Preliminary Proxy Statement
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Filed by the Registrant   þ

Filed by a party other than the Registrant  ¨

Check the appropriate box:

þ   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to §240.14a-12

 

Nabi Biopharmaceuticals

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

¨   No fee required.

þ   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  1)   Title of each class of securities to which transaction applies:

 

  2)   Aggregate number of securities to which transaction applies:

 

  3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

The aggregate purchase price payable under the asset purchase agreement is $185,000,000.

 

  4)   Proposed maximum aggregate value of transaction: $185,000,000

 

  5)   Total fee paid: $5,680

 

¨  Fee paid previously with preliminary materials.

¨  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing   for which the offsetting fee was paid previously. Identify the previous filing by registration statement   number, or the Form or Schedule and the date of its filing.

 

  (1)   Amount Previously Paid: $

 

  (2)   Form, Schedule or Registration Statement No.:

 

  (3)   Filing Party:

 

  (4)   Date Filed:


Table of Contents

LOGO

 

Nabi Biopharmaceuticals

5800 Park of Commerce Boulevard, N.W.

Boca Raton, Florida 33487

 

, 2007

 

To our stockholders:

 

You are cordially invited to attend a special meeting of stockholders of Nabi Biopharmaceuticals, a Delaware corporation, (“Nabi,” “us” or “we”) to be held at 10:00 a.m., local time, on                     , 2007 at the Bethesda Marriott, 5151 Pooks Hill Road, Bethesda, Maryland.

 

We have agreed to sell all of our rights in and to assets of Nabi relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of biologics products, and that together comprise our biologics strategic business unit, or the BSBU, and certain corporate shared services assets located primarily in Boca Raton, Florida, or the CSS assets, to Biotest Pharmaceuticals Corporation, a Delaware corporation, or Biotest Pharmaceuticals, which is a wholly-owned subsidiary of Biotest AG, a company organized under the laws of Germany, or Biotest, pursuant to an asset purchase agreement, dated as of September 11, 2007. In exchange for our rights in and to the BSBU and CSS assets, Biotest Pharmaceuticals has agreed to pay us $185 million in cash, subject to specific inventory adjustments, and assume certain liabilities. The performance of Biotest Pharmaceuticals’ obligations is guaranteed by Biotest. The full text of the asset purchase agreement is included as Annex A to the proxy statement that accompanies this letter.

 

The proposed asset sale will not become effective unless approved by the stockholders of Nabi. We have scheduled a special meeting of our stockholders for this vote on                     , 2007. YOUR VOTE IS VERY IMPORTANT.

 

After careful consideration, our board of directors has unanimously determined that the proposed asset sale is expedient and in the best interests of Nabi. THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE PROPOSED SALE AND THE ASSET PURCHASE AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE PROPOSED SALE.

 

Please review carefully the attached proxy statement for more complete information regarding the proposal to approve the asset sale, which includes a description of the asset purchase agreement, the background of our decision to enter into the asset purchase agreement, and the reasons that our board of directors has decided to recommend that you approve the asset sale.

 

Your vote is very important to us regardless of the number of shares you own. Whether or not you plan to attend the special meeting in person, please complete, sign and date the enclosed proxy card and return it in the envelope provided as soon as possible. If you hold shares of our common stock directly in your name, you may also grant a proxy using the Internet or by telephone by following the instructions printed on your proxy card. Even if you return the proxy, you may attend the special meeting and vote your shares in person.

 

On behalf of our board of directors, I thank you for your support and urge you to vote “FOR” each of the proposals described in this proxy statement.

 

Sincerely,

 

 

LOGO

Leslie Hudson, Ph.D.

Interim President and Chief Executive Officer

 

The accompanying notice and proxy statement are first being mailed

or otherwise distributed to our stockholders on or about                     , 2007.


Table of Contents

Nabi Biopharmaceuticals

5800 Park of Commerce Boulevard, N.W.

Boca Raton, Florida 33487

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On                  , 2007

 

To our stockholders:

 

A special meeting of stockholders of Nabi Biopharmaceuticals will be held at 10:00 a.m., local time, on                     , 2007 at the Bethesda Marriott, 5151 Pooks Hill Road, Bethesda, Maryland.

 

At the special meeting, we will consider:

 

  1.   A proposal to approve the sale of our rights in and to our assets relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of biologics products, and that together comprise our biologics strategic business unit, and certain of our corporate shared services assets located primarily in Boca Raton, Florida, pursuant to the asset purchase agreement attached as Annex A to the enclosed proxy statement; and

 

  2.   A proposal to approve adjournment of the special meeting, if necessary, to facilitate the approval of the preceding proposal, including to permit the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to approve the preceding proposal.

 

After careful consideration, our board of directors has unanimously determined that the proposed asset sale is expedient and in the best interests of Nabi. THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE PROPOSED SALE AND THE ASSET PURCHASE AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE PROPOSED SALE. THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY.

 

Only holders of record of our common stock at the close of business on                     , 2007, will be entitled to notice of and to vote at the special meeting or any adjournment thereof. Each share of our common stock is entitled to one vote on each matter to be voted upon at the special meeting.

 

Your vote is important, regardless of the number of shares you own. The proposed asset sale will not be completed unless it is approved by the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote at the special meeting. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy card or grant a proxy by telephone or using the Internet to ensure that your shares will be represented at the special meeting if you are unable to attend. Your prompt cooperation will be greatly appreciated.

 

You are urged to review carefully the information contained in the enclosed proxy statement prior to deciding how to vote your shares at the special meeting.

 

Please follow the voting instructions on the enclosed proxy card to vote either by mail, telephone or electronically through the Internet.

 

By Order of the Board of Directors,

LOGO

Constantine Alexander

Secretary

 

Boca Raton, Florida

                    , 2007

 

 


Table of Contents

TABLE OF CONTENTS

 


 

     Page

SUMMARY TERM SHEET

   1

Parties to the Asset Sale

   1

The Special Meeting

   2

The Asset Sale

   3

Material U.S. Federal and State Income Tax Consequences

   5

Regulatory Matters

   5

Asset Purchase Agreement

   5

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

   8

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

   10

THE SPECIAL MEETING

   11

Date, Time and Place

   11

Purpose of the Special Meeting

   11

Board Recommendations

   11

Record Date; Shares Entitled to Vote

   11

Stock Ownership of Directors and Executive Officers

   12

Quorum Requirement

   12

Votes Required to Approve Proposals

   12

Voting of Proxies

   12

Revocation of Proxies

   13

Solicitation of Proxies

   14

Householding

   14

PROPOSAL ONE: THE ASSET SALE

   15

Background of the Asset Sale

   15

Reasons for the Asset Sale

   19

Recommendation of Our Board of Directors

   20

Required Vote

   21

Opinion of Our Financial Advisor

   21

Proceeds from the Asset Sale

   25

Effects of the Asset Sale

   26

Purpose of the Asset Sale

   27

Other Agreements and Transactions Related to the Asset Sale

   27

Interests of Our Executive Officers and Directors in the Asset Sale

   28

Dissenters’ Rights

   29

Accounting Treatment of the Asset Sale

   29

Financing

   29

Material U.S. Federal and State Income Tax Consequences

   29

Regulatory Matters

   29

Asset Purchase Agreement

   29

General

   30

Closing

   30

Representations and Warranties

   30

Indemnification; Survival of Indemnification Obligations

   32

Covenants and Agreements

   32

Regulatory Matters

   34

No Negotiation

   34

Conditions to Completion of the Asset Sale

   34

Employee Transfer

   35

Termination

   36

Termination Fee

   37

Expenses

   37

Amendment

   37

Biotest Guarantee

   37

 

i


Table of Contents
     Page

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

   38

UNAUDITED FINANCIAL STATEMENTS OF THE BSBU AND CSS ASSETS OF NABI BIOPHARMACEUTICALS

   46

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT

   69

PROPOSAL TWO: ADJOURNMENT OF THE SPECIAL MEETING

   71

STOCKHOLDER PROPOSALS FOR NEXT YEAR’S ANNUAL MEETING

   72

WHERE YOU CAN FIND MORE INFORMATION

   72

 

LIST OF ANNEXES

 

Annex A   

Asset Purchase Agreement

    
Annex B   

Opinion of Banc of America Securities LLC

    

 

ii


Table of Contents

SUMMARY TERM SHEET

 

The following summary highlights selected information from this proxy statement and may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement and its annexes. Each item in this summary includes a page reference directing you to a more complete description of that item. In this proxy statement, the terms “Nabi,” “Company,” “we,” “our,” “ours,” and “us” refer to Nabi Biopharmaceuticals, a Delaware corporation, and its subsidiaries.

 

Parties to the Asset Sale

 

Nabi Biopharmaceuticals

 

5800 Park of Commerce Boulevard, N.W.

Boca Raton, Florida 33487

Telephone No.: (561) 989-5800

 

Nabi leverages its experience and knowledge in powering the immune system to develop and, in certain areas, market products that target serious medical conditions in the areas of hepatitis and transplants, gram positive bacterial infections and nicotine addiction. We are a vertically integrated company with sales of antibodies and other biologics, including Nabi-HB® [Hepatitis B Immune Globulin (Human)], a pipeline of products in various stages of development and a state-of-the-art manufacturing capability. The company operates through two strategic business units: Biologics and Pharmaceuticals. Biologics has responsibility for the Company’s marketed product Nabi-HB, a spectrum of plasma products from its nine plasma centers and a development pipeline, including human plasma proteins and antibody products. Pharmaceuticals is responsible for the vaccine pipeline that targets significant unmet medical needs, including NicVAX® [Nicotine Conjugate Vaccine], its innovative vaccine for smoking cessation, and StaphVAX®, its vaccine against Staphylococcus aureus development programs. NicVax is nearing the end of an important Phase 2b clinical trial which has shown long term efficacy in smoking cessatation in statistically significant numbers of treated subjects. Pharmaceuticals also holds the right to receive up to an additional $75 million in milestone and royalty payments related to its divestiture of PhosLo in 2006. Nabi currently has approximately 550 employees.

 

Biotest AG

 

Landsteinerstr. 5

63303 Dreieich

Germany

Telephone No.: +49 6103 801 347

 

Biotest AG, or Biotest, is a company that researches and manufactures pharmaceutical, biotherapeutic and diagnostic products and has specialized in immunology and hematology. In its pharmaceutical segment, Biotest develops immunoglobulins, clotting factors and albumins based on human blood plasma. These are used for diseases of the immune system or haematopoietic system. In the biotherapeutic segment, Biotest researches into the clinical development of monoclonal antibodies, including in the indications of rheumatoid arthritis and blood cancer. The diagnostic segment spans reagents and serology and microbiology systems which are used, for example, in blood transfusions. Biotest has approximately 1,200 employees worldwide and its shares are listed in the Frankfurt Stock Exchange’s Prime Standard.

 

1


Table of Contents

Biotest Pharmaceuticals Corporation

 

Landsteinerstr. 5

63303 Dreieich

Germany

Telephone No.: +49 6103 801 347

 

Biotest Pharmaceuticals Corporation, or Biotest Pharmaceuticals, is a Delaware corporation and a wholly-owned subsidiary of Biotest. Biotest Pharmaceuticals does not engage in any operations and exists to facilitate the asset sale. After the closing of the asset sale, Biotest Pharmaceuticals will operate the assets being acquired.

 

The Special Meeting

 

Date, Time, Place and Purpose (Page 11)

 

The special meeting will be held on                 , 2007, starting at 10:00 a.m., local time, at the Bethesda Marriott, 5151 Pooks Hill Road, Bethesda, Maryland.

 

You will be asked to consider and vote upon approval of the asset sale pursuant to an asset purchase agreement that we have entered into with Biotest and Biotest Pharmaceuticals. In addition, you will be asked to approve the adjournment of the special meeting, if necessary, in order to permit the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to approve the foregoing proposal.

 

Record Date; Votes (Page 11)

 

Nabi has fixed the close of business on                  as the record date for determining the Nabi stockholders entitled to receive notice of and to vote at the special meeting. Only holders of record of Nabi common stock on the record date are entitled to receive notice of and to vote at the special meeting, and any adjournment or postponement thereof.

 

Each share of Nabi common stock is entitled to one vote. On the record date, there were              shares of Nabi common stock entitled to vote at the special meeting.

 

Required Votes (Page 12)

 

The proposals have different voting standards for approval:

 

   

the proposal for the approval of the asset sale requires the affirmative vote of a majority of the outstanding shares of Nabi common stock entitled to vote at the special meeting; and

 

   

the proposal to adjourn the special meeting, including, if necessary, to solicit additional proxies in favor of the proposal to approve the asset sale, requires the affirmative vote of a majority of the votes cast by stockholders present in person or represented by proxy at the special meeting.

 

Approval of the asset sale by the requisite vote of our stockholders is required for us to complete the asset sale.

 

Stock Ownership of Directors and Executive Officers (Page 12)

 

On             , the record date, directors and executive officers of Nabi and their respective affiliates owned and were entitled to vote              shares of Nabi common stock, or approximately         % of the shares of Nabi common stock outstanding on that date. To our knowledge, the directors and executive officers of Nabi and their respective affiliates intend to vote their shares of Nabi common stock in favor of all proposals at the special meeting.

 

2


Table of Contents

The Asset Sale

 

The Asset Sale (Page 15)

 

On September 9, 2007, our board of directors, at a meeting duly called and held, approved the asset sale by and among Nabi, Biotest and Biotest Pharmaceuticals, pursuant to an asset purchase agreement, dated as of September 11, 2007, a copy of which is included as Annex A to this proxy statement. Please read it carefully. Nabi, Biotest and Biotest Pharmaceuticals may sometimes be referred to in this proxy statement as a party, or collectively as the parties. Pursuant to the terms of the asset purchase agreement:

 

 

 

we have agreed to sell (i) all of our rights in and to our assets relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of our biologics products, Nabi-HB® [Hepatitis B Immune Globulin (Human)] and our plasma products, and our products in development, Nabi-HB® Intravenous [Hepatitis B Immune Globulin (Human) Intravenous], Civacir® [Hepatitis C Immune Globulin (Human)], Altastaph® [Staphylococcus aureus Immune Globulin Intravenous (Human)], IVIG and other plasma fractions, our state-of-the-art manufacturing facility and nine Food and Drug Administration, or FDA,- and European- certified plasma collection centers, and plasma protein production and vaccine manufacturing facilities that together comprise our biologics strategic business unit, or BSBU, and (ii) certain of our corporate shared services assets located primarily in Boca Raton, Florida, or the CSS assets, including our Boca Raton, Florida headquarters;

 

   

Biotest Pharmaceuticals has agreed to assume certain post-closing liabilities related to the BSBU and CSS assets; and

 

   

in exchange for our rights in and to the BSBU and CSS assets, Biotest and Biotest Pharmaceuticals have agreed to pay us $185 million in cash, subject to specific inventory levels. At the closing of the asset sale, $10 million of the cash payment will be deposited into an escrow account to support any indemnification claims made under the asset purchase agreement by Biotest or Biotest Pharmaceuticals on or prior to March 31, 2009.

 

If all necessary approvals have been obtained, including stockholder and regulatory approvals and any third party consents, we hope to complete the asset sale shortly after this special meeting scheduled for                 , 2007.

 

Reasons for the Asset Sale (Page 19)

 

In evaluating the asset sale, our board of directors considered the recommendations of its strategic action committee, its consultations with our management and legal and financial advisors and other various factors. For the material factors considered by our board of directors in reaching its decision to approve the asset sale and the asset purchase agreement, see “The Asset Sale — Reasons for the Asset Sale,” beginning on page [·].

 

Recommendation of Our Board of Directors (Page 20)

 

After careful consideration, our board of directors has unanimously:

 

   

determined that the asset sale, the asset purchase agreement and the transactions contemplated thereby are expedient and in the best interests of Nabi;

 

   

approved the asset sale and the asset purchase agreement; and

 

   

recommended that our stockholders vote to approve the asset sale.

 

Opinion of Our Financial Advisor (Page 21 and Annex B)

 

In connection with the asset sale, Banc of America Securities LLC, Nabi’s financial advisor, delivered to Nabi’s board of directors a written opinion, dated September 9, 2007, to the effect that, as of the date of the

 

3


Table of Contents

opinion and based on and subject to various assumptions and limitations described in its opinion, the purchase price to be received by Nabi in the asset sale was fair, from a financial point of view, to Nabi. The full text of the written opinion, dated September 9, 2007, of Banc of America Securities, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this proxy statement. Holders of Nabi common stock are encouraged to read the opinion carefully in its entirety. Banc of America Securities provided its opinion to Nabi’s board of directors for the benefit and use of Nabi’s board of directors in connection with and for purposes of its evaluation of the purchase price to be received by Nabi from a financial point of view. Banc of America Securities’ opinion does not address any other aspect of the transaction and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed transaction.

 

Proceeds from the Asset Sale (Page 25)

 

Nabi has not made a decision about the uses of the proceeds from the asset sale. Leading up to and after the anticipated closing of the asset sale, the board intends to review with management working capital needs, anticipated liabilities and potential strategic uses of capital. We may use the proceeds from the asset sale for the following purposes, although there can be no assurances that we will do so:

 

   

Working Capital, Liabilities and Product Development.    The proceeds of the asset sale will be used for general corporate purposes, including satisfying our working capital needs and paying our remaining liabilities as they come due, and potentially for further clinical development of NicVAX and our other ongoing programs as well as our efforts to secure a strategic partner both for NicVAX and StaphVAX. Among our remaining liabilities are our outstanding 2.875% Convertible Senior Notes due 2025 (Convertible Notes). Under the terms of the indenture governing the Convertible Notes, the holders thereof may elect to require us to repurchase the Convertible Notes on April 15, 2010 and on other dates specified in the indenture. We are currently evaluating the possible elective repurchase from time to time, depending on market conditions and other factors, of some or all of our Convertible Notes.

 

   

Possible Distribution to Stockholders or Repurchase.    If our board determines that we have cash and cash equivalents in excess of what is needed to fund our liabilities and projected operating needs, it may consider a distribution to stockholders of a portion of the net cash proceeds from the asset sale, either by a special dividend, a self-tender, through a stock repurchase or any combination of the foregoing. Our board has not conducted the analyses necessary to determine if such a distribution will be made and, if made, the amount and timing of any such distribution or its form. Accordingly, we cannot assure you that the Company will distribute any of the net cash proceeds from the asset sale to our stockholders in the event the asset sale is consummated. Consequently, we advise our stockholders that they should not vote in favor of the asset sale based upon the assumption that they will receive a distribution out of the net cash proceeds of the asset sale.

 

Our board of directors and management will continue to evaluate the operational needs and remaining liabilities of the Company after the closing of the asset sale, as well as other potential uses of proceeds. Accordingly, our plans for use of the proceeds from the asset sale could change.

 

Effects of the Asset Sale (Page 26)

 

If our stockholders approve the asset sale and the asset sale is consummated, Biotest Pharmaceuticals will acquire all of our rights in and to the BSBU and CSS assets. If the asset sale is consummated, we will operate our pharmaceuticals strategic business unit from our existing Rockville, Maryland facility, which will become our new corporate headquarters. We will continue ongoing discussions and efforts to secure a strategic partner for our NicVAX and StaphVAX programs. If the asset sale is not approved by our stockholders, then, subject to a termination fee payable in certain circumstances as described below, either we or Biotest may terminate the asset purchase agreement and our board of directors, along with management, will reassess our options in light of our long-term strategic goals.

 

4


Table of Contents

Other Agreements and Transactions Related to the Asset Sale (Page 27)

 

In addition to the asset purchase agreement, we will also enter into the following related agreements in connection with the asset sale:

 

   

a bill of sale;

 

   

an assignment of the BSBU intellectual property;

 

   

an escrow agreement;

 

   

a contract manufacturing agreement (pursuant to a term sheet that we agreed to in conjunction with the asset purchase agreement);

 

   

a transition services agreement (pursuant to a term sheet that we agreed to in conjunction with the asset purchase agreement);

 

   

a right of first refusal agreement (pursuant to a term sheet that we agreed to in conjunction with the asset purchase agreement); and

 

   

a trademark license agreement (pursuant to a term sheet that we agreed to in conjunction with the asset purchase agreement).

 

Interests of Our Executive Officers and Directors in the Asset Sale (Page 28)

 

When you consider our board of directors’ recommendation that stockholders vote in favor of the asset sale, you should be aware that certain Nabi executive officers have interests that may be different from or in addition to those of Nabi’s stockholders. For a more complete description of the interests of Nabi’s executive officers and directors in the asset sale, please see “The Asset Sale — Interests of Our Executive Officers and Directors in the Asset Sale” beginning on page 28.

 

Dissenters’ Rights (Page 29)

 

You will not experience any change in your rights as a stockholder as a result of the asset sale. Neither Delaware law nor our certificate of incorporation provides for appraisal or other similar rights for dissenting stockholders in connection with the asset sale. Accordingly, you will have no right to dissent and obtain payment for your shares.

 

Material U.S. Federal and State Income Tax Consequences (Page 29)

 

The asset sale will not result in any U.S. federal income tax consequences to our stockholders. The transaction will be a taxable event to Nabi for U.S. federal income tax purposes, but Nabi anticipates that a substantial portion of the taxable gain resulting from the asset sale will be offset by net operating losses. For a complete description of the material tax consequences of the asset sale to Nabi, please see “The Asset Sale —Material U.S. Federal and State Income Tax Consequences” beginning on page 29.

 

Regulatory Matters (Page 29)

 

On                     , 2007, we submitted our initial notification under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, or the HSR Act, which is a federal antitrust regulation law.

 

Asset Purchase Agreement (Page 29)

 

The asset purchase agreement provides that we will sell the BSBU and CSS assets to Biotest Pharmaceuticals for $185 million in cash, subject to specific inventory levels. $10 million of the cash payment

 

5


Table of Contents

will be deposited into an escrow account to support any indemnification claims made under the asset purchase agreement by Biotest or Biotest Pharmaceuticals on or prior to March 31, 2009. Any funds remaining in the escrow account on April 15, 2009 will be released to Nabi on such date. For a more complete description of Nabi’s indemnification obligations under the asset purchase agreement, please see “The Asset Sale — Asset Purchase Agreement — Indemnification; Survival of Indemnification Obligations” beginning on page 32. In addition, Biotest Pharmaceuticals has agreed to assume certain post-closing liabilities related to the purchased assets. The performance of Biotest Pharmaceuticals’ obligations is guaranteed by Biotest.

 

No Negotiation (Page 34)

 

The asset purchase agreement restricts our ability to solicit or engage in discussions or negotiations with third parties regarding specified transactions involving Nabi. Notwithstanding these restrictions, under certain limited circumstances, our board of directors may respond to an alternative acquisition proposal, change its recommendation with respect to the asset sale and/or terminate the asset purchase agreement and enter into an alternative agreement if it constitutes a superior transaction, as defined in the asset purchase agreement, after paying the termination fee specified in the asset purchase agreement.

 

Conditions to Completion of the Asset Sale (Page 34)

 

Before we can complete the asset sale, a number of conditions must be satisfied. These include, among others:

 

   

the absence of any governmental or court order that enjoins, restrains, prohibits, or makes illegal the asset sale, or materially limits Biotest Pharmaceuticals’ ability to acquire, hold or control the BSBU and CSS assets;

 

   

the expiration or termination of the applicable waiting period under the HSR Act;

 

   

the approval of the asset sale by a majority of the outstanding shares of our common stock;

 

   

the use of reasonable efforts to split and segregate certain shared use assets related to the BSBU or CSS assets;

 

   

the accuracy of the parties’ representations and warranties, subject to specified materiality qualifications;

 

   

the performance by each party of its obligations under the asset purchase agreement in all material respects;

 

   

the delivery of title documents for the BSBU and CSS assets, including surveys and title policy binders for owned real property; and

 

   

the execution and delivery of specified agreements.

 

Other than the conditions pertaining to our stockholder approval and the absence of governmental or court orders, either Nabi on the one hand, or Biotest Pharmaceuticals on the other hand, may elect to waive conditions to their respective performance and consummate the asset sale.

