Preliminary Proxy Statement
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.      )

 

Filed by the Registrant x

 

Filed by a Party other than the Registrant ¨

 

Check the appropriate box:

x   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 Under § 240.14a-12

 

Nabi Biopharmaceuticals


(Name of Registrant as Specified In Its Charter)

 

N/A


(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

¨   No fee required.
x   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:

Common stock, par value $0.10 per share, of Nabi Biopharmaceuticals (the “common stock”)

 

  


  (2)   Aggregate number of securities to which transaction applies:

126,000,000 shares of common stock to be issued in the transaction

 

  


  (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 maximum aggregate value of the transaction was calculated, solely for purposes of determining the filing fee, by multiplying 126,000,000 shares of common stock by $1.58 per share (value of one share of common stock, based on the average of high and low prices of Nabi Biopharmaceuticals common stock as reported on the NASDAQ Global Select Market on June 4, 2012). In accordance with Section 14(g) of the U.S. Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying 0.0001146 by the sum under item (4) below.

 

  


  (4)   Proposed maximum aggregate value of transaction: $199,080,000

 

  


  (5)   Total fee paid: $22,815
¨   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

Preliminary Proxy Statement

Subject to completion, dated June 8, 2012

 

LOGO

[*****], 2012

PROPOSED TRANSACTION—YOUR VOTE IS VERY IMPORTANT

The board of directors of Nabi Biopharmaceuticals (“Nabi”) has unanimously approved and declared advisable a Merger Implementation Agreement (the “Transaction Agreement”), dated as of April 22, 2012, by and between Nabi and Biota Holdings Limited (“Biota”), pursuant to which Nabi will acquire all of the outstanding shares of Biota in exchange for shares of Nabi common stock, and Biota will become a wholly-owned subsidiary of Nabi (the “Transaction”). Upon the completion of the Transaction, shares of Nabi common stock representing approximately 74% of the outstanding common stock of the combined company will be issued to former Biota stockholders, and the shares of common stock held by existing Nabi stockholders will represent approximately 26% of the outstanding common stock of the combined company immediately after the completion of the Transaction. The combined company will be named Biota Pharmaceuticals, Inc., and the shares of the combined company will be traded on the NASDAQ Global Select Market under the symbol “[*****].”

We are sending you the accompanying proxy statement to ask you to attend a special meeting of the stockholders of Nabi, or to vote your shares by proxy, in respect of the following proposals in connection with the Transaction:

 

   

to approve an amendment to the Nabi Restated Certificate of Incorporation (the “Nabi certificate of incorporation”) to increase the authorized shares of Nabi common stock from 125,000,000 shares to 200,000,000 shares;

 

   

to approve an amendment to the Nabi certificate of incorporation to change the name of Nabi from “Nabi Biopharmaceuticals” to “Biota Pharmaceuticals, Inc.”;

 

   

to approve an amendment to the Nabi certificate of incorporation to effect a reverse stock split of Nabi common stock at any time prior to December 31, 2012 at a ratio ranging from four-to-one to eight-to-one, as determined by Nabi’s board of directors in its sole discretion;

 

   

to approve the issuance of shares of Nabi common stock to Biota stockholders contemplated by the Transaction Agreement;

 

   

to approve, on an advisory (non-binding) basis, the compensation payable to certain executive officers of Nabi under existing arrangements in connection with the Transaction; and

 

   

to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve any of proposals 1 through 4.

After careful consideration, Nabi’s board of directors has determined that it is advisable and in the best interests of Nabi and its stockholders to consummate the Transaction as contemplated by the Transaction Agreement, and unanimously recommends that you vote “FOR” each of the foregoing proposals.

The accompanying proxy statement provides you with information about the Transaction Agreement, the Transaction and the special meeting of Nabi’s stockholders. Nabi encourages you to read the proxy statement carefully and in its entirety, including the Transaction Agreement, which is attached as Annex A. Before deciding how to vote, you should consider the “Risk Factors” beginning on page 28 of the proxy statement. You may also obtain more information about Nabi from documents Nabi has filed with the Securities and Exchange Commission as described under “Where You Can Find More Information” beginning on page 142 of the proxy statement.


Table of Contents

Your vote is important.

The Transaction cannot be completed unless the proposals to approve the amendments to the Nabi certificate of incorporation to increase the number of authorized shares and to change the name of the company are approved by the affirmative vote of the holders of a majority of the outstanding shares of Nabi’s common stock entitled to vote thereon, and the proposal to approve the issuance of Nabi common stock to Biota stockholders in the Transaction is approved by the affirmative vote of the holders of a majority of the votes cast on the proposal at the special meeting of Nabi stockholders. Accordingly, whether or not you plan to attend the special meeting, you are requested to promptly vote your shares by completing, signing and dating the enclosed proxy card or voting instruction form and returning it in the postage-paid envelope provided, or by voting over the telephone or via the Internet as instructed in these materials. If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote “FOR” each of the proposals described above.

Thank you for your cooperation and continued support.

 

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

President and Chief Executive

Officer

 

This proxy statement is dated [*****], 2012 and, together with the accompanying proxy card, is first being mailed or otherwise distributed to stockholders of Nabi on or about [*****], 2012.


Table of Contents

 

LOGO

12270 Wilkins Avenue

Rockville, Maryland 20852

NOTICE OF

SPECIAL MEETING OF STOCKHOLDERS

To Be Held On [*****], 2012

A special meeting of stockholders of Nabi Biopharmaceuticals (“Nabi”) will be held at [*****] on [*****], 2012, at [*****] a.m. local time, for the purpose of considering and voting upon the following proposals:

 

  1. to approve an amendment to the Nabi Restated Certificate of Incorporation (the “Nabi certificate of incorporation”) to increase the authorized shares of Nabi common stock from 125,000,000 shares to 200,000,000 shares;

 

  2. to approve an amendment to the Nabi certificate of incorporation to change the name of Nabi from “Nabi Biopharmaceuticals” to “Biota Pharmaceuticals, Inc.”;

 

  3. to approve an amendment to the Nabi certificate of incorporation to effect a reverse stock split of Nabi common stock at any time prior to December 31, 2012 at a ratio ranging from four-to-one to eight-to-one, as determined by Nabi’s board of directors in its sole discretion;

 

  4. to approve the issuance of shares of Nabi common stock to Biota stockholders contemplated by the Merger Implementation Agreement (the “Transaction Agreement”), dated as of April 22, 2012, by and between Nabi and Biota Holdings Limited (“Biota”), pursuant to which Nabi will acquire all of the outstanding shares of Biota in exchange for shares of Nabi common stock, and Biota will become a wholly-owned subsidiary of Nabi (the “Transaction”);

 

  5. to approve, on an advisory (non-binding) basis, the compensation payable to certain executive officers of Nabi under existing arrangements in connection with the Transaction; and

 

  6. to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve any of proposals 1 through 4.

[*****], 2012 has been fixed as the record date for the determination of Nabi stockholders who are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement thereof. Only holders of Nabi common stock of record as of the close of business on [*****], 2012 are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement thereof.

Your vote is important. Each of the proposals to be considered and voted upon at the special meeting is subject to a separate vote by Nabi’s stockholders. The Transaction cannot be completed unless the proposals to approve the amendments to the Nabi certificate of incorporation to increase the number of authorized shares and change the name of the company are approved by the affirmative vote of the holders of a majority of the outstanding shares of Nabi’s common stock entitled to vote thereon, and the proposal to approve the issuance of Nabi common stock to Biota stockholders in the Transaction is approved by the affirmative vote of the holders of a majority of the votes cast on the proposal at the special meeting of Nabi stockholders. Accordingly, whether or not you plan to attend the special meeting, you are requested to promptly vote your shares by completing, signing and dating the enclosed proxy card or voting instruction form and returning it in the postage-paid envelope provided, or by voting over the telephone or via the Internet as instructed in these materials. If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote “FOR” each of the proposals described above.


Table of Contents

Instructions on the different ways to vote are found on the enclosed proxy card or voting instruction form. Please vote each and every proxy card or voting instruction form you receive. You may revoke your proxy at any time before it is voted at the special meeting by following the procedures set forth in the accompanying proxy statement.

Nabi’s board of directors has determined that it is advisable and in the best interests of Nabi and its stockholders to consummate the Transaction as contemplated by the Transaction Agreement, and unanimously recommends that you vote “FOR” each of the proposals to be considered and voted upon at the special meeting.

 

By Order of the Board of Directors,
  

Raafat E. F. Fahim, Ph.D.

President and Chief Executive Officer

Rockville, Maryland

[*****], 2012


Table of Contents

TABLE OF CONTENTS

 

SUMMARY

     1   

The Companies

     1   

Special Meeting of Nabi Stockholders

     2   

The Transaction

     4   

Selected Historical Consolidated Financial Data of Nabi

     10   

Selected Historical Consolidated Financial Information of Biota

     11   

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

     12   

COMPARATIVE PER SHARE DATA

     19   

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     20   

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

     22   

RISK FACTORS

     28   

Risks Related to the Transaction

     28   

Risks Related to Biota and the Combined Company

     33   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     43   

THE SPECIAL MEETING

     45   

Date, Time and Place

     45   

Purpose

     45   

Board Recommendation

     45   

Record Date; Outstanding Shares; Shares Entitled to Vote

     45   

Quorum

     46   

Security Ownership of Certain Beneficial Owners and Management of Nabi Stock

     47   

Required Vote

     48   

Voting by Proxy

     49   

How to Vote

     50   

Revoking Your Proxy

     50   

Voting in Person at the Special Meeting

     51   

Adjournments and Postponements

     51   

Householding

     51   

Solicitation of Proxies

     51   

Other Business

     52   

Assistance

     52   

THE TRANSACTION

     53   

Structure of the Transaction

     53   

Background of the Transaction

     53   

Nabi Reasons for the Transaction

     57   

Biota Reasons for the Transaction

     60   

Recommendation of the Nabi Board of Directors

     61   

Opinion of Financial Advisor to the Nabi Board of Directors

     61   

Interests of Nabi Executive Officers and Directors in the Transaction

     67   

Executive Compensation Payable in Connection with the Transaction

     70   

Accounting Treatment

     71   

Board of Directors and Management of the Combined Company Following the Transaction; Headquarters

     72   

Federal Securities Laws Consequences; Stock Transfer Restrictions

     75   

Material U.S. Federal Income Tax Consequences of the Transaction

     76   

Considerations by Nabi’s Board of Directors if the Transaction is Not Completed

     76   

NO APPRAISAL RIGHTS

     76   

REPURCHASE OF SHARES OF NABI COMMON STOCK; DIVIDENDS AND DISTRIBUTIONS

     77   

Issuer Tender Offer; Dividends and Distributions

     77   

Contingent Value Rights

     77   

 

i


Table of Contents

REGULATORY AND OTHER APPROVALS REQUIRED FOR THE TRANSACTION

     79   

Australian Regulatory Matters

     79   

Biota Stockholder Approval

     79   

NASDAQ Initial Listing

     80   

HSR Approval

     80   

INFORMATION ABOUT THE COMPANIES

     81   

Nabi Biopharmaceuticals

     81   

Biota Holdings Limited

     81   

Biota Management’s Discussion and Analysis of Financial Condition and Results of Operations

     98   

Biota Quantitative and Qualitative Disclosures About Financial, Credit and Liquidity Risk

     103   

THE TRANSACTION AGREEMENT

     106   

Form of the Transaction; Transaction Consideration

     106   

Potential Adjustment to Transaction Consideration

     107   

Status of Newly Issued Shares of Nabi Common Stock and Exemption from Registration

     107   

Nabi Closing Net Cash Balance

     107   

Conditions Precedent to the Transaction

     108   

Representations and Warranties

     110   

Conduct of Business and Related Covenants

     114   

Additional Obligations

     119   

Board Recommendation

     120   

Exclusivity; No-Solicitation

     122   

Termination

     123   

Break Fee

     124   

Costs and Expenses

     126   

Amendment; Waiver

     126   

PROPOSAL 1: AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK

     127   

PROPOSAL 2: AMENDMENT TO CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF NABI BIOPHARMACEUTICALS

     130   

PROPOSAL 3: AMENDMENT TO CERTIFICATE OF INCORPORATION TO EFFECTUATE REVERSE STOCK SPLIT

     131   

PROPOSAL 4: ISSUANCE OF NABI SHARES IN CONNECTION WITH THE TRANSACTION

     138   

PROPOSAL 5: ADVISORY VOTE ON EXECUTIVE COMPENSATION

     139   

PROPOSAL 6: ADJOURNMENT OF SPECIAL MEETING

     140   

FUTURE NABI STOCKHOLDER PROPOSALS AND NOMINATIONS

     141   

WHERE YOU CAN FIND MORE INFORMATION

     142   

Where Stockholders Can Find More Information About Nabi

     142   

Where Stockholders Can Find More Information About Biota

     143   

LIST OF ANNEXES

 

Annex A

  

Merger Implementation Agreement

  

Annex B

  

Biota Financial Statements

  

Annex C

  

Opinion of Financial Advisor to the Nabi Board of Directors

  

Annex D

  

Amendment No. 1 to Certificate of Incorporation

  

Annex E

  

Amendment No. 2 to Certificate of Incorporation

  

Annex F

  

Amendment No. 3 to Certificate of Incorporation

  

Annex G

  

Contingent Value Rights Agreement

  

 

ii


Table of Contents

SUMMARY

This proxy statement is being furnished to the stockholders of Nabi Biopharmaceuticals (“Nabi”) in connection with the solicitation of proxies by our board of directors for use at a special meeting of stockholders to be held on [******], 2012 at [******] a.m. local time, and at any reconvened meeting following any adjournment or postponement thereof. The special meeting will be held at [*****]. The purpose of the special meeting is for our stockholders to consider and vote upon certain proposals in connection with the transaction contemplated by the Merger Implementation Agreement, dated as of April 22, 2012, as it may be amended or supplemented (the “Transaction Agreement”), by and among Nabi and Biota Holdings Limited, a Melbourne, Australia company (“Biota”), pursuant to which each outstanding ordinary share of Biota capital stock will be acquired by Nabi in exchange for newly issued shares of Nabi common stock pursuant to a scheme of arrangement under Australian corporate law, and Biota will become a wholly-owned subsidiary of Nabi (the “Transaction” or the “scheme of arrangement”).

The following summary highlights selected information in this proxy statement and may not contain all of the information that may be important to you. Accordingly, you are urged to read carefully this entire proxy statement, including the attached annexes, and the other documents to which this proxy statement refers you in order for you to fully understand the Transaction. See “Where You Can Find More Information” beginning on page 142 of this proxy statement. Each item in this summary refers to the page of this proxy statement on which that subject is discussed in more detail.

The functional currency of Nabi is the United States (“U.S.”) dollar. Unless otherwise specified, all references to “dollars,” “$,” or “U.S.$” shall mean U.S. dollars. Biota uses the Australian dollar (“A$”) as its functional currency.

The Companies

Nabi Biopharmaceuticals (see page 81)

Nabi Biopharmaceuticals, headquartered in Rockville, Maryland, is a biopharmaceutical company that has focused on the development of vaccines addressing unmet medical needs, including nicotine addiction. Its sole product currently in development is NicVAX® (Nicotine Conjugate Vaccine), an innovative and proprietary investigational vaccine for the treatment of nicotine addiction and prevention of smoking relapse based on patented technology.

The principal trading market for Nabi’s common stock (NASDAQ: NABI) is the NASDAQ Global Select Market (“NASDAQ”). Nabi’s principal executive offices are located at 12270 Wilkins Avenue, Rockville, MD 20852. Its telephone number is (301) 770-3099. Nabi’s website is located at www.nabi.com (the contents of which are not part of this proxy statement).

Biota Holdings Limited (see page 81)

Biota Holdings Limited, headquartered in Melbourne Australia, is an anti-infective drug discovery and development company with key expertise in respiratory diseases, particularly influenza. Biota’s first revenue-producing product, zanamivir, was developed and commercialized as the first-in-class neuraminidase inhibitor (“NI”) pursuant to a research and license agreement entered into with GlaxoSmithKline (“GSK”). GSK markets the product as Relenza™. Biota and Daiichi Sankyo co-own a range of second generation influenza NI antivirals, of which the lead product, laninamivir, is marketed in Japan by Daiichi Sankyo as Inavir®. Biota holds a contract from the U.S. Office of Biomedical Advanced Research and Development Authority (“BARDA”) for the late stage development of laninamivir.

 

 

1


Table of Contents

In addition, Biota has undertaken a Phase IIb study with its lead antiviral compound for human rhinovirus (“HRV”) infection in patients with asthma. Further Biota research achievements include a series of candidate drugs aimed at treatment of respiratory syncytial virus (“RSV”) infection and hepatitis C virus (“HCV”) infection.

The principal trading market for Biota’s ordinary shares (ASX: BTA) is the Australian Securities Exchange (“ASX”). Biota’s ordinary shares also are traded in the U.S. in the form of American Depositary Receipts (ADR Trading Symbol: BTAHY). Biota’s principal executive offices are located at 10/585 Blackburn Road, Notting Hill Victoria 3168, Australia. Its telephone number is +61 3 9915 3700. Biota’s website is located at www.biota.com.au (the contents of which are not part of this proxy statement).

Special Meeting of Nabi Stockholders

The Special Meeting (see page 45)

Nabi’s stockholders are being asked to consider and vote upon the following proposals in connection with the Transaction:

 

  1. to approve an amendment to the Nabi Restated Certificate of Incorporation (the “Nabi certificate of incorporation”) to increase the authorized shares of Nabi common stock from 125,000,000 shares to 200,000,000 shares;

 

  2. to approve an amendment to the Nabi certificate of incorporation to change the name of Nabi from “Nabi Biopharmaceuticals” to “Biota Pharmaceuticals, Inc.”;

 

  3. to approve an amendment to the Nabi certificate of incorporation to effect a reverse stock split of Nabi common stock at any time prior to December 31, 2012, at a ratio ranging from four-to-one to eight-to-one, as determined by Nabi’s board of directors in its sole discretion;

 

  4. to approve the issuance of shares of Nabi common stock to Biota stockholders contemplated by the Transaction Agreement;

 

  5. to approve, on an advisory (non-binding) basis, of the compensation payable to certain executive officers of Nabi under existing arrangements in connection with the Transaction; and

 

  6. to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve any of proposals 1 through 4.

Proposals 1, 2 and 3 are collectively referred to herein as the “Charter Amendment Proposals.” Proposals 1, 2 and 4 are collectively referred to herein as the “Transaction Proposals.”

The Nabi stockholder’s vote on such proposals will take place at a special meeting to be held at [*****] a.m. local time on [*****], 2012, at [*****].

Record Date for the Special Meeting (see page 45)

You can vote at the special meeting all of the shares of Nabi’s common stock you held of record as of the close of business on [*****], 2012, which is the record date for the special meeting. As of the close of business on the record date, there were [*****] shares of Nabi’s common stock outstanding.

Recommendation of the Nabi Board of Directors (see page 61)

Nabi’s board of directors unanimously recommends that you vote “FOR” each of the proposals to be considered and voted upon at the special meeting. In connection with its decision to recommend that you vote

 

 

2


Table of Contents

FOR” each of the proposals, Nabi’s board of directors has determined that it is advisable and in the best interests of Nabi and its stockholders to adopt each amendment to the Nabi certificate of incorporation and to issue the Nabi shares in connection with the Transaction. See “The Transaction—Nabi Reasons for the Transaction” beginning on page 57 of this proxy statement and “The Transaction—Recommendation of the Nabi Board of Directors” beginning on page 61 of this proxy statement for more information about the factors considered by Nabi’s board of directors.

Required Vote (see page 48)

Each share of Nabi’s common stock is entitled to one vote at the special meeting. The holders of issued and outstanding shares of Nabi’s common stock which represent a majority of the votes entitled to be cast at the special meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business at the special meeting. Abstentions will be counted for purposes of determining the presence of a quorum at the special meeting. Banks, brokers and other nominees that hold their customers’ shares in street name may not vote their customers’ shares on “non-routine” matters without instructions from their customers. As each of the proposals to be voted upon at the special meeting is considered “non-routine,” such organizations do not have discretion to vote on any proposal for which they do not receive instructions from their customers (this is referred to in this context as a “broker non-vote”). As a result, if you fail to provide your broker, bank or other nominee with any instructions regarding how to vote your shares, your shares will not be considered present at the special meeting, will not be counted for purposes of determining the presence of a quorum and will not be voted on any of the proposals. If you provide instructions to your broker, bank or other nominee which indicate how to vote your shares with respect to certain proposals but not with respect to a particular proposal, your shares will be considered present at the special meeting and be counted for purposes of determining the presence of a quorum but will not be voted with respect to that particular proposal.

Approval of the proposals presented at the special meeting will require the following:

 

   

Approval of each of the Charter Amendment Proposals requires the affirmative vote of the holders of a majority of the shares of Nabi’s common stock outstanding at the close of business on the record date. An abstention from voting or a broker non-vote on any of the Charter Amendment Proposals will have the same effect as a vote against the proposal.

 

   

Approval of the issuance of shares of Nabi common stock to Biota stockholders as contemplated by the Transaction Agreement will require the affirmative vote of the holders of a majority of the shares of Nabi’s common stock properly cast on the proposal at the special meeting. An abstention from voting or a broker non-vote on this proposal will have no effect on the outcome of the vote on this proposal.

 

   

Approval, on an advisory (non-binding) basis, of the compensation payable to certain executive officers of Nabi under existing arrangements in connection with the Transaction will require the affirmative vote of the holders of a majority of the shares of Nabi’s common stock properly cast on the proposal at the special meeting. An abstention from voting or a broker non-vote on this proposal will have no effect on the outcome of the vote on this proposal.

 

   

Approval of one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve any of proposals 1 through 4, will require the affirmative vote of the holders of a majority of the shares of Nabi’s common stock properly cast on the proposal at the special meeting. An abstention from voting or a broker non-vote on this proposal will have no effect on the outcome of the vote on this proposal.

Security Ownership of Certain Beneficial Owners and Management of Nabi Stock (see page 47)

As of the close of business on May 15, 2012, the current directors and executive officers of Nabi were deemed to beneficially own 2,722,663 shares of Nabi’s common stock, which represented approximately 6.3% of

 

 

3


Table of Contents

the shares of Nabi’s common stock outstanding on that date. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (“SEC”), as described below under “The Special Meeting—Security Ownership of Certain Beneficial Owners and Management of Nabi Stock” beginning on page 47 of this proxy statement.

The Transaction

Structure of the Transaction (see page 53)

On April 22, 2012, Nabi and Biota entered into the Transaction Agreement, pursuant to which Nabi will acquire all of the outstanding ordinary shares of Biota in accordance with a scheme of arrangement under Australian corporate law and to be submitted for approval by the Supreme Court of Victoria, Australia. Subject to the terms and conditions of the Transaction Agreement, upon the completion of the Transaction, each ordinary share of Biota outstanding immediately prior to the completion of the Transaction will be transferred to Nabi in exchange for 0.669212231 newly issued shares of Nabi common stock (the “exchange ratio”), subject to certain adjustments as described below. Biota does not have any class or series of capital stock outstanding other than the ordinary shares. As a result of the Transaction, Biota will become a wholly-owned subsidiary of Nabi. A copy of the Transaction Agreement is attached as Annex A to this proxy statement. Nabi encourages you to read the Transaction Agreement carefully and in its entirety, as it is the principal legal document that governs the Transaction.

Consideration (see page 106)

Nabi stockholders.    Nabi stockholders will continue to own their existing shares of Nabi common stock after the Transaction. Nabi stockholders should not return their stock certificates with the enclosed proxy card.

Biota stockholders.    Nabi has agreed to issue 0.669212231 shares of Nabi common stock for each ordinary share of Biota outstanding immediately prior to the completion of the Transaction, subject to certain adjustments as described below. Immediately after the completion of the Transaction, Nabi’s existing stockholders collectively will own approximately 26% of the outstanding common stock of the combined company, and Biota’s former stockholders collectively will own approximately 74% of the outstanding common stock of the combined company. In the event that Nabi conducts an issuer tender offer to purchase shares of Nabi common stock or implements the reverse stock split described in the proxy statement before the completion of the Transaction, the number of shares of Nabi common stock to be issued in exchange for each ordinary share of Biota will be adjusted in accordance with the Transaction Agreement in order to preserve the respective percentage of shares of the outstanding common stock of the combined company to be held immediately after the completion of the Transaction by Biota’s former stockholders on the one hand (collectively being approximately 74%) and Nabi’s existing stockholders on the other hand (collectively being approximately 26%).

Treatment of Equity-Based Awards (see page 106)

Biota has represented in the Transaction Agreement that, immediately prior to the completion of the Transaction, there will be no outstanding rights to acquire any ordinary shares of Biota under Biota’s equity incentive arrangements.

Opinion of Financial Advisor to the Nabi Board of Directors (see page 61)

On April 20, 2012, Houlihan Lokey Financial Advisors, Inc., which we refer to as Houlihan Lokey, rendered its written opinion to Nabi’s board of directors as to the fairness to Nabi from a financial point of view as of such date of the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement.

 

 

4


Table of Contents

Houlihan Lokey’s opinion was directed to Nabi’s board of directors (in its capacity as such) and only addressed the fairness to Nabi, from a financial point of view, of the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement and did not address any other aspect or implication of the Transaction. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex C to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to any Nabi stockholder as to how such stockholder should act or vote with respect to any matter relating to the Transaction.

Interests of Nabi’s Executive Officers and Directors in the Transaction (see page 67)

In considering the recommendation of Nabi’s board of directors to vote in favor of each of the proposals to be considered and voted upon at the special meeting, you should be aware that Nabi’s executive officers and directors have interests in the Transaction that may be different from, or in addition to, the interests of Nabi’s stockholders generally. Nabi’s board of directors was aware of these interests and considered them, among other matters, when it approved the Transaction Agreement and the Transaction. See “The Transaction—Interests of Nabi Executive Officers and Directors in the Transaction” beginning on page 67 of this proxy statement for more information.

Accounting Treatment (see page 71)

Under accounting principles generally accepted in the U.S. (“U.S. GAAP”), the Transaction will be accounted for as a “reverse acquisition” pursuant to which Biota will be considered the acquiring entity for accounting purposes. As such, Biota will allocate the total purchase consideration to Nabi’s tangible and identifiable intangible assets and liabilities based on their relative fair values at the date of the completion of the Transaction. Biota’s historical results of operations will replace Nabi’s historical results of operations for all periods prior to the Transaction; after completion of the Transaction, the results of operations of both companies will be included in Nabi’s consolidated financial statements.

Directors and Executive Officers Following the Transaction (see page 72)

The parties have reached certain agreements regarding the governance of the combined company following the completion of the Transaction, including the following:

 

   

Board of Directors.    The board of directors of the combined company will initially consist of eight directors, six of whom will be former directors of Biota and two of whom will be former directors of Nabi. It is currently expected that a certain number of directors of the combined company who were former directors of Biota will not stand for election at the first stockholders’ meeting of the combined company following the Transaction. Thereafter, it is currently expected that the board of directors of the combined company will consist of fewer members with a majority of the directors being based in the U.S.

 

   

Executive Officers.    Biota’s current chief executive officer, Peter Cook, and Biota’s current chief financial officer, Damian Lismore, will fill those roles within the combined company for an appropriate transition period until U.S. based executives are appointed and assume responsibility. It is anticipated that senior management positions in the combined company will be filled principally from current members of the Biota management team.

 

   

Headquarters.    It is the current intention of Biota and Nabi that the combined company’s corporate headquarters will initially be located in Rockville, Maryland.

 

 

5


Table of Contents

Material U.S. Federal Income Tax Consequences of the Transaction (see page 76)

There are no material U.S. federal income tax consequences to Nabi’s existing stockholders that will result from the issuance of Nabi shares in the Transaction. See “Proposal 3: Amendment to Certificate of Incorporation to Effectuate Reverse Stock Split—Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split” beginning on page 136 of this proxy statement for a discussion of certain U.S. federal income tax consequences of the proposed reverse stock split described in this proxy statement.

Regulatory and Other Approvals (see page 79)

Australian Regulatory Matters

Under the Corporations Act of 2001 (Cth) (“Corporations Act”), the Transaction must be approved by Biota stockholders and a Supreme or Federal Court of Australia (expected to be the Supreme Court of Victoria, Australia) to become effective. The Corporations Act expressly prevents a court from granting approval unless:

 

   

the Australian Securities and Investments Commission (“ASIC”) provides the court with a statement that it has no objection to the Transaction; or

 

   

the court is satisfied that the Transaction has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Corporations Act (which relates to takeovers).

Biota intends to apply to the Supreme Court of Victoria, Australia at a first court hearing (the “first court hearing”) for (1) an order that meetings for each applicable class of Biota stockholders be convened and (2) an approval of the distribution of the explanatory memorandum about the Transaction to Biota stockholders. Biota must give ASIC at least 14 days’ notice before the first court hearing and must allow ASIC a reasonable opportunity to review the explanatory memorandum and to make submissions to the court with respect to it. Biota also intends to apply to ASIC for ASIC to provide to the court a written statement that it has no objection to the Transaction. Provided that ASIC is satisfied with the terms of the Transaction documents (including the Transaction Agreement) and the explanatory memorandum to be provided to Biota stockholders, Biota expects that ASIC will provide to the court at the first court hearing a letter stating that ASIC intends to issue a no-objection statement at the second court hearing (described below).

Pursuant to the orders made by the court at the first court hearing, Biota will convene a meeting of Biota stockholders to vote on a resolution to approve the Transaction. The Transaction requires the approval of a majority in number of Biota stockholders that are present and voting in person or by proxy at the meeting, as well as at least 75% of the votes cast on the resolution in person or by proxy by Biota stockholders at the meeting. The Biota stockholders meeting is expected to occur on or about [****], 2012.

If the Transaction is approved at the Biota stockholders meeting and all other conditions to the Transaction are satisfied, Biota will seek to obtain court approval of the Transaction at the second court hearing (the “second court hearing”). The second court hearing is expected to occur on or about [****], 2012. If the court approves the Transaction, a copy of the court order will be filed with ASIC and the Transaction will become binding on all applicable classes of Biota stockholders, including those who voted against the Transaction (the “effective date of the scheme of arrangement”).

Trading in ordinary shares of Biota on the ASX will be suspended from the close of trading on the effective date of the scheme of arrangement, which is anticipated to be shortly after the date of court approval. A record date (which will be the fifth business day following the effective date of the arrangement) will be set to determine the Biota stockholders entitled to receive shares of Nabi common stock as consideration in the Transaction. The Transaction consideration will be provided to Biota stockholders three business days after such

 

 

6


Table of Contents

record date and the Transaction will be deemed to have been completed or implemented on that date (the “implementation date”).

Biota Stockholder Approval

Biota will hold a special meeting of its stockholders on or about [****], 2012 to consider and vote upon a resolution to approve the Transaction. The Transaction must be approved by the requisite majorities of the Biota stockholders under Section 411(4)(a)(ii) of the Corporations Act (a majority in number of Biota stockholders that are present and voting in person or by proxy at the meeting, as well as at least 75% of the votes cast on the resolution in person or by proxy by Biota stockholders at the meeting).

HSR Approval

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the implementing regulations thereunder (the “HSR Act”) require the parties to certain acquisitions and other transactions that meet specified minimum size requirements to file notifications with the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission and observe a waiting period before closing, unless an exemption applies. Nabi and Biota believe that the Transaction is exempt from the notification requirements based on the fair market value of Biota’s non-exempt assets, namely its assets in the U.S. Accordingly, neither Nabi nor Biota is expected to make a notification under the HSR Act with respect to the Transaction. If such exemption does not apply, the Transaction would not be able to be consummated until notification and report forms have been filed with the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission by Nabi and Biota, and the applicable waiting period has expired or been terminated.

Other than as described above, neither Nabi nor Biota is aware of any regulatory approvals required to be obtained, or waiting periods required to expire, to complete the Transaction. If Nabi and Biota discover that other approvals or waiting periods are necessary, Nabi and Biota intend to seek to obtain or comply with them in accordance with the Transaction Agreement.

Listing of Nabi Common Stock (see page 80)

Nabi has agreed to obtain listing approval from the NASDAQ for the Nabi shares that will be issued in the Transaction.

No Appraisal Rights (see page 76)

Under Delaware law, holders of shares of Nabi common stock are not entitled to appraisal rights in connection with the Transaction or any of the matters to be acted on at the special meeting.

Conditions to Completion of the Transaction (see page 108)

As more fully described in this proxy statement and in the Transaction Agreement, the completion of the Transaction is conditioned on the satisfaction or, where legally permissible, waiver of a number of conditions, including among others:

 

   

Biota stockholder approval of the Transaction;

 

   

Nabi stockholder approval of the Transaction Proposals;

 

   

approval of the Transaction by the Supreme Court of Victoria, Australia;

 

   

approval by the NASDAQ of the listing of the Nabi shares that will be issued in the Transaction;

 

   

Nabi having a closing net cash balance of no less than $54 million after satisfying outstanding liabilities; and

 

 

7


Table of Contents
   

expiration or early termination of any applicable waiting period under the HSR Act and certain other competition laws.

Each party’s obligation to complete the Transaction is subject to certain other conditions, including the absence of any injunction, restraint or governmental restriction prohibiting the Transaction, the accuracy of the other party’s representations and warranties contained in the Transaction Agreement, material compliance by the other party with its obligations under the Transaction Agreement, and the absence of a material adverse effect related to the other party. Nabi cannot be certain when, or if, the conditions to the Transaction will be satisfied or waived, or that the Transaction will be completed. Approval, on an advisory (non-binding) basis, of the compensation payable under existing arrangements to certain executive officers of Nabi and approval of the proposed amendment to the Nabi certificate of incorporation to effect a reverse stock split are not conditions to completion of the Transaction.

Non-Solicitation of Other Offers (see page 122)

The Transaction Agreement obliges each party to abide by certain restrictions on such party’s ability to solicit competing proposals from third parties and to provide non-public information to and enter into discussions or negotiations with third parties regarding competing proposals. Notwithstanding this obligation, each party may under certain circumstances furnish information to and engage in discussions or negotiations with third parties with respect to unsolicited competing proposals if such company’s board of directors determines in good faith that the competing proposal is, or may reasonably be expected to lead to, a superior proposal, as defined in the Transaction Agreement, and that not taking such action would, or would be likely to, involve a breach of the fiduciary or statutory duties owed by a director.

Termination of the Transaction Agreement (see page 123)

The Transaction Agreement may be terminated and the Transaction abandoned at any time before the effective time of the Transaction upon the mutual agreement of Nabi and Biota. In addition, either Nabi or Biota may terminate the Transaction Agreement if:

 

   

there is a breach or non-fulfillment of a condition to closing described under “—Conditions to Completion of the Transaction” above that is not waived;

 

   

a condition to closing becomes incapable of being satisfied, and the parties are unable to reach an agreement to resolve the matter within 15 business days after a notice is given by the non-breaching party to the breaching party;

 

   

before the approval of the Transaction by the Supreme Court of Victoria, Australia, if the other party is in material breach of any clause of the Transaction Agreement and the breach continues to exist for 15 business days after a notice is given by the non-breaching party to the breaching party; or

 

   

the Transaction has not become effective on or before October 31, 2012.

