Profitable detour

Dyax - which tried unsuccessfully to sell a $27.5 million IPO in the summer - raised more money by going back to a syndicate of private investors. The high throughput drug discovery company raised $31 million in a private placement last week.

The company and investors would not disclose the post money valuation of Dyax, but said it was below the $107 million valuation it would have had if it sold its IPO at the mean price.

The private round also was in the range of the average biotech IPO this year, where 21 companies in the class of 1998 have averaged $30.9 million.

Helping generate investor interest was Dyax's bioseparations business, which should bring in more than $10 million in revenues this year and perhaps helped mitigate the perceived risk in investing in a biotech. "The revenues provide a nice valuation floor and give investors some comfort level," said Paul Howard, vice president of Hambrecht & Quist Capital Management.

For valuation purposes, Howard said investors could assume 2-3 times revenues for the bioseparations business, putting the valuation "floor" at $30 million. H&Q was an investor in Biotage, which merged with Protein Engineering in 1995 to create Dyax. H&Q re-invested in this round, and owns 2-3 percent post-financing.

"Having a shipping dock and a billing department is a novelty in biotech," said John Littlechild, general partner at HealthCare Ventures, which invested $9 million in the round.

Chairman and CEO Henry Blair said the bioseparations business is growing at 40 percent a year, which will help control dilution. "We don't have to keep raising money to move products along," he said.

The company has licensed its phage display technology to more than 30 companies, including Affymax, Glaxo Wellcome, Bristol-Myers Squibb, Chiron (CHIR), Genzyme (GENZ), Merck, Monsanto and Pharmacia & Upjohn. Dyax also is developing proprietary phage display targets for cystic fibrosis and angioedema. Blair said the financing will provide enough capital for the company to reach breakeven.

Dyax's financing is the third largest by a privately held biotech company this year. The Medicines Co.'s $36 million private placement in September ranks first, with Lexicon Genetics' $31.8 million financing in second place. Rounding out the top five are Orchid's $27.5 million financing, and MediGene's DM46.3 million (US$25.7 million) deal.


Investors drove Icos (ICOS) up $3.063 (15 percent) to $22.875 on 4.8 million shares on Thursday after Microsoft's Bill Gates made an SEC filing that led investors to believe he had upped his stake in the company