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                                                                    EXHIBIT 99.1

                                   DYAX CORP.

         IMPORTANT FACTORS THAT MAY AFFECT FUTURE OPERATIONS AND RESULTS

                                   MARCH 2004

In this Exhibit 99.1, "we," "us," "our" and "Dyax" refer to Dyax Corp. and its
subsidiaries.

From time to time, we may make forward-looking public statements, such as
statements concerning our then expected results of operations, financial
resources or our projected plans for research and development programs, clinical
trials and collaborations, as well as other estimates relating to future
operations. Forward-looking statements may be in reports filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in press
releases or informal statements made with the approval of an authorized
executive officer. In some cases, words or phrases of expectation or uncertainty
like "expect," "believe," "continue," "anticipate," "estimate," "may," "will,"
"could," "opportunity," "future," "project," or similar expressions identify
"forward-looking statements" within the meaning of Section 21E of the Exchange
Act and Section 27A of the Securities Act of 1933, as amended, as enacted by the
Private Securities Litigation Reform Act of 1995.

Statements that are not historical facts are based on our current expectations,
beliefs, assumptions, estimates, forecasts and projections for our business and
the industry and markets in which we compete. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions, which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed in such forward-looking
statements.

We caution you not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they are made. In addition, we advise
you that the factors listed below, as well as other factors we have not
currently identified, could affect our financial or other performance and could
cause our actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods or events in any
forward-looking statement. We will not undertake and specifically decline any
obligation to publicly release revisions to these forward-looking statements to
reflect either circumstances after the date of the statements or the occurrence
of events which may cause us to re-evaluate our forward-looking statements,
except as may be required by law.

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act, we are hereby filing cautionary statements identifying
important factors that could cause our actual results to differ materially from
those projected in forward-looking statements made by us or on our behalf.


WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT TO INCUR SIGNIFICANT ADDITIONAL
OPERATING LOSSES.

We have incurred operating losses since our inception in 1989. As of December
31, 2003, we had an accumulated deficit of approximately $118.2 million. We
expect to incur substantial additional operating losses over the next several
years as our research, development, preclinical testing and clinical trial
activities increase, particularly with respect to our current product
candidates, DX-88 and DX-890. We have not generated any revenue from product
sales to date, and it is possible that we will never have significant, if any,
product sales revenue.

Currently, we generate revenue from collaborators through research and
development funding and through license and maintenance fees that we receive in
connection with the licensing of our phage display technology. We expect to
continue to be dependent upon revenue generated from our collaborative
arrangements and our licensing efforts over the next several years.

To become profitable, we, either alone with our collaborators, must successfully
develop, manufacture and market our current product candidates, DX-88 and
DX-890, and continue to leverage our phage display technology to generate
research funding and licensing revenue. It is possible that we will never have
significant product sales revenue or receive significant royalties on our
licensed product candidates.

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WE MAY BE UNABLE TO RAISE THE CAPITAL THAT WE WILL NEED TO SUSTAIN OUR
OPERATIONS.

We expect that existing cash and cash equivalents plus anticipated cash flow
from product development, license fees and collaborations will be sufficient to
support our current operating plans into 2006. We may, however, need to raise
additional funds before then. We will need additional funds if our cash
requirements exceed our current expectations or if we generate less revenue than
we expect.

Our future capital requirements will depend on many factors, including:

     -   the progress of our drug discovery and development programs;

     -   our ability to develop and commercialize our product candidates;

     -   maintaining or expanding our existing collaborative and license
         arrangements and entering into additional ones;

     -   the progress of the development and commercialization of milestone and
         royalty-bearing compounds by our collaborators and licensees;

     -   our decision to manufacture materials used in our product candidates;

     -   competing technological and market developments;

     -   costs of defending our patents and other intellectual property rights;
         and

     -   the amount and timing of additional capital equipment purchases.

We also may seek additional funding through collaborative arrangements and
public or private financings. We may not be able to obtain financing on
acceptable terms or at all or we may not be able to enter into additional
collaborative arrangements. In addition, the terms of any financing may
adversely affect the holdings or the rights of our stockholders. If we are
unable to obtain funding on a timely basis, we may be required to curtail
significantly one or more of our research or development programs. We also could
be required to seek funds through arrangements with collaborators or others that
may require us to relinquish rights to some of our technologies, product
candidates or products that we would otherwise pursue on our own.


