Company Overview

6 Months Ended

Jun. 30, 2012

Company Overview [Abstract]

Company Overview

NOTE 1 COMPANY OVERVIEW

We are a biopharmaceutical company that has focused on the development of vaccines addressing unmet medical needs, including nicotine addiction. We have been incorporated in Delaware since 1969 and our operations are located in Rockville, Maryland. Our sole remaining product currently in development is NicVAX ^® [Nicotine Conjugate Vaccine], an innovative and proprietary investigational vaccine for the treatment of nicotine addiction and prevention of smoking relapse based on patented technology. We suffered a significant setback in 2011 when NicVAX did not achieve the primary endpoint in two Phase III efficacy trials conducted in the U.S. The only remaining trial of NicVAX is the Phase IIb trial in combination with Pfizer’s varenicline being conducted in the Netherlands. If the results of the remaining trial, which are expected before year-end 2012, are positive, we believe the potential residual value of NicVAX will be enhanced. As of June 30, 2012, our remaining assets include the following: (i) $92.6 million of cash and cash equivalents, (ii) the potential residual value of NicVAX as well as any next-generation nicotine vaccine which was licensed to GlaxoSmithKline Biologicals S.A. (GSK) in 2010, (iii) the potential royalty from Phoslyra which was sold to Fresenius USA Manufacturing, Inc. (Fresenius) in 2006, and (iv) the potential value of our net operating losses (NOLs).

Merger Agreement with Biota Holdings Limited. On April 22, 2012, we entered into a merger implementation agreement (Merger Agreement) with Biota Holdings Limited, a Melbourne, Australia company (Biota), pursuant to which, among other things, Nabi and Biota will undertake a business combination under Australian corporate law such that each ordinary share of Biota capital stock will be exchanged for newly issued shares of Nabi common stock, and Biota will become a wholly-owned subsidiary of Nabi (the Merger). In connection with the Merger, Nabi will change its name to “Biota Pharmaceuticals, Inc.” but will remain listed on the NASDAQ Stock Market as its sole stock exchange listing and be headquartered in the United States.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger:

• Each Biota share outstanding immediately prior to the effective time will be transferred to Nabi in exchange for 0.669212231 Nabi shares (as such amount may be adjusted pursuant to the terms of the Merger Agreement, including an adjustment for the shares purchased pursuant to the tender offer that we just completed). Immediately after the closing of the Merger, the Nabi shares issued to former Biota stockholders will represent approximately 74% of Nabi’s outstanding common stock, and the shares of common stock held by current Nabi stockholders will represent approximately 26% of Nabi’s outstanding common stock;

• The board of directors of Nabi will consist of six Biota directors and two Nabi directors; and

• Biota’s current Chief Executive Officer and Chief Financial Officer are expected to serve as the Chief Executive Officer and Chief Financial Officer, respectively, of Nabi until the appointment of a new U.S.-based management team.

Prior to the closing of the Merger Agreement, subject to the terms and conditions of the Merger Agreement:

• Nabi intends to return to Nabi’s stockholders excess cash above $54 million (which is required to be delivered to the combined company), after satisfying and reserving for outstanding liabilities, through a dividend, return of capital or repurchase of outstanding Nabi shares through an issuer tender offer approved by the Board of Directors of Nabi, or a combination thereof. We currently estimate the amount of cash to be returned to Nabi stockholders to be in the range of $25 to $29 million, including the $ 24.4 million that we paid to stockholders who tendered their shares to us in our recently completed tender offer on July 30, 2012; and

• Nabi plans to distribute to its stockholders contingent value rights providing certain payment rights arising from cash received by Nabi from a future sale, transfer, license or similar transaction involving our NicVAX program assets.

Consummation of the Merger is subject to customary conditions for a business combination of this type under Australian and Delaware corporate law, including, among others, (i) approval of the Merger by the stockholders of Biota in accordance with applicable Australian law, (ii) the affirmative vote of the holders of a majority of the issued and outstanding Nabi shares at a meeting of stockholders approving amendments to the certificate of incorporation of Nabi to (a) increase the number of authorized Nabi Shares to 200,000,000, principally to allow for the issuance of additional Nabi Shares to pay the Merger consideration, and (b) change the name of Nabi to “Biota Pharmaceuticals, Inc.,” and (iii) the affirmative vote of the holders of a majority of the votes cast at the Nabi stockholder meeting approving issuance of new Nabi shares to Biota stockholders in the Merger, as required by the rules of the NASDAQ Stock Market.

