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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the twelve months ended December 30, 2000
Commission file number: 0-4829-03
NABI
(Exact name of registrant as specified in its charter)
DELAWARE 59-1212264
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5800 PARK OF COMMERCE BOULEVARD N.W., BOCA RATON, FLORIDA 33487
(Address of principal executive offices and zip code)
(561) 989-5800
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.10 PER SHARE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form of the 10-K. [ ]
As of February 24, 2001, 37,839,016 shares of common stock were
outstanding, of which 35,756,600 shares were held of record by non-affiliates.
The aggregate market value of shares held by non-affiliates was approximately
$169,643,850 based on the closing price per share of such common stock on such
date as reported by Nasdaq Stock Market.
Documents Incorporated by Reference
Portions of the definitive Proxy Statement for the annual meeting of
shareholders, which will be filed within 120 days of the close of the
Registrant's fiscal year ended December 30, 2000, are incorporated by reference
into Part III.
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NABI
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TABLE OF CONTENTS
Page No.
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Part I.
Item 1 Business..............................................................................3
Item 2. Properties...........................................................................25
Item 3. Legal Proceedings....................................................................26
Item 4. Submission of Matters to a Vote of Security Holders..................................26
Item 4a. Executive Officers of the Registrant.................................................26
Part II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters..................................................................28
Item 6. Selected Financial Data..............................................................29
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................................30
Item 7a. Quantitative and Qualitative Disclosures about Market Risk...........................34
Item 8. Financial Statements and Supplementary Data..........................................37
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................................57
Part III.
Item 10. Directors and Executive Officers of the Registrant...................................58
Item 11. Executive Compensation...............................................................58
Item 12. Security Ownership of Certain Beneficial Owners and
Management...........................................................................58
Item 13. Certain Relationships and Related Transactions.......................................58
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K..........................................................................59
Signatures ...................................................................................................63
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NABI
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PART I
ITEM 1. BUSINESS
OVERVIEW
Nabi is focused on the discovery, development and commercialization of products
that prevent and treat infections and autoimmune diseases. We are nearing
completion of a multi-year transition from being a leading provider of antibody
products into becoming a vertically integrated biopharmaceutical company. We
currently have an extensive pipeline of innovative drugs and vaccines in
clinical and pre-clinical development and have four marketed biopharmaceutical
products: Nabi-HB(TM) [Hepatitis B Immune Globulin (Human)], WinRho SDF(R) [Rho
(D) Immune Globulin Intravenous (Human)], Autoplex(R) T [Anti-Inhibitor
Coagulant Complex, Heat Treated] and Aloprim(TM) [(Allopurinol sodium) for
injection]. We are also one of the largest collectors and suppliers of specialty
and non-specific antibody products in the world. We collect these products from
an extensive donor base in the U.S. Some of these antibodies are used in the
production of our biopharmaceutical products. Most are supplied to other
biopharmaceutical and diagnostic companies for the manufacture of numerous
products.
PRODUCTS
CURRENTLY MARKETED BIOPHARMACEUTICAL PRODUCTS
Sales of our biopharmaceutical products, Nabi-HB, WinRho SDF, Autoplex T and
Aloprim, totaled $73.0 million in 2000 compared to $71.1 million in 1999. Sales
of our biopharmaceutical business has grown at a compounded annual growth rate
of approximately 39% since 1995. In 2000, biopharmaceutical products accounted
for 32% of our sales and 92% of our gross margin. Each of our four currently
marketed biopharmaceutical products are described below:
NABI-HB(TM) [HEPATITIS B IMMUNE GLOBULIN (HUMAN)]
The hepatitis B virus ("HBV") is a major health concern globally as it affects
approximately 350 million people worldwide. One out of 20 people in the U.S.
have been infected with hepatitis B. The U.S. Center for Disease Control and
Prevention ("CDC") estimates that in the U.S. alone there are an estimated 1.25
million chronic hepatitis B carriers, 140,000 to 320,000 new hepatitis B
infections per year, 16,000 babies born to hepatitis B positive mothers and
5,000 to 6,000 individuals who die annually from hepatitis B or its
complications. The HBV is 100 times more infectious than the human
immunodeficiency virus ("HIV") and approximately half (50%) of new hepatitis B
infections are caused by sexual exposures. The CDC estimates that the HBV costs
at least of $700 million annually in medical expenses and lost work time.
Nabi-HB is a human polyclonal antibody product used to prevent hepatitis B
following sexual or other exposure, including needle sticks and transmission
from hepatitis B antigen-positive mothers to their newborns. We launched the
product immediately upon receipt of the Food and Drug Administration ("FDA")
approval in March 1999. In December 1999, we submitted a Biologics License
Application ("BLA") to the FDA for the manufacture of Nabi-HB at our
biopharmaceutical manufacturing facility in Boca Raton, Florida and we expect
licensure in 2001. We are also currently involved in a Phase IV trial. See also
"Strategic Alliances" and "Supply and Manufacturing."
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WINRHO SDF(R) [RHO(D) IMMUNE GLOBULIN INTRAVENOUS (HUMAN)]
Immune Thrombocytopenia Purpura ("ITP") is an autoimmune disease that manifests
itself in abnormally low platelet levels (thrombocytopenia) resulting in
excessive bleeding. The term "purpura" refers to the appearance of large purple
patches on the body caused by bleeding into the skin and mucous membranes. In
ITP, the body's immune system produces antibodies that attach to platelets
causing them to be removed from circulation, primarily by the spleen. Because
platelets are required for blood clotting, as platelet counts decrease, the
incidence of bleeding episodes increase. In certain cases, such as severe trauma
or spontaneous intracranial hemorrhage, the bleeding can be life threatening. In
the U.S., it is estimated that there are 15 cases of ITP per 100,000 population,
or approximately 40,000 cases per year. In children, the disease is usually
acute in onset and is often resolved with treatment in six months. In adult ITP,
the onset is insidious and rarely resolves itself spontaneously. Additionally,
ITP is more common in females than males. ITP can occur as either a primary
disease or secondary to another underlying disease such as HIV or Lupus. The
incidence of ITP is estimated at 650 per 100,000 in HIV-positive individuals.
Rho (D) isoimmunization is a condition where antibodies of a Rho (D) negative
pregnant woman may be incompatible with their Rho (D) positive newborn. This
condition could be a complication in up to 9-10% of the approximately 4 million
births each year in the U.S.
WinRho SDF is a human polyclonal antibody product approved for the treatment of
ITP and for the prevention of Rho (D) isoimmunization. WinRho SDF has been
designated by the FDA as an Orphan Drug for the treatment of ITP through March
2002. We began exclusive marketing of WinRho SDF in the U.S. in mid-1995 under a
license and distribution agreement with Cangene Corporation ("Cangene"). We are
currently conducting several Phase IV clinical studies involving WinRho SDF,
including (a) a comparison of WinRho SDF versus IVIG for the treatment of ITP,
(b) an evaluation of WinRho SDF in the treatment of ITP during pregnancy, and
(c) a comparison of WinRho SDF versus routine care with prednisone followed by
splenectomy in the management of ITP. See also "Strategic Alliances," "Supply
and Manufacturing," and "Government and Industry Regulation-Orphan Drug Act."
AUTOPLEX(R) T [ANTI-INHIBITOR COAGULANT COMPLEX, HEAT TREATED]
Hemophilia is a blood clotting disorder characterized by a lack of functional
coagulation factor (factor VIII or IX). In the case of hemophilia A, the
deficient factor is factor VIII. Physicians typically treat hemophilia by
replacing the deficient factor with either recombinant clotting factor or plasma
derived human factor VIII or IX. In most cases, replacement therapy is effective
in stopping bleeding episodes. However, the treatment of hemophilia A is
complicated when an inhibitor or antibody is produced in response to outside
sources of factor VIII. These antibodies neutralize infused factor VIII,
rendering the patient at risk for excessive bleeding episodes. There are
approximately 13,000 hemophilia A patients in the U.S., and approximately 10-20%
of them suffer from the production of inhibitors.
Autoplex T is a coagulation complex used to treat hemophilia A patients who have
developed inhibitors to factor VIII. Autoplex T "bypasses" the factor VIII
requirement for clotting by stimulating other components of the coagulation
process. We acquired exclusive rights to Autoplex T in the U.S., Canada and
Mexico from Baxter Healthcare Corporation ("Baxter") in May 1997. See also
"Supply and Manufacturing."
ALOPRIM(TM)[(ALLOPURINOL SODIUM) FOR INJECTION]
Aloprim is indicated for the treatment of chemotherapy induced hyperuricemia in
patients with leukemia, lymphoma, or solid organ tumors. There are approximately
90,000 patients annually who suffer from these conditions in the U.S. We
acquired certain rights to distribute Aloprim from Catalytica Pharmaceuticals
("Catalytica") in June 1999, as part of our ongoing strategy to
opportunistically in-license commercial products targeted to the physicians'
population we currently sell to. We have exclusive U.S. and Canadian
distribution rights. Globally, we have the rights to purchase the product from
Glaxo SmithKline ("GSK"), former license holder prior to Catalytica. We are
currently exploring
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future clinical development of Aloprim in new indications beyond oncology. See
also "Strategic Alliances" and "Supply and Manufacturing."
CURRENTLY MARKETED ANTIBODY PRODUCTS
SPECIALTY ANTIBODIES
Specialty antibody products, derived from human plasma that contains high
concentrations of a specific antibody, are used primarily to manufacture
hyperimmune globulins. These immunoglobulins are used in products to treat
chronic immune disorders as well as to prevent and treat viral diseases and to
develop diagnostic products. As we are able to achieve licensure for products in
our research and development pipeline, we anticipate a strategic shift of
converting non-specific antibody production into the production of specialty
antibodies used in the manufacture of our own biopharmaceutical products as well
as continuing to sell specialty products to third parties. Some of our anti-HBs
production is currently used in the production of Nabi-HB.
We identify potential specialty antibody donors through screening and testing
procedures. We also have developed FDA-licensed programs to vaccinate potential
donors to stimulate their production of specific antibodies. Through our
nationwide operation and access to large and diverse donor base of approximately
225,000 individuals, we believe we have a strategic advantage in our ability to
collect specialty antibodies.
Our principal specialty antibody products include:
o ANTI-D. Anti-D is the antibody to the Rh blood group antigen D, responsible
for the designation of blood as either Rh+ or Rh-. Anti-D antibodies have
long been used to prevent Rh-D immunization in Rh-negative women and
subsequent hemolytic disease (blue baby disease) in Rh-positive infants.
These antibodies are also used to treat ITP in children and adults.
o HEPATITIS B ANTIBODIES. Antibodies to HBV are used to manufacture hepatitis
B immune globulin therapeutic products that provide passive immunity
against HBV. We are strategically committed to utilizing our collection of
these specialty antibodies to produce Nabi-HB, our hepatitis B
biopharmaceutical product.
o CMV ANTIBODIES. CMV antibodies are supplied to manufacturers to enhance
intravenous immune globulin ("IVIG") products and to produce CMV-specific
immune globulin therapeutic products.
o RABIES ANTIBODIES. Rabies antibodies are used by manufacturers to make
therapeutic products that provide short-term protective antibody immunity
to patients exposed to the rabies virus.
o TETANUS ANTIBODIES. Manufacturers use specialty antibodies enriched with
antibodies to tetanus toxin to produce therapeutic products, which provide
short-term protective immunity to patients exposed to tetanus.
o DIAGNOSTIC PRODUCTS AND SERVICES. We are a supplier of infectious disease
quality assurance and specialty plasma-based products to IN-VITRO
diagnostic manufacturers, regulatory agencies and testing
laboratories.
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During 2000, sales of specialty antibodies were $58.0 million, a 9% increase
from 1999 sales of $53.2 million. Certain specialty product sales increased
during 2000, including anti-CMV, tetanus and rabies antibodies, diagnostic
products and outside laboratory testing. These increases were offset by
decreases in specialty antibody product sales for anti-D and anti-HBs. Specialty
antibody sales accounted for 25% of total sales in 2000 and 23% of total sales
in 1999.
NON-SPECIFIC ANTIBODIES
We are one of the world's largest suppliers of human non-specific antibody
products to the biopharmaceutical and diagnostic industries.
Among other uses, non-specific antibodies are used to manufacture IVIG, a
product used to fight infections and in the treatment of several conditions,
including bone marrow transplantation, B cell chronic lymphocytic leukemia,
hypogammaglobulinemia, Kawasaki syndrome and other chronic immune deficiencies.
In 2000, we derived sales of $97.8 million from sales of non-specific antibodies
as compared to 1999 levels of $109.3 million. The lower sales from non-specific
antibodies was attributable to our strategic decision to exit unprofitable
operations through the sale, transfer and closure of 11 antibody collection
centers in the U.S. and Germany during 1999. This factor was offset by an
increase in antibody collections on a same store basis in the second half of
2000 compared to 1999. Sales of non-specific antibodies in 2000 accounted for
43% of total sales.
THE FOLLOWING IS A SUMMARY OF OUR CURRENTLY MARKETED PRODUCTS:
Products Indications or Potential Applications Status
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NABI-HB Post exposure prevention of hepatitis B infection CURRENTLY MARKETED; in Phase
IV clinical trials
WINRHO SDF Treatment of ITP CURRENTLY MARKETED; in Phase
Rho (D) isoimmunization IV clinical trials
AUTOPLEX T Treatment of hemophilia patients with CURRENTLY MARKETED
inhibitors to Factor VIII
ALOPRIM Treatment of patients with chemotherapy-induced CURRENTLY MARKETED
hyperuricemia
SPECIALTY ANTIBODIES Intermediate for production of immunoglobulin CURRENTLY MARKETED
products (e.g., tetanus, rabies, HBV and anti-D
antibodies)
NON-SPECIFIC Intermediate for production of non-specific CURRENTLY MARKETED
ANTIBODIES antibody products (e.g., standard IVIG) and other
products (e.g., albumin and clotting factors)
RESEARCH AND DEVELOPMENT PRODUCT PIPELINE
We have an extensive pipeline of biopharmaceutical products under development.
Our lead program consists of vaccines for long-term protection caused by
Gram-positive bacteria (e.g., S. AUREUS, S. EPIDERMIDIS, AND ENTEROCOCCI) and
human polyclonal antibody products for the treatment and/or prevention of
various infectious diseases in at risk populations. We believe there may be
areas outside
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of infectious diseases, including the prevention and treatment of nicotine
addiction, where our conjugate vaccine technologies may also be applied
successfully.
NABI GRAM-POSITIVE PROGRAM
EPIDEMIOLOGY
Nabi StaphVAX(R) (Staphylococcus aureus Polysacchride Conjugate Vaccine), an
investigational polysaccharide conjugate vaccine, is a novel approach to the
prevention of S. AUREUS infections. Nabi StaphVAX targets the two S. AUREUS
serotypes (type 5 and type 8) responsible for approximately 85-90% of S. AUREUS
infections. Traditional vaccines typically target pediatric populations or
healthy adults and entail mass vaccination. Nabi StaphVAX targets primarily
hospitalized adult, chronically ill or long term care facility patients that are
at high risk of developing S. AUREUS infection. The CDC estimates the annual
cost of treating hospital-acquired (nosocomial) infections to be $4.5 billion.