OUR BIOPHARMACEUTICAL OR DIAGNOSTIC PRODUCT CANDIDATES MUST UNDERGO RIGOROUS
CLINICAL TRIALS AND REGULATORY APPROVALS, WHICH COULD SUBSTANTIALLY DELAY OR
PREVENT THEIR DEVELOPMENT OR MARKETING.

Any biopharmaceutical or diagnostic product we develop will be subject to
rigorous clinical trials and an extensive regulatory approval process
implemented by the Food and Drug Administration and analogous foreign regulatory
agencies. This approval process is typically lengthy and expensive, and approval
is never certain. Positive results from preclinical studies and early clinical
trials do not ensure positive results in late stage clinical trials designed to
permit application for regulatory approval. We may not be able to conduct
clinical trials at preferred sites, enroll sufficient patients or begin or
successfully complete clinical trials in a timely fashion, if at all. We expect
to enter into contractual arrangements with collaborators and third parties to
conduct clinical trials on our behalf. Any failure of these collaborators or
third parties to perform may delay or terminate the trials.

Because of the risks and uncertainties in biopharmaceutical development,
products that we or our collaborators develop could take a significantly longer
time to gain regulatory approval than we expect or may never gain approval. If
we or our collaborators do not receive these necessary approvals, we will not be
able to generate substantial product or royalty revenues and may not become
profitable. We and our collaborators may encounter significant delays or
excessive costs in our efforts to secure regulatory approvals. Factors that
raise uncertainty in obtaining these regulatory approvals include the following:

     -   we must demonstrate through clinical trials that the proposed product
         is safe and effective for its intended use;

     -   we have limited experience in conducting the clinical trials necessary
         to obtain regulatory approval; and

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     -   data obtained from preclinical and clinical activities are susceptible
         to varying interpretations, which could delay, limit or prevent
         regulatory approvals.

Regulatory authorities may delay, suspend or terminate clinical trials at any
time if they believe that the patients participating in trials are being exposed
to unacceptable health risks or if they find deficiencies in the clinical trial
procedures. In addition, our or our collaborators' failure to comply with
applicable regulatory requirements may result in criminal prosecution, civil
penalties and other actions that could impair our ability to conduct our
business.


BECAUSE WE CURRENTLY LACK THE RESOURCES, CAPABILITY AND EXPERIENCE NECESSARY TO
MANUFACTURE BIOPHARMACEUTICALS, WE WILL DEPEND ON THIRD PARTIES TO PERFORM THIS
FUNCTION, WHICH MAY ADVERSELY AFFECT OUR ABILITY TO COMMERCIALIZE ANY
BIOPHARMACEUTICALS WE MAY DEVELOP.

We do not currently operate manufacturing facilities for the clinical or
commercial production of biopharmaceuticals. We also lack the resources,
capability and experience necessary to manufacture biopharmaceuticals. As a
result, we will depend on collaborators, partners, licensees and other third
parties to manufacture clinical and commercial scale quantities of our
biopharmaceuticals. If we enter into these types of third party arrangements,
then we will be dependent on the efforts of others, which if not successful
could result in decreased revenue to us.

To date we have identified only a few facilities that are capable of producing
material for preclinical and clinical studies and we cannot assure you that they
will be able to supply sufficient clinical materials during the clinical
development of our product candidates. There is no assurance that contractors
will have the capacity to manufacture or test our products at the required scale
and within the required time frame. There is no assurance that the supply of
clinical materials can be maintained during the clinical development of our
product candidates. We will also be dependent on contract manufacturers to
produce and test any biopharmaceuticals that are approved for market.


WE LACK EXPERIENCE IN CONDUCTING CLINICAL TRIALS, REGULATORY PROCESSES, AND
CONDUCTING SALES AND MARKETING ACTIVITIES, ANY OR ALL OF WHICH MAY ADVERSELY
IMPACT OUR ABILITY TO COMMERCIALIZE ANY BIOPHARMACEUTICALS THAT WE MAY DEVELOP.