 

Termination (Page 36)

 

The asset purchase agreement may be terminated and the asset sale may be abandoned at any time prior to consummation of the asset sale by:

 

   

the parties upon mutual written consent;

 

   

either Biotest Pharmaceuticals or us, if the asset sale has not been completed by March 31, 2008 and, in either case, the failure of the party seeking to terminate to fulfill any obligation under the asset purchase agreement did not materially contribute to the failure to complete the sale by such time;

 

6


Table of Contents
   

either Biotest Pharmaceuticals or us, if any governmental authority takes action that would make the asset sale illegal or otherwise prevent or prohibit its consummation, if the party seeking to terminate has used commercially reasonable efforts to oppose such action;

 

   

either Biotest Pharmaceuticals or us, if our stockholders do not approve the asset sale at the special meeting;

 

   

either Biotest Pharmaceuticals or us, if the other party is in material breach of the asset purchase agreement, which breach is not cured within 10 days of the breaching party being notified of such breach or is incapable of being cured by March 31, 2008, and if the party seeking to terminate is not also in material breach;

 

   

us, if our board of directors has determined that an alternative acquisition proposal is a superior transaction, after we have complied with the non-solicitation provisions of the asset purchase agreement, including providing Biotest and Biotest Pharmaceuticals with an opportunity to improve their offer; and

 

   

Biotest Pharmaceuticals, if, prior to the approval of the asset sale by our stockholders, our board of directors fails to include in this proxy statement its recommendation of the asset purchase agreement, withdraws or materially changes the recommendation, or approves or recommends an acquisition proposal to our stockholders as a superior transaction.

 

Termination Fee (Page 37)

 

We are obligated to pay Biotest Pharmaceuticals a termination fee of $8.5 million if the asset purchase agreement is terminated:

 

   

by us after our board of directors has determined that an alternative acquisition proposal is a superior transaction; or

 

   

by Biotest Pharmaceuticals because of our failure to include the board recommendation to the stockholders in the proxy statement, our withdrawal of or change to the recommendation, or our recommendation of a superior transaction.

 

If the asset purchase agreement is terminated by any party because our stockholders do not approve the asset purchase agreement, then we must pay Biotest Pharmaceuticals:

 

   

Biotest Pharmaceuticals’ reasonable and documented out-of-pocket expenses incurred in connection with the asset purchase agreement up to $3 million; and

 

   

if, within 12 months after the date of the asset purchase agreement, we consummate a transaction including the acquisition by any entity other than Biotest Pharmaceuticals of at least 50% of our securities (by merger, stock purchase or otherwise) or 50% of our assets, with terms at least as favorable to us in the aggregate as the terms of the asset purchase agreement, upon consummation of such subsequent transaction, we must pay to Biotest Pharmaceuticals the difference between $8.5 million and the expenses previously paid to Biotest Pharmaceuticals.

 

7


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

 

The Special Meeting

 

Q:   Why am I receiving this proxy statement and proxy card?

 

A:   You are receiving a proxy statement and proxy card because you owned shares of our common stock as of the record date. This proxy statement and proxy card relate to our special meeting of stockholders (and any adjournment thereof) and describe the matters on which we would like you, as a stockholder, to vote.

 

Q:   Who is soliciting my proxy?

 

A:   Our board of directors is soliciting your proxy for use at the special meeting.

 

Q:   What proposals will be voted on at the special meeting?

 

A:   You will be asked to consider and vote on the following:

 

   

a proposal to approve the sale of our rights in and to certain of our assets relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of biologics products, and that together comprise our biologics strategic business unit, and certain of our corporate shared services assets located primarily in Boca Raton, Florida, pursuant to the asset purchase agreement attached as Annex A to this proxy statement; and

 

   

a proposal to approve adjournment of the special meeting, if necessary, to facilitate the approval of the preceding proposal, including to permit the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to approve the preceding proposal.

 

Q:   Why is Nabi asking for a stockholder vote?

 

A:   Obtaining stockholder approval by the holders of at least a majority of our outstanding shares of common stock is a condition to closing the asset sale under the terms of the asset purchase agreement we negotiated with Biotest and Biotest Pharmaceuticals.

 

Q:   How does the Nabi board of directors recommend that I vote?

 

A:   Our board of directors unanimously recommends that you vote:

 

   

FOR” the proposal to approve the asset sale pursuant to the asset purchase agreement; and

 

   

FOR” the proposal to approve adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve the asset sale.

 

Q:   What vote of Nabi stockholders is required to approve the asset sale?

 

A:   For us to complete the asset sale at least a majority of the shares of our outstanding common stock at the close of business on the record date must be voted “FOR” the resolution approving the asset sale.

 

Q:   What vote of Nabi stockholders is required to approve the proposal to adjourn the special meeting, if necessary, to solicit additional proxies?

 

A:   Stockholder approval of the adjournment proposal will require the affirmative vote of a majority of the votes cast by stockholders present or represented by proxy at the special meeting and entitled to vote on the matter.

 

8


Table of Contents
Q:   Am I entitled to appraisal or dissenters’ rights in connection with the asset sale?

 

A:   No. Holders of shares of our common stock will not have appraisal or dissenters’ rights in connection with the asset sale.

 

Q:   What do I need to do now?

 

A:   After carefully reading and considering the information contained in this proxy statement, please vote your shares by completing, signing, dating and returning the enclosed proxy card in the enclosed return envelope, by granting a proxy using the telephone number printed on your proxy card, or by granting a proxy using the Internet instructions printed on your proxy card. You can also attend the special meeting and vote in person. The special meeting will take place on             , 2007. Our board of directors unanimously recommends that you vote “FOR” the asset sale and “FOR” the adjournment proposal.

 

Q:   Can I change my vote after I have mailed in my signed proxy card?

 

A:   Yes. You can change your vote in four ways. First, you can send written notice stating that you would like to revoke your proxy to our Secretary at the address given below. Second, you can request a new proxy card and complete and send it to our Secretary at the address given below. Third, you can vote at a later time by telephone or through the Internet. Fourth, if you are a holder of record, you can attend the special meeting and vote in person, but your attendance alone will not revoke any proxy that you have previously given. You should send any written notice or request for a new proxy card to the attention of the Secretary, in care of Keri Mattox, Investor Relations, Nabi Biopharmaceuticals, 5800 Park of Commerce Boulevard, N.W., Boca Raton, Florida 33487.

 

Q:   If my shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A:   Your broker or other nominee will vote your shares only if you provide instructions on how to vote to such broker or other nominee. Following the directions provided by your broker or other nominee, you should instruct your broker or other nominee to vote your shares. Without your instructions, your shares will not be voted, which will have the same effect as a vote against the asset sale.

 

Q:   How will Nabi solicit proxies and who is bearing the cost of this Nabi proxy solicitation?

 

A:   Proxies may be solicited on behalf of our board of directors by mail, telephone, facsimile or electronic communication or in person and we will pay the solicitation costs, which include the cost of printing and distributing proxy materials and soliciting of votes. Our directors, officers and employees may solicit proxies by such methods without additional compensation. In addition, we have retained Morrow & Co., Inc. to assist us in the solicitation of proxies at a cost estimated to be $7,500 plus expenses. We also will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to stockholders.

 

Q:   Who can help answer any questions that I have about the asset sale?

 

A:   If you have any questions about the asset sale, the special meeting or this proxy statement, you should contact either:

 

Nabi Biopharmaceuticals

          Morrow & Co., Inc.

5800 Park of Commerce Boulevard, N.W.

          470 West Avenue

Boca Raton, Florida 33487

   or      Stamford, Connecticut 06902

Attention: Keri Mattox, Investor Relations

          Phone: (203) 858-9400

Phone: (561) 989-5800

                      (800) 662-5200

 

9


Table of Contents

CAUTIONARY STATEMENT CONCERNING

FORWARD-LOOKING INFORMATION

 

This proxy statement contains forward-looking statements about our plans, objectives, expectations and intentions. Forward-looking statements include information concerning possible or assumed future results of operations of Nabi, the expected completion and timing of the asset sale and other information relating to the asset sale. There are forward-looking statements throughout this proxy statement, including, among others, under the headings “Summary Term Sheet,” “The Asset Sale — Effects of the Asset Sale,” “The Asset Sale — Proceeds from the Asset Sale,” and in statements containing the words “believes,” “expects,” “estimates,” “forecasts,” “seeks,” “may,” “will,” and “continues” or other similar words or expressions. You should read statements that contain these words carefully. They discuss our future expectations or state other forward-looking information, and may involve known and unknown risks over which we have no control, including, without limitation:

 

   

the inability to complete the asset sale due to the failure to satisfy the conditions to consummation of the asset sale, including the failure to obtain stockholder approval;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the asset purchase agreement;

 

   

the failure of the asset sale to close for any other reason;

 

   

the ability to achieve the benefits of the asset sale;

 

   

the outcome of legal proceedings that may be instituted against us and others in connection with the asset purchase agreement;

 

   

the amount of the costs, fees, expenses and charges related to the asset sale;

 

   

the effect of the announcement of the asset sale on our client relationships, operating results and business generally, including the ability to retain key employees;

 

   

the ability to successfully partner with third parties to fund, develop, manufacture and/or distribute our existing and pipeline products, including NicVAX and StaphVAX; and

 

   

the ability to generate sufficient cash flow from sales of products or from royalty payments to fund our development and commercialization efforts.

 

You should not place undue reliance on forward-looking statements. We cannot guarantee any future results, levels of activity, performance or achievements. All forward-looking statements contained in this proxy statement speak only as of the date of this proxy statement or as of such earlier date that those statements were made and are based on current expectations or expectations as of such earlier date and involve a number of assumptions, risks and uncertainties that could cause the actual result to differ materially from such forward-looking statements. Except as required by law, we undertake no obligation to update or publicly release any revisions to these forward-looking statements or reflect events or circumstances after the date of this proxy statement.

 

10


Table of Contents

THE SPECIAL MEETING

 

We are furnishing this proxy statement to you, as a stockholder of Nabi, as part of the solicitation of proxies by our board of directors for use at the special meeting of stockholders. In this proxy statement, the terms “Nabi,” “Company,” “we,” “our,” “ours,” and “us” refer to Nabi Biopharmaceuticals, a Delaware corporation, and its subsidiaries. The term “asset purchase agreement” refers to the asset purchase agreement, dated as of September 11, 2007, by and among Nabi Biopharmaceuticals, Biotest AG, and Biotest Pharmaceuticals Corporation, as it may be amended from time to time. The term “asset sale” refers to the proposed sale of all of our rights in and to certain assets of Nabi relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of biologics products, and that together comprise the biologics strategic business unit, or the BSBU, and certain corporate shared services assets located primarily in Boca Raton, Florida, or the CSS assets, pursuant to the asset purchase agreement. The term “Biotest” refers to Biotest AG, and the term “Biotest Pharmaceuticals” refers to Biotest Pharmaceuticals Corporation. We are first mailing this proxy statement and accompanying form of proxy to Nabi stockholders on or about             , 2007.

 

Date, Time and Place

 

The special meeting of Nabi stockholders will be held on             , 2007 at 10:00 a.m., local time, at the Bethesda Marriott, 5151 Pooks Hill Road, Bethesda, Maryland.

 

Purpose of the Special Meeting

 

At the special meeting, we will consider:

 

  1.   A proposal to approve the sale of our rights in and to certain of our assets relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of biologics products, and that together comprise our biologics strategic business unit, and certain of our corporate shared services assets located primarily in Boca Raton, Florida, pursuant to the asset purchase agreement attached as Annex A to this proxy statement; and

 

  2.   A proposal to approve adjournment of the special meeting, if necessary, to facilitate the approval of the preceding proposal, including to permit the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to approve the preceding proposal.

 

We are not aware of any other matter that may properly come before the special meeting.

 

Board Recommendations

 

Our board of directors has unanimously determined that the asset sale is expedient and in the best interests of Nabi and unanimously recommends that stockholders vote “FOR” the proposal to approve the asset sale and “FOR” the proposal to approve the adjournment.

 

Record Date; Shares Entitled to Vote

 

Our board of directors has fixed the close of business on             , 2007 as the record date for the special meeting. Accordingly, only holders of record of our common stock as of the close of business on the record date will be entitled to notice of, and to vote at, the special meeting or any adjournment or postponement thereof. As of the record date, an aggregate of              shares of our common stock were issued and outstanding. The holders of our common stock are entitled to one vote per share on any proposal presented at the special meeting.

 

Any shares of our common stock held by us as treasury shares and shares of our common stock held by our subsidiaries will not be entitled to vote.

 

11


Table of Contents

Stock Ownership of Directors and Executive Officers

 

On             , 2007, the record date, our directors and executive officers and their respective affiliates owned and were entitled to vote              shares of our common stock, or approximately             % of the shares of our common stock outstanding on that date. To our knowledge, our directors and executive officers and their respective affiliates intend to vote their shares of common stock in favor of all proposals at the special meeting.

 

Quorum Requirement

 

The presence in person or by proxy of stockholders representing at least a majority of the votes entitled to be cast by holders of the shares of our common stock issued and outstanding and entitled to vote at the special meeting is necessary to establish a quorum for the transaction of business at the special meeting. Abstentions and broker “non-votes” are counted as present or represented for purposes of determining the presence or absence of a quorum. A “non-vote” occurs when a broker holding shares for a beneficial owner votes on one proposal, but does not vote on another proposal because, in respect of such other proposal, the broker does not have discretionary voting power and has not received instructions from the beneficial owner.

 

Under the Financial Industry Regulatory Authority rules, or FINRA rules, brokers who hold shares in street name for customers have the authority to vote on certain “routine” proposals when they have not received instructions from beneficial owners. Under FINRA rules, such brokers are precluded from exercising their voting discretion with respect to the approval and adoption of non-routine matters, such as the asset sale. Therefore, absent specific instructions from the beneficial owner of such shares, brokers are not empowered to vote such shares with respect to the approval of these non-routine proposals.

 

The vote on each matter submitted to stockholders is tabulated separately. Abstentions and broker “non-votes” are included in the number of shares present or represented for purposes of quorum, but are not considered as shares voting or as votes cast with respect to any matter presented at the special meeting.

 

Votes Required to Approve Proposals

 

Required Vote for Approval of Asset Sale (Proposal 1).    The affirmative vote of a majority of the outstanding shares of our common stock entitled to vote is required to approve the asset sale. Consequently, failure to vote, an abstention from voting or a broker “non-vote” on Proposal 1 will have the effect of a vote “AGAINST” Proposal 1.

 

Approval of the asset sale by the requisite vote of our stockholders is required for us to complete the asset sale.

 

Required Vote for Adjournment of the Special Meeting (Proposal 2).    Stockholder approval of any adjournment of the special meeting requires the affirmative vote of a majority of the votes cast by stockholders present in person or represented by proxy. Abstentions and broker “non-votes” will have no effect on the vote on Proposal 2.

 

Voting of Proxies

 

By Mail.    A proxy card is enclosed for your use. To submit your proxy by mail, we ask that you sign and date the accompanying proxy and, if you are a stockholder of record, return it as soon as possible in the enclosed postage-paid envelope or according to the instructions provided in the proxy card. If the envelope is missing, please see the instructions on your proxy card. If you hold your shares in “street name”, please refer to your proxy card or the information provided to you by your bank, broker, custodian or record holder. When the accompanying proxy is returned properly executed, the shares of Nabi common stock represented by it will be voted at the special meeting in accordance with the instructions contained in the proxy.

 

12


Table of Contents

If proxies are returned properly executed without indication as to how to vote, the Nabi common stock represented by each such proxy will be considered to be voted in favor of all matters for consideration at the special meeting as follows: “FOR” the proposal to approve the asset sale, and “FOR” the proposal to approve the adjournment.

 

To our knowledge, there are no voting agreements in place in respect of any outstanding shares of Nabi common stock entitled to vote at the special meeting.

 

Your vote is important. Accordingly, please sign, date and return the enclosed proxy card whether or not you plan to attend the special meeting in person.

 

By Telephone.    If you are a stockholder of record, you may also submit your proxy by telephone by dialing the toll-free telephone number on your proxy card and providing the unique control number indicated on the enclosed proxy card. Telephone voting is available 24 hours a day, seven days a week, and will be accessible until 11:59 p.m., New York City time, on             , 2007. Easy-to-follow voice prompts allow you to submit your proxy and confirm that your instructions have been properly recorded. If you hold your shares in “street name,” please refer to your proxy card or the information provided by your bank, broker, custodian or record holder for information on telephone voting. If you are located outside the United States, Canada and Puerto Rico, see your proxy card or other materials for additional instructions. If you submit your proxy by telephone, you do not need to return your proxy card.

 

By Internet.    If you are a stockholder of record, you may also choose to submit your proxy on the Internet. Internet voting is available 24 hours a day, seven days a week, and will be accessible until 11:59 p.m., New York City time, on             , 2007. Please refer to the enclosed proxy card for information about the website for Internet voting and the unique control number you will be required to provide. If you hold your shares in “street name,” please refer to your proxy card or the information provided by your bank, broker, custodian or record holder for information on Internet voting. As with telephone voting, you will be given the opportunity to confirm that your instructions have been properly recorded. If you submit your proxy on the Internet, you do not need to return your proxy card.

 

Voting In Person.    If you wish to vote in person at the special meeting, a ballot will be provided at the special meeting. However, if your shares are held in “street name” by your bank, broker, custodian or other record holder, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the meeting.

 

Revocation of Proxies

 

You have the power to revoke your proxy at any time before your proxy is voted at the special meeting. Your proxy can be revoked in one of four ways:

 

   

you can send a signed notice of revocation;

 

   

you can grant a new, valid proxy by executing a new proxy card bearing a later date;

 

   

you can vote at a later time by telephone or through the Internet; or

 

   

if you are a holder of record, you can attend the special meeting (or, if the special meeting is adjourned or postponed, attend the adjourned or postponed meeting) and vote in person which will automatically cancel any proxy previously given, but your attendance alone will not revoke any proxy previously given.

 

If you choose either of the first two methods, your notice of revocation or new proxy must be received by our corporate secretary no later than the beginning of the special meeting or, if the special meeting is adjourned or postponed, before the adjourned or postponed meeting is actually held.

 

13


Table of Contents

If your shares are held in “street name,” you may change your vote by submitting new voting instructions to your broker or nominee.

 

Solicitation of Proxies

 

All costs of this solicitation of proxies will be borne by Nabi. In addition to solicitations by mail, certain of our directors, officers and regular employees, without additional remuneration, may solicit proxies in person or by telephone or telegraph. Brokers, custodians and fiduciaries will be requested to forward proxy soliciting material to the owners of Nabi common stock held in their names, and we will reimburse them for their reasonable out-of-pocket costs. Solicitation by our officers and employees may also be made of some Nabi stockholders in person or by mail, telephone, telegraph or electronically following the original solicitation. In addition, we have engaged Morrow & Co., Inc. to assist it in the distribution and solicitation of proxies at a fee of $7,500, plus expenses.

 

Householding

 

In accordance with notices sent to Nabi stockholders who share a single address and own their Nabi shares through a bank, broker or other holder of record, we are sending only one proxy statement to that address unless we received contrary instructions from any stockholder at that address. This “householding” practice reduces our printing and postage costs. Our stockholders may request or discontinue householding, or may request a separate copy of the proxy statement. Nabi stockholders who wish to either discontinue or begin householding should contact their bank, broker or other record holder. Any householded stockholder may request prompt delivery of a copy of the proxy statement by visiting the Investors section of our website, www.nabi.com, or by writing to Nabi at Investor Relations, 5800 Park of Commerce Boulevard, N.W., Boca Raton, Florida 33487.

 

14


Table of Contents

PROPOSAL ONE:

THE ASSET SALE

 

The following is a description of the material aspects of the asset sale, including background information relating to the proposed asset sale transaction. While we believe that the following description covers the material terms of the asset sale, the asset purchase agreement and other arrangements among Biotest, Biotest Pharmaceuticals and us, the description may not contain all of the information that is important to you. In particular, the following summary of the asset purchase agreement is not intended to be complete and is qualified in its entirety by reference to the copy of the asset purchase agreement attached to this proxy statement as Annex A and incorporated by reference herein. You should carefully read this proxy statement and the other documents to which we refer, including the asset purchase agreement, for a complete understanding of the terms of the asset sale.

 

Background of the Asset Sale

 

Nabi’s board of directors, the strategic action committee of the board of directors, or SAC, and management have from time to time evaluated and considered a variety of strategic alternatives as part of our long-term strategy to enhance stockholder value. The circumstances regarding the formation of the SAC in November 2006 are described below.

 

On November 1, 2005, Nabi announced that StaphVAX® failed to meet its primary endpoint in Nabi’s confirmatory Phase III clinical trial. Because these results were not consistent with previous positive clinical data for StaphVAX, Nabi halted further development of StaphVAX and withdrew its marketing authorization application to market StaphVAX in the European Union. Currently, Nabi is seeking a partner for StaphVAX before further developing it.

 

On April 17, 2006, Daniel S. Loeb, Third Point LLC, and Third Point Offshore Fund, Ltd., which we collectively refer to as Third Point, filed a Schedule 13D with the Securities and Exchange Commission, or SEC, stating that they had acquired 8.4% of Nabi’s outstanding common stock. Third Point’s Schedule 13D noted Third Point’s view that Nabi should immediately retain a new investment banking firm to implement a strategic process aimed at enhancing stockholder value. Between April 27, 2006 and September 14, 2006, Third Point reiterated its demands that a “bona fide sale process be commenced immediately.”

 

In May 2006, Nabi’s board of directors selected Banc of America Securities as Nabi’s financial advisor to assist the board in reviewing various strategic alternatives.

 

On July 7, 2006, the board of directors held a regular meeting, together with members of Nabi management and Nabi’s legal and financial advisors. At this meeting, Banc of America Securities discussed with the board certain financial matters pertaining to Nabi, its business and the current stock market environment.

 

On August 31, 2006, the board of directors held a special meeting along with members of Nabi management and Nabi’s legal advisors. At this meeting, the board concluded that a preliminary non-public review of the level of interest in Nabi and its various assets by possible bidders should be undertaken with the assistance of Nabi’s financial advisor. Following this meeting and in accordance with the board’s direction, Banc of America Securities contacted approximately twelve potential acquirors that Nabi’s management believed were the most likely to be interested in an acquisition of all or part of Nabi.

 

At its regular meeting held on September 15, 2006, attended by members of Nabi management and Nabi’s legal and financial advisors, the board discussed Nabi’s current share price and the continued demand of a number of hedge fund stockholders that Nabi publicly announce that it had begun to explore strategic alternatives and had engaged a financial advisor to assist Nabi with such process. Representatives of Banc of America Securities updated the board as to the results of the inquiries it had made to selected potential parties, at the

 

15


Table of Contents

board’s direction, to determine whether there was any preliminary interest in acquiring all or part of Nabi. Nabi’s financial advisor reported that, to date, no company had expressed any interest in acquiring Nabi as a whole; however, some companies had expressed an interest in acquiring certain assets or businesses of Nabi relating to its biologics business.

 

On September 22, 2006, the board of directors approved the sale of PhosLo and related assets to Fresenius USA Manufacturing, Inc. This transaction was a result of management’s business development activities that were initiated prior to April 2006.

 

On September 27, 2006, Nabi publicly announced that the board had authorized the exploration of strategic alternatives and that Nabi had retained Banc of America Securities as its financial advisor to assist the board in its exploration of potential strategic alternatives available to Nabi, including licensing or development arrangements, joint ventures, strategic alliances, a recapitalization, and the sale or merger of all or part of the Company.

 

On October 3, 2006, the board of directors held a special meeting together with members of Nabi management and Nabi’s legal and financial advisors. Banc of America Securities updated the board on the process of exploring strategic alternatives available to Nabi, including the sale of all or a part of Nabi, noting that it had received calls inquiring about Nabi from third parties and, as directed by the board, had contacted other parties. The board was informed that confidentiality agreements would be sent shortly to interested parties, and that after executing such confidentiality agreements, interested parties would be furnished with an information memorandum.

 

On October 12, 2006, Nabi announced that it had signed a definitive agreement to sell PhosLo and the product’s related assets to Fresenius USA Manufacturing, Inc. for consideration of up to $150 million consisting of a combination of up-front cash, milestone payments, and royalties on sales of a new product formulation under development.

 

In October 2006, approximately seventy parties were contacted to gauge their interest in acquiring all or part of Nabi. Twenty-nine parties signed confidentiality agreements and received information about Nabi. These parties were requested to submit non-binding preliminary proposals by November 17, 2006.

 

On October 31, 2006, Third Point filed a preliminary consent solicitation statement with the SEC to remove from the board Thomas H. McLain, Nabi’s President, Chief Executive Officer and Chairman, as well as a majority of the Company’s directors. On November 6, 2006, Nabi filed a preliminary consent revocation statement with the SEC.

