prevent hereditary angioedema (HAE) attacks -- for some time now. Yet on yesterday's call, management also devoted some space to discussing DX-2507, an anti-FcRn antibody under development for various autoimmune diseases, and DX-4012, an anti-factor XIIa antibody designed to fight thrombosis. These drugs are currently preclinical, and in fact Dyax is expecting to submit an Investigational New Drug Application (IND) -- required for human trials -- for the first of these drugs in 2016. It's great to see that management is pursuing new opportunities in drug development, but right now it's hard to assign any value to these drugs until we see some human data. Stay tuned.
3. Paying down the HC Royalty loan
Dyax has a loan with HealthCare Royalty Partners that matures in August of 2018. It can pay the loan off without penalty starting in August 2015, and management has decided to do just that. While it's a big chunk of the company's cash -- $84.1 million out of the total $394 million Dyax has on its balance sheet -- it's a good move for one simple reason: The loan carries a whopping 12% interest rate. While it may have made sense to take out the loan in early 2012, the company's improved cash position after a share offering in April now gives it the flexibility to end the loan and divert those interest payments back into pipeline research.
4. The current moneymakers are still largely on track
Kalbitor, which treats HAE attacks, sold $17.8 million in the quarter. That's up a little from last quarter -- $16 million -- and still comfortably within management's guided range of $60 million to $70 million in revenue for the year. Eli Lilly's cancer drug Cyramza, which Dyax receives a single-digit royalty on, generated $4.4 million in revenue for Dyax in the quarter. There may be some additional upside for the drug -- and therefore for Dyax -- as it's in phase 3 trials in a number of additional cancer indications. The Licensing and Funded Research Portfolio (LFRP), which contains other drugs Dyax has licensed out to pharma heavy-hitters, brought in $4.3 million in development and license fees last quarter, bringing the year-to-date total to $5.3 million. Given that management has guided for $7 million to $9 million in total development and license fees from that portfolio in 2015, we can probably expect some reductions in the back-half of the year. That's no surprise -- management's always told us that the portfolio revenue would be lumpy. The real opportunity with the LFRP is when those drugs (hopefully) get to market -- that's when the royalty revenue can start flowing in, just like with Cyramza.
Good, but still not good enough
Dyax had great news to report across its main strategic initiatives, but it's important to remember that the company still sports a $3.5 billion market cap based on early stage data from DX-2930 and assets that generated $47 million so far this year. Personally, I'm going to need to see good phase 3 data and expansion in those other revenue streams before I'm willing to hop in.