We have hired experienced clinical development, regulatory, and marketing staff
to develop and supervise clinical trials, regulatory processes, and sales and
marketing activities. However, we will remain dependent upon third party
contract research organizations to carry out some of our clinical and
preclinical research studies for the foreseeable future. While we will seek to
establish contracts with experienced, resourceful contractors who can carry out
these activities efficiently, effectively, and quickly, we cannot assure that
these third party contractors will perform as expected and required. Any failure
to perform adequately may cause delays in one or more products and might lead to
a failure to gain regulatory approval.

Similarly, we may be unable to enter into third party arrangements for the
marketing and sale of biopharmaceuticals on acceptable terms. For certain
products, we may incur substantial expenses to develop our own marketing and
sales force in order to commercialize our biopharmaceuticals and our efforts may
not be successful or the product may not be approved. As a result we may
experience delays in the commercialization of our biopharmaceuticals and we may
be unable to compete effectively.


WE ARE SUBSTANTIALLY DEPENDENT ON OUR COLLABORATOR'S ABILITY TO SUCCESSFULLY AND
TIMELY COMPLETE CLINICAL TRIALS AND OBTAIN REGULATORY APPROVAL TO MARKET ONE OF
OUR MOST ADVANCED PRODUCT CANDIDATES, DX-890. OUR BUSINESS MAY BE MATERIALLY
HARMED AND OUR STOCK PRICE ADVERSELY AFFECTED IF REGULATORY APPROVAL OF DX-890
IS NOT OBTAINED OR IS SUBSTANTIALLY DELAYED.

Under our existing collaboration agreement for the development of DX-890,
Debiopharm S.A. is responsible for the management of the non-clinical and
clinical development of DX-890. Consequently, the success of the DX-890
development program is largely dependent on Debiopharm's ability to demonstrate
positive results in non-clinical and clinical trials designed to permit
application for regulatory approval of DX-890 as a treatment for cystic
fibrosis. In the event that Debiopharm is unable to successfully and timely
complete such studies, our business may be materially harmed and our stock price
adversely affected.

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In order to assume greater control over the development of DX-890, it would be
necessary to amend our existing collaboration agreement with Debiopharm. Such an
amendment could potentially affect the financial structure of our collaboration
with Debiopharm and cause Dyax to assume responsibility for costs incurred in
connection with the development of DX-890, costs which are currently fully
funded by Debiopharm.


IF WE FAIL TO ESTABLISH AND MAINTAIN STRATEGIC LICENSE, RESEARCH AND
COLLABORATIVE RELATIONSHIPS, OR IF OUR COLLABORATORS ARE NOT ABLE TO
SUCCESSFULLY DEVELOP AND COMMERCIALIZE PRODUCT CANDIDATES, OUR ABILITY TO
GENERATE REVENUES COULD BE ADVERSELY AFFECTED.

Our business strategy includes leveraging our proprietary phage display
technology through collaborations and licenses that are structured to generate
revenues through license fees, technical and clinical milestone payments, and
royalties. For us to receive any significant milestone or royalty payments from
our licensees and collaborators, they must advance product candidates through
clinical trials, establish safety and efficacy, obtain regulatory approvals and
achieve market acceptance of those products. In general, however, under our
existing license and collaboration agreements, our licensees and collaborators:

     -   are not obligated to develop or market product candidates discovered
         using our phage display technology;

     -   may pursue alternative technologies or develop competing products;

     -   control many of the decisions with respect to research, clinical trials
         and commercialization of product candidates we discover or develop with
         them;

     -   may terminate their collaborative arrangements with us under specified
         circumstances with short notice; and

     -   may disagree with us as to whether a milestone or royalty payment is
         due under the terms of our collaborative arrangements.

We cannot assure you that we will be able to maintain our current licensing and
collaborative efforts nor can we assure the success of any current or future
licensing and collaborative relationships. If any significant portion of our
licensing and collaborative efforts fail, our business and financial condition
would be materially harmed.


WE AND OUR COLLABORATORS MAY NOT BE ABLE TO GAIN MARKET ACCEPTANCE OF OUR
BIOPHARMACEUTICALS, WHICH COULD ADVERSELY AFFECT OUR REVENUES.