 

On November 10, 2006, the board of directors held a regular meeting, attended by members of Nabi management and Nabi’s legal and financial advisors, at which the board authorized the Company to enter into a settlement agreement between the Company and Third Point. On November 10, 2006, Nabi entered into a settlement agreement with Third Point, under which Third Point agreed to terminate its consent solicitation. Under the terms of the settlement agreement, Nabi expanded the size of the board and appointed two new directors selected by Third Point. In addition, Nabi agreed to establish a strategic action committee of the board of directors, or SAC, to actively explore and consider for recommendation to the board strategic alternatives for Nabi, including asset acquisitions or sales, joint ventures, strategic alliances, licensing and development agreements, a recapitalization, and the merger or sale of all or substantially all of Nabi’s assets. As required by the agreement, the board appointed as the members of the SAC Third Point’s two director nominees, Jason Aryeh and Timothy Lynch, and three existing members of the board, Peter B. Davis, Richard A. Harvey, Jr. and Leslie Hudson, Ph.D.

 

On November 14, 2006, Nabi consummated the sale of PhosLo to Fresenius USA Manufacturing, Inc. for consideration of up to $150 million in up-front cash, milestone payments and royalties on sales of a new product

 

16


Table of Contents

formulation under development. In connection with the sale, Fresenius paid Nabi $65 million in cash and agreed to pay an additional $20.5 million upon the successful completion of certain milestones and royalties on the new product formulation until the total consideration paid in the transaction reaches $150 million.

 

In response to Nabi’s solicitation for non-binding preliminary proposals, we received proposals from twelve interested parties. None of these proposals concerned the sale of Nabi as a whole.

 

Commencing on November 11, 2006 and continuing through September 21, 2007, the SAC met twenty times. On November 20, 2006, the SAC held a meeting, attended by members of Nabi management and representatives of Nabi’s legal and financial advisors, to review the preliminary expressions of interest that had been received. At that meeting, the SAC determined that, based on the preliminary expressions of interest, one or more specific transactions should be proposed to interested parties with respect to specific assets of the Company, and that interested parties should be given financial information relevant to such a transaction.

 

On December 19, 2006, the SAC held a meeting attended by members of Nabi management and representatives of Nabi’s legal and financial advisors. The SAC was updated on the preliminary expressions of interest previously received and discussed how best to communicate with interested parties in order to elicit more informed bids offering greater value to Nabi and its stockholders. The SAC discussed ways to approach other parties that had not yet submitted a preliminary expression of interest.

 

On January 5, 2007, the SAC held a special meeting attended by members of Nabi management and representatives of Nabi’s legal and financial advisors. The SAC was updated by Nabi’s financial advisor on recent interactions with potential acquirors, and was informed that none of such potential acquirors had expressed an interest in acquiring Nabi as a whole.

 

On February 15, 2007, Mr. McLain resigned as President, Chairman and Director of Nabi, effective immediately. At a regular meeting of the board of directors held on February 15, 2007, the board unanimously elected Leslie Hudson, Ph.D. as the interim President and Chief Executive Officer of Nabi and Geoffrey F. Cox, Ph.D. as non-executive Chairman of the board of directors.

 

On March 7, 2007, the SAC held a meeting attended by members of Nabi management, during which Dr. Hudson presented his plan for restructuring Nabi into two business units, Nabi Biologics (BSBU) and Nabi Pharmaceuticals. The SAC approved Dr. Hudson’s plan for presentation to the board of directors.

 

On March 8, 2007, the board of directors held a special meeting attended by members of Nabi management and Nabi’s legal advisors. During this meeting, Dr. Hudson outlined a 2007 strategic plan that would organize Nabi into two business units, the BSBU and Nabi Pharmaceuticals. The board approved Dr. Hudson’s strategic plan of dividing Nabi into these two business units. In connection with his appointment as Nabi’s Chief Executive Officer, Dr. Hudson was no longer eligible to serve on the SAC and was replaced on the SAC by David L. Castaldi.

 

Following the decision to divide Nabi into separate business units, Nabi’s management and board of directors developed a set of financial projections for the BSBU as a stand-alone business. The board and the SAC refocused the strategic alternatives process on the possible sale of the BSBU as a separate business. Management believed that the creation of the two strategic business units would allow potential buyers to more clearly understand the possible transaction opportunities and values.

 

In April 2007, in light of the planned formation of the BSBU and in accordance with the board’s directives, thirteen potential acquirors were contacted by Nabi’s financial advisor. A second round of non-binding proposals from such potential acquirors was requested to be submitted by May 1, 2007. Five of the thirteen potential bidders contacted had previously submitted proposals prior to the end of 2006. In making these solicitations, the potential acquirors were informed that they could submit their preliminary bid only for specific assets, but that Nabi preferred, and would pursue first, transactions for all of the BSBU or the Company as a whole.

 

17


Table of Contents

On April 19, 2007, Nabi announced that it had executed a definitive agreement to sell its Aloprim® (allopurinol sodium) for Injection product to Bioniche Teoranta for $3.7 million in proceeds. This transaction was a result of business development activities initiated by Nabi management.

 

In response to the request for a second round of non-binding proposals, we received two non-binding proposals for Nabi-HB only, with a maximum bid price of $125 million to $150 million. Nabi did not pursue these two bids because they did not involve the entire BSBU. Non-binding proposals for the entire BSBU or most of the products of the BSBU were submitted by four interested parties, Company A, Company B, Company C, and Biotest. Of these bids, Company C’s was rejected as it was significantly lower than the bids of Company A, Company B, and Biotest.

 

Company A, Company B, and Biotest conducted diligence on the BSBU. During this process, Company A expressed an interest in acquiring Nabi as a whole. Following discussions with Nabi, however, Company A elected not to pursue a possible transaction and withdrew from the process.

 

Upon their completion of the diligence process, Company B and Biotest were requested to submit a third round bid by July 6, 2007. Biotest submitted a bid to purchase the BSBU. Company B did not submit a third round bid.

 

On August 10, 2007, following approval of the board of directors, Nabi entered into an exclusivity agreement with Biotest, under which Nabi agreed that it would negotiate exclusively with Biotest for a period of up to 45 days for the acquisition of the BSBU.

 

Biotest continued its due diligence investigation and commenced active negotiations with Nabi of the asset purchase agreement.

 

Over the next several weeks, the parties exchanged revised drafts of the asset purchase agreement and of the schedules accompanying the asset purchase agreement. Biotest personnel met with Nabi personnel in Boca Raton, Florida and in Rockville, Maryland, on August 21-22, 2007 to continue due diligence and to discuss technical issues. Biotest and Nabi personnel and their counsel met in Washington, D.C. on August 22-23, 2007 to discuss and resolve asset purchase agreement issues. After these meetings the parties exchanged further revised drafts of the asset purchase agreement and accompanying schedules.

 

On September 7, 2007, the SAC met with members of Nabi management and Nabi’s legal and financial advisors and reviewed the proposed transaction and the asset purchase agreement that had been negotiated. The SAC unanimously recommended that the board of directors of Nabi approve the proposed transaction and asset purchase agreement.

 

On September 9, 2007, Nabi’s board of directors met and further reviewed the proposed transaction. Members of Nabi management and Nabi’s legal and financial advisors attended the meeting. Nabi’s legal advisors reviewed with the board the asset purchase agreement that had been negotiated. Also at this meeting, Banc of America Securities reviewed with Nabi’s board of directors its financial analysis of the purchase price to be received by Nabi and delivered to Nabi’s board of directors an oral opinion, which was confirmed by delivery of a written opinion dated September 9, 2007, to the effect that, as of that date and based on and subject to various assumptions and limitations described in its opinion, the purchase price to be received by Nabi in the asset sale was fair, from a financial point of view, to Nabi. After discussion, the board of directors unanimously approved the proposed transaction and the asset purchase agreement.

 

On September 11, 2007, Nabi, Biotest Pharmaceuticals and Biotest executed an asset purchase agreement for the sale of the BSBU and CSS assets.

 

18


Table of Contents

Reasons for the Asset Sale

 

In evaluating the asset sale, our board of directors considered the recommendations of its SAC, consulted with our management and legal and financial advisors, reviewed information regarding the Company’s business, operations and strategic plan and considered a number of factors with respect to the proposed sale of assets. The material factors considered by management and the board of directors were:

 

   

the value and the consideration to be received by the Company pursuant to the asset purchase agreement, including the fact that the consideration for the transaction would consist entirely of cash;

 

   

historical, current and projected information concerning the BSBU and its financial performance and condition, operations, technology, management and competitive position, and current industry, economic and market conditions, based on various scenarios, including our continued operation of the BSBU, the shut down of certain operations or the sale of other business assets;

 

   

the benefit of receiving a relatively certain value for the BSBU upon closing of the asset sale versus the risks inherent in the continued operation of the BSBU, including the cyclical nature of the plasma products business and the relatively long time frame until the BSBU would likely become profitable;

 

   

our liquidity requirements to fund operating losses and product development costs and to satisfy our existing liabilities;

 

   

the competitive threats to sales of Nabi-HB from another product that recently received approval from the FDA;

 

   

the length and breadth of the strategic alternatives review process undertaken by Nabi which included the retention of legal and financial advisors; the review and management of the strategic alternatives process by the SAC and a private and then public solicitation and bid process designed to seek bids for the entire company or particular business, which ultimately resulted in Biotest’s offer to acquire the BSBU and CSS assets;

 

   

the recommendation of the SAC to approve the asset purchase agreement;

 

   

the fact that at the end of the process the only remaining offer for the BSBU was the Biotest offer reflected in the asset purchase agreement;

 

   

the prospects of the remaining assets and product candidates of Nabi to create value for us and our stockholders;

 

   

the opinion of Banc of America Securities, dated September 9, 2007, to Nabi’s board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to Nabi of the purchase price to be received by Nabi in the asset sale, as more fully described below in the section entitled “— Opinion of Our Financial Advisor;”

 

   

the availability of our existing net operating losses to increase the potential after-tax value of the consideration to be received by Nabi in the asset sale;

 

   

the potential impact of the asset sale on our reputation, customers, strategic partners and employees;

 

   

the fact that the asset purchase agreement affords our board of directors flexibility to consider, evaluate and accept superior proposals in the period after signing and prior to the consummation of the asset purchase agreement as follows:

 

   

subject to compliance with the asset purchase agreement, we can participate in discussions or negotiations with, and provide information to, any person in response to an unsolicited bona fide inquiry or acquisition proposal by any such person, if our board of directors in good faith (after consultation with our outside financial advisor and outside counsel) determines that there is a reasonable likelihood that such inquiry or proposal could lead to a superior transaction, as defined in the asset purchase agreement;

 

19


Table of Contents
   

subject to compliance with the asset purchase agreement, our board of directors is permitted to change its recommendation to stockholders with respect to the asset sale or enter into an alternative transaction that is a superior transaction, conditioned upon the payment to Biotest Pharmaceuticals of a $8.5 million termination fee; and

 

   

our efforts, with the assistance of our legal advisors, to extensively negotiate and execute an asset purchase agreement that we believe is favorable to us.

 

In the course of its deliberations, the board of directors and management also considered a variety of risks and other countervailing factors concerning the asset purchase agreement and asset sale. The material factors considered by the board of directors were:

 

   

the risk that the asset sale might not be completed in a timely manner or at all;

 

   

the restrictions on the conduct of our business prior to completion of the asset sale, requiring us to conduct our business only in the ordinary course, subject to specific limitations or Biotest’s consent, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the asset sale;

 

   

the risk of the continued viability of Nabi’s remaining businesses after the asset sale;

 

   

the restrictions on our board of directors’ ability to solicit or engage in discussions or negotiations with a third party regarding alternative transactions involving the BSBU or the Company as a whole, and the requirement that we pay Biotest Pharmaceuticals a $8.5 million termination fee in certain cases in the event of a termination of the asset purchase agreement;

 

   

the risk that the inventory adjustments required under the asset purchase agreement could be substantial, thus reducing the up-front cash consideration;

 

   

the risk of diverting management focus and resources from other strategic opportunities and from operational matters while working to implement the asset sale; and

 

   

the possibility of management and employee disruption associated with the asset sale.

 

After consideration of these risks and countervailing factors, our board determined that these risks could be mitigated or managed by Nabi, were reasonably acceptable under the circumstances, and that, overall, these risks were significantly outweighed by the potential benefits of the asset sale.

 

Although this discussion of the information and factors considered by our board is believed to include the material factors considered by our board, it is not intended to be exhaustive and may not include all of the factors considered by our board. In reaching its determination to approve and recommend the asset sale, our board did not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the transaction is expedient and in the best interests of Nabi. Rather, our board based its position and recommendation on the totality of the information presented to and factors considered by it. In addition, individual members of our board may have given differing weights to different factors.

 

Recommendation of Our Board of Directors

 

After careful consideration, our board of directors unanimously determined that the asset sale is expedient and in the best interests of Nabi and that the asset purchase agreement and the asset sale are advisable. Accordingly, our board of directors approved the asset purchase agreement and recommended that our stockholders approve the asset sale.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE ASSET SALE.

 

20


Table of Contents

Required Vote

 

Approval of the asset sale requires the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote at the special meeting. Each holder of a share of our common stock is entitled to one vote per share. Since the approval of the asset sale requires the approval of a majority of our shares outstanding, abstentions, broker “non-votes” and the failure to vote will have the same effect as votes against the proposal.

 

Opinion of Our Financial Advisor

 

Nabi has retained Banc of America Securities to act as Nabi’s financial advisor. Banc of America Securities is an internationally recognized investment banking firm which is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Nabi selected Banc of America Securities as Nabi’s financial advisor on the basis of Banc of America Securities’ experience in transactions similar to the transaction, its reputation in the investment community and its familiarity with Nabi’s business.

 

On September 9, 2007, at a meeting of Nabi’s board of directors held to evaluate the transaction, Banc of America Securities delivered to Nabi’s board of directors an oral opinion, which was confirmed by delivery of a written opinion, dated September 9, 2007, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its opinion, the purchase price to be received by Nabi in the asset sale was fair, from a financial point of view, to Nabi.

 

The full text of Banc of America Securities’ written opinion to Nabi’s board of directors, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this proxy statement and is incorporated by reference in its entirety into this proxy statement. Holders of Nabi common stock are encouraged to read the opinion carefully in its entirety. The following summary of Banc of America Securities’ opinion is qualified in its entirety by reference to the full text of the opinion. Banc of America Securities provided its opinion to Nabi’s board of directors for the benefit and use of Nabi’s board of directors in connection with and for purposes of its evaluation of the purchase price to be received by Nabi from a financial point of view. Banc of America Securities’ opinion does not address any other aspect of the transaction and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed transaction.

 

In connection with rendering its opinion, Banc of America Securities:

 

   

reviewed certain publicly available financial statements and other business and financial information relating to the BSBU;

 

   

reviewed certain internal financial statements and other financial and operating data concerning the BSBU;

 

   

reviewed certain financial forecasts relating to the BSBU prepared by Nabi’s management;

 

   

reviewed and discussed with Nabi’s management their assessments as to the BSBU’s products and product candidates, including, without limitation, the probability of successful testing and development, and approval by appropriate governmental authorities, of such products and product candidates;

 

   

discussed the BSBU’s past and current operations, financial condition and prospects with senior executives of Nabi;

 

   

compared the financial performance of the BSBU with that of certain publicly traded companies that Banc of America Securities deemed relevant;

 

   

compared certain financial terms of the transaction to financial terms, to the extent publicly available, of certain other acquisition transactions that Banc of America Securities deemed relevant;

 

21


Table of Contents
   

participated in discussions and negotiations among representatives of Nabi, Biotest and their respective advisors;

 

   

reviewed a draft, dated September 9, 2007, of the asset purchase agreement, referred to as the draft asset purchase agreement;

 

   

considered the fact that Nabi had publicly announced that it would explore strategic alternatives and the results of Banc of America Securities’ efforts to solicit, at Nabi’s direction, indications of interest and proposals from third parties with respect to a possible acquisition of the BSBU; and

 

   

performed such other analyses and considered such other factors as Banc of America Securities deemed appropriate.

 

In arriving at its opinion, Banc of America Securities assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information reviewed by it. With respect to the BSBU’s financial forecasts, Banc of America Securities assumed, at Nabi’s direction, that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of Nabi’s management as to the BSBU’s future financial performance. Banc of America Securities also assumed, at Nabi’s direction, that the portion of the purchase price which under the terms of the agreement will be held in escrow will be fully payable to Nabi. Banc of America Securities relied, at Nabi’s direction, on the assessments of Nabi’s management as to the BSBU’s products and product candidates, including, without limitation, the probability of successful testing and development, and approval by appropriate governmental authorities, of such products and product candidates. Banc of America Securities did not make any independent valuation or appraisal of the assets or liabilities (contingent or otherwise) of the BSBU, nor was Banc of America Securities furnished with any such valuations or appraisals. Banc of America Securities assumed, at Nabi’s direction, that the final executed agreement would not differ in any material respect from the draft agreement reviewed by Banc of America Securities and further assumed, with Nabi’s consent, that the transaction would be consummated as provided in the draft agreement, with full satisfaction of all covenants and conditions set forth in the draft agreement and without any waivers. In addition, Banc of America Securities assumed, with Nabi’s consent, that all third party consents, approvals and agreements necessary for the consummation of the transaction would be obtained without any adverse effect on the BSBU or the transaction.

 

Banc of America Securities expressed no view or opinion as to any terms or aspects of the transaction, other than the purchase price to the extent expressly specified in its opinion, including, without limitation, the form or structure of the transaction, any adjustments to the purchase price, the allocation of the purchase price among the assets being sold or any aspect or implication of any other agreement, arrangement or understanding entered into in connection with the transaction or otherwise, including, without limitation, certain rights which will be granted to Biotest Pharmaceuticals by Nabi with respect to Nabi’s StaphVAX product as more fully described in the asset purchase agreement. In addition, no view or opinion was expressed as to the relative merits of the transaction in comparison to other transactions available for the assets or in which Nabi might engage or as to whether any transaction might be more favorable to Nabi as an alternative to the transaction, nor did Banc of America Securities express any opinion as to the underlying business decision of Nabi’s board of directors to proceed with or effect the transaction. Except as described above, Nabi imposed no other limitations on the investigations made or procedures followed by Banc of America Securities in rendering its opinion.

 

Banc of America Securities’ opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to Banc of America Securities as of, the date of its opinion. Accordingly, although subsequent developments may affect its opinion, Banc of America Securities did not assume any obligation to update, revise or reaffirm its opinion.

 

The following represents a brief summary of the material financial analyses presented by Banc of America Securities to Nabi’s board of directors in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by Banc of America Securities, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by Banc of

 

22


Table of Contents

America Securities. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by Banc of America Securities. In addition, neither the fact that any specific analysis has been referred to, nor the order in which the analysis is described, in the summary below is meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

 

Selected Publicly Traded Companies Analysis.

 

Banc of America Securities reviewed publicly available financial and stock market information for the BSBU and the following five companies in the plasma industry:

 

   

Biotest

 

   

Cangene Corporation

 

   

Crucell NV

 

   

CSL Limited

 

   

Grifols, S.A.

 

Banc of America Securities reviewed, among other things, market values of the selected publicly traded companies, calculated based on closing stock prices on September 6, 2007, as a multiple of calendar year 2007 estimated net income. Banc of America Securities then applied a range of selected multiples of calendar year 2007 estimated net income derived from the selected publicly traded companies to the BSBU’s calendar years 2012 and 2013 estimated net income (discounted to present value using a discount rate of 14.0%, the midpoint of the discount rate range derived in the “—Discounted Cash Flow Analysis” described below). Estimated financial data of the selected publicly traded companies were based on publicly available research analysts’ estimates, public filings and other publicly available information. Estimated financial data of the BSBU were based on internal estimates of Nabi’s management. This analysis indicated the following implied enterprise value reference ranges for the BSBU, as compared to the purchase price:

 

Implied Enterprise Value Reference Ranges for the BSBU


  

Purchase Price


2012E Net Income


  

2013E Net Income


    

$180.0 million - $230.0 million

   $250.0 million - $320.0 million    $185.0 million

 

No company used in this analysis is identical or directly comparable to the BSBU. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which the BSBU was compared.

 

Selected Precedent Transactions Analysis.

 

Banc of America Securities reviewed, to the extent publicly available, financial information relating to the following eight selected transactions involving companies in the plasma industry:

 

Announcement Date

   Acquiror

   Target

•     9/12/2005

  

•     Morgan Stanley, Och-Ziff Capital Management Group LLC and Amaranth Advisors LLC

  

•     Grifols, S.A.

•     12/13/2004

  

•     Cerberus Capital Management, L.P. and Ampersand Ventures

  

•     Bayer AG (Plasma Products business)

•     12/8/2003

  

•     CSL Limited

  

•     Aventis SA (Aventis Behring business)

•     7/8/2003

  

•     Probitas Pharma S.A.

  

•     Alpha Therapeutic Corporation (specified assets)

•     7/1/2002

  

•     Octapharma AG

  

•     Biovitrum AB (Plasma Products division)

•     4/15/2000

  

•     Morgan Grenfell Private Equity

  

•     Grifols, S.A. (34.5% interest)

•     2/1/1997

  

•     Yoshitomi Pharmaceutical Industries Ltd.

  

•     Green Cross International, Inc.

•     8/1/1996

  

•     Baxter International Inc.

  

•     Immuno International AG

 

23


Table of Contents

Banc of America Securities reviewed, among other things, transaction values, calculated as the equity value implied for the target company based on the consideration payable in the selected transaction, plus debt and minority interests, less cash, as multiples of latest 12 months sales and earnings before interest, taxes, depreciation and amortization, referred to as EBITDA. Banc of America Securities then applied a range of selected multiples of latest 12 months sales and EBITDA derived from the selected transactions to the BSBU’s calendar year 2007 estimated sales and calendar year 2012 estimated EBITDA (discounted to present value using a discount rate of 14.0%), respectively. Financial data of the selected transactions were based on publicly available research analysts’ estimates, public filings and other publicly available information. Financial data of the BSBU were based on internal estimates of Nabi’s management. This analysis indicated the following implied enterprise value reference ranges for the BSBU, as compared to the purchase price:

 

Implied Enterprise Value Reference Ranges for the BSBU


  

Purchase Price


2007E Sales


  

2012E EBITDA


    

$85.0 million - $170.0 million

   $155.0 million - $190.0 million    $185.0 million

 

No company, business or transaction used in this analysis is identical or directly comparable to the BSBU or the transaction. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition or other values of the companies, business segments or transactions to which the BSBU and the transaction were compared.

 

Discounted Cash Flow Analysis.

 

Banc of America Securities performed a discounted cash flow analysis of the BSBU to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that the BSBU could generate during fiscal years 2007 through 2016 based on internal estimates of Nabi’s management. Banc of America Securities calculated terminal values for the BSBU by applying a perpetuity growth rate range of 4.0% to 6.0% to the BSBU’s calendar year 2017 estimated cash flow. The cash flows and terminal values were then discounted to present value as of September 30, 2007 using discount rates ranging from 13.0% to 15.0%. This analysis indicated the following implied enterprise value reference range for the BSBU, as compared to the purchase price:

 

Implied Enterprise Value

Reference Range for the BSBU


  

Purchase Price


$125.0 million - $220.0 million

   $185.0 million

 

Miscellaneous.    As noted above, the discussion set forth above is a summary of the material financial analyses presented by Banc of America Securities to Nabi’s board of directors in connection with its opinion and is not a comprehensive description of all analyses undertaken by Banc of America Securities in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. Banc of America Securities believes that its analyses summarized above must be considered as a whole. Banc of America Securities further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Banc of America Securities’ analyses and opinion.

 

In performing its analyses, Banc of America Securities considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of Nabi. The estimates of the future performance of the BSBU provided by Nabi’s management in or underlying Banc of America Securities’

 

24


Table of Contents

analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by Banc of America Securities’ analyses. These analyses were prepared solely as part of Banc of America Securities’ analysis of the fairness, from a financial point of view, to Nabi of the purchase price to be received by Nabi in the asset sale and were provided to Nabi’s board of directors in connection with the delivery of Banc of America Securities’ opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be Banc of America Securities’ view of the actual value of the BSBU.

 

The type and amount of consideration payable in the transaction were determined through negotiations between Nabi and Biotest, rather than by any financial advisor, and were approved by Nabi’s board of directors. The decision to enter into the agreement was solely that of Nabi’s board of directors. As described above, Banc of America Securities’ opinion and analyses were only one of many factors considered by Nabi’s board of directors in its evaluation of the proposed transaction and should not be viewed as determinative of the views of Nabi’s board of directors or management with respect to the transaction or the purchase price.