Nabi may terminate the Transaction Agreement if Biota’s board of directors publicly changes (including by attaching qualifications) or withdraws its recommendation in favor of the Transaction or publicly recommends, promotes or otherwise endorses a superior proposal. Similarly, the Transaction Agreement may be terminated by Biota if (1) Nabi’s board of directors publicly changes (including by attaching qualifications) or withdraws its recommendation in favor of the Transaction Proposals or publicly recommends, promotes or otherwise endorses a superior proposal or (2) if Nabi does not comply with its obligations, after the Transaction is approved by the Supreme Court of Victoria, Australia, to provide the Nabi closing net cash balance certificate to Biota on the implementation date showing a Nabi closing net cash balance of no less than $54 million.

 

 

8


Table of Contents

Expenses and Break Fees (see page 124)

In certain circumstances described under “The Transaction Agreement—Break Fee” beginning on page 124 of this proxy statement, Nabi may be obligated to pay Biota a break fee of A$2.0 million or Biota may be obligated to pay Nabi a break fee of A$2.0 million. The Transaction Agreement generally provides that each party will bear its own costs and expenses, except as described under “The Transaction Agreement—Costs and Expenses” beginning on page 126 of this proxy statement.

Repurchase of Shares of Nabi Common Stock; Dividends and Distributions (see page 77)

Nabi plans to return to its stockholders, before the completion of the Transaction, its remaining cash in excess of the $54 million required to be held by Nabi at the completion of the Transaction after satisfying outstanding liabilities. Such distribution is expected to take the form of a repurchase of certain of the outstanding shares of Nabi common stock through an issuer tender offer and, for any remaining amounts, through a dividend or return of capital, and currently is expected to be in the range of approximately $25 million to $30 million in the aggregate. Nabi plans to commence an issuer tender offer to repurchase certain of the outstanding shares of Nabi common stock after filing a preliminary form of this proxy statement with the SEC and to complete such issuer tender offer before mailing a definitive form of this proxy statement to Nabi stockholders. After the completion of the issuer tender offer but prior to the completion of the Transaction, Nabi plans to declare a dividend or effect a return of capital, as applicable, to distribute any remaining cash in excess of the $54 million required to be held by Nabi at the completion of the Transaction that is not required to satisfy any outstanding liabilities.

Contingent Value Rights (see page 77)

Nabi plans to issue contingent value rights (each, a “CVR” and collectively, the “CVRs”) to existing Nabi stockholders before the completion of the Transaction. Nabi expects that one CVR will be issued for each share of Nabi common stock outstanding as of a record date to be set at a date prior to the completion of the Transaction. However, the CVRs will not be attached to the shares of Nabi common stock. A CVR will be a non-transferrable (subject to certain limited exceptions) right to potentially receive certain cash payments in connection with a NicVAX Transaction (as defined in the CVR Agreement) upon the terms and subject to the conditions set forth in a Contingent Value Rights Agreement to be entered into between Nabi and a rights agent (the “CVR Agreement”). The form of the CVR Agreement is attached to this proxy statement as Annex G.

See “Repurchase of Shares of Nabi Common Stock; Dividends and Distributions—Contingent Value Rights” beginning on page 77 of this proxy statement for more information regarding the CVRs, the CVR Agreement and the NicVAX Transaction.

Questions

If you have additional questions about the Transaction or other matters discussed in this proxy statement after reading this proxy statement, you should contact Morrow & Co., LLC, Nabi’s proxy solicitation agent. The address of Morrow & Co., LLC is 470 West Avenue, Stamford, CT 06902. You can call Morrow & Co., LLC at (203) 658-9400 or toll-free at (800) 662-5200.

 

 

9


Table of Contents

Selected Historical Consolidated Financial Data of Nabi

The following table sets forth selected consolidated financial data for Nabi. The data should be read in conjunction with Nabi’s audited consolidated historical financial statements and related notes included in Nabi’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and Nabi’s unaudited condensed consolidated historical financial statements and related notes included in Nabi’s Quarterly Report on Form 10-Q for the three months ended March 31, 2012. See “Where You Can Find More Information” beginning on page 142 of this proxy statement for information regarding how you can view Nabi’s periodic reports filed with the SEC. The summary financial data for the three months ended March 31, 2012 and March 26, 2011 are unaudited, but in the opinion of Nabi’s management reflect all adjustments of a normal recurring nature necessary for a fair statement of Nabi’s financial position and results of operations at the dates and for the periods indicated. The results for the three months ended March 31, 2012 are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year.

Nabi’s historical financial data may not be indicative of the results of operations or financial position to be expected in the future.

 

(in thousands, except per share
amounts)

   Three Months Ended      Year ended  
   March 31,
2012
    March 26,
2011
     December 31,
2011
    December 25,
2010
    December 26,
2009
    December 27,
2008
    December 29,
2007
 

Statement of Operations Data:

               

Revenue:

               

Revenue

   $ 632      $ 9,173       $ 14,838      $ 35,005      $ 10,489        —          —     

Operating expenses:

               

Cost of services

     —          625         1,463        3,951        1,988        —          —     

Research and development expense

     1,518        5,335         17,765        26,078        16,490        12,556        18,841   

General and administrative expense

     1,277        1,342         5,372        6,174        9,987        12,415        26,090   

Total operating expenses

     2,795        7,302         24,600       36,203        28,465        24,971        44,931   

Operating income (loss)

     (2,163     1,871         (9,762 )     (1,198     (17,976     (24,971     (44,931

Interest income

     32        72         194       230        368        4,579        6,026   

Interest expense

     —          —           —          (210     (1,071     (3,902     (9,007

Other income (expense), net

     33        37         37       291        (48     (1,454     446   

Income (loss) from continuing operations before income taxes

     (2,098     1,980         (9,531 )     (877     (18,727     (25,748     (47,466

Benefit from income taxes

     671        —           2,018       1,765        —          2,765        14,265   

Net income (loss) from continuing operations

     (1,427     1,980         (7,513 )     878        (18,727     (22,983     (33,201

Net income from discontinued operations

     991        —           2,982       —          —          4,245        71,587   

Net income (loss)

   $ (436   $ 1,980       $ (4,531 )   $ 878      $ (18,727   $ (18,738   $ 38,386   

Basic income (loss) per share:

               

Continuing operations

   $ (0.03   $ 0.05       $ (0.18 )   $ 0.02      $ (0.37   $ (0.44   $ (0.55

Discontinued operations

     0.02        —           0.07       —          —        $ 0.08      $ 1.19   

Basic income (loss) per share

     (0.01   $ 0.05       $ (0.11 )   $ 0.02      $ (0.37   $ (0.36   $ 0.64   

Diluted income (loss) per share:

               

Continuing operations

   $ (0.03   $ 0.05       $ (0.18 )   $ 0.02      $ (0.37   $ (0.44   $ (0.55

Discontinued operations

     0.02        —         $ 0.07        —          —        $ 0.08      $ 1.19   

Diluted income (loss) per share

   $ (0.01   $ 0.05       $ (0.11 )   $ 0.02      $ (0.37   $ (0.36   $ 0.64   

Balance Sheet Data:

               

Cash, cash equivalents and marketable securities

   $ 94,875      $ 100,525       $ 96,389     $ 110,667      $ 118,999      $ 130,338      $ 219,206   

Working capital

     91,604        95,072         91,629       92,093        95,783        134,540        205,893   

Total assets

     95,236        110,947         97,965     $ 113,871        131,317        144,221        239,236   

Convertible senior notes, non-current

     —          —           —          —          —          15,202        64,450   

Total stockholders equity

   $ 59,410      $ 63,418       $ 58,871     $ 60,570     $ 97,407      $ 121,382     $ 154,486   

 

10


Table of Contents

Selected Historical Consolidated Financial Information of Biota

The following tables set forth the selected historical consolidated financial and operating data for Biota. The selected consolidated statement of income data for the fiscal years ended June 30, 2011, 2010 and 2009, and the selected balance sheet data as of June 30, 2011, 2010 and 2009 are derived from Biota’s audited consolidated financial statements included in Annex B to this proxy statement. The selected consolidated statement of income data for the fiscal years ended June 30, 2008 and 2007, and the selected balance sheet data as of June 30, 2008 and 2007 are derived from Biota’s consolidated financial statements included in its annual reports to stockholders for the fiscal years ended June 30, 2009 and 2008, which are not included in this proxy statement. See “Where You Can Find More Information” beginning on page 142 of this proxy statement for information regarding how you can view Biota’s annual reports to stockholders. The summary financial data for the nine months ended March 31, 2012 and 2011 have been derived from Biota’s unaudited consolidated interim financial statements included in Annex B to this proxy statement. Biota’s unaudited consolidated interim financial data, in the opinion of Biota’s management, reflect all adjustments of a normal recurring nature necessary for a fair statement of Biota’s financial position and results of operations at the dates and for the periods indicated. The results for the nine months ended March 31, 2012 are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year. All financial information is presented in Australian dollars and is prepared under U.S. GAAP.

Biota’s historical financial data may not be indicative of the results of operations or financial position to be expected in the future.

You should read this selected historical consolidated financial data of Biota in conjunction with the section entitled “Information About the Companies—Biota Holdings Limited—Biota Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with Biota’s consolidated financial statements and the related notes to those financial statements included in Annex B to this proxy statement.

 

(in thousands, except per share
amounts)
   Nine Months Ended     Year ended  
   March 31,
2012
(Unaudited)
    March 31,
2011
(Unaudited)
    June 30,
2011
    June 30,
2010
    June 30,
2009
    June 30,
2008
(Unaudited)
    June 30,
2007
(Unaudited)
 

Statement of Operations Data:

              

CONSOLIDATED STATEMENT OF INCOME DATA:

              

Total revenues and other income

   A$ 12,823      A$ 8,746      A$ 12,657      A$ 68,952      A$ 80,399      A$ 41,787      A$ 54,794   

Total costs and expenses

     28,437        33,021        43,510        54,201        41,731        54,119        39,418   

Operating income (loss)

     (15,614     (24,275     (30,853     14,751        38,668        (12,332     15,376   

Interest revenue

     2,467        3,476        4,414        2,513        2,935        3,201        2,507   

Profit (loss) before tax

     (13,147     (20,799     (26,439     17,264        41,603        (9,131     17,883   

Provision for income taxes

     485        466        772        (3,747     (3,636     2,820        (2,349
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Biota

     (12,662     (20,333     (25,667     13,518        37,967        (6,311     20,231   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share attributable to Biota common stockholders—basic

   A$ (0.07   A$ (0.11   A$ (0.14   A$ 0.08      A$ 0.02      A$ (0.04   A$ 0.11   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation—basic

     181,664,389        180,346,145        180,610,151        177,506,986        176,218,530        182,925,866        180,216,862   

Net income (loss) per share attributable to Biota common stockholders—diluted

   A$ (0.07   A$ (0.11   A$ (0.14   A$ 0.08      A$ 0.02      A$ (0.04   A$ 0.11   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation—diluted

     181,664,389        180,346,145        180,610,151        178,630,811        176,456,253        182,925,866        183,195,879   

 

      March  31,
2012

(Unaudited)
     June 30,
2011
     June 30,
2010
     June 30,
2009
     June  30,
2008

(Unaudited)
     June  30,
2007

(Unaudited)
 

Balance Sheet Data:

                 

Cash, cash equivalents and marketable securities

   A$ 51,361         70,011         104,867         86,703         60,164         62,156   

Total assets

     69,651         83,561         119,391         111,790         89,373         92,454   

Current liabilities

     4,608         6,385         17,132         12,454         19,204         13,558   

Non-current liabilities

     424         320         138         2,304         6,869         7,361   

Total liabilities and stockholders’ equity

     69,651         83,561         119,391         111,790         89,373         92,454   

 

11


Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial data is intended to show how the Transaction might have affected historical financial statements if the Transaction had been completed on January 1, 2011 for the purpose of the statement of operations and March 31, 2012 for the purposes of the balance sheet, and was prepared based on the historical financial results reported by Nabi and Biota. The information has been prepared in accordance with U.S. GAAP. It has been derived from and should be read in conjunction with the audited and unaudited historical financial statements of each of Nabi and Biota and the notes thereto, as well as the disclosures contained in each company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations. For more information about Nabi, see “Where You Can Find More Information” beginning on page 142 of this proxy statement for information regarding how you can view Nabi’s periodic reports filed with the SEC. For more information about Biota, see “Information About the Companies—Biota Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 98 of this proxy statement and the consolidated financial statements of Biota and the related notes to those financial statements included in Annex B to this proxy statement. The fiscal year end of the combined company is expected to be December 31.

The Transaction will be accounted for as a reverse acquisition under the acquisition method of accounting. Under the acquisition method of accounting, Biota will be treated as the accounting acquirer and Nabi will be treated as the “acquired” company for financial reporting purposes because, immediately upon completion of the Transaction, Biota’s stockholders prior to the Transaction will hold a majority of the voting interest of the combined company. In addition, the eight member board of directors of the combined company will be comprised of six of the current members of the Biota board of directors and therefore Biota’s current board of directors will possess majority control of the board of directors of the combined company. Members of the current management of Biota will be responsible for the management of the combined company and the majority of the combined company’s activities will be activities related to Biota’s current business.

The unaudited pro forma combined financial statements were prepared in accordance with the regulations of the SEC. The pro forma adjustments reflecting the completion of the Transaction are based upon the acquisition method of accounting in accordance with U.S. GAAP, and upon the assumptions set forth in the notes to the unaudited pro forma combined financial statements.

The unaudited pro forma combined balance sheet as of March 31, 2012 combines the historical balance sheets of Nabi and Biota as of March 31, 2012 and gives pro forma effect to the Transaction as if it had been completed on March 31, 2012.

The unaudited pro forma combined statements of operations for the three months ended March 31, 2012 combine the unaudited historical statements of operations of Nabi and Biota for their respective three-month periods ended March 31, 2012 and gives pro forma effect to the Transaction as if it had been completed on January 1, 2011. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2011 combine the historical statements of operations of Nabi and Biota for their respective twelve months ended December 31, 2011 and gives pro forma effect to the Transaction as if it had been completed on January 1, 2011. Statements of operations information is presented for the continuing operations of Nabi for all periods.

Unaudited Pro Forma Condensed Consolidated Financial Information

The tables presented below reflect the unaudited pro forma adjustments mentioned above to Nabi’s statement of operations for the year ended December 31, 2011 and the three-month period ended March 31, 2012 and to Nabi’s balance sheet as of March 31, 2012.

 

12


Table of Contents

Unaudited Pro Forma Condensed Consolidated Statement of Operations

The accompanying notes on the following page are an integral part of, and should be read together in connection with, these financial statements.

 

      Year ended December 31, 2011  
     Nabi (A)
U.S.$’000
    Biota (B)
U.S.$’000
    Pro Forma
Adjustments
U.S.$’000
     Note      Pro Forma
Combined
U.S.$’000
 

Revenue

            

Revenues from trading operations, net

     14,838        11,867              26,705   

Grant income

     0        1,691              1,691   

Expenses

            

Cost of services

     (1,463     (5,758           (7,221

Research and development

     0        (18,977           (18,977

Product development

     (17,765     (10,097           (27,862

Business development

     0        (2,194           (2,194

General, selling and administrative expenses

     (5,372     (5,260           (10,632
  

 

 

   

 

 

         

 

 

 

Operating (loss)/income

     (9,762     (28,728           (38,490

Interest income/(expense)

     194        3,819              4,013   

Other income/(expense)

     37        0              37   
  

 

 

   

 

 

         

 

 

 

(Loss)/profit before tax

     (9,531     (24,909           (34,440

Income tax credit

     2,018        961              2,979   
  

 

 

   

 

 

         

 

 

 

Net (loss)/income from continuing operations

     (7,513     (23,949           (31,462
  

 

 

   

 

 

         

 

 

 

Basic and diluted net loss per share

     (0.18          C         (0.19

Weighted average shares used in basic and diluted per share computations

     42,336          125,413         D         167,749   

 

      Three months ended March 31, 2012  
     Nabi (E)
U.S.$’000
    Biota (F)
U.S.$’000
    Pro Forma
Adjustments
U.S.$’000
     Note      Pro Forma
Combined
U.S.$’000
 

Revenue

            

Revenues from trading operations, net

     632        7,047              7,679   

Grant income

     0        100              100   

Expenses

            

Cost of services

     0        (1,782           (1,782

Research and development

     0        (3,835           (3,835

Product development

     (1,518     (1,788           (3,306

Business development

     0        (712           (712

General, selling and administrative expenses

     (1,277     (1,470           (2,747
  

 

 

   

 

 

         

 

 

 

Operating (loss)/income

     (2,163     (2,440           (4,603

Interest income/(expense)

     32        736              768   

Other income/(expense)

     33        0              33   
  

 

 

   

 

 

         

 

 

 

(Loss)/profit before tax

     (2,098     (1,704           (3,802

Income tax credit/(expense)

     671        (153           518   
  

 

 

   

 

 

         

 

 

 

Net (loss)/income from continuing operations

     (1,427     (1,856           (3,283
  

 

 

   

 

 

         

 

 

 

Basic and diluted net loss per share

     (0.03          C         (0.02

Weighted average shares used in basic and diluted per share computations

     42,949          125,413         D         168,362   

 

13


Table of Contents

Unaudited Pro Forma Condensed Consolidated Balance Sheet

The accompanying notes on the following pages are an integral part of, and should be read together in connection with, these financial statements.

 

     Nabi (A)
U.S.$’000
    Biota (B)
U.S.$’000
    Pro Forma
Adjustments
U.S.$’000
    Note      Pro
Forma
Combined
U.S.$’000
 

ASSETS

           

Current assets

           

Cash & Equivalents

     94,875        53,338        (40,875     C         107,338   

Accounts Receivable—Trade net

     128        8,673        (128     C         8,673   

Prepaid expense

     216        706        (216     C         706   

Deferred tax asset (a)

     0        535        0           535   

Other current assets

     0        659        0           659   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total Current Assets

     95,219        63,911        (41,219        117,911   
  

 

 

   

 

 

   

 

 

      

 

 

 

Non-current assets

           

Property, plant and equipment

     17        5,353        0           5,370   

Intangible assets

     0        1,995        0           1,995   

Deferred tax asset

     0        1,072        0           1,072   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total Non-current assets

     17        8,420        0           8,437   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total Assets

     95,236        72,332        (41,219        126,349   
  

 

 

   

 

 

   

 

 

      

 

 

 

LIABILITIES

           

Current liabilities

           

Accounts payable

     69        1,192        (69     C         1,192   

Accrued expenses

     1,020        1,094        980        C         3,094   

Customer Advances

     2,526        404        (2,526     C         404   

Other current liabilities—provisions

     0        2,096        0           2,096   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total Current liabilities

     3,615        4,785        (1,615        6,785   
  

 

 

   

 

 

   

 

 

      

 

 

 

Non-current liabilities

           

Customer Advances

     32,211        0        (32,211     C         0   

Other long term liabilities—provisions

     0        440        0           440   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total Non-current liabilities

     32,211        440        (32,211        440   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities

     35,826        5,226        (33,826        7,226   
  

 

 

   

 

 

   

 

 

      

 

 

 

EQUITY

           

Common Stock (b)

     6,357        100,196        42,558        C         149,111   

Treasury Stock—Common (b)

     (92,567     (968     92,567        C         (968

Additional paid in capital

     374,134        773        (374,134     C         773   

Retained Earnings

     (228,514     (60,612     231,616        C         (57,510

Foreign currency translation reserve

     0        27,716        0           27,716   

Stockholders’ equity

     59,410        67,106        (7,393        119,123   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities and stockholders’ equity

     95,236        72,332        (41,219        126,349   
  

 

 

   

 

 

   

 

 

      

 

 

 

 

14


Table of Contents
1. Basis of Presentation

The historical financial data has been adjusted to give pro forma effect to events that are (i) directly attributable to the Transaction, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. The pro forma adjustments are preliminary and based on Biota’s management’s estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition and certain other adjustments. The final purchase price allocation and a final determination of these fair values will reflect Biota’s management’s consideration of relevant information including discounted cash flows analysis and Biota’s management’s own estimates and taking into account significant changes, if any, in long term assumptions. This final purchase price allocation will be based on the actual net tangible and intangible assets that exist as of the closing date of the acquisition. Any final adjustment will change the allocation of purchase price, which could affect the fair value assigned to the assets and liabilities of Nabi and could result in a significant change to the unaudited pro forma condensed consolidated financial information, including goodwill.

The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and is not necessarily indicative of the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the entities been combined during the periods presented. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial statements, the preliminary acquisition-date fair value of the identifiable assets acquired and liabilities assumed reflected in the unaudited pro forma condensed combined financial statements is subject to adjustment and may vary from the actual amounts that will be recorded upon completion of the Transaction.

 

2. Description of Transaction

On April 22, 2012, Nabi entered into the Transaction Agreement with Biota. Pursuant to the terms and subject to the conditions set forth in the Transaction Agreement, Biota will become a wholly owned subsidiary of Nabi.

On the completion of the Transaction, each outstanding share of Biota ordinary shares will be converted into the right to receive that number of shares of Nabi common stock as determined pursuant to the exchange ratio, as calculated pursuant to the terms of the Transaction Agreement. Immediately upon completion of the Transaction and regardless of the exact exchange ratio, Biota shareholders are expected to receive shares of Nabi common stock representing an aggregate of approximately 74% of the outstanding shares of common stock of the combined company. Nabi stockholders will continue to own their existing shares of Nabi common stock, which will not be affected by the Transaction, and will not receive any additional shares of Nabi common stock as a result of the Transaction. As a result, such shares will represent an aggregate of approximately 26% of the outstanding shares of common stock of the combined company.

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of Nabi will be recorded at the acquisition date fair values and added to those of Biota. The pro forma adjustments are preliminary and based on Biota’s management’s estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition. These estimates are based on the most recently available information. To the extent there are significant changes to the combined company’s business following the completion of the Transaction, the assumptions and estimates set forth in the unaudited pro forma condensed combined financial statements could change significantly. The allocation is dependent upon certain valuation and other studies that will not be completed until after the Transaction. Accordingly, the pro forma purchase price adjustments are subject to further adjustments as additional information becomes available and as additional analyses and final valuations are conducted following the completion of the Transaction. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below under Note 4.

 

15


Table of Contents

The unaudited pro forma condensed combined financial statements assume an exchange ratio of 0.669212231. Such ratio was calculated assuming that Nabi does not complete an issuer tender offer prior to the transaction and does not implement the reverse stock split described in the proxy statement. Should Nabi conduct an issuer tender offer or implement the reverse stock split described in the proxy statement prior to the closing of the transaction, the exchange ratio will be adjusted such that Biota shareholders receive approximately 74% of the outstanding shares of the combined company.

 

3. Calculation of estimated consideration transferred

The purchase consideration in a reverse acquisition is determined with reference to the value of equity that the accounting acquirer (in this case Biota, the legal subsidiary) would have had to issue to the owners of the accounting acquiree (Nabi, the legal parent) to give them the same percentage interest in the combined entity. A preliminary estimate of the purchase price is as follows:

 

Number of Biota shares deemed issued

     65,980,514   

Value per share

   $ 0.74  

Estimated purchase price (in thousands)

   $ 48,915   

For pro forma purposes, the fair value of the Biota common stock used in determining the purchase price was $0.74 per share based on the closing price of Biota ordinary shares June 7, 2012 and the U.S.$/A$ exchange rate on that day. The final purchase consideration could differ from the amounts presented in the unaudited pro forma condensed combined financial statements due to movements in Biota’s share price and the U.S.$/A$ exchange rate between June 7, 2012, and the closing date of the transaction. For example, if the Biota share price and U.S.$/A$ exchange rate on April 22, 2012 (the date of the Transaction Agreement) were used, the value per share would have been $0.98 and the estimated purchase price calculated would be $62,506,000.

The impact of possible movements in the Biota share price and the U.S.$/A$ exchange rate from those applied above is as follows:

 

Impact on estimated purchase price (in thousands)

  

Share price fluctuations of +/- A$0.10

   $ 6,447  

Exchange rate fluctuation of +/- U.S.$0.10

   $ 5,015   

 

4. Preliminary allocation of consideration transferred to net assets acquired

The estimated acquired tangible and intangible assets and liabilities assumed based on their estimated fair values as of March 31, 2012 comprises (table in thousands):

 

     $’000  

Cash and cash equivalents

     54,000   

Property, plant and equipment

     17   
  

 

 

 
     54,017   

Excess of fair value of assets over purchase price

     (5,102
  

 

 

 

Total estimated purchase price based on value of Biota shares

     48,915   

The allocation of the purchase price is preliminary. The final determination of the purchase price allocation will be based on the fair values of assets acquired, other identifiable intangibles and the fair values of liabilities assumed as of the date that the Transaction is completed. Any excess of the purchase price over the fair value of assets and liabilities acquired is allocated to goodwill. Any excess of the fair value of assets and liabilities over the purchase price is recognised as a gain in profit or loss on the acquisition date by the acquirer. The preliminary valuation analysis conducted by Nabi and Biota determined that the fair value of identifiable assets acquired less the fair value of identifiable liabilities assumed by the combined company were greater than the estimated

 

16


Table of Contents

purchase price, resulting in a gain in profit or loss. In accordance with the regulations of the SEC, this gain has not been included in the pro forma statements of operations but has been included in the pro forma balance sheet adjustments. As noted in 3 above, the determination of the purchase price is preliminary as of the date of this filing. If the Biota share price and U.S.$/A$ exchange rate on April 22, 2012 (the date of the Transaction Agreement) were used, the estimated purchase price calculated would be $62,506,000. Applying this estimated purchase price to the fair value of assets and liabilities indicated above would lead to an allocation to goodwill of $8,489,000.

The estimates of assets acquired and assumed liabilities will remain preliminary until the combined company completes a valuation of identifiable intangible assets acquired and determines the fair values of other assets and liabilities acquired. The final determination of the fair values is expected to be completed as soon as practicable after the completion of the Transaction. The final amounts could differ from the amounts presented in the unaudited pro forma condensed combined financial statements, because the amounts allocated will not be determined until the date of the Transaction.

No amounts have been allocated to identifiable intangible assets. Nabi’s remaining assets include:

 

   

The residual value of NicVAX®, which was licensed to GSK in 2010, subject to the right of holders of CVRs to potentially receive certain cash payments in connection with a NicVAX Transaction (as defined in the CVR Agreement) upon the terms and subject to the conditions set forth in the CVR Agreement, as more fully described under “Repurchase of Shares of Nabi Common Stock; Dividends and Distributions—Contingent Value Rights” beginning on page 77 of this proxy statement; and

 

   

the potential royalty of Phoslyra which was sold to third party in 2006.

Given the significant uncertainty associated with future cash flows from these assets, no value has been ascribed to them in the preliminary allocation of the purchase price.

Cash and cash equivalents

Nabi will return to its existing shareholders cash in excess of the $54 million required to be held by Nabi under the terms of the Transaction Agreement, potentially through undertaking an issuer tender offer to be completed prior to the completion of the Transaction. The cash balance presented as part of the pro forma adjustments reflects the cash balance expected to remain in Nabi after the return of capital and settlement of Nabi’s obligations including the severance obligations discussed below.

Nabi Severance Obligations

All of Nabi’s employees are eligible for severance payments upon termination of employment under certain circumstances, including following a merger. Following the completion of the Transaction, the majority of Nabi’s employees will not continue to be employed by the combined company. However, these terminations did not form part of the negotiations in advance of the signing of the Transaction Agreement, and the Transaction is not conditioned on any such arrangements. The accounting guidance for business combinations (ASC805-10-55) requires severance obligations that are incurred by the acquiree for the benefit of the acquirer to be recognized as an expense in the post-combination period. Because the terminations were determined by the Nabi Board in advance of the Transaction, are not at the option of Biota and were a consequence of changes to Nabi’s operations prior to the completion of the Transaction rather than a consequence of the Transaction, the severance obligations have been deemed to be for the benefit of Nabi prior to the acquisition. For purposes of preparing the unaudited pro forma condensed combined financial statements, Nabi has assumed that all severance payouts will be made prior to the closing date of the Transaction. No provision was recognized in the Nabi historical balance sheet. The payments have been included in the determination of the cash balance expected within Nabi on acquisition date.

 

5. Notes to the Unaudited Pro Forma Condensed Consolidated Statement of Operations

 

(A) Represents Nabi’s historical financial information in 2011 under U.S. GAAP.

 

17


Table of Contents
(B) The information is derived from the historical consolidated financial statements of Biota for its fiscal year ended June 30, 2011 under U.S. GAAP adjusted for the following to derive a comparable reporting period with Nabi:

 

   

information for the six month period ended December 31, 2011 is included in the pro forma financial information for Biota; and

 

   

information for the six month period ended December 31, 2010 has not been included in the pro forma financial information for Biota.

The information for Biota and the pro forma adjustments above were originally denominated in Australian dollars and have been converted to U.S. dollars based on the average exchange rate of U.S.$1.0000 = A$0.9681 for the year ended December 31, 2011.

The historical financial statements of Biota for the six month periods ended December 31, 2011 and 2010 under U.S. GAAP from which the above information is derived are unaudited.

 

(C) Represents the loss per share, taking into consideration the adjusted number of common shares described in note 3 above.

 

(D) Represents the number of common shares, in thousands, adjusted by 125,412,618 common shares anticipated to be issued in connection with the Transaction. The weighted average number of pro forma shares has been adjusted as if the shares had been issued on January 1, 2011.

 

(E) Represents Nabi’s unaudited historical financial information in the three-month period ended March 31, 2012 under U.S. GAAP.

 

(F) Represents Biota’s unaudited historical financial information in the three-month period ended March 31, 2012 under U.S. GAAP.

The information for Biota and the pro forma adjustments above were originally denominated in Australian dollars and have been converted to U.S. dollars based on the average exchange rate of U.S.$1.0000 = A$0.9480 for the three month period ended March 31, 2012.

 

6. Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

(A) Represents Nabi’s unaudited historical financial information as of March 31, 2012 under U.S. GAAP.

 

(B) Represents the unaudited historical financial information of Biota as of March 31, 2012 under U.S. GAAP. The information for Biota and the pro forma adjustments above were originally denominated in Australian dollars and have been converted to U.S. dollars based on the period end rate of U.S.$1.0000 = A$0.9629.

 

(C) Reflects the acquisition method of accounting based on an appraisal of the assets and liabilities of Nabi as discussed in notes 3 and 4 above. This includes the elimination of Nabi’s historical stockholder’s equity accounts as Nabi is not considered the accounting acquiror. It also incorporates an accrual for acquisition costs contingent on the Transaction.

 

18


Table of Contents

COMPARATIVE PER SHARE DATA

The following table sets forth selected historical share information of Nabi and Biota and unaudited pro forma share information after giving effect to the Transaction, assuming that 0.669212231 shares of Nabi common stock had been issued in exchange for each outstanding share of Biota common stock.

This assumption is based on an estimate of the exchange ratio assuming that Nabi does not complete an issuer tender offer prior to the Transaction and does not implement a reverse stock split described in the proxy statement. The pro forma equivalent information of Biota was derived using the historical share information assuming that 0.669212231 shares of Nabi common stock had been issued in exchange for each outstanding share of Biota common stock. You should read this information in conjunction with the selected historical financial information, the unaudited pro forma condensed combined financial information and the separate historical financial statements of Nabi and Biota and the notes thereto included elsewhere in or incorporated by reference in this proxy statement. The historical share information as of and for the three-month period ended March 31, 2012 is derived from unaudited consolidated financial statements of Nabi and Biota as of and for the three-months ended March 31, 2012. The historical share information as of and for the year ended December 31, 2011 is derived from audited financial statements of Nabi for the year ended December 31, 2011. Given that Biota’s fiscal year ends June 30, 2011, Biota’s results represents the sum of unaudited historical financial information in the six-month period ended June 30, 2011 and in the six-month period ended December 31, 2011. The amounts set forth below are in thousands, except per share amounts. The unaudited pro forma condensed combined financial statements and the pro forma share information are not necessarily indicative of the operating results or financial position that would have been achieved had the Transaction been consummated at the beginning of the period presented and should not be construed as representative of future operations. Biota’s results as reported in Australian dollars have been converted into U.S. dollars using the average and period end exchange rates set out in notes 5 and 6 under “Unaudited Pro Forma Condensed Consolidated Financial Information” beginning on page 12 of this proxy statement.

 

      Year Ended December 31, 2011  
     Nabi     Biota  
     Historical     Pro Forma     Historical     Pro Forma
Equivalent
of One
Nabi
Share (1)
 

Basic and diluted net (loss) income per common share

   $ (0.18   $ (0.04   $ (0.18   $ (0.13
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in calculating basic and diluted net (loss) income per share

     42,336        167,749        181,627        121,545   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

      Three Months Ended March 31, 2012  
     Nabi     Biota  
     Historical     Pro Forma     Historical     Pro Forma
Equivalent
of One
Nabi
Share (1)
 

Basic and diluted net (loss) income per common share

   $ (0.03   $ (0.01   $ (0.01   $ (0.02
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in calculating basic and diluted net (loss) income per share

     42,949        168,362        181,738        121,619   
  

 

 

   

 

 

   

 

 

   

 

 

 

Book value per share (2)

   $ 1.38      $ 0.35      $ 0.37      $ 0.55   

 

(1) These amounts were calculated by applying an assumed exchange ratio of 0.669212231 to the historical Biota shares.

 

(2) The historical book value per common share is computed by dividing total stockholders’ equity by the number of shares of common stock outstanding at the end of the period. The pro forma book value per share is computed by dividing pro forma stockholders’ equity by the pro forma number of shares of common stock as of each of the periods presented.

 

19


Table of Contents

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Shares of Nabi common stock are currently listed and principally traded on the NASDAQ under the symbol “NABI.” Ordinary shares of Biota are currently listed and principally traded on the ASX under the symbol “BTA.” The following table sets forth, for the periods indicated, the high and low sales prices per share of Nabi common stock and Biota ordinary shares as reported on the NASDAQ and the ASX, respectively. Price per share information for Biota ordinary shares is presented in Australian dollars.

