West Coast Editor

Dyax Corp. is generating cash from a deal with Paul Capital Partners - $30 million up front, and maybe $5 million more later - while figuring out the next step with DX-88, its kallikrein inhibitor for hereditary angioedema (HAE), about which the FDA recently asked for more clinical data.

Dyax's stock (NASDAQ:DYAX) rose 48 cents Friday, or 16.9 percent, to close at $3.32.

For 10 years, Paul Capital's Paul Royalty Fund II LLP will keep rights to revenues through Dyax's phage-display licensing program, which has 14 products in development by companies such as ImClone Systems Inc., Amgen Inc. and AstraZeneca plc. The added $5 million from Paul would come if that program hits revenue goals during the next two years.

Henry Blair, chairman and CEO of Cambridge, Mass.-based Dyax, told investors during a conference call that the phage-display department includes more than 75 licenses and collaborations in three categories: patent licenses, library licenses and funded research.

He called the Paul deal, expected to close within days, "complex," due to the number of collaborators involved. "I'm not sure there's been another one similar to it that's been done," he said, noting that the arrangement will not affect any of Dyax's other programs - except to help drug development along with the infusion of cash.

Nine compounds from phage display program have reached Phase I trials, four are in Phase II, and one has gone as far as Phase II, Blair said. The most recent phage-display deal was signed in May, when ICOS Corp., of Bothell, Wash., bought a license to the libraries.

Stephen Galliker, chief financial officer of Dyax, said phage display revenues will be recorded as before.

"We'll also calculate an interest expense for this debt, and the amount Paul is paid as their 'share' will satisfy that interest expense and be applied against the debt," he said. "It really is a debt instrument through the 10 years, based upon the expected payments to be made to Paul over the life of the deal."

Royalty rates, "the tiering and share, if you will, for Paul Capital is dependent [on money raised] each year, and is calculated each year, and it ranges from 70 percent down to 1 percent," Galliker said.

Dyax's revenues in the second quarter totaled $3.4 million, mainly from the phage display program except for a $1.5 million milestone from DebioPharm SA, of Lausanne, Switzerland, with which Dyax has a partnered, Phase II compound for cystic fibrosis, the neutrophil elastase inhibitor DX-890.

Blair turned aside questions about DX-88, the subject of news in May, when Dyax said that regulators are not yet satisfied with data. The FDA, as part of a consolidation move, had transferred the DX-88 program from the Center for Biologics Evaluation and Research division to the Center for Drug Evaluation and Research, which then approached Dyax with questions. (See BioWorld Today, May 17, 2006.)

"It wouldn't be appropriate for me to comment on the outcome of the FDA meeting," set for late this summer, Blair said, adding that Dyax "may [and] probably will have to do some sort of subsequent trial" - possibly a small dosing trial, but maybe something larger.