Notice & Proxy Statement

DEF 14A 1 ddef14a.htm NOTICE & PROXY STATEMENT Notice & Proxy Statement

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NABI BIOPHARMACEUTICALS

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LOGO

12276 Wilkins Avenue

Rockville, Maryland 20852

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 20, 2010

The annual meeting of stockholders (the “Annual Meeting”) of Nabi Biopharmaceuticals, a Delaware corporation (the “Company”), will be held at 10:00 a.m. on Thursday, May 20, 2010, at The Bethesda Marriott Hotel, 5151 Pooks Hill Road, Bethesda, Maryland, for the following purposes:

To elect a Board of Directors;

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 25, 2010; and

To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

Stockholders of record at the close of business on March 29, 2010 are entitled to notice of and to vote at the Annual Meeting.

Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote by submitting a proxy as soon as possible. Stockholders entitled to vote at the Annual Meeting may submit a proxy by mail, telephone, or the Internet, as provided by the enclosed proxy card.

By Order of the Board of Directors,

LOGO

Constantine Alexander

Secretary

April 16, 2010

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 20, 2010. THE PROXY STATEMENT, ANNUAL REPORT TO SHAREHOLDERS AND ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 26, 2009 ARE AVAILABLE AT WWW.NABI.COM, BY CLICKING ON THE “INVESTORS” LINK AND THEN THE “SEC REPORTS” LINK.

LOGO

12276 Wilkins Avenue

Rockville, Maryland 20852

PROXY STATEMENT

This proxy statement and the enclosed proxy card are being furnished to you in connection with the solicitation of proxies by the Board of Directors of Nabi Biopharmaceuticals, a Delaware corporation (the “Company”), from holders of the Company’s common stock, par value $.10 per share (the “Common Stock”), for the Company’s annual meeting of stockholders (the “Annual Meeting”) to be held at 10:00 a.m. on Thursday, May 20, 2010, at The Bethesda Marriott Hotel, 5151 Pooks Hill Road, Bethesda, Maryland.

The Company’s principal executive offices are located at 12276 Wilkins Avenue, Rockville, Maryland 20852. The Company first mailed this proxy statement to stockholders on or about April 16, 2010.

VOTING AT THE ANNUAL MEETING

Stockholders of record at the close of business on March 29, 2010 are entitled to notice of and to vote at the Annual Meeting. As of March 29, 2010, 48,080,879 shares of Common Stock were outstanding. A quorum of stockholders is necessary to take action at the Annual Meeting. The holders of issued and outstanding shares of Common Stock that represent a majority of the votes entitled to be cast at the Annual Meeting, present in person or represented by proxy, will constitute a quorum. Directions to withhold authority, abstentions, and broker non-votes, if any, will be counted for purposes of determining the existence of a quorum at the Annual Meeting. Broker non-votes occur when a broker or other nominee that holds shares for a beneficial owner does not vote on a proposal because the broker or other nominee does not have discretionary authority to vote on the proposal and has not received voting instructions from the beneficial owner. Please note that unlike previous years, members of the New York Stock Exchange holding shares beneficially owned by their clients will no longer have the ability to cast votes with respect to the election of directors unless they have received voting instructions from their clients. If you are a beneficial owner, it is important that you provide instructions to your bank, broker or other holder of record so that your vote on the election of directors is counted.

Stockholders are entitled to one vote per share on all matters that properly come before the Annual Meeting. Stockholders of record may vote by signing, dating, and mailing the enclosed proxy card; by calling the toll-free number listed on the enclosed proxy card; or by accessing the Internet website listed on the enclosed proxy card. If your shares are held in the name of a bank or broker, then you may vote by following the instructions that you receive from your bank or broker. Voting by proxy will not limit your right to attend the Annual Meeting and vote in person. If your shares are held in the name of a bank or broker, you must bring an account statement or letter from your bank or broker showing that you are the beneficial owner of the shares as of the record date in order to be admitted to the meeting. To be able to vote your shares held in the name of a bank or broker at the meeting, you will need to obtain a legal proxy from the bank or broker.

Each proxy that is properly received before the Annual Meeting will be exercised in accordance with the specified voting instructions. If no voting instructions are specified, then the shares represented by the proxy will be voted (i) for the election of the director nominees named in this proxy statement, (ii) for the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 25, 2010, and (iii) in accordance with the discretionary authority granted in the enclosed proxy card. You may revoke your proxy before it is exercised by submitting another proxy with a subsequent date, by delivering a written notice of revocation to the Secretary of the Company, in care of Greg Fries, Investor Relations, Nabi Biopharmaceuticals, 12276 Wilkins Avenue, Rockville, Maryland 20852, or by attending the Annual Meeting and voting in person.

PROPOSAL 1

ELECTION OF DIRECTORS

The Company’s by-laws provide that it shall have one or more directors, the number of directors to be determined from time to time by vote of a majority of directors then in office. Pursuant to the Company’s by-laws, the size of the Board currently is fixed at nine directors, but has been reduced to seven effective at the Annual Meeting. Linda Jenckes, who has been a director since 1997, and Stephen Sudovar, who has been a director since 2002, are not seeking reelection as directors. Proxies cannot be voted at the Annual Meeting for a greater number of persons than the number of nominees named in this proxy statement. All of the nominees named in this proxy statement are currently serving as directors of the Company.

Vote Required

A plurality of votes cast will be required to elect each director nominee. Directions to withhold authority and broker non-votes will have no effect on the election of directors. Your proxy will confer discretionary authority to vote on the election of any person to serve as a director if a nominee named in this proxy statement is unable to serve or for good cause will not serve. The Board of Directors has no reason to believe that any director nominee will be unable or unwilling to serve, if elected.

Director Nominees

Each of the following directors has been nominated for election at the Annual Meeting.

Jason M. Aryeh, age 41, has been a director of the Company since 2006. He is the founder and general partner of JALAA Equities, LP, a private hedge fund formed in 1996 with a focus on biotechnology and specialty pharmaceutical companies. Mr. Aryeh also serves on the board of directors of Ligand Pharmaceuticals. Mr. Aryeh’s experience in the biotechnology industry, including his investor-side knowledge of the industry, were among the factors considered by the Board of Directors in determining that Mr. Aryeh should be nominated for election as a director.

David L. Castaldi, age 70, has been a director of the Company since 1994. Since 1994 he has been an independent consultant to the life science industry. Mr. Castaldi founded Cadent Medical Corp., a medical device company that was sold to Cardiac Science, Inc. While at Cadent, Mr. Castaldi served as Chairman of the Board from 1996 to 2001 and as Chief Executive Officer from 1998 to 1999. Previously, Mr. Castaldi was founder and Chief Executive Officer of BioSurface Technology, Inc., a Nasdaq-listed biotechnology company sold to Genzyme Corporation, and President of the worldwide protein-based pharmaceuticals division of Baxter International. He is a graduate of the University of Notre Dame and Harvard Business School. Mr. Castaldi serves on the boards of directors of four privately-held biopharmaceutical and medical device companies, and previously served on the board of directors of Embrex, Inc. Mr. Castaldi’s financial and business experience in the life sciences field, as well as his qualification as an audit committee financial expert, were among the factors considered by the Board of Directors in determining that Mr. Castaldi should be nominated for election as a director.

Geoffrey F. Cox, Ph.D., age 66, has been a director of the Company since 2000 and has served as non-executive Chairman of the Board of Directors of the Company since February 2007. He has been Chairman, President and Chief Executive Officer of GTC Biotherapeutics, Inc., a biopharmaceutical company, since 2001. From 1997 to 2001, he was Chairman of the Board and Chief Executive Officer of Aronex Pharmaceuticals, Inc., a biotechnology company. From 1984 to 1997, he was employed by Genzyme Corporation, a biotechnology company, last serving as its Executive Vice President, Operations. During the past five years, Dr. Cox has served, and continues to serve, on the board of directors of GTC Biotherapeutics, Inc. and on the board of directors of the Biotechnology Industry Organization and the Massachusetts Biotechnology Council. Dr. Cox’s extensive biotechnology industry expertise, including his many years of experience as an executive officer and board

member at publicly-traded biotechnology companies, were among the factors considered by the Board of Directors in determining that Dr. Cox should be nominated for election as a director.

Peter B. Davis, age 63, has been a director of the Company since 2006. He is currently an independent consultant. He served as Vice President Finance and Chief Financial Officer of XOMA Ltd., a biotechnology company, from 1994 to his retirement in June 2005. From 1991 to 1994 he served as Vice President Financial Operations for the Ares Serono Group, a global pharmaceutical company. From 1988 to 1991, he was Vice President, Chief Financial Officer of Akzo America Inc., a subsidiary of a diversified Dutch chemical company. From 1985 to 1988, he was Controller-International Division of Stauffer Chemical Corporation, and from 1972 to 1985, he was employed by PepsiCo Inc., last serving as Division Finance Director of Pepsi-Cola International. Mr. Davis’s business background and biotechnology and pharmaceutical industry experience, as well as his qualification as an audit committee financial expert, were among the factors considered by the Board of Directors in determining that Mr. Davis should be nominated for election as a director.

Raafat Fahim, Ph.D., age 56, has been President, Chief Executive Officer and a director of the Company since January 2008 and acting Chief Financial Officer of the Company since May 2008. From July 2007 to January 2008, Dr. Fahim served as Senior Vice President, Research, Technical and Production Operations of the Company and Chief Operating Officer and General Manager of the Biologics Strategic Business Unit. From March 2003 to July 2007, Dr. Fahim served as Senior Vice President, Research, Technical and Production Operations of the Company. From 2002 to 2003, Dr. Fahim was an independent consultant, working with Aventis Pasteur and other companies worldwide on projects that included manufacturing, process improvement, quality operations and regulatory issues. From 2001 to 2002, he served as President and Chief Operating Officer of Lorus Therapeutics, Inc., a biopharmaceutical company. From 1987 to 2001, Dr. Fahim was employed by Aventis Pasteur where he was instrumental in developing several vaccines from early research to marketed products. During his employment with Aventis Pasteur, Dr. Fahim held the positions of Vice President, Industrial Operations, Vice President, Development, Quality Operations and Manufacturing, Director of Product Development, and head of bacterial vaccines research/research scientist. Dr. Fahim’s background in the biopharmaceutical industry, position as President and Chief Executive Officer of the Company and right to be nominated to the Board under the terms of his employment agreement with the Company were among the factors considered by the Board of Directors in determining that Dr. Fahim should be nominated for election as a director.

Richard A. Harvey, Jr., age 60, has been a director of the Company since 1992. He has been President of Stonebridge Associates, LLC, an investment banking firm, since 1996. Mr. Harvey has 35 years of experience advising mid-cap and small-cap companies on matters involving corporate finance and strategic transactions. Mr. Harvey’s business and investment banking experience in life sciences and other industries were among the factors considered by the Board of Directors in determining that Mr. Harvey should be nominated for election as a director.

