Note 7 - Merger

6 Months Ended

Dec. 31, 2012

Business Combination Disclosure [Text Block]

(7)     Merger

Summary

On April 22, 2012, Nabi and Biota Holdings Limited entered into a merger implementation agreement (the “Agreement”), which was subsequently amended on August 6, 2012 and further amended on September 17, 2012. Pursuant to the terms and subject to the conditions set forth in the Agreement, Biota Holdings Limited became a wholly owned subsidiary of Nabi on November 8, 2012. As outlined in Note 1, Nabi then changed its name to Biota Pharmaceuticals, Inc.

Reverse Stock Split

On November 8, 2012, as contemplated by the Agreement and as approved by Nabi’s stockholders and board of directors, Nabi filed a Certificate of Amendment to its Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to affect a reverse stock split of Nabi’s common stock at a ratio of 1:6. As a result of the reverse stock split, each six shares of Nabi common stock issued and outstanding immediately prior to the reverse stock split were automatically combined into and became one share of Nabi common stock. Also, as a result of the reverse stock split, the per share exercise price of, and the number of shares of common stock underlying, of Company stock options outstanding immediately prior to the reverse stock split were automatically proportionally adjusted based on the one-for-six split ratio in accordance with the terms of such options. The reverse stock split did not alter the par value of the Nabi common stock or modify any voting rights or other terms of the common stock. Following the reverse stock split, 0.5 million stock options remained outstanding.

Exchange Ratio

Upon completion of the merger, each outstanding share of Biota Holdings Limited ordinary shares converted into the right to receive 0.1249539870 shares of Nabi common stock as determined pursuant to the exchange ratio, as calculated pursuant to the terms of the Transaction Agreement, as amended. Pursuant to the various agreements, Biota Holdings Limited stockholders received shares in Nabi common stock representing approximately 83% of the outstanding combined stock of the resulting combined company. Nabi stockholders continued to own their existing Nabi common stock, which represented approximately 17% of the outstanding combined stock of the resulting combined company. The issued share capital upon completion of the merger comprised of the following:

	No. of Shares
Ex-Nabi stockholders		4,720,999
Ex-Biota Holdings Limited stockholders		23,416,347
Total		28,137,346

Purchase Consideration and Net Assets Acquired

Due to the fact that former Biota Holdings Limited stockholders held a majority of the ongoing voting interest in the Company upon completion of the merger, the merger has been accounted for as a ‘reverse merger’, whereby Biota Holdings Limited is treated as the acquirer for financial accounting purposes, with Nabi being treated as the acquired company. In addition, members of the Company’s management and board of directors are principally drawn from the Biota Holdings Limited business, and the majority of the ongoing business is related to the Biota Holdings Limited business.

The purchase consideration in a reverse merger is determined with reference to the value of equity that the accounting acquirer (in this case Biota Holdings Limited,) issues to the stockholders of the accounting acquiree (Nabi, in this case) to give them their interest in the combined entity.Further, as a result of the merger, stock options to purchase an aggregate of 0.5 million shares of Nabi common stock that were held by officers and directors of Nabi immediately vested (see Note 3 to the consolidated financial statements). The fair values of the Nabi outstanding stock options were determined using the Black-Scholes option pricing model with the following assumptions: a strike price range between $11.34 – $99.91; a volatility range between 78.79% – 99.62%; a risk-free interest rate range between 0.12% – 0.87%; and an expected life range of 0.3 – 6.1 years.

The purchase price, based on the price per share of the Company’s common stock as of the date of the merger is as follows:

Number of shares issued to Nabi stockholders		4,720,999
Fair value per share, using volume weighted share price on November 9, 2012	$	4.0168
Implied purchase consideration (in thousands)	$	18,963
Number of stock options outstanding to former Nabi employees		508,918
Fair value per option	$	0.456
Implied purchase consideration (in thousands)	$	232
Total implied purchase consideration (in thousands)	$	19,195

The net assets acquired consist of (in thousands):

Cash	$	32,687
Accrual for severance obligations and employee benefits		(4,977	)
Accounts payable		(694	)
Other liabilities		(16	)
Net cash received	$	27,000
Excess of net assets acquired over total fair value purchase consideration/gain recorded on merger	$	7,805

No purchase consideration has been allocated to the residual value of any of Nabi’s drug development programs, including NicVAX® or any next-generation nicotine vaccine, or the potential royalty of Phoslyra that was sold to a third party in 2006, due to the significant uncertainty associated with future cash flows from these assets.

Pursuant to the Agreement, Biota Holdings Limited received net cash of $27 million from Nabi, while Nabi stockholders received a proportion of the combined entity based on the Biota Holdings Limited share price upon completion of the merger. Movements in the Biota Holdings Limited share price and the U.S. and Australian dollar exchange rates between the date of the determination of the exchange ratio and the date of the completion of the merger, coupled with changes in the fair value of certain assets and liabilities, have resulted in the net assets acquired exceeding the calculated purchase consideration. The gain recorded on the merger of $7.8 million is recognized as non-operating income in the condensed consolidated statements of operations.

Acquisition-related Costs

Acquisition-related costs related to the merger, including adviser, investment banking, legal, accounting and various other costs of $1.3 million and $4.6 million have been included as a general and administrative expense for the three and six month periods ended December 31, 2012, respectively. Total acquisition-related costs were approximately $6.5 million.

Pro forma Financial Information

The following table presents selected unaudited financial information, as if the merger with Nabi had occurred on July 1, 2011 (in thousands, expect per share data).

	Three Months Ended December 31,						Six Months Ended December 31,
	2012			2011			2012			2011
Pro forma net revenue	$	1,018		$	2,984		$	13,114		$	8,160
Pro forma net loss	$	(1,124	)	$	(8,989	)	$	(10,898	)	$	(13,164	)
Pro forma basic loss per share	$	(0.03	)	$	(0.31	)	$	(0.38	)	$	(0.46	)
Pro forma diluted loss per share	$	(0.03	)	$	(0.31	)	$	(0.38	)	$	(0.46	)