In 1999, 20 million hospitalized patients in the U.S. received nearly 44 million
anti-infective drug courses of treatment. Of these 20 million patients, 6.4% or
1.3 million cultured positive for S. AUREUS either upon admission to the
hospital or during hospitalization. Treating these infections often requires
hospitalization of two weeks or more and are associated with high morbidity and
mortality. The rank order of nosocomial bloodstream infections and associated
crude mortality among 49 hospitals throughout the U.S. showed S. AUREUS, causing
16% of bacteremias, to be second only to coagulase-negative staphylococci,
especially S. EPIDERMIDIS, as a cause of nosocomial bloodstream infection. In
this population, S. AUREUS infections were associated with 25% crude mortality.
Based on a 1995 study, the Lewin Group, an independent consulting group,
published data on the incidence, deaths and direct medical costs of S. AUREUS
infections in hospitalized patients in the New York City metropolitan area. The
report found that in 1995 the total direct medical costs incurred as a result of
S. AUREUS infections was estimated at $32,100 per patient. S. AUREUS-associated
hospitalizations resulted in more than twice the length of hospitalization stay,
twice the deaths and twice the medical costs compared to an average hospital
stay. Methicillin-resistant and -sensitive infections had similar direct medical
costs, but resistant infections caused more deaths (21% versus 8%).
These infections are difficult to treat because the bacterial pathogens are
highly virulent and are resistant to many currently available antimicrobial
drugs. Overall, 70% of the bacteria causing Gram-positive infections are
resistant to at least one of the drugs most commonly used to treat these
infections. Although the contribution of antibiotic resistance to the outcome of
such infections is unclear, nosocomial infections of the bloodstream may
represent the eighth leading cause of death in the U.S., and the relentless rise
of antibiotic resistance has markedly curtailed options for therapy.
The first penicillin-resistant strains of S. AUREUS were identified in 1944, and
by the late 1950's, approximately half of S. AUREUS infections were of this
type. Methicillin-resistant strains were identified in 1961, just one year after
the introduction of this antibiotic. The CDC currently estimates that in large,
urban U.S. hospitals, up to 55% of S. AUREUS infections are resistant to
methicillin. In 1997, the first S. AUREUS strains with notably reduced
sensitivity to vancomycin (so called, vancomycin intermediate sensitivity S.
AUREUS - VISA strains) and teicoplanin were discovered. VISA strains have been
isolated in 23 states within the U.S. and have contributed to the death of
patients in the U.S., Europe and Japan.
DUAL APPROACH
Nabi utilizes a dual approach to developing products to combat Gram-positive
infections. Nabi StaphVAX is an investigational vaccine intended to stimulate
patients to produce antibodies to S. AUREUS that provide active, long-term
protection. After receiving the vaccine, the patient's immune system responds in
about two weeks with the production of high levels of specific antibodies that
may last for several years in non-immune compromised patients and almost a year
in immune compromised patients. Nabi Altastaph(TM) [Staphylococcus aureus Immune
Globulin Intravenous (Human)] is an investigational
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human polyclonal antibody product that is being developed to prevent S. AUREUS
infections in patients who are at immediate risk of infection and/or treat an
existing infection. Based on the circulation half-life of the administered
antibodies, the protection and/or therapy provided by a single injection of Nabi
Altastaph is expected to last two to three weeks, but may be extended by giving
repeated doses.
Staph bacteria have a polysaccharide capsule ("CP") that is controlled by many
genes and cloaks the bacteria from the immune system. The activity of Nabi
Altastaph and Nabi StaphVAX is based on polyclonal antibodies that are given to
the patient (for Nabi Altastaph) or that is induced by vaccination (with Nabi
StaphVAX) and are directed against multiple sites on the bacteria's surface CP.
By attacking multiple CP targets, development of a bacterial strain resistant to
Nabi StaphVAX or Nabi Altastaph would require multiple genetic mutations. This
has yet to be observed and we believe it is unlikely. In addition, since
vaccines and antibodies present a different mechanism of action from that of
antibiotics, it is reasonable to expect that concurrent use of vaccines,
antibodies and antibiotics will act synergistically or additively to combat
infection, and thus may reduce the appearance of additional antibiotic resistant
strains in the future.
NABI STAPHVAX(R) (STAPHYLOCOCCUS AUREUS POLYSACCHARIDE CONJUGATE VACCINE)
Nabi StaphVAX is being developed for the 9 to 11 million patients who are at
high risk of infection and able to respond to a vaccine by producing their own
antibodies. The initial clinical study was completed in hemodialysis patients
with end stage renal disease ("ESRD") who are at high risk and long-term risk of
S. AUREUS infections due to their underlying disease and their vascular access
grafts. Other potential patient populations for Nabi StaphVAX include: (a)
at-risk patients such as the elderly and those suffering chronic diseases such
as congestive heart failure, chronic obstructive pulmonary disease and diabetes
who are expected to have long stays in medical or extended care facilities; (b)
patients undergoing planned surgery who can be vaccinated in advance and in whom
staph infections can have serious consequences; (c) prosthetic surgery and
vascular graft patients whose implants are at long-term risk of staph
infections; (d) chronic osteomyelitis patients, spinal cord injury and spinal
fusion patients; and (e) hematology/oncology patients. Infection rates in these
high-risk populations range from 1-10% and, as shown by the Lewin Group, result
in longer hospital stays, higher death rates and significantly higher medical
costs.
Nabi StaphVAX is based on patented vaccine technology in-licensed from the
Public Health Services ("PHS")/ National Institute of Health ("NIH"). See also
"Strategic Alliances." In 2000, we completed a pivotal Phase III placebo
controlled clinical trial for Nabi StaphVAX in hemodialysis patients. A total of
1,809 patients were included in the study. Approximately half were vaccinated
with Nabi StaphVAX and half received a placebo. The population was followed for
a year to evaluate vaccine safety and S. AUREUS infection rates. The results of
the trial showed that vaccination with Nabi StaphVAX was safe and reduced the
incidence of S. AUREUS bacteremias by almost 60% through 10 months
post-vaccination in adult ESRD patients on hemodialysis. The reduction in
bacteremia one year after vaccination was 26%. Reactogenicity associated with
the vaccine was mild to moderate and was generally resolved within 36-48 hours
following vaccination. The most commonly occurring adverse event was pain at the
intramuscular injection site.
We have been advised by the FDA that because the reduction in infections was not
statistically significant at twelve months, the primary endpoint of the trial,
the FDA will require a second Phase III clinical trial for Nabi StaphVAX with a
prescribed endpoint that may be achieved. This endpoint is expected to be less
than twelve months. We plan to appeal the decision to require a second clinical
trial and to request a meeting with the FDA's Vaccines and Related Biological
Products Advisory Committee. We will also develop a plan for a second Phase III
clinical trial. In addition, in 2001 we expect to initiate a boosting trial with
Nabi StaphVAX in hemodialysis patients.
NABI ALTASTAPH(TM) [STAPHYLOCOCCUS AUREUS IMMUNE GLOBULIN INTRAVENOUS (HUMAN)]
Nabi Altastaph is an investigational human polyclonal antibody product that
contains high levels of specific antibodies against S. AUREUS Type 5 and Type 8
CP. These antibodies are purified from the
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plasma of normal healthy antibody donors who have been vaccinated with Nabi
StaphVAX at our donor centers. The collected plasma will be purified into Nabi
Altastaph at our biopharmaceutical manufacturing facility in Boca Raton,
Florida. In contrast to Nabi StaphVAX, which is intended to provide long-term
protection against S. AUREUS infection, Nabi Altastaph is designed to provide
immediate protection to those at immediate risk of infection, or who are
immunocompromised and cannot respond effectively to a vaccine. Nabi Altastaph is
also being developed as a therapeutic agent for use in those patients with
diagnosed S. AUREUS infection. This type of protection or treatment is likely to
be cost-effective because antibodies in a single dose of Nabi Altastaph persists
in the bloodstream for three to four weeks to provide protection for the entire
risk period. High-risk populations include low birth weight newborns, trauma
patients and emergency surgical patients.
In 1999, Nabi Altastaph successfully completed a multi-dose safety and
pharmacokinetic ("PK") Phase I/II trial in low birth weight newborns that
demonstrated its safety and PK at a variety of dosage levels. The preliminary PK
analysis indicates that titers of the specific anti-staph antibodies are
dose-related. Even the lowest dose (500 mg/kg) of Nabi Altastaph resulted in
plasma titers that pre-clinical models and clinical trials with Nabi StaphVAX
predict may be protective against infection.
We plan to evaluate the use of Nabi Altastaph as a therapeutic drug for the
treatment of diagnosed S. AUREUS infections. As a therapeutic product, Nabi
Altastaph may be expected to act synergistically, or additively, with
antibiotics given the different mechanisms of these therapies. A Phase I/II
clinical study of Nabi Altastaph in a hospital-intensive care unit for trauma
patients with diagnosed S. AUREUS is in the planning stages. This blinded study
will help define the safety and PK of Nabi Altastaph in adults in combination
with traditional antibiotics for the treatment of serious S. AUREUS infections
in a hospitalized patient population.
In 2001, we expect to initiate a Phase II clinical trial of Nabi Altastaph in
conjunction with the NIH in adults with staph infections. We are also planning
to conduct clinical studies of the combined use of Nabi Altastaph and Nabi
StaphVAX in preventing infections.
NEXT GENERATION PRODUCTS AND OTHER ANTI-BACTERIAL VACCINES IN DEVELOPMENT
We have also identified and patented a serotype of S. AUREUS, named type 336,
that accounts for over 90% of non-type 5 and non-type 8 S. AUREUS clinical
infections (about 10-12% of all clinically significant S. AUREUS infections). We
have identified, purified and characterized type 336 antigen and have prepared a
conjugate vaccine that is capable of protecting animals from challenge with
clinical isolates of this serotype. During 1998, we were issued a U.S. patent on
a S. AUREUS 336 antigen. Included in the patent were claims, including vaccines
made from that antigen and antibodies reactive to the antigen. The next
generation of Nabi StaphVAX is expected to contain type 336 antigen in addition
to type 5 and type 8 antigens. Patents for type 336 antigen and its use are
being pursued worldwide.
S. EPIDERMIDIS and enterococcus sp. are the two other clinically significant
Gram-positive bacteria causing nosocomial infections. We intend to extend
product coverage to these two Gram-positive bacteria in subsequent generations
of Nabi StaphVAX and Nabi Altastaph. We have filed patent applications on
selected enterococcal antigens and were issued two patents during 1999
containing claims covering both a S. EPIDERMIDIS vaccine and a human polyclonal
antibody. Prototypic S. EPIDERMIDIS and enterococcal vaccines produced by us
have been shown to induce antibodies that are protective in animal models and
that facilitate killing of bacteria by human phagocytes.
ANTI-VIRAL PROGRAM:
NABI-HB(TM) [HEPATITIS B IMMUNE GLOBULIN (HUMAN)]
In December 1999, we submitted to the FDA a BLA for Nabi-HB, a polyclonal
antibody for post-exposure prophylaxis against HBV. Nabi-HB will be manufactured
in our Boca Raton, Florida biopharmaceutical manufacturing facility once we
receive final licensing from the FDA which is expected in 2001. In November
1999, we initiated clinical studies for the use of Nabi-HB to prevent the
reinfection of
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transplanted livers in HBV positive patients. Our application to the FDA for
this new indication for the product is expected to be filed as a new BLA in
2001.
CIVACIR(TM) [HEPATITIS C IMMUNE GLOBULIN (HUMAN)]
Hepatitis C virus (HCV) has significant economic impact because it causes
chronic infections in a large percentage of those infected and results in
significant morbidity and mortality in later stages of the disease. Management
believes that approximately 40-50% of liver transplants result from
complications of chronic HCV infections. HCV infection also contributes to
frequent hospitalizations and failure of the transplanted liver when it occurs
in transplant patients. There are approximately 4 million individuals in the
U.S. and an estimated 170 million individuals worldwide infected with HCV.
Civacir is an experimental human polyclonal antibody product that contains
antibodies to HCV. Pre-clinical studies indicate that Civacir contains
antibodies that are neutralizing to HCV. We are developing Civacir for the
prevention of HCV reinfection of transplanted livers and for the treatment of
certain stages of chronic HCV infections.
In 2000, we completed a series of chimpanzee studies of Civacir in collaboration
with the CDC under a Cooperative and Research Development Agreement. The results
from these animal studies suggest that the elevated level of anti-HCV in serum
maintained by multiple infusions of Civacir may be associated with the
elimination of virus from the blood, prevention of acute hepatitis and the
possible elimination of HCV antigen from liver cells after HCV infection. In
chronically infected chimpanzees, Civacir appears to reduce circulating levels
of HCV in the bloodstream. We have manufactured a clinical lot of Civacir and
plan to manufacture commercial lots of Civacir at our Boca Raton, Florida
biopharmaceutical manufacturing facility upon licensure by the FDA of this
product.
In September 2000, we signed a Clinical Trials Agreement for the "Evaluation of
the Safety and Pharmacokinetics of Hepatitis C Immune Globulin (Human), Civacir
in Liver Transplant Patients" with the National Institute of Allergy and
Infectious Disease ("NIAID"). This first clinical trial of Civacir will be
funded by NIAID and will be run under the auspices of the Division of
Microbiology and Infectious Disease Collaborative Antiviral Study Group. The
Phase I/II trial is expected to begin in the first half of 2001.
RENS (RING EXPANDED NUCLEOSIDES AND NUCLEOTIDES)
Nucleosides and nucleotides are the building blocks of DNA and RNA. Scientists
at the University of Maryland Baltimore County ("UMBC") and at Nabi have
developed a novel, proprietary, platform technology which permits the synthesis
of a new class of nucleoside and nucleotide analogs called Ring Expanded
Nucleosides ("RENs") and Ring Expanded Nucleotides ("RENt"). Nucleoside and
nucleotide analogs have been shown to possess anti-microbial, anti-viral and
anti-tumor activities. In addition to evaluating RENs compounds as stand-alone
drugs, we believe there are opportunities to evaluate use of our current
antibody based anti-virals in combination with RENs compounds.
In 1998, Nabi and UMBC were issued a U.S. patent with claims encompassing
certain RENs and RENt compounds. We have exclusively licensed UMBC rights in the
patented inventions, inclusive of a pending patent application claiming
therapeutic (anti-viral/anti-tumor) uses of these analogs. We have prepared a
number of active compounds through our collaboration with UMBC under a series of
Maryland Industrial Partnership grants. A lead compound, Nabi 3700.001, has been
selected for further development. In pre-clinical IN-VITRO studies, this drug
has been shown to have an acceptable toxicity profile and to have good
anti-viral activity and specificity against HBV. Under the license agreement we
are obligated to pay the UMBC a royalty based on net sales.