Timothy P. Lynch, age 40, has been a director of the Company since 2006. He has been Managing Member of Stonepine Capital LP, a life science focused investment fund since July 2008. From October 2005 to June 2008, Mr. Lynch was President and Chief Executive Officer of NeuroStat Pharmaceuticals, Inc., a start-up specialty pharmaceuticals company. From June 2005 to September 2005, Mr. Lynch was President and Chief Executive Officer of Vivo Therapeutics, Inc., a venture-backed specialty pharmaceuticals start-up. From October 2002 to June 2005, Mr. Lynch served as Chief Financial Officer of Tercica, Inc., a biopharmaceutical company. From 1999 to June 2002, Mr. Lynch served as Chief Financial Officer of InterMune, Inc., a biopharmaceutical company. He was involved with the initial public offerings of both biopharmaceutical companies. Previously, Mr. Lynch served as Director of Strategic Planning and as a pharmaceutical sales representative at Elan Corporation, PLC, a pharmaceutical company. He started his career at Goldman, Sachs & Co. and Chase Securities, Inc. Mr. Lynch is currently a director of Allos Therapeutics and Insite Vision. Additionally, within the past five years, Mr. Lynch has served as a director of BioForm Medical, Inc. and Aradigm Corp. Mr. Lynch

received his B.A. in economics from Colgate University and his M.B.A. from the Harvard Graduate School of Business. Mr. Lynch’s experience in the pharmaceutical and biopharmaceutical industries, as well as his qualification as an audit committee financial expert, were among the factors considered by the Board of Directors in determining that Mr. Lynch should be nominated for election as a director.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH DIRECTOR NOMINEE.

Retiring Directors

Linda Jenckes, who has been a director of the Company since 1997, is not seeking reelection as a director at the Annual Meeting. Ms. Jenckes has been President of Linda Jenckes & Associates, a government relations consulting firm that she founded, since 1995. Prior to that time she was Senior Vice President of the Health Insurance Association of America and also served as Principal Deputy Assistant Secretary for Legislation at the U.S. Department of Health and Human Services. Ms. Jenckes also serves on the boards of directors of the National Multiple Sclerosis Society and the National Polycystic Kidney Disease Research Foundation.

Stephen G. Sudovar, who has been a director of the Company since 2002, is not seeking reelection as a director at the Annual meeting. Mr. Sudovar currently serves as President and Chief Executive Officer of SGS Associates, a management consulting firm. From 1999 to 2005, Mr. Sudovar served as President and Chief Executive Officer of EluSys Therapeutics, Inc., a biotechnology company. From 1988 to August 1999, he was employed by Roche Laboratories, a division of F. Hoffmann-La Roche Ltd, a global healthcare company, last serving as its President. Mr. Sudovar also serves on the board of directors of Aastrom Biosciences, Inc. During the past five years, Mr. Sudovar has also served on the board of directors of Ambrilia Biopharma, Inc. and Atherogenics, Inc.

The Company thanks Ms. Jenckes and Mr. Sudovar for their years of service to the Company.

CORPORATE GOVERNANCE

Board of Directors

The Board has determined that Messrs. Aryeh, Castaldi, Davis, Harvey, and Lynch and Dr. Cox are independent directors, as defined under the Nasdaq Marketplace Rules. Furthermore, all of the Audit Committee members are independent, as independence for audit committee members is defined under the Nasdaq Marketplace Rules; all of the Compensation Committee members are independent, as independence for compensation committee members is defined under the Nasdaq Marketplace Rules; and all of the Nominating and Governance Committee members are independent, as independence for nominating committee members is defined under the Nasdaq Marketplace Rules. Dr. Cox serves as non-executive Chairman of the Board. There are no family relationships among any of the directors or executive officers of the Company.

The Board of Directors met eight times in fiscal year 2009. During fiscal year 2009, each incumbent director of the Company attended at least 75% of the aggregate of (i) all meetings of the Board of Directors held during the period for which he or she has been a director and (ii) all meetings of all committees of the Board on which he served that were held during the periods that he or she served as a member of such committees.

Standing Committees of the Board

The Board of Directors of the Company has formed three standing committees, which are discussed below.

The Audit Committee currently consists of Messrs. Castaldi (Chairman), Davis and Lynch, and its function is to oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The Board of Directors has adopted a written charter for the

Audit Committee. A copy of the amended charter is available on the Company’s website at http://www.nabi.com. All of the Audit Committee members are able to read and understand fundamental financial statements. The Board of Directors has determined that each of Messrs. Castaldi, Davis and Lynch is an audit committee financial expert, as defined under the federal securities laws. The Audit Committee met seven times in fiscal year 2009.

The Compensation Committee currently consists of Mr. Harvey (Chairman), Ms. Jenckes and Mr. Sudovar and its function is to assist the Board of Directors in determining and overseeing the compensation practices and policies of the Company, in particular with respect to the compensation of executive officers. The Board of Directors has adopted a written charter for the Compensation Committee. A copy of the charter is available on the Company’s website at http://www.nabi.com. The Compensation Committee met four times in fiscal year 2009.

The Nominating and Governance Committee currently consists of Messrs. Aryeh and Harvey, Ms. Jenckes and Mr. Sudovar (Chairman), and its function is to focus on issues involving the composition and operation of the Board of Directors and its committees, and the development of good corporate governance practices. The Board of Directors has adopted a written charter for the Nominating and Governance Committee. A copy of the charter is available on the Company’s website at http://www.nabi.com. The Nominating and Governance Committee met three times in fiscal year 2009.

Director Nomination Process

The Nominating and Governance Committee reviews and makes recommendations to the Board of Directors regarding the appropriate qualifications, skills and experience expected of individual Board members and of the Board of Directors as a whole with the objective of having a Board of Directors with sound judgment and diverse backgrounds and experience to represent stockholder interests. Although the Nominating and Governance Committee does not have a formal policy with regard to the consideration of diversity in identifying director nominees, the Committee considers diversity as one of many factors in the director nomination process. The Committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The Committee believes that the backgrounds and qualifications of the directors, considered as a group, should provide a complementary mix of experience, knowledge and abilities to enable the Board to fulfill its responsibilities.

The Nominating and Governance Committee believes that nominees for election to the Board of Directors should possess sufficient business or financial experience and a willingness to devote the time and effort necessary to discharge the responsibilities of a director. This experience can include, but is not limited to, service on other boards of directors or active involvement with other boards of directors, experience in the industries in which the Company conducts its business, audit and financial expertise, clinical experience, operational experience, or a scientific or medical background. The Committee does not believe that nominees for election to the Board of Directors should be selected through mechanical application of specified criteria. Rather, the Committee believes that the qualifications and strengths of individuals should be considered in their totality with a view to nominating persons for election to the Board of Directors whose backgrounds, integrity, and personal characteristics indicate that they will make a positive contribution to the Board of Directors.

When an incumbent director is considered for re-election, the Nominating and Governance Committee reviews the performance, skills and characteristics of such incumbent director before making a determination to recommend that the full board nominate him or her for re-election.

A description of the specific experience, qualifications, attributes and skills that contributed to the decision of our Board of Directors to nominate each of the continuing members of the Board of Directors for election as a director is included in the biographical information of each director set forth in “Proposal 1—Election of

Directors—Director Nominees.” The Board of Directors values the strong collegial working relationship that exists among the current members of the Board that has been critical to leading the Company through a multi-year strategic alternatives process. This process culminated recently with the closing in March 2010 of the exclusive option and license agreement with GSK. The status of each nominee as a current director and a key participant in the Board’s consensus-driven approach over the last several years was a factor in the nomination of each nominee. Over the past year the Board of Directors has reviewed the size of the Board with a goal of reducing the size of the Board and effective at the Annual Meeting the size of the Board will be reduced from nine to seven directors.

The Nominating and Governance Committee intends to identify candidates for election to the Board of Directors through the personal knowledge and experience of the members of the Committee, third-party recommendations, and, if the Committee believes it appropriate, a search firm selected by the Committee and compensated by the Company. Candidates will be evaluated based upon their backgrounds and interviews with members of the Board of Directors. The Committee does not plan to evaluate candidates identified by the Committee differently from those recommended by a stockholder or otherwise.

The Nominating and Governance Committee will consider director candidates recommended by stockholders. Stockholders who wish to recommend candidates for election to the Board of Directors must do so in writing. The recommendation should be sent to the Secretary of the Company, in care of Greg Fries, Investor Relations, Nabi Biopharmaceuticals, 12276 Wilkins Avenue, Rockville, Maryland 20852, who will forward the recommendation to the Committee. The recommendation must set forth (i) the name and address as they appear on the Company’s books of the stockholder making the recommendation and the class and number of shares of capital stock of the Company beneficially owned by such stockholder and (ii) the name of the candidate and all information relating to the candidate that is required to be disclosed in solicitations of proxies for election of directors under the federal proxy rules. The recommendation must be accompanied by the candidate’s written consent to being named in the Company’s proxy statement as a nominee for election to the Board and to serving as a director, if elected. Stockholders and their nominees must also comply with all requirements of the Company’s by-laws and Corporate Governance Principles with respect to the nomination and election of persons to the Board of Directors.

Corporate Governance Principles and Majority Vote in Election of Directors Policy

The Board of Directors of the Company has adopted Corporate Governance Principles to guide the operation of the Board of Directors and its standing committees. The Corporate Governance Principles include a majority vote in election of directors policy that provides that any nominee for director who does not receive a majority of the votes cast in an uncontested election for director must tender his or her resignation as a director of the Company promptly following the meeting of stockholders at which the election occurred. The Nominating and Governance Committee will act on an expedited basis to recommend to the Board whether or not it should accept any such resignation and will submit such recommendation for prompt consideration by the Board. The Nominating and Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept any such resignation. An “uncontested election” occurs if no stockholder nominates one or more candidates to compete with the Board’s nominees in a director election in accordance with the Company’s by-laws, or if stockholders have withdrawn all such nominations by the day before the date the Company mails its notice of meeting to stockholders. A “majority of the votes cast” means that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election. Votes cast include votes to withhold authority in each case and exclude permitted abstentions with respect to that director’s election. A copy of the Corporate Governance Principles is available on the Company’s website at http://www.nabi.com.

Review, Approval or Ratification Transactions with Related Persons

The Nominating and Governance Committee charter contains a related party transaction policy. The policy applies to any transaction with a related person that is required to be disclosed in the Company’s SEC filings pursuant to Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended. In general, that

rule requires disclosure of any transaction in which the Company is a participant, the aggregate amount involved exceeds $120,000, and any related person has or will have a direct or indirect material interest. A “related person” means any director or executive officer, any nominee for director, any immediate family member of a director or executive officer of the Company or of any nominee for director, or any greater than 5% stockholder of the Company. Related party transactions that are subject to the policy will be referred to the Nominating and Governance Committee for review, approval, ratification or other action. In reviewing related party transactions, the Nominating and Governance Committee of the Board may take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction.

The Nominating and Governance Committee did not review any transactions in 2009 in connection with its related party transaction policy.

Compensation Committee Interlocks and Insider Participation

The following directors served as members of the Compensation Committee during the Company’s 2009 fiscal year: Ms. Jenckes and Messrs. Harvey and Sudovar. During the Company’s 2009 fiscal year, no member of the Compensation Committee had a relationship that requires disclosure as a Compensation Committee interlock.

Shareholder Communication Policy

Stockholders may send communications to the Board of Directors or individual members of the Board by writing to them, in care of Greg Fries, Manager, Investor Relations, Nabi Biopharmaceuticals, 12276 Wilkins Avenue, Rockville, Maryland 20852, who will forward the communication to the intended director or directors. If a stockholder wishes the communication to be confidential, then the communication should be provided in a form that will maintain confidentiality.

Attendance at Annual Meetings of Stockholders

The Company’s policy is to encourage attendance by all directors at annual meetings of stockholders. All members of the Board who were directors at the time of last year’s annual meeting attended the annual meeting, except for Mr. Aryeh and Leslie Hudson, Ph.D.