Nabi:

 

Fiscal Year Ending December 31, 2012

   High      Low  

Second Quarter (through June 7)

   $ 1.95       $ 1.54   

First Quarter

     2.03         1.74   

 

Fiscal Year Ended December 31, 2011

   High      Low  

Fourth Quarter

   $ 2.07       $ 1.50   

Third Quarter

     5.82         1.55   

Second Quarter

     5.88         4.64   

First Quarter

     5.98         5.30   

 

Fiscal Year Ended December 25, 2010

   High      Low  

Fourth Quarter

   $ 5.75       $ 4.75   

Third Quarter

     5.85         4.68   

Second Quarter

     5.98         4.40   

First Quarter

     6.42         4.70   

Biota:

 

Fiscal Year Ending June 30, 2012

   High      Low  

Fourth Quarter (through June 7)

   A$ 1.07       A$ 0.70   

Third Quarter

     1.04         0.76   

Second Quarter

     0.88         0.69   

First Quarter

     1.07         0.80   

 

Fiscal Year Ended June 30, 2011

   High      Low  

Fourth Quarter

   A$ 1.66       A$ 0.90   

Third Quarter

     1.54         0.89   

Second Quarter

     1.06         0.90   

First Quarter

     1.11         0.85   

 

Fiscal Year Ended June 30, 2010

   High      Low  

Fourth Quarter

   A$ 2.34       A$ 1.01   

Third Quarter

     2.42         2.00   

Second Quarter

     3.47         2.30   

First Quarter

     2.73         1.25   

The table below sets forth the closing sale prices of Nabi common stock and Biota ordinary shares as reported on the NASDAQ and ASX, each on April 20, 2012, the last trading day prior to the public announcement of the transaction. The table also shows the implied value of one ordinary share of Biota, which was calculated by multiplying the closing price of Nabi common stock on that date by the exchange ratio of 0.669212231. The market prices of Nabi common stock and Biota ordinary shares likely will fluctuate between the date of this proxy statement and the time of the special meetings and the completion of the Transaction. No assurance can be given concerning the market prices of Nabi common stock or Biota ordinary shares before the completion of the Transaction or the market price of Nabi common stock after the completion of the Transaction.

 

20


Table of Contents

The Transaction consideration is fixed in the Transaction Agreement and will not be adjusted for changes in the market value of the Nabi common stock or Biota ordinary shares, except that it will be adjusted in the event that Nabi conducts an issuer tender offer to purchase shares of Nabi common stock or implements the reverse stock split described in the proxy statement prior to the completion of the Transaction in order to preserve the respective percentage of shares of the outstanding common stock of the combined company to be held immediately after the completion of the Transaction by Biota’s former stockholders on the one hand (collectively being approximately 74%) and Nabi’s existing stockholders on the other hand (collectively being approximately 26%). As a result, the market value of the Nabi common stock that Biota stockholders will receive in the Transaction may vary significantly from the prices shown in the table below.

 

     Biota
Ordinary Share
   Nabi
Common Stock
   Implied Value
of Biota
Ordinary Share

April 20, 2012

       A$0.94          $1.85      $1.24

Nabi stockholders should obtain current market prices for shares of Nabi common stock and Biota ordinary shares in deciding whether to vote for the approval of the Transaction Proposals.

Dividends

Nabi has never declared or paid cash dividends on its capital stock. In connection with the Transaction, Nabi may pay cash dividends or return capital to its stockholders.

Biota has never declared nor paid cash dividends on its capital stock and does not expect to pay any cash dividends in the foreseeable future.

 

21


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING PROPOSALS

The following are some questions that you, as a stockholder of Nabi, may have regarding the Transaction and the other matters being considered at the special meeting of Nabi stockholders, as well as answers to those questions. Nabi urges you to read this proxy statement carefully and in its entirety because the information in this section does not provide all of the information that might be important to you with respect to the Transaction and the other matters being considered at the special meeting. Additional important information is also contained in the annexes to, and the documents incorporated by reference into, this proxy statement.

Q:    Why am I receiving this proxy statement?

A:    Nabi and Biota are proposing to combine the two companies in the Transaction pursuant to the terms and conditions of the Transaction Agreement that is described in this proxy statement. In the Transaction, Nabi will acquire all of the outstanding ordinary shares of Biota in exchange for shares of Nabi common stock pursuant to a scheme of arrangement under Australian corporate law, and Biota will become a wholly-owned subsidiary of Nabi. Upon the completion of the Transaction, shares of Nabi common stock representing approximately 74% of the outstanding common stock of the combined company will be issued to former Biota stockholders, and the shares of common stock held by existing Nabi stockholders will represent approximately 26% of the outstanding common stock of the combined company immediately after the completion of the Transaction. The combined company will be named “Biota Pharmaceuticals, Inc.” A copy of the Transaction Agreement is attached to this proxy statement as Annex A.

In order to complete the Transaction, Nabi stockholders must approve an amendment to the Nabi certificate of incorporation to increase the number of authorized shares of Nabi common stock, an amendment to the Nabi certificate of incorporation to change the name of the company to “Biota Pharmaceuticals, Inc.,” and the issuance of shares of Nabi common stock to Biota stockholders in the Transaction. In addition, Biota stockholders must approve the Transaction, and all other conditions to the Transaction must be satisfied or waived.

The amendment to the Nabi certificate of incorporation to increase the number of authorized shares of Nabi common stock, the amendment to the Nabi certificate of incorporation to change the name of the company, and the issuance of Nabi common stock in Transaction will not occur unless all of these proposals are approved by Nabi’s stockholders. Nabi will hold a special meeting of its stockholders to obtain the required approvals of its stockholders, and Biota will hold a separate special meeting of its stockholders to obtain the required approval of the Biota stockholders.

At the Nabi special meeting, Nabi’s stockholders also will be asked to consider and vote upon certain other proposals in connection with the Transaction as described below and under “The Special Meeting” beginning on page 45 of this proxy statement.

Q:    What will I receive in the Transaction?

A:    Nabi stockholders will continue to own their existing shares of Nabi common stock after the Transaction. Immediately after the completion of the Transaction, Nabi’s existing stockholders will own collectively approximately 26% of the outstanding common stock of the combined company, and Biota’s former stockholders will own collectively approximately 74% of the outstanding common stock of the combined company.

Q:    Will Nabi distribute any cash on hand or other assets to the existing Nabi stockholders?

A:    Nabi plans to return to its stockholders, before the completion of the Transaction, its remaining cash in excess of the $54 million required to be held by Nabi at the completion of the Transaction after satisfying outstanding liabilities. Such distribution is expected to take the form of a repurchase of certain of the outstanding shares of Nabi common stock through an issuer tender offer and, for any remaining amounts, through a dividend

 

22


Table of Contents

and return of capital, and currently is expected to be in the range of approximately $25 million to $30 million in the aggregate. Nabi plans to commence an issuer tender offer to repurchase certain of the outstanding shares of Nabi common stock after filing a preliminary form of this proxy statement with the SEC and to complete such issuer tender offer before mailing a definitive form of this proxy statement to Nabi stockholders. After the completion of the issuer tender offer but prior to the completion of the Transaction, Nabi plans to declare a dividend and effect return of capital, if applicable, to distribute any remaining cash in excess of the $54 million required to be held by Nabi at the completion of the Transaction that is not required to satisfy any outstanding liabilities.

In addition, Nabi plans to issue CVRs to existing Nabi stockholders before the completion of the Transaction. Nabi expects that one CVR will be issued for each share of Nabi common stock outstanding as of a record date to be set at a date prior to the completion of the Transaction. However, the CVRs will not be attached to the shares of Nabi common stock. A CVR will be a non-transferrable (subject to certain limited exceptions) right to potentially receive certain cash payments in connection with a NicVAX Transaction upon the terms and subject to the conditions set forth in the CVR Agreement to be entered into between Nabi and a rights agent. The form of the CVR Agreement is attached to this proxy statement as Annex G. See “Repurchase of Shares of Nabi Common Stock; Dividends and Distributions—Contingent Value Rights” beginning on page 77 of this proxy statement for more information regarding the CVRs, the CVR Agreement and the NicVAX Transaction.

Q:    Is the Transaction expected to be taxable to stockholders?

A:    Nabi’s existing stockholders will simply retain their shares of Nabi common stock in the Transaction, and accordingly will be no material U.S. federal income tax consequences to Nabi’s existing stockholders resulting from the issuance of Nabi shares in the Transaction. See “Proposal 3: Amendment to Certificate of Incorporation to Effectuate Reverse Stock Split—Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split” beginning on page 136 of this proxy statement for a discussion of certain U.S. federal income tax consequences of the proposed reverse stock split described in this proxy statement.

Q:    When and where will Nabi hold its special meeting?

A:    The special meeting will be held at [*****] a.m. local time on [*****], 2012, at [*****], to consider and vote on each of the proposals described below.

Q:    What will the Nabi stockholders be asked to vote upon at the special meeting?

A:    At the special meeting, Nabi’s stockholders will be asked to consider and vote upon the following proposals:

 

  1. to approve an amendment to the Nabi certificate of incorporation to increase the authorized shares of Nabi common stock from 125,000,000 shares to 200,000,000 shares;

 

  2. to approve an amendment to the Nabi certificate of incorporation to change the name of Nabi from “Nabi Biopharmaceuticals” to “Biota Pharmaceuticals, Inc.”;

 

  3. to approve an amendment to the Nabi certificate of incorporation to effect a reverse stock split of Nabi common stock at any time prior to December 31, 2012 at a ratio ranging from four-to-one to eight-to-one, as determined by Nabi’s board of directors in its sole discretion;

 

  4. to approve the issuance of shares of Nabi common stock to Biota stockholders contemplated by the Transaction Agreement;

 

  5. to approve, on an advisory (non-binding) basis, the compensation payable to certain executive officers of Nabi under existing arrangements in connection with the Transaction; and

 

23


Table of Contents
  6. to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve any of proposals 1 through 4.

Proposals 1, 2 and 3 are collectively referred to herein as the Charter Amendment Proposals. Proposals 1, 2 and 4 are collectively referred to herein as the Transaction Proposals.

Q:    What will the Biota stockholders be asked to vote upon?

A:    Biota stockholders will not be asked to vote on any of the proposals to be considered and voted upon at the Nabi special meeting. Rather, Biota will hold a separate special meeting of its stockholders, pursuant to Australian corporate law, at which Biota’s stockholders will be asked to consider and vote upon a resolution to approve the Transaction.

Q:    Who is eligible to vote at the special meeting?

A:    Holders of Nabi common stock as of the close of business on [******], 2012, the record date for the special meeting, are eligible to vote.

Q:    How many votes do Nabi’s stockholders have?

A:    Holders of Nabi’s common stock are entitled to cast one vote on each motion properly brought before the special meeting for each share of Nabi common stock that such holder owned at the close of business on the record date.

Q:    What constitutes a quorum for the special meeting?

A:    A majority of the outstanding shares of Nabi common stock entitled to vote being present in person or represented by proxy constitutes a quorum for the special meeting. Abstentions will be counted for purposes of determining the presence of a quorum at the special meeting. Banks, brokers and other nominees that hold their customers’ shares in street name may not vote their customers’ shares on “non-routine” matters without instructions from their customers. As each of the proposals to be voted upon at the special meeting is considered “non-routine,” such organizations do not have discretion to vote on any proposal for which they do not receive instructions from their customers (this is referred to in this context as a “broker non-vote”). As a result, if you fail to provide your broker, bank or other nominee with any instructions regarding how to vote your shares, your shares will not be considered present at the special meeting, will not be counted for purposes of determining the presence of a quorum and will not be voted on any of the proposals. If you provide instructions to your broker, bank or other nominee which indicate how to vote your shares with respect to certain proposals but not with respect to a particular proposal, your shares will be considered present at the special meeting and be counted for purposes of determining the presence of a quorum but will not be voted with respect to that particular proposal.

If a quorum is not present at the meeting, the chairman of the meeting may adjourn the meeting to continue to solicit proxies.

Q:    What vote by the Nabi stockholders is required to approve the Charter Amendment Proposals and the proposal to approve the issuance of Nabi common stock to Biota stockholders in the Transaction?

A:    Approval of each of the Charter Amendment Proposals requires the affirmative vote of a majority of the shares of Nabi’s common stock outstanding at the close of business on the record date. Approval of the issuance of shares of Nabi common stock to Biota stockholders as contemplated by the Transaction Agreement will require the affirmative vote of a majority of the holders of Nabi’s common stock properly cast on the proposal at the special meeting.

 

24


Table of Contents

Q:    Why is my vote important? What happens if I don’t vote?

A:    In order to complete the Transaction, Nabi stockholders must approve each of the Transaction Proposals. If you abstain from voting, fail to vote (either in person or by proxy), or fail to provide your broker, bank or other nominee with instructions on how to vote your shares in connection with any Charter Amendment Proposal, it will have the same effect as a vote against that proposal.

Q:    Why am I being asked to cast an advisory (non-binding) vote to approve the executive compensation payable in connection with the Transaction?

A:    The SEC adopted rules that require some public companies to seek an advisory (non-binding) vote with respect to certain payments that will be made in transactions such as the Transaction. These rules require us to seek such an advisory vote regarding certain payments to Nabi’s named executive officers under existing arrangements in connection with the Transaction.

Q:    What will happen if the Nabi stockholders do not approve the executive compensation payable in connection with the Transaction?

A:    Approval, on an advisory (non-binding) basis, of the compensation payable to certain of Nabi’s executive officers under existing arrangements in connection with the Transaction is not a condition to completion of the Transaction. The vote with respect to such compensation is an advisory vote and will not be binding on Transaction. Nabi is contractually obligated to pay such compensation. Therefore, if the Transaction Proposals are adopted by the stockholders and the Transaction is completed, the compensation payable to Nabi’s named executive officers will still be paid regardless of the outcome of this advisory vote.

Q:    Why am I being asked to consider and vote upon a proposal to amend the Nabi certificate of incorporation to effect a reverse stock split of the Nabi common stock?

A:    The primary intent of the reverse stock split is to make the price of Nabi common stock more attractive to a broader range of institutional and other investors and to ensure Nabi’s stock price remains in compliance with NASDAQ listing requirements. However, approval of the amendment to the Nabi certificate of incorporation to effect such a reverse stock split is not a condition to completion of the Transaction.

Q:    Why am I being asked to consider and vote upon a proposal to approve the issuance of shares of Nabi common stock to Biota stockholders contemplated by the Transaction Agreement?

A:    Because Nabi common stock is listed for trading on NASDAQ, issuances of Nabi common stock are subject to the NASDAQ Stock Market Listing Rules. NASDAQ Stock Market Listing Rule 5635 requires stockholder approval for the issuance of Nabi common stock (1) in connection with the acquisition of the stock or assets of another company if the issuance would result in an increase of 20% or more of the total number of shares of Nabi common stock outstanding before any such proposed issuance, or (2) that constitutes a change of control of Nabi. Because both of these events will occur if the Transaction is completed, we are asking you to approve the issuance of Nabi common stock in the Transaction.

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

A;    Nabi’s board of directors unanimously recommends that you vote “FOR” each of the proposals to be considered and voted upon at the special meeting.

 

25


Table of Contents

Q:    What do I need to do now?

A:    Please read this proxy statement carefully, including its annexes, to consider how the Transaction affects you. After you read this proxy statement, you should complete, sign and date your proxy card and mail it in the enclosed return envelope or submit your proxy over the telephone or over the Internet as soon as possible so that your shares can be voted at the special meeting. If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote “FOR” each of the proposals being considered and voted upon at the special meeting.

Q:    How do I vote?

A:    If you are a stockholder of record, you may vote in any of the following ways:

 

   

To vote in person, come to the special meeting and you will be able to vote by ballot. To ensure that your shares are voted at the special meeting, Nabi’s board of directors recommends that you submit a proxy even if you plan to attend the special meeting.

 

   

To vote using the enclosed proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the enclosed return envelope. If you return your signed proxy card to Nabi before the special meeting, Nabi will vote your shares as you direct.

 

   

To vote by telephone, dial the toll-free telephone number located on the enclosed proxy card using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on [*****], 2012 to be counted.

 

   

To vote over the Internet, go to the web address located on the enclosed proxy card to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on [*****], 2012 to be counted.

If your shares of common stock are held in “street name” by your broker, bank or other nominee, you should have received a voting instruction form with these proxy materials from that organization rather than from Nabi. Your broker, bank or other nominee will vote your shares only if you provide instructions to that organization on how to vote. You should provide your broker, bank or other nominee with instructions regarding how to vote your shares by following the enclosed procedures provided by that organization. Your shares will not be voted with respect to any proposal for which you fail to provide instructions, which will have the same effect as voting against the Charter Amendment Proposals, but which will have no effect on approval of the other proposals.

A control number, located on your proxy card or voting instruction form, is designed to verify your identity and allow you to vote your shares of Nabi common stock, and to confirm that your voting instructions have been properly recorded when voting over the Internet or by telephone.

Q:    What does it mean if I receive more than one set of materials?

A:    This means you own shares of Nabi common stock that are registered under different names. For example, you may own some shares directly as a stockholder of record and other shares through a broker or you may own shares through more than one broker, bank or other nominee. In these situations, you will receive multiple sets of proxy materials. You must complete, sign, date and return each of the proxy cards and voting instruction forms that you receive, or vote all of your shares over the telephone or over the Internet in accordance with the instructions above in order to vote all of the shares you own. Each proxy card you receive comes with its own prepaid return envelope and control number(s). If you vote by mail, make sure you return each proxy card in the return envelope that accompanies that proxy card or voting instruction form, and if you vote by telephone or via the Internet, please follow the enclosed instructions and use your control number(s).

 

26


Table of Contents

Q:    What happens if I sell my shares of common stock before the special meeting?

A:    The record date for stockholders entitled to vote at the special meeting is earlier than the date of the special meeting. If you transfer your shares of Nabi common stock after the record date but before the date of the special meeting, you will retain your right to vote at the special meeting unless special arrangements are made between you and the person to whom you transfer your shares.

Q:    May I vote in person?

A:    If you are the stockholder of record of shares of common stock, you have the right to vote in person at the special meeting with respect to those shares. If you are the beneficial owner of shares of Nabi common stock, you are invited to attend the special meeting but, since you are not the stockholder of record, you may not vote these shares in person at the special meeting, unless you obtain a document called a “legal proxy” from your broker, bank or other nominee giving you the right to vote the shares at the special meeting. Even if you plan to attend the special meeting as a stockholder of record, we recommend that you also submit your proxy card or voting instructions as described above under “How do I vote?” so that your vote will be counted if you later decide not to attend the special meeting.

Q:    How can I change or revoke my vote?

A:    You have the right to revoke a proxy, delivered by mail, by telephone, or over the Internet, at any time before it is exercised, by voting again at a later date through any of the methods available to you, by delivering written notice of revocation to our Corporate Secretary by the time the special meeting begins, or by attending the special meeting and voting in person.

Q:    Am I entitled to appraisal rights?

A:    No. Under Delaware law, holders of shares of Nabi common stock are not entitled to appraisal rights in connection with the Transaction or any of the matters to be acted on at the special meeting.

Q:    Is completion of the Transaction subject to any conditions?

A:     Yes. Nabi and Biota are not required to complete the Transaction unless a number of conditions are satisfied or waived, including receipt of the required approvals from the Nabi stockholders and Biota stockholders. See “The Transaction Agreement—Conditions Precedent to the Transaction” beginning on page 108 of this proxy statement for a more complete summary of the conditions that must be satisfied or waived prior to completion of the Transaction.

Q:    Who can help answer my questions?

A:    The information provided above in the question-and-answer format is for your convenience only and is merely a summary of some of the information in this proxy statement. You should carefully read the entire proxy statement, including its annexes. If you would like additional copies of this proxy statement, without charge, or if you have questions about the Transaction, including the procedures for voting your shares, you should contact Morrow & Co., LLC, Nabi’s proxy solicitation agent. The address of Morrow & Co., LLC is 470 West Avenue, Stamford, CT 06902 You can call Morrow & Co., LLC at (203) 658-9400 or toll-free at (800) 662-5200.

You may also wish to consult your legal, tax and/or financial advisors with respect to any aspect of the Transaction, the Transaction Agreement or other matters discussed in this proxy statement.g

 

27


Table of Contents

RISK FACTORS

You should carefully consider the following risk factors related to the Transaction and the anticipated business of the combined company after the closing of the Transaction, as well as the other information contained in this proxy statement, including the attached annexes, in evaluating whether to approve the Transaction Proposals. If any of the risks described below, or elsewhere in this proxy statement, actually occurs, the business, financial results, financial condition, operating results or stock price of the combined company could be materially adversely affected.

Risks Related to the Transaction

Nabi stockholders will suffer immediate and substantial dilution to their equity and voting interests as a result of the issuance of Nabi common stock to Biota stockholders.

In connection with the Transaction, Nabi will issue approximately 126.0 million shares of common stock, which number will be adjusted depending on the number of shares of Nabi common stock that remain outstanding after completion of the issuer tender offer described under “Repurchase of Shares of Nabi Common Stock; Dividends and Distributions” beginning on page 77 of this proxy statement and the reverse stock split described under “Proposal 3: Amendment to Certificate of Incorporation to Effectuate Reverse Stock Split” beginning on page 131 of this proxy statement. Immediately following the completion of the Transaction, former Biota stockholders will own collectively approximately 74% of the total number of shares of the combined company’s outstanding common stock and existing stockholders of Nabi will own approximately 26% of the outstanding common stock of the combined company. Accordingly, the issuance of Nabi common stock to Biota stockholders will have the effect of reducing the percentage of equity and voting interest held by each of Nabi’s existing stockholders. Consequently, Nabi stockholders as a group will have significantly less influence over the management and policies of the combined company after the Transaction than they currently exercise.

The integration of Biota with Nabi will subject the combined company to liabilities that may exist at Biota.

The integration of Biota with Nabi may pose special risks, including one-time write-offs or restructuring charges, unanticipated costs, and the loss of key employees. There can be no assurance that integration of Nabi and Biota will be accomplished effectively or in a timely manner. In addition, the integration of Biota will subject the combined company to liabilities that may exist at Biota, some of which may be unknown. While Nabi and its advisors have conducted due diligence on the operations of Biota, there can be no guarantee that Nabi is aware of any and all liabilities of Biota. These liabilities, and any additional risks and uncertainties related to the Transaction not currently known to Nabi or that Nabi may currently deem immaterial, could negatively impact the combined company’s future business, financial condition and results of operations.

The price of the combined company’s common stock and the combined company’s results of operations after the Transaction will likely be affected by factors different from those currently affecting the price of Nabi common stock and Nabi’s results of operations.

Biota’s business is different in certain ways from that of Nabi, and the combined company’s results of operations, as well as the price of the combined company’s common stock after the Transaction, may be affected by factors different from those currently affecting Nabi’s results of operations and the price of Nabi common stock. The price of the combined company’s common stock may fluctuate significantly following the Transaction, including as a result of factors over which Nabi and Biota have no control. See “—Risks Related to Biota and the Combined Company” beginning on page 33 of this proxy statement for a discussion of Biota’s business and certain factors to consider in connection with such business, including risk factors for Biota.

Some Biota and Nabi stockholders may not intend to hold shares of the combined company’s common stock received in the Transaction. If a significant number of Biota or Nabi stockholders seek to sell their shares of the combined company’s common stock, this may adversely affect the trading price of the combined company’s common stock following the completion of the Transaction.

 

28


Table of Contents

Nabi will incur significant transaction and combination-related costs in connection with the Transaction.

Nabi and Biota expect to incur significant costs associated with the Transaction and combining the operations of the two companies. Nabi’s fees and expenses related to the Transaction include financial advisors’ fees, filing fees, legal and accounting fees, soliciting fees, regulatory fees and mailing costs, some of which will be paid regardless of whether the Transaction is completed. Such fees and expenses will reduce Nabi’s cash on hand and the amount of cash that Nabi may be able to distribute to Nabi stockholders in a form of dividend or return of capital. Furthermore, following the completion of the Transaction, the combined company will incur costs associated with combining the operations of the two companies. However, it is difficult to predict the amount of these costs before the combined company begins the integration process. The combined company may incur additional unanticipated costs as a consequence of difficulties arising from efforts to integrate the companies.

The market price of Nabi common stock may decline as a result of the Transaction.

The market price of the combined company’s common stock may decline as a result of the Transaction if the integration of Biota’s business is unsuccessful, the perceived benefits of the Transaction are not achieved as rapidly or to the extent anticipated by financial analysts or investors, or the effect of the Transaction on the combined company’s financial results after the completion of the Transaction is not consistent with the expectations of financial analysts or investors.

The Transaction Agreement limits Nabi’s ability to pursue alternatives to the Transaction, and in certain instances requires payment of a break fee, which could deter a third party from proposing an alternative transaction to the Transaction.

While the Transaction Agreement is in effect, subject to certain limited exceptions, Nabi is prohibited from soliciting, initiating, encouraging or entering into certain transactions, such as a merger, sale of assets or other business combination, with any third party. See “The Transaction Agreement—Exclusivity; No-Solicitation” beginning on page 122 of this proxy statement for a description of the foregoing limitations. As a result of these limitations, Nabi may lose opportunities to enter into a more favorable transaction than the Transaction.

Moreover, under specified circumstances, Nabi could be required to pay Biota a break fee of A$2 million in connection with the termination of the Transaction Agreement. See “The Transaction Agreement—Break Fee” beginning on page 124 of this proxy statement for a description of Nabi’s obligations in these circumstances. The break fee could deter a third party from proposing an alternative to the Transaction.

The Transaction is subject to conditions to closing that could result in the Transaction being delayed or not completed and the Transaction Agreement can be terminated in certain circumstances, each of which could negatively impact the price of Nabi common stock and its future business and operations.

The Transaction is subject to conditions to closing as set forth in the Transaction Agreement. See “The Transaction Agreement—Conditions Precedent to the Transaction” beginning on page 108 of this proxy statement. In addition, each of Nabi and Biota has the right, in certain circumstances, to terminate the Transaction Agreement. See “The Transaction Agreement—Termination” beginning on page 123 of this proxy statement. If the Transaction Agreement is terminated or any of the conditions to closing are not satisfied and, where permissible, not waived, the Transaction will not be completed. Failure to complete the Transaction or any delay in the completion of the Transaction or any uncertainty about the completion of the Transaction may adversely affect the price of Nabi common stock or have an adverse impact on Nabi’s future business and operations.

If the Transaction is not completed, Nabi’s ongoing business may be adversely affected and, without realizing any of the benefits of having completed the Transaction, Nabi would be subject to a number of risks, including the following:

 

   

negative reactions from the financial markets and from persons who have or may be considering business dealings with Nabi;

 

29


Table of Contents
   

incurring and paying significant expenses in connection with the Transaction, such as financial advisors’ fees, filing fees, legal and accounting fees, soliciting fees, regulatory fees, mailing costs and other related expenses; and

 

   

paying a break fee of A$2 million if the Transaction Agreement is terminated in certain circumstances or the Transaction is not completed for certain reasons. See “The Transaction Agreement—Break Fee” beginning on page 124 of this proxy statement for further information regarding break fees.

In addition, Nabi could be subject to litigation related to any failure to complete the Transaction or seeking to require Nabi to perform its obligations under the Transaction Agreement.

Certain directors and executive officers of Nabi may have potential conflicts of interest in connection with the Transaction.

The interests of certain of the directors and executive officers of Nabi are different from those of Nabi stockholders generally, and such directors and executive officers of Nabi participate in arrangements that are different from, or in addition to, those of Nabi stockholders. See “The Transaction—Interests of Nabi Executive Officers and Directors in the Transaction” beginning on page 67 of this proxy statement for more information. Nabi stockholders should consider whether these interests may have influenced those directors and executive officers with respect to the Transaction.

As of May 15, 2012, Nabi directors and executive officers collectively beneficially owned approximately 2,722,663 or 6.3% of the shares of Nabi common stock then outstanding.

The application of the purchase method of accounting may adversely affect the market value of Nabi common stock following the Transaction.

In accordance with U.S. GAAP, the Transaction will be accounted for as a “reverse merger” pursuant to which Biota will be considered the acquiror of Nabi. The combined company will account for the Transaction using the purchase method of accounting, which may result in charges to the combined company’s earnings that could adversely affect the market value of the combined company’s common stock following the completion of the Transaction.

Under the purchase method of accounting, the combined company will allocate the total estimated purchase price to the assets acquired and liabilities assumed from Nabi based on their fair values as of the completion date of the Transaction, and record any excess of the purchase price over those fair values as goodwill. For certain tangible and identifiable intangible assets (excluding goodwill), recording their fair values as of the completion date of the Transaction may result in the combined company incurring significant additional depreciation and/or amortization expense that exceed the amounts recorded by Nabi prior to the Transaction. This increased expense will be recorded by the combined company over the useful lives of the underlying assets. In addition, to the extent the value of goodwill or identifiable intangible assets were to become impaired, the combined company may be required to incur charges relating to the impairment of those assets.

If the fair value of assets acquired and liabilities assumed from Nabi exceed the estimated purchase price at the completion date, instead of recording goodwill, the combined company will recognize a gain for such excess on the completion date of the Transaction.

The pro forma financial information is presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the Transaction.

The unaudited condensed pro forma financial information contained in this proxy statement are presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the Transaction for several reasons. For example, the unaudited condensed pro

 

30


Table of Contents

forma financial information has been derived from the historical financial statements of Nabi and Biota and certain adjustments and assumptions have been made regarding the combined company after giving effect to the Transaction. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with complete accuracy. Moreover, the unaudited condensed pro forma financial information does not reflect all costs that are expected to be incurred by the combined company in connection with the Transaction. For example, the impact of any incremental costs incurred in integrating Nabi and Biota is not reflected in the unaudited condensed pro forma financial information. As a result, the actual financial condition and results of operations of the combined company following the Transaction may not be consistent with, or evident from, the unaudited condensed pro forma financial information. Additionally, the purchase price used in preparing the pro forma financial information is based on the closing price of Biota’s shares as of June 7, 2012, which may be materially different from the closing price of Biota’s shares on the completion date of the Transaction. The assumptions used in preparing the unaudited condensed pro forma financial information may not prove to be accurate, and other factors may affect the combined company’s financial condition or results of operations following the Transaction. The combined company’s stock price may be adversely affected if the actual results of the combined company fall short of the historical results reflected in the unaudited condensed pro forma financial information contained in this proxy statement. See “Unaudited Pro Forma Condensed Consolidated Financial Information” beginning on page 12 of this proxy statement.

Biota’s public filings are subject to Australian disclosure standards, which differ from SEC requirements.

Biota is an Australian issuer that is required to prepare and file its periodic and other filings in accordance with Australian securities laws. As a result, certain of the information about Biota, including any management’s discussion and analysis, that is contained in this proxy statement was prepared in conjunction with Biota’s financial statements that were prepared in accordance with International Financial Reporting Standards (“IFRS”) or Australian GAAP and other Australian disclosure regulations, rather than the requirements that would apply in the U.S. Because Australian disclosure requirements are different from SEC requirements, the information about Biota contained in this proxy statement may not be comparable to similar information available about Nabi or other U.S. issuers.

Following the Transaction, the combined company’s exposure to foreign currency risk will be increased.

Following the completion of the Transaction, the combined company will hold assets, incur liabilities, earn revenues and pay expenses for its Australian operations in Australian dollars. Because the combined company’s financial statements will continue to be presented in U.S. dollars, the combined company will be required to translate assets, liabilities, income and expenses that relate to the combined company’s Australian operations and that are denominated in Australian dollars into U.S. dollars at the then-applicable exchange rates. Consequently, increases and decreases in the value of the U.S. dollar versus the Australian dollar will affect the value of these items in the combined company’s financial statements, even if their underlying value has not changed, and as a result, the combined company’s financial results could be more volatile as a result of the Transaction. Although the combined company may enter into transactions to hedge portions of this foreign currency translation exposure, the combined company may not be able to eliminate this exposure.

Nabi cannot assure you whether, when or in what amounts the combined company will be able to use Nabi’s net operating losses following the Transaction.

Based on current U.S. tax law, as of December 31, 2011, Nabi had approximately $167.2 million of net operating losses (“NOLs”) for U.S. federal income tax purposes. After entering into the Transaction Agreement, the combined company’s ability to utilize these tax attributes to offset future taxable income became subject to significant limitations under Sections 382 and 383 and other provisions of the Internal Revenue Code of 1986, as amended (the “IRC”). Moreover, issuances or sales of the combined company’s common stock following the Transaction (including certain transactions outside of Nabi’s control) could result in an ownership change further limiting the combined company’s ability to utilize the NOLs. Determining whether an ownership change has occurred and the limitations applicable to the NOLs is technical and highly complex. For these and other reasons, Nabi cannot assure you that the combined company will be able to use Nabi’s NOLs after the Transaction in the amounts it projects.

 

31


Table of Contents

If the number of Nabi’s authorized shares of common stock is increased as we are proposing and the proposed reverse stock split is implemented, the combined company may be able to issue a significant number of additional shares of common stock in the future. Additional issuances of common stock by the combined company would dilute the combined company stockholders’ ownership interest in the combined company, could reduce some or all of the combined company’s financial measures on a per share basis and could reduce the trading price of the combined company’s common stock.

The combined company may issue equity in the future following the completion of the Transaction in connection with acquisitions, strategic transactions or for other purposes. To the extent the combined company issues additional equity securities, the combined company stockholders’ ownership interest in the company would be diluted. Furthermore, some or all of the combined company’s financial measures on a per share basis could be reduced. In addition, the shares of the combined company’s common stock that the combined company issues may not be subject to resale restrictions and may be freely tradable in the U.S. The market price of the combined company’s common stock could decline if certain large holders of the combined company’s common stock, or recipients of the combined company’s common stock, sell all or a significant portion of their shares of the combined company’s common stock or are perceived by the market as intending to sell these shares other than in an orderly manner.

If the shares of Nabi common stock to be issued in the Transaction are not exempt from the registration requirements of the Securities Act, Nabi must use its best endeavors to register such shares with the SEC, which will cause Nabi to incur significant additional costs and delay the completion of the Transaction.

The shares of Nabi common stock to be issued in the Transaction have not been, and are not expected to be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any other jurisdiction. The shares of Nabi common stock to be issued in the Transaction will be issued pursuant to an exemption from the registration requirements provided by Section 3(a)(10) of the Securities Act based on the approval of the Transaction by the Supreme Court of Victoria, Australia. See “The Transaction—Federal Securities Law Consequences; Stock Transfer Restrictions” beginning on page 75 of this proxy statement for more information on the exemption from the registration requirements provided by Section 3(a)(10) of the Securities Act.

In the event that the exemption from the registration requirements provided by Section 3(a)(10) of the Securities Act is not available for any reason, Nabi has agreed in the Transaction Agreement to use its best endeavors (as such term is qualified in the Transaction Agreement) to file a Registration Statement on Form S-4 (or on such other form that may be available to Nabi) in order to register the shares of Nabi common stock to be issued in the Transaction and to use its best endeavors to cause such registration statement to become effective prior to the completion of the Transaction. Preparing, filing and causing effectiveness of such registration statement will result in significant additional costs for Nabi, consisting of additional filing fees, legal and accounting fees, mailing costs and other related expenses, and will delay the completion of the Transaction.

Nabi may not issue CVRs and, even if issued, CVRs may not result in any cash payments to its holders.

Although Nabi currently plans to enter into the CVR Agreement and issue CVRs to Nabi stockholders, there is no assurance that the CVRs will be issued at all or based on the terms currently set forth in the form of the CVR Agreement. See “Repurchase of Shares of Nabi Common Stock; Dividends and Distributions—Contingent Value Rights” on page 77 of this proxy statement for more information on the terms of the CVR Agreement. Nabi currently has not entered into the CVR Agreement and Nabi’s board of directors may determine in its sole discretion not to issue the CVRs based on, among other things, the progress of the remaining investigator-initiated combination clinical trial in the Netherlands for NicVAX® with Pfizer Inc.’s varenicline (Chantix/Champix). Furthermore, if Nabi and Biota agree, the terms of the CVR Agreement as currently contemplated may be changed prior to Nabi entering into the CVR Agreement.