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OTHER PROGRAMS:
NABI NICVAX(TM) (NICOTINE CONJUGATE VACCINE)
Tobacco use is the single leading preventable cause of death in the U.S. It is
estimated that more than 48 million Americans smoke tobacco and another 6.8
million use smokeless tobacco. In the U.S., there are over 4.5 million smokers
between the ages of 12 - 17 and more than 3,000 additional teens become daily
smokers every day. Economically, smoking is reportedly responsible for
approximately 7% of total U.S. health care costs - estimated at $50 billion each
year. On a worldwide basis, the statistics are even more staggering as one out
of three men, women and children over the age of 15 smokes. According to the
CDC, 430,000 annual deaths are attributable to cigarette smoking in the U.S.
alone - more than alcohol, cocaine, heroin, homicide, suicide, car accidents,
fire, and AIDS combined. The repeated use of tobacco leads to nicotine
addiction. Addiction to nicotine is the primary reason people find it difficult
to stop using tobacco in its various forms.
Our researchers have shown that it is possible to link haptens, usually small,
sub-antigenic molecules such as nicotine, to carrier proteins, thereby making
the haptens immunogenic (able to induce antibodies). Nabi NicVAX is an
experimental vaccine that is being developed to prevent and treat nicotine
addition. Nabi NicVAX has been developed to induce the production of high levels
of nicotine-specific antibodies in the vaccinated individual. Results with Nabi
NicVAX in animal models indicate that nicotine bound to the antibodies is unable
to cross the blood/brain barrier and thus is unable to bind and activate
neuroreceptors in the brain. One of the potential effects of a nicotine vaccine
might be to prevent positive feedback from nicotine should a user be exposed to
nicotine during an attempt to break their habit. Vaccination with Nabi NicVAX
has been shown to generate high levels of nicotine-specific antibodies in
experimental animals. The antibodies induced by the vaccine have been shown to
be able to attenuate induction of nicotine dependence in rats, reduce nicotine
levels in the brains of rats by 64% compared to controls, prevent
nicotine-induced blood pressure increases, and attenuate the hyperactivity
induced rats in response to nicotine injections.
Our nicotine vaccine uses a proprietary production technology that yields a
vaccine with a significantly greater immunogenicity than experimental vaccines
derived by more classical conjugation technologies. We believe that antibodies
to Nabi NicVAX are highly specific to nicotine and are of higher affinity than
has been achievable with other conjugation technologies. Patent applications on
this technology, on the resultant nicotine vaccine and its use to prevent and
treat nicotine addiction has been filed.
In 2000, Nabi and its collaborators at the University of Minnesota, Hennepin
County Medical Center and the University of Houston - Clear Lake received a
grant from the NIH's National Institute on Drug Abuse ("NIDA") for the further
development of Nabi NicVAX. Nabi anticipates beginning human clinical testing of
Nabi NicVAX immediately after conclusion of ongoing toxicity studies. We expect
to initiate a Phase I/II clinical trial of Nabi NicVAX in conjunction with NIDA
in 2002.
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THE FOLLOWING IS A SUMMARY OF OUR PRODUCTS UNDER DEVELOPMENT:
Products Intended Use Status
-------- ------------ ------
GRAM-POSITIVE PROGRAM:
Nabi StaphVAX Vaccine to provide long-term protection Completed Phase III efficacy trial in
against onset of staph infections ESRD patients in 2000. Boosting
trial in ESRD patients in 2001.
Nabi Altastaph Purified human polyclonal antibodies to Completed Phase I/II safety and PK
provide treatment or immediate protection clinical trial in premature infants;
against S. AUREUS infections expect to begin Phase II trials in
2001 in adult trauma patients with
diagnosed S. AUREUS infection.
Next Generation Products Combat S. AUREUS 336, S. EPIDERMIDIS, and Research and pre-clinical development.
(vaccines and hyperimmune Enterococcal bacterial infections
antibodies)
ANTI VIRAL PROGRAMS:
Nabi-HB Antibodies administered post exposure for BLA filed with FDA in December 1999
prevention of HBV infection for product to be manufactured in
Boca Raton facility. Expected to be
licensed in 2001.
Prevention of HBV reinfection in liver Completed Phase III clinical studies.
transplant patients BLA will be filed in 2001.
Civacir Antibody to prevent reinfection of Expected to begin Phase I/II clinical
transplanted livers in patients with trials in liver transplant patients
hepatitis C liver disease and to treat beginning in 2001.
chronic hepatitis C virus infections
RENs & RENt Small molecule nucleoside and nucleotide Research
analog technology to treat viral
infections and cancer.
OTHER PROGRAMS:
Nabi NicVAX Vaccine for smoking cessation and Phase I/II clinical trial anticipated
prevention and treatment of nicotine to begin in 2002 once toxicology
addiction studies are completed in 2001.
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STRATEGIC ALLIANCES
We are actively pursuing strategic alliances to assist in the development of
some of the products in our pipeline. Our current key strategic alliances are
discussed below.
CANGENE CORPORATION
Under a license and distribution agreement with Cangene, we have exclusive
rights to distribute and market WinRho SDF in the U.S. Cangene, which holds the
FDA licenses for the product, is required to supply the necessary quantities of
WinRho SDF to support such sales and shares in the profits from sales after
accounting for the costs of production and selling expenses. The license and
distribution agreement terminates in 2005 and requires us, among other things,
to meet specified annual sales goals or make specified annual payments to
Cangene in order to maintain exclusivity. During 2000, we continued to meet
these goals.
Cangene also manufactures Nabi-HB for the company under an agreement that
requires minimum purchase of product prior to the termination of the agreement
in March 2002. See also "Supply and Manufacturing - Biopharmaceuticals." In
addition, Cangene has exclusive marketing rights for Nabi-HB in Canada provided
it meets specified sales goals. We share in the profits from sales of Nabi-HB in
Canada. The term of the Canadian marketing agreement with Cangene for Nabi-HB is
co-extensive with the term of the manufacturing agreement for Nabi-HB.
CHIRON CORPORATION
In November 1995, we entered into an agreement with Chiron Corporation (the
"Chiron Agreement"). The Chiron Agreement grants us an exclusive supply
agreement for four vaccines, including hepatitis C. In addition, we have rights
to 10 additional Chiron vaccines for use in humans to produce immunotherapeutic
products. The Chiron Agreement may also grant us access to Chiron's adjuvant, MF
59. We will be responsible for all development, manufacturing and worldwide
distribution of these products. We may terminate the Chiron Agreement on a
product-by-product basis in which event we shall transfer to Chiron all of our
rights with respect to the product as to which the Chiron Agreement has been
terminated. Similarly, Chiron may terminate its obligations to supply immunizing
agents to us on a product-by-product basis, in which event Chiron shall grant to
us a license of the technology necessary for us to manufacture the applicable
immunizing agent and the financial arrangements in the Chiron Agreement with
respect to such agent shall continue.
CATALYTICA PHARMACEUTICALS
In 1999, we entered into a five-year agreement with Catalytica for exclusive
distribution rights in the U.S. and Canada for Aloprim. Under this agreement, we
sell and Catalytica manufactures the product and both companies share in profits
from the sale of the product. In addition to the U.S. and Canada, we can
purchase Aloprim in territories where the license holder prior to Catalytica,
GSK has not commercialized the product within five years from the effective date
of the agreement. We and Catalytica are currently pursuing regulatory approval
for licensure of Aloprim in the Canadian market. We intend to establish sales
and distribution infrastructure to support sales in this market. Globally, we
have the rights to purchase the product from GSK.
PUBLIC HEALTH SERVICES/NATIONAL INSTITUTE OF HEALTH
Under a license agreement with the PHS/NIH, we have exclusive rights to a patent
relating to a carbohydrate/protein conjugate vaccine against Staphylococcus and
are obligated to pay PHS a royalty based on net sales. The licensed patent
rights cover staphylococcal vaccines including Nabi StaphVAX. The license
terminates with respect to each country it applies to on the date that the
patent rights expire in such country.
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CUSTOMER RELATIONSHIPS
We sell our biopharmaceutical products to hospitals, wholesalers, distributors,
and home healthcare companies and sell our antibody products to
biopharmaceutical and diagnostic manufacturers, most of which have been
long-term customers.
We generally sell our antibody products under contracts ranging from one to five
years from the date the contract is signed. Certain contracts allow for annual
pricing renegotiations. Others contain provisions that provide for fixed price
increases that have been agreed to by both parties at the inception of the
contract period. Pricing for product deliveries is generally mutually agreed to
prior to the beginning of the contract year and fixed for that year, but
generally does provide for price increases/decreases to reflect changes in
customer specifications and new governmental regulations. Consequently, our
profit margins may be adversely or beneficially affected if the cost of
collecting antibody products rises or falls during the year. Because most of our
antibody customers are committed under contracts extending a year or longer, we
are protected against short-term downturns in the market but are unable to take
advantage of short-term market changes which could benefit us.
Customers to which sales exceeded 10% of our annual consolidated sales in the
last three fiscal years ending December 30, 2000, December 31, 1999 and December
31, 1998 were Baxter and Bayer Corporation. Sales to Cardinal Health, Inc.
exceeded 10% for the year ended December 30, 2000. Aggregate sales to these
customers were approximately $119.3 million, $112.4 million and $101.0 million,
or 52%, 47% and 42% of total sales for the years ended December 30, 2000,
December 31, 1999 and December 31, 1998, respectively.
SUPPLY AND MANUFACTURING
BIOPHARMACEUTICAL PRODUCTS
We have completed construction of our biopharmaceutical manufacturing facility
in Boca Raton, Florida that is designed for the manufacture, formulation and
processing of biopharmaceutical products. We submitted a BLA to the FDA in
December 1999 for Nabi-HB for post exposure prophylaxis of hepatitis B to be
manufactured in this new facility. We have manufactured clinical lots of the
Nabi-HB and Civacir in this new facility. We expect licensure of Nabi-HB for our
manufacturing plant in 2001.
Cangene manufactures Nabi-HB for us under an agreement that establishes minimum
purchase quantities and terminates March 2002, although either party may
terminate the agreement upon twelve months notice. We collect and supply the
anti-HBs antibodies necessary for the manufacture of Nabi-HB.
We are required to purchase our requirements of WinRho SDF from Cangene, which
has granted us exclusive distribution and marketing rights to the product in the
U.S., under an agreement which terminates in 2005.
In 1997, we acquired from Baxter the exclusive rights to Autoplex T in the U.S.,
Canada and Mexico. In connection with the acquisition, Baxter agreed to
manufacture Autoplex T until May 2000 or such later time as may be determined
under the terms of a consent order entered into between Baxter and the Federal
Trade Commission ("FTC"), but in any event four months after we receive approval
from the FDA to manufacture Autoplex T. At the discretion of the FTC, the period
Baxter manufactures Autoplex T can be extended for up to four twelve-month
intervals. The FTC approved the first twelve month extension beginning in May
2000. The FTC could require us to return our rights to Autoplex T to Baxter if
we do not obtain FDA approval to manufacture the product by May 2001 or by a
later date agreed to by the FTC. We anticipate that the period Baxter
manufactures Autoplex T under the terms of the consent order from the FTC will
be extended for the twelve-month period through May 2002. If the rights revert
to Baxter and Baxter later sells these rights, Nabi and Baxter will share
equally the proceeds of any such
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sale, and under certain circumstances Baxter will be required to make a
specified payment to us. We expect to manufacture Autoplex T for commercial sale
in our Boca Raton, Florida biopharmaceutical manufacturing facility.
Catalytica manufactures Aloprim for us and has granted us exclusive distribution
rights in the U.S. and Canada under an agreement which terminates in June 2004.
We manufacture both pre-clinical and clinical lots of vaccine products at our
pilot facility in Rockville, Maryland and immune globulin products at our Boca
Raton, Florida and Miami, Florida facilities.
In May 2000, we completed an agreement with Dow Biopharmaceutical Contract
Manufacturing (formerly Collaborative BioAlliance) for the contract production
and commercial supply of Nabi StaphVAX. Significant progress in the transfer of
manufacturing from our pilot plant in Rockville, Maryland to Dow's current Good
Manufacturing Practice ("cGMP") manufacturing facility in Smithfield, Rhode
Island, was made during 2000.
ANTIBODY COLLECTION PROCESS
We currently collect and process antibody products from 56 collection centers
located across the U.S. Each Nabi center is licensed and regulated by the FDA.
Most of our centers are located in urban areas and many are near universities
and military bases. Prospective donors are required to complete a medical
questionnaire and are subject to laboratory testing and a physical examination
under the direction or supervision of a physician. Following this screening,
antibodies are collected from suitable donors by means of a process known as
plasmapheresis.
PATENTS AND PROPRIETARY RIGHTS
Our continued success will depend, in part, on our ability to obtain and protect
our patent rights, trade secrets and other intellectual property. We have
acquired title or obtained licenses to a number of patents or patent
applications and have filed a number of patent applications of our own. See also
"Factors to Be Considered - Uncertainty of Legal Protection Afforded by Patents
and Proprietary Rights."
GOVERNMENT AND INDUSTRY REGULATION
The collection, processing and sale of our products as well as our research,
pre-clinical development and clinical trials are subject to regulation for
safety and efficacy by numerous governmental authorities in the U.S. and other
countries, including the United Kingdom, Germany and Australia. Domestically,
the federal Food, Drug and Cosmetic Act, the Public Health Service Act, and
other federal and state statutes and regulations govern the collection, testing,
manufacturing, safety, efficacy, labeling, storage, record keeping,
transportation, approval, advertising and promotion of our products. We believe
we are in substantial compliance with all relevant laws and regulations.
BIOPHARMACEUTICAL PRODUCTS
Vaccines and human polyclonal antibody products are classified as "biological
products" under FDA regulations. The steps required before a biological product
may be marketed in the U.S. generally include pre-clinical studies and the
filing of an Investigational New Drug application with the FDA, which must be
accepted by the FDA before human clinical studies may commence. The initial
human clinical evaluation, called a Phase I trial, generally involves
administration of a product to a small number of normal healthy volunteers to
test for safety. Phase II trials involve administration of a product to a
limited number of patients with a particular disease to determine dosage and
safety, as well as provide indications of efficacy. Phase III trials examine the
efficacy and safety of a product in an expanded patient population at
geographically dispersed clinical sites. The FDA reviews the clinical plans and
the results of trials and can discontinue the trials at any time if there are
significant safety issues. Biological
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products, once approved, have no provision allowing competitors to market
generic versions. Each biological product must undergo the entire development
process in order to be approved.
The results of all trials are submitted in the form of a BLA/New Drug
Application ("NDA") for approval to commence commercial sales. For BLA/NDA
approval, the FDA requires, among other things, that the prospective
manufacturer's methods conform to the agency's cGMP regulations, which must be
followed at all times. In complying with standards set forth in these
regulations, manufacturers must continue to expend time, money and effort in the
area of production and quality control to ensure full regulatory compliance. The
approval process is affected by several factors, including the severity of the
disease, the availability of alternative treatments, and the risks and benefits
demonstrated in clinical trials. The FDA also may require post-marketing
surveillance to monitor potential adverse effects of the product. The regulatory
process can be modified by Congress or the FDA in specific situations.
ANTIBODY PRODUCTS
The collection, storage and testing of plasma and antibody based products are
strictly regulated by the FDA. In order to operate in the U.S., a plasma
collection facility must hold a Biologics License issued by the FDA's Center for
Biologics Evaluation and Research. Each collection facility must be regularly
inspected and approved in order to maintain licensure. In addition, collection
centers require FDA approval to collect each specialty antibody product.
We hold Biologics License No. 1022 covering all Nabi-owned centers. We are also
subject to and are required to be in compliance with pertinent regulatory
requirements of the foreign countries where we export products.