Code of Ethical Conduct

The Company has adopted a Code of Ethical Conduct that includes a code of ethics, as defined under the federal securities laws. The Code of Ethical Conduct applies to all directors, officers, and employees of the Company. The Code of Ethical Conduct is posted on the Company’s website at http://www.nabi.com.

Board Leadership Structure

Dr. Cox has been the Company’s non-executive Chairman of the Board since February 2007. Previously, one of the Company’s non-management directors had served as Lead Director. The Company’s Corporate Governance Principles provide that the Board shall either select a non-executive Chairman of the Board or a Lead Director who will coordinate the activities of the other non-management directors. Since February 2007, the Board of Directors has concluded that the Board and the Company as a whole is best served by having an independent non-executive Chairman of the Board.

Role of Board in Risk Oversight

While management is responsible for managing the various risks facing the Company and its business, the Board of Directors as a whole and through its various committees is responsible for oversight of risk management for the Company. The Audit Committee in particular has assumed a lead role in discharging this responsibility.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Equity securities of the Company are authorized for issuance under the 1990 Equity Incentive Plan, the 1998 Non-Qualified Employee Stock Option Plan, the 2007 Omnibus Equity and Incentive Plan, the Stock Plan for Non-Employee Directors, and the 2000 Employee Stock Purchase Plan.

The following table provides information with respect to the Company’s equity compensation plans as of December 26, 2009:

Equity Compensation Plan Information


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
Equity compensation plans approved by security holders	3,278,777	$	5.77	8,248,739	⁽¹⁾
Equity compensation plans not approved by security holders	409,226	$	9.45	—
Total	3,688,003	$	6.13	8,248,739

(1)	Includes 416,057 shares available for purchase under the 2000 Employee Stock Purchase

The 3,688,003 shares of Common Stock that could be obtained under outstanding awards issued under the Company’s equity compensation plans as of December 26, 2009 had a weighted average exercise price of $6.13 and a weighted average term of 4.68 years and excluded 356,715 shares of outstanding unvested restricted stock. As of December 26, 2009, there were 7,832,682 shares remaining to be awarded under the Company’s equity compensation plans other than the 2000 Employee Stock Purchase Plan.

1998 Non-Qualified Employee Stock Option Plan

In 1998, the Board adopted the 1998 Non-Qualified Employee Stock Option Plan (the “1998 Stock Option Plan”), which provided for the award of up to 7,400,000 shares of Common Stock in the form of non-qualified stock options. The 1998 Stock Option Plan has not been approved by the Company’s stockholders. The 1998 Stock Option Plan terminated upon stockholder approval at the 2007 Annual Meeting of the 2007 Omnibus Equity and Incentive Plan, except with respect to then outstanding awards.

Persons who received awards under the 1998 Stock Option Plan that remain outstanding include employees, consultants and advisors of the Company who, in the opinion of the Compensation Committee or Board at the time such awards were made, were in a position to make a significant contribution to the success of the Company and its subsidiaries. Directors and officers of the Company were not eligible to receive awards under the 1998 Stock Option Plan.

Options granted under the 1998 Stock Option Plan generally have an exercise price equal to the fair market value of the Common Stock on the date of grant. The options generally become exercisable in four equal annual installments beginning one year after the date of grant. In the event that an optionee’s employment or service with the Company terminates for any reason other than by death, options that are not then exercisable generally terminate immediately, but options that are exercisable on the date that employment or service terminates generally continue to be exercisable for a period of 90 days or such longer period as the Compensation Committee may determine, but in no event beyond the option expiration date.

As of December 26, 2009, 409,266 shares were subject to outstanding options granted under the 1998 Stock Option Plan, and no shares were available for future grants under the 1998 Stock Option Plan.

2007 Omnibus Equity and Incentive Plan

The Board has adopted the 2007 Omnibus Equity and Incentive Plan (the “2007 Omnibus Plan”), which as of December 26, 2009 provided for the award of up to 10,324,919 shares of Common Stock in the form of non-qualified stock options, restricted stock and other equity and incentive awards. The 2007 Omnibus Plan amends and restates the Company’s 2000 Equity Incentive Stock Plan. The 2007 Omnibus Plan also supersedes and replaces the 1998 Stock Option Plan and the Company’s 2004 Stock Plan for Non-Employee Directors (the “2004 Directors Plan”) for future awards to the Company’s employees, consultants and directors. Both the 1998 Stock Option Plan and the 2004 Directors Plan remain in effect with respect to currently outstanding awards. The number of shares available for award under the 2007 Omnibus Plan is automatically increased by any shares subject to awards that expire, terminate or are forfeited to the Company under the 1998 Stock Option Plan and the 2004 Directors Plan.

The number of shares to be issued upon exercise of outstanding options and available for future grants under the 2007 Omnibus Plan is subject to adjustment in the event of a stock dividend, stock split or combination of shares, recapitalization, or other change in the Company’s capital stock.

Persons eligible to receive awards under the 2007 Omnibus Plan include all employees, consultants, and directors of the Company who, in the opinion of the Board, are in a position to make a significant contribution to the success of the Company and its subsidiaries.

The exercise price of options granted under the 2007 Omnibus Plan may not be less than 100% of the fair market value of the Common Stock on the date of the award. The exercise date of options granted under the 2007 Omnibus Plan is at the discretion of the Compensation Committee and the Compensation Committee may at any time accelerate the exercisability of all or any portion of any option. The expiration date of options granted under the 2007 Omnibus Plan may not be more than ten years after the date of grant.

In the event that an optionee’s employment or service with the Company terminates for any reason including death, disability, retirement, or other termination, the Compensation Committee, in its sole discretion, may determine the extent to which, and the period during which, options granted may be exercised, but in no event shall the options be exercisable beyond the option expiration date.

In the event of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding shares of the Common Stock are exchanged for securities, cash, or other property of any other business entity or in the event of a liquidation of the Company, then under the 2007 Omnibus Plan the Compensation Committee may, in its discretion, (i) provide for the acceleration of any time period relating to the exercise or realization of an award, (ii) provide for the purchase of an award upon the participant’s request for an amount of cash or other property that could have been received upon the exercise or realization of an award had the award been currently exercisable or payable, (iii) adjust the terms of an award in a manner determined by the Compensation Committee, (iv) cause an award to be assumed, or new rights to be substituted for the award, by another entity, or (v) make such other provision as the Compensation Committee may consider equitable and in the best interests of the Company.

As of December 26, 2009, 2,180,136 shares were subject to outstanding options granted under the 2007 Omnibus Plan, and 7,832,682 shares were available for future grants under the 2007 Omnibus Plan.

COMPENSATION DISCUSSION AND ANALYSIS

The purpose of this Compensation Discussion and Analysis is to describe the Company’s compensation program provided to the executive officers named in the Summary Compensation Table (the “Named Executive Officers”) for fiscal year 2009.

During fiscal year 2009, the Company’s executive compensation program consisted of the following forms of compensation:

•

base salary;

•

cash bonuses, including annual, special inducement and incentive bonuses for our Named Executive Officers;

•

equity compensation;

•

benefits and perquisites; and

•

change of control and severance agreements.

Compensation Objectives and Philosophy

The Company’s general executive compensation program was designed with three main objectives in mind. First, the program should allow the Company to attract and retain individuals whose performance will enhance stockholder value. Second, the program should develop a strong link between compensation and the achievement of organizational and individual performance goals. Third, the program should provide total compensation opportunities that exceed the median for comparable companies when the Company achieves above-median performance and below the median for comparable companies when there is below-median performance.

The Company’s executive compensation program was developed by the Compensation Committee with the assistance of outside consultants and the Company’s human resources department. The Compensation Committee approves all compensation and benefit arrangements for executive officers, including the Named Executive Officers. In determining these arrangements, the Compensation Committee considers recommendations made by the Chief Executive Officer and other members of management, as well as recommendations made by the Compensation Committee’s outside executive compensation consultant. The Compensation Committee, however, retains final authority to accept or reject these recommendations. The Compensation Committee also administers the Company’s equity incentive plans, and makes recommendations to the Board regarding outside director compensation and the Company’s overall compensation practices and programs, including retirement plans and material benefit, change of control and severance plans.

For fiscal year 2009, the Compensation Committee relied upon advice and information provided by Frederic W. Cook & Co., Inc. (“FWC”), an independent executive compensation consulting firm, retained to provide general advice and guidance to the Compensation Committee on compensation-related issues.

The Compensation Committee uses a comparator group of biotechnology companies and other relevant compensation survey data, including the Radford Biotechnology Survey, to determine appropriate levels of compensation provided to the Company’s Named Executive Officers. In 2009, FWC performed a study of executive compensation provided by 13 public companies recommended by FWC as comparable to the Company. The companies in the peer group all fall within the Company’s Global Industry Classification Standard sub-industry, biotechnology, or a related sub-industry, life sciences tools and services. The factors used

by FWC for selection of the peer group included market capitalization, number of employees, revenues and operating income. The peer group consisted of the following companies:


Arqule Inc.		Lexicon Genetics Inc.
Array Biopharma Inc.		Martek Biosciences Corp.
Curagen Corp.		Neurogen Corp.
Dyax Corp.		Rigel Pharmaceuticals Inc.
Enzo Biochem Inc.		Seattle Genetics Inc.
Exelixis Inc.		Verenium Corporation
Immunogen Inc.

FWC preformed no services in fiscal year 2009 on behalf of the Company’s management and reported solely to the Compensation Committee.

Base Salary

Overview. The Compensation Committee typically approves base salaries for the Chief Executive Officer and other executive officers of the Company after a structured annual review. The Chief Executive Officer provides information to the Compensation Committee regarding the performance of the other executive officers. This annual review includes an examination of salary levels from the peer group and from the Radford Biotechnology Survey to determine whether salary levels for the Company’s executive officers are commensurate with the salary levels of executives at these companies with comparable responsibilities. Final base salary decisions generally are made after a review of various criteria such as (i) position of the executive’s salary relative to market data, (ii) corporate performance, and (iii) individual attributes and relative importance to the Company’s future performance. Consistent with its policies, the Compensation Committee set the 2009 base salaries of its executive officers at levels that are slightly below the twenty-fifth percentile for comparable positions in the peer group.

2009 Base Salary Determinations. On February 4, 2009, the annual base salary of Dr. Fahim was established at $466,375, which represented a 2.5% increase over his 2008 base salary. Dr. Fahim’s base salary was set at this level based upon market compensation data, the Company’s compensation practices and the economic climate.

The annual base salary of Dr. Kessler in connection with his service as Senior Vice President Clinical, Medical and Regulatory Affairs was increased in February 2009 from $290,000 to $330,000 based upon market compensation data, the Company’s compensation practices and the recommendation of Dr. Fahim.

In connection with his promotion to the Company’s Senior Vice President, Strategic Planning and Business Operations, the annual base sale of Matthew Kalnik, Ph.D. was increased from $260,000 to $300,000. Dr. Kalnik’s base salary was set at this level based upon market compensation data and the Company’s compensation practices.

Cash Incentive Compensation

Overview. The Company’s compensation policy is to typically provide executives with the opportunity to earn an annual cash award based on Company and individual performance under the VIP Management Incentive Plan with the Chief Executive Officer’s award typically based solely on the Company’s performance. The objective of the VIP Management Incentive Plan is to motivate each executive’s performance in order to advance the Company’s defined strategy by aligning measurement and accountability with rewards.