We cannot be certain that any of our biopharmaceutical candidates, even if
successfully approved, will gain market acceptance among physicians, patients,
healthcare payors, pharmaceutical manufacturers or others. We may not achieve
market acceptance even if clinical trials demonstrate safety and efficacy of our
biopharmaceutical and diagnostic products and the necessary regulatory and
reimbursement approvals are obtained. The degree of market acceptance of our
biopharmaceutical candidates will depend on a number of factors, including:

     -   their clinical efficacy and safety;

     -   their cost-effectiveness;

     -   their potential advantage over alternative treatment methods;

     -   their marketing and distribution support;

     -   reimbursement policies of government and third-party payors; and

     -   market penetration and pricing strategies of competing and future
         products.

If our products do not achieve significant market acceptance, our revenues could
be adversely affected.

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COMPETITION AND TECHNOLOGICAL CHANGE MAY MAKE OUR POTENTIAL PRODUCTS AND
TECHNOLOGIES LESS ATTRACTIVE OR OBSOLETE.

We compete with major pharmaceutical and biotechnology companies that are
pursuing forms of treatment or prevention for the diseases that we target. Many
of our competitors have substantially greater financial and other resources than
we do and are conducting extensive research and development activities. Other
companies may succeed in developing products earlier than we do, obtaining
regulatory approval for products more rapidly than we do, or developing products
that are more effective or less costly than those we develop.

For DX-88 as a treatment for hereditary angiodema, our competitors include
Aventis Behring, which currently markets plasma-derived C1 esterase inhibitor
products that are approved for the treatment of this disease in Europe. In
addition, other competitors include Jerini AG, which is developing a bradykinin
antagonist for the treatment of angioedema in Europe, companies developing
recombinant or plasma-derived C1 inhibitors, such as Pharming Group N.V., as
well as companies that market and develop corticosteroid drugs or other
anti-inflammatory compounds.

For DX-88 as a treatment for patients undergoing on-pump open-heart surgery
during coronary artery bypass grafting surgery (CABG), our competitors include
Bayer AG, which currently markets aprotinin, under the name Trasylol(R), for
reduction of blood loss in CABG patients. A number of companies, including
Alexion Pharmaceuticals, Inc., Avant Immunotherapeutics, Inc. and Zymogenetics,
Inc., are developing additional products to reduce the complications associated
with cardiopulmonary bypass procedures.

For our DX-890 product candidate, companies with marketed products for the
treatment of cystic fibrosis include Genentech, Inc. and Chiron Corporation. In
addition, a number of companies are developing products for the treatment of
cystic fibrosis, including Inspire Pharmaceuticals Inc., Genaera Corporation,
Targeted Genetics Corporation and BCY LifeSciences, Inc. A number of other
companies are also developing neutrophil elastase inhibitors for broader
indications. These include Ono Pharmaceuticals, Teijin Institute for Bio-medical
Research, Arriva Pharmaceuticals, Inc., and Ivax Corporation.

For potential oncology product candidates coming out of our biopharmaceutical
discovery and development programs, our potential competitors include numerous
pharmaceutical and biotechnology companies, most of which have substantially
greater financial resources and experience than we do.

In addition, most large pharmaceutical companies seek to develop orally
available small molecule compounds against many of the targets for which others
and we are seeking to develop protein, peptide, and/or antibody products.

Our phage display technology is one of several technologies available to
generate libraries of compounds that can be used to discover and develop new
protein, peptide, and/or antibody products. The primary competing technology
platforms that pharmaceutical, diagnostics and biotechnology companies use to
identify antibodies that bind to a desired target are transgenic mouse
technology and the humanization of murine antibodies derived from hybridomas.
Abgenix Inc., Medarex Inc., Genmab A/S, and Protein Design Labs, Inc. are
leaders in these technologies. Further, we license our phage display patents and
libraries to other parties in the fields of therapeutics and IN VITRO diagnostic
products on a non-exclusive basis. Our licensees may compete with us in the
development of specific therapeutic and diagnostic products. In particular,
Cambridge Antibody Technology Group plc (CAT), Morphosys AG, and BioInvent
International AB, all of which have licenses to our base technology, compete
with us, both to develop therapeutics and to offer research services to larger
pharmaceutical and biotechnology companies. Biosite Incorporated, which is also
a patent licensee of ours, has partnered with Medarex, Inc. to combine phage
display technology with transgenic mouse technology to create antibody libraries
derived from the RNA of immunized mice. Other companies are attempting to
develop new antibody engineering technology. These include Phylos, Inc. and CAT,
which are each developing ribosomal display technology and antibody mimics,
Diversa Corp., which is developing combinatorial arrays for large-scale
screening of antibodies, our patent licensee Domantis Limited, which makes
single domain antibody libraries, and Novagen, Inc., which is developing cDNA
display technology.