 

Nabi has agreed to pay Banc of America Securities for its services in connection with the transaction an aggregate fee of approximately $2.0 million, portions of which were payable in connection with Banc of America Securities’ engagement and upon the rendering of Banc of America Securities’ opinion and a significant portion of which is contingent upon the completion of the transaction. Nabi also has agreed to reimburse Banc of America Securities for all reasonable expenses (including any reasonable fees and disbursements of Banc of America Securities’ counsel) incurred in connection with Banc of America Securities’ engagement, and to indemnify Banc of America Securities, any controlling person of Banc of America Securities and each of their respective directors, officers, employees, agents, affiliates and representatives against specified liabilities, including liabilities under the federal securities laws.

 

Banc of America Securities and certain of its affiliates have in the past provided and in the future may provide financial advisory and financing services to Nabi, and have received and in the future may receive fees for the rendering of these services. In the ordinary course of its business, Banc of America Securities or its affiliates may actively trade or hold securities or loans of Nabi and Biotest for its own accounts or for the accounts of customers and, accordingly, Banc of America Securities or its affiliates may at any time hold long or short positions in such securities or loans.

 

Proceeds from the Asset Sale

 

Nabi has not made a decision about the uses of the proceeds from the asset sale. Leading up to and after the anticipated closing of the asset sale, the board intends to review with management working capital needs, anticipated liabilities and potential strategic uses of capital. We may use the proceeds from the asset sale for the following purposes, although there can be no assurances that we will do so:

 

   

Working Capital, Liabilities and Product Development.    The proceeds of the asset sale will be used for general corporate purposes, including satisfying our working capital needs and paying our remaining liabilities as they come due, and potentially for further clinical development of NicVAX and our other ongoing programs as well as our efforts to secure a strategic partner both for NicVAX and StaphVAX. Among our remaining liabilities are our outstanding 2.875% Convertible Senior Notes due 2025 (Convertible Notes). Under the terms of the indenture governing the Convertible Notes, the holders thereof may elect to require us to repurchase the Convertible Notes on April 15, 2010 and on other dates specified in the indenture. We are currently evaluating the possible elective repurchase from time to time, depending on market conditions and other factors, of some or all of our Convertible Notes.

 

   

Possible Distribution to Stockholders or Repurchase.    If our board determines that we have cash and cash equivalents in excess of what is needed to fund our liabilities and projected operating needs, it may

 

25


Table of Contents
 

consider a distribution to stockholders of a portion of the net cash proceeds from the asset sale, either by a special dividend, a self-tender, through a stock repurchase or any combination of the foregoing. Our board has not conducted the analyses necessary to determine if such a distribution will be made and, if made, the amount and timing of any such distribution or its form. Accordingly, we cannot assure you that the Company will distribute any of the net cash proceeds from the asset sale to our stockholders in the event the asset sale is consummated. Consequently, we advise our stockholders that they should not vote in favor of the asset sale based upon the assumption that they will receive a distribution out of the net cash proceeds of the asset sale.

 

Other than the possible operational needs and remaining liabilities which are discussed below under the heading, “— Effects of the Asset Sale,” we cannot accurately determine other liabilities and obligations that may remain for us if and when we consummate the asset sale. While our board of directors and management have had preliminary discussions regarding our operational needs and remaining liabilities following the asset sale, the discussions are still preliminary in nature and could change. We also do not have definitive figures for our possible operational or product development needs over the next twelve months or our remaining liabilities, as they depend on a number of currently unknown factors, such as the size and expense structure of Nabi following the asset sale, potential liabilities under the asset purchase agreement, and the cost of the continued clinical development of NicVAX, StaphVAX, and our other retained products. Accordingly, our plans for use of the proceeds from the asset sale could change.

 

Effects of the Asset Sale

 

If the asset sale is approved and the transaction is consummated, we will operate our pharmaceuticals strategic business unit from our existing Rockville, Maryland facility, which will become our new corporate headquarters. We will continue ongoing discussions and efforts to secure a strategic partner or partners for our NicVAX and StaphVAX programs and continue our clinical development programs for these products. We also retain the right to receive up to an additional $75 million in milestone and royalty payments related to the divestiture of PhosLo in 2006. In addition, we will consider alternatives which may include, without limitation, the repurchase of some of our common stock or some or all of our Convertible Notes, the acquisition of new business(es) or assets or alternatively, the sale of the Company, the sale and/or licensing of additional assets, restructuring, the distribution of assets to our stockholders or the possible dissolution of the Company and liquidation of our assets, the discharge of any remaining liabilities, and the eventual distribution of the remaining assets to our stockholders in the event we are liquidated.

 

Most of our remaining products, including NicVAX and StaphVAX, will require extensive additional development, including preclinical testing and human studies for StaphVAX, and additional human testing for NicVAX, as well as regulatory approvals, before we can market them. We cannot predict if or when any of the products we are developing or those being developed with our partners will be approved for marketing. Any product development failures for these or other reasons, whether with our products or our partners’ products, may reduce our expected revenues, profits, and stock price.

 

The BSBU assets generated substantially all of our revenues and operating income in the first two quarters of fiscal 2007. Following the asset sale, our immediate ability to produce revenues and income will therefore be substantially reduced. As such, the proceeds from the asset sale, along with other capital that we have access to, may not be adequate to bring our remaining products to market.

 

In addition, under the asset purchase agreement, we have agreed to indemnify Biotest and Biotest Pharmaceuticals for a number of specified matters including the breach of our representations, warranties and covenants contained in the asset purchase agreement and liabilities that we retain under the asset purchase agreement. That indemnification obligation could cause us to be liable to Biotest or Biotest Pharmaceuticals under certain circumstances, which would decrease the remaining cash available for our use in connection with any future corporate purposes.

 

26


Table of Contents

Finally, we will continue to have an obligation to comply with the applicable reporting requirements of the Securities Exchange Act of 1934, as amended, even though compliance with such reporting requirements is economically burdensome.

 

Purpose of the Asset Sale

 

The purpose of the asset sale is to enable us to immediately realize the value of the BSBU and CSS assets. In this respect, our board of directors believes that the asset sale is more favorable to our stockholders than any other alternative reasonably available because of the uncertain returns to such stockholders in light of our business, operations, financial condition, strategy and prospects, as well as the risks involved in achieving those prospects, and general industry, economic and market conditions, both on a historical and on a prospective basis.

 

For these reasons, and the other reasons discussed under “— Reasons for the Asset Sale” beginning on page 19, the board of directors has determined that the asset purchase agreement, the asset sale and related transactions are expedient and in the best interests of Nabi.

 

Other Agreements and Transactions Related to the Asset Sale

 

The asset purchase agreement provides that the parties will negotiate in good faith and at the closing of the asset sale enter into a transition services agreement, a contract manufacturing agreement, a right of negotiation and first refusal agreement and a trademark license agreement. Certain terms of these agreements were set forth in term sheets that were agreed to by the parties in conjunction with the asset purchase agreement.

 

Pursuant to the transition services agreement, the parties agree to provide transition services to each other for a period of up to six months after closing for a price equal to 150% of direct salary costs plus out-of-pocket costs.

 

Pursuant to the contract manufacturing agreement, Biotest Pharmaceuticals will provide specified manufacturing services related to NicVAX and StaphVAX until December 31, 2009. We will pay Biotest Pharmaceuticals for the manufactured products at cost calculated in substantially the same manner as calculated by us prior to closing. Biotest Pharmaceuticals will allocate, on average, 50% of its vaccine manufacturing capacity at the Boca Raton, Florida facility.

 

Pursuant to the right of first negotiation and first refusal agreement we will grant a right of first negotiation and a right of first refusal to obtain rights to utilize StaphVAX and to license the StaphVAX intellectual property, or the StaphVAX Rights, that are necessary to enable Biotest Pharmaceuticals to use StaphVAX solely for purposes relating to Altastaph® [Staphylococcus aureus Immune Globulin Intravenous (Human)] or an Altastaph-type product. If the terms of the right of first refusal are exercised, for a period of three months following closing, Nabi will enter into exclusive, good faith negotiations with Biotest Pharmaceuticals regarding terms of an agreement relating to the StaphVAX Rights discussed above. If after three months, Nabi and Biotest Pharmaceuticals are unable to come to an agreement, Biotest Pharmaceuticals will obtain a right of first refusal regarding the StaphVAX Rights. If Nabi receives an offer from a third party relating to the StaphVAX Rights, it would offer Biotest Pharmaceuticals a right to match such an offer. If Biotest Pharmaceuticals does not match the offer within thirty days of notification, Nabi will be free to enter into an agreement with the third party with respect to the StaphVAX Rights or to exploit the rights on its own.

 

Pursuant to the trademark license agreement, we will license the “Nabi-HB” marks to Biotest Pharmaceuticals on a worldwide, perpetual, royalty-free basis solely for its use in the promotion, distribution and sale of Nabi-HB.

 

27


Table of Contents

Interests of Our Executive Officers and Directors in the Asset Sale

 

When you consider our board of directors’ recommendation that stockholders vote in favor of the asset sale, you should be aware that certain Nabi executive officers have interests that may be different from or in addition to those of Nabi’s stockholders. The interests of Nabi’s executive officers and directors in the asset sale are summarized below.

 

Equity-Based and Incentive Bonus Plan Awards.    On September 20, 2007, our board of directors approved certain compensation-related actions in connection with the asset sale. The compensation-related actions apply to all employees of the BSBU and the Boca Raton-based corporate shared services group employees who remain employed with us through the closing of the asset sale and (i) who are offered employment with Biotest, accept the employment offer and resign as a Nabi employee, or (ii) who do not become employed by Biotest and are terminated by us without cause in connection with the asset sale. We refer herein to such employees as the affected employees.

 

For all affected employees the board approved:

 

   

the acceleration of vesting of all unvested stock options held by affected employees on the closing of the asset sale and the amendment to all outstanding options held by them to extend the post-termination of employment exercise period from 90 days to six months;

 

   

the acceleration of vesting of all unvested restricted stock held by affected employees that would have vested in 2008 or 2009;

 

   

the payment of a portion of the 2007 VIP Incentive Bonus Plan bonus that is otherwise determined to be due under the terms of the plan pro rated based on the portion of 2007 that each affected employee who participates in the plan was employed by us; and

 

   

the continued participation by those affected employees who participate in the Employee Stock Purchase Plan, or ESPP, through the current period ending November 30, 2007, notwithstanding the fact that their employment with us may terminate before such date, and an amendment to the ESPP to permit such continued participation.

 

On September 20, 2007, the board also determined that the asset sale is not a sale of all or substantially all of the assets of Nabi for purposes of the ESPP. Therefore, the ESPP will not terminate upon the anticipated consummation of the asset sale which would have occurred under the terms of the ESPP if the asset sale was the sale of all or substantially all the assets of Nabi for purposes of the ESPP.

 

The affected employees include executive officers Raafat E.F. Fahim, Ph.D., our Chief Operating Officer and General Manager of the BSBU and Senior Vice President, Research, Technical and Production Operations, and Jordan I. Siegel, our Senior Vice President, Finance and Administration, Chief Financial Officer and Treasurer, but not Leslie Hudson, Ph.D., our Interim President and Chief Executive Officer.

 

Change in Control and Employment Agreements.    The entry into the asset purchase agreement and consummation of the asset sale does not trigger any payments under the change in control agreements we have with our executives. Similarly, the entry into the asset purchase agreement and consummation of the asset sale does not trigger any payments under the employment agreements we have with our executive officers unless such executive officer’s employment is terminated by us without cause as such term is defined in the agreement.

 

Interests of Directors.    On September 20, 2007, our board determined that for purposes of all outstanding options held by directors under our 2007 Omnibus Equity and Incentive Plan, 2004 Stock Plan for Non-Employee Directors and Stock Plan for Non-Employee Directors, the asset sale will not constitute a sale of all or substantially all of our assets. Therefore, the vesting of options held by directors will not accelerate as a result of the asset sale, and the options held by directors will not terminate as a result of the asset sale but rather will continue to be exercisable in accordance with their terms.

 

28


Table of Contents

Dissenters’ Rights

 

Holders of our common stock will not have appraisal or dissenters’ rights in connection with the asset sale. Neither the Delaware General Corporation Law nor our certificate of incorporation provides our stockholders with appraisal or dissenters’ rights in connection with the asset sale. Our shares of common stock will remain publicly traded on the NASDAQ Global Market following the consummation of the asset sale.

 

Accounting Treatment of the Asset Sale

 

Under U.S. generally accepted accounting principles, or GAAP, we expect to reflect the results of operations of the assets sold as discontinued operations, commencing with the third quarter of 2007. The related gain on the sale, net any applicable taxes, will be recorded when the asset sale closes.

 

Financing

 

The asset sale is not conditioned upon Biotest obtaining financing. Biotest expects to fund the transaction from its working capital and from a credit facility with Commerzbank.

 

Material U.S. Federal and State Income Tax Consequences

 

The asset sale will not result in any U.S. federal income tax consequences to our stockholders. The transaction will be a taxable event to Nabi for U.S. federal income tax purposes, but Nabi expects, subject to the completion and outcome of certain tax analysis and studies currently in process, that a substantial portion of the taxable gain resulting from the asset sale will be offset by net operating losses. These analyses include studies to assess the potential impact of ownership changes on the Company’s net operating losses under Internal Revenue Code Section 382 and to evaluate and support the availability of research and credit development credits. At a minimum, however, the asset sale is expected to result in some federal alternative minimum tax being imposed on Nabi in the year of the sale and may, depending upon several factors, result in the imposition of federal income taxes in subsequent years that may or may not be offset by available tax credits. The asset sale also may result in Nabi being subject to state or local sales, use or other taxes in jurisdictions in which Nabi files tax returns or has assets.

 

Regulatory Matters

 

The asset sale is subject to the HSR Act, which provides that certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice, which we refer to as the DOJ, and the Federal Trade Commission, which we refer to as the FTC, and certain waiting period requirements have been satisfied. On                     , 2007, each of Nabi and Biotest submitted its initial notification under the HSR Act in connection with the asset sale to the DOJ and FTC.

 

Asset Purchase Agreement

 

The following is a summary of the material terms of the asset purchase agreement. This summary does not purport to describe all the terms of the asset purchase agreement and is qualified in its entirety by reference to the complete asset purchase agreement, which is attached as Annex A to this proxy statement. We urge you to read the asset purchase agreement carefully and in its entirety because it, and not this proxy statement, is the legal document that governs the asset sale.

 

The text of the asset purchase agreement has been included to provide you with information regarding its terms. The terms of the asset purchase agreement (such as the representations and warranties) are intended to govern the contractual rights and relationships, and allocate risks, between the parties in relation to the asset sale. The asset purchase agreement contains representations and warranties that Nabi, on the one hand, and Biotest and

 

29


Table of Contents

Biotest Pharmaceuticals on the other hand, made to each other as of specific dates. The representations and warranties were negotiated between the parties with the principal purpose of setting forth their respective rights with respect to their obligations to consummate the asset sale and may be subject to important limitations and qualifications as set forth therein, including a contractual standard of materiality different from that generally applicable under federal securities laws.

 

In addition, such representations and warranties are qualified by information in confidential disclosure schedules that Nabi and Biotest have exchanged in connection with signing the asset purchase agreement. While Nabi does not believe that the disclosure schedules contain information that the securities laws require to be publicly disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached asset purchase agreement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since they are modified by the underlying disclosure schedules. These disclosure schedules contain information that has been included in our prior public disclosures, as well as potential additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the asset purchase agreement, which subsequent information may or may not be fully reflected in our public disclosures.

 

General

 

Under the terms of the asset purchase agreement, Biotest Pharmaceuticals has agreed to purchase (i) all of our assets relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of biologics products that comprise our BSBU, including our nine FDA-certified plasma collection centers, and certain of our corporate shared services assets, including our headquarters and other Boca Raton, Florida facilities, and (ii) generally assume post-closing liabilities related to the purchased assets as set forth in the asset purchase agreement. Biotest guarantees Biotest Pharmaceuticals’ obligations under the asset purchase agreement.

 

Pursuant to the terms of the asset purchase agreement, Biotest Pharmaceuticals will make a $185 million cash payment to Nabi, $10 million of which will be funded into an escrow account to support any indemnification claims made by Biotest Pharmaceuticals or Biotest. At closing, the price will also be adjusted to account for prepaid fees and prepaid expenses necessary to the operation of the BSBU.

 

Additionally, we have committed to delivering to Biotest, at closing, minimum amounts of inventory of Nabi-HB in work-in-process form, Nabi-HB which has been formulated, filled and packaged, specialty plasma and normal plasma. If we fail to provide Biotest Pharmaceuticals with the minimum amount of inventory in any of these categories, then we shall pay Biotest Pharmaceuticals the book value of the shortfall calculated in accordance with GAAP.

 

The performance of Biotest Pharmaceuticals’ obligations is guaranteed by Biotest.

 

Closing

 

Closing of the asset sale under the asset purchase agreement will occur no later than the third business day following the satisfaction or waiver of all conditions to the obligations of the parties to consummate the transactions contemplated thereby, including the approval of the asset sale by a majority of our common stock outstanding on the record date.

 

Representations and Warranties

 

The asset purchase agreement contains a number of customary representations and warranties applicable to Nabi, subject in some cases to customary qualifications, relating to, among other things, the following:

 

   

due organization, valid existence, good standing, foreign qualification and other corporate matters of Nabi;

 

30


Table of Contents
   

authorization, execution, delivery and enforceability of the asset purchase agreement and ancillary agreements;

 

   

conflicts or violations under charter documents, contracts or laws;

 

   

title to, or interest in, encumbrances upon and the sufficiency of the properties and assets that are used to conduct our BSBU business;

 

   

intellectual property matters;

 

   

pending or threatened litigation;

 

   

required government and third-party consents and approvals;

 

   

taxes;

 

   

real and personal property relating to the BSBU;

 

   

environmental, safety and health matters;

 

   

employee benefits plans;

 

   

material compliance with all applicable laws;

 

   

regulatory matters, government contracts and regulatory correspondence;

 

   

material contracts;

 

   

financial statements;

 

   

accounts receivable;

 

   

absence of certain changes;

 

   

brokerage or finders’ fees, and other fees with respect to the asset sale;

 

   

insurance;

 

   

compensation and status of employees;

 

   

customers and suppliers;

 

   

FDA approvals required for operation of our manufacturing facility in Boca Raton, Florida;

 

   

product regulatory status; and

 

   

return policy.

 

The asset purchase agreement also contains a number of customary representations and warranties applicable to Biotest and Biotest Pharmaceuticals, subject in some cases to customary qualifications, relating to, among other things, the following:

 

   

due organization, valid existence and good standing, and other corporate matters of Biotest and Biotest Pharmaceuticals;

 

   

authorization, execution, delivery and enforceability of the asset purchase agreement and ancillary agreements;

 

   

conflicts or violations under charter documents, contracts or laws;

 

   

pending or threatened material litigation;

 

   

required consents and approvals;

 

   

financing;

 

   

government authorizations;

 

31


Table of Contents
   

brokerage or finders’ fees, and other fees with respect to the asset sale; and

 

   

independent investigation.

 

Most of the representations and warranties of each of the parties to the asset purchase agreement shall survive until March 31, 2009. Certain other representations and warranties of the parties shall survive according to the applicable statutes of limitations, and others shall survive indefinitely.

 

Indemnification; Survival of Indemnification Obligations

 

After closing of the asset sale, we have agreed to indemnify and hold Biotest, Biotest Pharmaceuticals and their affiliates and their respective officers, directors, employees, stockholders, agents, and representatives harmless from any loss arising out of (i) any breach of representations and warranties by us, (ii) a failure by us to perform covenants applicable to us under the asset purchase agreement or any ancillary agreement, (iii) any liability returned by us pursuant to the asset purchase agreement, or (iv) fees owed by us to any broker, financial advisor, or others retained by us in connection with the asset sale. In general, we may be required to indemnify Biotest Pharmaceuticals for any indemnifiable losses incurred by them arising out of any breach of representations or warranties by us until March 31, 2009. Our obligation to indemnify Biotest and Biotest Pharmaceuticals for the other categories of indemnifiable losses described above does not expire. We are not obligated to make Biotest Pharmaceuticals whole for any losses arising out of any breach of representations or warranties until Biotest Pharmaceuticals suffers aggregate losses in excess of $1.25 million at which time we would be liable for the full amount of the losses. In addition, our liability for all claims for indemnification brought by Biotest Pharmaceuticals, other than claims arising out of liabilities retained by us, is limited to $46.25 million (25% of $185 million). Also, we have no indemnification obligation for individual claims for which losses are less than $25,000, and we are only obligated to indemnify Biotest Pharmaceuticals for the portion of any claim that exceeds $25,000. Pursuant to the asset purchase agreement, $10 million of the cash payment to be made by Biotest Pharmaceuticals to us at the closing of the asset sale will be funded into an escrow account to support any indemnification claims made by Biotest Pharmaceuticals and inventory shortfall payments. Any funds remaining in the escrow account will be released to Nabi on April 15, 2009.

 

After closing of the asset sale, Biotest Pharmaceuticals has agreed to indemnify and hold us and our affiliates, and our respective officers, directors, employees, stockholders, agents, and representatives harmless from any loss to us arising out of (i) any breach of representations and warranties by Biotest Pharmaceuticals, (ii) any failure by Biotest Pharmaceuticals to perform covenants applicable to them under the asset purchase agreement or ancillary agreements, (iii) any liability assumed by Biotest Pharmaceuticals under the asset purchase agreement, or (iv) fees owed by Biotest Pharmaceuticals to any broker, financial advisor, or others retained by them in connection with the asset sale.

 

Covenants and Agreements

 

Under the asset purchase agreement, we have agreed to abide by certain customary covenants prior to the closing of the asset sale. Among others, these covenants include the following:

 

   

permitting representatives of Biotest Pharmaceuticals to have reasonable access to all premises, personnel, personnel records, other records and contracts of Nabi with respect to the BSBU, including as necessary to complete Phase I Environmental Site Assessments;

 

   

promptly notifying Biotest Pharmaceuticals if any of certain key employees identified on a schedule notifies certain of our executives of their plan to terminate employment;

 

   

operating the BSBU in the ordinary course, preserving in all material respects the BSBU, using commercially reasonable efforts to maintain the BSBU and CSS assets in reasonably good condition and repair in all material respects and preserving materially the goodwill of the BSBU;

 

   

using our commercially reasonable efforts to maintain the inventory at customary operating levels in the ordinary course;

 

32


Table of Contents
   

complying with all material contractual obligations and laws, and paying all taxes and payables as they become due and payable in the ordinary course;

 

   

making all filings, providing notices and using commercially reasonable efforts to obtain consents required to consummate the asset sale;

 

   

preparing and filing this proxy statement, soliciting proxies from our stockholders in favor of the approval of the asset sale and holding the special meeting to which this proxy statement relates;

 

   

negotiating in good faith with respect to ancillary agreements and using commercially reasonable efforts to split or segregate shared use assets;

 

   

during the two weeks after signing of the asset purchase agreement, reviewing certain recently delivered contracts and working with Biotest Pharmaceuticals in good faith and using commercially reasonable efforts to resolve certain adverse issues identified in the review;

 

   

updating asset and disclosure schedules;

 

   

using commercially reasonable efforts to ensure that the inventory at closing meets or exceeds the minimum inventory required to be delivered at closing, subject only to an inventory shortfall payment for insufficient inventory; and

 

   

furnishing Biotest Pharmaceuticals with sample quantities of promotional materials.

 

Biotest Pharmaceuticals is obligated to complete its financing with Commerzbank and fund the $185 million purchase price on the closing date.

