Why Dyax Corp. Is Soaring 30% Higher Today

By Brian FeroldiFool.com

What: Shares of Dyax Corp. , a drug developer with a focus on rare diseases, skyrocketed more than 30% today after the company announced that it is being acquired by Shire PLC .

So what:Shire has agreed to acquireDyaxfor$37.30in cash, which values the company at approximately$5.9 billion. In addition, Dyax shareholders could receive some additional upside from this deal as they will also receive a non-tradable contingent value right, which could pay off an additional $4.00in cash if its investigational drug DX-2930 gains FDA approval before Dec. 31, 2019. If that happens, it would add another$646 million to the purchase price, which would bring the total value of this deal to $6.5 billion.

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Shire will finance this deal with its existing$2.1 billionrevolving credit facilityin addition to a newlyannounced$5.6 billionloan.

Now what: This deal shows thatShire is willing to bet big on the future success of DX-2930, and it appears to have good reason to do so. DX-2930 is an investigational drug that is being studied as a treatment for hereditary angiodema, or HAE, which is a rare genetic disease that causes episodes of swelling in the face, extremities, and GI tract. This disease can be life-threatening, and in clinical studies DX-2930 demonstrated a greater than 90% reduction in HAE attacks compared to placebo.

Those results were good enough for the FDA to bestow DX-2930 with the coveted Fast Track, Breakthrough Therapy, and Orphan Drug designations, and it has also received Orphan Drug status in the EU. It is expected to enter phase 3 clinical trials by the end of the year. If approved, Shire estimates that its annual global sales could be up to $2.0 billion, and it also holds patent protection and anticipated regulatory exclusivity beyond 2030.

Shire is already a big player in the HAE market, as it holds a leadership position with its products Firazyr and Cinryze. Given its position, if DX-2930 is approved, the company already has the infrastructure in place to launch the drug successfully.

Shire is assuming that the FDA will approve the drug in 2018, and it's looking to launch soon after. The company expects this deal to be slightly dilutive to earnings in 2016 and 2017 and accretive in 2018 and beyond. Like most deals, Shire is expecting to realize synergies of about $50 millionstarting in 2017, which could grow to over $100 millionby 2019.

Dyax CEO Gustav A. Christensen said:

The article Why Dyax Corp. Is Soaring 30% Higher Today originally appeared on Fool.com.

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