We continually pursue our commitment to quality and compliance with applicable
FDA regulations and other regulatory requirements through our own internal
training and quality assurance programs. As part of our commitment to quality,
we have embraced the Quality Plasma Program ("QPP") that was initiated by the
American Blood Resources Association, an organization that establishes and
recommends guidelines for the plasma industry. QPP imposes standards on antibody
collection facilities in addition to those presently required by the FDA. QPP
certification has proven to be increasingly significant and fractionators
worldwide now require that the supply of plasma come only from QPP certified
centers. All collection facilities owned by us are QPP certified.
ORPHAN DRUG ACT
WinRho SDF and Aloprim have received Orphan Drug protection, WinRho SDF for the
treatment of ITP through March 2002, and Aloprim for treatment of chemotherapy
induced hyperuricemia through 2003. Under the Orphan Drug Act, the FDA may
designate a product as having Orphan Drug status to treat a "rare disease or
condition," which currently is defined as a disease or condition that affects
populations of less than 200,000 individuals in the U.S. at the time of
designation, or, if victims of a disease number more than 200,000, for which the
sponsor establishes that costs of development will not be recovered from U.S.
sales in seven years. When a product is designated an Orphan Drug, the sponsor
is entitled to receive certain incentives to undertake the development and
marketing of the product. In addition, the sponsor that obtains the first
marketing approval for a designated Orphan Drug for a given indication
effectively has marketing exclusivity for a period of seven years. There may be
multiple designations of Orphan Drug status for a given drug and for different
indications. However, only the sponsor of the first BLA approved for a given
drug for its use in treating a given rare disease may receive marketing
exclusivity. See also "Factors to Be Considered - Uncertainty of Orphan Drug
Designation."
OTHER
The State of Florida agency for Health Care Administration, and the states of
Maryland, New York, and Pennsylvania license our Miami-based FDA-certified
testing laboratory. The plasma testing laboratory in Miami also has testing
permits from California. The laboratory is licensed pursuant to Medicare
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regulations and regulations of the U.S. Health Care Finance Administration's
Clinical Laboratory Improvement Amendment of 1988.
The Miami laboratory passed its ISO 9001 Quality Management System registration
audit in September of 2000. The registration was granted to their plasma testing
laboratory, diagnostics product manufacturing and biopharmaceutical distribution
systems. The registration enhances overseas marketing opportunities as well as
helps assure compliance with both domestic and international regulatory
requirements. It allows us to pursue the prestigious CE product marking as well
as provides solid common ground for interaction with our many international
business partners.
COMPETITION
BIOPHARMACEUTICAL PRODUCTS
We believe that Nabi-HB has achieved a significant share of the domestic market
and that our access to the vaccines and specialty antibodies necessary for the
manufacture of Nabi-HB will allow us to maintain our market share. Anti-HBs
production is currently used in the production of Nabi-HB. See also "Supply and
Manufacturing - Biopharmaceutical Products."
WinRho SDF is the first and only anti-D therapy approved for the treatment of
ITP. We believe that WinRho SDF has a significant and growing share of the
domestic market for ITP treatment. Competing therapeutic modalities include the
use of steroids, IVIG, and splenectomy (a surgical procedure to remove the
spleen). WinRho SDF has orphan drug status through 2002.
Autoplex T competes in the anti-inhibitor segment of the hemophilia A
marketplace. Autoplex T and other competitive agents are used to treat patients
that have developed inhibitors (an immunity) to Factor VIII, the standard
therapy for people suffering from hemophilia A. There are two biopharmaceutical
products currently on the market that compete with Autoplex T.
Aloprim is the first and only intravenous allopurinol therapy available for the
treatment of chemotherapy-induced hyperuricemia or Tumor Lysis Syndrome. Aloprim
provides a new therapeutic option for patients that cannot tolerate oral
allopurinol therapy. Currently, Aloprim has no direct competitors.
ANTIBODY PRODUCTS
Nabi and other independent suppliers of antibody products sell these products
principally to biopharmaceutical companies that process this raw material into
finished products. Although these biopharmaceutical companies generally own
plasmapheresis centers, in the aggregate, they purchase a substantial portion of
their antibody requirements from independent suppliers. There is competition
among these independent suppliers and certain independent suppliers have
consolidated their operations through mergers and acquisitions. We compete for
sales by maintaining competitive pricing and by providing customers with
high-quality products and superior customer service. Management believes we have
the ability to continue to compete successfully in these areas.
We compete for donors with biopharmaceutical companies that obtain antibodies
for their own use through their own collection centers, other commercial
collectors of antibody products, and non-profit organizations such as the
American Red Cross and community blood banks that solicit donations of whole
blood. We compete for donors by providing competitive compensation and
outstanding donor service, by implementing programs to attract donors through
education as to the uses for collected antibodies, by encouraging groups to have
their members become antibody donors for fund raising purposes and by improving
the attractiveness of our collection facilities.
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EMPLOYEES
We employed 1,945 persons at December 30, 2000. We believe that the relations
between our management and our employees are generally good.
FACTORS TO BE CONSIDERED
This Annual Report on Form 10-K contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Statements in
this Annual Report on Form 10-K that are not historical facts are hereby
identified as "forward-looking statements" for the purpose of the safe harbor
provided by Section 21E of the Securities and Exchange Act of 1934 and Section
27A of the Securities Act of 1933. Words such as "estimate," "project," "plan,"
"intend," "expect," "believe" and similar expressions are intended to identify
forward-looking statements. All forward-looking statements are necessarily only
estimates of future results and there can be no assurance that actual results
will not differ materially from expectations, and, therefore, investors are
cautioned not to place undue reliance on such statements. Set forth below is a
discussion of certain factors which could cause our actual results to differ
materially from the results projected or suggested in such forward-looking
statements. Investors should understand that it is not possible to predict or
identify all such factors and that this list should not be considered a complete
statement of all potential risks and uncertainties. We undertake no obligation
to update any forward-looking statements as a result of future events or
developments.
ADDITIONAL FINANCING REQUIREMENTS AND ACCESS TO CAPITAL
Our outstanding debt matures in 2002 and 2003. To satisfy these obligations, we
will need to raise additional capital to repay the debt or restructure the
outstanding debt. In addition, we will need to raise additional capital to
increase funding of our product research, development and marketing activities.
We intend to seek additional funding through public or private equity or debt
financing, collaborative arrangements with strategic partners or from other
sources. There can be no assurance, however, that additional financing will be
available on acceptable terms, if at all. If adequate funds are not available,
we will have to defer certain investments in the areas of research, product
development, manufacturing or marketing activity, or otherwise modify our
business strategy, and our future business and future prospects could be
materially and adversely affected.
COSTS OF RESEARCH AND DEVELOPMENT
We have incurred and expect to continue incurring significant expenses
associated with our biopharmaceutical product development activities, including
the cost of clinical trials relating to product development and marketing
expenses relating to product introduction. Products under development may not
generate sales for several years or at all. We currently do not have the
financial resources to concurrently fund all of our biopharmaceutical product
development programs. Additional funding will be necessary in order to fund a
second Phase III clinical trial for Nabi StaphVAX. We are actively pursuing
strategic alliances to assist in the development and commercialization of our
biopharmaceutical products. There can be no assurance that our efforts will be
successful, and if they are not, we will not be able to continue to aggressively
develop our early stage products. Our ability to continue to fund our ongoing
research and development activities is currently dependent on our ability to
generate sales from our biopharmaceutical products or obtain financing. There
can be no assurance, therefore, that we will be able to continue to fund our
research and development activities at the current level, and if we are required
to further reduce the funding for our research and development activities, this
could have a material adverse effect on our future prospects.
DEPENDENCE UPON THIRD PARTIES TO MANUFACTURE PRODUCTS; LIMITED MANUFACTURING
CAPABILITY AND EXPERIENCE
We do not currently manufacture any of our marketed biopharmaceutical products
and are dependent upon third parties to manufacture these products. The failure
by our manufacturers to meet our needs
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for these products or delays in the receipt of deliveries could have a material
adverse effect on our future business, financial condition and results of
operations. Biopharmaceutical product sales were constrained in 2000 because of
the inability of the contract manufacturer for WinRho SDF and Nabi-HB to supply
product for a period of time and because of continuing contract production
issues with the contract manufacturer of Autoplex T. We have constructed a
biopharmaceutical manufacturing facility that is designed to allow us to
manufacture, formulate and process biopharmaceutical products. We submitted a
BLA to the FDA in December 1999 for licensure for the manufacture of Nabi-HB at
our biopharmaceutical manufacturing facility in the Boca Raton, Florida. No
assurance can be given that we will be able to obtain such licensure, and
failure to obtain such licensure on a timely basis, or at all, would have a
material adverse effect on our future business, financial condition and results
of operations.
The new facility is designed to process specialty antibodies into
biopharmaceutical products. However, we have not previously owned or operated
such a facility and have no direct experience in commercial, large-scale
manufacturing of biopharmaceutical products. There can be no assurance that when
FDA licensure is received, we will have sufficient product to manufacture so
that the facility can be operated efficiently and profitably. Further, there can
be no assurance that when the facility is ready for its intended use we will
have product to manufacture, either on our own behalf or on behalf of third
parties, to offset the cost of the facility's operation. Our failure to
successfully operate our new manufacturing facility would have a material
adverse effect on our future business, financial condition and results of
operations.
We anticipate that the facility will be able to produce Nabi-HB for commercial
sale in 2001, but there can be no assurance that we will be able to do so.
However, we expect to have an adequate supply of Nabi-HB based on our
manufacturing agreement with Cangene that expires in 2002. Moreover,
manufacturing products at a single site may present risks if a disaster (such as
a fire or hurricane) causes interruption of manufacturing capability. In such an
event, we will have to resort to alternative sources of manufacturing that could
increase our costs as well as result in significant delays while required
regulatory approvals are obtained. Any such delays or increased costs could have
a material adverse effect on our future business, financial condition and
results of operations.
Our research and development pipeline principally involves specialty vaccines.
Because we do not have and have no current plans to construct an FDA-licensed
facility to manufacture these vaccines, we will be dependent on third parties to
manufacture these products. Such dependence is subject to the same risks
described above with respect to the manufacture of our marketed
biopharmaceutical products.
UNCERTAINTY OF NEW PRODUCT DEVELOPMENT
Our future success will depend on our ability to achieve scientific and
technological advances and to translate such advances into commercially
competitive products on a timely basis. Our biopharmaceutical products under
development are at various stages, and substantial further development,
pre-clinical testing and clinical trials will be required to determine their
technical feasibility and commercial viability. The proposed development
schedules for these products may be affected by a variety of factors, including
technological difficulties, competition, failure to achieve desired results in
clinical trials, proprietary technology positions of others, reliance on third
parties for manufacturing, failure to market effectively and changes in
government regulation. Positive results for a product in a clinical trial do not
necessarily assure that positive results will be obtained in future clinical
trials or that government approval to commercialize the product will be
obtained. In addition, any delay in the development, introduction or marketing
of our products under development could result either in such products being
marketed at a time when their cost and performance characteristics would not be
competitive in the marketplace or in a shortening of their commercial lives.
There can be no assurance that our biopharmaceutical products under development
will prove to be technologically feasible, commercially viable and able to
obtain necessary regulatory approvals and licenses on a timely basis, if at all.
Our failure to successfully develop and commercialize in a timely manner our
biopharmaceutical products and obtain necessary regulatory approvals could have
a material adverse effect on our future
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operations. In particular, our failure to obtain the statistically significant
results for Nabi StaphVAX required for FDA approval may have a major impact on
our market valuation.
COMPETITIVE MARKET FOR BIOPHARMACEUTICAL PRODUCTS
Our currently marketed biopharmaceutical products compete with those of other
companies. Most of these companies have greater financial resources, research
and product development capabilities and marketing organizations than Nabi. In
order to successfully develop additional biopharmaceutical products, additional
expenditures, management resources and time will be required. We may need to
supplement our own sales efforts through the use of a partner. If we so elect,
there can be no assurance that we will be able to find a partner on acceptable
terms or at all, or that any such partner will be successful in its efforts. If
we succeed in bringing one or more products to market, we will compete with many
other companies that may have extensive and well-funded marketing and sales
operations. Our failure to successfully market new biopharmaceutical products
could have a material adverse effect on our future business, financial condition
and results of operations.
RISK WITH RESPECT TO CERTAIN EXISTING PRODUCTS
We could lose our exclusive marketing rights to WinRho SDF if it fails to
achieve specified performance criteria including sales goals and compensatory
payments. Pursuant to the terms under which we acquired our rights to Autoplex T
from Baxter, the FTC could require us to return to Baxter our rights to Autoplex
T if we do not obtain FDA approval to manufacture the product by May 2001 or a
later date agreed to by the FTC. We will not obtain FDA approval to manufacture
Autoplex T by May 2001 and are seeking an extension from the FTC. Although we
believe we will receive the extension, there can be no assurance that it will be
granted by the FTC. Loss of exclusive marketing rights to market WinRho SDF or
rights to Autoplex T would have an adverse effect on our future business,
financial condition and results of operations.
Our future capability to produce high potency anti-HBs antibodies will be
directly dependent on the availability of a suitable vaccine to stimulate the
antibody response in donors. We are currently utilizing a human plasma source
vaccine for donor stimulation. The supply of this vaccine, which is no longer
manufactured, is expected to be exhausted in the next few years. Based on
studies conducted to date with currently licensed alternative vaccines
manufactured using recombinant technology, we have been unable to identify a
comparable replacement for the human source vaccine. Our cost of production of
hepatitis B immune globulin will significantly increase if the currently
licensed vaccines remain the only alternative for stimulation of antibody
production in donors.
UNCERTAINTY OF MARKET ACCEPTANCE
There can be no assurance that any of our products in development will achieve
market acceptance. The degree of market acceptance will depend upon a number of
factors, including the receipt of regulatory approvals, the establishment and
demonstration in the medical community of the clinical efficacy and safety of
our products and their potential advantages over existing treatment methods, the
prices of such products, and reimbursement policies of government and third
party payers. The failure of our product pipeline to gain market acceptance
could have a material adverse effect on our future business, financial condition
and results of operations.
FACTORS AFFECTING ANTIBODY PRODUCTS SUPPLY AND DEMAND; UNCERTAINTY OF
TECHNOLOGICAL CHANGE
Our customers for antibody products are subject to extensive regulation by the
FDA. Concern over the safety of antibody products has resulted in the adoption
of more rigorous screening procedures by regulatory authorities and
manufacturers of antibody products. These changes have resulted in significantly
increased cost to us in providing non-specific and specialty antibodies to our
customers. New procedures, which include a more extensive investigation into a
donor's background, as well as more sensitive tests, have also disqualified
numerous potential donors and discouraged other donors who may be reluctant to
undergo the screening procedures. These more stringent measures,
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particularly when coupled with a period of low unemployment nationally, could
adversely affect our antibody production with a corresponding adverse effect on
our future business, financial condition and results of operations. In addition,
our efforts to increase production to meet customer demand have resulted in
higher costs to attract and retain donors.
Most of the antibody products we collect, process and sell to our customers are
used in the manufacture of therapeutic products to treat certain diseases.
