Dyax (NASDAQ: DYAX) is a biopharmaceutical company with a robust proprietary pipeline and a strong phage display discovery technology. The company uses its phage display technology to fuel discover activities for its proprietary pipeline and to generate fees, milestones and royalties through its out-licensing program, the Licensing and Funded Research Program (“LFRP”). The LFRP includes over 75 licenses and collaborations and continues to grow.
As a research and development company, Dyax had an ongoing need for cash in order to develop its various product candidates. Public investors and Wall Street had also not assigned significant value to the company’s cash flow-generating phage display LFRP.
In order to build its cash reserves for future development programs and to realize value from the phage display LFRP technology program, Dyax decided to monetize a portion of the cash generated by the LRFP. Paul Capital Healthcare structured an investment such that Dyax sold a tiered portion of annual cash receipts associated with the LFRP that declines as certain revenue levels are achieved. This allowed Dyax to retain a substantial interest in the upside performance of its LFRP program, and maximize their participation in these revenues at a time when products developed by Dyax's licensees are expected to reach the marketplace.
Additionally, the agreement was limited to the LFRP and did not affect Dyax's current or future internal drug development nor any of its co-development programs – something that was very important to Dyax from the outset.
The financing allowed Dyax to monetize an unrecognized asset in order to finance its proprietary pipeline without diluting equity ownership. Research analysts immediately recognized the value of the transaction to Dyax and its shareholders.