 

32


Table of Contents

Even if CVRs are issued, they may not result in any cash payments to its holders. Under the CVR Agreement, the combined company will not have any obligation whatsoever to pursue, engage in, negotiate, enter into or consummate an actual or potential NicVAX Transaction (as such term is defined in the CVR Agreement) or to research, develop or commercialize NicVAX (Nicotine Conjugate Vaccine) or any other product that would trigger a payment to CVR holders. Even if the combined company enters into a NicVAX transaction, holders of CVRs will not receive any cash payments unless certain threshold amount requirements are met.

Risks Related to Biota and the Combined Company

Biota and Nabi each have a history of net losses, and following the Transaction, the combined company may never achieve or maintain profitability.

Biota and Nabi each have a history of significant net losses. Biota’s net losses from continuing operations were approximately A$1.8 million for the three months ended March 31, 2012, A$28.1 million for the twelve months ended June 30, 2011, a profit of A$16.2 million in 2010 and a profit of A$38.2 million in 2009. Nabi’s net income/losses from continuing operations were approximately $1.4 million in net losses for the three months ended March 31, 2012, $7.5 million in net losses for the twelve months ended December 31, 2011, $0.9 million in net income for the twelve months ended December 25, 2010, and $18.7 million in net losses for the twelve months ended December 26, 2009.

Following the Transaction, the combined company may continue to incur significant expenses for the foreseeable future for research and development and regulatory activities and maintaining existing and obtaining additional intellectual property rights. Following the Transaction, the combined company cannot provide you any assurance that it will ever achieve profitability and, even if the combined company achieves profitability, that it will be able to sustain or increase profitability on a quarterly or annual basis.

The continuation of the BARDA contract depends on the ability of the combined company to meet milestones previously agreed with BARDA, on results of certain key clinical trials relating to laninamivir and the combined company’s compliance with certain operating procedures and protocols. The termination or suspension of the BARDA contract could adversely affect the business of the combined company and its ability to further develop and commercialize laninamivir.

Biota was awarded a contract for the late stage development of laninamivir. Under this contract, Biota is entitled to up to $231 million in funding. Biota is relying on this funding to pay for development of laninamivir. BARDA might attempt to terminate or suspend this contract should laninamivir fail to achieve primary end points of key clinical trials or should the combined company otherwise fail to satisfy various objectives or milestones or fail to comply with normal operating procedures and processes approved by BARDA and its audit agency, Defense Contract Audit Agency. There can be no assurance that laninamivir will achieve these end points or that the combined company will comply with these procedures and protocols.

If the BARDA contract were terminated or suspended this would adversely affect the business of the combined company and its ability to further develop and commercialize laninamivir. The combined company may not have access to sufficient resources to continue to fund its development and commercialization of laninamivir.

The BARDA contract can be varied or terminated by the U.S. Federal Government prior to completion, which could result in revenue shortfalls and reduce profitability or cause losses on the BARDA contract.

The BARDA contract is with a U.S. Federal Government agency and contains provisions permitting BARDA to vary the contract or terminate it on short notice, with or without cause. Variation or unexpected termination of this contract could result in significant revenue shortfalls. If revenue shortfalls occur and are not offset by corresponding reductions in expenses, the combined company’s business could be adversely affected. Biota cannot anticipate if, when or to what extent BARDA might vary or terminate its contract with Biota.

 

33


Table of Contents

It is the current intention of Biota and Nabi that the combined company will rely upon third parties for all of the manufacturing and most of the distribution of its products.

It is the current intention of Biota and Nabi that the combined company will rely upon third parties to manufacture, distribute and market most of its products.

The combined company’s reliance on third parties for the manufacture of its products creates a dependency that could disrupt the combined company’s research and development, clinical testing, and sales and marketing of its products if the sources of such supply prove to be unreliable or unavailable. If the contracted manufacturing and/or distribution sources become unreliable or unavailable, the combined company and its licensees may not be able to manufacture or market the combined company’s products.

Biota’s collaboration and license agreement with Daiichi Sankyo does not fully address the respective rights and obligations of Biota and Daiichi Sankyo with respect to how laninamivir may be developed and marketed outside of Japan or how the proceeds from any direct sales of laninamivir outside of Japan would be shared. As a result, unless Biota and Daiichi Sankyo come to an agreement disputes between Biota and Daiichi Sankyo could result in litigation or arbitration and could adversely affect the business, results of operations or financial condition of the combined company.

The collaboration and license agreement between Biota and Daiichi Sankyo does not fully address the respective rights and obligations of Biota and Daiichi Sankyo with respect to how laninamivir may be developed and marketed outside of Japan or how the proceeds from any direct sales by Biota or Daiichi Sankyo of laninamivir outside of Japan would be shared. Also, the agreement includes a provision which restricts either Biota or Daiichi Sankyo from developing, commercializing or otherwise handling or dealing with laninamivir in any country (or enter into any license, collaboration or agreement with a third party to do any of the foregoing).

Unless Biota and Daiichi Sankyo come to an agreement with respect to the development and marketing of laninamivir outside of Japan, disputes between Biota and Daiichi Sankyo could result in litigation or arbitration, which can be expensive and time consuming. If any such dispute were to be resolved unfavorably to Biota, the amount of future revenue laninamivir generates could be reduced. This may have a material adverse effect on the business, results of operations or financial condition of the combined company.

If the combined company fails to attract and retain highly qualified personnel, it may be unable to successfully develop new product candidates, manage clinical trials or enter into strategic collaborations.

The combined company’s future success will depend in large part on its ability to attract and retain highly qualified scientific, technical and management personnel, as well as personnel with expertise in preclinical testing, clinical development, regulatory affairs, government relations and strategic partnering. The combined company will face competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations. Competition for qualified personnel in the pharmaceutical field is intense, and there is a limited pool of qualified potential employees to recruit. The combined company may not be able to attract and retain quality personnel on acceptable terms. If the combined company is unsuccessful in its recruitment and retention efforts, its business may be harmed.

The combined company’s clinical trials may not be successful.

Following the Transaction, the combined company will only obtain marketing approval to commercialize a product candidate if it or its licensee can demonstrate to the satisfaction of the U.S. Food and Drug Administration (the “FDA”) or the applicable non-U.S. regulatory authority, in clinical trials, that the product candidate is safe and effective, and otherwise meets the appropriate standards required for approval for a particular indication. Clinical trials are lengthy, complex and extremely expensive processes with uncertain results. A failure of one or more of the combined company’s clinical trials may occur at any stage of testing and may preclude the ability of the combined company or its licensees to submit an application for marketing approval of its product candidate.

 

34


Table of Contents

It is the current intention of Biota and Nabi that the combined company will rely on third parties to conduct certain preclinical development activities and clinical trials and those third parties may not perform satisfactorily.

It is the current intention of Biota and Nabi that following the Transaction, the combined company will not conduct in its facilities certain preclinical development activities with respect to its product candidates, such as preclinical studies in animals, nor will it conduct clinical trials for its product candidates itself. It is the current intention of Biota and Nabi that the combined company will rely on, or work in conjunction with, third parties to perform these functions, such as contract research organizations, medical institutions and clinical investigators. The combined company’s reliance on these third parties for preclinical and clinical development studies may reduce its control over these activities. The combined company will remain responsible for ensuring that the preclinical development activities and clinical trials with respect to each of its product candidates is conducted in accordance with the applicable U.S. federal and state laws and foreign regulations, general investigational plans and protocols. However, other than contracts between these third parties and the combined company or its licensees, it has no direct control over these researchers or contractors, as they will not be employees of the combined company. Moreover, the regulatory authorities will require the combined company to comply with standards, commonly referred to as Good Laboratory Practices and Good Clinical Practices for conducting, recording and reporting the results of its preclinical development and clinical trials, respectively, to assure that data and reported results are credible and accurate and that the rights, safety and confidentiality of trial participants are protected. The combined company’s reliance on third parties that it will not control, including its licensees, will not relieve the combined company of these responsibilities and requirements. Furthermore, these third parties may have relationships with other entities, some of which may be the combined company’s competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct the combined company’s preclinical development activities or clinical trials in accordance with regulatory requirements or the stated protocols of the combined company or its licensees, the combined company or its licensees may not be able to obtain, or may be delayed in obtaining, marketing approvals for its product candidates and may not be able to, or may be delayed in its efforts to successfully commercialize its product candidates. These third parties may be warned, suspended or otherwise sanctioned by the FDA or other government or regulatory authorities for failing to meet the applicable requirements imposed on such third parties. As a result, the third parties may not be able to fulfill their contractual obligations, and the results obtained from the preclinical and clinical research using their services may not be accepted by the regulatory authorities to support the marketing approval of the combined company’s product candidates. If the third parties or their employees become debarred by the regulatory authorities, the combined company and its licensees will not be able to use the research data derived from their services to support the marketing approval of the combined company’s product candidates. Finally, these third parties may be bought by other entities, change their business plans or strategies or they may go out of business, thereby preventing them from meeting their contractual obligations to the combined company and its licensees.

It is the current intention of Biota and Nabi that the combined company will rely on pharmaceutical companies with whom they partner to pay the majority of the costs associated with obtaining regulatory approval for, and manufacturing and marketing of, most of its existing products and future product candidates. If the combined company is unable to obtain agreements with strategic partners to fund these costs, it will have to fund such costs itself or it may not be able to continue its development of these product candidates.

It is the current intention of Biota and Nabi that the combined company will continue to rely on significant collaborative relationships with major pharmaceutical companies for the advanced development, regulatory approval, sales and marketing of its products. There are existing relationships with GSK for Relenza™ and Daiichi Sankyo for laninamivir (marketed as Inavir® in Japan). As the combined company continues to advance its product candidates following the Transaction, Biota and Nabi currently intend that the combined company will either license product candidates to, or partner with, one or more major pharmaceutical companies at some point in their product development. If the combined company is able to do so, it is the current intention of Biota

 

35


Table of Contents

and Nabi for these licensees or partners to pay the majority of the costs associated with any remaining development work, regulatory submissions, clinical trials and the manufacturing and marketing of its product candidates. If the combined company is unable to license its future product candidates or otherwise partner with third parties, the combined company will have to fund the costs of its development itself.

Following the Transaction, the combined company’s dependence on collaborative arrangements with third parties would subject it to a number of risks. These collaborative arrangements may not be on terms favorable to the combined company. Agreements with collaborative partners typically allow partners significant discretion in electing whether or not to pursue any of the planned activities. The combined company will not be able to control the amount and timing of resources its collaborative partners may devote to products based on the collaboration, and the combined company’s partners may choose to pursue alternative products. The combined company’s partners may not perform their obligations as expected. Business combinations or significant changes in a collaborative partner’s business strategy may adversely affect a partner’s willingness or ability to complete its obligations under the arrangement. Moreover, the combined company could become involved in disputes with its partners, which could lead to delays or termination of the collaborations and time-consuming and expensive litigation or arbitration. Even if the combined company fulfills its obligations under a collaborative agreement, its partner may be able to terminate the agreement under certain circumstances. If any collaborative partner were to terminate or breach the combined company’s agreement with it, or otherwise fail to complete its obligations in a timely manner, the combined company’s chance of successfully commercializing its product candidates would be materially and adversely affected.

Preclinical results may not be indicative of clinical results. In addition, clinical results may not be sufficient to obtain marketing approvals necessary for marketing its product candidates, including approval by regulatory authorities.

The combined company has a number of product candidates that are at an early stage of development. The combined company may not be able to progress its product candidates that are undergoing preclinical testing into clinical trials. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and favorable initial results from a clinical trial do not necessarily predict outcomes in subsequent clinical trials. The indications of use for which the combined company will pursue development may have clinical effectiveness endpoints that have not previously been reviewed or validated by regulatory authorities, which may complicate or delay the combined company’s effort to ultimately obtain marketing approval. The combined company cannot therefore guarantee that the clinical trials of its product candidates will ultimately be successful.

The combined company and its licensees may not successfully design or implement clinical trials required for marketing approval of the combined company’s product candidates. The combined company might not be able to demonstrate that its product candidates meet the appropriate standards for marketing approval.

Regulatory authorities may impose requirements on the combined company’s clinical trials that are difficult to comply with, which could harm the business of the combined company.

The requirements that regulatory authorities may impose on clinical trials for product candidates of the combined company are uncertain. As a result, the combined company cannot guarantee that it or its licensees will be able to comply with such requirements. For example, regulatory authorities may require endpoints in the combined company’s late-stage clinical trials that are different from or in addition to the endpoints in its early-stage clinical trials or the endpoints which the combined company or its licensees may propose. The endpoints or other study elements, including sample size, required by regulatory authorities may make it less likely that the combined company’s Phase III clinical trials are successful or may delay or increase the cost of completing the clinical trials. If the combined company or its licensees are unable to comply with the requirements of regulatory authorities, the combined company and its licensees will not be able to obtain marketing approval for product candidates and the business of the combined company will suffer.

 

36


Table of Contents

If the combined company or its licensees are not able to conduct clinical trials properly and on schedule, marketing approval by regulatory authorities may be delayed or denied.

Clinical trials of the product candidates by the combined company or its licensees may be delayed or terminated for many reasons, including, but not limited to, if:

 

   

regulatory authorities do not grant permission to proceed or places the trial on clinical hold;

 

   

subjects do not enroll or remain in the clinical trials at the expected rate;

 

   

the incidence of infectious viruses targeted by the product candidate is low or fluctuates during the clinical trial;

 

   

a third party fails to manufacture the necessary amounts of product candidate;

 

   

a third party fails to manufacture product candidate in a timely manner;

 

   

a third party manufacturing facility is ordered by a government or regulatory authority to temporarily or permanently shut down due to violations of current GMP or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process;

 

   

subjects experience an unacceptable rate or severity of adverse side effects;

 

   

reports from preclinical or clinical testing on similar technologies and products raise safety and/or efficacy concerns;

 

   

third party clinical investigators lose their license or permits necessary to perform the clinical trials of the combined company or its licensee, do not perform clinical trials on the anticipated schedule or consistent with the clinical trial protocol, Good Clinical Practice and regulatory requirements, or other third parties do not perform data collection and analysis in a timely or accurate manner;

 

   

inspections of clinical trial sites by regulatory authorities or Institutional Review Boards (“IRBs”) find regulatory violations that require the combined company or its licensee to undertake corrective action, suspend or terminate one or more sites, or prohibit the combined company or its licensee from using some or all of the data in support of the marketing applications for such product candidate; and

 

   

third party contractors become debarred or suspended or otherwise penalized by regulatory or other government authorities for violations of regulatory requirements, in which case the combined company or its licensee may need to find a substitute contractor, and the combined company or its licensee may not be able to use some or any of the data produced by such contractors in support of the marketing applications for such product candidates; or one or more IRBs or the combined company’s Data Safety Monitoring Board (“DSMB”), refuses to approve, suspends or terminates the clinical trial at an investigational site, precludes enrollment of additional subjects, or withdraws its approval of the clinical trial.

If the combined company or its licensees are unable to conduct clinical trials in a proper or timely manner, the regulatory authorities may delay or deny marketing approval.

As the combined company loses patent protection on its marketed products, it may have a material adverse effect on the combined company’s business.

Following the Transaction, the combined company will rely on certain patents to provide it and its licensees with exclusive rights for certain of the combined company’s products. When all patents underlying a license expire, the combined company’s revenue from that license may cease, and there can be no assurance that the

 

37


Table of Contents

combined company will be able to replace it with revenue from new or existing licenses. The primary patents on Relenza™ will expire in December 2014 in the U.S., May 2015 in Australia and major countries of the European Union, and July 2019 in Japan.

The combined company’s patents and proprietary rights may not provide sufficient protection, and patents of other companies could prevent the combined company or its licensees from developing and marketing the combined company’s products.

The patent positions of pharmaceutical firms generally are highly uncertain and involve complex legal and factual questions. The ultimate degree of patent protection that will be afforded to pharmaceutical and biotechnology products and processes in the U.S. and in other important markets remains uncertain and is dependent upon the scope of protection decided upon by the patent offices, courts and lawmakers in these countries. There can be no assurance that existing patent applications will result in issued patents, that the combined company will be able to obtain additional licenses to patents of others or that it will be able to develop additional patentable technology of its own. The combined company cannot be certain that it was the first creator of inventions covered by its patents or pending patent applications or that it was the first to file patent applications for such inventions. There can be no assurance that any patents issued to the combined company will provide the combined company or its licensees with competitive advantages or will not be challenged by others. Furthermore, there can be no assurance that others will not independently develop similar products, or, if patents are issued to the combined company, others may design their patents around such patents.

A number of pharmaceutical companies, biotechnology companies, universities and research institutions may have filed patents or patent applications or received patents relating to products or processes competitive with or similar to those of the combined company. Some of these applications or patents may compete with the applications of the combined company or conflict in certain respects with claims made under applications of the combined company. Such a conflict could result in a significant reduction of the coverage of the combined company’s patents, if issued. In addition, if patents that contain competitive or conflicting claims are issued to others and such claims are ultimately determined to be valid, the combined company or its licensees may be required to obtain licenses to these patents or to develop or obtain alternative technology. See “Information About the Companies—Biota Holdings Limited—Patents and Proprietary Rights.”

If any license is required, there can be no assurance that the combined company would be able to obtain any such license on commercially favorable terms, if at all. The failure of the combined company to obtain a license to any technology that it may require in order to commercialize its products could have a material adverse effect on the future business, financial condition and results of operations of the combined company.

Litigation may be necessary to enforce any patents issued to the combined company or to determine the scope or validity of third party proprietary rights or to defend against any claims that the combined company’s products infringe on third party proprietary rights. Patent litigation is expensive and time consuming and could result in substantial cost to the combined company or its licensees. The costs of patent litigation and the ability of the combined company to prevail in such litigation could have a material adverse effect on its future business, financial condition and results of operations.

It is also the current intention of Biota and Nabi that the combined company will rely on secrecy to protect its technology, especially where patent protection is not believed to be appropriate or obtainable. It is also intended that the combined company will maintain strict controls and procedures regarding access to and use of its proprietary technology and processes. However, there can be no assurance that these controls or procedures will not be violated, that the combined company would have adequate remedies for any violation, or that trade secrets of the combined company will not otherwise become known or be independently discovered by competitors.

 

38


Table of Contents

The combined company or its licensees may be subject to costly and damaging product liability and other claims in connection with the development and commercialization of the combined company’s products.

Pharmaceutical and biotechnology companies may be subject to litigation, including class action lawsuits, and governmental and administrative investigations and proceedings, including with respect to product pricing and marketing practices. There can be no assurance that lawsuits will not be filed against the combined company or its licensees, or that either will be successful in the defense of these lawsuits. Defense of suits can be expensive and time consuming, regardless of the outcome, and an adverse result in one or more suits could have a material adverse effect on the combined company’s future business, financial condition and results of operations. In recent years, coverage and availability of cost-effective product liability insurance has decreased, so the combined company or its licensees may be unable to maintain sufficient coverage for product liabilities that may arise.

Adverse market and economic conditions may exacerbate certain risks affecting the combined company’s business.

Sales of the combined company’s products are dependent on government purchases and on reimbursement from government health administration authorities, private health insurers, distribution partners and other organizations. These organizations may be unable to satisfy their reimbursement obligations or may delay payment due to deteriorating global economic conditions, uncertainty about the direction and relative strengths of their economies, volatility in the credit and financial markets, and other disruptions due to natural disasters, political instability or otherwise. These adverse market and economic conditions also may cause governmental health authorities to reduce the extent of reimbursements and private insurers to increase their scrutiny of claims. A reduction in the availability or extent of reimbursement could reduce product sales and revenue of the combined company, or result in additional allowances or significant bad debts, which may adversely affect the results of operations of the combined company.

The combined company will earn royalties on sales by licensees of influenza drugs. Sales of influenza drugs are seasonal and cyclical in nature and are often dependent on the severity and resistance profile of the circulating influenza viruses. In addition governments may purchase large quantities of influenza antiviral drugs for stockpiling purposes. It is impossible to accurately predict future revenue.

The combined company faces significant competition.

The combined company faces significant competition from large pharmaceutical and biotechnology companies, many of whom have substantially greater resources. Zanamivir and laninamivir compete with oseltamivir (Tamiflu®), an anti-influenza drug that is sold by F. Hoffmann-La Roche Ltd and associated companies.

In addition, a number of companies are pursuing the development of technologies which are competitive with the combined company’s existing products and research programs. These companies include specialized pharmaceutical firms and large pharmaceutical companies acting either independently or together with other pharmaceutical companies.

If significant safety issues arise for the combined company’s marketed products, the combined company’s future royalty revenue may be reduced, which would adversely affect its results of operations.

The data supporting the marketing approvals for the combined company’s marketed products and forming the basis for the safety warnings in the product labels of such products were obtained in controlled clinical trials of limited duration and, in some cases, from post-approval use. As the combined company’s marketed products may be used over longer periods of time by many patients with underlying health problems, taking numerous other medicines, the combined company expects to continue to find new issues such as safety, resistance or drug interaction issues, which may require the combined company’s licensees to provide additional warnings or

 

39


Table of Contents

contraindications on their labels or narrow the approved indications, each of which could reduce the market acceptance of these products.

If serious safety, resistance or drug interaction issues arise with the combined company’s marketed products, sales of these products could be limited or halted by the combined company or its licensees or by regulatory authorities and the results of operations of the combined company would be adversely affected.

The future royalty revenue of the combined company depends on compliance with regulatory requirements and comparable international regulations. Failure to obtain broad approvals on a timely basis or to maintain compliance could delay or halt commercialization of the combined company’s products and reduce the royalty revenue receivable by the combined company.

The product candidates being developed by the combined company or its licensees must be approved for marketing and sale by regulatory authorities and, once approved, are subject to extensive regulation by these regulatory authorities. The combined company will progress the clinical trials of laninamivir planned by Biota. The combined company currently anticipates that it will file for marketing approval of laninamivir with the FDA in 2016. This product may fail to receive such marketing approvals on a timely basis, or at all.

On September 27, 2007, President Bush signed into law the Food and Drug Administration Amendments Act of 2007, which significantly expanded the FDA’s authority, including, among other things, to:

 

   

require sponsors of marketed products to conduct post-approval clinical studies to assess a known serious risk, signals of serious risk or to identify an unexpected serious risk;

 

   

mandate labeling changes to products, at any point in a product’s lifecycle, based on new safety information; and

 

   

require sponsors to implement a Risk Evaluation and Mitigation Strategy for a product which could include a medication guide, patient package insert, a communication plan to healthcare providers or other elements as the FDA deems are necessary to assure safe use of the drug, which could include imposing certain restrictions on the distribution or use of a product.

Failure to comply with these or other requirements, if imposed on a sponsor by the FDA, could result in significant civil monetary penalties and the combined company’s operating results may be adversely affected.

Expenses associated with clinical trials may cause the combined company’s earnings to fluctuate, which could adversely affect its stock price.

The clinical trials required for regulatory approval of the combined company’s product candidates, as well as clinical trials required to be conducted after approval, are expensive. It is difficult to accurately predict or control the amount or timing of these expenses from quarter to quarter and regulatory authorities may require more clinical testing than originally anticipated. Uneven and unexpected spending on these programs may cause the combined company’s operating results to fluctuate from quarter to quarter, and the combined company’s stock price may decline.

Some of the combined company’s operating expenses will increase as a result of operating as a public company, and the combined company’s management may be required to devote substantial time to complying with U.S. public company regulations.

The Sarbanes-Oxley Act of 2002 (“SOX”), the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules subsequently implemented by the SEC and NASDAQ, have imposed increased regulation and disclosure and have required enhanced corporate governance practices of U.S. public companies. The combined company’s efforts to comply with evolving laws, regulations and standards in this

 

40


Table of Contents

regard are likely to result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. Even acknowledging that Biota will give up its ASX listing, these changes may require a significant commitment of additional resources. The combined company may not be successful in implementing these requirements, and implementing them could materially adversely affect its business, results of operations and financial condition. If the combined company does not implement such requirements in a timely manner or with adequate compliance, it might be subject to sanctions or investigation by regulatory authorities, such as the SEC or NASDAQ. Any such action could harm the combined company’s reputation and the confidence of investors and customers in the combined company and could materially adversely affect its business and cause its share price to fall.

Failure to establish and maintain adequate internal controls in accordance with the Sarbanes-Oxley Act of 2002 and other regulations could have a material adverse effect on the combined company’s business and stock price.

As a U.S. public company, the combined company will be required to establish and maintain an adequate internal control structure and procedures for financial reporting and to assess the effectiveness of its internal control procedures in order to satisfy the requirements of SOX. In addition, for the first time, in fiscal 2012, the combined company’s independent registered public accounting firm will be required to issue a report that addresses the effectiveness of its internal controls over financial reporting. During the course of assessing the combined company’s internal controls, the combined company or its independent registered public accounting firm may identify deficiencies that the combined company may not be able to remediate in time to meet its deadline for compliance with SOX. Establishing, maintaining and assessing the effectiveness of the combined company’s internal controls can divert its management’s attention from other matters that are important to the operation of its business. The combined company also expects regulations to continue to increase its legal and financial compliance costs, to make it more difficult to attract and retain qualified officers and members of its Board of Directors, particularly to serve on its audit committee, and to make some activities more difficult, time consuming and costly. The combined company may not be able to conclude on an ongoing basis that it has effective internal controls over financial reporting, or its independent registered public accounting firm may not be able or willing to issue an unqualified report on the effectiveness of its internal controls over financial reporting. If the combined company or its independent registered public accounting firm conclude that its internal controls over financial reporting are not effective, the combined company cannot be certain as to the timing of remediation actions or their effect on its operations because there is presently no precedent available by which to measure compliance adequacy.

If the combined company is unable to conclude that it has effective internal controls over financial reporting, its independent auditors may be unable to provide it with an unqualified report on the effectiveness of the combined company’s internal controls over financial reporting or it may be required to restate its financial statements or fail to meet its public reporting obligations. As a result, investors could lose confidence in the combined company’s reported financial information, which could have a negative effect on the trading price of its stock.

The trading price of the combined company’s shares of common stock may fluctuate significantly.

The price of the combined company’s shares of common stock may be volatile, which means that it could decline substantially within a short period of time. The trading price of the shares may fluctuate, and investors may experience a decrease in the value of the shares that they hold, sometimes regardless of the combined company’s operating performance or prospects. The trading price of the combined company’s common stock could fluctuate significantly for many reasons, including the following:

 

   

large quarterly and even yearly variations in operating results since the market for Relenza™ and Inavir® is likely to continue to be volatile, unpredictable and difficult to forecast because influenza outbreaks are highly variable in terms of severity, frequency and morbidity, and because government stockpiling decisions can change over time;

 

41


Table of Contents
   

future announcements concerning the combined company’s business and that of its competitors including in particular, the progress of the combined company’s development of laninamivir pursuant to the BARDA contract and the development programs for the other product candidates;

 

   

regulatory developments, enforcement actions bearing on advertising, marketing or sales of Relenza™, Inavir® or pipeline products;

 

   

introduction of new products or changes in product pricing policies by the combined company or its competitors;

 

   

fluctuations of investor interest in the NI product sector; and

 

   

fluctuations in the economy, world political events or general market conditions.

 

42


Table of Contents

CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including under the headings “Summary,” “Risk Factors,” “The Transaction,” “Information About the Companies—Biota Holdings Limited,” “Information About the Companies—Biota Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this proxy statement. Statements in this proxy statement that are not historical facts are “forward-looking statements.” These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, financial position, levels of activity, performance or achievements of Nabi, Biota or the combined company to be materially different from any future results, financial position, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or similar words. You should read statements that contain these words carefully because they discuss the companies’ future expectations, contain projections of the companies’ future results of operations or of the companies’ financial positions, or state other forward-looking information. Nabi believes that it is important to communicate this information to Nabi’s investors. However, there may be events in the future that Nabi and Biota are not able to control or predict accurately. The risks described under “Risk Factors” in this proxy statement and in Nabi’s filings with the SEC as well as any cautionary language in this proxy statement, provide examples of risks, uncertainties and events that may cause the companies’ actual results to differ materially from the expectations that Nabi or Biota describe in the forward-looking statements. These risks, uncertainties and events include, but are not limited to:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Transaction Agreement, including a termination under circumstances that could require Nabi to pay a break fee;

 

   

the inability to complete the Transaction due to the failure of either party to obtain stockholder approval or the failure to satisfy other conditions to completion of the Transaction, including required regulatory approvals;

 

   

the failure of the Transaction to close for any other reason;

 

   

the outcome of legal proceedings, if any, instituted against Nabi and/or others relating to the Transaction Agreement;

 

   

diversion of management’s attention from ongoing business concerns;

 

   

the effect of the announcement of the Transaction on our business relationships, operating results and business generally;

 

   

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

 

   

changes in regulation and the regulatory environment;

 

   

competition in the markets in which the companies operate;

 

   

the ability of the companies to raise capital in the future; and

 

   

effects of natural catastrophes, terrorism and other interruptions to the business of the companies.

You should be aware that the occurrence of the events described in these risk factors and elsewhere in this proxy statement could have a material adverse effect on the business, results of operations and financial position of the companies. You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by Nabi or persons acting on Nabi’s behalf.

 

43


Table of Contents

Nabi and Biota cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on the forward-looking statements included in this proxy statement, which apply only as of the date of this proxy statement. Except as required by applicable law, we are under no obligation (and expressly disclaim any such obligation) to publicly release any revision or update to any forward-looking statement contained herein to reflect any future events or occurrences.

 

44


Table of Contents

THE SPECIAL MEETING

Date, Time and Place

The special meeting will take place at [*****] a.m., local time, on [*****], 2012, at [*****].

Purpose

At the special meeting, the holders of Nabi’s common stock, par value $0.10 per share, will be asked to consider and vote upon the following six proposals:

 

  1. to approve an amendment to the Nabi certificate of incorporation to increase the authorized shares of Nabi common stock from 125,000,000 shares to 200,000,000 shares;

 

  2. to approve an amendment to the Nabi certificate of incorporation to change the name of Nabi from “Nabi Biopharmaceuticals” to “Biota Pharmaceuticals, Inc.”;

 

  3. to approve an amendment to the Nabi certificate of incorporation to effect a reverse stock split of Nabi common stock at any time prior to December 31, 2012 at a ratio ranging from four-to-one to eight-to-one, as determined by Nabi’s board of directors in its sole discretion;

 

  4. to approve the issuance of shares of Nabi common stock to Biota stockholders contemplated by the Transaction Agreement;

 

  5. to approve, on an advisory (non-binding) basis, the compensation payable to certain executive officers of Nabi under existing arrangements in connection with the Transaction; and

 

  6. to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve any of proposals 1 through 4.

Board Recommendation

After determining that it is advisable and in the best interests of Nabi and its stockholders to consummate the Transaction as contemplated by the Transaction Agreement, Nabi’s board of directors unanimously authorized, approved, and declared advisable each amendment to the Nabi certificate of incorporation and the issuance of shares of Nabi common stock. Accordingly, Nabi’s board of directors unanimously recommends that Nabi’s stockholders vote “FOR” each of the foregoing proposals.

The effectiveness of proposals 1 through 4 is conditioned upon the approval of each proposal, except that failure to approve proposal 3 will not affect the implementation of proposals 1, 2 or 4. The Nabi stockholders can cast separate votes on each proposal. The proposal to approve the compensation payable to executive officers of Nabi in connection with the Transaction is subject to a vote by Nabi’s stockholders separate from each of the votes on proposals 1 through 4, and approval of the executive compensation is not a condition to completion of the Transaction.

There are certain risks associated with the Transaction. See “Risk Factors” beginning on page 28 of this proxy statement for more information regarding such risks. Nabi stockholders should carefully read this proxy statement in its entirety for more detailed information concerning the Transaction. In particular, Nabi stockholders are directed to the Transaction Agreement, which is attached as Annex A to this proxy statement.

Record Date; Outstanding Shares; Shares Entitled to Vote

Nabi’s board of directors has fixed the close of business on [*****], 2012 as the record date for determination of stockholders entitled to notice of, and to vote at, the special meeting. Only stockholders of

 

45


Table of Contents

record of shares of Nabi common stock as of the close of business on the record date will receive notice of, and be entitled to vote at, the special meeting and any adjournments, postponements or continuations of the special meeting.

As of the close of business on the record date for the special meeting, there were [*****] shares of Nabi common stock outstanding and held by approximately [*****] holders of record. Each stockholder is entitled to one vote at the special meeting for each share of Nabi common stock held by that stockholder at the close of business on the record date. Nabi’s common stock is the only security the holders of which are entitled to notice of, and to vote at, the special meeting.

If you own shares that are registered in the name of someone else, such as a broker, bank or other nominee, you need to direct that organization to vote those shares or obtain an authorization from them and vote the shares yourself at the meeting.

Quorum

The holders of issued and outstanding shares of Nabi common stock which represent a majority of the votes entitled to be cast at the special meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business at the special meeting. A quorum must be present in order for the votes on the Charter Amendment Proposals, the proposal to approve the issuance of Nabi common stock to Biota stockholders pursuant to the Transaction Agreement, and the other proposals to be taken. It is important that Nabi stockholders vote promptly so that their shares are counted toward the quorum.

Abstentions will be counted for purposes of determining the presence of a quorum at the special meeting. Banks, brokers and other nominees that hold their customers’ shares in street name may not vote their customers’ shares on “non-routine” matters without instructions from their customers. As each of the proposals to be voted upon at the special meeting is considered “non-routine,” such organizations do not have discretion to vote on any proposal for which they do not receive instructions from their customers (this is referred to in this context as a “broker non-vote”). As a result, if you fail to provide your broker, bank or other nominee with any instructions regarding how to vote your shares, your shares will not be considered present at the special meeting, will not be counted for purposes of determining the presence of a quorum and will not be voted on any of the proposals. If you provide instructions to your broker, bank or other nominee which indicate how to vote your shares with respect to certain proposals but not with respect to a particular proposal, your shares will be considered present at the special meeting and be counted for purposes of determining the presence of a quorum but will not be voted with respect to that particular proposal.

Nabi may seek to adjourn the special meeting if a quorum is not present at the meeting.

 

46


Table of Contents

Security Ownership of Certain Beneficial Owners and Management of Nabi Stock

The following table sets forth information as of May 15, 2012 as to the Nabi common stock beneficially owned by (i) all directors, (ii) each named executive officer, (iii) current directors and executive officers of Nabi as a group, and (iv) each person who is known to Nabi to be the beneficial owner of more than 5% of the Nabi common stock. Unless otherwise noted, this information has been provided by the persons named in the table.

 

     Amount of Beneficial
Ownership (1)
    Percentage
(2)
 

Directors

    

Jason M. Aryeh

     249,183 (3)      *   

David L. Castaldi

     189,389 (4)      *   

Geoffrey F. Cox, Ph.D.

