Dyax Corp. (DYAX), Shire PLC (ADR) (SHPG): An Interesting Bio Play in the Blood Disorder Niche

Thousands of Americans suffer from a rare and painful disease every year. This inherited disease is called Hereditary Angioedema, or HAE for short. Its most effective treatment is about to become more convenient than ever, and the company that makes this possible could reap rich rewards.

Dyax Corp.There are only five approved drugs for the disease: SC injections Kalbitor from Dyax Corp. (NASDAQ:DYAX) and Firazyr from Shire PLC (ADR) (NASDAQ:SHPG), and IV injections Berinert from CSL Limited, Cinryze from Viropharma Inc (NASDAQ:VPHM) and Ruconest from Biovitrum. Among these all, the Cinryze IV injection is considered the most effective, comprising 60% of the total HAE market by sales.

Subcutaneous versus Intravenous

You may have noticed that I have mentioned two types of injections here: the SC, or subcutaneous, and the IV, or intravenous. Patients can inject themselves with SC treatments just under the skin, but a doctor or a trained nurse must inject IV solutions into a patient’s vein. The difference lies in ease and promptness of administering. When you are having an attack, most people would prefer immediate relief as opposed to a visit to a hospital.

Until recently Viropharma Inc (NASDAQ:VPHM)’s Cinryze, although the most popular of the HAE drugs, did not have an SC option. So many patients who suffer from the disease were opting for other options, despite wanting Cinryze, just because they did not want to suffer through half an hour of excruciating pain before they reached a hospital for their Cinryze IV injection.

With a new SC injection of Cinryze being developed by Halozyme Therapeutics, Inc. (NASDAQ:HALO), all that is about to change.

Using a proprietary technology that makes it easy to inject drugs subcutaneously, Halozyme Therapeutics, Inc. (NASDAQ:HALO) is about to change the whole landscape for Cinryze. Halozyme’s Cinryze SC injection has successfully passed Phase II trials, and we should see the drug in the market very, very soon. Given the fact that Cinryze is the most popular HAE drug by a large margin, it is logical to assume that its SC version will be very popular, too.

The Cinryze advantage

Cinryze is approved in the US and Europe, and is about to be approved in Japan as well. The drug has proved to be safe and effective in early and severe stages of HAE attacks. During the first quarter of 2013, Cinryze reported sales of $97 million, up by 44% compared to $67 million last year.

The HAE market is growing at a CAGR of 16.5%. At this rate, the market will expand to $385 million by 2019. Even without an SC option, Cinryze will be worth about $250 million in 2019 if it retains its market share.

I see very little chance of the drug failing Phase III trials. First, the technology used by Halozyme, known as ENHANZE, is proving itself to be very foolproof, as seen by the number of technology licensing partnerships between Halozyme and other biotechs. Second, Cinryze is widely used, approved, and tested. The combination has little chance of being any less successful than either of its ingredients.

Now, assume that at least half the people (20% of the market) that use other drugs at present do so because they prefer an SC injection. Once Halozyme can offer the market an SC option for Cinryze, we can conclude that Cinryze’s market will grow by another 20%. That is another $80 million in 2019, and that will be entirely due to Halozyme’s technology. This gives us a ballpark estimate of the worth of the technology and how much money Halozyme can make off of it.