Several companies are marketing and developing products to treat some of these
diseases based upon technology which would lessen or eliminate the need for
human antibodies. Such products could adversely affect the demand for antibody
products. Although products utilizing technology developed to date have not
proven as cost-effective and marketable to healthcare providers as products
based on human antibodies, we are unable to predict the impact on our business
of future technological advances.
The worldwide supply of plasma has fluctuated historically. Future changes in
government regulation relating to the collection, fractionation and use of
antibodies or any negative public perception about the antibody collection
process or the safety of products derived from blood or plasma could further
adversely affect the overall supply of or demand for antibodies. Increases in
supply or decreases in demand of antibody products could have a material adverse
effect on our future business, financial condition and results of operations.
DEPENDENCE OF THE ANTIBODY PRODUCTS BUSINESS ON A SMALL NUMBER OF CUSTOMERS,
EFFECT OF EXISTING CONTRACTS
Our antibody sales are currently concentrated among a few large
biopharmaceutical companies. During the 2000, 1999, and 1998 fiscal years,
antibody product sales to our top two customers collectively accounted for
approximately 60%, 51% and 42%, respectively, of our antibody product sales. The
loss of any major customer or a material reduction in a major customer's
purchases of antibodies could have a material adverse effect upon our future
business, financial condition and results of operations. If these customers are
unable to comply with FDA regulations, their manufacturing facilities may be
temporarily closed which will reduce the need for antibodies provided by us.
Plant closures and reductions in customers' production because of FDA regulatory
problems have occurred in recent years, and our financial performance has been
adversely affected as a result. There can be no assurance that the customer
regulatory problems, which are not within our control, will not reoccur with the
same adverse impact on us in the future.
Most of our antibody products are sold under contracts which extend for a period
of one year and longer. These contracts generally do not permit us to increase
prices during the year or longer except to reflect changes in customer
specifications and new governmental regulations. If our costs of collecting
antibody products rises for reasons other than changes in customer
specifications and new governmental regulations, we are unable to pass on these
cost increases to our antibody product customers except with the consent of the
customer. Moreover, these contracts which cover most of our antibody production
do not permit us to expeditiously take advantage of market changes which could
benefit us.
GOVERNMENT REGULATION; UNCERTAINTY OF REGULATORY APPROVALS
Our research, pre-clinical development, clinical trials, manufacturing and
marketing of our products are subject to extensive regulation by various
government authorities in the U.S. The process of obtaining FDA and other
required regulatory approvals is lengthy and expensive, and the time required
for such approvals is uncertain. The approval process is affected by such
factors as the severity of the disease, the availability of alternative
treatments, and the risks and benefits demonstrated in clinical trials. The FDA
also may require post-marketing surveillance to monitor potential adverse
effects of the product. The regulatory process can be modified by Congress or
the FDA in specific situations. Many of our clinical trials are at a relatively
early stage and, except for Nabi-HB, WinRho SDF, Autoplex T, Aloprim and certain
non-specific and specialty antibody products, no approval from the FDA or any
other government agency for the manufacturing or marketing of any other products
under development has
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been granted. There can be no assurance that we will be able to obtain the
necessary approvals for manufacturing or marketing of any of our products.
Failure to obtain additional FDA approvals of products currently marketed or FDA
approval for products under development could have a material adverse effect on
our future business, financial condition and results of operations. Once
approved, a product's failure to comply with applicable regulatory requirements
could, among other things, result in warning letters, fines, suspension or
revocation of regulatory approvals, product recalls or seizures, operating
restrictions, injunctions and criminal prosecutions.
Distribution of our products outside the U.S. is subject to extensive government
regulation. These regulations, including the requirements for approvals or
clearance to market, the time required for regulatory review and the sanctions
imposed for violations, vary from country to country. There can be no assurance
that we will obtain regulatory approvals in such countries or that we will not
be required to incur significant costs in obtaining or maintaining our foreign
regulatory approvals. In addition, the export by us of certain of our products
that have not yet been cleared for domestic commercial distribution may be
subject to FDA export restrictions. Failure to obtain necessary regulatory
approvals, the restriction, suspension or revocation of existing approvals or
any other failure to comply with regulatory requirements would have a material
adverse effect on our future business, financial condition and results of
operations.
Our U.S. antibody collection, storage, labeling and distribution activities also
are subject to strict regulation and licensing by the FDA. Our collection
centers in the U.S. are subject to periodic inspection by the FDA, and from time
to time we receive notices of deficiencies from the FDA as a result of such
inspections. Our failure or the failure of our collection centers to continue to
meet regulatory standards or to remedy any such deficiencies could result in
corrective action by the FDA, including closure of one or more collection
centers and fines or penalties. In addition, before new antibody collection
centers are opened, the collection centers and their procedures and personnel
must meet certain regulatory standards to obtain necessary licenses. New
regulations may be enacted and existing regulations or their interpretation or
enforcement are subject to change. Therefore, there can be no assurance that we
will be able to continue to comply with any regulations or that the costs of
such compliance will not have a material adverse effect on our future business,
financial condition and results of operations.
POTENTIAL ADVERSE EFFECT OF LITIGATION
Antibody products collected by us and plasma-based products manufactured by our
customers run the risk of being HIV-contaminated. As a result, suits may be
filed against our customers and us claiming that the plaintiffs became infected
with HIV as a result of using the HIV-contaminated products. Such suits have
been filed in the past, and in a number of suits we were one of several
defendants. With the exception of one suit that is still pending, all of these
suits have been dismissed without liability to us. No assurance can be given
that additional lawsuits relating to infection with HIV will not be brought
against us by persons who have become infected with HIV or from plasma
fractionates. In addition, there can be no assurance that lawsuits based on
other causes of action will not be filed or that we will be successful in the
defense of any or all existing or potential future 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 our future
business, financial condition and results of operations.
RISK OF PRODUCT LIABILITY; LIMITED INSURANCE
The processing and sale of our products involves a risk of product liability
claims, and we currently are a party to litigation involving such claims. In
addition, there can be no assurance that infectious diseases will not be
transmitted by our products and create additional product liability claims.
Product liability insurance for the biopharmaceutical industry generally is
expensive to the extent it is available at all. There can be no assurance that
we will be able to maintain such insurance on acceptable terms or that we will
be able to secure increased coverage if the commercialization of our products
progresses, or that existing or future claims against us will be covered by our
product liability insurance. Moreover, there can be no assurance that the
existing coverage of our insurance policy and/or any rights of indemnification
and contribution that we may have will offset existing or future claims. A
successful
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claim against us with respect to uninsured liabilities or in excess of insurance
coverage and not subject to any indemnification or contribution could have a
material adverse effect on our future business, financial condition and results
of operations.
STRATEGIC ALLIANCES
We are pursuing strategic alliances with third parties for the development of
certain of our biopharmaceutical products. No assurance can be given that we
will be successful in these efforts or, if successful, that the collaborators
will conduct their activities in a timely manner. If we are not successful in
our efforts, we will not be able to continue to develop our products under
development. Even if we are successful, if any of our collaborative partners
violate or terminate their agreements with us or otherwise fail to conduct their
collaborative activities in a timely manner, the development or
commercialization of products could be delayed, and we might be required to
devote significant additional resources to product development and
commercialization or terminate certain development programs. In addition, there
can be no assurance that disputes will not arise in the future with respect to
the ownership of rights to any technology developed with third parties. These
and other possible disagreements between collaborators and us could lead to
delays in the collaborative research, development or commercialization of
certain products or could require or result in litigation or arbitration, which
would be time-consuming and expensive and could have a material adverse effect
on our future business, financial condition and results of operations.
UNCERTAINTY OF LEGAL PROTECTION AFFORDED BY PATENTS AND PROPRIETARY RIGHTS
The patent positions of biotechnology firms generally are highly uncertain and
involve complex legal and factual questions. There can be no assurance that
existing patent applications will result in issued patents, that we will be able
to obtain additional licenses to patents of others or that we will be able to
develop additional patentable technology of our own. Because patent applications
in the U.S. are not disclosed by the Patent and Trademark Office until patents
issue, and because publication of discoveries in the scientific or patent
literature often lags behind actual discoveries, we cannot be certain that we
were the first creator of inventions covered by our pending patent applications
or that we were the first to file patent applications for such inventions. There
can be no assurances that any patents issued to us will provide us 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 us, design around such patents.
A number of biopharmaceutical companies, biotechnology companies, universities
and research institutions have filed patent applications or received patents
relating to products or processes competitive with or similar to those of Nabi.
Some of these applications or patents may be competitive with our applications
or conflict in certain respects with claims made under our applications. Such a
conflict could result in a significant reduction of the coverage of our 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, we may be required to obtain licenses to these patents or to develop or
obtain alternative technology. If any licenses are required, there can be no
assurance that we will be able to obtain any such licenses on commercially
favorable terms, if at all. Our failure to obtain a license to any technology
that we may require to commercialize our products could have a material adverse
effect on our future business, financial condition and results of operations.
Litigation, which could result in substantial cost to us, may also be necessary
to enforce any patents issued to us or to determine the scope and validity of
third party proprietary rights.
We also rely on secrecy to protect our technology, especially where patent
protection is not believed to be appropriate or obtainable. We maintain strict
controls and procedures regarding access to and use of our proprietary
technology and processes. However, there can be no assurance that these controls
or procedures will not be violated, that we would have adequate remedies for any
violation, or that our trade secrets will not otherwise become known or be
independently discovered by competitors.
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UNCERTAINTY OF ORPHAN DRUG DESIGNATION
If a product is designated an Orphan Drug by the FDA, the sponsor is entitled to
receive certain incentives to undertake the development and marketing of the
product. In addition, the sponsor that obtains the first marketing approval for
a designated Orphan Drug for a given indication effectively has marketing
exclusivity for a period of seven years. There may be multiple designations of
Orphan Drug status for a given drug with different indications. However, only
the sponsor of the first approved BLA/NDA for a given drug indication in
treating a given rare disease may receive marketing exclusivity. While it may be
advantageous to obtain Orphan Drug status for eligible products, there can be no
assurance that the precise scope of protection that is currently afforded by
Orphan Drug status will be available in the future or that the current level of
exclusivity will remain in effect. Congress has considered legislation that
would amend the Orphan Drug Act to limit the scope of marketing exclusivity
granted to Orphan Drug products. WinRho SDF has received Orphan Drug marketing
exclusivity for the treatment of ITP (and has obtained Orphan Drug status for
certain other indications) and certain other of our products under development
have Orphan Drug status. Aloprim has received Orphan Drug status for the
treatment of chemotherapy induced hyperuricemia. There can be no assurance that
we will succeed in obtaining Orphan Drug marketing exclusivity for products that
have Orphan Drug status or that Orphan Drug marketing exclusivity with respect
to WinRho SDF or other products, if obtained, will be of material benefit to us.
Furthermore, another manufacturer could obtain an Orphan Drug designation as
well as approval for the same product for a different indication or a different
product for the same indication.
INTENSE COMPETITION; UNCERTAINTY OF TECHNOLOGICAL CHANGE
Competition in the development of biopharmaceutical products is intense, both
from biotechnology and biopharmaceutical companies, and is expected to increase.
Many of our competitors have greater financial resources and larger research and
development staffs than us, as well as substantially greater experience in
developing products, obtaining regulatory approvals, and manufacturing and
marketing biopharmaceutical products. Competition with these companies involves
not only product development, but also acquisition of products and technologies
from universities and other institutions. We also compete with universities and
other institutions in the development of biopharmaceutical products,
technologies and processes and for qualified scientific personnel. There can be
no assurance that our competitors will not succeed in developing technologies
and products that are more effective or affordable than those being developed by
us. In addition, one or more of our competitors may achieve product
commercialization of or patent protection for competitive products earlier than
us, which would preclude or substantially limit sales of our products. Further,
several companies are attempting to develop and market products to treat certain
diseases based upon technology that would lessen or eliminate the need for human
antibodies. The successful development and commercialization by any of our
competitors of any such product could have a material adverse effect on our
future business, financial condition and results of operations.
We compete for antibody donors with biopharmaceutical companies, other
independent antibody suppliers, other commercial collection companies and
non-profit organizations such as the American Red Cross and community blood
banks that solicit the donation of blood. A number of these competitors have
access to greater financial, marketing and other resources than us. We compete
for donors by offering financial incentives to donors to compensate them for
their time and inconvenience, providing outstanding customer service to our
donors, implementing programs designed to attract donors through education as to
the uses for collected antibodies, encouraging groups to have their members
become antibodies donors and improving the attractiveness of our antibody
collection facilities. We also compete with other independent antibody suppliers
that sell antibodies principally to biopharmaceutical companies that process
antibodies into finished products. If we are unable to maintain and expand our
donor base, our future business, financial condition and results of operations
will be materially and adversely affected.
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UNCERTAINTY OF PRODUCT PRICING AND REIMBURSEMENT
Our ability to commercialize our biopharmaceutical products and related
treatments will depend in part upon the availability of, and our ability to
obtain adequate levels of reimbursement from government health administration
authorities, private healthcare insurers and other organizations. Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products, and there can be no assurance that adequate third party coverage will
be available, if at all. Inadequate levels of reimbursement may prohibit us from
maintaining price levels sufficient for realization of an adequate return on our
investment in developing new biopharmaceutical products and could result in the
termination of production of otherwise commercially viable products. Government
and other third party payers are increasingly attempting to contain healthcare
costs by limiting both the coverage and level of reimbursement for new products
approved for marketing by the FDA and by refusing, in some cases, to provide any
coverage for disease indications for which the FDA has not granted marketing
approval. Also, the trend towards managed healthcare in the U.S. and the
concurrent growth of organizations such as HMOs, which could control or
significantly influence the purchase of healthcare services and products, as
well as legislative proposals to reform healthcare or reduce government
insurance programs, may all result in lower prices for our products. The cost
containment measures that healthcare providers are instituting and the impact of
any healthcare reform could have an adverse effect on our ability to sell our
products and may have a material adverse effect on our future business,
financial condition and results of operations.
There can be no assurance that reimbursement in the U.S. or foreign countries
will be available for our products, or, if available, will not be decreased in
the future, or that reimbursement amounts will not reduce the demand for, or the
price of, our products. The unavailability of third party reimbursement or the
inadequacy of the reimbursement for medical treatments using our products could
have a material adverse effect on our future business, financial condition and
results of operations. Moreover, we are unable to forecast what additional
legislation or regulation, if any, relating to the healthcare industry or third
party coverage and reimbursement may be enacted in the future or what effect
such legislation or regulation would have on our future business.
Most of our antibody product sales are made pursuant to contracts having initial
terms ranging from one to five years. These contracts generally provide for
annual pricing renegotiations. The pricing generally remains fixed for the first
year and subsequently is subject to price changes to reflect changes in customer
specifications or price adjustments to compensate us for increased costs
associated with new governmental or customer testing requirements. As a result,
our future business, financial condition and results of operations would be
adversely affected if our costs of collecting and preparing antibodies rise
during a given year and we are not able to pass on the increased costs until the
next annual pricing re-negotiation, if at all.