     239,679 (5)      *   

Peter Davis

     132,630 (6)      *   

Richard A. Harvey, Jr.

     164,996 (7)      *   

Named Executive Officers

    

Raafat E.F. Fahim, Ph.D.

     1,070,328 (8)      2.5

Paul D. Kessler, M.D.

     481,241 (9)      1.1

Matthew W. Kalnik, Ph.D.

     190,050 (10)      *   

Current Directors and Executive Officers as a group (8 persons)

     2,717,496 (11)      6.3

5% Beneficial Owners

    

Renaissance Technologies LLC and Renaissance Technologies Holding

    Corporation

    300 Third Avenue

    New York, NY 10022

     2,772,843 (12)      6.5

The Vanguard Group, Inc.

    100 Vanguard Avenue

    Malvern, PA 19355

     2,308,413 (13)      5.4

BlackRock, Inc.

    40 East 52nd Street

    New York, NY 10022

     2,377,972 (14)     5.5

The Mangrove Partners Fund, L.P.

    10 East 53rd Street

    31st Floor

    New York, NY 10022

     2,421,322        5.65

 

* Less than 1%

 

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

 

(2) Based on 42,877,226 shares of Nabi common stock outstanding as of May 15, 2012.

 

(3) Consists of (i) 131,183 shares beneficially owned by Jason Aryeh through his relationship with JALAA Equities, LP and JLV Investments, LP (the Aryeh Entities); and (ii) 118,000 shares of Nabi common stock that may be acquired under stock options that are presently exercisable or will be exercisable on July 14, 2012. Mr. Aryeh disclaims beneficial ownership of all securities beneficially owned by the Aryeh Entities, except to the extent of any indirect pecuniary interest he may have therein.

 

(4) Consists of (i) 49,189 shares of Nabi common stock owned by Mr. Castaldi; (ii) 6,200 shares of Nabi common stock owned by Mr. Castaldi’s wife and daughters; and (iii) 134,000 shares of Nabi common stock that may be acquired under stock options that are presently exercisable or will be exercisable on July 14, 2012.

 

47


Table of Contents
(5) Consists of (i) 25,679 shares of Nabi common stock owned directly by Dr. Cox and (ii) 214,000 shares of Nabi common stock that may be acquired under stock options that are presently exercisable or will be exercisable on July 14, 2012.

 

(6) Consists of (i) 14,630 shares of Nabi common stock owned by the Davis Family Trust dated August 29, 1996, of which Mr. Davis is a Trustee; and (ii) 118,000 shares of Nabi common stock that may be acquired under stock options that are presently exercisable or will be exercisable on July 14, 2012.

 

(7) Consists of (i) 30,996 shares of Nabi common stock owned by jointly by Mr. Harvey and his wife; and (ii) 134,000 shares of Nabi common stock that may be acquired under stock options that are presently exercisable or will be exercisable on July 14, 2012.

 

(8) Consists of (i) 298,724 shares of Nabi common stock owned by Dr. Fahim; (ii) 1,000 shares held jointly with Dr. Fahim’s spouse; (iii) 73,750 shares of restricted Nabi common stock which are subject to future vesting but which may be voted; and (iv) 696,854 shares of Nabi common stock that may be acquired under stock options that are presently exercisable or will be exercisable on July 14, 2012.

 

(9) Consists of (i) 37,628 shares of Nabi common stock owned by Dr. Kessler; (ii) 52,500 shares of restricted Nabi common stock which are subject to future vesting but which may be voted; and (iii) 376,113 shares of Nabi common stock that may be acquired under stock options that are presently exercisable or will be exercisable on July 14, 2012.

 

(10) Consists of (i) 28,925 shares of Nabi common stock owned by Dr. Kalnik; (ii) 39,000 shares of restricted Nabi common stock which are subject to future vesting but which may be voted; and (iii) 122,125 shares of Nabi common stock that may be acquired under stock options that are presently exercisable or will be exercisable on July 14, 2012.

 

(11) See notes 3 through 10.

 

(12) The information in the table and this note is derived from a Schedule 13G/A filed with the SEC on February 13, 2012 by Renaissance Technologies LLC and Renaissance Technologies Holding Corporation. Renaissance Technologies LLC and Renaissance Technologies Holding Corporation each have (i) sole power to vote or to direct the vote of 2,331,237 shares of common stock; (ii) sole power to dispose or to direct the disposition of 2,419,772 shares of common stock; and (iii) shared power to dispose of or direct the disposition of 353,071 shares of common stock.

 

(13) The information in the table and this note is derived from a Schedule 13G/A filed with the SEC on February 06, 2012 by The Vanguard Group, Inc., which has (i) sole power to vote or direct the vote of 61,529 shares of common stock; (ii) sole power to dispose or director the disposition of 2,246,884 shares of common stock; and (iii) shared power to dispose or direct the disposition of 61,529 shares of common stock.

 

(14) The information in the table and this note is derived from a Schedule 13G/A filed with the SEC on February 13, 2012 by BlackRock, Inc., which has (i) sole power to vote or to direct the vote; and (ii) sole power to dispose or to direct the disposition of 2,377,972 shares of common stock.

 

(15) The information in the table and this note is derived from a Schedule 13G filed with the SEC on May 2, 2012 by The Mangrove Partners Fund, L.P., Mangrove Partners, Mangrove Capital, Nathaniel August, who collectively have (i) shared power to vote or to direct the vote of 2,421,322 shares of common stock; and (ii) shared power to dispose of or direct the disposition of 2,421,322 shares of common stock.

Required Vote

Assuming a quorum is present at the special meeting, approval of the Charter Amendment Proposals will require the affirmative vote of the holders of a majority of the outstanding shares of Nabi common stock as of the close of business on the record date for the special meeting. If you fail to vote, if you fail to provide instruction to your broker, bank or other nominee to vote on your behalf, or if you abstain from voting, the effect will be the same as if you had voted against each of the Charter Amendment Proposals.

 

48


Table of Contents

Assuming a quorum is present at the special meeting, approval of the proposal to approve the issuance of shares of Nabi common stock to Biota stockholders as contemplated by the Transaction Agreement will require the affirmative vote of a majority of the shares of Nabi’s common stock properly cast on the proposal at the special meeting. An abstention from voting on this proposal will have no effect on the outcome of the vote on this proposal. If you fail to submit a proxy and do not attend the special meeting in person, or if you fail to provide instructions to your broker, bank or other nominee to vote on your behalf, your shares will not affect whether this proposal is approved.

Assuming a quorum is present at the special meeting, approval, on an advisory (non-binding) basis, of the compensation payable to certain executive officers of Nabi under existing arrangements in connection with the Transaction will require the affirmative vote of the holders of a majority of the shares of Nabi’s common stock properly cast on the proposal at the special meeting. An abstention from voting on this proposal will have no effect on the outcome of the vote on the proposal. Because the vote on this proposal is advisory, the result of the vote will not be binding on Nabi. If you fail to submit a proxy and do not attend the special meeting in person, or if you fail to provide instructions to your broker, bank or other nominee to vote on your behalf, your shares will not affect whether this proposal is approved.

Approval of one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of any of proposals 1 through 4, will require the affirmative vote of the holders of a majority of the shares of Nabi’s common stock properly cast on the proposal at the special meeting. An abstention from voting on this proposal will have no effect on the outcome of the vote on the proposal. If you fail to submit a proxy and do not attend the special meeting in person, or if you fail to provide instructions to your broker, bank or other nominee to vote on your behalf, your shares will not affect whether this proposal is approved.

Voting by Proxy

This proxy statement is being sent to you on behalf of Nabi’s board of directors for the purpose of requesting that you allow your shares of Nabi common stock to be represented at the special meeting by the persons named in the enclosed proxy card. All shares of Nabi common stock represented at the meeting by properly executed proxy cards, voted over the telephone or voted over the Internet will be voted in accordance with the instructions indicated on those proxies. If you sign and return a proxy card without giving voting instructions, your shares will be voted as follows:

 

   

FOR” approval of an amendment to the Nabi certificate of incorporation to increase the authorized shares of Nabi common stock from 125,000,000 shares to 200,000,000 shares;

 

   

FOR” approval of an amendment to the Nabi certificate of incorporation to change the name of Nabi from “Nabi Biopharmaceuticals” to “Biota Pharmaceuticals, Inc.”;

 

   

FOR” approval of an amendment to the Nabi certificate of incorporation to effect a reverse stock split of Nabi common stock at any time prior to December 31, 2012 at a ratio ranging from four-to-one to eight-to-one, as determined by Nabi’s board of directors in its sole discretion;

 

   

FOR” approval of the issuance of shares of Nabi common stock to Biota stockholders contemplated by the Transaction Agreement;

 

   

FOR” approval, on an advisory (non-binding) basis, the compensation to certain executive officers of Nabi under existing arrangements in connection with the Transaction; and

 

   

FOR” approval of one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve any of proposals 1 through 4.

 

49


Table of Contents

How to Vote

Whether or not you plan to attend the special meeting in person, you should submit your proxy as soon as possible.

If you own shares of Nabi common stock in your own name, you are an owner or holder of record. This means that you may use the enclosed proxy card or the Internet or telephone voting options to tell the persons named as proxies how to vote your shares of Nabi common stock. You have four voting options:

 

   

In Person.    To vote in person, come to the special meeting and you will be able to vote by ballot. To ensure that your shares are voted at the special meeting, Nabi’s board of directors recommends that you submit a proxy even if you plan to attend the special meeting.

 

   

Mail.    To vote using the enclosed proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the enclosed return envelope. If you return your signed proxy card to Nabi before the special meeting, Nabi will vote your shares as you direct.

 

   

Telephone.    To vote by telephone, dial the toll-free telephone number located on the enclosed proxy card using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on [*****], 2012 to be counted.

 

   

Internet.    To vote over the Internet, go to the web address located on the enclosed proxy card to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on [*****], 2012 to be counted.

If your shares of common stock are held in “street name” by your broker, bank or other nominee, you should have received a voting instruction form, as well as voting instructions with these proxy materials from that organization rather than from Nabi. Your broker, bank or other nominee will vote your shares only if you provide instructions to that organization on how to vote. You should provide your broker, bank or other nominee with instructions regarding how to vote your shares by following the enclosed instructions provided by that organization. Your shares will not be voted with respect to any proposal for which you fail to provide instructions, which will have the same effect as voting against the Charter Amendment Proposals, but which will have no effect on approval of the other proposals.

The Internet and telephone voting options available to holders of record are designed to authenticate stockholders’ identities, to allow stockholders to give their proxy voting instructions and to confirm that these instructions have been properly recorded. Proxies submitted over the Internet or by telephone through such a program must be received by 11:59 p.m. Eastern Time on [******]. Submitting a proxy will not affect your right to vote in person if you decide to attend the special meeting.

Revoking Your Proxy

Your grant of a proxy on the enclosed proxy card or through one of the alternative methods discussed above does not prevent you from voting in person or otherwise revoking your proxy at any time before it is voted at the special meeting. If your shares of Nabi common stock are registered in your own name, you may revoke your proxy in one of the following ways:

 

   

by delivering to Nabi Biopharmaceuticals, 12270 Wilkins Avenue, Rockville, Maryland 20852, Attn: Corporate Secretary, a written notice revoking your proxy that bears a date later than the date of the proxy that you are revoking and that is received before the special meeting;

 

   

by submitting another proxy card bearing a later date and mailing it so that it is received before the special meeting;

 

50


Table of Contents
   

by submitting another proxy using the Internet or telephone voting procedures; or

 

   

by attending the special meeting and voting in person, although simply attending the meeting will not revoke your proxy, as you must deliver a notice of revocation or vote at the special meeting in order to revoke a prior proxy.

Your last vote is the vote that will be counted.

If you have instructed a broker, bank or other nominee to vote your shares, you must follow the directions received from your broker, bank or other nominee if you wish to change your vote.

Voting in Person at the Special Meeting

All stockholders of record may vote their shares in person by attending the special meeting and submitting the ballot that will be provided there. If your shares are held in “street name,” you may vote in person at the special meeting if you have a document known as a “legal proxy” from the holder of record. You will need to ask the broker, bank or other nominee holding your shares for a legal proxy and bring the legal proxy with you to the special meeting. You will not be able to vote your shares at the meeting without a legal proxy. If you request a legal proxy, any previously executed proxy will be revoked, and your vote will not be counted unless you appear at the special meeting and vote in person or legally appoint another proxy to vote on your behalf.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed to a later date. Any adjournment or postponement to a date not more than 30 days after the date originally fixed for the special meeting may be made without notice, other than by an announcement made at the special meeting of the time and place of the adjourned meeting. Any adjournment of the special meeting for the purpose of soliciting additional proxies will allow Nabi’s stockholders who have already sent in their proxies to revoke them at any time before voting occurs at the special meeting as adjourned. See “Proposal 6: Adjournment of Special Meeting” beginning on page  140 of this proxy statement for more information about the proposal relating to adjournments of the special meeting.

Householding

Certain of Nabi’s stockholders who share an address are being delivered only one copy of this proxy statement unless Nabi or one of its mailing agents has received contrary instructions. Upon the written or oral request of a stockholder at a shared address to which a single copy of this proxy statement was delivered, Nabi will promptly deliver a separate copy of such document to the requesting stockholder. Written requests should be made to Nabi Biopharmaceuticals, Attention: Investor Relations, 12270 Wilkins Avenue, Rockville, Maryland 20852, and oral requests may be made by calling Investor Relations of Nabi at (706) 645-8553.

In addition, Nabi stockholders who wish to receive a separate copy of Nabi’s proxy statements and annual reports, if any, in the future should notify Nabi either in writing addressed to the foregoing address or by calling the foregoing telephone number. Nabi stockholders sharing an address who are receiving multiple copies of Nabi’s notice of Internet availability of proxy materials and/or proxy statements and annual reports may request delivery of a single copy of such documents by writing Nabi at the address above or calling Nabi at the telephone number above.

Solicitation of Proxies

Nabi is soliciting proxies for the special meeting from Nabi stockholders. Nabi will bear the entire cost of soliciting proxies from Nabi stockholders, including the expenses incurred in connection with the preparation of

 

51


Table of Contents

the proxy statement and its filing with the SEC. In addition to this mailing, Nabi’s directors, officers and employees, who will not receive any additional compensation for their services, may solicit proxies personally, electronically or by telephone. Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries to forward proxy solicitation materials to the beneficial owners of Nabi common stock held of record by those persons, and Nabi will reimburse these brokerage firms, custodians, nominees and fiduciaries for related, reasonable out-of-pocket expenses they incur.

Nabi has engaged Morrow & Co., LLC to assist in the solicitation of proxies for the special meeting and will pay Morrow & Co., LLC a fee of approximately $35,000, plus reimbursement of out-of-pocket expenses. The address of Morrow & Co., LLC is 470 West Avenue, Stamford, CT 06902. You can call Morrow & Co., LLC at (203) 658-9400 or toll-free at (800) 662-5200.

A list of stockholders entitled to vote at the special meeting will be open for examination by any Nabi stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of ten days before the meeting at Nabi’s principal executive offices at 12270 Wilkins Avenue, Rockville, Maryland 20852, and at the time and place of the meeting during the entire time of the meeting.

Other Business

Nabi does not expect that any matter other than the proposals listed above will be brought before the special meeting. If, however, other matters are properly brought before the special meeting, or any adjournment or postponement of the special meeting, the persons named as proxies will vote in accordance with their judgment.

Assistance

If you need assistance in completing your proxy card or have questions regarding the various voting options with respect to the special meeting, please contact Nabi’s proxy solicitor, Morrow & Co., LLC at (203) 658-9400 or toll-free at (800) 662-5200.

 

52


Table of Contents

THE TRANSACTION

The following discussion contains important information relating to the Transaction. You are urged to read this discussion together with the Transaction Agreement and related documents attached as annexes to this proxy statement and incorporated herein by reference before voting on the amendments to Nabi’s certificate of incorporation, the issuance of Nabi common stock in the Transaction, and the other proposals to be considered and voted upon at the special meeting.

Structure of the Transaction

Nabi and Biota are proposing to engage in a business combination under Australian corporate law, pursuant to which Nabi will acquire all of the outstanding ordinary shares of Biota, and Biota will thereby become a wholly-owned subsidiary of Nabi. As set forth in the Transaction Agreement, the business combination will be carried out in accordance with a scheme of arrangement to be submitted for approval by Biota stockholders and the Supreme Court of Victoria, Australia.

Subject to the terms and conditions of the Transaction Agreement, at the effective time of the Transaction, each ordinary share of Biota outstanding immediately prior to the completion of the Transaction will be transferred to Nabi in exchange for 0.669212231 shares of Nabi common stock, or approximately 126.0 million shares in aggregate, as such amount may be adjusted as described below. Immediately after the completion of the Transaction, the shares of Nabi common stock issued to former Biota stockholders will represent collectively approximately 74% of the outstanding common stock of the combined company, and the shares of common stock held by existing Nabi stockholders will represent collectively approximately 26% of the outstanding common stock of the combined company. The number of shares to be issued in connection with the Transaction will be adjusted based on the number of shares of Nabi common stock that remain outstanding after completion of the issuer tender offer or similar transaction, as described under “Repurchase of Shares of Nabi Common Stock; Dividends and Distributions” beginning on page 77 of this proxy statement, or the reverse stock split, as described under “Proposal 3: Amendment to Certificate of Incorporation to Effectuate Reverse Stock Split” beginning on page 131 of this proxy statement, in order to preserve the respective percentage of shares of the outstanding common stock of the combined company to be held immediately after the completion of the Transaction by Biota’s former stockholders on the one hand (collectively being approximately 74%) and Nabi’s existing stockholders on the other hand (collectively being approximately 26%).

The Transaction will be accounted for under the purchase method of accounting in accordance with U.S. GAAP for accounting and financial reporting purposes, as described under “—Accounting Treatment” beginning on page 71 of this proxy statement.

The Transaction is expected to be completed in the third quarter of 2012 subject to satisfaction or waiver of the various closing conditions set forth in the Transaction Agreement. See “The Transaction Agreement—Conditions Precedent to the Transaction” beginning on page 108 of this proxy statement for more information regarding the conditions to closing the Transaction.

Background of the Transaction

The following is a summary of the meetings, negotiations, material contacts and discussions between Nabi and Biota that preceded the execution of the Transaction Agreement, as well as certain contacts and discussions Nabi had with third parties concerning a potential strategic transaction with Nabi.

Over the past seven years, Nabi has sold or licensed all of its marketed products and product candidates. In 2010, Nabi granted to GSK an option to exclusively license NicVAX, Nabi’s sole remaining product in development, on a worldwide basis and a license to develop follow-on next-generation nicotine vaccines using Nabi’s intellectual property combined with GSK proprietary technology. On July 18, 2011, Nabi announced that

 

53


Table of Contents

NicVAX did not meet its primary endpoint in Nabi’s first of two confirmatory Phase III clinical trials and that the results from its second confirmatory Phase III clinical trial were expected before the end of calendar year 2011. At that time, Nabi had approximately $100 million in cash and marketable securities. The negative clinical trial results rendered remote the likelihood that GSK would exercise its option. (During the first quarter of 2012, GSK notified Nabi that GSK did not intend to exercise its option.) In light of these developments, Nabi’s board of directors directed Nabi’s management to focus on reducing costs and to identify a financial advisor to assist the board in evaluating and pursuing strategic alternatives.

On August 23 and 24, 2011, Nabi’s board of directors held a meeting, which included Nabi’s management and representatives from Nutter McClennen & Fish, LLP, Nabi’s corporate and securities counsel (“Nutter”), and Nabi’s tax advisers, and discussed the various strategic alternatives available to Nabi, including liquidating the company and distributing Nabi’s remaining assets to stockholders as well as pursuing a business combination transaction with another company. Such discussion included a review of the potential costs of pursuing various alternatives and the potential return to stockholders. Following these discussions, Nabi’s board of directors concluded that the company would explore a possible business combination transaction with a commercial or near-commercial stage company while continuing to review the alternative course of liquidating the company. During this meeting, Nabi’s board of directors met with a representative from a financial advisor for possible engagement, and directed Nabi’s management to identify and recommend for further discussion one or more additional financial advisors.

At the meeting held on August 24, 2011, Nabi’s board of directors also adopted a stockholder rights agreement for the purpose of preserving Nabi’s NOL tax assets, which as of December 25, 2010 included NOL carry-forwards of approximately $178 million.

On October 11, 2011, Nabi’s board of directors held a meeting, at the recommendation of Nabi’s management, and met with representatives from Piper Jaffray & Co. (“Piper Jaffray”). Nabi’s board of directors discussed with representatives from Piper Jaffray its qualifications as well as the proposed strategic alternatives process. After such discussion, Nabi’s board of directors approved the engagement of Piper Jaffray as its financial advisor based on, among other factors, its experience in the biopharmaceutical industry and in strategic transactions. Nabi’s board authorized Nabi’s management to direct Piper Jaffray to solicit indications of interest regarding a possible business combination transaction with Nabi and to focus those efforts on companies with a commercial or near-commercial stage product.

On November 7, 2011, Nabi announced that NicVAX did not meet its primary endpoint in its second confirmatory Phase III clinical trials. Nabi also announced that it had retained Piper Jaffray to assist Nabi’s board of directors in its review of the strategic alternatives available to Nabi.

During October through December of 2011, Piper Jaffray contacted a total of 92 companies, focusing on companies with a commercial or near-commercial stage product, rather than those with products in early stage clinical trials or still undergoing development. A total of 26 companies expressed preliminary interest in considering a business combination transaction with Nabi, all of whom entered into confidentiality agreements and received a confidential information memorandum. These companies also were granted access to Nabi’s online data room.

During the period between November 24, 2011 and December 15, 2011, Nabi received preliminary non-binding proposals from 11 companies (including Biota).

On December 15, 2011, Nabi received a preliminary non-binding proposal from a company referred to in this proxy statement as “Company A.”

On December 15, 2011, Nabi’s board of directors held a meeting, which included representatives from Piper Jaffray and Nutter, at which meeting, Nabi’s board of directors reviewed the preliminary non-binding proposals taking into account considerations such as valuation, strategic fit, and risks and uncertainties (both related to the potential success of the business of the combined company as well as the potential for the successful

 

54


Table of Contents

consummation of a transaction). Based on such review, Nabi’s board of directors determined to invite six companies (including Biota) to participate in the next phase of the process, which was to include mutual due diligence reviews. Of the six companies, Nabi’s board of directors considered four to be the leading candidates based on the considerations described immediately above. Nabi’s board of directors determined that these four companies—namely, Biota, Company A and two other companies referred to in this proxy statement as “Company B” and “Company C”—should be the focus of the initial mutual due diligence reviews. At the meeting, representatives from Piper Jaffray informed Nabi’s board of directors that Piper Jaffray had been previously retained, and were currently engaged, by Biota as its financial advisor to assist in a strategic alternatives process for Biota. Nabi’s board of directors discussed Piper Jaffray’s role as Nabi’s financial advisor, including with its legal advisors from Nutter.

During the December 15, 2011 meeting, Nabi’s board of directors met with representatives from Company A regarding Company A’s preliminary proposal. Company A’s preliminary proposal included a deadline by which Nabi was required to enter into an exclusivity agreement, which would have required Nabi to negotiate exclusively with Company A. After the meeting with Company A and after discussions with its financial and legal advisors Nabi’s board of directors determined that it would not be in the best interest of Nabi to enter into an exclusivity agreement at this time with Company A, and Nabi’s management informed Company A of the board’s determination.

During the remainder of December 2011 and January and February 2012, Nabi’s management conducted preliminary due diligence review of all six companies, including on-site visits to four of the six companies (including Biota). On January 27, 2012, Nabi received a revised preliminary non-binding proposal from Company A. On February 13, 2012, Nabi received a revised preliminary non-binding proposal from Biota.

On February 13, 2012, Nabi’s board of directors held a meeting, which included representatives from Piper Jaffray and Nutter and Nabi’s management to discuss the preliminary due diligence review conducted by Nabi’s management and its advisers of the six companies. Following such discussions and based on the considerations set forth at the December 15, 2011 meeting (as described above), Nabi’s board of directors determined not to pursue a potential strategic transaction with two of the six companies but to continue the process with Biota, Company A, Company B and Company C. Nabi’s board of directors instructed Piper Jaffray to inform the two companies of the board’s decision not to pursue a potential business combination transaction with them. Regarding the four remaining companies, Nabi’s board of directors preliminarily determined Biota’s proposal to be most favorable to Nabi as compared to the proposals from the other three companies based on Biota’s financial position, likely future capital needs, product risk, pipeline of potential new products and potential for market appreciation, the proposed premium over Nabi’s cash to be held at closing, and the proposed transaction structure allowing Nabi to return a portion of its cash to Nabi stockholders. Based on such determination, Nabi’s board of directors directed Nabi’s management to advise Biota of Nabi’s interest in pursuing a potential business combination transaction with Biota, to continue with the due diligence review of Biota and to seek to improve the terms of the Biota proposal. Nabi’s board of directors also determined that it should not exclude the remaining three other candidates (Company A, Company B and Company C) from continuing in the process and to continue to evaluate an alternative course of liquidating and dissolving the company. During the second half of February 2012, each of Company A, Company B and Company C was informed by Nabi’s management and/or representatives of Piper Jaffray that Nabi’s board of directors was considering its preliminary proposal and that it was one of the remaining companies in Nabi’s strategic alternatives review process. In addition, Nabi’s management continued with the due diligence review of Biota, Company A, Company B and Company C.

At the February 13, 2012 meeting, Nabi’s board of directors also determined that Piper Jaffray would continue as its financial advisor based on, among other factors, its significant role in Nabi’s strategic alternatives review process up to this point and its confirmation of the implementation of an information wall between the Piper Jaffray representatives advising Nabi and those representatives advising Biota. Nabi’s board of directors also determined that it would engage an additional financial advisor to, if requested by the Nabi board, render an opinion with respect to the fairness to Nabi, from a financial point of view, of the exchange ratio provided for in a proposed transaction.

 

55


Table of Contents

Following the February 13, 2012 board meeting, Nabi’s management continued its due diligence review of Biota and sought to obtain improved terms from Biota, including Nabi being able to issue to Nabi stockholders CVRs with respect to NicVAX.

On February 25, 2012, Nabi’s board of directors held a meeting, which included representatives from Piper Jaffray and Nutter and Nabi’s management, and discussed with Nabi’s management the progress of the negotiations with Biota, including the proposed terms of the CVRs with respect to NicVAX. Nabi’s management updated Nabi’s board of directors with respect to its due diligence review of Biota. Nabi’s board of directors also discussed Biota’s proposal as compared to the alternative course of liquidating and dissolving the company.

On February 29, 2012, Nabi received notification from Company C that it would no longer pursue a transaction with Nabi. On March 2, 2012, Nabi received a revised preliminary non-binding proposal from Company B.

On March 15, 2012, Nabi’s board of directors held a meeting, which included representatives from Piper Jaffray and Nutter and Nabi’s management. Representatives of Piper Jaffray discussed with Nabi’s board of directors, among other things, the financial terms of the Biota proposal and certain financial implications of a transaction with Biota, as well as certain factors which the board might consider when evaluating the Biota proposal. Nabi’s management discussed with Nabi’s board of directors its due diligence review of Biota. Later during the March 15, 2012 meeting, at the invitation of Nabi’s board of directors, Peter Cook, Chief Executive Officer of Biota, made a presentation to the board, including a review of Biota’s products, programs, plans and competitive landscape.

On March 16, 2012, Nabi’s board of directors held a meeting, which included representatives from Piper Jaffray, Nutter and Hogan Lovells US LLP, special U.S. transaction counsel to Nabi (“Hogan Lovells”), and Nabi’s management to review the discussions, including the meeting with Mr. Cook, from the previous day. Nabi’s board of directors also reviewed the various aspects of Biota’s proposal and discussed the alternative course of liquidating and dissolving Nabi. Nabi’s board of directors discussed with a representative from Hogan Lovells the legal process involved in combining Biota with Nabi, the likely timetable for a business combination transaction, the preliminary terms and conditions of a draft transaction agreement proposed by Biota, as well as the fiduciary obligations of a board of directors of a Delaware corporation when considering a business combination. Nabi’s board of directors directed Nabi’s management to continue negotiations with Biota on the terms of the proposed transaction and authorized Nabi’s management to retain Houlihan Lokey to, if requested by Nabi’s board, render an opinion to Nabi’s board with respect to the fairness to Nabi, from a financial point of view, of the exchange ratio provided for in a proposed transaction. Nabi’s management discussed with Nabi’s board of directors its due diligence review of Company A and Company B. Nabi’s board of directors determined not to pursue a potential strategic transaction with either Company A or Company B. The board’s determination with respect to Company A was based on the findings from the due diligence review that Company A’s products were at much earlier stages of development than originally expected and with respect to Company B was based on the conclusion by the board that Company B’s revised preliminary proposal was not as competitive as the other remaining proposals and on the findings from the due diligence review that Company B’s products presented potentially more financial risks than originally expected. Following the meeting, representatives of Piper Jaffray informed each of Company A and Company B of the determination by Nabi’s board of directors not to pursue a potential strategic transaction with them.

During the week of March 19, 2012, Nabi and Biota continued to negotiate the terms of the proposed transaction, including the amount of cash required to be held by Nabi at closing, the exchange ratio pursuant to which the Biota shares will be converted to Nabi shares, and the other terms and conditions of the Transaction Agreement, as well as the terms of the CVRs.

On March 25, 2012, Nabi’s board of directors held a meeting, which included representatives from Piper Jaffray, Hogan Lovells and Nutter and Nabi’s management, and discussed with Nabi’s management and its legal and financial advisers the status of the negotiations with Biota.

 

56


Table of Contents

During the weeks of March 26, 2012 through April 16, 2012, Nabi and Biota continued to negotiate the terms of the proposed transaction, including, among other things, the amount of cash required to be held by Nabi at closing, the exchange ratio pursuant to which the Biota shares will be converted to Nabi shares, and the other terms and conditions of the Transaction Agreement, as well as the terms of the CVRs.

On April 19, 2012, Nabi’s board of directors held a meeting, at which representatives from Piper Jaffray, Houlihan Lokey, Hogan Lovells and Nutter and Nabi’s management were also present, during which Nabi’s management and representatives from Hogan Lovells discussed with the board the due diligence review of Biota. Representatives from Hogan Lovells also provided a review of the terms of the Transaction Agreement. Hogan Lovells also reviewed the fiduciary obligations of a board of directors of a Delaware corporation when considering a business combination. Representatives from Nabi’s management and from Hogan Lovells discussed with the board the terms of the CVRs. During the course of this meeting, representatives of Houlihan Lokey reviewed their preliminary financial analysis of Nabi, Biota and the proposed Transaction. At the meeting, members of Nabi’s board of directors discussed the financial and legal aspects of the proposed transaction and the other matters described under “—Nabi Reasons for the Transaction” beginning on page 57 of this proxy statement. After such discussion, Nabi’s board of directors unanimously determined that, subject to the receipt of Houlihan Lokey’s updated financial analysis and opinion with respect to the fairness to Nabi, from a financial point of view, of the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement, the Transaction Agreement and the Transaction are advisable, fair to and in the best interests of Nabi and Nabi stockholders and approved the Transaction Agreement. Nabi’s board of directors also unanimously recommended that Nabi stockholders vote “FOR” each of the proposals to be considered and voted upon at the special meeting and described in this proxy statement. Nabi’s board of directors also approved an amendment terminating the stockholder rights agreement, which was adopted for the purpose of preserving Nabi’s NOL tax assets, effective immediately prior to the execution of the Transaction Agreement.

On April 20, 2012, representatives of Houlihan Lokey provided the members of Nabi’s board of directors with Houlihan Lokey’s financial analysis of Nabi, Biota and the proposed Transaction, as well as Houlihan Lokey’s opinion to the effect that, subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion, as of April 20, 2012, the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement was fair to Nabi from a financial point of view. After receipt of Houlihan Lokey’s updated financial analysis and opinion, Nabi’s board of directors, by unanimous written consent and for the reasons described under “—Nabi Reasons for the Transaction” beginning on page 57 of this proxy statement, determined that the Transaction Agreement and the Transaction are advisable, fair to and in the best interests of Nabi and Nabi stockholders and approved the Transaction Agreement.

On April 22, 2012, Nabi and Biota executed the Transaction Agreement. See “The Transaction Agreement” beginning on page 106 of this proxy statement for a discussion of the terms of the Transaction Agreement. Prior to the opening of the U.S. financial markets on April 23, 2012, Nabi and Biota issued separate press releases publicly announcing the execution of the Transaction Agreement and the Transaction.

Nabi Reasons for the Transaction

In reaching its unanimous determination that it is advisable and in the best interests of Nabi and its stockholders to complete the Transaction as contemplated by the Transaction Agreement and to recommend that Nabi stockholders vote “FOR” the Transaction Proposals described in this proxy statement, Nabi’s board of directors consulted and received advice from its financial and legal advisors and Nabi’s management and considered a number of factors, including the following material factors:

 

   

the lack of significant on-going operations as a stand-alone entity except with respect to the remaining clinical trials for NicVAX and remaining royalty payments (if certain milestones are met) related to Phoslyra;

 

57


Table of Contents
   

the fact that the $54 million in cash to be held by Nabi at the closing of the Transaction was valued at a 19% premium in the calculation of the exchange ratio for the number of shares of Nabi common stock to be issued for one ordinary share of Biota;

 

   

Nabi’s ability, under the terms of the Transaction Agreement, to return its remaining cash (after satisfying or reserving for certain liabilities) in excess of $54 million, which is currently expected to be in the range of approximately $25 million to $30 million in the aggregate, to its stockholders prior to the completion of the Transaction either in the form of a dividend or return of capital or through an issuer tender offer or a combination thereof;

 

   

the likelihood that Nabi would not be able to distribute immediately all of its remaining cash to its stockholders in the event of a liquidation and dissolution of the company, given the current estimation that Nabi would need to set aside a reserve in the range of approximately $20 million to $25 million in the aggregate to pay, and make provisions for, existing and future contingent and potential claims and liabilities, including severance payments and transaction-related fees and liabilities, expenses related to continuing operations including making required regulatory filings and the establishment of a mechanism for collecting and distributing any future distributions, milestone or royalty payments under existing agreements with respect to NicVAX and Phoslyra (of the foregoing amount, approximately $5 million to $10 million in the aggregate would need to be set aside for future contingent and potential claims and liabilities in accordance with Delaware corporate law) (see “—Considerations by Nabi’s Board of Directors If the Transaction is Not Completed” on page 76 of this proxy statement for more information);

 

   

the likely timing and expenses with respect to any potential liquidation and dissolution process;

 

   

the Transaction will allow Nabi stockholders to participate in the benefits of the combined company, including future potential value from Biota’s marketed products and pipeline of new product candidates;

 

   

the combination of Nabi and Biota will provide substantial financial resources for the combined company for the execution of near-term goals and further development of Biota’s new product candidates;

 

   

Nabi’s ability, under the terms of the Transaction Agreement, to issue CVRs to its stockholders prior to the completion of the Transaction, which CVRs are subject to the terms and conditions contained in the CVR Agreement;

 

   

the financial analysis provided to the Nabi board of directors by representatives of Houlihan Lokey as well as the opinion of Houlihan Lokey to the effect that, subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion, as of April 20, 2012, the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement was fair to Nabi from a financial point of view; see “—Opinion of Financial Advisor to the Nabi Board of Directors” beginning on page 61 of this proxy statement;

 

   

the terms and conditions of the Transaction Agreement, including the following related factors:

 

   

the determination that the relative percentage ownership of Nabi stockholders and Biota stockholders is fixed, providing certainty as to the number of shares of Nabi common stock to be issued to Biota stockholders and the percentage of the total shares of Nabi common stock that Nabi stockholders will own immediately after the completion of the Transaction;

 

   

Nabi’s ability to provide material non-public information to, and engage in negotiations with, a third party that makes an acquisition proposal that is or is reasonably likely to lead to a superior proposal (as described in “The Transaction Agreement—Exclusivity; No-Solicitation” beginning on page 122 of this proxy statement), on the terms and subject to the conditions of the Transaction Agreement;

 

58


Table of Contents
   

Nabi’s ability, under certain circumstances, to terminate the Transaction Agreement in order to enter into an alternative transaction that is deemed by Nabi’s board of directors to be a superior proposal;

 

   

the ability of Nabi’s board of directors, under certain circumstances not involving a superior proposal, to change its recommendation that Nabi stockholders vote in favor of the Transaction Proposals described in the proxy statement;

 

   

the circumstances under which the break fee is payable by Nabi under the Transaction Agreement and the view of Nabi’s board of directors that these provisions should not preclude a bona fide alternative proposal involving Nabi;

 

   

the view of Nabi’s board of directors that the size of the A$2 million break fee is reasonable in light of the size and benefits of the Transaction; and

 

   

the fact that the representations, warranties and covenants of Nabi and Biota are generally reciprocal; and

 

   

the results of the due diligence review of Biota by Nabi’s management, financial and legal advisors and outside consultants.