Each party’s obligation to consummate the Merger is subject to certain other conditions, including approval of the Merger by the Supreme Court of Victoria, Australia, the expiration or early termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain other competition laws, the absence of any injunction, restraint or governmental restriction making illegal or restraining the consummation of the transactions contemplated by the Merger Agreement, the accuracy of the other party’s representations and warranties contained in the Merger Agreement that are qualified as to materiality, the accuracy in all material respects of the other party’s representations and warranties contained in the Merger Agreement that are not qualified as to materiality, the other party’s performance in all material respects of all obligations to be performed by it under the Merger Agreement, and the absence of any effect, event, occurrence or matter that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the other party of the nature specified in the Merger Agreement. In addition, Biota’s obligation to consummate the Merger is subject to receiving a certificate from Nabi showing that Nabi has a closing net cash balance of no less than $54 million, calculated in accordance with the terms of the Merger Agreement, and the appointment of specified Biota directors to the Nabi board of directors effective as of the closing of the Merger. The parties expect to close the Merger in the third quarter of 2012 subject to satisfaction of these and other closing conditions.

Tender Offer. On July 30, 2012 we completed a “modified Dutch auction” tender offer for our common stock at a price per share not less than $1.58 and not greater than $1.72 and purchased 14,547,996 shares of our common stock for approximately $24.4 million at an average costs per share of approximately $1.68. We funded the share purchases in the tender offer using available cash on hand.

In response to a preliminary proxy solicitation by Mangrove Partners indicating that they intend to oppose the merger with Biota, Nabi filed an 8-K in which our Board of Directors affirmed its belief that the Merger Agreement with Biota is in the best interest of shareholders.

NicVAX Agreement with GSK. In March 2010, we closed an exclusive worldwide option and licensing agreement with GSK for NicVAX as well as for the development of follow-on nicotine addiction vaccines. Upon closing, we received a $40 million initial payment. Under the terms of the agreement, we granted to GSK (i) an option to obtain an exclusive worldwide license to develop, commercialize and manufacture NicVAX as it currently exists, as well as certain potential alternative forms of NicVAX together with an adjuvant other than a GSK proprietary adjuvant and/or with different presentation, dosage or administration (NicVAX Alternatives), and (ii) an exclusive worldwide license to develop, commercialize and manufacture certain future generation candidate vaccines for the prevention or treatment of nicotine addiction based on our NicVAX intellectual property (other than NicVAX and NicVAX Alternatives). GSK has informed us that it does not intend to exercise the NicVAX option due to the failure of the Phase III trials to achieve their primary end points. However, GSK has not indicated that it has terminated the development of the future generation nicotine vaccine.

Notwithstanding the failure to achieve the primary endpoint in our two Phase III trials, if the future generation nicotine vaccine being developed by GSK is successful, GSK will pay us up to a total of $290 million in contingent milestone payments as follows: (i) up to $47 million based on Phase II and Phase III clinical trial-related milestones, (ii) up to $34 million based on obtaining regulatory approval in certain major market countries, and (iii) up to a total of $209 million based on tiered annual sales of future generation candidates. GSK also will pay us royalty payments on annual net sales of future generation candidates, beginning at 5% and potentially increasing on incremental sales to as high as 7%, with the increase depending on whether annual net sales of future generation candidates meet or exceed specified annual sales targets in any calendar year ranging from $300 million to $600 million. The probability of us receiving future contingent milestones or royalties is uncertain as it is based on the achievement of various success-based development and regulatory approvals contingent upon the occurrence of various future events, the occurrence of most of which have a high degree of uncertainty.

PentaStaph Sale to GSK. In November 2009, we sold our PentaStaph product candidate and related assets to GSK under an Asset Purchase Agreement for a total consideration of $46 million including a $20 million up-front payment and $26 million payable upon achievement of certain milestones, all of which we have received. We completed our work to help develop PentaStaph under contract with GSK during the second quarter of 2011.

PhosLo. In 2006, we sold certain assets related to our PhosLo operations to Fresenius. Under the sale agreement, we are entitled to additional contingent milestone payments of $2.5 million upon approval of a new indication for PhosLo and royalties of up to $65.0 million on annual sales of Phoslyra, a new formulation of PhosLo, over a base amount of $32 million for 10 years after the November 14, 2006 closing date. To date, annual sales of Phoslyra have not exceeded the base amount, and we have not recognized any royalty revenue from those sales.