 

We have agreed to promptly notify Biotest Pharmaceuticals upon becoming aware of any event arising after the date of the asset purchase agreement that would or would be reasonably likely to result in any of our representations, warranties or conditions to closing becoming incapable of being satisfied or any event which, if not disclosed, would have the effect of making any representation or warranty untrue or incorrect in any material respect and any material failure of ours to perform, comply with or satisfy any covenant, condition or agreement to be performed under the asset purchase agreement. In addition, we have also agreed that until the consummation of the asset sale, we will comply with specific restrictions relating to, among others:

 

   

creating any encumbrance on the purchased assets or selling, leasing, licensing or disposing of any interest in the BSBU or CSS assets other than sales of inventory in the ordinary course;

 

   

entering into any promotional sale, discount or other activity other than in the ordinary course;

 

   

terminating or modifying any of the material contracts to be assigned to Biotest Pharmaceuticals pursuant to the asset purchase agreement;

 

   

materially altering customary practices with respect to collection of accounts receivable or billing practices of the BSBU or the provision of discounts, rebates or allowances;

 

   

making or rescinding any election relating to taxes with respect to the BSBU or CSS assets or making any change in the method of accounting relating thereto, unless required by law or GAAP;

 

   

settling or compromising any material claims relating solely to the purchased assets or assumed liabilities;

 

   

granting or announcing any material increase in salary or cash compensation to any key employee or materially modifying employment agreements with key employees;

 

   

taking or omitting to take any action that would reasonably be anticipated to have a material adverse effect on the BSBU or CSS assets, other than as required by law; or

 

   

agreeing to take any of the actions specified in the previous bullet points, except as contemplated by the asset purchase agreement or ancillary agreements.

 

33


Table of Contents

Regulatory Matters

 

The asset purchase agreement provides that we, Biotest Pharmaceuticals and Biotest will file as soon as practicable after the date of the asset purchase agreement any required filings and applications with governmental authorities in connection with the asset sale, including filings under the HSR Act.

 

No Negotiation

 

The asset purchase agreement provides that Nabi will not, nor will it cause any of its affiliates or representatives to, directly or indirectly, take any action to:

 

   

solicit, initiate or knowingly encourage any inquiries, or the making of any offer or proposal regarding any alternative transaction (as described below);

 

   

enter into, continue or participate in any discussions or negotiations with, or furnish any non-public information to, any third party regarding any alternative transaction; or

 

   

enter into any letter of intent or agreement with respect to any alternative transaction other than in connection with a termination of the asset purchase agreement as described below.

 

An alternative transaction is any direct or indirect acquisition of our voting equity, our merger, recapitalization or similar transaction, our sale or disposition of a substantial portion of our assets or any other transaction that would, in each case, reasonably be expected to interfere with, prevent, materially delay or limit the economic benefit to Biotest Pharmaceuticals of the transactions contemplated by the asset purchase agreement.

 

The prohibition on solicitation does not prevent Nabi or our board of directors from entering into discussions with regard to an unsolicited bona fide inquiry or proposal if (i) the third party making such inquiry or proposal executes a confidentiality agreement, (ii) we have complied with our non-solicitation obligations, (iii) our board determines in good faith, after consultation with our outside financial advisor and outside counsel, that the unsolicited acquisition proposal is reasonably likely to lead to a superior transaction (as described below), and (iv) we provide Biotest Pharmaceuticals with notice and certain information regarding the inquiry or proposal.

 

If Nabi receives an unsolicited bona fide inquiry, proposal or offer that the board determines in good faith (after consultation with Nabi’s outside financial advisor and outside counsel) constitutes or is reasonably likely to lead to a superior transaction, Nabi must allow Biotest Pharmaceuticals fourteen (14) days to propose an amendment to the terms of the asset purchase agreement, after which the board may change its recommendation or, subject to payment of the termination fee described below, terminate the agreement and enter into the superior transaction.

 

A superior transaction is defined in the asset purchase agreement as any alternative transaction that (a) if consummated would result in the acquisition, directly or indirectly, by any entity other than Biotest Pharmaceuticals of at least 50% of the voting securities of Nabi or of the assets of Nabi, (b) is on terms that our board has determined in its good faith judgment (after consultation with our outside financial advisor and outside counsel) are more favorable to us than the asset purchase agreement and (c) which our board has determined in good faith (after consultation with our outside financial advisor and outside counsel) is reasonably capable of being consummated.

 

Conditions to Completion of the Asset Sale

 

The obligations of Nabi and Biotest Pharmaceuticals to complete the asset sale are subject to the satisfaction or waiver of the following conditions:

 

   

no law, preliminary or permanent injunction or other order has been issued by any court or by any government authority enjoining, restraining, prohibiting or making illegal the asset sale;

 

34


Table of Contents
   

any waiting period (and any extension) under the HSR Act (or required by any other governmental authority or regulation) has expired or been terminated;

 

   

a majority of the outstanding shares of our common stock have approved the asset sale; and

 

   

Nabi and Biotest Pharmaceuticals shall have used reasonable efforts to split or segregate the shared use assets.

 

In addition, the obligations of Biotest Pharmaceuticals to complete the asset sale are subject to the satisfaction by Nabi or waiver by Biotest Pharmaceuticals of conditions, including the following:

 

   

Nabi’s representations and warranties shall be true and correct as of the date of the asset purchase agreement and the date of the closing of the asset sale, except that those representations and warranties which address matters only as of a particular date need only be true and correct as of such date, and except that so long as any failure of Nabi’s representations and warranties to be true and correct would not, individually or in the aggregate, be expected to have a material adverse effect, the condition will be deemed satisfied;

 

   

Nabi shall have performed and complied in all material respects with each of the covenants, agreements and obligations Nabi is required to perform under the asset purchase agreement;

 

   

Biotest or Biotest Pharmaceuticals shall have received a certificate from us certifying the accuracy of our representations and warranties and performance of our obligations;

 

   

the absence of any governmental or court order than enjoins, restrains, prohibits, or makes illegal the asset sale, or materially limits Biotest’s ability to acquire, hold or control the BSBU and CSS assets;

 

   

Nabi shall have prepared, executed and filed all returns, questionnaires, applications or other documents regarding any transfer taxes that are required to be filed by Nabi prior to closing;

 

   

the delivery of title documents for the BSBU and CSS assets, including surveys and title policy binders for owned real property; and

 

   

the execution and delivery of specified agreements.

 

In addition, the obligations of Nabi to complete the asset sale are subject to the satisfaction by Biotest and Biotest Pharmaceuticals or waiver by Nabi of conditions, including the following:

 

   

Biotest’s and Biotest Pharmaceuticals’ representations and warranties shall be true and correct as of the date of the asset purchase agreement and the date of the closing of the asset sale, except that those representations and warranties which address matters only as of a particular date need only be true and correct as of such date, and except that so long as any failure of Biotest’s and Biotest Pharmaceuticals’ representations and warranties to be true and correct would not, individually or in the aggregate, be expected to have a material adverse effect on Biotest Pharmaceuticals’ performance of the asset purchase agreement, the condition will be deemed satisfied;

 

   

Biotest and Biotest Pharmaceuticals shall have performed and complied in all material respects with each of the covenants, agreements and obligations Biotest and Biotest Pharmaceuticals are required to perform under the asset purchase agreement; and

 

   

Nabi shall have received a certificate from Biotest and Biotest Pharmaceuticals certifying the accuracy of their representations and warranties and performance of their obligations.

 

Employee Transfer

 

Biotest Pharmaceuticals will offer to employ, on an at-will basis and at compensation levels and with bonus opportunities reasonably comparable to those currently available to such employees, all BSBU employees and certain related legal, finance, accounting, information technology and human resources employees, subject to

 

35


Table of Contents

their resignation from employment with us. For a period of two years following the date of the asset purchase agreement, Biotest Pharmaceuticals agrees that, except for the foregoing offers or as agreed to in writing by us, it will not solicit for employment, offer employment to, or hire as an employee or consultant any individual who is, or was within six months prior to such solicitation, offer, or hiring, a Nabi employee, except for those employees whose work relates to the BSBU or the operation of Nabi’s headquarters in Boca Raton, Florida.

 

Termination

 

The asset purchase agreement may be terminated by mutual consent or by:

 

   

either Biotest Pharmaceuticals or us, if the asset sale has not been completed by March 31, 2008, and, in either case, the failure of the party seeking to terminate to fulfill any obligation under the asset purchase agreement did not materially contribute to the failure to complete the sale by such time;

 

   

by either Biotest Pharmaceuticals or us if a governmental authority has entered any injunction or taken any other final and non-appealable action that has the effect of making the closing of the asset purchase agreement illegal or otherwise preventing the closing so long as the party seeking to terminate has used commercially reasonable efforts to oppose such action; and

 

   

by either Biotest Pharmaceuticals or us if, at the Nabi stockholders meeting, stockholder approval of the asset purchase agreement is not obtained (subject to the termination fee described below).

 

The asset purchase agreement may be terminated by Nabi:

 

   

if Biotest Pharmaceuticals is in material breach of any representation, warranty, covenant or agreement of Biotest Pharmaceuticals and such breach would cause the closing conditions not to be satisfied and is not cured within ten days after notice or is, in our reasonable determination, incapable of being cured prior to March 31, 2008, and if we are not also in material breach;

 

   

if Nabi enters into a superior transaction pursuant to the “No Negotiation” section described above; provided, however, that each of the following conditions have been met:

 

   

Nabi has complied with its obligations under the asset purchase agreement related to the “— No Negotiation” section;

 

   

Nabi has given Biotest Pharmaceuticals prior written notice of its intention to enter into a superior transaction and the material terms and conditions thereof, and Biotest Pharmaceuticals does not within the 14-day period following receipt by Biotest Pharmaceuticals of such notice, make an offer that the board, in its good faith judgment (after consultation with our outside financial advisors and outside counsel) determines to be at least as favorable to Nabi as the superior transaction (provided, that during such period, Nabi has negotiated in good faith with Biotest Pharmaceuticals);

 

   

our board of directors, after taking into account any modifications to the terms of the asset purchase agreement agreed to by Biotest Pharmaceuticals, continues to believe the proposed transaction constitute a superior transaction, as defined in the asset purchase agreement;

 

   

Nabi concurrently with its delivery of the written notice of termination pays to Biotest Pharmaceuticals the termination fee described below; and

 

   

a majority of the holders of our common stock have not yet approved the asset purchase agreement.

 

The asset purchase agreement may be terminated by Biotest Pharmaceuticals:

 

   

if Nabi is in material breach of any representation, warranty, covenant or agreement of Nabi and such breach would cause the closing conditions not to be satisfied and is not cured within ten days after notice or is, in Biotest Pharmaceuticals’ reasonable determination, incapable of being cured prior to March 31, 2008, and if Biotest Pharmaceuticals is not also in material breach; or

 

36


Table of Contents
   

if Biotest Pharmaceuticals is not in material breach of its obligations under the asset purchase agreement, and if, prior to the obtaining the approval of the asset purchase agreement by a majority of the holders of our common stock:

 

   

Nabi fails to include the board’s recommendation that the asset purchase agreement is expedient and in the best interests of Nabi in this proxy statement;

 

   

Nabi has withdrawn or materially changed the board’s recommendation to the stockholders; or

 

   

our board approves or recommends a superior transaction to the Nabi stockholders.

 

Termination Fee

 

If the asset purchase agreement is terminated by us to pursue a superior transaction, or by Biotest Pharmaceuticals because of our failure to include the board recommendation to the stockholders in the proxy statement, or withdrawal of or change to the recommendation, or recommendation of a superior transaction, we must pay to Biotest Pharmaceuticals $8.5 million. If the asset purchase agreement is terminated by any party because stockholders holding a majority of the shares of our common do not approve the asset purchase agreement, then we must pay (a) Biotest Pharmaceuticals’ reasonable and documented out-of-pocket expenses incurred in connection with the asset purchase agreement, up to $3 million and (b) if, within 12 months after the date of the asset purchase agreement, we consummate a transaction including the acquisition by any entity other than Biotest Pharmaceuticals of at least 50% of our securities (by merger, stock purchase or otherwise) or 50% of our assets, with terms at least as favorable to us in the aggregate as the terms of the asset purchase agreement, upon consummation of such subsequent transaction, we must pay to Biotest Pharmaceuticals the difference between $8.5 million and the expenses previously paid to Biotest Pharmaceuticals.

 

Expenses

 

The asset purchase agreement provides that all costs and expenses incurred in connection with the asset purchase agreement and the transactions contemplated by the asset purchase agreement will be paid by the party incurring the expenses.

 

Amendment

 

The asset purchase agreement may only be amended, supplemented or otherwise modified by a written instrument signed by all of the parties.

 

Biotest Guarantee

 

The performance of Biotest Pharmaceuticals’ obligations is guaranteed by Biotest.

 

37


Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

As described further in this proxy statement, on September 11, 2007, we entered into the asset purchase agreement with Biotest and Biotest Pharmaceuticals to sell all of our rights in and to certain assets of Nabi relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of biologics products, and that together comprise our biologics strategic business unit, or the BSBU, and certain of our corporate shared services assets located primarily in Boca Raton, Florida, or CSS assets to Biotest Pharmaceuticals for $185 million.

 

Included in the assets to be sold are Nabi-HB, and other plasma business assets, including Nabi’s state-of-the-art plasma protein production plant, nine FDA- and European- certified plasma collection centers across the U.S., and investigational products, Civacir®, IVIG, anti-D and Altastaph. The acquisition also will include most of Nabi’s corporate shared services group assets (other than cash and cash equivalents) and the Company’s Boca Raton, Florida headquarters and real properties. Nabi will retain all cash, cash equivalents and accounts receivable, its Rockville, Maryland facility, which will become its new corporate headquarters, and its Pharmaceuticals strategic business unit assets, including NicVAX® [Nicotine Conjugate Vaccine], its innovative and proprietary investigational vaccine for nicotine addiction and the prevention of smoking relapse, and its investigational vaccine StaphVAX® designed to protect against Staphylococcus aureus infections. Nabi also will retain the right to receive up to an additional $75 million in milestone and royalty payments related to the divestiture of PhosLo in November 2006.

 

During the second quarter of 2007, Nabi sold certain assets related to its Aloprim™ (allopurinol sodium) for Injection, or Aloprim, product to Bioniche Teoranta, a limited company incorporated in the Republic of Ireland, for aggregate sale proceeds of $3.7 million. In connection with the closing of this transaction, a gain of $2.6 million was recorded during the second quarter of 2007, which was classified in “Other income, net” on the Company’s unaudited condensed consolidated statement of operations.

 

The Company expects to account for the dispositions of the BSBU, CSS assets and Aloprim product line as discontinued operations in its consolidated financial statements in the future. Aloprim was not treated as a discontinued operation in the second quarter of 2007 due to its relative immateriality.

 

The following unaudited pro forma condensed consolidated financial statements illustrate the effects of the asset sale as well as the consummated sale of Aloprim, to the extent that these transactions have not yet been fully reflected in the Company’s consolidated historical financial statements.

 

The unaudited pro forma condensed consolidated balance sheet as of June 30, 2007 gives effect to the asset sale as if it occurred as of that date. The unaudited pro forma condensed consolidated statements of operations give effect to the asset sale and disposition of Aloprim product line as if they occurred at the beginning of the period presented. The unaudited pro forma condensed consolidated financial statements have been derived from, and should be read in conjunction with the Company’s historical consolidated financial statements, including the notes thereto, in the Company’s Annual Report filed on Form 10-K for the year ended December 30, 2006 and Quarterly Report filed on Form 10-Q for the quarter ended June 30, 2007. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the financial position or results of operations that would have been achieved had the transactions described above occurred on the dates indicated or that may be expected to occur in the future as a result of such transactions.

 

The unaudited pro forma condensed consolidated statements of operations exclude revenues and expenses directly attributable to the Aloprim and the assets being sold in the asset sale. As such, the unaudited pro forma condensed consolidated statements of operations do not reflect a reduction of general corporate allocations or other non-direct costs which may occur as a result of the transactions. The unaudited pro forma financial statements also do not include non-recurring expenses associated with the transactions. In particular the unaudited pro forma financials do not include our current estimate of approximately $3.5 million of non-cash expense associated with modifications to certain stock option and restricted stock awards as more fully detailed below.

 

38


Table of Contents

On September 20, 2007, our board of directors approved certain compensation-related actions in connection with the pending asset sale to Biotest. The compensation-related actions apply to all employees of the BSBU and the Boca Raton-based corporate shared services group employees who remain employees of Nabi through the closing of the transaction and (i) who are offered employment with Biotest, accept the employment offer and resign as an employee of Nabi, or (ii) who do not become employed by Biotest and are terminated by Nabi without cause in connection with the transaction. (the “Affected Employees”). For all Affected Employees the board approved:

 

   

The acceleration of vesting of all unvested stock options held by Affected Employees on the closing of the transaction and the amendment to all outstanding options held by Affected Employees to extend on the closing of the transaction the post-termination of employment exercise period from 90 days to six months.

 

   

The acceleration of vesting on the closing of the transaction of all unvested restricted stock held by Affected Employees that would have vested in 2008 or 2009.

 

   

The payment of a portion of the 2007 VIP Incentive Bonus Plan bonus that is otherwise determined to be due under the terms of the plan pro rated based on the portion of 2007 that each Affected Employee who participates in the plan was employed by Nabi.

 

   

The continued participation by those Affected Employees who participate in the Employee Stock Purchase Plan (“ESPP”) through the current period ending November 30, 2007, notwithstanding the fact that their employment with Nabi may terminate before such date and an amendment to the ESPP to permit such continued participation.

 

   

The payment to Affected Employees that were awarded incentive bonuses that would otherwise be payable to them on January 2, 2008 had such Affected Employees continued to be employed by Nabi through such date.

 

The Affected Employees include executive officers Raafat E.F. Fahim, Ph.D., Chief Operating Officer and General Manager of the BSBU, and Senior Vice President, Research, Technical and Production Operations, and Jordan I. Siegel, Senior Vice President, Finance and Administration, Chief Financial Officer and Treasurer, but not Leslie Hudson, Ph.D., Interim President and Chief Executive Officer.

 

In addition, the board determined that for purposes of all outstanding options held by directors under Nabi’s 2007 Omnibus Equity and Incentive Plan, 2004 Stock Plan for Non-Employee Directors and Stock Plan for Non-Employee Directors, the transaction will not constitute a sale of all or substantially all of the Company’s assets. Therefore, the vesting of options held by directors will not accelerate as a result of the transaction, and the options held by directors will not terminate as a result of the transaction but rather will continue to be exercisable in accordance with their terms.

 

39


Table of Contents

NABI BIOPHARMACEUTICALS

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

AS OF JUNE 30, 2007

 

(In thousands)

 

     As Reported

   

Biologics/CSS

Adjustments


   

Pro Forma

As Adjusted


 

Assets

                        

Current assets:

                        

Cash and cash equivalents

   $ 68,517     $ 172,355  A   $ 240,872  

Marketable securities

     35,425       —         35,425  

Trade accounts receivable, net

     16,489       (16,489 )B     —    

Inventories, net

     18,592       (18,592 )A     —    

Prepaid expenses and other current assets

     5,483       (1,335 )B     4,148  

Assets of discontinued operations

     338       17,957  B     18,295  
    


 


 


Total current assets

     144,844       153,896       298,740  

Property, plant and equipment, net

     84,816       (82,623 )A     2,193  

Other assets:

                     —    

Intangible assets, net

     1,247       (1,247 )A     —    

Restricted cash

     —         10,000  A     10,000  

Other, net

     1,523       (133 )B     1,390  
    


 


 


Total assets

   $ 232,430     $ 79,893     $ 312,323  
    


 


 


Liabilities and stockholders’ equity

                        

Current liabilities:

                        

Trade accounts payable

   $ 6,751     $ (2,474 )C   $ 4,277  

Accrued expenses

     14,106       (6,847 )C     7,259  

Capital lease obligations, net

     155       (155 )A     —    

Liabilities of discontinued operations

     4,146       13,620  C     17,766  
    


 


 


Total current liabilities

     25,158       4,144       29,302  

2.875% convertible senior notes, net

     109,397       —         109,397  

Other liabilities

     243       (243 )C     —    
    


 


 


Total liabilities

     134,798       3,901       138,699  

Commitments and contingencies

                        

Stockholders’ equity:

                        

Convertible preferred stock

     —         —         —    

Common stock

     6,190       —         6,190  

Capital in excess of par

     329,237       —         329,237  

Treasury stock

     (5,321 )     —         (5,321 )

Accumulated deficit

     (232,474 )     75,992  A     (156,482 )
    


 


 


Total stockholders’ equity

     97,632       75,992       173,624  
    


 


 


Total liabilities and stockholders’ equity

   $ 232,430     $ 79,893     $ 312,323  
    


 


 


 

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

 

40


Table of Contents

NABI BIOPHARMACEUTICALS

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 

FOR THE SIX MONTHS ENDED JUNE 30, 2007

 

(In thousands, except per share data)

 

     As
Reported


    Aloprim
Adjustments


         Pro Forma
Before
Biologics
Adjustments


    Biologics/CSS
Adjustments


         Pro
Forma As
Adjusted


 

Revenues

   $ 44,621     $ (162 )   D    $ 44,459     $ (44,459 )   F    $ —    

Costs of products sold

     26,487       (118 )   D      26,369       (26,369 )   F      —    
    


 


      


 


      


Gross margin

     18,134       (44 )          18,090       (18,090 )          —    

Selling, general and administrative expense

     18,587       (18 )   D      18,569       (3,889 )   F      14,680  

Research and development expense

     19,104       (8 )   D      19,096       (8,323 )   F      10,773  
    


 


      


 


      


Operating loss

     (19,557 )     (18 )          (19,575 )     (5,878 )          (25,453 )

Interest income

     2,999       —              2,999       —              2,999  

Interest expense

     (1,803 )     —              (1,803 )     74     F      (1,729 )

Other income, net

     2,559       (2,557 )   E      2       —              2  
    


 


      


 


      


Loss from continuing operations before income taxes

     (15,802 )     (2,575 )          (18,377 )     (5,804 )          (24,181 )

Income taxes

     (190 )     —       G      (190 )     —       G      (190 )
    


 


      


 


      


Loss from continuing operations

   $ (15,992 )   $ (2,575 )        $ (18,567 )   $ (5,804 )        $ (24,371 )
    


 


      


 


      


Basic and diluted loss per share

                                                  

Continuing operations

   $ (0.26 )                $ (0.30 )                $ (0.40 )

Basic and diluted weighted average shares

     61,192                    61,192                    61,192  

 

 

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

 

41


Table of Contents

NABI BIOPHARMACEUTICALS

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 

FOR THE YEAR ENDED DECEMBER 30, 2006

 

(In thousands, except per share data)

 

     As
Reported


    Aloprim
Adjustments


         Pro Forma
Before
Biologics
Adjustments


    Biologics/CSS
Adjustments


         Pro
Forma As
Adjusted


 

Revenues

   $ 89,868     $ (1,524 )   D    $ 88,344     $ (88,344 )   F    $ —    

Costs of products sold

     62,985       (1,124 )   D      61,861       (61,861 )   F      —    
    


 


      


 


      


Gross margin

     26,883       (400 )          26,483       (26,483 )          —    

Selling, general and administrative expense

     43,571       (7 )   D      43,564       (10,988 )   F      32,576  

Research and development expense

     37,572       (7 )   D      37,565       (8,820 )   F      28,745  
    


 


      


 


      


Operating loss

     (54,260 )     (386 )          (54,646 )     (6,675 )          (61,321 )

Interest income

     4,148       —              4,148       —              4,148  

Interest expense

     (3,724 )     —              (3,724 )     257     F      (3,467 )

Other expense, net

     (38 )     —              (38 )     (28 )   F      (66 )
    


 


      


 


      


Loss from continuing operations before income taxes

     (53,874 )     (386 )          (54,260 )     (6,446 )          (60,706 )

Income taxes

     162       —       G      162       (93 )   G      69  
    


 


      


 


      


Loss from continuing operations

   $ (53,712 )   $ (386 )        $ (54,098 )   $ (6,539 )        $ (60,637 )
    


 


      


 


      


Basic and diluted loss per share

                                                  

Continuing operations

   $ (0.88 )                $ (0.89 )                $ (1.00 )

Basic and diluted weighted average shares

     60,936                    60,936                    60,936  

 

 

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

 

42


Table of Contents

NABI BIOPHARMACEUTICALS

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 

FOR THE YEAR ENDED DECEMBER 31, 2005

 

(In thousands, except per share data)

 

     As
Reported


    Aloprim
Adjustments


         Pro Forma
Before
Biologics
Adjustments


    Biologics/CSS
Adjustments


        

Pro

Forma As
Adjusted


 

Revenues

   $ 94,149     $ (870 )   D    $ 93,279     $ (93,279 )   F    $ —    

Costs of products sold

     67,941       (694 )   D      67,247       (61,963 )   F      5,284  
    


 


      


 


      


Gross margin

     26,208       (176 )          26,032       (31,316 )          (5,284 )