In the course of its deliberations, Nabi’s board of directors also considered a variety of risks and other potentially negative factors related to the Transaction, including the following material factors:

 

   

the fact that the shares of Nabi common stock to be issued in the Transaction will represent 74% of the outstanding common stock of the combined company immediately after the completion of the Transaction, thus causing existing Nabi stockholders to experience significant dilution in their percentage ownership of Nabi as a result of the Transaction;

 

   

the challenges and costs of combining clinical, regulatory and administrative operations of a U.S. company and an Australian company, which could adversely affect the combined company’s operating results and prevent the achievement of the anticipated benefits of the Transaction;

 

   

the fact that Nabi will incur significant costs associated with the Transaction, some of which will be paid regardless of whether the Transaction is completed, and that such costs will reduce the amount of cash that Nabi may be able to distribute to its stockholders in the form of a dividend or return of capital or through an issuer tender offer;

 

   

the fact that, under the terms of the Transaction Agreement, Nabi must pay to Biota a A$2 million break fee in connection with the Transaction if the Transaction Agreement is terminated under certain circumstances, which may deter other parties from proposing an alternative transaction that may be more advantageous to Nabi stockholders or which may become payable in circumstances where no alternative acquisition agreement or superior proposal is available to Nabi;

 

   

the fact that, while Nabi expects the Transaction to be completed, there can be no assurance that all conditions to the parties’ obligations, including with respect to Nabi obtaining stockholders approval of the Transaction Proposals, to complete the Transaction will be satisfied within the time frames contemplated by the Transaction Agreement and, as a result, the Transaction may not be completed;

 

   

the effect of the pendency of the Transaction and the effect of the delay or failure to complete the Transaction may have on:

 

   

the trading price of shares of Nabi common stock;

 

   

incurring and paying significant expenses in connection with the Transaction; and

 

   

paying a break fee of A$2 million if the Transaction is terminated in certain circumstances or the Transaction is not completed for certain reasons;

 

59


Table of Contents
   

the fact that Nabi directors and officers may have interests in the Transaction that are different from, or in addition to, Nabi stockholders as described in “—Interests of Nabi Executive Officers and Directors in the Transaction” beginning on page 67 of this proxy statement; and

 

   

the other risks associated with the Transaction and the combined company, including those described in “Risk Factors” beginning on page 28 of this proxy statement and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 43 of this proxy statement.

The foregoing discussion of the factors considered by Nabi’s board of directors is not intended to be exhaustive, but rather includes the material factors considered by the board. In reaching its decision that it is advisable and in the best interests of Nabi and its stockholders to complete the Transaction as contemplated by the Transaction Agreement and to recommend that Nabi stockholders vote “FOR” the Transaction Proposals set forth in the proxy statement, Nabi’s board of directors did not quantify, rank or otherwise assign relative weights to the factors considered and individual members of the board may have given different weight to different factors. Nabi’s board of directors based its decision on the totality of the information presented.

Biota Reasons for the Transaction

In reaching its unanimous determination that it is advisable and in the best interests of Biota and its shareholders to complete the Transaction as contemplated by the Transaction Agreement and to recommend that Biota shareholders vote in favor of the scheme of arrangement for the Transaction, in the absence of a Superior Proposal (as defined in the Transaction Agreement), Biota’s board of directors (the “Biota board”) consulted and received advice from its financial and legal advisors and Biota’s management and considered a number of factors, including the following:

 

   

the Biota board is of the view that the Transaction is the best way to improve the value of the Biota shares and the U.S. capital markets are best positioned to recognize the value of Biota’s contract with BARDA;

 

   

the Transaction will strengthen Biota’s cash position and provide the combined company with sufficient funds for at least the next two years (based on Biota’s current planned activities). The Biota board considers this to be an appropriate and advisable balance to achieve successful post-Transaction trading on NASDAQ;

 

   

the Biota board is of the view that a NASDAQ listing, rather than an ASX listing, will increase options to deliver higher value from future programs;

 

   

Biota shareholders should be entitled to defer any Australian capital gains tax until the date on which they sell their shares in the combined company (provided Australian capital gains tax roll-over relief is available in their personal circumstances); and

 

   

the Transaction will deliver to Biota an immediate U.S. shareholder base of scale, which should assist share trading liquidity on and from the implementation of the Transaction.

In the course of its deliberations, the Biota board also considered a variety of risks and other potentially negative factors related to the Transaction, including the following:

 

   

the combined company, due to its listing on NASDAQ rather than the ASX, will be subject to a different regulatory regime and currency exposure;

 

   

Biota shareholders’ ownership in Biota will be diluted following completion of the Transaction;

 

60


Table of Contents
   

if the Transaction is completed, Biota shareholders with registered addresses outside Australia and its external territories, New Zealand, the U.S. and the United Kingdom (“U.K.”) will not receive shares in the combined company. Instead, shares which would otherwise be attributable to such shareholders will be issued to a nominee who will sell those shares on NASDAQ and remit the proceeds to those shareholders; and

 

   

the Transaction could result in taxation consequences for Biota shareholders earlier than may otherwise have been the case.

The foregoing discussion of the factors considered by the Biota board is not intended to be exhaustive, but rather includes the material factors considered by the Biota board. In reaching its decision that it is advisable and in the best interests of Biota and the Biota shareholders to complete the Transaction as contemplated by the Transaction Agreement and to recommend that Biota shareholders vote to approve the scheme of arrangement, the Biota board did not quantify, rank or otherwise assign relative weights to the factors considered and individual members of the board may have given different weight to different factors. The Biota board based its decision on the totality of the information presented.

Recommendation of the Nabi Board of Directors

After careful consideration, Nabi’s board of directors has determined that it is advisable and in the best interests of Nabi and its stockholders to consummate the Transaction as contemplated by the Transaction Agreement. Accordingly, Nabi’s board of directors unanimously recommends that Nabi’s stockholders vote:

 

   

FOR” approval of an amendment to the Nabi certificate of incorporation to increase the authorized shares of Nabi common stock from 125,000,000 shares to 200,000,000 shares;

 

   

FOR” approval of an amendment to the Nabi certificate of incorporation to change the name of Nabi from “Nabi Biopharmaceuticals” to “Biota Pharmaceuticals, Inc.”;

 

   

FOR” approval of an amendment to the Nabi certificate of incorporation to effect a reverse stock split of Nabi common stock at any time prior to December 31, 2012 at a ratio ranging from four-to-one to eight-to-one, as determined by Nabi’s board of directors in its sole discretion;

 

   

FOR” approval of the issuance of shares of Nabi common stock to Biota stockholders contemplated by the Transaction Agreement;

 

   

FOR” approval, on an advisory (non-binding) basis, of the compensation payable to certain executive officers of Nabi under existing arrangements in connection with the Transaction; and

 

   

FOR” approval of one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve any of proposals 1 through 4.

When you consider recommendation of Nabi’s board of directors, you should be aware that Nabi’s directors have interests in the Transaction that may be different from, or in addition to, your interests. See “—Interests of Nabi Executive Officers and Directors in the Transaction” beginning on page 67 of this proxy statement for more information regarding such interests.

Opinion of Financial Advisor to the Nabi Board of Directors

On April 20, 2012, Houlihan Lokey rendered its written opinion to Nabi’s board of directors as to the fairness to Nabi from a financial point of view as of such date of the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement.

Houlihan Lokey’s opinion was directed to Nabi’s board of directors (in its capacity as such) and only addressed the fairness to Nabi, from a financial point of view, of the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement and did not address any other aspect or implication

 

61


Table of Contents

of the Transaction. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex C to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to any Nabi stockholder as to how to such stockholder should act or vote with respect to any matter relating to the Transaction.

In arriving at its opinion, Houlihan Lokey:

 

  1. reviewed an execution copy, received on April 20, 2012, of the Transaction Agreement, including the form of the scheme of arrangement set out in annexure A thereto;

 

  2. reviewed certain publicly available business and financial information relating to Biota and Nabi that Houlihan Lokey deemed to be relevant;

 

  3. reviewed certain information relating to the historical, current and future operations, financial condition and prospects of Biota and Nabi made available to Houlihan Lokey by Biota and Nabi, including (a) financial projections prepared by Nabi (and adjustments thereto based on discussions with management of Nabi) relating to the future financial results and condition of Biota for the fiscal years June 30, 2012 through June 30, 2020 based on certain information regarding the future operations, financial condition and prospects of Biota provided to Nabi by management of Biota, which we refer to as the “Nabi Projections for Biota,” (b) limited financial estimates (and adjustments thereto based on discussions with management of Nabi) provided by management of Nabi relating to the future financial results of certain drugs and other biopharmaceutical products currently under development, testing, or production by Nabi which reflected probability weightings applied by Nabi management based on observed average clinical phase transition probabilities and clinical approval success probabilities as published by the Tufts Center for the Study of Drug Development, as further adjusted by the management of Nabi, which we refer to as the “Nabi Projections” and (c) the estimates of Nabi’s NOLs prepared and provided to Houlihan Lokey by management of Nabi, which we refer to as the “Nabi NOLs” and estimates of the potential tax savings available to Nabi on a standalone basis or to a potential buyer in connection with an acquisition of Nabi on a pro forma basis based on the Nabi NOLs as discussed with the management of Nabi, which we refer to as the “Estimated NOL Tax Savings”;

 

  4. spoke with certain members of the managements of Biota and Nabi regarding the respective businesses, operations, financial condition and prospects of Biota and Nabi, the Transaction and related matters;

 

  5. reviewed the current and historical market prices and trading volume for certain of Biota’s and Nabi’s publicly traded securities, and the current and historical market prices and trading volume of the publicly traded securities of certain other companies that Houlihan Lokey deemed to be relevant; and

 

  6. conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to it, discussed with or reviewed by it, or publicly available, and did not assume any responsibility with respect to such data, material and other information. In addition, management of Nabi advised Houlihan Lokey, and Houlihan Lokey assumed, that the Nabi Projections for Biota were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Nabi as to the future financial results and condition of Biota and were a reasonable basis on which to evaluate Biota and, for purposes of Houlihan Lokey’s analyses

 

62


Table of Contents

and opinion, management of Nabi directed Houlihan Lokey to rely on the Nabi Projections for Biota. Furthermore, management of Nabi advised Houlihan Lokey, and Houlihan Lokey assumed, that (A) the Nabi Projections reviewed by Houlihan Lokey were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of Nabi as to the future financial results of such drugs and other biopharmaceutical products currently under development, testing or production by Nabi and (B) the Nabi NOLs were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of Nabi as to the amount of such NOLs, and the Estimated NOL Tax Savings were a reasonable basis on which to evaluate the Nabi NOLs. Houlihan Lokey expressed no opinion with respect to any of the foregoing projections or estimates or the assumptions on which they were based. For purposes of Houlihan Lokey’s analyses and opinion, Nabi advised Houlihan Lokey, and Houlihan Lokey assumed that: (i) immediately prior to closing of the Transaction, Nabi would not have any material assets other than (a) cash held in a bank account in an amount not in excess of $54 million, (b) certain payment rights arising from the future sale, transfer, license or a similar transaction involving NicVAX®, (c) certain payment rights with respect to Phoslyra® and (d) the Nabi NOLs; (ii) on a standalone basis, Nabi was not expected to be able to utilize the Nabi NOLs to reduce taxes in the foreseeable future and, consequently, the Nabi NOLs had little if any value to Nabi on a standalone basis; and (iii) there was a low probability that the payment rights referred to above with respect to NicVAX® and Phoslyra® would result in significant payments to Nabi. Houlihan Lokey also relied upon, without independent verification, the assessments of the managements of Biota and Nabi as to Biota’s existing and future technology, products, services and the validity and marketability of, and risks associated with, such technology, products and services (including, without limitation, the development, testing and marketing of such technology, products and services; the receipt of all necessary governmental and other regulatory approvals for the development, testing and marketing thereof; and the life of all relevant patents and other intellectual and other property rights associated with such technology, products and services), and Houlihan Lokey assumed, at Nabi’s direction, that there would be no developments with respect to any such matters that would adversely affect Houlihan Lokey’s analyses or opinion. Houlihan Lokey relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of Biota and Nabi since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would be material to its analyses or opinion, and that there was no information or any facts that would make any of the information reviewed by Houlihan Lokey incomplete or misleading.

Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the Transaction Agreement and all other related documents and instruments that are referred to therein were true and correct, (b) each party to the Transaction Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the Transaction will be satisfied without waiver thereof, (d) the CVRs would be distributed to Nabi’s stockholders, and the Permissible Nabi Stockholder Cash Transactions (which is defined in the Transaction Agreement as one or more of an issuer tender offer, a dividend or a capital distribution by Nabi to Nabi stockholders, to be launched or declared at Nabi’s sole and absolute discretion, provided that the applicable Nabi closing net cash balance certificate provided by Nabi under the Transaction Agreement show a Nabi closing net cash balance of no less than $54 million) would be effected by means of a pro-rata cash dividend to Nabi’s stockholders prior to the record date for the implementation of the Transaction, (e) any substantial payments with respect the sale, transfer, license or a similar transactions relating to NicVAX® would occur prior to the expiration of the CVRs and (f) the Transaction would be consummated in a timely manner in accordance with the terms described in the Transaction Agreement and such other related documents and instruments, without any amendments or modifications thereto. Houlihan Lokey also relied upon and assumed, without independent verification, that (i) the Transaction would be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Transaction would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would result in the disposition of any assets of Biota or Nabi, or otherwise have an effect on the Transaction, Biota or Nabi or any expected benefits of the Transaction that would

 

63


Table of Contents

be material to Houlihan Lokey’s analyses. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that any adjustment to the exchange ratio pursuant to the Transaction Agreement or otherwise would not be material to its analyses or its opinion and that the final form of the Transaction Agreement would not differ in any respect from the execution copy of the Transaction Agreement identified above.

Furthermore, in connection with its opinion, Houlihan Lokey was not requested to make, and did not make, any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of Biota, Nabi or any other party, nor was Houlihan Lokey provided with any such appraisal or evaluation. Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of any entity or business. Houlihan Lokey did not undertake any independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities to which Biota or Nabi was or may be a party or was or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which Biota or Nabi was or may be a party or was or may be subject.

Houlihan Lokey was not requested to, and did not, (a) initiate or participate in any discussions or negotiations with, or solicit any indications of interest from, third parties with respect to the Transaction, the securities, assets, businesses or operations of Nabi or any other party, or any alternatives to the Transaction, (b) negotiate the terms of the Transaction, or (c) advise Nabi’s board of directors or any other party with respect to alternatives to the Transaction. Houlihan Lokey’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of its opinion. Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date thereof. Houlihan Lokey did not express any opinion as to what the value of Nabi’s shares of common stock actually would be when issued pursuant to the Transaction or the price or range of prices at which the shares of common stock of Nabi or the ordinary shares of Biota could be purchased or sold at any time.

Houlihan Lokey’s opinion was furnished for the use by Nabi’s board of directors (in its capacity as such) in connection with its evaluation of the Transaction and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Houlihan Lokey’s opinion should not be construed as creating any fiduciary duty on Houlihan Lokey’s part to any party. Houlihan Lokey’s opinion is not intended to be, and does not constitute, a recommendation to Nabi’s board of directors, Nabi, any of Nabi’s stockholders or any other party as to how to act or vote with respect to any matter relating to the Transaction or otherwise.

Houlihan Lokey’s opinion only addressed whether, as of the date thereof, the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement was fair to Nabi from a financial point of view, and did not address any other aspect or implication of the Transaction or any agreement, arrangement or understanding entered into in connection therewith or otherwise. Houlihan Lokey’s opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of Nabi’s board of directors, Nabi, its security holders or any other party to proceed with or effect the Transaction, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the Transaction or otherwise (other than the exchange ratio to the extent expressly specified herein), (iii) the fairness of any portion or aspect of the Transaction to the holders of any class of securities, creditors or other constituencies of Nabi, or to any other party, except if and only to the extent expressly set forth in the last sentence of its opinion, (iv) the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available for Nabi or any other party, (v) the fairness of any portion or aspect of the Transaction to any one class or group of Nabi’s or any other party’s security holders or other constituents vis-à-vis any other class or group of Nabi’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) whether or not Biota, Nabi, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Transaction, (vii) the solvency,

 

64


Table of Contents

creditworthiness or fair value of Biota, Nabi or any other participant in the Transaction, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Transaction, any class of such persons or any other party, relative to the exchange ratio or otherwise. Furthermore, no opinion, counsel or interpretation was intended in matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice. It was assumed that such opinions, counsel or interpretations have been or will be obtained from the appropriate professional sources. Furthermore, Houlihan Lokey relied, with the consent of Nabi’s board of directors, on the assessments by Biota, Nabi and their respective advisors, as to all legal, regulatory, accounting, insurance and tax matters with respect to Biota, Nabi and the Transaction or otherwise.

In preparing its opinion to Nabi’s board of directors, Houlihan Lokey performed a variety of analyses, including those described below. The summary of Houlihan Lokey’s analyses described below is not a complete description of the analyses underlying Houlihan Lokey’s opinion. The preparation of such opinions is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of those methods to the unique facts and circumstances presented. As a consequence, neither Houlihan Lokey’s opinion nor its underlying analyses is readily susceptible to summary description. Houlihan Lokey arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. Accordingly, Houlihan Lokey believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Houlihan Lokey’s analyses and opinion. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques.

In performing its analyses, Houlihan Lokey considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of the opinion. The implied exchange ratio reference ranges and valuation reference ranges indicated by Houlihan Lokey’s financial analyses are illustrative and not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, such analyses do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond Nabi’s control. Much of the information used in, and accordingly the results of, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.

Houlihan Lokey’s analyses and opinion were provided to Nabi’s board of directors in connection with its consideration of the proposed Transaction and were among many factors considered by Nabi’s board of directors in evaluating the proposed Transaction. Neither Houlihan Lokey’s opinion nor its analyses were determinative of the exchange ratio or of the views of Nabi’s board of directors or management with respect to the Transaction or exchange ratio. The type and amount of consideration payable in the Transaction were determined through negotiation between Nabi and Biota, and the decision to enter into the Transaction Agreement was solely that of Nabi’s board of directors.

The following is a summary of the material financial analyses performed by Houlihan Lokey in preparing its written opinion, dated April 20, 2012, to Nabi’s board of directors.

Biota Discounted Cash Flow/Nabi Sum of the Parts Analyses

Houlihan Lokey calculated an implied exchange ratio reference range based on:

 

   

for Biota, the net present value of Biota’s unlevered, after-tax future free cash flows:

 

   

in performing a discounted cash flow analysis with respect to Biota, Houlihan Lokey applied:

 

65


Table of Contents
   

discount rates ranging from 14% to 17% to the unlevered, after-tax future free cash flows for Biota through the fiscal year ended June 30, 2020 based on the Nabi Projections for Biota, and

 

   

terminal value multiples ranging from 2.00x to 2.50x to estimated revenue for Biota for the fiscal year ended June 30, 2020 based on the Nabi Projections for Biota, which range was selected taking into account, among other things, the selected companies’ data described below; and

 

   

for Nabi, the net present value of Nabi based on a sum-of-the-parts analysis:

 

   

for purposes of its sum of the parts analysis with respect to Nabi, Houlihan Lokey was advised by Nabi and assumed that immediately prior to closing of the Transaction and after giving effect to the distribution of the CVRs and Permissible Nabi Stockholder Cash Transactions, Nabi would not have any material assets other than:

 

   

cash held in a bank account in an amount not in excess of $54 million;

 

   

certain payment rights arising from the future sale, transfer, license or a similar transaction involving NicVAX® and Phoslyra®, with respect to which, in performing a discounted cash flow analysis, Houlihan Lokey applied discount rates ranging from 14% to 17% to the probability weighted cash flows for NicVAX® and Phoslyra® included in the Nabi Projections; and

 

   

the Nabi NOLs, which management of Nabi had advised Houlihan Lokey and Houlihan Lokey had assumed Nabi was not expected to be able to utilize to reduce taxes in the foreseeable future.

The discounted cash flow analysis with respect to Biota indicated an implied aggregate equity valuation range for Biota of $231 million to $298 million. The sum of the parts analysis with respect to Nabi indicated an implied aggregate equity valuation range of $54 million to $61.3 million consisting of an implied aggregate valuation of the cash in a Nabi bank account at closing of $54 million; an implied aggregate valuation reference range of the payment rights arising from the future sale, transfer, license or a similar transaction involving NicVAX® and Phoslyra® of approximately $0.0 to $6.4 million; and an implied aggregate valuation reference range for the Nabi NOLs of approximately $0.0 to $0.9 million. Based on the discounted cash flow analysis with respect to Biota and the sum of the parts analysis with respect to Nabi, Houlihan Lokey calculated an implied exchange ratio reference range of 0.977 to 1.111 shares of Nabi common stock for each ordinary share of Biota, as compared to the exchange ratio in the proposed Transaction of 0.669212231 of a share of Nabi common stock for each ordinary share of Biota.

Other Analysis

Solely for illustrative purposes, Houlihan Lokey also calculated the implied exchange ratio reference range indicated by historical stock trading prices of Nabi common stock and Biota ordinary shares and the implied exchange ratio reference range indicated by the sum of the parts analysis with respect to Nabi and historical stock trading prices of Biota ordinary shares. The analysis of historical stock trading prices of Nabi common stock and Biota ordinary shares indicated an implied exchange ratio reference range of 0.830 to 0.841 of a share of Nabi common stock for each ordinary share of Biota, as compared to the exchange ratio in the proposed Transaction of 0.669212231 of a share of Nabi common stock for each ordinary share of Biota. The analysis of the sum of the parts analysis with respect to Nabi and historical stock trading prices of Biota ordinary shares indicated an implied exchange ratio reference ranges of 0.754 to 0.781 of a share of Nabi common stock for each ordinary share of Biota, as compared to the exchange ratio in the proposed Transaction of 0.669212231 of a share of Nabi common stock for each ordinary share of Biota.

 

66


Table of Contents

Selected Companies’ Data

Houlihan Lokey also reviewed certain data for selected biopharmaceutical companies with publicly traded equity securities that Houlihan Lokey deemed relevant, including enterprise values as multiples of 2012E revenue and 2013E revenue. The selected companies were selected because they were deemed similar to Biota in one or more respects, including the nature of their business, size, diversification and financial performance. The selected companies and resulting data were:

AVI Biopharma, Inc.

Bavarian Nordic A/S

BioCryst Pharmaceuticals, Inc.

Dynavax Technologies Corporation

Emergent BioSolutions, Inc.

Eurocine Vaccines AB

Hemispherx Biopharma, Inc.

Human Genome Sciences Inc.

iBio, Inc.

Inovio Pharmaceuticals, Inc.

Medicago Inc.

Novavax, Inc.

PharmAthene, Inc.

SIGA Technologies, Inc.

 

     Enterprise Value/  
     2012E Revenue      2013E Revenue  

Low

     1.21x         0.86x   

High

     9.53x         6.81x   

Median

     4.05x         2.52x   

Mean

     4.35x         3.28x   

Other Matters

Houlihan Lokey was engaged by Nabi to provide an opinion to Nabi’s board of directors regarding the fairness to Nabi, from a financial point of view, of the exchange ratio provided for in the Transaction pursuant to the Transaction Agreement. Nabi selected Houlihan Lokey based on Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged to render financial opinions in connection with mergers, acquisitions, divestitures, leveraged buyouts, recapitalizations, and for other purposes. Houlihan Lokey will receive a fee of $275,000 for its services, no portion of which is contingent upon the successful completion of the Transaction. Nabi has also agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey, its affiliates and certain related parties against certain potential liabilities and expenses arising out of Houlihan Lokey’s engagement.

In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests, may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, Biota, Nabi or any other party that may be involved in the Transaction and their respective affiliates, or any currency or commodity that may be involved in the Transaction. Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and other financial services to Biota, Nabi, other participants in the Transaction and certain of their respective affiliates in the future, for which Houlihan Lokey and such affiliates may receive compensation.

Interests of Nabi Executive Officers and Directors in the Transaction

In considering the recommendations of Nabi’s board with respect to the Transaction Agreement, you should be aware that Nabi’s directors and executive officers have interests in the Transaction that may be different from,

 

67


Table of Contents

or in addition to, those of Nabi’s stockholders generally. These interests may create potential conflicts of interest. The board of directors was aware of these interests and considered them, among other matters, when it adopted the Transaction Agreement and approved the Transaction and voted to recommend that Nabi’s stockholders vote in favor of approving the Transaction Agreement.

Employment and Change of Control Agreements

We have entered into agreements with each of our executive officers providing for the payment of severance benefits in the event of a qualifying termination of employment following a change of control of Nabi. Nabi’s obligation to provide severance benefits in connection with a change of control is conditioned upon the executive’s execution of a separation agreement containing a release of claims against Nabi.

Change of Control Agreements with Paul Kessler and Matthew Kalnik

Each of Dr. Kessler, Nabi’s Senior Vice President—Clinical, Medical and Regulatory Affairs, and Dr. Kalnik, Nabi’s Senior Vice President—Strategic Planning and Business Operations, has entered into a separate change of control agreement pursuant to which he is entitled to receive change of control benefits if, within twelve months after a change of control, his employment is terminated by Nabi without cause or he terminates his employment with Nabi for good reason. Drs. Kessler and Kalnik’s benefits under the agreements include a payment equal to two times their base salary plus target bonus for the year in which the change of control occurs, payable in equal installments over a 24-month period. They also are entitled to receive the continuation of benefits under Nabi’s employee welfare benefit plans and any other employee benefit program or arrangements (including without limitation, medical and dental insurance plans and disability and life insurance plans) for twelve months following termination if it is possible to do so under the general terms and provisions of such plans and programs and up to $18,000 for executive outplacement services. In addition, all outstanding equity awards vest upon a change of control of Nabi and, in the case of options, remain exercisable for 24 months or, in most circumstances in connection with the Transaction Agreement, for the full remaining option term. See “—Amendment of Outstanding Option Terms” on page 70 of this proxy statement. Any severance benefit paid under these change of control provisions is in lieu of any severance benefits that might otherwise be payable to the executive under any employment agreement with Nabi.

Change of Control Provisions in Employment Agreement with Raafat Fahim

In March 2011, Dr. Fahim, our President and Chief Executive Officer, entered into an amended and restated employment agreement with Nabi. Under this agreement, Dr. Fahim is entitled to receive change of control benefits under his employment agreement if (i) within twelve months after a change of control or during a potential change of control period he terminates his employment with Nabi for good reason or dies or becomes disabled; (ii) during a potential change of control period or within twelve months after a change of control his employment is terminated by Nabi without cause (including Nabi’s failure to renew his employment agreement); or (iii) during the six-month period beginning six months after a change of control he terminates his employment for any reason, unless the change of control arises from the exercise by GSK of the NicVAX option under the Exclusive Option and License Agreement, dated as of November 13, 2009, between Nabi and GSK. In 2012, GSK notified Nabi that GSK did not intend to exercise such NicVAX option. Dr. Fahim also will be entitled to receive change of control benefits in the event that his employment is terminated (i) by Nabi without cause, (ii) by Nabi if it fails to renew his agreement at the expiration of the term or (iii) by Dr. Fahim for good reason, within (a) the twelve-month period ending upon a change of control (other than as a result of a liquidation or dissolution of Nabi approved by Nabi’s stockholders), (b) the twelve-month period ending upon the execution by Nabi of a definitive agreement and providing for and resulting in a change of control or (c) the 18-month period ending upon a change of control constituted solely by a liquidation or dissolution of Nabi approved by Nabi’s stockholders.

Dr. Fahim’s change of control severance benefits include his regular severance benefits that he would receive in any non-change of control situation (which are described below) plus a lump sum amount equal to (A) two and one-half (2.5) times the sum of (a) the higher of (x) Dr. Fahim’s then current annual base salary or

 

68


Table of Contents

(y) his base salary immediately prior to the date of termination plus (b) the target bonus Dr. Fahim could have earned under Nabi’s VIP Management Incentive Plan or any comparable bonus plan maintained by Nabi for the fiscal year in which the date of termination occurs), reduced by (B) an amount equal to the sum of (x) two times Dr. Fahim’s base salary in effect as of the last day of the employment term, plus (y) the amount of any pro-rated bonus paid or payable pursuant to any such bonus plan (i.e., reduced by the amount of Dr. Fahim’s regular severance benefits). In addition, all outstanding equity awards vest upon a change of control of Nabi and, in the case of options, remain exercisable for 24 months or, in most circumstances in connection with the Transaction Agreement, for the full remaining option term. See “—Amendment of Outstanding Option Terms” on page 70 of this proxy statement. While Dr. Fahim’s regular severance benefits include 24 months of salary continuation, following a change of control or an approval of a bankruptcy court that (A) qualifies as an event described in Treasury Regulation Section 1.409A-3(j)(4)(ix)(A) or (B) permits acceleration of Dr. Fahim’s regular severance pay, all unpaid amounts of the regular severance pay will be paid to him in a lump sum on the date of the change of control or within 10 days of the approval of the bankruptcy court, as the case may be. Nabi has agreed to reimburse Dr. Fahim on a grossed-up basis for any excise tax that is payable by him under Sections 409A or 4999 of the IRC as a result of any payments by Nabi to him under his employment agreement with Nabi.

Dr. Fahim’s regular severance benefits that he would receive in a non-change of control situation consist of (i) severance pay equal to his base salary as in effect at the time of such termination for 24 months, (ii) bonus compensation prorated for the portion of the year worked, (iii) the continuation of certain fringe benefits for 24 months, (iv) immediate vesting of any non-vested stock options or shares of restricted stock held by the executive, which will be exercisable for 12 months after the termination date, but in no event later than the original option expiration date, and (v) up to $20,000 for executive outplacement services.

Other key Nabi employees also have change of control agreements with terms that vary from the terms of the change of control agreements with Drs. Fahim, Kessler and Kalnik.

VIP Management Incentive Plan Special Bonus

In connection with the approval by the compensation committee of Nabi’s board of directors of Nabi’s VIP Management Incentive Plan , the compensation committee approved a special additional bonus available to all 2012 VIP Management Incentive Plan participants in the event that Nabi completes a transaction resulting from the announced strategic alternative process that results in a premium for Nabi’s stockholders to Nabi’s net cash at the time of the execution of the definitive agreement for any such transaction. In the event that Nabi completes a transaction resulting from the strategic alternatives process that results in a premium for Nabi’s stockholders to Nabi’s net cash, each participant in the 2012 VIP Management Incentive Plan will be entitled to receive an additional bonus equal to the to the bonus amount that such participant would have received under the VIP Plan for 2011, but for the fact that the Compensation Committee exercised its discretion to reduce the payments under the VIP Plan for 2011. The maximum potential cash award available under the special additional bonus to Drs. Fahim, Kessler and Kalnik is $59,373, $37,548 and $36,748 respectively.

Indemnification and Insurance

Under the terms of the Transaction Agreement, Biota’s directors and executive officers will be entitled to indemnification by Nabi after consummation of the Transaction in specified circumstances. In addition, for a period of six years after the completion of the Transaction, Nabi will maintain in effect directors’ and officers’ liability insurance covering those persons who are currently covered by Nabi’s and Biota’s directors’ and officers’ liability insurance policy on terms no less favorable to those applicable to the then current directors and officers of Nabi; provided, that Nabi will not be required to expend in excess of 300% of the annual premium paid by Nabi at the time of the completion of the Transaction for such coverage or such coverage as is available for 300% of the annual premium. See “The Transaction Agreement—Additional Obligations—Indemnification and Insurance” beginning on page 120 of this proxy statement for more information regarding these indemnification and insurance provisions.

 

69


Table of Contents

Amendment of Outstanding Option Terms

Effective June 8, 2012, Nabi’s board of directors modified the terms of all outstanding Nabi stock options held by all current employees, officers and directors of Nabi to provide that the term of any Nabi stock option held by any person whose employment with or service to Nabi ends while the Transaction Agreement is in effect or after completion of the Transaction, other than as a result of such person’s voluntary termination while the Transaction Agreement is in effect or termination by Nabi for cause, shall be the full original term of such option. Without the modification, the stock options held by Nabi employees who are not officers would terminate 90 days after the termination of their employment, the stock options held by Nabi executive officers would terminate two years after the termination of their employment (in connection with a change of control) and the stock options held by Nabi directors and the corporate secretary would terminate one year after their service to Nabi ends. The majority of Nabi’s outstanding options have terms of seven years. Prior to 2007, most Nabi stock options had a term of 10 years. Nabi’s outstanding stock options had a weighted average exercise price of $6.09 as of December 31, 2011. The lowest currently outstanding stock option exercise price is $1.87.

Executive Compensation Payable in Connection with the Transaction

The following table sets forth the amount of payments and benefits that each of Nabi’s named executive officers would receive in connection with the Transaction, assuming (i) the Transaction was completed on September 30, 2012, (ii) that each of the named executive officers incurred a severance-qualifying termination under the officer’s employment or change of control agreement on such date and (iii) the price per share of Nabi’s common stock is $1.65. These payments and benefits are the subject of an advisory (non-binding) vote of Nabi stockholders, as described below under “Proposal 5: Advisory Vote on Executive Compensation” beginning on page 139 of this proxy statement.