2009 VIP Management Incentive Plan Structure and Performance Measures. The Named Executive Officers, as well as other senior management of the Company, were eligible to participate in the VIP Management Incentive Plan during 2009. As provided in their employment agreements with the Company, the total bonus potential for each of Drs. Fahim, Kessler and Kalnik under the Plan was 80%, 55% and 55%, respectively, of base salary. Awards under the Plan were determined based on performance as measured by two

sets of goals, corporate goals for the Company and individual goals for each individual, except for Dr. Fahim, who as President and Chief Executive Officer is measured only on corporate goals. For Drs. Kessler and Kalnik, 70% of the total bonus potential is determined by corporate goals and the remaining 30% of bonus potential is determined by individual goals. Each set of goals assigns a different percentage weight to each goal with the total percentage weight of each set of goals totaling 100%. The bonus potential, the relative weights of the corporate and individual goals, and all other elements of the VIP Plan are subject to change at the discretion of the Compensation Committee.

The Compensation Committee established two sets of corporate goals for the 2009 VIP Management Incentive Plan to reflect the Company’s two principal initiatives during 2009:

•

pursuing strategic alternatives with respect to the Company as a whole or its products in development, NicVAX^® [Nicotine Conjugate Vaccine] and PentaStaph^™ [Pentavalent S.aureus Vaccine]; and

•

developing and adding value to its pipeline products while maintaining appropriate financial controls and operations.

Under the 2009 VIP Management Incentive Plan corporate goals, 100% percent of the corporate goals could be achieved if management of the Company was successful during 2009 in obtaining the sale or merger of the entire Company. Otherwise, 10% to 50% of the 2009 corporate goals could be achieved (as determined in the discretion of the Compensation Committee) upon the establishment of a successful partnering arrangement for, a successful sale of, or the receipt of a government grant relating to NicVAX and/or PentaStaph. The remaining 50% of the 2009 corporate goals could be achieved through the successful accomplishment of six goals (weighted as indicated) relating to the initiation of Phase I trials for two new PentaStaph antigens (15%), containing operating expenses (10%), manufacturing and technology transfer objectives (10%), and three clinical, regulatory and operational objectives (each 5%).

2009 VIP Management Incentive Plan Payments. The Compensation Committee determined that 100% of the 2009 VIP Management Incentive Plan corporate goals were achieved. Half (50%) of the 2009 corporate goals were achieved because in 2009 the Company entered into an exclusive option and license agreement with GlaxoSmithKline Biologicals S.A. (“GSK”) for NicVAX (which closed in March 2010 after obtaining the approval of the Company’s stockholders), sold the Company’s PentaStaph Staphylococcus epidermidis vaccine programs to GSK and obtained a $10 million grant from the National Institute on Drug Abuse to partially offset the cost of the first of two Phase III studies that the Company is required by the FDA to conduct in support of NicVAX’s licensure. The remaining half (50%) of the 2009 corporate goals were achieved because management obtained each of the six goals related to clinical, regulatory, operational, manufacturing and financial matters.

Special Cash Incentive Payments. In November 2009, the Compensation Committee authorized a $250,000 cash incentive payment to Dr. Fahim under the terms of his employment agreement with the Company. Under his employment agreement, Dr. Fahim was entitled to a $250,000 cash incentive payment upon the execution of an exclusive licensing and partnering arrangement with a partner in the smoking cessation field involving all or substantially all of the Company’s NicVAX assets on or before June 30, 2009 or, if the Company commenced a Phase III clinical trial on NicVAX without a partner prior to June 30, 2009, the execution of a NicVAX License on or before the date that is six months after the publication of the final results of such a clinical trial. During 2009, Dr. Fahim and the Company’s management maintained the Company’s readiness to commence the first NicVAX Phase III trial and pursued various strategic initiatives, including partnering discussions and grant proposals. In November 2009, the Company entered into an exclusive worldwide option and licensing agreement with GSK for NicVAX. The Compensation Committee concluded that the Company’s execution of the GSK agreement for NicVAX satisfied the condition in Dr. Fahim’s employment agreement to payment of the $250,000 cash award because the Company was fully prepared to commence the Phase III clinical trial for NicVAX well before June 30, 2009 but did not do so because the Company’s Board of Directors sought further advancement of the Company’s strategic initiatives before authorizing commencement of the NicVAX Phase III trial.

The Compensation Committee also determined that under the terms of Dr. Kalnik’s employment agreement, he was entitled to a $10,000 bonus upon the execution of the agreement with GSK related to PentaStaph, and a $40,000 bonus upon the executive of the exclusive license and option agreement with GSK related to NicVax.

Equity Incentive Compensation

Overview. The Chief Executive Officer, other Named Executive Officers and key employees receive long-term equity incentive compensation in the form of stock options and restricted stock. The Compensation Committee believes that equity-based compensation motivates the Company’s executive officers and key employees to have an interest in the long-term success of the Company. As a result, the Company has traditionally made annual equity awards to its executive officers and key employees as well as commencement of employment awards and retention awards.

Annual Awards. The Compensation Committee considers a number of factors, including competitive data from the peer group, management and FWC’s recommendations, and the number of equity awards already held by each executive when setting annual grant amounts. All awards are granted pursuant to the Company’s 2007 Omnibus Plan. In February 2009, the Company made annual equity awards to Drs. Fahim, Kessler and Kalnik effective on April 1, 2009.

Stock Options and Restricted Stock. In the last several years, the Company has made annual long-term equity incentive awards in the form of stock options and restricted stock awards. The Compensation Committee believes that stock options provide executives with incentive to increase long-term stockholder value, because stock options only have value to the recipient when the Company’s share price exceeds the share price on the date of grant. The Compensation Committee’s policy is to grant non-qualified stock options (as opposed to incentive stock options) to obtain a tax benefit for the Company. The Compensation Committee believes that awarding restricted stock provides immediate potential value to employees after the award vests and encourages stock ownership by employees which helps align their interests with those of the Company’s other stockholders. In 2009, in connection with annual equity awards made to Named Executive Officers, Dr. Fahim received awards of stock options to purchase 115,000 shares of Common Stock of the Company and 45,000 shares of restricted stock of the Company, Dr. Kessler received awards of stock options to purchase 90,000 shares of Common Stock of the Company and 30,000 shares of restricted stock of the Company, and Dr. Kalnik received awards of stock options to purchase 45,000 shares of Common Stock of the Company and 18,000 shares of restricted stock of the Company. Annual option awards made in 2009 to Named Executive Officers had an exercise price equal to the fair market value of the Company’s Common Stock on the date of grant and a term of seven years. The annual equity awards vest in four equal annual amounts commencing April 1, 2010. The Compensation Committee anticipates that most future equity awards will have similar terms.

Benefits and Perquisites

The Named Executive Officers are entitled to participate in the Company’s benefit programs which are available to all of the Company’s full-time employees. In addition, the Named Executive Officers received certain benefits and perquisites in fiscal year 2009 not available to the Company’s general employee population. The Compensation Committee will continue to monitor the benefits and perquisites for the Named Executive Officers, including their costs, and believes that these benefits and perquisites help the Company in retaining and maintaining the services of the Named Executive Officers.

In fiscal year 2009, each of Drs. Fahim, Kessler and Kalnik participated in the Company’s Supplemental Executive Retirement Plan, under which the Company contributed $27,388 for Dr. Fahim, $18,190 for Dr. Kessler and $12,000 for Dr. Kalnik to a self-directed insurance or annuity-based retirement plan. The only other retirement plan maintained by the Company is a 401(k) plan in which the Named Executive Officers and other employees generally can participate. The Company also generally pays premiums on behalf of the Named Executive Officers for life and disability insurance coverage beyond the coverage provided for all other employees generally and pays associated tax gross-ups attributable to income tax on the increased premiums. In fiscal year 2009, under the terms

of his employment agreement with the Company, the Company provided to Dr. Fahim (i) an amount equal to any Maryland state income taxes payable by him with respect to any compensation, benefits or other payments that he receives in connection with his appointment as the Company’s President and Chief Executive Officer, (ii) a per diem fee of $180 to cover certain expenses while he is working at the Company’s facilities in Rockville, Maryland (Dr. Fahim is not a resident of Maryland), (iii) an automobile allowance of $1,200 per month, (iv) the cost of financial planning services up to $5,000 per year, (v) term life insurance of $500,000 in excess of the term life insurance coverage the Company provides employees generally, (vi) reimbursement for reasonable travel and lodging expenses incurred while traveling to and working at the Company’s facilities in Rockville, Maryland, and (vii) such other fringe benefits as are accorded generally to the Company’s other executive officers. The Committee approved many of these benefits, including the Maryland tax reimbursement in Dr. Fahim’s employment agreement, to compensate Dr. Fahim for the additional costs and burdens he would bear by working at the Company’s Rockville, Maryland facility, which became the Company’s headquarters following the sale of the Company’s Boca Raton, Florida facilities to Biotest Pharmaceuticals Corporation. Dr. Fahim is a Florida resident who previously worked at the Company’s Boca Raton facilities prior to the Biotest sale. Additionally, in 2009 the Compensation Committee approved a one-time payment of $15,000 to Dr. Kalnik to reimburse him for expenses associated with his move to Maryland. Further information on the aggregate cost of providing these and other additional benefits and perquisites can be found in the All Other Compensation column of the Summary Compensation Table.

Change of Control and Severance Payments

Severance Payments upon a Change of Control. In fiscal year 2008, the Company entered into agreements with Drs. Fahim and Kessler providing for the payment of severance benefits in the event of a qualifying termination of employment following a change of control of the Company in order to remove any personal financial concerns an executive may have when evaluating a potential transaction, and to allow them to focus on maximizing value for the Company’s stockholders. The Company entered into a similar agreement with Dr. Kalnik during fiscal year 2009. For purposes of the change of control severance agreements with Drs. Kessler and Kalnik, a change of control also includes the execution of an exclusive out-licensing and partnering arrangement with one or more partners involving all or substantially all of the Corporation’s NicVAX rights and assets. Each of Drs. Kessler and Kalnik are entitled to receive benefits under the agreement if, within 12 months after a change of control, his employment is terminated by the Company without cause or he terminates his employment with the Company for good reason. Dr. Fahim is entitled to receive benefits under the agreement if within six months after a change of control or during a potential change of control period he terminates his employment with the Company for good reason or dies or becomes disabled; during a potential change of control period or within 12 months after a change of control his employment is terminated by the Company without cause; or during the six-month period beginning six months after a change of control he terminates his employment for any reason. Dr. Fahim’s right to terminate his employment for any reason and receive benefits beginning six months after a change of control is consistent with the rights he previously enjoyed under his prior agreement with the Company. Drs. Kessler and Kalnik’s benefits under the agreements include a payment equal to two times the sum of annual base salary and target bonus for the year in which the change of control occurs, payable ratably over a 24-month period. Dr. Fahim’s benefits under his agreement include a lump sum payment equal to two and one-half times the sum of annual base salary and target bonus for the year in which the change of control occurs. Dr. Fahim is also entitled to receive the continuation of benefits under the Company’s employee benefit plans (including medical, dental, disability, and life insurance and car allowance programs) for 24 months, and Drs. Kessler and Kalnik are entitled to receive the continuation of benefits under the Company’s employee benefit plans (including medical, dental, disability, and life insurance and car allowance programs) for 12 months following termination. In addition, all outstanding equity awards vest upon a change in control of the Company and, in the case of options, remain exercisable for 12 months. The Company has agreed to pay up to $20,000 for executive outplacement services for the benefit of Dr. Fahim and up to $18,000 for executive outplacement services for the benefit of each of Drs. Kessler and Kalnik and make gross-up payments on behalf of Drs. Fahim, Kessler and Kalnik for any excise taxes imposed on excess payments (as defined by the Internal Revenue Code) received by them under their employment or change of control agreements. Additionally, Dr. Fahim is entitled to receive the continuation of certain fringe benefits for 30 months if he is terminated prior

to the completion or termination of the strategic alternatives process announced in January 2008. Any severance benefit paid under the change of control provisions is in lieu of any severance benefits that might otherwise be payable to the executive under any employment agreement with the Company.