ITEM 2. PROPERTIES
A majority of the space we occupy is primarily used to collect antibody products
and is leased from non-affiliates under leases expiring through 2012. A majority
of these leases contain renewal options that permit us to renew the leases for
varying periods up to ten years at the then fair rental value. We believe that
in the normal course of our business, we will be able to renew or replace our
existing leases. We also own four collection facilities located in Arizona,
Indiana, Minnesota and Washington. Our collection centers range in size from
approximately 3,000 to 21,000 square feet.
We lease office, laboratory, warehouse and pilot manufacturing space in Boca
Raton, Florida, Miami, Florida and Rockville, Maryland with terms expiring
through May of 2005.
We own an 87,300 square foot facility that houses our executive offices and our
biopharmaceutical manufacturing facility in Boca Raton, Florida. We will
commence commercial manufacturing in this location after we obtain FDA
licensure.
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ITEM 3. LEGAL PROCEEDINGS
We are a party to litigation in the ordinary course of business. We do not
believe that such litigation will have a material adverse effect on our future
business, financial position or results of operations.
We are a co-defendant with various other parties in one suit filed in the U.S.
by, or on behalf of, individuals who claim to have been infected with HIV as a
result of either using HIV-contaminated products made by the defendants other
than us or having familial relations with those so infected. The claims against
us are based on negligence and strict liability. Several similar suits
previously pending against us, including a purported class action, have been
dismissed.
We deny all claims against us in these suits and intend to defend these cases
vigorously. We believe that any such litigation will not have a material adverse
effect on our future business, financial position or results of operations.
We have advised Baxter that we are terminating a contract to supply antibodies
to Baxter. The contract, by its terms, extends until December 31, 2004. We
believe the contract permits us to terminate it if it becomes commercially
unreasonable for us to perform under the contract. Baxter is contesting this
termination and has invoked an arbitration provision in the contract to resolve
the controversy. We have asserted counterclaims against Baxter in the
arbitration proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the fourth quarter of
the year ended December 30, 2000.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Nabi are as follows:
Name Age Position
- ---- --- --------
DAVID J. GURY 62 Chairman of the Board, President and
Chief Executive Officer
BRUCE K. FARLEY 50 Senior Vice President, Manufacturing Operations
THOMAS H. McLAIN 43 Senior Vice President, Corporate Services
and Chief Financial Officer
DAVID D. MUTH 47 Senior Vice President, Business Operations
ROBERT B. NASO, Ph.D. 56 Senior Vice President, Quality, Regulatory
and Product Development
MARK L. SMITH 39 Vice President of Finance and
Chief Accounting Officer
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DAVID J. GURY has served as Chairman of the Board, President and Chief Executive
Officer since April 3, 1992. Previously, from May 1984, Mr. Gury has served as
President and Chief Operating Officer for Nabi. Mr. Gury has been a director of
Nabi since 1984. From July 1977 until his employment by Nabi, Mr. Gury was
employed by Alpha Therapeutic Corporation (formerly Abbott Scientific Products)
as Director of Plasma Procurement (through October 1980), General Manager,
Plasma Operations (through October 1981) and Vice President, Plasma Supply
(through May 1984). In these capacities, Mr. Gury had executive responsibilities
for plasma procurement and operation of plasmapheresis centers.
BRUCE K. FARLEY has served as Senior Vice President, Manufacturing Operations
since February 1999. Previously, Mr. Farley was Executive Vice President and
Chief Operating Officer of Meris Laboratories, where he led the company through
a strategic reorganization and sale. From 1983 to 1996, he was employed by
Laboratory Corporation of America (formerly National Health Laboratories) in
numerous positions of increasing general management and operational
responsibility as Vice President, Divisional Manager Northwest (Seattle), Vice
President, Chief Operating Officer, Esoteric and Drugs of Abuse Testing
(Nashville), Divisional Manager, California (San Diego), and Regional Manager
(Houston).
THOMAS H. McLain has served as Senior Vice President, Corporate Services and
Chief Financial Officer since June 1998. Previously, from 1988 to 1998, Mr.
McLain was employed by Bausch & Lomb, Inc. where, as Staff Vice President,
Business Process Reengineering, he led a cross functional team to restructure
the global finance and purchasing organizations. He also held various positions
of increasing responsibility in finance at Bausch & Lomb, including Staff Vice
President, Accounting and Reporting and Assistant Corporate Controller. Before
joining Bausch & Lomb, Mr. McLain practiced with the accounting firm of Ernst &
Young LLP.
DAVID D. MUTH has served as Senior Vice President of Business Operations since
March 1998. Since November 1996, he was Senior Vice President of Sales,
Marketing and Business Development and responsible for growing our
biopharmaceutical business. Mr. Muth joined Nabi in August 1996 as the Senior
Vice President of Business Development. Previously, he was Senior Vice President
of Business Development at Duramed Pharmaceuticals, Inc. from February 1995 to
May 1996. From 1978 to 1995, Mr. Muth was employed at Johnson and Johnson where
he held numerous positions of increasing responsibility in business development,
sales, marketing, new product development and finance at the corporate
headquarters in New Brunswick, New Jersey, at Ethicon Inc. in Sommerville, New
Jersey and at Ortho McNeil Pharmaceuticals in Raritan, New Jersey.
ROBERT B. NASO, Ph.D. has served as Senior Vice President Quality, Regulatory
and Product Development, since August 1998. He joined Nabi in November 1995 as
Senior Vice President, Research and Development and General Manager, Rockville
Operations. Previously, he was Vice President of Research at Univax Biologics,
Inc. beginning in May 1992, and became Vice President of Research and
Development in October 1994. From 1983 to 1992, Dr. Naso was employed at Johnson
and Johnson where he held various positions of increasing responsibility in
research and development.
MARK L. SMITH has served as Vice President of Finance and Chief Accounting
Officer since February 2001. He joined Nabi in August 1999 as Senior Director of
Finance and Chief Accounting Officer. Prior to joining Nabi, Mr. Smith served as
Vice President of Finance and Chief Financial Officer of Neuromedical Systems,
Inc. where he played a leadership role in that company's strategic restructuring
and sale. Prior to joining Neuromedical Systems, Mr. Smith served in various
financial executive capacities at Genzyme Corporation from 1996 until 1998 and
as Vice President of Finance and Administration and Chief Financial Officer of
Genetrix, Inc. from 1991 until 1996. Before joining Genetrix, Mr. Smith
practiced with the accounting firm of PricewaterhouseCoopers LLP in both
Australia and the U.S.
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NABI
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Nabi's common stock is quoted on the Nasdaq National Market under the symbol
"NABI." The following table sets forth for each period the high and low sale
prices for the common stock (based upon intra-day trading) as reported by the
Nasdaq National Market.
High Low
---- ---
2000
----
First Quarter 12 4 1/8
Second Quarter 8 5/8 3 3/4
Third Quarter 10 1/16 5 5/16
Fourth Quarter 6 15/16 2 1/2
1999
----
First Quarter 4 2 1/2
Second Quarter 3 2 13/32
Third Quarter 6 2 13/16
Fourth Quarter 5 7/8 3 1/16
The closing price of our common stock on February 24, 2001 was $4.75 per share.
The number of record holders of our common stock at December 30, 2000 was 1,330.
No cash dividends have been previously paid on our common stock and
none are anticipated in 2001. Our credit agreement also restricts dividend
payments.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the five
years ended December 30, 2000 that were derived from our audited consolidated
financial statements.
The data should be read in conjunction with, and are qualified by reference to,
Nabi's Consolidated Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." All
amounts in the following table are expressed in thousands, except for per share
data.
For the Years Ended
---------------------------------------------------------------------------
December 30, December 31, December 31, December 31, December 31,
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
STATEMENTS OF OPERATIONS DATA:
Sales $ 228,783 $ 233,603 $ 243,087 $ 228,744 $ 239,909
Costs of products sold 160,766 163,407 178,366 180,533 181,914
Selling, general and administrative expense 37,168 33,282 31,151 25,012 21,095
Research and development expense 14,266 15,469 21,822 19,126 16,721
Royalty expense 11,175 13,739 10,946 6,617 5,253
Other operating expense 1,827 1,905 2,169 3,087 3,757
Non-recurring charge (credit) (3,875) (1,935) 14,605 5,680 --
--------- --------- --------- --------- ---------
Operating income (loss) 7,456 7,736 (15,972) (11,311) 11,169
Interest income 33 74 48 272 1,275
Interest expense (3,581) (4,313) (5,681) (4,712) (3,987)
Other income (expense), net 198 (110) (105) (70) (511)
--------- --------- --------- --------- ---------
Income (loss) before (provision) benefit for income
taxes and extraordinary item 4,106 3,387 (21,710) (15,821) 7,946
(Provision) benefit for income taxes (87) (43) (47) 4,668 6,214
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item 4,019 3,344 (21,757) (11,153) 14,160
Extraordinary item 340 -- -- -- (932)
--------- --------- --------- --------- ---------
Net income (loss) $ 4,359 $ 3,344 $ (21,757) $ (11,153) $ 13,228
========= ========= ========= ========= =========
Basic earnings (loss) per share:
Income (loss) before extraordinary item $ 0.11 $ 0.10 $ (0.62) $ (0.32) $ 0.41
Extraordinary item 0.01 -- -- -- (0.03)
--------- --------- --------- --------- ---------
Net income (loss) $ 0.12 $ 0.10 $ (0.62) $ (0.32) $ 0.38
========= ========= ========= ========= =========
Diluted earnings (loss) per share:
Income (loss) before extraordinary item $ 0.11 $ 0.09 $ (0.62) $ (0.32) $ 0.40
Extraordinary item 0.01 -- -- -- (0.03)
--------- --------- --------- --------- ---------
Net income (loss) $ 0.12 $ 0.09 $ (0.62) $ (0.32) $ 0.37
========= ========= ========= ========= =========
BALANCE SHEET DATA:
Working capital $ 39,594 $ 35,999 $ 39,720 $ 63,933 $ 63,630
Total assets 224,487 214,564 218,300 225,906 202,142
Notes payable, including current maturities 109,535 112,998 118,044 121,081 83,465
Total stockholders' equity 77,394 58,177 54,189 75,663 86,061
29
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of our financial condition and results of
operations for each of the three years ended December 30, 2000, December 31,
1999 and December 31, 1998, should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and with the information contained under
"Factors to be Considered" in Item 1. All amounts are expressed in thousands,
except for per share data.
Nabi is focused on the discovery, development and commercialization of products
that prevent and treat infections and autoimmune diseases. We are nearing
completion of a multi-year transition from being a leading provider of antibody
products into becoming a vertically integrated biopharmaceutical company. We
currently have an extensive pipeline of innovative drugs and vaccines in
clinical and pre-clinical development and have four marketed biopharmaceutical
products: Nabi-HB(TM) [Hepatitis B Immune Globulin (Human)], WinRho SDF(R) [Rho
(D) Immune Globulin Intravenous (Human)], Autoplex(R) T [Anti-Inhibitor
Coagulant Complex, Heat Treated] and Aloprim(TM) [(Allopurinol sodium) for
injection]. We are also one of the largest collectors and suppliers of specialty
and non-specific antibody products in the world. We collect these products from
an extensive donor base in the U.S. Some of these antibodies are used in the
production of our biopharmaceutical products. Most are supplied to other
biopharmaceutical and diagnostic companies for the manufacture of numerous
products.
RESULTS OF OPERATIONS
The following table sets forth our results of operations expressed as a
percentage of sales:
For the Years Ended
--------------------------------------------
December 30, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
RESULTS OF OPERATIONS
Sales 100.0 % 100.0 % 100.0 %
Costs of products sold 70.3 70.0 73.4
Selling, general and administrative expense 16.2 14.2 12.8
Research and development expense 6.2 6.6 9.0
Royalty expense 4.9 5.9 4.5
Other operating expense 0.8 0.8 0.9
Non-recurring charge (credit) (1.7) (0.8) 6.0
----- ----- -----
Operating income (loss) 3.3 3.3 (6.6)
Interest income -- -- --
Interest expense (1.6) (1.9) (2.3)
Other income (expense), net 0.1 -- --
----- ----- -----
Income (loss) before income taxes and
extraordinary item 1.8 1.4 (8.9)
Income taxes -- -- --
Extraordinary item 0.1 -- --
----- ----- -----
Net income (loss) 1.9 % 1.4 % (8.9)%
===== ===== =====
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31
Information concerning Nabi's sales by industry segment, for the respective
periods, is set forth in the following table. All dollar amounts set forth in
the table are expressed in thousands.
For the Years Ended
--------------------------------------------------------------------------
Segment December 30, 2000 December 31, 1999 December 31, 1998
- ------- ---------------------- ---------------------- ----------------------
Biopharmaceutical Products $ 72,985 31.9% $ 71,112 30.4% $ 54,983 22.6%
-------- ----- -------- ----- -------- -----
Antibody Products:
-Specialty antibodies 58,037 25.4 53,175 22.8 54,963 22.6
-Non-specific antibodies 97,761 42.7 109,316 46.8 133,141 54.8
-------- ----- -------- ----- -------- -----
155,798 68.1 162,491 69.6 188,104 77.4
-------- ----- -------- ----- -------- -----
TOTAL $228,783 100.0% $233,603 100.0% $243,087 100.0%
======== ===== ======== ===== ======== =====
2000 AS COMPARED TO 1999
SALES. Biopharmaceutical sales increased in 2000 by approximately $1.9 million
or 3% from 1999. Sales of our biopharmaceutical product Nabi-HB increased 55% in
2000 over 1999 levels, while sales of WinRho SDF were down approximately 20%.
Overall growth in biopharmaceutical sales was constrained by product supply
issues limiting the supply of WinRho SDF. WinRho SDF and Nabi-HB are
manufactured for us by Cangene Corporation ("Cangene"). Cangene initiated the
development of clinical lots of a new product at its manufacturing facility in
Canada earlier in 2000. This new product involved changes in production
materials that affected the release of WinRho SDF and Nabi-HB in the third
quarter of 2000. As a result of this issue, the U.S. Food and Drug
Administration ("FDA") required a regulatory submission for release for these
products, as well as the agency's release of these products by lot. We were able
to resume shipment of lots of Nabi-HB in September 2000 with FDA approval and
resumed shipment of WinRho SDF in October 2000. Sales of Autoplex T were lower
in 2000 compared to 1999 as a result of contractual delivery shortfalls by the
supplier of that product.
Total antibody sales in 2000 decreased by 4% from 1999 levels. Sales of higher
margin specialty antibody products increased 9%, reflecting higher sales for
anti-CMV, tetanus and rabies antibodies, increased sales of diagnostic products
and increased outside laboratory testing sales, partially offset by decreased
sales of other specialty products, including anti-D and anti-HBs. Sales of
non-specific antibody product decreased 11%, reflecting lower overall production
volumes. Production of non-specific antibody products did increase in the third
and fourth quarter of 2000 compared to the same periods in 1999. The overall
decrease in sales of non-specific antibody products results from our strategic
decision to exit unprofitable operations through the sale, transfer or closure
of 11 antibody collection centers in the U.S. and Germany during 1999.