Selling, general and administrative expense

     52,041       (343 )   D      51,698       (14,656 )   F      37,042  

Research and development expense

     60,906       (14 )   D      60,892       (3,104 )   F      57,788  

Impairment of vaccine manufacturing facility

     19,842       —              19,842       —              19,842  

Write-off of manufacturing right

     2,684       —              2,684       —              2,684  
    


 


      


 


      


Operating loss

     (109,265 )     181            (109,084 )     (13,556 )          (122,640 )

Interest income

     4,094       —              4,094       —              4,094  

Interest expense

     (2,523 )     —              (2,523 )     63     F      (2,460 )

Other expense, net

     (483 )     —              (483 )     5     F      (478 )
    


 


      


 


      


Loss from continuing operations before income taxes

     (108,177 )     181            (107,996 )     (13,488 )          (121,484 )

Income taxes

     2,610       53     G      2,663       253     G      2,916  
    


 


      


 


      


Loss from continuing operations

   $ (105,567 )   $ 234          $ (105,333 )   $ (13,235 )        $ (118,568 )
    


 


      


 


      


Basic and diluted loss per share

                                                  

Continuing operations

   $ (1.76 )                $ (1.76 )                $ (1.98 )

Basic and diluted weighted average shares

     59,862                    59,862                    59,862  

 

 

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

 

43


Table of Contents

NABI BIOPHARMACEUTICALS

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 

FOR THE YEAR ENDED DECEMBER 25, 2004

 

(In thousands, except per share data)

 

     As
Reported


    Aloprim
Adjustments


         Pro Forma
Before
Biologics
Adjustments


    Biologics/CSS
Adjustments


         Pro
Forma As
Adjusted


 

Revenues

   $ 142,183     $ (3,417 )   D    $ 138,766     $ (138,766 )   F    $ —    

Costs of products sold

     88,489       (595 )   D      87,894       (87,783 )   F      111  
    


 


      


 


      


Gross margin

     53,694       (2,822 )          50,872       (50,983 )          (111 )

Selling, general and administrative expense

     46,188       (1,058 )   D      45,130       (17,618 )   F      27,512  

Research and development expense

     59,551       (1 )   D      59,550       (5,626 )   F      53,924  
    


 


      


 


      


Operating loss

     (52,045 )     (1,763 )          (53,808 )     (27,739 )          (81,547 )

Interest income

     1,628       —              1,628       —              1,628  

Interest expense

     (971 )     —              (971 )     14     F      (957 )

Other income, net

     213       —              213       103     F      316  
    


 


      


 


      


Loss from continuing operations before income taxes

     (51,175 )     (1,763 )          (52,938 )     (27,622 )          (80,560 )

Income taxes

     (4,727 )     658     G      (4,069 )     11,687     G      7,618  
    


 


      


 


      


Loss from continuing operations

   $ (55,902 )   $ (1,105 )        $ (57,007 )   $ (15,935 )        $ (72,942 )
    


 


      


 


      


Basic and diluted loss per share

                                                  

Continuing operations

   $ (0.95 )                $ (0.97 )                $ (1.24 )

Basic and diluted weighted average shares

     58,800                    58,800                    58,800  

 

 

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

 

44


Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

A.   Reflects the net cash received on the sale of the BSBU and CSS assets to Biotest, removal of the assets from Nabi’s historical balance sheet and estimated gain on sale as follows:

 

     (In thousands)

 

Proceeds:

        

Purchase price

   $ 185,000  

Less cash held in escrow

     (10,000 )

Less estimated unpaid transaction costs

     (2,645 )
    


Net cash received

     172,355  

Cash held in escrow

     10,000  

Net assets assumed by the buyer:

        

Inventory

     (18,592 )

Property, plant and equipment

     (82,623 )

Intangible assets

     (1,247 )

Capital lease obligations

     155  
    


Total net assets assumed

     (102,307 )

Estimated income tax on gain

     (4,056 )
    


Estimated gain on sale

   $ 75,992  
    


 

Cash held in escrow is to support any indemnification claims that may be made by Biotest following the closing and will not be released until April 2009. The inventory balance is subject to a purchase price adjustment if the Nabi-HB inventory does not meet a minimum requirement. See Note C for further information on the estimated income taxes associated with the gain.

 

B.   Reflects the reclassification of accounts receivable, prepaid and other assets into assets of discontinued operations.

 

C.   Reflects the reclassification of accounts payable, accrued expenses and other liabilities related to the BSBU and CSS assets which were not assumed by Biotest or Biotest Pharmaceuticals to liabilities of discontinued operations. Also reflects the estimated income tax liability associated with the sale assuming it occurred on June 30, 2007. We believe we will be able to utilize available net operating loss carryforwards to offset a significant amount of the taxable gain on the transaction. The estimated liability of $4.1 million relates to alternative minimum tax and income taxes in certain state jurisdictions.

 

D.   Reflects the adjustments to remove the results of operations directly attributable to the Aloprim product line.

 

E.   Reflects the removal of the gain associated with the sale of the Aloprim product line.

 

F.   Reflects the adjustments to remove the results of operations directly attributable to the BSBU and CSS assets. These adjustments do not reflect the removal of indirect corporate expenses incurred by Nabi on behalf of the BSBU and CSS assets.

 

G.   Reflects adjustments related to income taxes associated with the Aloprim product line and the BSBU and CSS assets that will be reclassified to discontinued operations in our historical consolidated financial statements. These are not representative of the income taxes that would be associated with the individual businesses on a stand-alone basis.

 

45


Table of Contents

UNAUDITED FINANCIAL STATEMENTS OF THE BSBU AND CSS ASSETS OF

NABI BIOPHARMACEUTICALS

 

As described further in this proxy statement, on September 11, 2007, we entered into the asset purchase agreement with Biotest and Biotest Pharmaceuticals to sell all of our rights in and to certain assets of Nabi relating to, used in or necessary for the development, manufacture, distribution, marketing or sale of biologics products, and that together comprise our biologics strategic business unit, or the BSBU, and certain of our corporate shared services assets located primarily in Boca Raton, Florida, or CSS assets to Biotest Pharmaceuticals for $185 million. The following are unaudited financial statements of the BSBU and CSS assets being sold by Nabi in the asset sale. These unaudited financial statements have been derived from historical financial data of Nabi and include unaudited balance sheets of the BSBU and CSS assets as of June 30, 2007, December 30, 2006 and December 31, 2005, and the related unaudited statements of operations and cash flows for the six months ended June 30, 2007 and July 1, 2006, and for the years ended December 30, 2006 and December 31, 2005. These unaudited financial statements reflect the assets and liabilities, operations and cash flows of the BSBU and CSS assets and include allocations for expenses incurred by Nabi on behalf of the BSBU and CSS assets. The unaudited financial statements are not necessarily indicative of the financial position, results of operations or cash flows that would have occurred had the BSBU and CSS assets been stand-alone entities during the periods presented, nor is it indicative of future results of the BSBU and CSS assets.

 

The unaudited financial statements of the BSBU and CSS assets are qualified in their entireties by, and should be read in conjunction with, the audited historical consolidated financial statements of Nabi including the notes thereto, in the Company’s Annual Report filed on Form 10-K for the year ended December 30, 2006, and the unaudited condensed consolidated financial statements in the Company’s Quarterly Report filed on Form 10-Q for the quarter ended June 30, 2007.

 

46


Table of Contents

BSBU AND CSS ASSETS OF NABI BIOPHARMACEUTICALS

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Unaudited)

 

(In thousands)

 

     June 30,
2007


   December 30,
2006


   December 31,
2005


Assets

                    

Current assets:

                    

Trade accounts receivable, net

   $ 16,489    $ 20,160    $ 19,641

Inventories, net

     18,592      19,029      20,112

Deferred tax assets

     —        —        4,487

Prepaid expenses and other current assets

     1,335      1,551      2,519
    

  

  

Total current assets

     36,416      40,740      46,759

Property, plant and equipment, net

     82,623      85,888      91,965

Other assets:

                    

Intangible assets, net

     1,247      1,308      1,430

Other, net

     133      156      363
    

  

  

Total assets

   $ 120,419    $ 128,092    $ 140,517
    

  

  

Liabilities and stockholders’ equity

                    

Current liabilities:

                    

Trade accounts payable

   $ 3,590    $ 4,128    $ 5,062

Accrued expenses

     10,445      9,931      9,709

Capital lease obligations, net

     155      291      223
    

  

  

Total current liabilities

     14,190      14,350      14,994

Deferred tax liabilities

     —        —        5,637

Other liabilities

     243      238      465
    

  

  

Total liabilities

     14,433      14,588      21,096

Commitments and contingencies

                    

Net business unit equity

     105,986      113,504      119,421
    

  

  

Total liabilities and invested capital

   $ 120,419    $ 128,092    $ 140,517
    

  

  

 

 

See accompanying notes to condensed consolidated financial statements.

 

47


Table of Contents

BSBU AND CSS ASSETS OF NABI BIOPHARMACEUTICALS

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

 

(In thousands)

 

    

For the

Six Months Ended


   

For the

Years Ended


 
     June 30,
2007


    July 1,
2006


    December 30,
2006


    December 31,
2005


 

Revenues

   $ 44,459     $ 39,050     $ 88,344     $ 93,279  

Costs of products sold

     26,369       28,321       61,861       61,963  
    


 


 


 


Gross margin

     18,090       10,729       26,483       31,316  

Selling, general and administrative expense

     15,950       18,789       36,732       34,578  

Research and development expense

     11,730       3,973       13,685       4,489  
    


 


 


 


Operating loss

     (9,590 )     (12,033 )     (23,934 )     (7,751 )

Interest expense

     (74 )     (142 )     (257 )     (63 )

Other (expense) income, net

     —         28       28       (5 )
    


 


 


 


Loss before income taxes

     (9,664 )     (12,147 )     (24,163 )     (7,819 )

Benefit for income taxes

     —         1,150       1,243       6,845  
    


 


 


 


Net loss

   $ (9,664 )   $ (10,997 )   $ (22,920 )   $ (974 )
    


 


 


 


 

 

See accompanying notes to condensed consolidated financial statements.

 

48


Table of Contents

BSBU AND CSS ASSETS OF NABI BIOPHARMACEUTICALS

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET BUSINESS UNIT EQUITY

 

(Unaudited)

 

(In thousands)

 

Balance at December 25, 2004

   $ 106,601  

Net loss

     (974 )

Net funds provided by Nabi

     13,285  

Stock-based compensation expense

     509  
    


Balance at December 31, 2005

     119,421  

Net loss

     (22,920 )

Net funds provided by Nabi

     12,983  

Stock-based compensation expense

     4,020  
    


Balance at December 30, 2006

     113,504  

Net loss

     (9,664 )

Net funds provided by Nabi

     1,040  

Stock-based compensation expense

     1,106  
    


Balance at June 30, 2007

   $ 105,986  
    


 

 

See accompanying notes to condensed consolidated financial statements

 

49


Table of Contents

BSBU AND CSS ASSETS OF NABI BIOPHARMACEUTICALS

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

(in thousands)

 

    

For the

Six Months Ended


   

For the

Years Ended


 
     June 30,
2007


    July 1,
2006


    December 30,
2006


    December 31,
2005


 

Cash flow from operating activities

                                

Net loss

   $ (9,664 )   $ (10,997 )   $ (22,920 )   $ (974 )

Adjustments to reconcile net loss to net cash used in operating activities:

                                

Depreciation and amortization

     3,803       4,041       8,139       8,312  

Provision for slow moving or obsolete inventory

     111       453       1,689       3,345  

Non-cash compensation

     1,106       1,122       4,020       509  

Deferred income taxes

     —         (1,150 )     (1,150 )     (6,769 )

Other

     54       225       429       (6 )

Changes in assets and liabilities

                                

Trade accounts receivable

     3,659       4,590       (526 )     5,621  

Inventories

     326       (2,200 )     (606 )     (5,850 )

Prepaid expenses and other current assets

     216       844       968       (1,029 )

Other assets

     23       87       207       (215 )

Accounts payable and accrued expenses

     (23 )     1,440       (712 )     (11,488 )
    


 


 


 


Total adjustments

     9,275       9,452       12,458       (7,570 )
    


 


 


 


Net cash used in operating activities

     (389 )     (1,545 )     (10,462 )     (8,544 )
    


 


 


 


Cash flow from investing activities

                                

Proceeds from sale of assets

     —         —         —         55  

Capital expenditures

     (514 )     (950 )     (2,352 )     (4,607 )
    


 


 


 


Net cash used in investing activities

     (514 )     (950 )     (2,352 )     (4,552 )
    


 


 


 


Cash flow from financing activities

                                

Repayments of capital leases

     (137 )     (72 )     (169 )     (189 )

Net funds provided by Nabi

     1,040       2,567       12,983       13,285  
    


 


 


 


Net cash provided by financing activities

     903       2,495       12,814       13,096  
    


 


 


 


Net change in cash and cash equivalents

     —         —         —         —    

Cash and cash equivalents at beginning of period

     —         —         —         —    
    


 


 


 


Cash and cash equivalents at end of period

   $ —       $ —       $ —       $ —    
    


 


 


 


 

See accompanying notes to condensed consolidated financial statements.

 

50


Table of Contents

BSBU AND CSS ASSETS OF NABI BIOPHARMACEUTICALS

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Our biologics strategic business unit, or the BSBU, consists of plasma proteins and antibody products including Nabi’s marketed product Nabi-HB® [Hepatitis B Immune Globulin (Human)], (“Nabi-HB”), and development pipeline, including Civacir® [Hepatitis C Immune Globulin Human)], (“Civacir”), Altastaph® [Staphylococcus aureus Immune Globulin Intravenous (Human)], Nabi’s IVIG and anti-D. The unit also manages the operations of Nabi’s nine FDA- and European- certified plasma collection centers and protein fractionation and vaccine production facilities. Additionally these historical financials statements include sales of $6.2 million related to WinRho in fiscal 2005, as well as research and development expenses related to the development of ATG-Fresenius S of $1.5 million in both the six months ended June 30, 2007 and July 1, 2006 and $4.1 million in the year ended December 2006. Please refer to Note 8 for further information on these products.

 

The unaudited financial statements have been carved out from the consolidated financial statements of Nabi using the historical assets and liabilities, results of operations and cash flows of Nabi attributable to the BSBU. The carve out financial statements include allocations for certain corporate expenses incurred by Nabi on behalf of the business, for further information see Note 2 under Corporate expense allocations. Management believes the assumptions underlying the unaudited carve-out financial statements of the BSBU are reasonable; however, the BSBU’s financial position, results of operations, and cash flows may have been materially different if it was operated as a stand-alone entity as of and for the periods presented.

 

As a group within of Nabi, the BSBU is dependent upon Nabi for all of its working capital and financing requirements. Accordingly, the transfers of financial resources between Nabi and the BSBU are reflected as a component of net business unit equity in lieu of cash, intercompany debt, and equity accounts.

 

Our fiscal year ends on the last Saturday of December. Consequently, we will periodically have a 53-week fiscal year. The fiscal year ended December 31, 2005 was a 53-week year with the additional week included in the fourth quarter of 2005. The fiscal year ended December 30, 2006 was a 52- week year, and both the six months ended June 30, 2006 and July 1, 2007 consisted of 26 weeks.

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Accounting estimates:    The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

 

Revenue recognition:    Our primary customers for Nabi-HB are pharmaceutical wholesalers. In accordance with our revenue recognition policy, revenue is recognized when title and risk of loss are transferred to the customer. Reported revenue is net of estimated customer prompt pay discounts, contractual allowances in accordance with managed care agreements known as chargebacks, rebates, customer returns and other wholesaler fees. Our policy regarding sales to customers is that we do not recognize revenue from, or the cost of, such sales, where we believe the customer has more than a demonstrably reasonable level of inventory. We make this assessment based on historical demand, historical customer ordering patterns for purchases, business considerations for customer purchases and estimated inventory levels. If our actual experience proves to be different than our assumptions we would then adjust such allowances accordingly.

 

We estimate allowances for revenue dilution items using a combination of information received from third parties, including market data, inventory reports from our major U.S. wholesaler customers, when available,

 

51


Table of Contents

historical information and analysis that we perform. The key assumptions used to arrive at our best estimate of revenue dilution reserves are estimated customer inventory levels, contractual prices and related terms. Our estimates of inventory at wholesaler customers and in the distribution channels are subject to the inherent limitations of estimates that rely on third-party data, as certain third-party information may itself rely on estimates, and reflect other limitations. Provisions for estimated rebates and other allowances, such as discounts, promotional and other credits are estimated based on historical payment experience, historical relationship to revenues, estimated customer inventory levels and contract terms and actual discounts offered. We believe that such provisions are reasonably ascertainable due to the limited number of assumptions involved and the consistency of historical experience. Provisions for chargebacks involve more subjective judgments and are more complex in nature. These provisions are discussed in further detail below.

 

Chargebacks:     The provision for chargebacks is a significant and complex estimate used in the recognition of revenue. We market products directly to wholesalers, distributors and homecare companies. We also market products indirectly to group purchasing organizations, managed care organizations, physician practice management groups and hospitals, collectively referred to as indirect customers. We have entered into agreements with indirect customers to establish contract pricing for certain products. The indirect customers then select wholesalers from which to actually purchase the products at these contracted prices. Under this arrangement, we will provide credit to the wholesaler for any difference between the contracted price with the indirect party and the wholesaler’s invoice price. Such credit is called a chargeback. The provision for chargebacks is based on our historical chargeback experience and estimated wholesaler inventory levels, as well as expected sell-through levels by our wholesale customers to indirect customers. Our estimates of inventory at wholesale customers and in the distribution channels are subject to the inherent limitations of estimates that rely on third-party data, as certain third-party information may itself rely on estimates, and reflect other limitations. We continually monitor our provision for chargebacks and make adjustments when we believe that actual chargebacks may differ from established reserves.

 

Corporate expense allocations:     The BSBU receives services and support functions from Nabi. The BSBU is dependent upon Nabi’s ability to perform these services and support functions. The costs associated with these services and support functions have been allocated to the BSBU using methodologies established by Nabi’s management and considered to be a reasonable reflection of the utilization of services provided to the BSBU. Allocations for research and development expenses are allocated based on the direct spend for Biologics projects in proportion to all research and development projects. Allocations for general and administration expenses are based primarily on headcount. The financial information included herein may not reflect the financial position, the results of operations and cash flows of the BSBU in the future or had the business unit been a separate, stand-alone entity during the periods presented.

 

Expense allocations for the following periods were:

 

     For the Six Months Ended

   For the Years Ended

(in thousands)


       June 30,    
2007


       July 1,    
2006


   December 30,
2006


   December 31,
2005


Allocated general and administrative expenses

   $ 12,061    $ 12,296    $ 25,744    $ 19,223

Allocated research and development expenses

     3,407      1,646      4,865      1,385
    

  

  

  

Total allocated expenses

   $ 15,468    $ 13,942    $ 30,609    $ 20,608
    

  

  

  

 

Research and development expense:     Research and development costs are expensed as incurred. Amounts payable to third parties under collaborative product development agreements are recorded at the earlier of the milestone achievement or as payments become contractually due.

 

Shipping and Handling Costs:     We report costs related to the shipment of our product as part of selling, general and administrative expenses. We incurred $0.1 million and $0.3 million of such costs in the six months

 

52


Table of Contents

ended June 30, 2007 and July 1, 2006, respectively, and $0.5 million and $0.3 million in the years ended December 30, 2006 and December 31, 2005, respectively.

 

Financial instruments:     The carrying amounts of financial instruments including accounts receivable, accounts payable and other accrued liabilities approximated fair value for all periods presented because of the relatively short-term maturity of these instruments.

 

Trade Accounts Receivable:    Trade accounts receivable is composed of the following:

 

(in thousands)


   June 30,
2007


    December 30,
2006


    December 31,
2005


 

Trade accounts receivable

   $ 16,505     $ 20,180     $ 19,647  

Allowance for doubtful accounts

     (16 )     (20 )     (6 )
    


 


 


Total accounts receivable, net

   $ 16,489     $ 20,160     $ 19,641  
    


 


 


 

We sell a significant portion of our products through pharmaceutical wholesalers and distributors and to major pharmaceutical companies and, as a result, maintain individually significant receivable balances with major customers. At June 30, 2007, Cardinal Health, Inc. and McKesson Drug Co. represented 28% and 10% of the total accounts receivable. At December 30, 2006, Amerisource/Bergen, Talecris Biotherapeutics and McKesson Drug Co. represented 31%, 11% and 12% of the total accounts receivable, respectively. At December 30, 2005, AmerisourceBergen, Talecris Biotherapeutics and Greencross Corporation represented 33%, 15% and 14% of the total accounts receivable, respectively. Also included in accounts receivable at June 30, 2007 and December 30, 2006 was a $4.5 million arbitration award related to a contract manufacturing agreement with Inhibitex, Inc, refer to Note 7 for further details on this receivable.

 

If the financial condition or operations of these customers were to deteriorate, our results could be adversely affected. Credit terms to these customers generally range from 30 to 60 days. We evaluate and monitor the credit worthiness of each customer on a case-by-case basis and do not require collateral on specific accounts receivable. Allowances are maintained for potential credit losses. Revenue to significant customers as a percentage of total BSBU revenue is as follows:

 

     For the Six
Months Ended


    For the Years Ended

 
     June 30,
2007


    December 30,
2006


    December 31,
2005


 

Talecris Biotherapeutics

   29 %   29 %   19 %

Cardinal Health, Inc

   25 %   10 %   16 %

AmerisourceBergen

   9 %   20 %   18 %

 

Inventories:    The components of net inventories, stated at the lower of cost or market with cost determined on the first-in first-out (FIFO) method, are as follows:

 

(in thousands)


   June 30,
2007


   December 30,
2006


   December 31,
2005


Finished goods

   $ 13,495    $ 13,161    $ 11,552

Work in process

     4,100      4,830      7,531

Raw materials

     997      1,038      1,029
    

  

  

Total inventories, net

   $ 18,592    $ 19,029    $ 20,112
    

  

  

 

Work in process inventory for all periods presented primarily consisted of Nabi-HB for which manufacture was in process or that was awaiting release to the market from the U.S. Food and Drug Administration, or FDA,

 

53


Table of Contents

in accordance with the normal course of our business. During 2006, we reserved $1.0 million of Nabi-HB due to the product not meeting our manufacturing specifications and $0.9 million due to the product being damaged in-transit to our contract fill and finisher. During 2005, we reserved $0.8 million of Nabi-HB Intravenous as a result of its shelf life being inadequate compared to the timing of our sales projections.

 

Property, plant and equipment:    Property, plant and equipment are carried at cost. Depreciation is generally recognized on the straight-line method over the estimated useful lives of the assets.

 

Depreciation for certain specialized production equipment in our Florida biopharmaceutical manufacturing facility is calculated over its remaining useful life using the units-of-production, or UOP, method, as the specialized equipment is subject to wear and tear and exhaustion primarily as a result of use as opposed to the passage of time or technical obsolescence. We expect the annual utilization of these assets to increase significantly during the useful life of the assets and, therefore, believe the units-of-production method of depreciation most appropriately reflects the pattern of consumption of the equipment. However, because we anticipated low utilization levels during the initial years of the asset life and there was uncertainty as to whether higher production levels would be attained, we determined that a minimum of straight-line depreciation over an approximate 13 year life should be recorded each period. Since placing the facility into service in 2001, we have recorded the minimum depreciation amount. We periodically evaluate the remaining life and recoverability of this equipment based on the appropriate facts and circumstances.

 

Depreciable lives of non-UOP property and equipment are as follows:

 

Asset


  

Initial Useful Life


Buildings

  

39 years

Building systems

  

20 years

Furniture and fixtures

  

8 years

Information systems

  

3 – 7 years

Machinery and equipment

  

3 – 8 years

Leasehold improvements and capital leases

  

Lesser of lease term or economic life

 

Intangible assets:    Intangible assets represent the fair values of certain assets acquired in the acquisition of Nabi-HB. The carrying costs of intangible assets are amortized ratably from the date acquired over 25 years. Intangible assets consist of the following:

 

(in thousands)


   June 30,
2007


    December 30,
2006


    December 31,
2005


 

Intangible assets

   $ 3,064     $ 3,064     $ 3,064  

Less accumulated depreciation

     (1,817 )     (1,756 )     (1,634 )
    


 


 


Total

   $ 1,247     $ 1,308     $ 1,430  
    


 


 


 

Amortization of intangible assets was $0.1 million in each of the years ended December 30, 2006 and December 30, 2005, and is expected to be $0.1 million in each of the five fiscal years subsequent to December 30, 2006.