Other key employees of the Company also have change of control agreements with terms that vary from the terms of the change of control agreements with Drs. Fahim, Kessler and Kalnik. Any new change of control agreement for any employee is subject to review and approval by the Compensation Committee.

Severance Payments without a Change of Control. The Company provides severance benefits to the Named Executive Officers under their employment agreements with the Company that were in effect during fiscal year 2009. These employment agreements provide that if the executive is terminated other than for cause or disability during the employment period, or if the employment period is not renewed for an additional employment period on terms no less favorable than those under his existing agreement and the executive terminates his employment with the Company, then he is entitled to receive the following severance benefits: (i) severance pay equal to his base salary as in effect at the time of such termination for 24 months in the case of Dr. Fahim, 18 months in the case of Dr. Kessler and 18 months in the case of Dr. Kalnik, (ii) pro rated bonus compensation, (iii) the continuation of certain fringe benefits for 18 months in the case of Drs. Kessler and Kalnik and in the case of Dr. Fahim, 24 months, (iv) immediate vesting of any non-vested stock options or shares of restricted stock held by the executive, which will be exercisable for 12 months after the termination date, but in no event later than the original option expiration date, and (v) up to $20,000 for executive outplacement services for the benefit of Dr. Fahim and up to $18,000 for executive outplacement services for the benefit of each of Drs. Kessler and Kalnik. In addition, if Dr. Fahim is terminated prior to the completion or termination of the strategic alternatives process announced in January 2008, he will receive additional severance equal to six months of base salary and benefit continuation. The obligation of the Company to provide severance benefits is conditioned upon the executive’s execution of a separation agreement containing a release of claims against the Company.

Compensation Polices and Practices as They Relate to the Company’s Risk Management

The Compensation Committee believes that the Company’s compensation policies and practices for all employees, including executive officers, do not create undue risks that are reasonably likely to have a material adverse effect on the Company. In this regard, the Compensation Committee notes that:

•

the ability to retain key personnel is a significant risk currently facing the Company and one of the purposes of the compensation policies is to foster retention of key personnel;

•

the Company’s compensation is balanced among base salary, annual bonus opportunity and long-term equity;

•

the Company’s incentive compensation is directly linked to specific performance metrics identified by the Compensation Committee with input from management, such as establishing successful partnering arrangements, initiating clinical trials for certain products, and clinical, regulatory and operational objectives that promote longer-term Company goals;

•

the Compensation Committee annually designs and assesses performance-based compensation, thereby allowing the Compensation Committee to assess risk management and consequences annually; and

•

the Company’s equity incentive awards typically vest over four years, encouraging our employees to focus on sustained growth and shareholder value.

In establishing and assessing management’s achievement of performance-based goals, the Compensation Committee intends to continue to consider as a part of the Company’s risk management the intended and unintended consequences of the behavior that it is seeking to motivate through its performance-based compensation.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed with management the foregoing “Compensation Discussion and Analysis,” and based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this proxy statement and filed with the Securities and Exchange Commission.

Respectfully submitted by,

The Compensation Committee

Richard A. Harvey, Jr., Chairman

Linda Jenckes

Stephen G. Sudovar

EXECUTIVE COMPENSATION

The following table sets forth information for the fiscal years ended December 29, 2007, December 27, 2008 and December 26, 2009 concerning the compensation paid to each person serving as the Company’s Chief Executive Officer during the last completed fiscal year; each person serving as the Company’s Chief Financial Officer during the last completed fiscal year; and the Company’s other executive officers serving at the end of the last completed fiscal year other than the Chief Executive Officer and Chief Financial Officer.

SUMMARY COMPENSATION TABLE


Name and Principal Position	Year	Salary ($) (1)	Stock Awards ($) (2)	Option Awards ($) (2)	Non-Equity Incentive Plan Compensation (3) ($)	All Other Compensation (4) ($)	Total ($)
Raafat Fahim, Ph.D.	2009	476,306	157,087	207,800	623,100	243,882	1,708,175
President, Chief Executive	2008	458,301	402,613	139,001	364,000	183,272	1,813,462
Officer and Acting Chief Financial Officer	2007	344,505	150,333	131,633	266,175	52,142	944,788

Paul Kessler, M.D.	2009	320,769	92,943	190,469	181,500	46,320	832,002
Senior Vice President	2008	297,808	70,448	118,554	158,065	15,390	795,169
Clinical, Medical and Regulatory Affairs	2007	—	—	—	—	—	—

Matthew Kalnik, Ph.D.	2009	291,385	34,556	50,708	215,000	46,790	638,439
Senior Vice President	2008	—	—	—	—	—	—
Strategic Planning and Business Operations	2007	—	—	—	—	—	—

(1)	Includes for certain individuals accrued unused vacation reimbursements which were paid in cash to the executive.

(2)

Reflects the dollar amounts recognized for financial statement reporting purposes for the applicable fiscal year ended December 29, 2007, December 27, 2008 or December 26, 2009. Assumptions made in the calculation of these amounts are included in Notes 10, 10 and 8 to the Company’s audited financial statements for fiscal years 2009, 2008 and 2007, respectively, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for that fiscal year.

(3)	All payments were made under the Company’s VIP Management Incentive Plan, except one-time payments of $250,000 and $50,000 to Drs. Fahim and Kalnik, respectively, under the terms of incentive compensation provisions of their employment agreements with the Company.

(4)

Includes for 2009 (i) contributions made by the Company under its 401(k) Plan in the amount of $9,200 on behalf of each of Drs. Fahim, Kessler and Kalnik; (ii) an automobile allowance of $14,400 to Dr. Fahim; (iii) contributions in the amounts of $27,388, $18,190 and $12,000 made by the Company on behalf of Drs. Fahim, Kessler and Kalnik, respectively, under the Company’s Supplemental Executive Retirement Plan, which provides the executive with a self-directed insurance or annuity-based retirement plan; (iv) reimbursement of $21,475, $14,263 and $7,789 paid to Drs. Fahim, Kessler and Kalnik respectively for taxes payable by them on contributions made by the Company under its Supplemental Executive Retirement Plan; (v) $1,355, $4,668 and $2,800 representing premiums for supplemental life insurance paid on behalf of Drs. Fahim, Kessler and Kalnik, respectively, and $12,955 representing premiums for supplemental disability insurance paid on behalf of Dr. Fahim; (vi) aggregate per diem reimbursements of $20,593 paid to Dr. Fahim for miscellaneous expenses in connection with his working at the Company’s facility in Rockville, Maryland; (vii) reimbursement of $80,670 paid to Dr. Fahim for hotel, airfare and car rental expenses in connection with working at the Company’s facility in Rockville, Maryland; (viii) reimbursement of $52,999 paid to Dr. Fahim for taxes related to hotel, airfare and car rental expenses incurred in connection with working at the Company’s facility in Rockville, Maryland and (ix) reimbursement of $15,000 paid to Dr. Kalnik for moving expenses.

The following table sets forth each grant of a plan-based award made to each of the Named Executive Officers during fiscal year 2009:

GRANTS OF PLAN-BASED AWARDS


Name	Grant Date	Approval Date (1)	Estimated Future Payouts Under Non Equity Incentive Plan Awards Target ($) (2)	Estimated Future Payouts Under Equity Incentive Plans Awards Target (#) (3)	Exercise or Base Price per Share of Option Awards ($) (4)	Grant Date Fair Value of Stock and Option Awards ($) (5)
Raafat E.F. Fahim, Ph.D.			373,100
	4/1/09	2/4/2009		45,000		170,100
	4/1/09	2/4/2009		115,000	3.78
Paul D. Kessler M.D.			181,500
	4/1/09	2/4/2009		30,000		113,400
	4/1/09	2/4/2009		90,000	3.78
Matthew W. Kalnik			165,000
	4/1/09	2/4/2009		18,000		68,040
	4/1/09	2/4/2009		45,000	3.78

(1)	Date approved by the Compensation Committee.

(2)

Awards to Drs. Fahim, Kessler and Kalnik reflect their participation in the 2009 VIP Management Incentive Plan. This plan is described under “Compensation Discussion and Analysis—Annual Cash Compensation—2009 VIP Management Incentive Plan Structure and Performance Measures” and “—2009 VIP Management Incentive Plan Payments.”

(3)	Consists of awards made under the 2007 Omnibus Plan. These awards are described under “Compensation Discussion and Analysis—Equity Incentive Compensation.”

(4)	The exercise price for all stock options is equal to the fair market value of the Company’s Common Stock on the date of grant.

(5)	Assumptions made in the calculation of these amounts are included in Note 10 to the Company’s audited financial statements for the fiscal year ended December 26, 2009, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2010.

Description of Plan-Based Awards

The terms of the “non-equity incentive plan” awards reflected in the Grants of Plan-Based Awards table are described in the “Compensation Discussion and Analysis” above.

Each of the equity-based awards granted during fiscal year 2009 and reported in the Grants of Plan-Based Awards Table was granted under, and is subject to, the terms of the 2007 Omnibus Plan. The 2007 Omnibus Plan is administered by the Compensation Committee. The Compensation Committee has authority to interpret the plan provisions and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding awards upon the occurrence of certain corporate events such as reorganizations, mergers and stock splits.

The terms of the 2007 Omnibus Plan are further described under “Securities Authorized for Issuance Under Equity Compensation Plans—2007 Omnibus Equity and Incentive Plan” above.

Options

Each option granted during fiscal year 2009 and reported in the table above was granted with a per-share exercise price equal to the fair market value of a share of the Company’s Common Stock on the grant date. For these purposes, and in accordance with the terms of the 2007 Omnibus Plan and the Company’s option grant practices, the fair market value is equal to the closing price of a share of the Company’s Common Stock on the applicable grant date.

Each option granted to our Named Executive Officers in fiscal year 2009 is subject to a four-year vesting schedule, with 25% of the option vesting on April 1, 2010 and on each of the next three anniversaries of the grant date. Once vested, each option will generally remain exercisable until its normal expiration date. Each of the options granted to our Named Executive Officers in fiscal year 2009 has a term of seven years. Subject to any accelerated vesting that may apply in a change of control transaction or a termination of employment without cause or for good reason, the unvested portion of the option will immediately terminate upon a termination of the Named Executive Officer’s employment. The Named Executive Officer will have 90 days to exercise the vested portion of the option following a termination of employment. The option (whether or not vested) will immediately terminate if the Named Executive Officer is terminated by the Company for cause.

The options granted to Named Executive Officers during fiscal year 2009 do not include any dividend rights.

Restricted Stock

The shares of restricted stock awarded to our Named Executive Officers during fiscal year 2009 are subject to a four-year vesting schedule subject to the Named Executive Officer’s continued employment with the Company through the vesting date. The Named Executive Officer does not have the right to dispose of the shares of restricted stock, but does have the right to vote and receive dividends (if any) paid by the Company.