Change in Control Compensation

 

Name

   Cash ($) (1)      Equity (2)      Perquisites/
Benefits  (3)
     Tax
Reimbursement  (4)
     Other      Total  

Raafat E.F. Fahim, Ph.D. (5)

   $ 2,228,498       $ 200,063       $ 177,316       $ 328,033       $ 127,044          $ 2,959,797   

Paul D. Kessler, M.D. (6)

   $ 1,085,302       $ 141,075       $ 59,650       $ 11,017       $ 41,850          $ 1,316,708   

Matthew W. Kalnik, Ph.D. (6)

   $ 986,637       $ 97,020       $ 61,926       $ 10,938       $ 41,750          $ 1,170,046   

 

(1) The amounts included in the “Cash” column consist of cash severance and bonus payments. The cash severance amount is a multiple of the named executive officer’s base salary, determined in accordance with each named executive officer’s change of control or employment agreement with Nabi. The cash severance amount for Dr. Fahim is $1,236,944, for Dr. Kessler is $700,195 and for Dr. Kalnik is $636,540. The bonus amount assumes the bonus earned in the year of termination under the VIP Management Incentive Plan was equal to 100% of the target bonus, and that each of the executive officers received the special additional bonus. The bonus amount for Dr. Fahim is $989,555, for Dr. Kessler is $385,107 and for Dr. Kalnik is $350,097.

 

(2) Represents the value of awards of shares of restricted common stock held by the named executive officer on the date of termination as to which vesting would accelerate.

 

(3) Consists of (i) the value of continued health and dental insurance plans in an amount equal to $50,272, $17,800, and $20,176 with respect to each Drs. Fahim, Kessler and Kalnik, respectively; (ii) reimbursement of $28,800 for automobile allowances payable to Dr. Fahim; (iii) payment of $30,000, $18,000 and $18,000 to Drs. Fahim, Kessler and Kalnik, respectively, for financial planning and outplacement expenses, (iv) reimbursement of $32,910, $14,050 and $13,950 for premiums payable under Nabi’s Supplemental Executive Retirement Plan and supplemental life insurance policy payable to Drs. Fahim, Kessler and Kalnik; (v) matching contributions of $9,800, $9,800 and $9,800 under Nabi’s 401(k) Plan payable to Drs. Fahim, Kessler and Kalnik; and (vi) for Dr. Fahim, the value of a supplemental disability insurance policy ($25,534).

 

70


Table of Contents
(4) Reflects reimbursements for Maryland state taxes payable by Dr. Fahim on his taxable income and reimbursements for federal taxes payable by Dr. Fahim on contributions made by Nabi under its Supplemental Executive Retirement Plan. Reflects reimbursements for federal taxes payable by Drs. Kessler and Kalnik on contributions made by Nabi under its Supplemental Executive Retirement Plan and supplemental life insurance policies.

 

(5) In certain circumstances, all amounts payable to Dr. Fahim may be payable upon a single trigger (that is, amounts triggered by a change-in-control for which payment is not conditioned upon the executive officer’s termination without cause or resignation for good reason). In other circumstances, all amounts may be payable only following a double trigger (that is, amounts triggered only if there is a change-in-control and the executive officer’s employment is terminated without cause or the executive resigns for good reason).

 

(6) All amounts payable to Drs. Kessler and Kalnik are payable only upon a double trigger (that is, a qualified termination of the executive’s employment within twelve months following consummation of the Transaction).

A description of the arrangements pursuant to and circumstances in which the amounts set forth in the table above would be payable to the named executive officers is set forth above under “—Interests of Nabi Executive Officers and Directors in the Transaction—Employment and Change of Control Agreements” beginning on page 68 of this proxy statement. The potential amounts of payments and benefits upon termination of employment in connection with a change of control disclosed above are estimates only and do not necessarily reflect (except as otherwise indicated) the actual amounts that would be paid to the named executive officers, which would only be known at the time that they become eligible for payment and would only be payable if a termination of employment or change of control were to occur.

Accounting Treatment

Under U.S. GAAP, the Transaction will be accounted for as a “reverse acquisition” pursuant to which Biota will be considered the acquiring entity for accounting purposes. As such, Biota will allocate the total purchase consideration to Nabi’s tangible and identifiable intangible assets and liabilities based on their relative fair values at the date of the completion of the Transaction. Biota’s historical results of operations will replace Nabi’s historical results of operations for all periods prior to the Transaction; after completion of the Transaction, the results of operations of both companies will be included in Nabi’s consolidated financial statements.

Nabi will account for the Transaction using the purchase method of accounting under U.S. GAAP. Accounting Standards Codification 805 “Business Combinations,” referred to as “ASC 805,” provides guidance for determining the accounting acquiror in a business combination when equity interests are exchanged between two entities. ASC 805 provides that in a business combination effected through an exchange of equity interests, such as the Transaction, the entity that issues the equity interests is generally the acquiring entity. Commonly, the acquiring entity is the larger entity. However, the facts and circumstances surrounding a business combination sometimes indicate that a smaller entity acquires a larger one. ASC 805 further provides that in identifying the acquiring entity in a combination effected through an exchange of equity interests, all pertinent facts and circumstances must be considered, including the relative voting rights of the stockholders of the constituent companies in the combined entity, the composition of the board of directors and senior management of the combined company and the terms of the exchange of equity securities in the business combination, including payment of any premium.

Based on the facts that the board of directors of the combined entity will be composed of six former-Biota board members and two former-Nabi directors and that the chief executive officer and chief financial officer of the combined entity will be the former chief executive officer and former chief financial officer of Biota, as well as the terms of the exchange, pursuant to which the Nabi stockholders will receive a premium of approximately 19.0% over the $54 million cash contribution of Nabi to the combined company at the date of signing the Transaction Agreement, Biota is considered to be the acquiror of Nabi for accounting purposes. This means that

 

71


Table of Contents

the total purchase price will be allocated to Nabi’s tangible and identifiable intangible assets and liabilities based on their estimated relative fair market values at the date of the completion of the Transaction. Final valuations of property, plant and equipment, and intangible and other assets have not yet been completed as management is still reviewing the existence, characteristics and useful lives of Nabi’s intangible assets. The completion of the valuation work could result in significantly different amortization expenses and balance sheet classifications. After completion of the Transaction, the results of operations of both companies will be included in the consolidated financial statements of Nabi. For further discussion of the accounting treatment, see “Unaudited Pro Forma Condensed Consolidated Financial Information” beginning on page 12 of this proxy statement.

Board of Directors and Management of the Combined Company Following the Transaction; Headquarters

Board of Directors.    Following the completion of the Transaction, the board of directors of the combined company will consist of eight directors, six of whom will be former directors of Biota and two of whom will be existing directors of Nabi. Set forth below is biographical information regarding each of the former directors of Biota who will serve as directors of the combined company following the effective time of the Transaction.

Dr. James Fox

Dr. Fox will serve as Chairman of the Board of the combined company.

James Fox, age 60, has served as a director of Biota since February 2009 and has served as Biota’s non-executive Chairman of the Board since such appointment. Dr. Fox has extensive experience in global technology and healthcare businesses. Prior to joining Biota, Dr. Fox founded Invetech, an Australian contract research and development company that specializes in healthcare products and complex instruments for international markets, in 1986. Invetech was merged with ASX listed Vision Systems Limited in 1993, with Dr. Fox taking over as Group Managing Director of the combined entity. In January 2007, Vision Systems Ltd. was acquired by Danaher Corporation. Prior to Invetech, Dr. Fox spent seven years working as a consultant and director with PA Technology. Dr. Fox currently serves on the boards of directors of GenMark Diagnostics, Inc., a molecular diagnostics company listed on the NASDAQ Global Market, Air New Zealand Ltd., a New Zealand-based airline listed on the New Zealand Stock Exchange and ASX, TTP Group plc, a privately held technology and product development company, and MS Research Australia, a not-for-profit organization aimed at financing public multiple sclerosis research. Dr. Fox received his Bachelor’s, Master’s and Ph.D. degrees in engineering from the University of Melbourne. Dr. Fox’s extensive experience in the healthcare industry, including technology and product development, and his business leadership as a director of several companies led to the conclusion that he should serve on the board of directors of the combined company.

Mr. Peter Cook

Peter Cook, age 64, has served as Chief Executive Officer and Managing Director of Biota in December 2005. Prior to joining Biota, Mr. Cook was the Chief Executive Officer and Managing Director of Orbital Corporation Limited, a powertrain engineering company with unique technologies in direct injection of internal combustion engines, from 2002 to 2005. Prior to joining Orbital Corporation Limited, Mr. Cook served as Chief Executive Officer of Faulding Pharmaceuticals, President of Ansell’s Protective Products Division, Deputy Managing Director of Invetech and Director of Research and Development for Nicholas Kiwi. Mr. Cook currently serves as a Non-Executive Director of Quickstep Holdings Limited, a holding company with investments in advanced composite manufacturing facilities in Australia and advanced composite manufacturing technologies for the global market listed on the ASX. Mr. Cook holds a Master’s Degree in Pharmacy from Monash University and post graduate qualifications in Management from RMIT University. Mr. Cook’s extensive experience in restructures, mergers and acquisitions, innovation and innovation commercialization with technology-based companies, strong manufacturing background and extensive business experience in Australia, Europe, the U.S. and Asia led to the conclusion that he should serve on the board of directors of the combined company.

 

72


Table of Contents

Mr. Paul Bell

Paul Bell, age 66, has served as a director of Biota since September 2006. Mr. Bell has extensive international business experience in the pharmaceutical, biotechnology and medical devices industries. Most of his executive career was with Merck & Co Inc. including approximately 10 years as Managing Director of MSD Australia Pty Ltd from 1988 to 1997 and President of Merck’s Asia Pacific Region from 1997 to 2002. Mr. Bell currently serves as a non-executive director of Cochlear Ltd and of the Westmead Millenium Institute for Medical Research. He is a former director of Gropep Limited and Biolink Partners Ltd, and a former member of the Business Development Advisory Board of the Garvan Institute of Medical Research and of the Australian Federal Governments Pharmaceutical Partnerships Program Committee. Mr. Bell holds an MA (Hons) from University of Canterbury, New Zealand. Mr. Bell’s expertise in medical research and product commercialization, his experience as an executive officer of a global pharmaceutical company and his business leadership as a director of Cochlear Limited led to the conclusion that he should serve on the board of directors of the combined company.

Prof. Jeffery Errington

Jeff Errington, age 56, has served as a director of Biota since February 2010. Prof. Errington has served as the Director of the Institute for Cell and Molecular Biosciences since 2005 and as the Director of the Centre for Bacterial Cell Biology at Newcastle University since 2007. Prof. Errington is a renowned scientist in the field of microbial cell and molecular biology and is a Fellow of the Royal Society of London, a Fellow of the U.K. Academy of Medical Sciences and a Fellow of the American Academy of Microbiology. Prof. Errington is a world authority on the biochemical pathways responsible for bacterial replication, an essential pre-requisite to the successful development of novel antibacterial drugs. Prof. Errington holds a Bachelor of Science (BSc) from Newcastle University, a Doctorate (PhD) from the U.K. Centre for National Academic Awards, and a Masters (MA) from the University of Oxford. Prof. Errington’s long and distinguished career as a microbiologist and his deep knowledge of the molecular cell biology of bacteria, along with his background and perspective as an academic in these fields, led to the conclusion that he should serve on the board of directors of the combined company.

Prof. Ian Gust

Ian Gust, age 71, has served as a director of Biota since July 2001. Prior to joining Biota, Prof. Gust served from 1990 to 2000 as the Director of Research and Development at CSL Limited, an ASX listed global specialty biopharmaceutical company that researches, develops, manufactures and markets products to treat and prevent serious medical conditions. During this period Prof. Gust was closely involved in CSL Limited’s successful domestic and international expansion. Prof. Gust also currently serves as a Professorial Fellow of the Department of Microbiology and Immunology at the University of Melbourne, as a consultant to several organizations funded by the Bill and Melinda Gates Foundation, UNICEF, the World Bank and the World Health Organization. Prof. Gust holds an MD from University of Melbourne, and has post graduate degrees in pathology and microbiology. Prof. Gust’s long and distinguished career in medical research, including his wide international recognition for his contributions to the field of virology, along with his background and perspective as an academic in these fields, led to the conclusion that he should serve on the board of directors of the combined company.

Mr. Richard Hill

Richard Hill, age 65, has served as a director of Biota since November 2008. Mr. Hill currently serves as chairman of the boards of directors of Sirtex Medical Limited, a biotechnology and medical device company listed on the ASX, Calliden Group Limited, an Australia-based company that underwrites general insurance and is listed on the ASX, and is Chairman of Blackwall Property Funds Limited, a vertically integrated property funds manager listed on the ASX. Mr. Hill was a founding partner of Hill Young & Associates a corporate advisory firm and previously held multiple senior executive positions in Hong Kong and New York with Wardley Holdings Limited, a wholly owned subsidiary of Hong Kong & Shanghai Banking Corporation (HSBC). Mr. Hill has been admitted as an attorney in New York, and holds a BA LLB (Sydney), and LLM (London).

 

73


Table of Contents

Mr. Hill’s business leadership as chairman and director of multiple companies and his extensive experience in finance and investing led to the conclusion that he should serve on the board of directors of the combined company.

Dr. Raafat E. F. Fahim

Dr. Fahim, age 58, has been President, Chief Executive Officer and a director of Nabi since January 2008 and acting Chief Financial Officer of Nabi since May 2008. From July 2007 to January 2008, Dr. Fahim served as Senior Vice President, Research, Technical and Production Operations of Nabi and Chief Operating Officer and General Manager of its Biologics Strategic Business Unit. From March 2003 to July 2007, Dr. Fahim served as Senior Vice President, Research, Technical and Production Operations of Nabi. Dr. Fahim is also non-executive Chairman of the Board of VM Farms, a Toronto, Canada-based private equity web hosting technology company. From 2002 to 2003, Dr. Fahim was an independent consultant, working with Aventis Pasteur, a pharmaceutical company, and other companies worldwide on projects that included manufacturing, process improvement, quality operations and regulatory issues. From 2001 to 2002, he served as President and Chief Operating Officer of Lorus Therapeutics, Inc., a biopharmaceutical company. From 1987 to 2001, Dr. Fahim was employed by Aventis Pasteur where he was instrumental in developing several vaccines from early research to marketed products. During his employment with Aventis Pasteur, Dr. Fahim held the positions of Vice President, Industrial Operations, Vice President, Development, Quality Operations and Manufacturing, Director of Product Development, and head of bacterial vaccines research/research scientist. Dr. Fahim’s background in the biopharmaceutical industry and current position as President and Chief Executive Officer of Nabi led to the conclusion that he should serve on the board of directors of the combined company.

Dr. Geoffrey F. Cox

Dr. Cox, age 68, has been a director of Nabi since 2000 and has served as non-executive Chairman of Nabi’s board of directors since February 2007. Dr. Cox is a partner with Red Sky Partners LLC and a member of the board of directors of QLT Inc. Dr. Cox previously served as Chairman of the Board, President and Chief Executive Officer of GTC Biotherapeutics, Inc., a biopharmaceutical company, from 2001 to 2010. From 1997 to 2001, he was Chairman of the Board and Chief Executive Officer of Aronex Pharmaceuticals, Inc., a biotechnology company. From 1984 to 1997, he was employed by Genzyme Corporation, a biotechnology company, last serving as its Executive Vice President, Operations. Dr. Cox is Immediate Past Chairman of the Massachusetts Biotechnology Council and served for a number of years on the Board of the Biotechnology Industries Association (“BIO”), together with the Health Governing Sections and Emerging Companies Sections of BIO. Dr. Cox received a BS in biochemistry from the University of Birmingham, U.K., and a Ph.D. in biochemistry from the University of East Anglia, U.K. Dr. Cox’s extensive biotechnology industry expertise, including his many years of experience as an executive officer and board member of publicly-traded biotechnology companies led to the conclusion that he should serve on the board of directors of the combined company.

Dr. Fahim and Dr. Cox are the existing directors of Nabi who will serve as directors of the combined company following the completion of the Transaction. If Nabi becomes aware, before the completion of the Transaction, that either Dr. Fahim or Dr. Cox is unable or unwilling to serve as a director of the combined company, then Nabi’s board of directors will have the sole right to replace such individual director with a new director designee, with the prior written consent of Biota, which consent will not to be unreasonably withheld.

The Transaction Agreement provides that the appointment of each of the former Biota directors and Nabi directors listed above to serve as a director of the combined company is subject to satisfaction of the regulatory requirements for directors set out in any applicable laws and the rules of NASDAQ.

Executive Officers.    Following the effective time of the Transaction, Biota’s current chief executive officer, Mr. Peter Cook, and Biota’s current chief financial officer, Mr. Damian Lismore, are expected to serve as the chief executive officer and chief financial officer, respectively, of the combined company. See “—Board of Directors and Management of the Combined Company Following the Transaction; Headquarters—Board of Directors” beginning on page 72 of this proxy statement for biographical information regarding Mr. Peter Cook. Set forth below is biographical information regarding Mr. Damian Lismore.

 

74


Table of Contents

Mr. Damian Lismore

Damian Lismore, age 53, has served as Chief Financial Officer of Biota since his appointment in August 2005. Mr. Lismore’s experience includes 10 years with Price Waterhouse (now PriceWaterhouseCoopers) in Australia and six years with Deloitte Haskins & Sells in the U.K. Mr. Lismore has held several management roles, including Group Financial Controller and General Manager Buying & Finance, for Sigma, an Australian pharmaceutical company. Mr. Lismore has extensive experience in the healthcare industry, particularly in acquisitions and restructurings, commercialization of new technologies and investor relations. Mr. Lismore holds a Bachelor of Arts (Honours) in Accountancy from the University of Ulster, is a member of the Institute of Chartered Accountants in Australia, a Fellow of the Institute of Chartered Accountants in Ireland and is a member of the Australian Institute of Company Directors.

Following the Transaction, Biota’s current chief executive officer, Peter Cook, and Biota’s current chief financial officer, Damian Lismore, will fill those roles within the combined company for an appropriate transition period until U.S.-based executives are appointed and assume responsibility. It is anticipated that senior management positions in the combined company will be filled principally from current members of the Biota management teams.

Headquarters.    It is currently proposed that following the completion of the Transaction, the corporate offices of the combined company will initially be located in Rockville, Maryland.

Federal Securities Laws Consequences; Stock Transfer Restrictions

The shares of Nabi common stock to be issued in the Transaction have not been, and are not expected to be registered under the Securities Act or the securities laws of any other jurisdiction. The shares of Nabi common stock to be issued in the Transaction will be issued pursuant to an exemption from the registration requirements provided by Section 3(a)(10) of the Securities Act based on the approval of the Transaction by the Supreme Court of Victoria, Australia. In the event that the exemption from the registration requirements provided by Section 3(a)(10) of the Securities Act is not available for any reason, Nabi has agreed to use its best endeavors (as such term is qualified in the Transaction Agreement) to file a Registration Statement on Form S-4 (or on such other form that may be available to Nabi) in order to register the shares of Nabi common stock to be issued in the Transaction and to use its best endeavors to cause such registration statement to become effective prior to the completion of the Transaction.

Section 3(a)(10) of the Securities Act exempts securities issued in exchange for one or more bona fide outstanding securities from the general requirement of registration where the fairness of the terms and conditions of the issuance and exchange of the securities have been approved by any court or authorized governmental entity, after a hearing upon the fairness of the terms and conditions of exchange at which all persons to whom the securities will be issued have the right to appear and to whom adequate notice of the hearing has been given. If the Supreme Court of Victoria, Australia approves the Transaction, its approval will constitute the basis for the shares of Nabi common stock to be issued without registration under the Securities Act in reliance on the exemption from the registration requirements of the Securities Act provided by Section 3(a)(10) of the Securities Act.

The shares of Nabi common stock issued in the Transaction to Biota stockholders will be freely transferable under U.S. federal securities laws, except by persons who are deemed to be “affiliates” (as that term is defined under the Securities Act) of Nabi, including persons who are deemed to have been affiliates of Nabi within 90 days before the date of the closing of the Transaction. In the event that the shares issued by Nabi in the Transaction are in fact held by affiliates of Nabi, those holders may resell the shares (1) in accordance with the provisions of Rule 144 promulgated under the Securities Act, or (2) as otherwise permitted under the Securities Act. Rule 144 generally provides that “affiliates” of Nabi may not sell securities of Nabi received in the Transaction unless the sale is effected in compliance with the volume, current public information, manner of sale

 

75


Table of Contents

and timing limitations set forth in such rule. These limitations generally permit sales made by an affiliate in any three-month period that do not exceed the greater of 1% of the outstanding shares of Nabi common stock or the average weekly reported trading volume in such securities over the four calendar weeks preceding the placement of the sale order, provided that the sales are made in unsolicited, open market “broker transactions” and that current public information on Nabi is available. Persons who may be deemed to be affiliates of an issuer generally include individuals or entities that directly or indirectly control, are controlled by, or are under common control with, that issuer and may include officers and directors of the issuer as well as beneficial owners of 10% or more of any class of capital stock of the issuer.

Material U.S. Federal Income Tax Consequences of the Transaction

There are no material U.S. federal income tax consequences to Nabi’s existing stockholders that will result from the issuance of Nabi shares in the Transaction.

Considerations by Nabi’s Board of Directors If the Transaction is Not Completed

In the event that the Transaction is not completed, either because of the failure of either Nabi’s or Biota’s stockholders to approve the Transaction, or the failure of another condition to completion of the Transaction, Nabi’s board of directors will consider whether to distribute its remaining cash through a dividend or other return of capital or by the liquidation and dissolution of Nabi. If Nabi’s board of directors determines that liquidation and dissolution is advisable, it will approve a plan of liquidation and dissolution and submit it to Nabi stockholders for their approval. If Nabi’s board of directors recommends liquidation and dissolution to the stockholders, a meeting of Nabi stockholders to consider any proposed plan of liquidation and dissolution likely would not be held until approximately three or four months after the termination of the Transaction Agreement. Thereafter, if the plan is approved by stockholders, it will take Nabi approximately three years to complete the dissolution process and distribute all remaining assets to Nabi stockholders in accordance with Delaware corporate law. Depending on wind-up costs and anticipated and unanticipated claims, Nabi likely would distribute to its stockholders a majority of its remaining cash assets following stockholder approval of a plan of liquidation and dissolution. Nabi currently estimates that, assuming that Nabi completes the currently contemplated issuer tender offer, it would need to set aside a reserve in the range of approximately $20 million to $25 million in the aggregate to pay, and make provisions for, existing and future contingent and potential claims and liabilities, including severance payments and transaction-related fees and liabilities, expenses related to continuing operations including making required regulatory filings and the establishment of a mechanism for collecting and distributing any future distributions, milestone or royalty payments under existing agreements with respect to NicVAX and Phoslyra (of the foregoing amount, approximately $5 million to $10 million in the aggregate would need to be set aside for future contingent and potential claims and liabilities in accordance with Delaware corporate law). Nabi also expects that it would retain an as yet undetermined significant portion of its assets during at least the first year of the three-year process until it determines the risk and likely amount of unanticipated claims against it. After Nabi has paid or made adequate provision for payment of all of its liabilities and obligations (including future contingent and potential claims and liabilities) in the manner provided under the Delaware corporate law, one or more distributions of the remaining cash, if any, will be made to Nabi stockholders. Nabi currently is unable to predict the precise nature, amount or timing of any such dissolution and liquidating distributions.

NO APPRAISAL RIGHTS

Under Delaware law, holders of shares of Nabi common stock are not entitled to appraisal rights in connection with the Transaction or any of the matters to be acted on at the special meeting.

 

76


Table of Contents

REPURCHASE OF SHARES OF NABI COMMON STOCK; DIVIDENDS AND DISTRIBUTIONS

Issuer Tender Offer; Dividends and Distributions

Nabi plans to return to its stockholders, before the completion of the Transaction, its remaining cash in excess of the $54 million required to be held by Nabi at the completion of the Transaction after satisfying outstanding liabilities. Such distribution is expected to take the form of a repurchase of certain of the outstanding shares of Nabi common stock through an issuer tender offer or other transaction and, for any remaining amounts, through a dividend or other return of capital, and currently is expected to be in the range of approximately $25 million to $30 million in the aggregate. Nabi plans to evaluate and, if deemed appropriate, to commence an issuer tender offer or other transaction to repurchase certain of the outstanding shares of Nabi common stock after filing a preliminary form of this proxy statement with the SEC and to complete such repurchase before mailing a definitive form of this proxy statement to Nabi stockholders. After the completion of the repurchase but prior to the completion of the Transaction, Nabi plans to declare a dividend or effect return of capital, as applicable, to distribute any remaining cash in excess of the $54 million required to be held by Nabi at the completion of the Transaction that is not required to satisfy any outstanding liabilities.

Contingent Value Rights

Nabi plans to issue CVRs to existing Nabi stockholders before the completion of the Transaction. Nabi expects that one CVR will be issued for each share of Nabi common stock outstanding as of a record date to be set at a date prior to the completion of the Transaction. However, the CVRs will not be attached to the shares of Nabi common stock. Nabi plans to enter into the CVR Agreement with a rights agent for the purpose of establishing the terms and conditions of the CVRs and the procedures by which payments, if any, will be made to the CVR holders. The form of the CVR Agreement is attached to this proxy statement as Annex G and is incorporated by reference herein.

The following is a summary of the material terms of the CVR Agreement. This summary does not purport to describe all of the terms of the CVR Agreement and is qualified by reference to the complete text of the form of the CVR Agreement. Nabi urges you to read the form of the CVR Agreement carefully and in its entirety.

The CVRs will be nontransferable, subject to certain limited exceptions as set forth in the CVR Agreement. The CVRs will not represent an equity or ownership interest, and CVR holders will have no voting or dividend rights. The rights of CVR holders will be limited to those rights expressly set forth in the CVR Agreement.

Pursuant to the CVR Agreement, CVR holders may, under certain circumstances, have rights to receive a portion of the cash proceeds actually received by the combined company in connection with a NicVAX Transaction. A “NicVAX Transaction” means a full or partial sale, license, transfer or any other similar transaction entered into by Nabi or the combined company with respect to the NicVAX Program (which is defined in the CVR Agreement to include those assets of Nabi that currently are or have been used in the research, development and manufacture of Nabi’s products for the prevention or treatment of nicotine addiction or for use as an aid to smoking prevention and/or cessation, including Nabi’s proprietary vaccine known as NicVAX® (Nicotine Conjugate Vaccine). NicVAX Transactions also include those transactions contemplated by the Exclusive Option and License Agreement, dated as of November 13, 2009, between Nabi and GSK, and any transactions involving any Nabi intellectual property not licensed to GSK under such agreement.

Subject to the terms and conditions of the CVR Agreement, if the combined company consummates a NicVAX Transaction within the 18-month period following the completion of the Transaction (the “Initial CVR Term”), CVR holders will be entitled to receive cash payments equal to such holder’s pro rata portion of (1) 75%

 

77


Table of Contents

of the cash proceeds in excess of $5 million actually received by the combined company in connection with such NicVAX Transaction during the Initial CVR Term (provided that such right is triggered only when the combined company actually receives $5.5 million or more in connection with such NicVAX Transaction) and (2) 75% of the first cash milestone payment actually received by the combined company in connection with such NicVAX Transaction during a five-year tail period following the expiration of the Initial CVR Term (provided that such right is triggered only when the combined company actually receives $0.5 million or more as such milestone payment and certain other thresholds are met). If the combined company does not consummate a NicVAX Transaction during the Initial CVR Term, or if the cash proceeds actually received by the combined company in connection with a NicVAX Transaction do not exceed certain thresholds as set forth in the CVR Agreement, no cash payment will be payable to CVR holders.

Under the CVR Agreement, the combined company will not have any obligation whatsoever to pursue, engage in, negotiate, enter into or consummate an actual or potential NicVAX Transaction or to research, develop or commercialize NicVAX® (Nicotine Conjugate Vaccine) or any other product that would trigger a payment to CVR holders; provided, that if the combined company makes a decision to pursue, engage in, negotiate or enter into a NicVAX Transaction, then it will need to use commercially reasonable efforts to seek to ensure that consideration paid to it in connection with a NicVAX Transaction is paid in cash and prior to the expiration of the Initial CVR Term.

Although Nabi currently plans to enter into the CVR Agreement and issue CVRs to Nabi stockholders, there is no assurance that CVRs will be issued at all or based on the terms currently set forth in the form of the CVR Agreement. Nabi currently has not entered into the CVR Agreement and Nabi’s board of directors may determine in its sole discretion not to issue the CVRs based on, among other things, the progress of the remaining investigator-initiated combination clinical trial in the Netherlands for NicVAX with Pfizer Inc.’s varenicline (Chantix/Champix). Furthermore, if Nabi and Biota agree, the terms of the CVR Agreement as currently contemplated may be changed prior to Nabi entering into the CVR Agreement.

 

78


Table of Contents

REGULATORY AND OTHER APPROVALS REQUIRED FOR THE TRANSACTION

Australian Regulatory Matters

Under the Corporations Act, the Transaction must be approved by Biota stockholders and a Supreme or Federal Court of Australia (expected to be the Supreme Court of Victoria, Australia) to become effective. The Corporations Act expressly prevents a court from granting approval unless:

 

   

ASIC provides the court with a statement that it has no objection to the Transaction; or

 

   

the court is satisfied that the Transaction has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Corporations Act (which relates to takeovers).

Biota intends to apply to the Supreme Court of Victoria, Australia at the first court hearing for (1) an order that meetings for each relevant class of Biota stockholders be convened and (2) an approval of the distribution of the explanatory memorandum about the Transaction to Biota stockholders. Biota must give ASIC at least 14 days’ notice before the first court hearing and must allow ASIC a reasonable opportunity to review the explanatory memorandum and to make submissions to the court with respect to it. Biota also intends to apply to ASIC for ASIC to provide to the court a written statement that it has no objection to the Transaction. Provided that ASIC is satisfied with the terms of the Transaction documents (including the Transaction Agreement) and the explanatory memorandum to be provided to Biota stockholders, Biota expects that ASIC will provide to the court at the first court hearing a letter stating that ASIC intends to issue a no-objection statement at the second court hearing.

Pursuant to the orders made by the court at the first court hearing, Biota will convene a meeting of Biota stockholders to vote on a resolution to approve the Transaction. The Transaction must be approved by a majority in number of Biota stockholders that are present and voting in person or by proxy at the meeting, as well as at least 75% of the votes cast on the resolution in person or by proxy by Biota stockholders at the meeting. The Biota stockholders meeting is expected to occur on or about [****], 2012.

If the Transaction is approved at the Biota stockholders meeting and all other conditions to the Transaction are satisfied, Biota will seek to obtain court approval of the Transaction at the second court hearing. The second court hearing is expected to occur on or about [****], 2012.

If the court approves the Transaction at the second court hearing, a copy of the court order will be filed with ASIC and the Transaction will become binding on all classes of Biota stockholders, including those who voted against the Transaction (referred to herein as the “effective date of the scheme of arrangement”).

Trading in Biota’s ordinary shares on the ASX will be suspended from the close of trading on the effective date of the scheme of arrangement, which is anticipated to be shortly after the court approval of the scheme. A record date (which will be the fifth business day following the effective date of the scheme of arrangement) will be set to determine the Biota stockholders entitled to receive shares of Nabi common stock as consideration for the Transaction. The Transaction consideration will be provided to Biota stockholders three business days after such record date and the Transaction will be deemed to have been completed or implemented on that date (referred to herein as the “implementation date”).

Biota Stockholder Approval

As described above, Biota will hold a special meeting of its stockholders on or about [****], 2012 to consider and vote upon a resolution to approve the Transaction. The Transaction must be approved by the requisite majorities of the Biota stockholders under Section 411(4)(a)(ii) of the Corporations Act (a majority in number of Biota stockholders that are present and voting in person or by proxy at the meeting, as well as at least 75% of the votes cast on the resolution in person or by proxy by Biota stockholders at the meeting).

 

79


Table of Contents

NASDAQ Initial Listing Application Requirement

Under the NASDAQ Listing Rule 5110(a), a NASDAQ listed corporation must apply for initial listing in connection with a transaction whereby the NASDAQ listed corporation combines with a non- NASDAQ entity, resulting in a change of control of the NASDAQ listed corporation and potentially allowing the non- NASDAQ entity to obtain a NASDAQ listing. On May 14, 2012, Nabi received a letter from The NASDAQ Stock Market notifying the staff’s conclusion that the Transaction would constitute a change of control under NASDAQ Rule 5110(a). Nabi plans to re-apply for initial listing prior to the completion of the Transaction.

HSR Approval

The HSR Act requires the parties to certain acquisitions and other transactions that meet specified minimum size requirements to file notifications with the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission and observe a waiting period before closing, unless an exemption applies. Nabi and Biota believe that the Transaction is exempt from the notification requirements based on the fair market value of Biota’s non-exempt assets, namely its assets in the U.S. Accordingly, neither Nabi nor Biota is expected to make a notification under the HSR Act with respect to the Transaction. If such exemption does not apply, the Transaction would not be able to be consummated until notification and report forms have been filed with the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission by Nabi and Biota, and the applicable waiting period has expired or been terminated.

Other than as described above, neither Nabi nor Biota is aware of any regulatory approvals required to be obtained, or waiting periods required to expire, to complete the Transaction. If Nabi and Biota discover that other approvals or waiting periods are necessary, Nabi and Biota intend to seek to obtain or comply with them in accordance with the Transaction Agreement.

 

80


Table of Contents

INFORMATION ABOUT THE COMPANIES

Nabi Biopharmaceuticals

Nabi is a biopharmaceutical company that has focused on the development of vaccines addressing unmet medical needs, including nicotine addiction. Nabi has sought to leverage its experience and knowledge in powering the human immune system to target these serious unmet medical needs. Nabi has been incorporated in Delaware since 1969 and its operations are located in Rockville, Maryland.

Nabi’s sole remaining product currently in development is NicVAX® (Nicotine Conjugate Vaccine), an innovative and proprietary investigational vaccine for the treatment of nicotine addiction and prevention of smoking relapse based on patented technology. Nabi suffered a significant setback in 2011 when NicVAX did not achieve the primary endpoint in two Phase III efficacy trials conducted in the U.S. As of March 31, 2012, Nabi’s remaining assets include the following: (1) $94.9 million of cash and cash equivalents, (2) the potential residual value of NicVAX as well as any next-generation nicotine vaccine which was licensed to GSK in 2010, (3) the potential royalty from Phoslyra which was sold to Fresenius USA Manufacturing, Inc. in 2006, and (4) the potential value of our NOLs.

Biota Holdings Limited

Business

Biota is an anti-infective drug development company based in Melbourne, Australia. Since its initial public offering in Australia on the ASX in 1985, Biota has evolved from a one-program research company to a diversified drug discovery and development company. Biota currently receives royalties from sales of two influenza antiviral drugs by its licensees and has a pipeline of candidate drugs aimed at treating HRV, RSV, HCV and bacterial infections. Biota also has recently completed a Phase IIb study in asthmatics of its lead compound, vapendavir, for HRV infections.