In addition, we may experience competition from companies that have acquired or
may acquire technology from universities and other research institutions. As
these companies develop their technologies, they may develop proprietary
positions that may prevent us from successfully commercializing our products.

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OUR SUCCESS DEPENDS SIGNIFICANTLY UPON OUR ABILITY TO OBTAIN AND MAINTAIN
INTELLECTUAL PROPERTY PROTECTION FOR OUR PRODUCTS AND TECHNOLOGIES AND THIRD
PARTIES NOT OBTAINING PATENTS THAT WOULD PREVENT US FROM COMMERCIALIZING ANY OF
OUR PRODUCTS.

We face risks and uncertainties related to our intellectual property rights. For
example:

     -   we may be unable to obtain or maintain patent or other intellectual
         property protection for any products or processes that we may develop;

     -   third parties may obtain patents covering the manufacture, use or sale
         of these products, which may prevent us from commercializing any of our
         products under development globally or in certain regions; or

     -   our patents or any future patents that we may obtain may not prevent
         other companies from competing with us by designing their products or
         conducting their activities so as to avoid the coverage of our patents.

Our phage display patent rights are central to our non-exclusive patent
licensing program. As part of that licensing program, we generally seek to
negotiate a phage display license agreement with parties practicing technology
covered by our patents. In countries where we do not have and/or have not
applied for phage display patent rights, we will be unable to prevent others
from using phage display or developing or selling products or technologies
derived using phage display. In addition, in jurisdictions where we have phage
display patent rights, we may be unable to prevent others from selling or
importing products or technologies derived elsewhere using phage display. Any
inability to protect and enforce our phage display patent rights, whether by
licensing or any invalidity of our patents or otherwise, would negatively affect
our research and revenues.

In all of our activities, we also rely substantially upon proprietary materials,
information, trade secrets and know-how to conduct our research and development
activities and to attract and retain collaborators, licensees and customers.
Although we take steps to protect our proprietary rights and information,
including the use of confidentiality and other agreements with our employees and
consultants and in our academic and commercial relationships, these steps may be
inadequate, these agreements may be violated, or there may be no adequate remedy
available for a violation. Also, our trade secrets or similar technology may
otherwise become known to, or be independently developed or duplicated by, our
competitors.

Before we and our collaborators can market some of our processes or products, we
and our collaborators may need to obtain licenses from other parties who have
patent or other intellectual property rights covering those processes or
products. Third parties have patent rights related to phage display,
particularly in the area of antibodies. While we have gained access to key
patents in the antibody area through the cross licenses with Affimed
Therapeutics AG, Biosite Incorporated, Genentech, Inc., XOMA Ireland Limited and
Cambridge Antibody Technology Limited, other third party patent owners may
contend that we need a license or other rights under their patents in order for
us to commercialize a process or product. In addition, we may choose to license
patent rights from third parties. In order for us to commercialize a process or
product, we may need to license the patent rights of other parties. If a third
party does not offer us a needed license or offers us a license only on terms
that are unacceptable, we may be unable to commercialize one or more of our
products. If a third party does not offer a needed license to our collaborators
and as a result our collaborators stop work under their agreement with us, we
might lose future milestone payments and royalties. If we decide not to seek a
license, or if licenses are not available on reasonable terms, we may become
subject to infringement claims or other legal proceedings, which could result in
substantial legal expenses. If we are unsuccessful in these actions, adverse
decisions may prevent us from commercializing the affected process or products.

We seek affirmative rights of license or ownership under existing patent rights
relating to phage display technology of others. For example, through our patent
licensing program, we have secured a limited freedom to practice some of these
patent rights pursuant to our standard license agreement, which contains a
covenant by the licensee that it will not sue us under certain of the licensee's
phage display improvement patents. We cannot guarantee, however, that we will be
successful in enforcing any agreements from our licensees, including agreements
not to sue under their phage display improvement patents, or in acquiring
similar agreements in the future, or that we will be able to obtain commercially
satisfactory licenses to the technology and patents of others. If we cannot
obtain and maintain these licenses and enforce these agreements, this could have
a negative effect on our business.