The following table sets forth certain information concerning the number and value of unvested Common Stock awards and shares of Common Stock subject to options held by the Named Executive Officers as of December 26, 2009.

OUTSTANDING EQUITY AWARDS AT DECEMBER 26, 2009


	Option Awards						Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable		Option exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock that have Not Vested	Market Value of Shares or Units of Stock that have Not Vested ($)
Raafat E.F. Fahim, Ph.D.	40,000			$	5.60	3/10/13	15,000	$	72,300
	43,116			$	14.92	3/24/14	33,750	$	162,675
	8,143			$	16.65	5/14/14	45,000	$	216,900
	160,000			$	15.56	11/11/14		$	0
	54,345			$	3.83	2/24/16		$	0
	45,000	45,000	⁽¹⁾	$	5.20	5/18/14
	28,750	86,250	⁽²⁾	$	3.95	4/1/15
		115,000	⁽³⁾	$	3.78	4/1/16

Paul D. Kessler M.D.	10,000			$	12.06	3/14/15	15,000	$	72,300
	15,000			$	11.49	5/16/15	22,500	$	108,450
	20,613			$	3.83	2/24/16	30,000	$	144,600
	11,250	3,750	⁽⁴⁾	$	5.65	5/25/13
	45,000	45,000	⁽¹⁾	$	5.20	5/18/14
	22,500	67,500	⁽²⁾	$	3.95	4/1/15
		90,000	⁽³⁾	$	3.78	4/1/16

Matthew W. Kalnik, Ph.D.	12,500	12,500	⁽⁵⁾	$	4.70	7/18/14	6,250	$	30,125
	4,500	13,500	⁽²⁾	$	3.95	4/1/15	5,400	$	26,028
		45,000	⁽³⁾	$	3.78	4/1/16	18,000	$	86,760

(1)	Awards vest in four equal annual installments beginning on January 2, 2008.

(2)	Awards vest in four equal annual installments beginning on April 1, 2009.

(3)	Awards vest in four equal annual installments beginning on April 1, 2010.

(4)	Awards vest in four equal annual installments beginning on May 25, 2007.

(5)	Award vests in four equal annual installments beginning on July 18, 2008.

The following table sets forth information concerning any option exercises or stock awards that vested for each Named Executive Officer during fiscal year 2009.

OPTION EXERCISES AND STOCK VESTED FOR FISCAL YEAR 2009


	Option Awards		Stock Awards
Name	Number of Shares Acquired On Exercise (#)	Value Realized Upon Exercise ($)	Number of Shares Acquired On Vesting (#)	Value Realized Upon Vesting ($)
Raafat E.F. Fahim, Ph.D.			76,943	276,557
Paul D. Kessler M.D.			29,360	109,562
Matthew W. Kalnik, Ph.D.			4,925	14,054

Potential Payments Upon Termination of Employment or Change of Control

Potential Payments Under Employment Agreements. The Company provides severance benefits to the Named Executive Officers under their employment agreements with the Company that were in effect during fiscal year 2009. These employment agreements provide that if the executive is terminated other than for cause or disability during the employment period, if the employment period is not renewed for an additional employment period on terms no less favorable than those under his existing agreement and the executive terminates his employment with the Company, or if the executive terminates his employment for good reason (in the case of Dr. Fahim), then he is entitled to receive the following severance benefits: (i) severance pay equal to his base salary as in effect at the time of such termination for 24 months in the case of Dr. Fahim, 18 months in the case of Dr. Kessler and 18 months in the case of Dr. Kalnik, (ii) pro rated bonus compensation, (iii) the continuation of certain fringe benefits for 18 months in the case of Drs. Kessler and Kalnik and in the case of Dr. Fahim, 24 months, (iv) immediate vesting of any non-vested stock options or shares of restricted stock held by the executive, which will be exercisable for 12 months after the termination date, but in no event later than the original option expiration date, and (v) up to $20,000 for executive outplacement services for the benefit of Dr. Fahim and up to $18,000 for executive outplacement services for the benefit of each of Drs. Kessler and Kalnik. Dr. Fahim is entitled to receive the continuation of certain fringe benefits for 30 months if he is terminated prior to the completion of the strategic alternatives process announced in January 2008. The obligation of the Company to provide severance benefits is conditioned upon the executive’s execution of a separation agreement containing a release of claims against the Company.

The following table sets forth potential payments and benefits to the Named Executive Officers upon termination of employment without cause, or termination for good reason (in the case of Dr. Fahim), not in connection with a change in control of the Company pursuant to the terms of the each officer’s employment agreement with the Company, assuming a termination on December 26, 2009.


Name	Severance payments (1)		Bonus Payments (2)		Accelerated Awards (3)		Continued and Accrued Benefits (4)		Tax Gross-Up Payments (5)		Other Perquisites (6)		Total
Raafat E.F. Fahim, Ph.D.	$	932,750	$	373,100	$	725,327	$	61,443	$	23,524	$	126,804	$	2,242,947
Paul D. Kessler, M.D.	$	495,000	$	181,500	$	445,357	$	24,497	$	18,819	$	56,200	$	1,221,373
Matthew W. Kalnik, Ph.D.	$	450,000	$	165,000	$	208,373	$	22,363	$	18,819	$	55,500	$	920,055

(1)	Consists of a multiple of the Named Executive Officer’s base salary, determined in accordance with each Named Executive Officer’s employment agreement with the Company.

(2)	Assumes the bonus earned in the year of termination under the VIP Management Incentive Plan was equal to 100% of the target bonus.

(3)	Represents the value of awards of shares of restricted Common Stock and options to purchase shares of Common Stock held by the Named Executive Officer on the date of termination as to which vesting would accelerate. Assumes a Common Stock price of $4.82.

(4)	Consists of some or all of (i) the value of continued health, dental, disability and life insurance, and (ii) payments for any unused vacation and sick time accrued by the Named Executive Officer on the date of termination.

(5)	Consists of reimbursements for taxes payable by the Named Executive Officer on contributions made by the Company on the officer’s behalf under its Supplemental Executive Retirement Plan and grossed-up reimbursement for excess taxes on excise payments (as defined by the Internal Revenue Code).

(6)

Consists of some of or all of (i) reimbursement for automobile allowances, financial planning and outplacement expenses, (ii) reimbursement for premiums payable under the Company’s Supplemental Executive Retirement Program, supplemental disability insurance policy and supplemental life insurance policy, and (iii) matching contributions under the Company’s 401(k) Plan.

Assuming a voluntary resignation on December 26, 2009 not in connection with a change of control of the Company, under his employment agreement with the Company Dr. Fahim would be entitled to receive a payment of $373,100 for the bonus amounts earned under the VIP Management Incentive Plan. Drs. Fahim and Kessler have 90 days following the termination of their employment within which to exercise any stock options vested as of the termination date.

Under Dr. Fahim’s employment agreement, if he is terminated prior to the completion or termination of the strategic alternatives process, then he is entitled to receive the following severance benefits: (i) severance pay equal to his base salary as in effect at the time of such termination, (ii) pro rated bonus compensation, and (iii) the continuation of certain fringe benefits for 30 months. The following table sets forth potential payments and benefits to Dr. Fahim upon termination of employment prior to the completion or termination of the strategic alternatives process, assuming a termination on December 26, 2009:


Name	Severance payments (1)		Bonus Payments (2)		Accelerated Awards (3)		Continued and Accrued Benefits (4)		Tax Gross-Up Payments (5)		Other Perquisites (6)		Total
Raafat E.F. Fahim, Ph.D.	$	1,165,938	$	373,100	$	725,327	$	68,728	$	29,405	$	153,556	$	2,516,053

(1)	Consists of a multiple of the Named Executive Officer’s base salary, determined in accordance with each Named Executive Officer’s employment agreement with the Company.

(2)	Assumes the bonus earned in the year of termination under the VIP Management Incentive Plan was equal to 100% of the target bonus.

(3)	Represents the value of awards of shares of restricted Common Stock and options to purchase shares of Common Stock held by the Named Executive Officer on the date of termination as to which vesting would accelerate. Assumes a Common Stock price of $4.82.

(4)	Consists of (i) the value of continued health, dental, disability and life insurance, and (ii) payments for any unused vacation and sick time accrued by the Named Executive Officer on the date of termination.

(5)	Consists of reimbursements for taxes payable by the Named Executive Officer on contributions made by the Company on the officer’s behalf under its Supplemental Executive Retirement Plan and grossed-up reimbursement for excise taxes on excess payments (as defined by the Internal Revenue Code).

(6)

Consists of (i) reimbursement for automobile allowances, financial planning and outplacement expenses, (ii) reimbursement for premiums for payable under the Company’s Supplemental Executive Retirement Program, supplemental disability insurance policy and supplemental life insurance policy, and (iii) matching contributions under the Company’s 401(k) Plan.

Potential Payments Under Change of Control Severance Agreements. The Company has entered into agreements with Drs. Fahim, Kessler and Kalnik providing for the payment of severance benefits in the event of a qualifying termination of employment following a change of control of the Company in order to remove any personal financial concerns an executive may have when evaluating a potential transaction, and to allow them to focus on maximizing value for the Company’s stockholders.

Under his agreement, Dr. Fahim is entitled to receive a lump sum payment equal to two and one-half times the sum of annual base salary and target bonus for the year in which the change of control occurs. Under each of their agreements, Drs. Kessler and Kalnik are entitled to receive a payment equal to two times the sum of annual base salary and target bonus for the year in which the change of control occurs, paid ratably over a twenty-four month period. Dr. Fahim is also entitled to receive the continuation of benefits under the Company’s employee benefit plans (including medical, dental, disability, and life insurance and car allowance programs) for 24 months, and Drs. Kessler and Kalnik are entitled to receive the continuation of benefits under the Company’s employee benefit plans (including medical, dental, disability, and life insurance and car allowance programs) for 12 months following termination. In addition, all outstanding equity awards vest upon a change in control of the

Company and, in the case of options, remain exercisable for 12 months. The Company has agreed to pay up to $20,000 for executive outplacement services for the benefit of Dr. Fahim and up to $18,000 for executive outplacement services for the benefit of each of Drs. Kessler and Kalnik and make gross-up payments on behalf of Drs. Fahim, Kessler and Kalnik for any excise taxes imposed on excess payments (as defined by the Internal Revenue Code) received by them under their employment or change of control agreements. Any severance benefit paid under the change of control provisions is in lieu of any severance benefits that might otherwise be payable to the executive under any employment agreement with the Company.

The Compensation Committee believes that these agreements are necessary given the volatility and uncertainty inherent in the Company’s business and future prospects. Any new change of control agreement for any employee is subject to review and approval by the Compensation Committee.

The following table sets forth potential payments and benefits to the Named Executive Officers upon termination of employment without cause in connection with a change in control of the Company pursuant to the terms of each officer’s employment agreement with the Company, assuming a termination on December 26, 2009.


Name	Severance payments (1)		Bonus Payments (2)		Accelerated Awards (3)		Continued and Accrued Benefits (4)		Tax Gross-Up Payments (5)		Other Perquisites (6)		Total
Raafat E.F. Fahim, Ph.D.	$	1,165,938	$	932,750	$	725,327	$	61,443	$	1,534,061	$	126,804	$	4,546,322
Paul D. Kessler, M.D.	$	660,000	$	363,000	$	517,657	$	24,497	$	872,974	$	42,200	$	2,480,328
Matthew W. Kalnik, Ph.D.	$	600,000	$	330,000	$	208,373	$	22,242	$	624,537	$	41,650	$	1,826,803

(1)	Consists of a multiple of the Named Executive Officer’s base salary, determined in accordance with each Named Executive Officer’s employment agreement with the Company.