GROSS PROFIT MARGIN AFTER ROYALTY EXPENSE. Gross profit and related margin for
2000 was $56.8 million, or 25% of sales, compared to $56.5 million or 24% of
sales in 1999. The increase was due primarily to increased sales of higher
margin Nabi-HB offset by lower margins from antibody product sales and the
adverse effect of reduced sales of WinRho SDF. The lower antibody product
margins reflect higher costs of production including higher donor fees and
increased cost of regulatory compliance. Gross profit margin also benefited from
a non-performance penalty due to us as a result of contractual delivery
shortfalls by the supplier of Autoplex T. Royalty expense in 2000 was $11.2
million, or 15% of biopharmaceutical product sales, compared to $13.7 million,
or 19% of biopharmaceutical product sales in 1999. Royalty expense in 2000
included payments to Abbott Laboratories for Nabi-HB under an obligation that
ended December 31, 2000. The decrease in royalty expense was primarily due to a
reduction in the royalty rate and sales for WinRho SDF in 2000 compared to 1999
following our achieving profitability milestones contained in that agreement
during 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $37.2 million or 16% of sales in 2000, compared to $33.3 million or
14% of sales in 1999. The increase
31
32
primarily reflects an increase in sales and marketing expenses for advertising
and sales force expansion to support anticipated growth in the biopharmaceutical
business in 2001. By the end of the second quarter of 2000, we had completed the
expansion of our U.S.-based sales force, increasing the sales representatives
from 30 to 40 and sales regions from three to four.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $14.3
million or 6% of sales in 2000, compared to $15.5 million or 7% of sales in
1999. The decrease in research and development expense reflects the completion
of the pivotal Phase III clinical trial for Nabi StaphVAX during 2000.
NON-RECURRING CREDIT. During 2000 we reversed restructuring accruals totaling
$3.9 million into income. This was reported as a non-recurring credit. These
accruals were originally recorded in the fourth quarter of 1998 to provide for
future rent costs for facilties impacted by the planned reduction of
pre-clinical activities at our research and development faciltiy in Rockville,
Maryland and the closure of an antibody collection center. The reversal was
based on the positive results from the Nabi StaphVAX Phase III trial announced
in September 2000 and Board approval of a plan to increase the level of research
and development activities in the future at our Rockville, Maryland facility.
This resulted in a non-recurring credit of $3.0 million in 2000. Also during
2000, we reviewed antibody center operations and amended our plan to close an
antibody collection center initially planned for closure. Based on this 2000
decision, we reversed $0.9 million for accrued antibody collection center
closure costs and accrued severance into income as a non-recurring credit.
INTEREST EXPENSE. Interest expense for 2000 was $3.6 million, compared to $4.3
million in 1999. The decrease in interest expense is attributable to lower
average outstanding bank borrowings and higher amounts of capitalized interest
during 2000. Capitalized interest relating primarily to construction of our
biopharmaceutical manufacturing facility in Boca Raton, Florida was $5.8 million
for 2000 as compared to $4.7 million for 1999. Once licensure to produce Nabi-HB
at our Boca Raton facility is received, which is expected to occur in 2001,
interest and other costs currently being capitalized will become expenses. At
that time, we will also begin to depreciate the capitalized cost of the plant.
The total capitalized value of the facility was approximately $79.7 million at
December 30, 2000.
OTHER FACTORS. The provision for income taxes was $87 thousand for 2000,
compared to $43 thousand in 1999. The 2% effective tax rate for 2000 differs
from the statutory rate of 35% due primarily to the tax benefit associated with
research and development tax credit adjustments and a reduction in the valuation
allowance.
EXTRAORDINARY ITEM. During 2000, we exchanged an aggregate of 241,795 shares of
our common stock for an aggregate of $2.0 million of our 6.5% Convertible
Subordinated Notes due 2003. The subsequent extinguishment of the Notes resulted
in an extraordinary gain of $0.3 million, net of taxes, that is included in the
results for 2000.
1999 AS COMPARED TO 1998
SALES. While total sales for 1999 decreased by $9.5 million, or 4%, from 1998,
biopharmaceutical sales increased as a percentage of total sales to 30.4% in
1999 from 22.6% in 1998. Biopharmaceutical sales increased by $16.1 million or
29% from 1998, reflecting the successful launch of Nabi-HB in March 1999, which
contributed to 47% of the biopharmaceutical sales increase; increased sales of
WinRho SDF attributable to higher volumes shipped to distributors and improved
pricing, which resulted in 36% of the biopharmaceutical sales increase; and the
launch of Aloprim in June 1999, representing 14% of the biopharmaceutical sales
increase. During the third quarter of 1998, Nabi had exhausted the remaining
inventory of H-BIG, the predecessor product to Nabi-HB.
Total antibody sales decreased by 14% from 1998. Non-specific antibody sales
decreased 18%, reflecting lower production volumes. This decrease was
attributable to our strategic decision to exit unprofitable operations through
the sale, transfer or closure of 11 antibody collection centers in the U.S.
32
33
and Germany during 1999. Also, we experienced a decline in antibody collections
on a same store basis due primarily to low unemployment levels and the
increasing impact of regulations limiting donor eligibility. Specialty antibody
sales decreased slightly (3%), reflecting lower sales for laboratory services,
diagnostic products, and anti-D and anti-RSV antibodies, partially offset by
increased sales of other specialty products, including anti-CMV, tetanus,
anti-HBs and rabies.
GROSS PROFIT MARGIN AFTER ROYALTY EXPENSE. Despite a 4% decrease in sales, gross
profit and related margin for 1999 was $56.5 million or 24% of sales, compared
to $53.8 million or 22% of sales in 1998. The increase in gross profit margin
resulted from an improved sales mix of higher-margin biopharmaceutical products,
offset by the effects of higher manufacturing costs and lower sales levels for
antibodies. Royalty expense was $13.7 million, or 19% of biopharmaceutical sales
in 1999, compared to $10.9 million, or 20% of biopharmaceutical sales in 1998.
Royalty expense decreased as a percentage of biopharmaceutical sales due to an
agreement limiting the amount of royalties to be paid on sales of Nabi-HB in
1999 and 2000 compared to 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $33.3 million or 14% of sales in 1999, compared to $31.2 million or
13% of sales in 1998. The increase reflects higher advertising expenses and
costs to expand the sales force to drive increased biopharmaceutical product
sales and support the launches of Nabi-HB and Aloprim. 1999 expenses also
include systems costs related to Year 2000 readiness efforts. The increase was
partially offset by the cost benefits associated with reorganizational measures
initiated in the first half of 1998.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $15.5
million or 7% of sales in 1999, compared to $21.8 million or 9% of sales in
1998. In 1998, we incurred significant expenditures related to the advancement
of clinical trials and the submission of the Product License Application ("PLA")
for Nabi-HB, which was approved by the FDA in March 1999. In 1999, we reduced
pre-clinical product development activities at our Rockville, Maryland site, and
focused our ongoing research and development efforts on the Gram-positive
program, including Nabi StaphVAX, and support for currently marketed products.
NON-RECURRING CREDIT AND CHARGES. During the fourth quarter of 1998, the Board
of Directors approved a plan to sell or close certain antibody collection
centers and actions to reduce pre-clinical product development activities at the
Rockville, Maryland facility. Results for 1998 included approximately $14.6
million for non-recurring charges. The 1998 charges were comprised of
restructuring ($13.0 million) and litigation ($1.6 million) costs. In February
1999, we reduced staff levels at our Rockville facility, thereby eliminating 35
positions. During 1999, we sold or closed seven U.S. antibody collection centers
out of the eight centers specified in the original plan.
As part of the plan to restructure our antibody operations, we made a provision
in 1998 for the cost of the planned shut-down of our German antibody collection
operations, which had been approved at that time. However, in the third quarter
of 1999, we were able to reach an agreement to transfer those operations to a
third party. As a result, we avoided estimated cash expenses for severance and
future lease costs amounting to $1.9 million and accordingly recognized a
non-recurring credit in that amount.
INTEREST EXPENSE. Interest expense for 1999 was $4.3 million, compared to $5.7
million in 1998. The decrease in interest expense is attributable to both higher
amounts of capitalized interest and lower average outstanding bank borrowings
during 1999. Capitalized interest relating primarily to construction of our
biopharmaceutical manufacturing facility in Boca Raton, Florida was
approximately $4.7 million for 1999 as compared to $3.8 million for 1998.
OTHER FACTORS. The provision for income taxes was $43 thousand for 1999,
compared to $47 thousand in 1998. The 1.3% effective tax rate for 1999 differs
from the statutory rate of 35% due to the tax benefit from the transfer of our
German operations to a third party and from a reduction in the valuation
allowance relating to the Company's deferred tax assets which had been
previously reserved.
33
34
LIQUIDITY AND CAPITAL RESOURCES
At December 30, 2000, our credit agreement provided for a revolving credit
facility of up to $45.0 million, subject to certain borrowing base restrictions,
and a $4.3 million term loan. The credit agreement matures in September 2002.
Borrowings under the revolving credit and term loan agreement totaled $31.0
million at December 30, 2000 as compared to $32.5 million at December 31, 1999,
and additional availability was approximately $9.7 million at December 30, 2000.
The credit agreement is secured by substantially all of our assets, requires the
maintenance of certain financial covenants and prohibits the payment of
dividends. In accordance with an amendment to the credit agreement dated
February 1, 2000, maturity of the term loan is concurrent with that of the
revolving line of credit and requires monthly principal payments of $83
thousand.
As of December 30, 2000, our current assets exceeded current liabilities by
$39.6 million as compared to a net working capital position of $36.0 million at
December 31, 1999. Cash at December 30, 2000 was $1.6 million compared to $0.8
million at December 31, 1999. Cash provided from operations in 2000 decreased
$13.5 million as compared to 1999. During 2000, we continued to reduce
inventories and reduced prepaid assets while also reducing accounts payable and
accrued liabilities. Reflecting the increased level of the fourth quarter sales
in 2000 compared to 1999, the accounts receivable balance increased at December
30, 2000 compared to December 31, 1999. The reversal of accrued restructuring
costs of $3.9 million during 2000 further reduced our liabilities. During July
2000, we raised $9.3 million, net of issuance costs, through a private placement
of our common stock with a group of institutional investors. In addition, during
2000, we realized $3.6 million of proceeds from the exercise of stock options.
The primary uses of cash during 2000 were capital expenditures, principally
associated with construction of our biopharmaceutical manufacturing facility in
Boca Raton, Florida, increases in accounts receivable and reductions in accounts
payable and accrued liabilities.
The biopharmaceutical manufacturing facility requires FDA licensure to produce
biopharmaceutical products for sale in the U.S. Projected capital expenditures
for 2001 include the anticipated costs of completion to prepare the facility for
its intended use of approximately $11.3 million, including capitalized interest,
the development of information systems and related expenditures, and antibody
collection center renovations. We believe that cash flow from operations and our
available bank credit facilities will be sufficient to meet our anticipated cash
requirements for 2001. We are also in the process of seeking additional cash to
fund the development of our biopharmaceutical product pipeline from strategic
alliances and may seek additional funding from new or existing credit facilities
and equity placements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not believe that there is any material market risk exposure with respect
to derivative or other financial instruments that would require disclosure under
this item.