 

Stock-Based Compensation:    Employee’s directly associated with the BSBU participate in various Nabi stock compensation plans. Additionally, the BSBU is allocated a portion of the stock-based compensation expense for Nabi employees who indirectly support the business. Stock-based compensation is currently accounted for under the fair value recognition provisions of SFAS No. 123R, Share-based Payment, and related interpretations using the modified-prospective method. Prior to January 1, 2006, these plans were accounted for under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, or APB No. 25, and related Interpretations, as permitted by SFAS No. 123. The operating results of

 

54


Table of Contents

the BSBU includes $1.0 million, $0.8 million, $3.5 million and $0.0 million of stock-based compensation expense for the six months ended June 30, 2007 and July 1, 2006 and fiscal years ended December 30, 2006 and December 31, 2005, respectively. The amount recorded in the fiscal year 2006 includes additional cumulative non-cash compensation expense of $1.7 million related to corrections in measurement dates for certain stock option grants in prior years. Please refer to Note 9 for more information on Nabi’s stock compensation plans.

 

Income taxes:    The BSBU does not file separate tax returns but rather is included in the income tax returns filed by Nabi in various domestic and foreign jurisdictions. For purposes of these unaudited historical carve-out financial statements, the tax provision of the BSBU was determined from the financial information carved out of the consolidated financial statements of Nabi, including allocations deemed necessary by management as though the BSBU was filing its own tax return.

 

We follow SFAS No. 109, Accounting for Income Taxes, or SFAS No. 109, which requires, among other things, recognition of future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to tax net operating loss carryforwards to the extent that realization of these benefits is more likely than not. We periodically evaluate the realizability of our net deferred tax assets. Our tax accruals are analyzed periodically and adjustments are made as events occur to warrant such adjustment.

 

Segment reporting:    The BSBU consists of a single operating segment and has no operations outside the U.S. The business had export sales of $15.1 million and $15.6 million for the years ended December 30, 2006 and December 31, 2005, respectively. The export sales are largely related to antibody products and are principally in the South Korea, Europe and Israel markets.

 

New accounting pronouncements:    Effective December 31, 2006, we adopted the provisions of Financial Accounting Standards Board (FASB) issued Interpretation Number 48, Accounting for Uncertainty in Income Taxes, or FIN 48. See Note 5 for further details.

 

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements. This Statement applies to other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after December 15, 2007. We plan to adopt SFAS No. 157 beginning in the first quarter of our 2008 fiscal year. We are currently evaluating the impact the adoption of SFAS No. 157 may have on our financial position and results of operations.

 

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, or SFAS No. 159, which gives companies the option to measure eligible financial assets, financial liabilities and firm commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes in fair value must be recorded in earnings. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are in the process of evaluating the impact, if any, of adopting this pronouncement.

 

55


Table of Contents

NOTE 3 PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment and related accumulated depreciation are summarized below:

 

(in thousands)


   June 30,
2007


    December 30,
2006


    December 31,
2005


 

Information systems

   $ 27,892     $ 27,158     $ 24,774  

Leasehold improvements

     4,730       4,723       4,351  

Machinery and equipment

     48,285       48,158       52,726  

Land and buildings

     51,467       51,487       45,794  

Building systems

     8,340       8,324       10,017  

Furniture and fixtures

     2,821       2,821       2,847  

Capital leased property

     539       539       539  

Asset retirement obligation

     193       193       193  

Construction in progress

     354       808       1,199  
    


 


 


Property, plant and equipment

     144,621       144,211       142,440  

Less accumulated depreciation

     (61,998 )     (58,323 )     (50,475 )
    


 


 


Property, plant and equipment, net

   $ 82,623     $ 85,888     $ 91,965  
    


 


 


 

We received FDA licensure to manufacture Nabi-HB at our biopharmaceutical manufacturing facility in Florida in October 2001. Capitalization of interest and other costs ceased at that time, which was the point at which the facility was ready for the manufacture of Nabi-HB in an FDA approved environment, its intended use, and the facility was placed into service. Total costs of construction of the Florida facility, including the building, building systems, plant equipment and information systems were approximately $90.3 million. Validation costs and capitalized interest related directly to preparing the facility for its intended use totaled $63.5 million.

 

Depreciation expense of property, plant and equipment during the six months ended June 30, 2007 and July 1, 2006 and the years ended December 30, 2006 and December 31, 2005 was $3.7 million, $4.0 million, $8.0 million and $8.2 million, respectively. Under the units of production method we recorded depreciation expense of $1.5 million and $1.0 million for the six months ended June 30, 2007 and July 1, 2006, respectively, and $2.3 million and $2.7 million for the years ended December 30, 2006 and December 31, 2005, respectively. In accordance with our depreciation policy (refer to Note 2), which has been consistently applied for all prior periods, we recorded additional depreciation expense of $0.6 million and $1.2 million for the six months ended June 30, 2007 and July 1, 2006, respectively, and $2.6 million and $2.1 million for the years ended December 30, 2006 and December 31, 2005, respectively, because the amount of depreciation resulting from the units-of-production method was less than our minimum threshold depreciation amount. Depreciation expense included depreciation of assets under capital leases of $0.1 million for each of the six months ended June 30, 2007 and July 1, 2006 and $0.2 million for each of the fiscal years 2006 and 2005.

 

Pursuant to the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review long-lived assets for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. If this review reveals indications of impairment, as generally determined based on estimated undiscounted cash flows, the carrying amount of the related long-lived assets are adjusted to fair value.

 

56


Table of Contents

NOTE 4 ACCRUED EXPENSES

 

Accrued expenses consist of the following:

 

(in thousands)


   June 30,
2007


   December 30,
2006


   December 31,
2005


Sales deductions:

                    

Accrued chargebacks

   $ 501    $ 638    $ 1,092

Accrued rebates

     699      925      1,252

Accrued discounts

     891      787      1,022

Other accrued sales deductions

     330      340      340
    

  

  

Total accrued sales deductions

     2,421      2,690      3,706

Employee compensation and benefits

     2,760      4,527      3,236

Accrued royalties and product costs

     352      461      429

Accrued clinical trial expenses

     597      697      54

Accrued severance

     2,062      248      1,131

Other

     2,253      1,308      1,153
    

  

  

Total

   $ 10,445    $ 9,931    $ 9,709
    

  

  

 

NOTE 5 INCOME TAXES

 

The benefit (provision) for income taxes consists of the following:

 

     For the Six Months Ended

    For the Years Ended

(in thousands)


       June 30,    
2007


        July 1,    
2006


        December 30,    
2006


        December 31,    
2005


Current:

                              

Federal

   $ —       $ —       $ 93     $ —  

State

     —         —         —         76
    


 


 


 

Subtotal

     —         —         93       76

Deferred:

                              

Federal

     3,006       4,213       9,007       6,431

State

     158       221       474       338
    


 


 


 

Subtotal

     3,164       4,434       9,481       6,769
    


 


 


 

Total

     3,164       4,434       9,574       6,845

Change in valuation allowance

     (3,164 )     (3,284 )     (8,331 )     —  
    


 


 


 

Total

   $ —       $ 1,150     $ 1,243     $ 6,845
    


 


 


 

 

57


Table of Contents

Deferred tax assets and liabilities are comprised of the following:

 

(in thousands)


   June 30,
2007


    December 30,
2006


    December 31,
2005


 

Deferred tax assets:

                        

Net operating loss carryforwards

   $ 10,722     $ 8,799     $ 355  

Research and development tax credit

     7,232       8,866       8,313  

Inventory reserve and capitalization

     3,259       3,609       2,776  

Amortization

     137       137       500  

Alternative minimum tax credit

     849       849       854  

Sales deductions

     484       536       690  

Accrued workers compensation

     610       650       411  

Other (including IRC 59(e) & SFAS No. 123R)

     3,870       2,603       2,512  
    


 


 


Deferred tax assets

     27,163       26,049       16,411  

Deferred tax liabilities:

                        

Depreciation

     (16,719 )     (17,468 )     (17,561 )

Accrued severance

     (234 )     (250 )     —    
    


 


 


Deferred tax liabilities

     (16,953 )     (17,718 )     (17,561 )
    


 


 


Net deferred tax assets

     10,210       8,331       (1,150 )

Valuation allowance

     (10,210 )     (8,331 )     —    
    


 


 


Net deferred tax liabilities

   $ —       $ —       $ (1,150 )
    


 


 


 

We have net operating loss carryforwards of approximately $39.9 million that expire at various dates through 2027. Approximately $3.8 million of our net operating loss carryforwards are related to the exercise of employee stock options, and we will record a tax benefit of approximately $1.4 million through capital in excess of par value if and when such losses are realized.

 

We have research and development tax credit carryforwards of $7.2 million that expire in varying amounts through 2027. We have alternative minimum tax credit carryforwards of $0.8 million that are available to offset future regular tax liabilities and do not expire.

 

The significant elements contributing to the difference between the federal statutory tax rate and the effective tax rate are as follows:

 

     For the Six Months Ended

    For the Years Ended

 
     June 30,
2007


    July 1,
2006


    December 30,
2006


    December 31,
2005


 

Federal statutory rate

   (34.0 )%   (34.0 )%   (34.0 )%   (34.0 )%

State income taxes, net of federal benefit

   (3.3 )   (3.3 )   (3.3 )   (3.3 )

Tax credits

   4.2     —       (2.3 )   (49.4 )

Change in valuation allowance

   32.7     27.0     34.5     —    

Other

   0.4     0.8     —       (0.8 )
    

 

 

 

Total

   0.0 %   (9.5 )%   (5.1 )%   (87.5 )%
    

 

 

 

 

Adoption of FIN 48

 

Prior to December 31, 2006, we recognized income taxes with respect to uncertain tax positions based upon SFAS No. 5, Accounting for Contingencies, or SFAS No. 5. Under SFAS No. 5, we recorded a liability associated with an uncertain tax position if the liability was both probable and estimable. Prior to December 31, 2006, the liabilities recorded under SFAS No. 5 including interest and penalties related to income tax exposures,

 

58


Table of Contents

would have been recognized as incurred within “income taxes” in our condensed consolidated statements of operations. We recorded no such liabilities in 2006.

 

Effective December 31, 2006, we adopted FIN 48, Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that we determine whether the benefit of our tax positions is more likely than not to be sustained upon audit, based on the technical merits of the tax position. For tax positions that are more likely than not to be sustained upon audit, we recognize the greatest amount of the benefit that is more likely than not to be sustained in our condensed consolidated financial statements. For tax positions that are not more likely than not to be sustained upon audit, we do not recognize any portion of the benefit in our condensed consolidated financial statements. The provisions of FIN 48 also provide guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure.

 

Our policy for interest and penalties under FIN 48, related to income tax exposures was not impacted as a result of the adoption of the recognition and measurement provisions of FIN 48. Therefore, we continue to recognize interest and penalties as incurred within “income taxes” in our condensed consolidated statements of operations, when applicable.

 

There was no change to our accumulated deficit as of December 31, 2006 as a result of the adoption of the recognition and measurement provisions of FIN 48.

 

Uncertain Income Tax Positions

 

We file income tax returns in the U.S. federal jurisdiction, with various states and with various foreign jurisdictions. We are subject to tax audits in all jurisdictions for which we file tax returns. Tax audits by their very nature are often complex and can require several years to complete. There are currently no tax audits that have commenced with respect to income returns in any jurisdiction.

 

Federal:    Under the tax statute of limitations applicable to the Internal Revenue Code, we are no longer subject to U.S. federal income tax examinations by the Internal Revenue Service for years before 2003. However, because we are carrying forward income tax attributes, such as net operating losses and tax credits from 2002 and earlier tax years, these attributes can still be audited when utilized on returns filed in the future.

 

State:    Under the statutes of limitation applicable to most state income tax laws, we are no longer subject to state income tax examinations by tax authorities for years before 2003 in states in which we have filed income tax returns. Certain states may take the position that we are subject to income tax in such states even though we have not filed income tax returns in such states and, depending on the varying state income tax statutes and administrative practices, the statute of limitations in such states may extend to years before 2003.

 

Foreign:    We began foreign operations in 2004. We are subject to foreign tax examinations by tax authorities for all such years of operation.

 

As a result of our December 31, 2006 implementation of FIN 48, the opening balance of our net deferred tax assets was reduced by approximately $1.3 million. This reduction of the opening deferred inventory balance resulted in a $1.3 million decrease of the valuation allowance.

 

Also, as a result of our December 31, 2006 implementation of FIN 48, the total amount of gross tax benefits, excluding the offsetting full valuation allowance, that became unrecognized, was approximately $2.2 million. There were no accrued interest and penalties resulting from such unrecognized tax benefits. As of June 30, 2007, the total amount of gross unrecognized tax benefits was $1.4 million, and there was no accrued interest and penalties on such unrecognized tax benefits.

 

59


Table of Contents

The net unrecognized tax benefits, if recognized, would not impact the effective tax rate as of December 30, 2006 and June 30, 2007, because of the effect of our full net deferred tax asset valuation allowance.

 

We do not currently anticipate that any significant increase or decrease to the gross unrecognized tax benefits will be recorded during the remainder of 2007.

 

Other Income Tax Disclosures

 

Consistent with 2006, we anticipate recording a valuation allowance against all of our deferred tax assets during 2007. As a result of this valuation allowance, we expect our full year effective tax rate to be at or about zero.

 

Under Section 382 of the Internal Revenue Code, or Section 382, certain significant changes in ownership may restrict the future utilization of our tax loss carryforwards. The annual limitation is equal to the value of our stock immediately before the ownership change, multiplied by the long-term tax-exempt rate (i.e., the highest of the adjusted federal long-term rates in effect for any month in the three-calendar-month period ending with the calendar month in which the change date occurs). Based upon preliminary calculations, we estimate that the utilization of pre-Section 382 ownership change tax losses for federal income tax purposes for Nabi as a whole would be limited to approximately $14.0 million per year. As a result, federal net operating losses may expire before we are able to fully utilize them. As we have recorded a full valuation allowance against our net deferred tax assets, there is no current impact of this limitation for financial reporting purposes. A more detailed calculation will be prepared once we have taxable income reportable under federal and state laws.

 

NOTE 6 LEASES

 

We conduct certain of our operations under operating lease agreements. The majority of these lease agreements contain renewal options, which enable us to renew the leases for periods of two to ten years at the then fair rental value at the end of the initial lease term.

 

Rent expense was approximately $1.1 million for each of the six months ended June 30, 2007 and July 1, 2006, respectively, and $2.4 million and $1.6 million for the years ended December 30, 2006 and December 31, 2005, respectively.

 

As of December 30, 2006, the aggregate future minimum lease payments under all non-cancelable operating leases with initial or remaining lease terms in excess of one year are as follows:

 

Year Ending


   (in thousands)

2007

   $ 1,371

2008

     1,279

2009

     614

2010

     332

2011

     285

Thereafter

     59
    

Total minimum lease commitments

   $ 3,940
    

 

As of December 30, 2006, future minimum lease payments under capital leases was $401,000, all of which is payable in 2007. The present value of these payments at December 30, 2006 was $291,000.

 

NOTE 7 COMMITMENTS AND CONTINGENCIES

 

During 2006, the BSBU recorded $4.5 million of other revenue related to a contract manufacturing agreement with Inhibitex, Inc., or Inhibitex. Inhibitex disputed the amounts due to us and we arbitrated this dispute during January 2007. On February 9, 2007, we received a favorable ruling from the arbitrator awarding

 

60


Table of Contents

us the full $4.5 million, which we recorded in 2006. On March 20, 2007, we filed a Motion to Confirm the arbitration award for which there was a hearing in April 2007. Nabi expects to receive the full amount during 2007.

 

As of December 30, 2006, there was open purchase order commitments of approximately $4.6 million associated with the BSBU. See lease commitments, Note 6 and Strategic Alliances, Note 8, for other commitments.

 

NOTE 8 STRATEGIC ALLIANCES

 

We enter into strategic alliances for the manufacture and commercialization of some of our marketed and pipeline products. The current material strategic alliances related to the BSBU are discussed below.

 

Novartis

 

We have an agreement with Novartis, that grants us an exclusive supply agreement for four vaccines, including the vaccine for hepatitis C. In addition, we have rights to 10 additional Novartis vaccines for use in humans to produce immunotherapeutic products. The agreement may also grant us access to a vaccine adjuvant, MF 59.

 

This agreement may be important to the development of the next generation of our investigational product, Civacir.

 

We will be responsible for all development, manufacturing and worldwide distribution of these products. We may terminate the agreement on a product-by-product basis in which event we must transfer to Novartis all of our rights with respect to the product as to which the agreement has been terminated. Similarly, Novartis may terminate its obligations to supply immunizing agents to us on a product-by-product basis, in which event Novartis shall grant to us a license of the technology necessary for us to manufacture the applicable immunizing agent and the financial arrangements in the Novartis agreement with respect to such agent shall continue.

 

Talecris Biotheraputics

 

In 2006, we extended our long-term supply agreement for non-specific antibodies with Talecris. The agreement guarantees sale of our non-specific antibodies at a predetermined price and protects our product from possible market downturns.

 

We are responsible for supplying Talecris with an annual minimum amount of non-specific antibodies until the end of 2011 and Talecris is responsible for testing the plasma.

 

ProMetic

 

In 2006, we signed an agreement with ProMetic of Montreal, Canada for the exclusive worldwide use of their technology in the purification of immunoglobulins for several hyperimmune products including Civacir. The ProMetic technology promises a higher yield of immunoglobulin from a liter of plasma, which we believe may thereby reduce the cost of production and improve manufacturing efficiency.

 

Fresenius Biotech

 

During 2006, we signed an agreement with Fresenius Biotech to advance the development of ATG-Fresenius S in the U.S. and Canada. ATG-Fresenius S is an immunosuppressive polyclonal antibody product used for the prevention and treatment of acute rejection following organ transplantation.

 

61


Table of Contents

Agreements related to the historical results of the BSBU which have been terminated include the following.

 

Cangene Corporation

 

Under a license and distribution agreement with Cangene, we had exclusive rights to distribute and market WinRho SDF in the U.S. This agreement ended on March 24, 2005 and we ceased distribution of the product. There was $6.2 million of sales of WinRho SDF during 2005, while there have been no sales subsequent to the termination of the agreement.

 

NOTE 9 STOCK-BASED COMPENSATION

 

Nabi maintains incentive stock plans that provide for grants of stock options and restricted stock to officers and key employees, of which the majority provide either direct or indirect support to BSBU. The majority of the expense that the BSBU incurs is related to employees who indirectly support the business; therefore, the information regarding award activity represents consolidated Nabi Biopharmaceuticals. The information related to the expense recorded in each period represents the total direct and allocated expense in the BSBU. For the six months ended June 30, 2007 the stock compensation expense allocated to the BSBU represented 79% of Nabi’s total stock compensation expense, whereas for both the six months ended July 1, 2006 and year ended 2006 the BSBU incurred 65% of Nabi’s total compensation expense. The stock plans are described more fully below.

 

Adoption of New Accounting Guidance and Transition

 

Prior to January 1, 2006, Nabi accounted for its incentive stock plans under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, or APB No. 25, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation, or SFAS No. 123. Under APB No. 25, when the exercise price of our employee stock options equaled or exceeded the market price of the underlying stock on the date of grant, no compensation cost was recognized.

 

Effective January 1, 2006, Nabi adopted the fair value recognition provisions of SFAS No. 123R, Share-Based Payment, and related interpretations, or SFAS No. 123R, which is a revision of SFAS No. 123, using the modified-prospective transition method. Under that method, compensation cost recognized in the year ended December 30, 2006 includes (a) compensation cost for all share-based payments granted prior to, but not yet vested as of, January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (b) compensation cost for all share-based payments granted on or subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. Compensation cost related to stock awards granted prior to, but not vested as of, January 1, 2006 is being recognized on a straight-line basis over the requisite remaining service period for the entire award in accordance with the provisions of SFAS No. 123R. Results for the prior periods have not been restated.

 

During the third quarter of 2006, Nabi initiated a voluntary review of its historical and current year equity grant programs and the accounting for these programs. The review identified errors in the determination of the measurement date for certain stock option grants in prior years. As a result the BSBU includes additional non-cash compensation expense of $1.7 million in 2006 related to these corrections.

 

62


Table of Contents

Pro Forma Information Under SFAS No. 123 for Periods Prior to Fiscal 2006

 

The fair value of each stock option on the date of grant and the fair value of shares issuable pursuant to Nabi’s Employee Stock Purchase Plan, or ESPP, in the year ended December 31, 2005 were estimated using a Black-Scholes option-pricing formula applying the following assumptions, and amortized over the respective option’s vesting period or ESPP plan purchase period, or six months, using the straight-line attribution approach, as shown in the following table:

 

     Stock Options

   ESPP

Expected term (in years)

   4.0-4.7    0.5

Risk-free interest rate

   3.92%-4.96%    2.41%-3.26%

Expected volatility

   47.9%-87.3%    41.6%-58.3%

Expected dividend yield

   0%    0%

 

Expected term:    The expected term represents the period over which the share-based awards are expected to be outstanding.

 

Risk-free interest rate:    The risk-free interest rate was based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the stock option award’s expected term.

 

Expected volatility:    The volatility factor was based on the historical price of Nabi common stock over the most recent period commensurate with the expected term of the award for stock options and over the six-month plan purchase period for ESPP shares.

 

Expected dividend yield:    Nabi does not intend to pay dividends on our common stock for the foreseeable future. Accordingly, a dividend yield of zero was used in the assumptions.

 

The expected term and expected volatility of the instruments were based upon Nabi’s historical data.

 

The weighted-average fair value of options granted during 2005 was $6.01. Forfeitures were recognized as they occurred. The weighted-average fair value of shares issuable pursuant to the ESPP during 2005 was $4.53 per share.

 

The table below illustrates the effect on the BSBU’s net loss during 2005 had the fair value recognition provisions of SFAS No. 123 been applied. The expense includes an estimated allocation related to both employees who directly support the business as well as those who indirectly support the business. The estimated fair value is amortized to expense over each option grant’s respective vesting period and over the six-month plan purchase period for shares issuable under the ESPP.

 

(in thousands)


      

Net loss, as reported

   $ (974 )

Total share-based exployee compensation cost included in reported net loss

     —    

Total share-based exployee compensation cost determined under SFAS No. 123

     (23,381 )
    


Pro forma net loss

   $ (24,355 )
    


 

Valuation and Expense Information under SFAS No. 123R

 

As a result of the adoption of SFAS No. 123R, the BSBU recorded compensation costs of $1.0 million, $0.8 million and $3.5 million for the six months ended June 30, 2007, July 1, 2006 and the year ended December 30, 2006, respectively. As of June 30, 2007, there was $6.8 million of total unrecognized compensation cost related to non-vested stock options, restricted stock, and shares issuable under the ESPP, which will be expensed over a weighted-average period of 3.1 years. However, if the transaction with Biotest is consummated, it will accelerate the vesting periods on many of the outstanding awards (see Note 10). We did not recognize a tax benefit for share-based compensation arrangements during the year ended December 30, 2006.

 

63


Table of Contents

As required by SFAS No. 123R, we now estimate forfeitures of stock options and restricted stock awards and recognize compensation cost only for those awards expected to vest. Forfeiture rates are determined for two groups of employees associated with the BSBU, senior management and all other employees, based on historical experience. Estimated forfeiture rates are adjusted from time to time based on actual forfeiture experience.

 

Stock Options

 

In connection with the adoption of SFAS No. 123R, the fair value of each stock option is estimated on the date of grant using a Black-Scholes option-pricing formula, applying the following assumptions, and amortized to expense over the option’s vesting period using the straight-line attribution approach:

 

     Six months ended
June 30, 2007


   Year Ended
December 30, 2006


Expected term (in years)

   4.94-6.29    2.15-8.12

Risk-free interest rate

   4.74%    4.47%-5.70%

Expected volatility

   75.5%-76.9%    81.4%-98.4%

Expected dividend yield

   0%    0%

 

Expected term:    The expected term represents the period over which the share-based awards are expected to be outstanding based on the historical experience of Nabi’s employees.

 

Risk-free interest rate:    The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the stock option award’s expected term.

 

Expected volatility:    The volatility factor is based on the historical price of Nabi’s common stock over the most recent period commensurate with the expected term of the stock option award.

 

Expected dividend yield:    Nabi does not intend to pay dividends on our common stock for the foreseeable future. Accordingly, a dividend yield of zero was used in the assumptions.