(2)	Assumes the bonus earned in the year of termination under the VIP Management Incentive Plan was equal to 100% of the target bonus.

(3)	Represents the value of awards of shares of restricted Common Stock and options to purchase shares of Common Stock held by the Named Executive Officer on the date of termination as to which vesting would accelerate. Assumes a Common Stock price of $4.82.

(4)	Consists of some or all of (i) the value of continued health, dental, disability and life insurance, and (ii) payments for any unused vacation and sick time accrued by the Named Executive Officer on the date of termination.

(5)	Consists of reimbursements for taxes payable by the Named Executive Officer on contributions made by the Company on the officer’s behalf under its Supplemental Executive Retirement Plan and grossed-up reimbursement for excise taxes on excess payments (as defined by the Internal Revenue Code).

(6)

Consists of some of or all of (i) reimbursement for automobile allowances, financial planning and outplacement expenses, (ii) reimbursement for premiums for payable under the Company’s Supplemental Executive Retirement Program, supplemental disability insurance policy and supplemental life insurance policy, and (iii) matching contributions under the Company’s 401(k) Plan.

The potential amounts of payments and benefits upon termination of employment without cause or in connection with a change of control disclosed above are estimates only and do not necessarily reflect (except as otherwise indicated) the actual amounts that would be paid to the Named Executive Officers, which would only be known at the time that they become eligible for payment and would only be payable if a termination of employment or change of control were to occur.

Director Compensation

Under the Company’s compensation policy for non-employee directors, each non-employee director (other than the non-executive Chairman of the Board) receives an annual retainer of $20,000 plus a fee of $1,500 for each Board and committee meeting attended by the director (whether the meeting is in person or by conference telephone). The non-executive Chairman of the Board of Directors receives an annual retainer of $80,000. Currently, each member of a standing committee receives an annual retainer of $2,500, and each chairman of a standing committee receives an annual retainer of $7,500, except that the chairman of the Audit Committee receives an annual retainer of $10,000. Fees are paid for attendance at committee meetings even if they are held on the same day as Board meetings. Directors are reimbursed for out-of-pocket expenses incurred in connection with attendance at Board and committee meetings.

Each non-employee director may elect to be paid his or her annual retainer, in whole or in part, in shares of Common Stock in lieu of cash, and each non-employee director is eligible to receive an option to purchase shares of Common Stock upon his or her initial election to the Board and each reelection to the Board at any meeting of stockholders. Awards are made under the 2007 Omnibus Plan. The number of shares of Common Stock underlying such options is determined by the Board of Directors at the time of grant in its sole discretion. The options have an exercise price equal to the fair market value of the Common Stock on the date of grant. The options become exercisable quarterly over a 12 month period after the date of grant, and the options expire seven years after the date of grant. To the extent that options are exercisable on the date that a director’s service on the board terminates, they will remain exercisable for 12 months after such termination, but in no event later than the original option expiration date. In May 2009, the Company granted options to purchase 20,000 shares of Common Stock to each of its non-employee directors, except the Chairman of the Board who received an option to purchase 40,000 shares of Common Stock.

The following table sets forth compensation actually paid, earned or accrued during fiscal year 2009 by the Company’s directors.


Name	Fees Earned or Paid in Cash ($)	Option Awards ($) (1)	All Other Compensation ($)(2)	Total ($)
Jason Aryeh	40,500	40,543	12,656	93,699
David L. Castaldi	56,500	40,543		97,043
Geoffrey F. Cox, Ph.D.	93,500	81,086		174,586
Peter B. Davis	46,500	40,543		87,043
Richard A. Harvey, Jr.	56,500	40,543		97,043
Linda Jenckes	49,000	40,543	10,000	99,543
Timothy P. Lynch	46,500	40,543		87,043
Stephen G. Sudovar	55,000	40,543		95,543

(1)

Reflects the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 26, 2009 and also the grant date fair value of each award. As of December 26, 2009, Messrs. Aryeh, Davis and Lynch each held options to purchase 78,000 shares of Common Stock, Messrs. Castaldi, Harvey, and Sudovar, and Ms. Jenckes each held options to purchase 94,000 shares of Common Stock, and Dr. Cox held options to purchase 154,000 shares of Common Stock. Assumptions made in the calculation of these amounts are included in Note 10 to the Company’s audited financial statements for the fiscal year ended December 26, 2009, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2010.

(2)	Reflects amounts paid to Ms. Jenckes for government relations consulting services and to Mr. Aryeh for reimbursement of legal fees incurred by him.

AUDIT COMMITTEE REPORT

The Company’s Audit Committee is responsible for providing independent, objective oversight of the Company’s accounting functions and internal controls. The Committee is composed of three directors, each of whom is independent as defined in the Nasdaq Stock Market Marketplace Rules. The Committee operates under a written charter most recently amended and approved by the Board of Directors in February 2009. A copy of this charter is available on the Company’s website at http://www.nabi.com. David Castaldi, Peter Davis and Timothy P. Lynch have each been designated by the Board of Directors as an audit committee financial expert, as defined under the federal securities laws.

Management is responsible for the Company’s financial statements and financial reporting process, including the Company’s internal controls. The Company’s principal independent registered public accounting firm, Ernst & Young LLP, is responsible for performing an audit of the Company’s financial statements and effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board and issuing reports thereon. Although the Audit Committee is responsible for overseeing these processes, it does not prepare or audit the Company’s financial statements and audit controls or certify that they are complete or accurate or design or audit internal control over financial reporting.

The Audit Committee has reviewed and discussed the Company’s audited financial statements as of and for the fiscal year ended December 26, 2009, with management and Ernst & Young LLP. The Audit Committee met with Ernst & Young LLP without management present on four occasions in 2009, and has discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as currently in effect, which includes, among other items, matters relating to the conduct of an audit of financial statements. The Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, as currently in effect, and has discussed with Ernst & Young LLP its independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2009, for filing with the Securities and Exchange Commission.

The Audit Committee has appointed Ernst & Young LLP to serve as the Company’s principal independent registered public accounting firm for the current fiscal year. The Audit Committee or its chairman pre-approves auditing and non-audit services (except de minimis non-audit services and auditing services within the scope of an approved engagement of the auditor) provided to the Company by Ernst & Young LLP. There were no non-de minimis non-audit services or auditing services provided to the Company in 2009 that were not approved by the Audit Committee or its chairman.

The Audit Committee has adopted procedures to investigate and resolve any complaints received by the Company concerning accounting, internal accounting controls, or auditing matters or theft or fraud, including any claim of retaliation for providing information to or otherwise assisting the Audit Committee. Any submissions by the Company’s employees are received and maintained in a manner that assures confidentiality without compromising the submitter’s anonymity, if so requested by the submitter.

In early 2009, the Audit Committee amended provisions of its Charter dealing with the Company’s internal audit function and eliminated the Company’s separate Internal Audit Charter. The Audit Committee continues to be responsible for reviewing the scope and results of the internal audit function, including the appointment, compensation and retention of any external firm or individual performing the internal audit function.

Respectfully submitted by,

The Audit Committee

David L. Castaldi, Chairman

Peter B. Davis

Timothy P. Lynch

PROPOSAL 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors of the Company has approved the engagement of Ernst & Young LLP to be the Company’s independent registered public accounting firm for the 2010 fiscal year, subject to the ratification of the engagement by the Company’s stockholders. At the Annual Meeting, stockholders will consider and vote on the ratification of the engagement of Ernst & Young LLP for the Company’s fiscal year ending December 25, 2010. Ernst & Young LLP served as the Company’s principal independent registered public accounting firm for the fiscal year ended December 26, 2009. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

Vote Required

Under the Company’s by-laws, the affirmative vote of a majority of the votes properly cast on this proposal will be required to approve the ratification of the engagement of Ernst & Young LLP to be the Company’s independent registered public accounting firm for the 2010 fiscal year. Abstentions and broker non-votes will have no effect on this proposal.

Additional Audit Information

The following table sets forth the aggregate fees and expenses billed by Ernst & Young LLP for each of the Company’s last two fiscal years.


	2009			2008
Audit Fees	$	375,000	⁽¹⁾	$	463,742	⁽¹⁾
Audit-Related Fees		13,224	⁽²⁾		0
All Other Fees		0			0

Total Fees	$	388,224		$	463,742

(1)	Includes fees and expenses billed in connection with the Company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

(2)	Consists of fees and expenses billed for technical accounting assistance.

The Audit Committee or its Chairman pre-approves all auditing and non-audit services (except de minimis non-audit services and auditing services within the scope of an approved engagement of the auditor) provided to the Company by the Company’s independent registered public accounting firm.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2010 FISCAL YEAR.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of April 1, 2010 as to the Common Stock beneficially owned by (i) all directors and nominees, (ii) each Named Executive Officer, (iii) current directors and executive officers of the Company as a group, and (iv) each person who is known to the Company to be the beneficial owner of more than 5% of the Common Stock. Unless otherwise noted, this information has been provided by the persons named in the table.


	Amount of Beneficial Ownership (1)		Percentage
Directors and Nominees
Jason M. Aryeh	329,883	⁽²⁾	*
David L. Castaldi	150,139	⁽³⁾	*
Geoffrey F. Cox, Ph.D.	177,771	⁽⁴⁾	*
Peter Davis	88,814	⁽⁵⁾	*
Richard A. Harvey, Jr.	124,996	⁽⁶⁾	*
Linda Jenckes	115,747	⁽⁷⁾	*
Timothy P. Lynch	78,000	⁽⁸⁾	*
Stephen G. Sudovar	102,362	⁽⁹⁾	*

Named Executive Officers
Raafat E.F. Fahim, Ph.D.	793,172	⁽¹⁰⁾	1.6	%
Paul D. Kessler, M.D.	314,113	⁽¹¹⁾	*
Matthew W. Kalnik, Ph.D.	78,975	⁽¹²⁾	*

Current Directors and Executive Officers as a group (11 persons)	2,353,972	⁽¹³⁾	4.8	%

5% Beneficial Owners
Third Point LLC, Third Point Offshore Master Fund, L.P., and Daniel S. Loeb 390 Park Avenue New York, NY 10022	5,914,100	⁽¹⁴⁾	12.3	%
James H. Simons and Renaissance Technologies LLC 300 Third Avenue New York, NY 10022	2,863,304	⁽¹⁵⁾	6.0	%
David M. Knott and Dorsett Management Corporation 485 Underhill Blvd., Suite 205 Syosset, NY 11791	3,980,373	⁽¹⁶⁾	8.3	%
BlackRock, Inc. 40 East 52^nd Street New York, NY 10166	3,919,074	⁽¹⁷⁾	8.2	%

*	Less than 1%

(1)	Unless otherwise noted, the nature of beneficial ownership consists of sole voting and investment power. No director or named executive officer has pledged any of his or her Common Stock as security.

(2)

Consists of (i) 17,000 shares owned directly by Mr. Aryeh; (ii) 234,883 shares beneficially owned by Jason Aryeh through his relationship with JALAA Equities, LP, JLV Investments, LP, the Jason Aryeh Trust, the Jason Aryeh 2003 Family Trust and the Jason Aryeh IRA (collectively, the “Aryeh Entities”); and (iii) 78,000 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010. Mr. Aryeh disclaims beneficial ownership of all securities beneficially owned by the Aryeh Entities, except to the extent of any indirect pecuniary interest he may have therein.