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PROCEEDINGS TO OBTAIN, ENFORCE OR DEFEND PATENTS AND TO DEFEND AGAINST CHARGES
OF INFRINGEMENT ARE TIME CONSUMING AND EXPENSIVE ACTIVITIES. UNFAVORABLE
OUTCOMES IN THESE PROCEEDINGS COULD LIMIT OUR PATENT RIGHTS AND OUR ACTIVITIES,
WHICH COULD MATERIALLY AFFECT OUR BUSINESS.

Obtaining, protecting and defending against patent and proprietary rights can be
expensive. For example, if a competitor files a patent application claiming
technology also invented by us, we may have to participate in an expensive and
time-consuming interference proceeding before the U.S. Patent and Trademark
Office to address who was first to invent the subject matter of the claim and
whether that subject matter was patentable. Moreover, an unfavorable outcome in
an interference proceeding could require us to cease using the technology or to
attempt to license rights to it from the prevailing party. Our business would be
harmed if a prevailing third party does not offer us a license on terms that are
acceptable to us.

In patent offices outside the United States, we may be forced to respond to
third party challenges to our patents. For example, our first phage display
patent in Europe, European Patent No. 436,597, known as the 597 Patent, was
ultimately revoked in 2002 in proceedings in the European Patent Office. We have
two divisional patent applications of the 597 Patent pending in the European
Patent Office. We will not be able to prevent other parties from using our phage
display technology in Europe if the European Patent Office does not grant us
another patent. We cannot be assured that we will prevail in the prosecution of
either of these patent applications.

We may need to resort to litigation to enforce any patent issued to us. Third
parties may assert that we are employing their proprietary technology without
authorization. In addition, third parties may have or obtain patents in the
future and claim that the use of our technology infringes these patents.

George Pieczenik and I.C. Technologies America, Inc. sued us in 1999 for patent
infringement of three United States patents. The complaint was initially filed
against us in New York, dismissed for lack of jurisdiction and then refiled in
the United States District Court in Massachusetts. On February 25, 2003, the
District Court granted summary judgment of non-infringement in our favor with
respect to the three asserted patents. On March 5, 2003, the plaintiff filed a
Notice of Appeal to the United States Court of Appeals for the Federal Circuit
(CAFC). On September 23, 2003 the CAFC affirmed the decision of the United
States District Court granting summary judgment that we do not infringe the
patents asserted by the plaintiff. The plaintiff has filed a petition for
CERTIORARI with the United States Supreme Court for the review of the decision
by the CAFC. The petition is still pending. On December 21, 2003, the plaintiff
asked the District Court to reconsider its decision that we did not infringe
plaintiff's patents. The Massachusetts Court denied plaintiff's request on
January 7, 2004. On January 19, 2004, plaintiff appealed that decision to the
CAFC.

George Pieczenik also recently filed an action in the United States District
Court for the Southern District of New York, alleging, among other things, that
we (and each of several other defendants) infringe a newly issued patent, which
issued on August 12, 2003. We challenged the new lawsuit on several grounds
(including jurisdictional and venue grounds) and on October 9, 2003 the District
Court dismissed the action as to us. The Court subsequently dismissed the action
as to one of our directors and one of our former officers. As a result, Dyax,
its directors and officers are no longer parties to the New York proceeding.

We have incurred substantial costs as a result of the Pieczenik litigation and
we could incur further costs in connection with it or any other litigation or
patent proceeding. In addition, our management's efforts would be diverted,
regardless of the results of the litigation. An unfavorable result could subject
us to significant liabilities to third parties, require us to cease
manufacturing or selling the affected products or using the affected processes,
require us to license the disputed rights from third parties or result in awards
of substantial damages against us. Our business will be harmed if we cannot
obtain a license, can obtain a license only on terms we consider to be
unacceptable or if we are unable to redesign our products or processes to avoid
infringement.


OUR REVENUES AND OPERATING RESULTS HAVE FLUCTUATED SIGNIFICANTLY IN THE PAST,
AND WE EXPECT THIS TO CONTINUE IN THE FUTURE.