Biota’s first revenue-producing product, zanamivir, was developed and commercialized as the first-in-class NI to treat influenza pursuant to a research and license agreement entered into with GSK in 1990. Under the terms of the agreement, Biota licensed zanamivir on an exclusive, worldwide basis to GSK, which markets the product as Relenza™. Under the agreement, Biota receives royalty payments of 7% of GSK’s annual net sales of Relenza™ in major countries and 10% of GSK’s annual net sales of Relenza™ in Australia, New Zealand, South Africa and Indonesia. Biota’s relationship and agreements with GSK are described in more detail below under “—Biota’s Products and Product Candidates—Zanamivir: marketed globally by GSK as Relenza™” beginning on page 85 of this proxy statement.

Biota’s second revenue-producing product is laninamivir, a second-generation NI, which was developed in collaboration with Daiichi Sankyo, pursuant to a collaboration and license agreement which provides for the cross-licensing of NI patents and other information relating to long acting NI (“LANI”) drugs, including laninamivir. Under the collaboration and license agreement, Biota and Daiichi Sankyo agreed to share equally any royalties, license fees, or milestone or other payments received from any third party licensee of laninamivir outside of Japan.

In September 2010, Inavir® was approved by the Japanese Ministry of Health and Welfare for the treatment of influenza in adults and children, which enabled Daiichi Sankyo to market the product in time for the 2010/2011 influenza season. Daiichi Sankyo is currently conducting a Phase III trial in Japan to investigate the effectiveness of laninamivir to prevent influenza. A successful outcome in this study would increase Biota’s revenue potential by allowing Daiichi Sankyo to market Inavir® in Japan for the prevention of influenza.

Laninamivir is marketed in Japan by Daiichi Sankyo as Inavir® pursuant to a commercialization agreement. Under the commercialization agreement, Biota receives a 4% royalty on Daiichi Sankyo’s net sales of Inavir®

 

81


Table of Contents

and has the right to earn up to an additional $18 million upon the achievement of sales milestones by Daiichi Sankyo in Japan. The royalty rate can increase to up to 6% of Daiichi Sankyo’s net sales of Inavir® in Japan if laninamivir is licensed under suitable terms to a third party outside of Japan.

Biota’s relationship and agreements with Daiichi Sankyo are described in more detail below under “—Biota’s Products and Product Candidates—Laninamivir: marketed in Japan by Daiichi Sankyo as Inavir®” beginning on page 85 of this proxy statement and “—Collaborative Relationships—Collaboration and License Agreement between Biota and Daiichi Sankyo” beginning on page 90 of this proxy statement.

On March 31, 2011, Biota’s wholly owned subsidiary, Biota Scientific Management Pty Ltd. (“BSM”), was awarded a contract by BARDA. BARDA is part of the U.S. Office of the Assistant Secretary for Preparedness and Response (“ASPR”) within the U.S. Department of Health and Human Services (“HHS”). The BARDA contract is for the late stage development of laninamivir on a cost-plus-fixed-fee basis, not to exceed $231,252,675 (of which $15,128,679 represents BSM’s fixed-fee and $216,123,996 represents the estimated costs reimbursable by BARDA). Pursuant to the BARDA contract, reimbursable costs include those costs incurred by BSM for manufacturing, a pilot clinical evaluation, scale-up development, and manufacturing facility design (but not facility construction) leading towards licensure of laninamivir by the FDA. The BARDA contract is designed to fund and provide BSM with technical and clinical data and U.S. based manufacturing to support a U.S. new drug application (“NDA”) to the FDA for laninamivir. The performance period of the BARDA contract commenced on March 31, 2011, and continues for 60 months. Biota’s agreement with BARDA is described in more detail below under “—BARDA Contract” beginning on page 86 of this proxy statement.

Market Opportunity

What is Influenza?

Influenza is a respiratory infection caused by a member of the influenza virus family. Influenza virus infections are usually more severe than other respiratory virus infections and typically involve a combination of respiratory (cough, sore throat) and constitutional (fever, headache, muscle aches) symptoms. In older adults and people with certain pre-existing medical conditions, influenza infections can lead to serious and even life-threatening complications. A notable feature of influenza is that repeated infections can occur throughout life.

Influenza viruses circulate in every part of the world. Seasonal influenza is an acute viral infection caused by an influenza virus. There are three types of seasonal influenza—A, B and C. Type A and type B viruses are of particular public health concern. They can be readily distinguished from each other by laboratory tests but not by clinical symptoms. Type C influenza viruses occur much less frequently than A and B and are of limited public health significance. Only influenza A and B viruses are included in seasonal influenza vaccines.

Type A influenza viruses are further classified into subtypes according to different kinds and combinations of virus surface proteins. Influenza viruses are coated with two proteins, called haemagglutinin (“HA”) and neuraminidase (“NA”). There are many subtypes of influenza A with different variants of HA and NA, although most of these subtypes only circulate in birds.

Influenza B viruses only infect humans and are not classified into subtypes. Two-closely related lineages of type B viruses are currently circulating in humans.

Occasionally a new subtype of influenza A virus emerges that has an HA to which most humans have not previously been exposed—this is known as “antigenic shift.” In addition to “antigenic shift,” the HA and NA of type A and B viruses continually change by mutation to produce new strains of the virus, a process referred to as “antigenic drift.”

 

82


Table of Contents

The highest risk of complications arising from yearly influenza outbreaks occurs among children younger than age two, adults age 65 or older, and people of any age with certain medical conditions, such as chronic heart, lung, kidney, liver, blood or metabolic diseases (such as diabetes), or weakened immune systems.

Seasonal influenza occurs yearly during autumn and winter in temperate regions. Illnesses result in hospitalizations and deaths mainly among high-risk groups (the very young, elderly or chronically ill). Worldwide, these annual outbreaks result in about three to five million cases of severe illness, and about 250,000 to 500,000 deaths. Most deaths associated with influenza in industrialized countries occur among people age 65 or older. In some tropical countries, influenza viruses circulate throughout the year with two peaks during wet seasons.

Pandemic Influenza

In addition to seasonal influenza, from time to time there are influenza pandemics that spread worldwide and infect a large proportion of the population. These pandemics occur irregularly, typically when a new strain of influenza emerges to which most of the human population has not been exposed or which is transmitted to humans from another species. The lack of previous exposure means that immunity within the community is low, allowing rapid infection and transmission of the new strain amongst people on a global scale. Over the course of the last 100 years, there have been four influenza pandemics.

In 2009, the world experienced its first pandemic in 41 years with the emergence of the Pandemic A(H1N1) 2009 virus. This virus had many characteristics of viruses circulating in swine and also is related to the 1918 pandemic virus (known as the Spanish flu). Other major influenza outbreaks during the last century include the 1957 Asian flu and the 1968 Hong Kong flu. Pandemics can cause high mortality and it has been estimated that the Spanish flu killed over 50 million people.

For most people infected by the H1N1 2009 pandemic virus, symptoms were relatively mild. However, certain population groups were at higher risk for severe illness or complications.

The timing and severity of pandemics are unpredictable. The key event that leads to a pandemic is a random genetic shuffling which generates a new influenza virus able to spread easily among humans.

Avian H5N1 and other influenza viruses

While only two influenza A subtypes currently circulate broadly in humans, influenza A viruses of all subtypes can infect birds. Of particular concern to public health authorities is the highly pathogenic avian influenza A(H5N1) virus (“bird flu”) which causes devastating disease in domestic poultry flocks. H5N1 viruses spread rapidly at a local level amongst poultry and their global transmission has been facilitated by international trade in poultry and poultry products and, to some extent, by migratory birds. Most known cases of human infection with these viruses have occurred in people who have had close contact with infected birds. To date cases of human-to-human transmission of A(H5N1) viruses have been extremely rare. H7 and H9 avian influenza subtypes are also known to infect humans occasionally but such cases are also relatively rare.

Public health authorities are concerned that an H5N1 virus may undergo changes that allow it to spread easily between humans, causing a pandemic. Furthermore, in cases where people have been infected by the H5N1 virus, the disease has been particularly severe and aggressive. If the new virus retained the properties of current H5N1 viruses that cause severe disease in humans, the mortality rate would be expected to be high.

While birds can be infected by all known influenza A subtypes, a smaller number of subtypes are also known to infect pigs, horses, dogs and other species. Historically there have been no recorded instances of natural transmission from horses or dogs to humans, but transmission from pigs to humans does occur from time to time. The Pandemic H1N1 influenza strain that emerged in 2009, commonly referred to as the “swine flu,”

 

83


Table of Contents

was the result of a series of genetic shuffling events between swine, avian and human influenza viruses that had occurred over many years, ultimately producing a virus that is now transmitted readily between people.

Current Approaches to Management and Treatment of Influenza

There are two different approaches to managing influenza outbreaks: prevention-only versus treatment and prevention.

The prevention-only approach involves administration of a vaccine to a wide population of people who may be vulnerable to influenza. The goal of the vaccine is to stimulate the production of the body’s own antibodies to combat future exposure to the influenza virus. While the prevention-only approach to managing influenza outbreaks is not as expensive as the treatment and prevention approach, it has limitations. First, influenza vaccinations are most effective when circulating viruses are well-matched with vaccine viruses. Influenza viruses are constantly changing. Second, the efficacy of the prevention-only approach depends on vaccinating a sufficient percentage of the potential patient population to contain the spread of the disease. Third, the effectiveness of influenza vaccine varies according to the age and immunocompetence of the vaccine recipient.

Unlike the prevention-only approach to managing influenza, the treatment and prevention approach involves using drugs known as neuraminidase inhibitors or NIs to both treat and prevent the disease. NIs are drugs that block the enzyme that releases virons from the host lung cell, following replication. The neuraminidase enzyme is common to all strains of influenza and therefore NIs are the only option to treat all strains. In addition, NIs can be used for prevention of influenza.

There are two forms of treatment for influenza: symptomatic and antiviral. Drugs that lessen the symptoms of the disease, such as a runny nose, high temperature, coughs and headache, are available over the counter in pharmacies and sometimes supermarkets but these treatments have no effect on the course of the infection. Other drugs that limit the multiplication of the virus are generally only available by prescription from a doctor. This second group comprises the drugs known as NIs, zanamivir (Relenza™), laninamivir (Inavir®) and oseltamivir (Tamiflu®) which act on both influenza A and B, and the older drugs amantadine and rimantadine. Amantadine and rimantadine are no longer recommended for treatment of influenza as currently circulating strains have developed resistance to this class of drugs. Not all antiviral drugs are available in all countries.

Biota holds a significant portion of the current treatment options and development pipeline of NIs.

The Global Market for NIs

NIs are sold in two ways—through prescriptions to treat patients who have contracted influenza and to governments, which seek to build stockpiles to ensure adequate supplies in the case of an epidemic or pandemic.

According to IMS Health, during the 2009/2010 influenza season worldwide prescription sales of NIs from July 2009 through June 2010 were approximately $1.4 billion, distributed through pharmacies. Of this total, approximately $800 million of sales were in the U.S. and approximately $400 million were in Japan. Biota believes that Relenza™ accounted for approximately 17% of worldwide NI sales in this period, while Tamiflu® accounted for the remainder.

Unlike the prescription market, the stockpile market is focused on sales to U.S. and foreign governments. Stockpiling is desirable because the shelf life for NIs is relatively long—up to seven years. The World Health Organization (“WHO”) recommends that NIs be stockpiled to cover 25% of the global population. The U.S. government has a policy to keep a stockpile that would cover 35% of its population, while some other developed countries are aiming for over 50% coverage.

A report published in 2011 by Market Research Media Ltd indicates that over the past five years, government spending worldwide on pandemic influenza preparedness (including vaccines, antivirals and medical supplies) has more than tripled from $2.2 billion in 2004 to $7 billion in 2009.

 

84


Table of Contents

Biota believes that prior to reports of emerging resistance to Tamiflu® in 2009, the relative percentages of Tamiflu® and Relenza™ in government stockpiles were approximately 85% and 15%, respectively. However, Biota believes that the market share of Relenza™ in new stockpile purchases should increase due to concerns about viral resistance and side effects associated with Tamiflu® and statements by relevant government authorities that they intend to rebalance stockpiles of NIs. A significant portion of the U.S. stockpile of Tamiflu® expires in 2012. Biota believes that there is significant opportunity for sales to the U.S. government as the current stockpile expires and is replenished.

Biota’s Products and Product Candidates

Zanamivir: marketed globally by GSK as Relenza™

In 1990, Biota and GSK entered into a research and license agreement, as amended on March 30, 1998 and November 28, 2001, pursuant to which GSK developed and commercialized zanamivir, the world’s first-in-class neuraminidase inhibitor antiviral drug for influenza. Zanamivir has been marketed by GSK as Relenza™ since 1999. GSK holds exclusive rights to manufacture, market and sell zanamivir globally for which Biota receives royalties at 7% of net sales in major countries and royalties of 10% of net sales in Australia, New Zealand, South Africa and Indonesia.

Influenza outbreaks are highly variable in terms of severity, frequency and morbidity and the market for Relenza™ is likely to continue to be volatile, unpredictable and difficult to forecast. Government purchases of Relenza™ for influenza pandemic stockpiles resulted in increased royalties to Biota in 2009 and 2010, particularly in the lead up to, and during, the H1N1 2009 pandemic. The threat of another influenza outbreak remains, and Biota believes that there are a number of countries that have aging stockpiles with inventory expiring from 2012.

GSK’s obligation to pay royalties to Biota on sales of Relenza™ ceases upon expiry of the patents covering zanamivir on a country-by-country basis. Accordingly, Biota believes that royalties on sales of Relenza™ could continue to provide an important revenue stream until key patents expire from December 2014 in the U.S., May 2015 in major countries of the European Union, and July 2019 in Japan. See “—Patents and Proprietary Rights—Projected Patent Estate Expiration in the U.S., European, Japanese and Australian Pharmaceutical Markets” beginning on page 92 of this proxy statement.

Laninamivir: marketed in Japan by Daiichi Sankyo as Inavir®

Biota’s LANI program seeks to address the limitations of the first generation neuraminidase inhibitors, which require twice daily dosing. The ability to dose patients with laninamivir on a “one and done” basis for treatment and the potential for once weekly dosing for prevention offers a number of potential benefits. Less frequent dosing may result in the patient being more likely to use the product as and when intended, as well as a reduced cost of storage and deployment in instances where the product is intended to be stockpiled.

On September 29, 2003, Biota and Sankyo Co., Ltd (now Daiichi Sankyo Company Limited) agreed to merge their respective LANI programs (laninamivir and FLUNET) pursuant to a collaboration and license agreement. On March 27, 2009, Daiichi Sankyo exercised its option under the agreement to develop and commercialize the LANI compound laninamivir in Japan. BSM, Biota and Daiichi Sankyo entered into a commercialization agreement, pursuant to which Daiichi Sankyo obtained the exclusive right to market laninamivir in Japan as Inavir®, in return for funding an extensive range of Japanese clinical trials. Daiichi Sankyo is also required to market and sell Inavir® in Japan with a view to maximizing net sales in accordance with a marketing plan. The collaboration and license agreement, as amended, is described in more detail below under “—Collaborative Relationships—Collaboration and License Agreement between Biota and Daiichi Sankyo” beginning on page 90 of this proxy statement.

 

85


Table of Contents

Under the commercialization agreement, Daiichi Sankyo is required to pay Biota a royalty of 4% of net sales of Inavir® in Japan. In certain circumstances, this royalty rate can increase up to 6% of net sales if laninamivir is licensed to a third party outside of Japan. The royalty rate may be reduced in the event a generic equivalent is successfully launched in Japan. Daiichi Sankyo is also required to pay Biota fixed sum payments up to $18 million on the achievement of specified sales milestones.

The commercialization agreement with Daiichi Sankyo terminates upon the later of the expiration of all patents covering the product and 12 years from the launch of the product in Japan, subject to its earlier termination for material breach.

In September 2010, the Japanese Ministry of Health and Welfare approved a new drug application for laninamivir, which permitted the product to be marketed in Japan for treatment of influenza in time for the 2010/2011 influenza season. Currently, Inavir® is approved in Japan for the treatment of influenza in adults and children. Depending on the results of a Phase III prophylaxis study that is currently underway, Biota expects that Daiichi Sankyo will apply for the approval from the Japanese Ministry of Health and Welfare to be able to market Inavir® in Japan for prevention of influenza which should facilitate the inclusion of Inavir® in Japanese stockpiles. The introduction of Inavir® to the Japanese market generated royalties for Biota of A$2.9 million in the 2010/2011 influenza season. Royalties to Biota for the nine month period ended March 31, 2012 were A$4.1 million.

BARDA Contract

On March 31, 2011, Biota’s wholly owned subsidiary, BSM, was awarded a contract from BARDA. As noted above, BARDA is part of the ASPR, within HHS. The BARDA contract is fully funded over an estimated five year period; however, it is contingent upon the delivery of key milestones throughout the period. The BARDA contract was awarded on a cost-plus-fixed-fee basis, not to exceed $231,252,675. Of the “not to exceed” contract value, $15,128,679 represents BSM’s fixed-fee and $216,123,996 represents the estimated costs reimbursable by BARDA.

The BARDA contract is designed to provide U.S. based manufacturing, technical and clinical data to support an NDA for laninamivir to the FDA. Subject to obtaining satisfactory clinical and other technical results, BSM expects to file an NDA for laninamivir in 2016.

BARDA’s Charter includes but is not limited to U.S. based “manufacturing, clinical evaluation of pilot and commercial scale lots of drugs or biologicals, including but not limited to small molecules, enzymes, polypeptides, proteins and natural or synthetic antibodies and nucleic acids or derivatives thereof.” Under the contract, BSM will establish U.S. manufacturing of laninamivir, optimize its manufacturing processes, and conduct clinical trials for safety and efficacy in adult and pediatric populations.

The BARDA contract is for 60 months, commencing on March 31, 2011. BSM’s entitlement to the $15,128,679 fixed-fee is contingent of BSM’s satisfaction of various “milestones” identified in the contract. Details regarding the contract milestones are provided in the BARDA contract’s Statement of Work. In brief, BSM is required to achieve the following milestones:

 

   

Milestone 1: Within three months of contract award, BSM shall provide to HHS for review and acceptance a comprehensive milestone-driven Product Development Plan, inclusive of preclinical and clinical activities performed and completed prior to the contract award, and those clinical and manufacturing activities to be performed after the contract award. The Product Development Plan has been submitted to HHS.

 

   

Milestone 2: Within 6 months of contract award, BSM shall provide to HHS for review and acceptance a comprehensive Clinical Development and Regulatory Plan, inclusive of a summary of preclinical studies, and detailed descriptions of clinical evaluation and regulatory activities. The Clinical Development and Regulatory Plan has been submitted to HHS.

 

86


Table of Contents
   

Milestone 3: Within nine months of contract award, BSM shall provide to HHS for review and acceptance a Manufacturing Facility Plan relating to a facility to producing laninamivir, including pre-pandemic and pandemic facility management plans. The Manufacturing Facility Plan has been submitted to HHS.

 

   

Milestone 4: Within 12 months of contract award, BSM shall provide to HHS for review and acceptance a Feasibility Plan to manufacture, test and release product containing laninamivir. The Feasibility Plan has been submitted to HHS.

 

   

Milestone 5: BSM will provide a work breakdown structure including comprehensive and integrated timelines (Gantt chart) and key objectives and its execution. This milestone is ongoing.

Like most contracts awarded by the U.S. Federal Government, the BARDA contract incorporates by reference many U.S. Federal Acquisition Regulation (“FAR”) and agency-supplement FAR clauses. Each of these clauses carries specific rights and obligations, many of which are unique to government contracting, including various procurement, socio-economic, ethics, import and export, security, pricing and cost accounting, contract termination, reporting, and audit requirements. BSM’s failure to comply with these regulations and requirements could result in reductions of the contract value, contract termination, the assessment of penalties and fines, and/or suspension or debarment from government contracting or subcontracting for a period of time. Additionally, these clauses subject BSM to routine audits and investigations by U.S. Federal Government agencies. These agencies are tasked with reviewing BSM’s performance, cost structure, and compliance with applicable laws, regulations, and standards. The HHS also has the right to conduct site visits/audits and collect samples of product held by BSM and its subcontractors.

Because BSM will continue as the contractor following the completion of the Transaction and the Transaction will not alter the assets used to perform the contract, no novation or name-change agreement should be required.

HRV Program

HRV infections are frequently associated with the common cold, which presents as a minor and mild disease in otherwise healthy individuals. However, there is a mounting body of medical evidence that links HRV infection to exacerbations in patients with concurrent, underlying lung disease such as asthma or chronic obstructive pulmonary disease and which may require significant medical intervention to reinstate control of the underlying disease.

In June 2009 the lead candidate vapendavir (BTA798) was demonstrated to reduce the incidence and severity of an induced HRV infection in healthy subjects. In July 2010 Biota commenced a U.S. based Phase IIb study in subjects with chronic asthma, designed to establish the effect of vapendavir on cold symptoms in asthmatics when given shortly after the onset of an infection. On March 28, 2012, Biota announced that the primary end point of the Phase IIb study was successfully achieved.

RSV Program

RSV infection affects most children by the age of two years and is the predominant cause of acute lower respiratory tract infections in children. Symptoms of RSV infection include cough, wheezing, fever and bronchiolitis, with 25-40% of affected children showing signs of pneumonia and bronchiolitis. Premature infants are particularly at risk of severe complications and few therapeutic options are available.

Biota has been active with its RSV program for a number of years and licensed an earlier lead compound to MedImmune/AstraZeneca. Development of that compound has ceased and all rights reverted to Biota.

 

87


Table of Contents

Since then, Biota has identified a new lead candidate which has an excellent pharmacokinetic profile. The new lead candidate is one of the few prospective antiviral drugs suitable for oral administration and that has demonstrated potent inhibition of RSV in both culture and animal models.

The RSV product candidate is at the preclinical stage of development.

Other early programs

Hepatitis C virus

After infection with HCV, approximately 75-85% of people develop chronic infection. The majority of these people are asymptomatic and unaware that they are infected. These carriers serve as a source of HCV transmission and are at risk of chronic liver disease or other HCV-related chronic diseases decades after infection. Somewhere between one and five percent of people with chronic HCV infection will die of cirrhosis or liver cancer.

The WHO estimates that about 3% of the world’s population has been infected with HCV, equating to more than 170 million chronic carriers who are at risk of developing the serious life threatening disease. The Centers for Disease Control (“CDC”) estimates that in the U.S. alone 4.1 million people (approximately 1.6% of the population) are infected with HCV. Of these people, 3.2 million are chronically infected.

Biota anticipates that the treatment of HCV will evolve towards oral multidrug therapy, in which combinations of different direct acting antiviral (“DAA”) drugs with complementary mechanisms of action serve to increase viral suppression and delay or prevent the emergence of resistance. This type of drug regimen could avert the need for the use of interferon and ribavirin, which have low response rates and are poorly tolerated by patients. Biota believes that there is a need for an effective direct acting antiviral (“DAA”) treatment that is active against a range of HCV genotypes without the side effect profile and inconvenience associated with current drugs.

Biota has two HCV antiviral approaches:

Non-nucleosides

Biota has discovered a new class of potent and selective pan-genotypic non-nucleoside (“NN”) polymerase inhibitors. Unlike the majority of non-nucleoside compounds in clinical development which generally only inhibit genotype 1, the Biota compounds target a site on the NS5b polymerase which confers HCV activity across the major genotypes (1 through 4). Biota’s antiviral compounds have a suitable pharmacokinetic profile with the potential for once-daily dosing in a combination therapy, demonstrate activity against clinically relevant resistant mutants and possess strong synergistic effects when tested in conjunction with other DAAs used to treat HCV. Biota’s HCV-NN inhibitor program is on track to nominate a preclinical candidate in 2012.

Nucleoside/tides

Biota has developed extensive “know how” and expertise in the chemistry and biology of antiviral nucleoside/tides. Biota’s research program has led to the discovery of several novel classes of such compounds which inhibit HCV replication. Selected HCV nucleosides and nucleotides from the Biota series have demonstrated potent pan-genotype HCV inhibition in enzyme and cellular assays and excellent pharmacokinetic profiles in multiple species including high concentrations and long half-lives in liver cells.

Multidrug resistant bacteria

Gram-positive and Gram-negative bacteria are common causes of serious diseases such as pneumonia and complicated skin infections. Resistance to currently available antibacterial drugs is increasing and presents an

 

88


Table of Contents

important medical need. For example, more than 70% of cases of bacterial disease in hospitals are now believed to be caused by pathogens resistant to at least one antibiotic commonly used in their treatment. Disturbingly, diseases caused by multidrug-resistant (“MDR”) Gram-positive pathogens such as methicillin-resistant Staphylococcus aureus (“MRSA”) are becoming more commonplace, turning what were previously manageable infections into urgent, potentially life-threatening clinical problems.

Biota is actively addressing this unmet need through the discovery of new classes of antibacterials targeting processes that are essential for bacterial growth. The key to Biota’s approach is to focus its proprietary technology on novel targets with potential to yield entirely new classes of antibacterials with activity against emerging drug resistant bacteria. Biota’s portfolio addresses Gram-positive and Gram-negative bacterial infections.

Gyrase

Biota’s program focuses on DNA supercoiling inhibitors, which target the ATPase of the enzymes DNA gyrase and DNA topoisomerase IV. Both enzymes are essential for bacterial survival and are simultaneously inhibited by compounds from this series. Dual-targeting inhibitors are attractive because they reduce the development of target-based resistance. The program is aimed at treating serious skin infections, bacterial pneumonia and sexually-transmitted infections in the first instance. The market for these types of therapies is valued in billions of dollars and existing therapies are increasingly compromised by resistance. Biota’s inhibitors have demonstrated class-leading efficacy through oral and intravenous administration in multiple animal models of infection.

Clostridium difficile

Another program, funded by a grant of $2.9 million from the U.S. National Institute of Health, targets a potentially serious infection of the gastrointestinal tract caused by Clostridium difficile. Clostridium difficile can infect and flourish in the colon of patients following eradication of the normal gut bacteria by a course of broad spectrum antibiotics. This infection can lead to severe inflammation of the colon and can prove life threatening, particularly in the elderly. Authorities are also increasingly concerned about the potential emergence of an epidemic strain with increased virulence and/or antibiotic resistance.

Biota is developing a class of inhibitors which are targeted to the gut and are not absorbed into the bloodstream. This approach circumvents several obstacles normally associated with drug discovery and development, such as oral absorption, and provides a localized delivery to the site of the infection. Biota’s antibacterials are potent and highly selective for Clostridium difficile, including drug resistant strains. They spare beneficial gut flora that are required for the normal functioning of the digestive system.

FLUNET

Biota’s FLUNET compounds are in the preclinical stage of development and are intended as follow-on compounds to laninamivir. These dimeric compounds act via the same neuraminidase site as zanamivir and laninamivir, but are substantially more potent and have demonstrated effectiveness via once weekly dosing in animal models.

Biota’s Strategy

Biota has traditionally licensed its programs to pharmaceutical companies relatively early in the development process. Licenses have earned Biota important income in the form of up-front payments on signing the license; research and development fees in respect of ongoing work on the relevant licensed programs; payments on key clinical and other milestones; and royalties and milestone payments on sales. With the award of the BARDA contract for the late stage development of laninamivir, the opportunity may arise to vary this traditional approach by means of direct sales to those countries that maintain stockpiles of influenza antivirals.

 

89


Table of Contents

Biota currently intends to seek to identify suitable partners capable of selling laninamivir in the seasonal influenza market. Biota expects these partners to be existing pharmaceutical companies that market other products and can leverage their existing sales forces.

In respect of clinical trials, Biota maintains a core expertise and uses contractors and clinical research organizations to conduct trials on an “as needs” basis.

Competition

NI antiviral drugs that compete with zanamivir and laninamivir are oseltamivir (Tamiflu®) and peramivir (Rapiacta and PeramiFlu). Tamiflu® is sold worldwide by F. Hoffmann-La Roche Ltd and is delivered orally in a capsule or suspension form. Peramivir is currently marketed in Japan (as Rapiacta) and in South Korea (as PeramiFlu) for the intravenous treatment of influenza. BioCryst Pharmaceuticals, Inc. is currently conducting Phase 3 clinical trials of peramivir in the U.S.

Other antiviral drugs approved but not recommended, for the treatment of influenza, include amantadine and rimantadine. These are both oral drugs that work via a different mechanism to NIs and only inhibit the replication of the influenza A virus. However, due to high levels of resistance to amantadine and rimantadine, the U.S. Centers for Disease Control and Prevention Advisory Committee on Immunization Practices does not currently recommend the use of these drugs for treatment or prophylaxis of currently circulating influenza A virus strains.

A number of other drugs are in clinical development for the treatment of influenza. Toyama Chemical Co., Ltd. is developing an oral formulation of favipiravir (T-706), a nucleoside RNA polymerase inhibitor, for the treatment of influenza. A marketing application for favipiravir has been submitted in Japan and a Phase II dose-finding trial has been completed in the U.S. NexBio, Inc. is currently conducting Phase II clinical trials of DAS-181 (Fludase®) for treatment of influenza. Targeting host cell sialic acid receptors, the drug is delivered to the lungs via inhalation. Vertex Pharmaceuticals Inc. is developing its influenza virus inhibitor VX-787 for the treatment of influenza A. A Phase II challenge study of VX-787 is currently underway.

Collaborative Relationships

As part of Biota’s business strategy, it establishes collaborations with other companies, universities and medical research institutions to assist in the clinical development and/or commercialization of certain of its products and product candidates and to provide support for its research programs. Biota also evaluates opportunities for acquiring products or rights to products and technologies that are complementary to its business from other companies, universities and medical research institutions.

Collaboration and License Agreement between Biota and Daiichi Sankyo

On September 29, 2003, Biota and Sankyo Co., Ltd agreed, pursuant to a collaboration and license agreement, to merge their respective LANI programs, including pooling their respective LANI compound patents and technology, and collaborating and working together to license the LANI compounds to one or more third parties for development and marketing. Daiichi Sankyo subsequently acquired Sankyo Co., Ltd’s rights and obligations under the agreement, as amended, as a result of a merger in 2007. This agreement was subsequently amended on June 30, 2005, March 27, 2009 and March 18, 2011 by BSM, Biota and Daiichi Sankyo.

Each of Biota and Daiichi Sankyo has cross-licensed to each other all patents and other information, including know-how, trade secrets, data and results relating to the LANI compounds.

Biota and Daiichi Sankyo are required to use their best efforts and work together to seek third party licensees to develop a finished product that contains a LANI compound on a worldwide basis in order to maximize the commercial return to the parties. Pursuant to the terms of the collaboration and license agreement,

 

90


Table of Contents

Biota and Daiichi Sankyo have formed a licensing committee to oversee the selection of third party licensees and the negotiation of license terms. All license fees, milestone payments, royalties, equity and other payments received from third party licensees of a LANI compound (e.g., laninamivir) outside of Japan are required to be divided between Biota and Daiichi Sankyo on a fifty/fifty basis.

Biota and Daiichi Sankyo have agreed not to develop, commercialize, or enter into any collaboration, license or development agreement with any other party for any LANI compound product in the field, in any country other than Japan, except for arrangements with third party licensees pursuant to the terms of the agreement or as otherwise agreed between Biota and Daiichi Sankyo.

The agreement terminates upon the later of the expiration of the last Biota or Daiichi Sankyo patent relating to the LANI compounds and the expiration or termination of the last license agreement with a third party licensee. The agreement can also be terminated on a country-by-country basis in certain other circumstances, including in the case of a material breach that is not remedied or in the case of a product recall or market withdrawal which continues for 12 months.

Research and Development

The following table provides the estimated amounts expensed under U.S. GAAP during the last three fiscal years on Biota’s programs. Research and development costs represent discovery activities including medicinal chemistry, virology, microbiology drug characteristics and early preclinical studies. Product development costs represent clinical program costs including sourcing, compound, toxicology and later stage preclinical studies. Cost of services represents research and development costs that have been incurred directly in relation to income generating activities, such as from collaboration agreements.

 

(in thousands) (A$)

   June 30,
2011
     June 30,
2010
     June 30,
2009
 

Research and development

   $ 20,531         20,562         6,053   

Acquisition of in-progress research and development programs

     —           12,024         —     

Product development

     13,338         7,538         5,862   

Cost of services

     2,526         4,668         12,823   

Total R&D programs

     36,395         44,792         24,738   
  

 

 

    

 

 

    

 

 

 

 

91


Table of Contents

Below is a summary of Biota’s key product candidates and their corresponding current stages of development.

 

LOGO

Patents and Proprietary Rights

Projected Patent Estate Expiration in the U.S., European, Japanese and Australian Pharmaceutical Markets

Biota has a number of U.S. and foreign patents, patent applications, intellectual property and rights, title and interest thereto related to its compounds, products and technology, but it cannot guarantee that any issued patents are valid or will be enforceable or will provide protection against competitors or will enable freedom to operate or that pending patent applications will result in issued patents.

Tables 1 and 2 show the projected expiration dates in the U.S., Europe, Japan and Australia for the new chemical entity (“NCE”) patents and for related patents that have or may issue under pending applications that are related to the NCE in Biota’s marketed products.

Table 3 shows the estimated expiration dates in the U.S., Europe, Japan and Australia for the NCE patents and for related patents that have or may issue under pending applications that are related to the NCE for Biota’s Phase 2 product candidate(s).

 

92


Table of Contents

Table 1: Marketed product zanamivir (Relenza™)

 

     U.S.    Europe *    Japan    Australia

NCE calculated

20 year term expiry

   24 April 2011    24 April 2011    24 April 2011    24 April 2011

Pharmaceutical

patent term

extended expiry

  

26 July 2013

(15 July 2014 for Method of Treatment and Process)

   9 February 2014
– 25 July 2016*
   24 April 2016
(Method of
Prevention)
   24 February 2014

Projected latest

expiry date for

NCE patent

protection based

on related

patented

technology

   15 December 2014 (“Crystalline N-acetyl neuraminic acid derivatives and process for their preparation”) subject to possible later expiry if pending “Compounds & compositions for administration via oral inhalation or insufflation” is granted.    15 December
2014 – 24 May
2015*
(“Crystalline N-
acetyl
neuraminic acid
derivatives and
process for their
preparation” or
“Compounds &
compositions for
administration
via oral
inhalation or
insufflation”)
   26 July 2019
(“Compounds &
compositions for
administration
via oral
inhalation or
insufflation”)
   24 May 2015
(“Crystalline N-
acetyl
neuraminic acid
derivatives and
process for their
preparation”)

* Note: ranges where provided are based on the earliest and latest expiries with respect to validation countries and are on a country-by-country basis

Table 2: Marketed product laninamivir (Inavir®)

 

     U.S.    Europe    Japan    Australia

NCE calculated

20 year term expiry

   17 July 2017    11 July 2017    10 July 2017    16 July 2017