 

64


Table of Contents

During the year ended December 30, 2006, Nabi granted options to purchase its common stock, which become exercisable over various vesting periods as follows: 26,500 options vested immediately, 1,461,638 options that vest ratably over four years on the anniversary of each award, 138,000 options granted to outside directors and the corporate secretary that vest at the end of six months and 437,260 options (granted as part of a retention program authorized by the compensation committee of our board of directors) that vest at the end of three years subject to continuous service with the Company and to acceleration in certain circumstances. During the six months ended June 30, 2007, Nabi granted 1,663,800 options which included 866,000 shares which become exercisable over four years in equal installments after the date of grant, 597,800 shares which become exercisable over four years in equal installments beginning January 2, 2008 and 200,000 shares granted to outside directors and the corporate secretary that vest over one year in equal quarterly installments. A summary of option activity under Nabi’s stock plans is presented below:

 

Options


   Number of
Options


    Weighted-
Average
Exercise
Price


   Weighted-
Average
Remaining
Contractual
Term (years)


   Aggregate
Intrinsic
Value
($000’s)


Outstanding at December 31, 2005

   8,699,323     $ 9.96            

Granted

   2,063,398       5.29            

Exercised

   (477,215 )     4.91            

Forfeited

   (828,607 )     7.61            

Expired

   (1,512,937 )     11.36            
    

                 

Outstanding at December 30, 2006

   7,943,962     $ 9.03    6.62    $ 5,431

Granted

   1,663,800       5.20            

Exercised

   (198,840 )     4.50            

Forfeited

   (609,772 )     4.80            

Expired

   (1,367,915 )     11.79            
    

                 

Outstanding at June 30, 2007

   7,431,235     $ 8.13    5.00    $ 578
    

 

  
  

Vested and expected to vest at June 30, 2007

   6,758,222       8.42    4.82      559
    

 

  
  

Exercisable at June 30, 2007

   5,313,358       9.30    4.29      474
    

 

  
  

 

The amount of compensation costs to stock options awards reflected in the BSBU was $0.8 million, $0.5 million and $1.2 million for the six months ended June 30, 2007 and July 1, 2006 and the year ended December 30, 2006, respectively. As of June 30, 2007, there was $4.9 million of unrecognized compensation cost related to the stock options granted under Nabi’s stock plans. That cost is expected to be recognized over a weighted-average period of 3.1 years, however if the transaction with Biotest is consummated, it will accelerate the vesting periods on many of the outstanding awards, see Note 10. The total intrinsic value of stock options exercised was $0.2 million during the six months ended June 30, 2007 and was $0.8 million and $4.9 million in 2006 and 2005, respectively.

 

Restricted Stock

 

During 2006, Nabi granted 60,000 shares of restricted stock that vest at the end of three years, and 80,000 and 20,000 shares of restricted stock that vest ratably over three and four years, respectively, subject to continuous service with Nabi and to acceleration in certain circumstances. In addition, as part of the retention program, during 2006, Nabi granted 50,000 and 304,610 shares of restricted stock that vest at the end of one and three years, respectively, subject to continuous service with the Company and to acceleration in certain circumstances. During the first half of 2007, Nabi granted 386,766 restricted shares, of which 373,700 shares vest ratably over four years beginning January 2, 2008, 4,355 shares vest in full on August 15, 2007 and 8,711 shares vest upon achievement of certain performance goals.

 

65


Table of Contents

A summary of the status of Nabi’s restricted stock awards as of June 30, 2007 and changes during fiscal 2006 and first six months of 2007 is presented below:

 

Restricted Stock


   Number of
Shares


    Weighted -
Average Fair
Value at Grant
Date


Nonvested at December 31, 2005

   —       $ —  

Granted

   514,610       4.46

Vested

   —         —  

Forfeited

   (64,831 )     3.83
    

     

Nonvested at December 30, 2006

   449,779       4.55

Granted

   386,766       5.22

Vested

   (74,833 )     4.93

Forfeited

   (232,066 )     4.47
    

     

Nonvested at June 30, 2007

   529,646       5.02
    

     

 

The amount of compensation costs reflected in the results of the BSBU related to restricted stock awards was $0.1 million, $0.1 million and $0.3 million for the six months ended June 30, 2007 and July 1, 2006 and the year ended December 30, 2006, respectively. As of June 30, 2007, there was $1.8 million of total unrecognized compensation cost related to restricted stock awards granted under Nabi’s stock plans. That cost is expected to be recognized over a weighted-average period of 3.1 years, however, if the transaction with Biotest is consummated, it will accelerate the vesting periods on many of the outstanding awards (see Note 10).

 

Employee Stock Purchase Plan (ESPP)

 

The terms of the ESPP, as amended, allow for qualified employees, as defined therein, to participate in the purchase of up to 1,000,000 shares of Nabi common stock at a price equal to 85% of the lower of the closing price at the beginning or end of each semi-annual stock purchase period.

 

In connection with the adoption of SFAS No. 123R, the fair value of each share of stock which may be issued under Nabi’s ESPP is estimated based upon Nabi’s common stock prices on December 1, 2005, June 1, 2006, and December 1, 2006, using a Black-Scholes option-pricing formula, applying the following assumptions, and amortized that value to expense over the plan purchase period using the straight-line attribution approach:

 

     Six Months Ended
June 30, 2007


   Year Ended
December 30, 2006


Expected term (in years)

   0.5    0.5

Risk-free interest rate

   5.0%   

4.2%-4.9%

Expected volatility

   33.5%   

41.1%-181.0%

Expected dividend yield

   0%    0%

Fair value at grant date

   $1.67    $2.21-$2.36

 

The amount of compensation costs recorded in the six months ended June 30, 2007 and July 1, 2006 and the year ended 2006 related to participation in the ESPP was $0.1 million, $0.2 million and $0.3 million, respectively, based upon the anticipated purchase of 148,890 shares, 80,023 shares, 43,778 and 47,283 on May 31, 2006, November 30, 2006, May 31, 2007, and November 30, 2007, respectively. As of June 30, 2007, there was $0.1 million of total unrecognized compensation cost related to shares that may be issued under the ESPP. That cost is expected to be fully recognized during the remainder of 2007.

 

66


Table of Contents

NOTE 10 SALE OF BSBU AND CSS ASSETS

 

On September 11, 2007, Nabi announced that it entered into the asset purchase agreement with Biotest and Biotest Pharmaceuticals to sell the BSBU and CSS assets (including certain related liabilities) to Biotest Pharmaceuticals for $185 million.

 

Included in the assets to be sold are Nabi-HB, and other plasma business assets, including Nabi’s state-of-the-art plasma protein production plant, nine FDA-certified plasma collection centers across the U.S., and investigational products, IVIG, Civacir®, anti-D and Altastaph. The acquisition also will include most of Nabi’s corporate shared services group assets (other than cash and cash equivalents) and Nabi’s Boca Raton, Florida headquarters and real properties. Nabi will retain all cash, cash equivalents and accounts receivable, its Rockville, Maryland facility, which will become its new corporate headquarters, and its pharmaceuticals strategic business unit assets, including its proprietary vaccines, NicVAX® [Nicotine Conjugate Vaccine], its innovative and proprietary investigational vaccine for nicotine addiction and the prevention of smoking relapse, and StaphVAX® its investigational vaccine against Staphylococcus aureus infections. Nabi also will retain the right to receive up to an additional $75 million in milestone and royalty payments related to the divestiture of PhosLo in November 2006.

 

The asset purchase agreement may be terminated by either Biotest Pharmaceuticals or Nabi if the closing has not occurred by March 31, 2008, or upon the occurrence of certain specified events. In addition, if the asset purchase agreement is terminated because of a determination by the Company’s board of directors to accept an acquisition proposal that is a “Superior Transaction” as defined in the asset purchase agreement, the Company has agreed to pay Biotest Pharmaceuticals a termination fee of $8.5 million. If the asset purchase agreement is terminated because the Company’s stockholders do not approve the transaction, (a) the Company must pay Biotest Pharmaceuticals its reasonable expenses incurred in connection with the asset purchase agreement (up to a maximum amount of $3 million) and (b) if, within 12 months after the date of the asset purchase agreement, the Company closes the acquisition by any entity other than Biotest Pharmaceuticals of at least 50% of the securities of the Company (by merger, stock purchase or otherwise) or 50% of the Company’s assets, with terms at least as favorable to the Company in the aggregate as the terms of the asset purchase agreement, upon consummation of such subsequent transaction, the Company must pay to Biotest Pharmaceuticals the difference between $8.5 million and the expenses previously paid to Biotest Pharmaceuticals. The closing is subject to certain closing conditions, including, but not limited to, Nabi stockholder approval of the transaction, consents, if required, to the assignment of specified material contracts, the expiration of the waiting period under the HSR Act and certain other specified conditions.

 

The asset purchase agreement also provides that, at closing, Nabi and Biotest Pharmaceuticals will enter into the following agreements: (i) a Transition Services Agreement with Biotest Pharmaceuticals pursuant to which Nabi and Biotest Pharmaceuticals will agree to provide transition services (including services related to finance, human resources, information technologies, and clinical and regulatory) to each other for a period of up to six months after closing for a price equal to 150% of direct salary costs plus out of pocket costs, (ii) a Contract Manufacturing Agreement pursuant to which Biotest Pharmaceuticals will provide manufacturing and technology transfer services related to NicVAX and StaphVAX until December 31, 2009 to Nabi at cost, (iii) a Right of First Refusal and Right of First Negotiation Agreement pursuant to which Nabi will grant Biotest Pharmaceuticals a right of first negotiation and a right of first refusal to obtain rights to utilize StaphVAX and to license the StaphVAX intellectual property that are necessary to enable Biotest Pharmaceuticals to use StaphVAX solely for purposes relating to Altastaph, and (iv) a Trademark License Agreement pursuant to which, Nabi will license to Biotest Pharmaceuticals the “Nabi-HB” marks on a worldwide, perpetual, royalty-free basis solely for Biotest Pharmaceuticals’ use in the promotion, distribution and sale of Nabi-HB.

 

On September 20, 2007, the board of directors of Nabi approved certain compensation-related actions in connection with the pending asset sale to Biotest Pharmaceuticals. The compensation-related actions apply to all employees of the BSBU and the Boca Raton-based corporate shared services group employees who remain employees of Nabi through the closing of the transaction and (i) who are offered employment with Biotest

 

67


Table of Contents

Pharmaceuticals, accept the employment offer and resign as an employee of Nabi, or (ii) who do not become employed by Biotest Pharmaceuticals and are terminated by Nabi without cause in connection with the transaction (the “Affected Employees”). For all Affected Employees the board approved:

 

   

The acceleration of vesting of all unvested stock options held by Affected Employees on the closing of the transaction and the amendment to all outstanding options held by Affected Employees to extend on the closing of the transaction the post-termination of employment exercise period from 90 days to six months.

 

   

The acceleration of vesting on the closing of the transaction of all unvested restricted stock held by Affected Employees that would have vested in 2008 or 2009.

 

   

The payment of a portion of the 2007 VIP Incentive Bonus Plan bonus that is otherwise determined to be due under the terms of the plan pro rated based on the portion of 2007 that each Affected Employee who participates in the plan was employed by Nabi.

 

   

The continued participation by those Affected Employees who participate in the Employee Stock Purchase Plan (ESPP) through the current period ending November 30, 2007, notwithstanding the fact that their employment with Nabi may terminate before such date and an amendment to the ESPP to permit such continued participation.

 

   

The payment to Affected Employees that were awarded incentive bonuses that would otherwise be payable to them on January 2, 2008 had such Affected Employees continued to be employed by Nabi through such date.

 

The Affected Employees include executive officers Raafat E.F. Fahim, Ph.D., Chief Operating Officer and General Manager of the BSBU, and Senior Vice President, Research, Technical and Production Operations, and Jordan I. Siegel, Senior Vice President, Finance and Administration, Chief Financial Officer and Treasurer, but not Leslie Hudson, Ph.D., Interim President and Chief Executive Officer.

 

In addition, the board determined that for purposes of all outstanding options held by directors under Nabi’s 2007 Omnibus Equity and Incentive Plan, 2004 Stock Plan for Non-Employee Directors and Stock Plan for Non-Employee Directors, the transaction will not constitute a sale of all or substantially all of the Company’s assets. Therefore, the vesting of options held by directors will not accelerate as a result of the transaction, and the options held by directors will not terminate as a result of the transaction, but rather will continue to be exercisable in accordance with their terms.

 

68


Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,

DIRECTORS AND MANAGEMENT

 

The following table sets forth information as of the close of business on                      2007, the record date (unless otherwise noted), as to the Nabi common stock beneficially owned by (i) all of our directors, (ii) each named executive officer as defined by the regulations of the SEC, (iii) current directors and executive officers of Nabi as a group, and (iv) each person who is known to us to be the beneficial owner of more than 5% of our common stock. Unless otherwise noted, this information has been provided by the persons named in the table.

 

Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned, subject to community property laws, where applicable. Percentage of ownership is based on                      shares of common stock outstanding on the record date. A person is deemed to be the beneficial owner of our common stock that can be acquired within 60 days of the record date upon the exercise of options or convertible securities, and that person’s options or convertible securities are assumed to have been exercised or converted (and the underlying shares of our common stock outstanding) in determining each person’s beneficial and percentage ownership but are not deemed outstanding for computing the percentage ownership of any other person. Consequently, the denominator for calculating that percentage may differ for each stockholder.

 

Name of Beneficial Owner


  

Amount of Beneficial

Ownership


   

Percent of

Class


 

Directors(1)

            

Jason M. Aryeh

   * *   * *

David L. Castaldi

   * *   * *

Geoffrey F. Cox, Ph.D.

   * *   * *

Peter Davis

   * *   * *

Richard A. Harvey, Jr.

   * *   * *

Leslie Hudson, Ph.D.

   * *   * *

Linda Jenckes

   * *   * *

Timothy P. Lynch

   * *   * *

Stephen G. Sudovar

   * *   * *

Named Executive Officers(1)(2)

            

Raafat E.F. Fahim, Ph.D.

   * *   * *

Jordan I. Siegel

   * *   * *

Current directors and executive officers as a group (11 persons)

   * *   * *

5% Beneficial Owners

            

Capital Research and Management Company and SMALLCAP World Fund, Inc.

333 South Hope Street

Los Angeles, CA 90071

   3,050,000 (3)   [5.0 %]

David M. Knott and Dorset Management Corporation

485 Underhill Boulevard, Suite 205

Syosset, New York 11791-3419

   5,914,800 (4)   [9.8 %]

Harvest Management, L.L.C.

James Morgan Rutman, Nathaniel Bohrer, and Marjorie Gochberg Kellner

600 Madison Avenue, 11th Floor

New York, NY 10022

   5,686,790 (5)   [9.4 %]

Third Point LLC, Third Point Offshore Fund, Ltd., Daniel S. Loeb and Jason Aryeh

   6,890,000 (6)   [11.4 %]

390 Park Avenue, 18th Floor

New York, NY 10022

            

Chap-Cap Activist Partners Master Fund, Ltd., Chap-Cap Partners II Master Fund, Ltd., Chapman Capital L.L.C. and Robert L. Chapman, Jr.

   5,693,578 (7)   [9.4 %]

222 N. Sepulveda Blvd.

El Segundo, CA 90245

            

 

 

69


Table of Contents

*   Less than one percent.
**   Information will be provided as of the record date.
(1)   The address for such beneficial owners is c/o Nabi Biopharmaceuticals, 5800 Park of Commerce Blvd., N.W., Boca Raton, Florida, 33487.

 

(2)   Messrs. McLain, Rasmussen, Smith, Johnson and Logal, who are listed in our proxy statement for the Company’s 2007 annual meeting, are no longer employed by the Company and therefore are not included in this table.

 

(3)   Information obtained from Amendment No. 1 to Schedule 13G filed with the SEC on February 12, 2007 by Capital Research and Management Company and SMALLCAP World Fund, Inc. Capital Research and Management Company, a registered investment adviser, is deemed to be the beneficial owner of 3,050,000 shares as a result of acting as investment adviser to various registered investment companies. SMALLCAP World Fund, Inc., a registered investment company, which is advised by Capital Research and Management Company, is the beneficial owner of 3,050,000 shares.

 

(4)   Information obtained from Amendment No. 1 to Schedule 13G filed with the SEC on February 14, 2007 by David M. Knott and Dorset Management Corporation. The Amendment No. 1 discloses that, of these shares, Mr. Knott and Dorset Management Corporation have (i) sole power to vote or direct the vote of 5,475,900 shares and sole power to dispose or to direct the disposition of 5,812,000 shares and (ii) shared power to vote or direct the vote of 374,900 shares and shared power to dispose or direct the disposition of 102,500 shares.

 

(5)   Information obtained from Schedule 13G filed with the SEC on April 25, 2007 by Harvest Management, L.L.C., James Morgan Rutman, Nathaniel Bohrer and Marjorie Gochberg Kellner. The Schedule 13G discloses that the reporting persons have shared power to vote or direct the vote and shared power to dispose or direct the disposition of the 5,686,790 shares.

 

(6)   Information obtained from Amendment No. 11 to Schedule 13D filed with the SEC on May 11, 2007 by Third Point LLC, Third Point Offshore Fund, Ltd., Daniel S. Loeb, and Jason Aryeh. The Amendment No. 11 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 6,890,000 shares; (ii) Third Point Offshore Fund, Ltd., has shared power to vote or direct the vote and shared power to dispose or direct the disposition of 4,428,500 shares; and (iii) Mr. Aryeh has shared power to vote or direct the vote and shared power to dispose or direct the disposition of 1,250,650 shares.

 

(7)   Information obtained from Amendment No. 3 to Schedule 13D filed with the SEC on July 30, 2007 by Chap-Cap Activist Partners Master Fund, Ltd., Chap-Cap Partners II Master Fund, Ltd., Chapman Capital L.L.C. and Robert L. Chapman, Jr. The Amendment No. 3 discloses that, of these shares, (i) Mr. Chapman and Chapman Capital L.L.C. have shared power to vote or direct the vote and shared power to dispose or direct the disposition of 5,693,578 shares; (ii) Chap-Cap Activist Partners Master Fund, Ltd. has shared power to vote or direct the vote of 4,019,051 shares and sole power to dispose or direct the disposition of 4,019,051 shares; and (iii) Chap-Cap Partners II Master Fund, Ltd. has shared power to vote or direct the vote of 1,674,527 shares and sole power to dispose or direct the disposition of 1,674,527 shares.

 

70


Table of Contents

PROPOSAL TWO:

ADJOURNMENT OF THE SPECIAL MEETING

 

Our stockholders are being asked to consider and vote upon a proposal to approve an adjournment of the special meeting, if necessary, including adjournments to permit further solicitation of proxies in favor of the proposal to approve the asset sale.

 

If a quorum is not present at the special meeting, our bylaws permit the person presiding at the meeting to adjourn the meeting from time to time until a quorum is present. If a quorum is present at the special meeting, but there are not sufficient votes at the time of the special meeting to approve the proposal to approve the asset sale, our stockholders may also be asked to vote on the proposal to approve the adjournment of the special meeting to permit further solicitation of proxies in favor of that proposal.

 

If the adjournment proposal is submitted for a vote at the special meeting, and if our stockholders vote to approve the adjournment proposal, the meeting may be adjourned to enable our board of directors to solicit additional proxies in favor of the proposal to approve the asset sale. If the adjournment proposal is approved, and the special meeting is adjourned, our board of directors will use the additional time to solicit additional proxies in favor of the proposal to approve the asset sale, including the solicitation of proxies from stockholders that have previously voted against the proposal to approve the asset sale. Among other things, approval of the adjournment proposal could mean that, even though we may have received proxies representing a sufficient number of votes against the proposal to approve the asset sale to defeat it, management could present the adjournment proposal for a vote of stockholders and thereby cause the special meeting to be adjourned without a vote on the proposal to approve the asset sale and seek during that period of adjournment to convince the holders of those shares to change their votes to vote in favor of the proposal to approve the asset sale.

 

Our board of directors believes that if the number of shares of our common stock voting in favor of the proposal to approve the asset sale is insufficient to approve that proposal, it is in the best interests of our stockholders to enable our board of directors, for a limited period of time, to continue to seek to obtain a sufficient number of additional votes in favor of the proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, INCLUDING ADJOURNMENTS TO PERMIT FURTHER SOLICITATION OF PROXIES IN FAVOR OF THE PROPOSAL TO APPROVE THE ASSET SALE.

 

71


Table of Contents

STOCKHOLDER PROPOSALS FOR NEXT YEAR’S ANNUAL MEETING

 

Under the federal securities laws, the deadline for submitting stockholder proposals for inclusion in Nabi’s proxy statement and form of proxy for Nabi’s 2008 annual meeting is December 13, 2007. Under our bylaws, notice of a stockholder proposal is considered untimely unless it is delivered to or mailed and received at Nabi’s principal executive offices 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.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s public reference room at 100 F Street, N.E., Room 1024, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the public reference room. The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers, including us, file electronically with the SEC. The SEC’s website is located at www.sec.gov. The information contained on the SEC’s website is not incorporated by reference into this proxy statement.

 

We make available, free of charge through our website at www.nabi.com, our Annual Reports on Form 10-K; Quarterly Reports on Form 10-Q; Current Reports on Form 8-K; and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the material is electronically filed with, or furnished to, the SEC. The information on our website is not incorporated by reference into this proxy statement.

 

72


Table of Contents

ANNEX A

EXECUTION VERSION

ASSET PURCHASE AGREEMENT

by and among

NABI BIOPHARMACEUTICALS,

BIOTEST PHARMACEUTICALS CORPORATION

and

BIOTEST AG

Dated as of September 11, 2007


Table of Contents

TABLE OF CONTENTS

 

          Page

ARTICLE I DEFINITIONS    A-1
1.1   

Definitions.

   A-1
1.2   

Other Definitional Provisions.

   A-1
ARTICLE II PURCHASE AND SALE    A-2
2.1   

Purchase and Sale of Purchased Assets.

   A-2
2.2   

Excluded Assets.

   A-2
2.3   

Assumed Liabilities.

   A-3
2.4   

Excluded Liabilities.

   A-5
2.5   

Consent of Third Parties.

   A-6
2.6   

Purchase Price; Escrow.

   A-7
2.7   

Accounts Receivable.

   A-7
2.8   

Inventory.

   A-7
2.9   

Purchase Price Allocation.

   A-8
2.10   

No Set-Off.

   A-9
2.11   

Risk of Loss.

   A-9
ARTICLE III CLOSING    A-9
3.1   

Closing.

   A-9
3.2   

Transactions at Closing.

   A-10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER    A-12
4.1   

Organization.

   A-12
4.2   

Due Authorization.

   A-13
4.3   

Organizational Documents.

   A-13
4.4   

No Conflicts; Enforceability.

   A-13
4.5   

Title; Sufficiency.

   A-13
4.6   

Inventory; Equipment.

   A-13
4.7   

Intellectual Property.

   A-14
4.8   

Litigation.

   A-15
4.9   

Government Consents.

   A-15
4.10   

Third Party Consents.

   A-15
4.11   

Taxes.

   A-15
4.12   

Real Property.

   A-16
4.13   

Personal Property and Equipment.

   A-18
4.14   

Environmental, Safety and Health.

   A-18
4.15   

Employee Benefit Plans.

   A-19
4.16   

Compliance with Laws.

   A-20
4.17   

Regulatory Matters.

   A-20
4.18   

Contracts.

   A-21
4.19   

Financial Statements.

   A-23

 

i


Table of Contents
4.20   

Accounts Receivable.

   A-23
4.21   

Absence of Certain Changes.

   A-23
4.22   

Brokers, Etc.

   A-24
4.23   

Insurance.

   A-24
4.24   

Compensation and Status of Employees.

   A-25
4.25   

Customers and Suppliers.

   A-26
4.26   

FDA Approval of the Boca Raton Facility.

   A-26
4.27   

Product Regulatory Status.

   A-26
4.28   

Return Policy.

   A-27
4.29   

Disclaimer.

   A-27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT    A-27
5.1   

Organization.

   A-27
5.2   

Due Authorization.

   A-27
5.3   

No Conflicts; Enforceability.

   A-27
5.4   

Litigation.

   A-28
5.5   

Consents.

   A-28
5.6   

Financing.

   A-28
5.7   

Government Authorizations.

   A-28
5.8   

Brokers, Etc.

   A-28
5.9   

Independent Investigation.

   A-29
ARTICLE VI COVENANTS PRIOR TO CLOSING    A-29
6.1   

Access to Information.

   A-29