Our revenues and operating results have fluctuated significantly on a quarter to
quarter basis. We expect these fluctuations to continue in the future.
Fluctuations in revenues and operating results will depend on:

     -   the timing of our increased research and development expenses;

     -   the establishment of new collaborative and licensing arrangements;

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     -   the timing and results of clinical trials;

     -   the development and marketing programs of current and prospective
         collaborators; and

     -   the completion of certain milestones.

If the revenues we receive are less than the revenues we expect for a given
fiscal period, then we may be unable to reduce our expenses quickly enough to
compensate for the shortfall. Our revenues in any period are not a reliable
indicator of our future performance. In addition, our fluctuating revenues and
operating results may fail to meet the expectations of securities analysts or
investors. Our failure to meet these expectations may cause the price of our
common stock to decline.


IF WE LOSE OR ARE UNABLE TO HIRE AND RETAIN QUALIFIED PERSONNEL, THEN WE MAY NOT
BE ABLE TO DEVELOP OUR PRODUCTS OR PROCESSES.

We are highly dependent on qualified scientific and management personnel, and we
face intense competition from other companies and research and academic
institutions for qualified personnel. If we lose an executive officer, a manager
of one of our principal business units or research programs, or a significant
number of any of our staff or are unable to hire and retain qualified personnel,
then our ability to develop and commercialize our products and processes may be
delayed or prevented.


WE USE AND GENERATE HAZARDOUS MATERIALS IN OUR BUSINESS, AND ANY CLAIMS RELATING
TO THE IMPROPER HANDLING, STORAGE, RELEASE OR DISPOSAL OF THESE MATERIALS COULD
BE TIME-CONSUMING AND EXPENSIVE.

Our phage display research and development involves the controlled storage, use
and disposal of chemicals and solvents, as well as biological materials. We are
subject to foreign, federal, state and local laws and regulations governing the
use, manufacture and storage and the handling and disposal of materials and
waste products. Although we believe that our safety procedures for handling and
disposing of these hazardous materials comply with the standards prescribed by
laws and regulations, we cannot completely eliminate the risk of contamination
or injury from hazardous materials. If an accident occurs, an injured party
could seek to hold us liable for any damages that result and any liability could
exceed the limits or fall outside the coverage of our insurance. We may not be
able to maintain insurance on acceptable terms, or at all. We may incur
significant costs to comply with current or future environmental laws and
regulations.


WE MAY HAVE SIGNIFICANT PRODUCT LIABILITY EXPOSURE.

We face exposure to product liability and other claims if products or processes
are alleged to have caused harm. These risks are inherent in the testing,
manufacturing and marketing of human therapeutic products. Although we currently
maintain product liability insurance, we may not have sufficient insurance
coverage, and we may not be able to obtain sufficient coverage at a reasonable
cost. Our inability to obtain product liability insurance at an acceptable cost
or to otherwise protect against potential product liability claims could prevent
or inhibit the commercialization of any products that we or our collaborators
develop. If we are sued for any injury caused by our products or processes, then
our liability could exceed our product liability insurance coverage and our
total assets.


OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND
COLLABORATIONS.

We receive product development and license fees from international customers.
For the year ended December 31, 2003, we earned revenue of approximately $12.1
million from non-US based companies. All of our revenue contracts are paid in US
dollars. We expect that international product development and license fees will
continue to account for a significant percentage of our revenues for the
foreseeable future. In addition, we have direct investments in subsidiaries
located in the European Union. Our operations could be limited or disrupted, and
the value of our direct investments may be diminished, by any of the following:

     -   fluctuations in currency exchange rates;

     -   the imposition of governmental controls;

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     -   less favorable intellectual property or other applicable laws;

     -   the inability to obtain any necessary foreign regulatory approvals of
         products in a timely manner;

     -   import and export license requirements;

     -   political instability;

     -   terrorist activities; and

     -   difficulties in staffing and managing international operations.

A portion of our business is conducted in currencies other than our reporting
currency, the U.S. dollar. We recognize foreign currency gains or losses arising
from our operations in the period in which we incur those gains or losses. As a
result, currency fluctuations among the U.S. dollar and the currencies in which
we do business have caused foreign currency transaction gains and losses in the
past and will likely do so in the future. Because of the variability of currency
exposures and the potential volatility of currency exchange rates, we may suffer
significant foreign currency transaction losses in the future due to the effect
of exchange rate fluctuations on our future operating results.


