Biotech Values

[DewDiligence]

>DYAX – the debt on the cowen loan doesn't have to be paid off until 2016.<

Debt does matter even if the maturity date is several years away.

If DYAX does not partner DX-88 for HAE, how much will it have to spend on building a commercial infrastructure? I’ve heard the company’s claim—that HAE is a small orphan condition and hence it won’t cost much to find and target the patients and treating physicians—but I don’t buy it. Gearing up to sell a company’s first product always costs more than companies say it will, in my experience. It will undoubtedly eat up a good chunk of DYAX’s cash balance.

Where the debt comes into play is in limiting the opportunities for funding a year from now, when DYAX will still not be cash-flow positive, IMO.

Check the balance sheet again: GAAP shareholders’ equity (net worth) at 9/30/08 was negative $28M. If you add back the $50M of deferred revenue, which is an accounting artifact rather than a real liability, you get positive $22M. Assuming DX-88 is approved by the FDA on the first review cycle, the costs of a product launch will likely drive this back into negative territory, making it hard to get funding in the current environment (#msg-33749911).

(If DYAX does not get FDA approval on the first cycle, as rkrw expects, the situation becomes much worse, obviously.)

In summary, you can make a case that DYAX does not need a partner for DX-88 in HAE; however, there’s an equally strong case to me made that they do need a partner, which is the reason I put DX-88 for HAE in the table in #msg-33735551.