(3)	Consists of (i) 49,189 shares of Common Stock owned by Mr. Castaldi; (ii) 6,950 shares of Common Stock owned by Mr. Castaldi’s wife and daughters; and (iii) 94,000 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(4)	Consists of (i) 23,771 shares of Common Stock owned directly by Dr. Cox and (ii) 154,000 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(5)	Consists of (i) 10,814 shares of Common Stock owned by the Davis Family Trust dated August 29, 1996, of which Mr. Davis is a Trustee and (ii) 78,000 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(6)	Consists of (i) 30,996 shares of Common Stock owned by jointly by Mr. Harvey and his wife and (ii) 94,000 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(7)	Consists of (i) 21,747 shares of Common Stock owned by Ms. Jenckes and (ii) 94,000 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(8)	Consists of 78,000 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(9)	Consists of (i) Consists of 8,362 shares of Common Stock owned by Mr. Sudovar and (ii) 94,000 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(10)

Consists of (i) 196,568 shares of Common Stock owned by Dr. Fahim; (ii) 1,000 shares held jointly with Dr. Fahim’s spouse, (iii) 136,250 shares of restricted Common Stock which are subject to future vesting but which may be voted and 459,354 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(11)

Consists of (i) 45,000 shares of Common Stock owned by Dr. Kessler, (ii) 73,500 shares of restricted Common Stock which are subject to future vesting but which may be voted and (iii) 195,613 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(12)

Consists of (i) 3,812 shares of Common Stock owned by Dr. Kalnik, (ii) 45,788 shares of restricted Common Stock which are subject to future vesting but which may be voted and (iii) 29,375 shares of Common Stock that may be acquired under stock options that are presently exercisable or will be exercisable on May 31, 2010.

(13)	See notes 2 though 12

(14)

The information in the table and this note is derived from a Schedule 13D/A filed with the SEC on March 30, 2010 by Third Point LLC, Third Point Offshore Master Fund, L.P., Third Point Advisors II L.L.C., and Daniel S. Loeb. The Schedule 13D/A discloses that, of these shares, (i) Third Point LLC and Mr. Loeb have shared power to vote or direct the vote and shared power to dispose or direct the disposition of 5,914,100 shares of common stock, and (ii) Third Point LLC, Mr. Loeb, Third Point Offshore Master Fund, L.P., and Third Point Advisors II L.L.C. have shared power to vote or direct the vote and shared power to dispose or direct the disposition of 3,671,300 shares of common stock.

(15)

The information in the table and this note is derived from a Schedule 13G/A filed with the SEC on February 12, 2010 by Renaissance Technologies LLC and John H. Simons, which have (i) sole power to vote or to direct the vote and (ii) sole power to dispose or to direct the disposition of 2,863,304 shares of common stock.

(16)

The information in the table and this note is derived from a Schedule 13D/A filed with the SEC on February 10, 2010 by David M. Knott and Dorset Management Corporation, which have (i) sole voting power for 3,835,973 shares of common stock, (ii) shared voting power for 104,600 shares of common stock and (iii) sole dispositive power for 3,980,373 shares of common stock.

(17)	The information in the table and this note is derived from a Schedule 13G filed with the SEC on January 29, 2010 by BlackRock, Inc., which has (i) sole power to vote or to direct the vote and (ii) sole power to dispose or to direct the disposition of 3,919,074 shares of common stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon a review of Forms 3, 4, and 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year and written representations from reporting persons that no Form 5 is required, the Company believes that all reporting persons filed on a timely basis the reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended, during the most recent fiscal year.

STOCKHOLDER PROPOSALS FOR NEXT YEAR’S ANNUAL MEETING

Under the federal securities laws, the deadline for submitting stockholder proposals for inclusion in the Company’s proxy statement and form of proxy for the Company’s next annual meeting is December 17, 2010. Under the Company’s by-laws, notice of a stockholder proposal is considered untimely unless it is delivered to or mailed and received at the principal executive offices of the Company not later than 90 days before the meeting; provided, however, that in the event that less than 100 days’ notice or prior public disclosure of the meeting date is given or made to stockholders, then notice by the stockholder, to be timely, must be received no later than the close of business on the tenth day after such notice of the meeting date was mailed or such prior public disclosure was made.

ANNUAL REPORT ON FORM 10-K

The Company will provide without charge to each stockholder entitled to vote at the Annual Meeting, on the written request of such stockholder, a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2009, including the financial statements and the financial statement schedules, required to be filed with the Securities and Exchange Commission. Written requests must be directed to Greg Fries, Manager, Investor Relations, Nabi Biopharmaceuticals, 12276 Wilkins Avenue, Rockville, Maryland 20852. The Company’s Annual Report on Form 10-K is also available free of charge through the Company’s website at http://www.nabi.com.

SEPARATE COPIES FOR BENEFICIAL HOLDERS

Institutions that hold shares in street name for two or more beneficial owners with the same address are permitted to deliver a single proxy statement and annual report to that address and the Company may deliver only one proxy statement or annual report to multiple security holders sharing an address unless the Company has received contrary instructions from one or more security holders. The Company will promptly deliver a separate copy of this proxy statement to any such beneficial owner that requests a separate copy by sending a request to Nabi Biopharmaceuticals, 12276 Wilkins Avenue, Rockville, Maryland 20852, Attention: Corporate Secretary or by calling 301-770-3099. Beneficial owners who share an address and receive multiple copies of the Company’s annual report and proxy statements may request one copy of each document by contacting the Company in the manner described above.

OTHER MATTERS

The Board of Directors is not aware of any other matter to be presented for action at the Annual Meeting. However, if any such matter is presented for action, your proxy will confer discretionary authority to vote on the matter if the Company did not receive timely notice of the matter in accordance with the Company’s by-laws.

SOLICITATION OF PROXIES

The Company will bear the costs of soliciting proxies from its stockholders. In addition to soliciting proxies by mail, directors, officers, and employees of the Company, without receiving additional compensation therefor, may solicit proxies by telephone or otherwise. Arrangements will also be made with brokerage firms and other custodians, nominees, and fiduciaries to forward solicitation materials to beneficial owners of Common Stock held of record by such persons, and the Company will reimburse such custodians, nominees, and fiduciaries for reasonable expenses incurred by them in connection therewith.

By Order of the Board of Directors,

LOGO

Constantine Alexander

Secretary

April 16, 2010

ANNUAL MEETING OF STOCKHOLDERS OF

NABI BIOPHARMACEUTICALS

May 20, 2010

PROXY VOTING INSTRUCTIONS


INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page, and use the Company Number and Account Number shown on your proxy card.
				COMPANY NUMBER
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call and use the Company Number and Account Number shown on your proxy card.
				ACCOUNT NUMBER
Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. IN PERSON - You may vote your shares in person by attending the Annual Meeting.

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of meeting, proxy statement and proxy card are available at www.nabi.com by clicking on the “Investors” link and then the “SEC Reports” link.

i Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. i


¢ 20730000000000000000 5								052010

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x

FOR

AGAINST

ABSTAIN

1. Vote on Directors For the election of all nominees listed below (except as indicated):

Vote on Proposal For the proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 25, 2010

NOMINEES:

¨ FOR ALL NOMINEES

O Jason M. Aryeh

O David L. Castaldi

O Geoffrey F. Cox, Ph.D.

O Peter B. Davis

O Raafat E.F. Fahim, Ph.D.

O Richard A. Harvey, Jr.

O Timothy P. Lynch

THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED. IF NO SPECIFICATION IS MADE, THE PROXIES INTEND TO VOTE FOR ALL NOMINEES FOR DIRECTOR AND FOR PROPOSAL 2.

¨ WITHHOLD AUTHORITY

FOR ALL NOMINEES

¨ FOR ALL EXCEPT

(See instructions below)

INSTRUCTIONS:

To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: l

To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.

Signature of Shareholder

Date:

Signature of Shareholder

Date:

Note:

Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

ANNUAL MEETING OF STOCKHOLDERS OF

NABI BIOPHARMACEUTICALS

May 20, 2010

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:

The Notice of meeting, proxy statement and proxy card

are available at www.nabi.com by clicking on the “Investors” link and then the “SEC Reports” link.

Please sign, date and mail

your proxy card in the

envelope provided as soon

as possible.

i Please detach along perforated line and mail in the envelope provided. i


¢ 20730000000000000000 5								052010

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x

1. Vote on Directors For the election of all nominees listed below (except as indicated):

Vote on Proposal For the proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 25, 2010

FOR

AGAINST

ABSTAIN

NOMINEES:

¨ FOR ALL NOMINEES

¨ WITHHOLD AUTHORITY

FOR ALL NOMINEES

¨ FOR ALL EXCEPT

(See instructions below)

O Jason M. Aryeh

O David L. Castaldi

O Geoffrey F. Cox, Ph.D.

O Peter B. Davis

O Raafat E.F. Fahim, Ph.D.

O Richard A. Harvey, Jr.

O Timothy P. Lynch

THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED. IF NO SPECIFICATION IS MADE, THE PROXIES INTEND TO VOTE FOR ALL NOMINEES FOR DIRECTOR AND FOR PROPOSAL 2.

INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
mark “FOR ALL EXCEPT” and fill in the circle next to
each nominee you wish to withhold, as shown here: l

Signature of Stockholder

Date:

Signature of Stockholder

Date:

Note:


		¨			¢

NABI BIOPHARMACEUTICALS

12276 Wilkins Avenue, Rockville, Maryland 20852

Annual Meeting of Stockholders to be held on May 20, 2010

This Proxy is Solicited on Behalf of the Board of Directors, which Recommends

Approval of the Proposals Contained Herein

The undersigned hereby appoint(s) Paul Kessler, M.D. and Matthew Kalnik, Ph.D., and each of them, as Proxies of the undersigned, with full power of substitution, to vote, as designated herein, all shares of stock that the undersigned would be entitled to vote if personally present at the Annual Meeting of Stockholders of Nabi Biopharmaceuticals (the “Company”), to be held on May 20, 2010 at 10:00 a.m., local time, at the Bethesda Marriott, 5151 Pooks Hill Road, Bethesda, Maryland, and all adjournments and postponements thereof (the “Meeting”). The undersigned acknowledge(s) receipt of the Company’s Proxy Statement. The undersigned hereby confer(s) upon the Proxies, and each of them, discretionary authority (i) to consider and act upon such matters, other than the business set forth herein, as may properly come before the Meeting for which the Company did not receive timely notice of the matter in accordance with the Company’s by-laws; (ii) with respect to the election of directors in the event that any of the nominees is unable to serve or for good cause will not serve; and (iii) with respect to such other matters upon which discretionary authority may be conferred. If shares of the Company’s Common Stock are issued to or held for the account of the undersigned under any of the Company’s employee benefit plans and voting rights are attached to such shares (any of such plans, a “Voting Plan”), then the undersigned hereby direct(s) the respective fiduciary of each applicable Voting Plan to vote all shares of the Company’s Common Stock in the undersigned’s name and/or account under such Voting Plan in accordance with the instructions given herein at the Meeting on all matters properly coming before the Meeting, including but not limited to the matters set forth on the reverse side.


¢		(Continued and to be signed on the reverse side)		14475		¢