WE MAY NOT SUCCEED IN ACQUIRING TECHNOLOGY AND INTEGRATING COMPLEMENTARY
BUSINESSES.

We may acquire additional technology and complementary businesses in the future.
Acquisitions involve many risks, any one of which could materially harm our
business, including:

     -   the diversion of management's attention from core business concerns;

     -   the failure to exploit effectively acquired technologies or integrate
         successfully the acquired businesses;

     -   the loss of key employees from either our current business or any
         acquired businesses; and

     -   the assumption of significant liabilities of acquired businesses.

We may be unable to make any future acquisitions in an effective manner. In
addition, the ownership represented by the shares of our common stock held by
you will be diluted if we issue equity securities in connection with any
acquisition. If we make any significant acquisitions using cash consideration,
we may be required to use a substantial portion of our available cash. If we
issue debt securities to finance acquisitions, then the debtholders would have
rights senior to the holders of shares of our common stock to make claims on our
assets and the terms of any debt could restrict our operations, including our
ability to pay dividends on our shares of common stock. Acquisition financing
may not be available on acceptable terms, or at all. In addition, we may be
required to amortize significant amounts of intangible assets in connection with
future acquisitions. We might also have to recognize significant amounts of
goodwill that will have to be tested periodically for impairment. These amounts
could be significant, which could harm our operating results.


OUR COMMON STOCK MAY CONTINUE TO HAVE A VOLATILE PUBLIC TRADING PRICE AND LOW
TRADING VOLUME.

The market price of our common stock has been highly volatile. Since our initial
public offering in August 2000 through March 2004, the price of our common stock
on the Nasdaq National Market has ranged between $54.12 and $1.05. The market
has experienced significant price and volume fluctuations for reasons unrelated
to our operating performance.

Many factors may have a negative effect on the market price of our common stock,
including:

     -   public announcements by us, our competitors or others;

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     -   developments concerning proprietary rights, including patents and
         litigation matters;

     -   publicity regarding actual or potential results with respect to
         products or compounds we or our collaborators are developing;

     -   regulatory developments in both the United States and abroad;

     -   public concern about the safety or efficacy of new technologies;

     -   general market conditions and comments by securities analysts; and

     -   quarterly fluctuations in our revenues and financial results.


ANTI-TAKEOVER PROVISIONS IN OUR GOVERNING DOCUMENTS AND UNDER DELAWARE LAW AND
OUR SHAREHOLDER RIGHTS PLAN MAY MAKE AN ACQUISITION OF US MORE DIFFICULT.

We are incorporated in Delaware. We are subject to various legal and contractual
provisions that may make a change in control of us more difficult. Our board of
directors has the flexibility to adopt additional anti-takeover measures.

Our charter authorizes our board of directors to issue up to 1,000,000 shares of
preferred stock and to determine the terms of those shares of stock without any
further action by our stockholders. If the board of directors exercises this
power to issue preferred stock, it could be more difficult for a third party to
acquire a majority of our outstanding voting stock. Our charter also provides
staggered terms for the members of our board of directors. This may prevent
stockholders from replacing the entire board in a single proxy contest, making
it more difficult for a third party to acquire control of us without the consent
of our board of directors. Our equity incentive plans generally permit our board
of directors to provide for acceleration of vesting of options granted under
these plans in the event of certain transactions that result in a change of
control. If our board of directors used its authority to accelerate vesting of
options, then this action could make an acquisition more costly, and it could
prevent an acquisition from going forward. Our shareholder rights plan could
result in the significant dilution of the proportionate ownership of any person
that engages in an unsolicited attempt to take over our company and,
accordingly, could discourage potential acquirers.

Section 203 of the Delaware General Corporation Law prohibits a corporation from
engaging in a business combination with any holder of 15% or more of its capital
stock until the holder has held the stock for three years unless, among other
possibilities, the board of directors approves the transaction. Our board of
directors could use this provision to prevent changes in management.

The provisions described above, as well as other provisions in our charter and
bylaws and under the Delaware General Corporation Law, may make it more
difficult for a third party to acquire our company, even if the acquisition
attempt was at a premium over the market value of our common stock at that time.