Blog > US Stocks and Markets > Dyax Corp. (DYAX) could soar on FDA approval for DX-88 HAE drug
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Dyax Corp. (DYAX) could soar on FDA approval for DX-88 HAE drug

Today's Financial News - Posted March 24, 2009

Dyax Corp. (NASDAQ:DYAX) is looking for FDA approval on Wednesday.

by J. Christoph Amberger

Baltimore—TFN: In early February, the U.S. Food and Drug Administration’s (FDA) Pulmonary-Allergy Advisory Committee voted in favor of approving the drug DX-88 for the treatment of acute attacks of hereditary angioedema (HAE).

The majority was razor-thin: There were 6 yes votes, 5 no votes… and 2 abstentions.

That’s as close as it gets.

On Wednesday, the FDA’s “Judgment Day Panel” will gather around the conference table once again to cast the final vote. And one tiny micro cap could get the news it’s been waiting for: Insiders consider DX-88 a groundbreaking product in one of the strongest and fastest-growing markets. And looking at the reaction of stock prices of similar companies, shareholders have a shot at doubling their money overnight.

When the verdict is read, the company’s market cap could easily swell from $195 million to well over $500 million… even two-thirds of a billion dollars. That could mean tremendous gains in as little as 24 hours.

But the vote could just as easily be a “no-go”

If that happens, expect to see $95 million—even $115 million!—in shareholder equity wiped clean off the board. That could leave investors trying to explain losses of 47% to 68% on a single position.

But we think there’s a good chance it goes our way. The FDA’s final approval for marketing typically follows in line with the preliminary decision. Sure, the vote was close and two members of the review board didn’t vote. But we put the odds are about 60/40 in favor. Which means there is still room for shares to jump.

If approved, DX-88 will be the first drug available in the U.S. for treating acute attacks of HAE and the first subcutaneously administered HAE therapy.

Genetic disorder

HAE is a rare, potentially lethal genetic disorder. It’s accompanied by spontaneous episodes of debilitating and painful swelling.

Hereditary angioedema occurs in about 1 in 50,000 to 150,000 people worldwide, and in 1 per 10,000 to 50,000 people in the United States. It affects men and women of all backgrounds. Attacks occur spontaneously, with anxiety, stress, surgery, and illnesses such as colds and flu cited as triggers. The disease manifests itself by swelling of hands, feet, face, arms, or legs, as well as painful and often deadly internal swelling of the abdomen and airways.

According to a recent study, the average HAE patient experiences more than 26 acute attacks per year.

Dyax Corp. (NASDAQ:DYAX), headquartered in Cambridge, Massachusetts, develops biotherapeutics for unmet medical needs. The company emphasises oncology and inflammatory indications. Its proprietary drug discovery technology focuses on identifying antibody, small protein and peptide compounds for clinical development.

It’s premier product at this point is DX-88 (ecallantide), a recombinant small protein currently evaluated for its therapeutic potential in two separate indications.

DX-88 has “orphan drug” designation in the United States and the EU, as well as Fast Track designation in the U.S., for the treatment of acute attacks of HAE. Additionally, DX-88 is being evaluated for the prevention of blood loss during on-pump cardiothoracic surgery (CTS) through Dyax’s partner, Cubist Pharmaceuticals.

Dyax has over 70 revenue generating licenses and collaborations for therapeutic discovery.

The stock is trading at just 50% of its 52-week high right now, with share prices around $2.55.

Of course, approval could as well be a denial. Looking at the extreme upside and downside, the stock may either trade for $5—or it may be busted down to $1.50.

March 25 will be a very big date for this micro cap—maybe the biggest day in its twenty-year history.

So there is some risk involved… especially in a volatile market like this that’s exposed to all kinds of news-generated fluctuations.

That’s why I’m hesitant to promise triple-digit gains on the stock. In fact, I think that I’d be happy with a 50-cent profit on each share over time… and possibly a 20% gain in the short term.

Last Thursday, I recommended HotStockConfidential subscribers take a position in the stock and buy Dyax Corp. (NASDAQ:DYAX) below $2.60 as a speculation on FDA approval of DX-88. We were able to log an entry price of $2.55 that day for the HSC tracking portfolio. We’ve seen some action so far… but are again within the range of our initial recommendation.


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Posted by J. Christoph Amberger · Filed Under US Stocks and Markets 

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