34
35
NABI
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of Nabi
We have audited the accompanying consolidated balance sheets of Nabi and
subsidiaries as of December 30, 2000 and December 31, 1999, and the related
consolidated statements of operations, changes in stockholder's equity, and cash
flows for each of the two years in the period ended December 30, 2000. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Nabi and
subsidiaries as of December 30, 2000 and December 31, 1999, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 30, 2000 in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Miami, Florida
February 2, 2001
35
36
NABI
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of Nabi
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) present fairly, in all material respects,
the results of operations and cash flows of Nabi and its subsidiaries for the
year ended December 31, 1998, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of Nabi's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above. We have not
audited the consolidated financial statements of Nabi for any period subsequent
to December 31, 1998.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Miami, Florida
March 26, 1999
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37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NABI
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
December 30, December 31,
(Amounts in Thousands, Except Per Share Data) 2000 1999
- --------------------------------------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ 1,554 $ 806
Trade accounts receivable, net 38,315 34,019
Inventories, net 32,602 35,932
Prepaid expenses and other assets 5,405 8,149
--------- ---------
TOTAL CURRENT ASSETS 77,876 78,906
PROPERTY AND EQUIPMENT, NET 120,188 109,138
OTHER ASSETS:
Goodwill 12,509 13,236
Intangible assets, net 7,091 6,028
Other, net 6,823 7,256
--------- ---------
TOTAL ASSETS $ 224,487 $ 214,564
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 15,923 $ 16,025
Accrued expenses 21,359 26,178
Notes payable 1,000 704
--------- ---------
TOTAL CURRENT LIABILITIES 38,282 42,907
NOTES PAYABLE 108,535 112,294
OTHER LIABILITIES 276 1,186
--------- ---------
TOTAL LIABILITIES 147,093 156,387
--------- ---------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, par value $.10 per share:
5,000 shares authorized; no shares outstanding -- --
Common stock, par value $.10 per share: 75,000 shares authorized;
37,833 and 34,961 shares issued and outstanding, respectively 3,783 3,496
Capital in excess of par value 152,642 138,071
Accumulated deficit (79,031) (83,390)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 77,394 58,177
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 224,487 $ 214,564
========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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38
NABI
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
------------------------------------------------
December 30, December 31, December 31,
(Amounts in Thousands, Except Per Share Data) 2000 1999 1998
- --------------------------------------------- ------------ ------------ ------------
SALES $ 228,783 $ 233,603 $ 243,087
COSTS AND EXPENSES:
Costs of products sold 160,766 163,407 178,366
Selling, general and administrative expense 37,168 33,282 31,151
Research and development expense 14,266 15,469 21,822
Royalty expense 11,175 13,739 10,946
Other operating expense, principally freight & amortization 1,827 1,905 2,169
Non-recurring charge (credit) (3,875) (1,935) 14,605
--------- --------- ---------
OPERATING INCOME (LOSS) 7,456 7,736 (15,972)
INTEREST INCOME 33 74 48
INTEREST EXPENSE (3,581) (4,313) (5,681)
OTHER INCOME (EXPENSE), NET 198 (110) (105)
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 4,106 3,387 (21,710)
PROVISION FOR INCOME TAXES (87) (43) (47)
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 4,019 3,344 (21,757)
EXTRAORDINARY ITEM, NET OF INCOME TAXES OF $13 340 -- --
--------- --------- ---------
NET INCOME (LOSS) $ 4,359 $ 3,344 $ (21,757)
========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) before extraordinary item $ 0.11 $ 0.10 $ (0.62)
Extraordinary item 0.01 -- --
--------- --------- ---------
Net income (loss) $ 0.12 $ 0.10 $ (0.62)
========= ========= =========
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) before extraordinary item $ 0.11 $ 0.09 $ (0.62)
Extraordinary item 0.01 -- --
--------- --------- ---------
Net income (loss) $ 0.12 $ 0.09 $ (0.62)
========= ========= =========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 36,604 34,934 34,885
========= ========= =========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 37,739 35,841 34,885
========= ========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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39
NABI
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 30, 2000, December 31, 1999 and December 31, 1998
Accumulated
Common Stock Other
Common Stock Warrants Capital in Accumu- Compre- Stock-
---------------- -------------- Excess of lated hensive holders'
(In Thousands) Shares Amount Shares Amount Par Value Deficit Income (Loss) Equity
- -------------- ------ ------ ------ ------ ---------- ------- ------------- --------
BALANCE AT DECEMBER 31, 1997 34,801 $ 3,480 100 $-- $137,780 $(64,977) $ (620) $ 75,663
Stock options exercised 97 10 -- -- 105 -- -- 115
Tax benefit from stock options exercised -- -- -- -- 5 -- -- 5
Comprehensive loss:
Net loss for the year -- -- -- -- -- (21,757) -- (21,757)
Foreign currency translation
adjustments -- -- -- -- -- -- 142 142
--------
Total comprehensive loss -- -- -- -- -- -- -- (21,615)
Other 5 -- -- -- 21 -- -- 21
------ -------- --- --- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1998 34,903 3,490 100 -- 137,911 (86,734) (478) 54,189
Stock options exercised 42 4 -- -- 85 -- -- 89
Tax benefit from stock options exercised -- -- -- -- 32 -- -- 32
Comprehensive income:
Net income for the year -- -- -- -- -- 3,344 -- 3,344
Foreign currency translation
adjustments -- -- -- -- -- -- 478 478
--------
Total comprehensive income -- -- -- -- -- -- -- 3,822
Other 16 2 -- -- 43 -- -- 45
------ -------- --- --- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1999 34,961 3,496 100 -- 138,071 (83,390) -- 58,177
Stock options exercised 875 88 -- -- 3,519 -- -- 3,607
Common Stock 1,667 167 133 -- 9,085 -- -- 9,252
Net income for the year -- -- -- -- -- 4,359 -- 4,359
Stock issued upon conversion of
convertible subordinated notes 242 25 -- -- 1,641 -- -- 1,666
Stock issued under Employee Stock
Purchase Plan 77 7 -- -- 303 -- -- 310
Other 11 -- -- -- 23 -- -- 23
------ -------- --- --- -------- -------- -------- --------
BALANCE AT DECEMBER 30, 2000 37,833 $ 3,783 233 $-- $152,642 $(79,031) $ -- $ 77,394
====== ======== === === ======== ======== ======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
39
40
NABI
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
-----------------------------------------------
December 30, December 31, December 31,
(Amounts in Thousands) 2000 1999 1998
- ---------------------- ------------ ------------ ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,359 $ 3,344 $(21,757)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 9,838 10,128 11,502
Non-recurring charges (3,875) (1,935) 13,039
Provision for doubtful accounts 380 (136) (20)
Provision for slow-moving or obsolete inventory 2,625 2,235 2,936
Extraordinary item, net of tax (340) -- --
Other 132 116 479
Change in assets and liabilities:
(Increase) decrease in trade accounts receivable (4,676) 6,146 (3,949)
Decrease in inventories 706 35 2,248
Decrease (increase) in prepaid expenses and other assets 2,745 (1,297) 9,912
(Increase) decrease in other assets (177) (43) 1,298
(Decrease) increase in accounts payable and accrued liabilities (1,906) 4,671 2,520
-------- -------- --------
Total adjustments 5,452 19,920 39,965
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,811 23,264 18,208
-------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of antibody centers -- 2,518 --
Capital expenditures (18,983) (21,036) (18,931)
Expenditures for other assets (1,809) -- --
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (20,792) (18,518) (18,931)
-------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Repayments under line of credit, net (759) (5,002) (1,783)
(Repayments) borrowings of term debt (667) -- 4,739
Other debt repayments (37) (43) (4,729)
Proceeds from issuance of common stock 9,252 -- --
Proceeds from the exercise of options 3,607 89 115
Proceeds from stock issued under employee stock
purchase plan and other equity transactions 333 -- --
-------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 11,729 (4,956) (1,658)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH 748 (210) (2,381)
CASH AT BEGINNING OF PERIOD 806 1,016 3,397
-------- -------- --------
CASH AT END OF PERIOD $ 1,554 $ 806 $ 1,016
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of capitalized interest $ 2,966 $ 3,576 $ 4,583
======== ======== ========
Income taxes refunded, net $ (38) $ (103) $ (7,645)
======== ======== ========
SIGNIFICANT NON-CASH ACTIVITY:
Conversion of 6 1/2% bonds to shares of common stock $ 2,000 $ -- $ --
======== ======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NABI
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BUSINESS AND ORGANIZATION
Nabi is focused on the discovery, development and commercialization of products
that prevent and treat infections and autoimmune diseases. We are nearing
completion of a multi-year transition from being a leading provider of antibody
products into becoming a vertically integrated biopharmaceutical company. We
currently have an extensive pipeline of innovative drugs and vaccines in
clinical and pre-clinical development and have four marketed biopharmaceutical
products: Nabi-HB(TM) [Hepatitis B Immune Globulin (Human)], WinRho SDF(R) [Rho
(D) Immune Globulin Intravenous (Human)], Autoplex(R) T [Anti-Inhibitor
Coagulant Complex, Heat Treated] and Aloprim(TM) [(Allopurinol sodium) for
injection]. We are also one of the largest collectors and suppliers of specialty
and non-specific antibody products in the world. We collect these products from
an extensive donor base in the U.S. Some of these antibodies are used in the
production of our biopharmaceutical products. Most are supplied to other
biopharmaceutical and diagnostic companies for the manufacture of numerous
products.
NOTE 2 SUMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Nabi and its wholly owned subsidiaries. All significant intercompany
accounts and transactions are eliminated in consolidation.
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting
period. Actual results could differ from those estimates.
BASIS OF PRESENTATION: Certain items in the 1999 and 1998 consolidated financial
statements have been reclassified to conform to the current year's presentation.
REVENUE RECOGNITION: Revenue from product sales is recognized when title and
risk of loss are transferred to the customer. Cash collections in excess of
amounts earned on billings are recorded as deferred revenue and recognized as
services are rendered or products are shipped. The application of the Staff
Accounting Bulletin (SAB) No. 101, which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements had no effect on
our accounting for revenue.
RESEARCH AND DEVELOPMENT EXPENSE: Research and development costs are expensed as
incurred. Amounts payable to third parties under collaborative product
development agreements are recorded at the earlier of the milestone achievement
or as payments become contractually due.
ADVERTISING COSTS: WE account for advertising costs under guidance set forth in
Statement of Position 93-7, "Reporting on Advertising Costs." Costs associated
with the production of media advertising for major new campaigns are deferred
until the time the advertising first takes place. Once the advertising is
publicly released, all related deferred costs must be expensed. Other
advertising costs are expensed as incurred. Deferred advertising costs of $0.1
million and $0.5 million are recorded as other current assets as of December 30,
2000 and December 31, 1999, respectively. Advertising expenses for the years
ended
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December 30, 2000, December 31, 1999 and December 31, 1998 amounted to $5.0
million, $3.4 million and $2.3 million, respectively.
EARNINGS PER SHARE: Basic earnings per share is computed by dividing
consolidated net earnings by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is computed by dividing
consolidated net earnings by the weighted average number of common shares
outstanding, and the impact of all potential dilutive common shares, primarily
stock options and convertible subordinated notes. The dilutive impact of stock
options is determined by applying the treasury stock method and the dilutive
impact of the convertible subordinated notes is determined by applying the "if
converted" method.
FINANCIAL INSTRUMENTS: The carrying amounts of financial instruments including
cash equivalents, short-term investments, accounts receivable, accounts payable
and short-term debt approximated fair value as of December 30, 2000 and December
31, 1999, because of the relatively short maturity of these instruments.
Information regarding long-term debt is included in Note 8.
INVENTORIES: Inventories are stated at the lower of cost or market with cost
determined on the first-in first-out ("FIFO") method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are carried at
cost. Depreciation is recognized on the straight-line method over the estimated
useful lives of the assets. Depreciable lives of property and equipment are as
follows:
Asset Life
----- -------------
Buildings 35 - 39 Years
Furniture and fixtures 5 - 8 Years
Information systems 3 - 7 Years
Machinery and equipment 3 - 8 Years
Leasehold improvements Lesser of lease term or economic life
GOODWILL: Goodwill represents the excess of cost over the fair value of
identifiable assets acquired in business acquisitions. Goodwill is amortized
ratably from the dates of acquisition over periods ranging from 10 to 25 years
and is evaluated periodically.
INTANGIBLE ASSETS: Intangible assets represent the fair values of certain assets
acquired in business, product and plasma center acquisitions including customer
lists, donor lists, trademarks and trademark registrations, non-competition
agreements and rights to use manufacturing capacity in future periods. These
costs are amortized ratably from the date placed into service over periods
ranging from 3 to 25 years and are evaluated periodically.
IMPAIRMENT OF LONG-LIVED ASSETS: Pursuant to the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," we review long-lived assets including goodwill for impairment
whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be fully recoverable. If this review reveals indications of
impairment, as generally determined based on estimated undiscounted cash flows,
the carrying amount of the related long-lived assets are adjusted to fair value.
STOCK-BASED COMPENSATION: We account for our stock-based compensation plans
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES," and related
interpretations. Note 9 to the consolidated financial statements contains a
summary of the pro forma effects to reported net income (loss) and earnings
(loss) per share for 2000, 1999 and 1998 as if we had elected to recognize
compensation expense based on the fair market value
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43
of the options granted at grant date as prescribed by SFAS No. 123, "ACCOUNTING
FOR STOCK-BASED COMPENSATION."
NOTE 3 TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are comprised of the following:
December 30, December 31,
Dollars in Thousands 2000 1999
-------------------- ------------ ------------
Trade accounts receivable $ 38,732 $ 34,081
Allowance for doubtful accounts (417) (62)
--------- ---------
TOTAL $ 38,315 $ 34,019
========= =========
NOTE 4 INVENTORIES
The components of inventories are as follows:
December 30, December 31,
Dollars in Thousands 2000 1999
-------------------- ------------ ------------
Finished goods $ 28,852 $ 32,780
Work in process 1,055 451
Raw materials 2,695 2,701
--------- ---------
TOTAL $ 32,602 $ 35,932
========= =========
As of December 30, 2000, $1.0 million of consigned inventory is included in
finished goods.
NOTE 5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and related allowances for depreciation and
amortization are summarized below:
December 30, December 31,
Dollars in Thousands 2000 1999
-------------------- ------------ ------------
Information systems $ 32,392 $ 21,605
Leasehold improvements 17,155 16,521
Machinery and equipment 9,845 10,179
Land and buildings 8,628 8,628
Furniture and fixtures 4,360 4,258
Construction in progress 83,249 76,743
--------- ---------
Total property, plant and equipment 155,629 137,934
Less accumulated depreciation and amortization (35,441) (28,796)
--------- ---------
TOTAL $ 120,188 $ 109,138
========= =========
Construction in progress consists primarily of costs incurred in connection with
construction of our biopharmaceutical manufacturing facility in Boca Raton,
Florida and includes deferred validation costs of
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44
$32.6 million and $24.7 million at December 30, 2000 and December 31, 1999,
respectively. Capitalized interest associated with the biopharmaceutical
manufacturing facility and system development projects was approximately $19.0
million and $13.6 million at December 30, 2000 and December 31, 1999,
respectively. Interest capitalized amounted to $5.8 million, $4.7 million and
$3.8 million during 2000, 1999 and 1998, respectively.
Depreciation and amortization expense during 2000, 1999 and 1998 includes
depreciation and amortization of property, plant and equipment of $7.8 million,
$7.8 million and $8.6 million, respectively.
NOTE 6 OTHER ASSETS
Other assets consist of the following:
December 30, December 31,
Dollars in Thousands 2000 1999
-------------------- ------------ ------------
Goodwill $ 18,452 $ 18,452
Less accumulated amortization (5,943) (5,216)
-------- --------
$ 12,509 $ 13,236
======== ========
Intangible assets $ 13,010 $ 11,201
Less accumulated amortization (5,919) (5,173)
-------- --------
$ 7,091 $ 6,028
======== ========
Other, primarily deferred tax assets and
deferred loan costs $ 10,263 $ 10,016
Less accumulated amortization (3,440) (2,760)
-------- --------
TOTAL $ 6,823 $ 7,256
======== ========
NOTE 7 ACCRUED EXPENSES
Accrued expenses consist of the following:
December 30, December 31,
Dollars in Thousands 2000 1999
-------------------- ------------ ------------
Accrued royalties and product costs $ 9,892 $11,664
Employee compensation and benefits 7,346 6,540
Accrued interest 2,448 2,379
Accrued restructuring costs, current -- 3,307
Other 1,673 2,288
------- -------
TOTAL $21,359 $26,178
======= =======
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NOTE 8 NOTES PAYABLE
Notes payable consist of the following:
December 30, December 31,
Dollars in Thousands 2000 1999
-------------------- ------------ ------------
Bank indebtedness:
Revolving credit facility $ 26,702 $ 27,461
Term loan 4,333 5,000
--------- ---------
31,035 32,461
6.5% Convertible Subordinated Notes 78,500 80,500
Other -- 37
--------- ---------
Total notes payable 109,535 112,998
Current maturities (1,000) (704)
--------- ---------
Notes payable, long-term $ 108,535 $ 112,294
========= =========
At December 30, 2000, the annual aggregate maturities of debt were $1.0 million
in 2001; $30.0 million in 2002; and $78.5 million in 2003.
Short-term indebtedness outstanding at December 30, 2000 and December 31, 1999
had a weighted-average interest rate of approximately 6.55% and 9.38%,
respectively.
At December 30, 2000, our credit agreement provided for a revolving credit
facility of up to $45.0 million subject to certain borrowing base restrictions,
and a $4.3 million term loan. The credit agreement matures in September 2002.
Borrowings under the revolving credit and term loan agreement totaled $31.0
million at December 30, 2000 as compared to $32.5 million at December 31, 1999,
and additional availability was approximately $9.7 million at December 30, 2000.
This credit agreement bears interest at the bank's prime rate plus 1%, is
secured by substantially all assets, including a mortgage on the
biopharmaceutical manufacturing facility, and contains covenants prohibiting
dividend payments and requiring the maintenance of certain financial covenants.
At December 30, 2000, we had outstanding letters of credit for approximately
$0.5 million that reduce our availability under the revolving credit facility.
The credit agreement requires monthly principal payments in the amount of $83
thousand on the term loan with the unpaid balance due in full in September 2002.
During 1996, we issued $80.5 million of 6.5% Convertible Subordinated Notes due
February 1, 2003 ("Notes") in a private placement. The Notes are convertible
into common stock at a conversion price of $14 per share at any time and may be
redeemed at our option without premium. A total of 5,750,000 shares of common
stock have been registered and reserved for issuance upon conversion of the
Notes. During June 2000, we exchanged an aggregate of 241,795 shares of our
common stock for $2.0 million of the Notes, resulting in an extraordinary gain
of $0.3 million, net of tax, which is included in the results for the year ended
December 30, 2000. At December 30, 2000, the fair value of our 6.5% Convertible
Subordinated Notes was approximately $54.5 million as compared to $59.9 million
at December 31, 1999. The fair value was estimated using an independently quoted
market price. The carrying value of all other long-term notes payable
approximated fair value based upon quoted market prices for the same or similar
debt issues.
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NOTE 9 STOCKHOLDERS' EQUITY
SALE OF COMMON STOCK
In July 2000, we completed a private placement of 1,666,667 shares of common
stock to a group of institutional investors and realized net proceeds of
approximately $9.3 million. Proceeds from the private placement were used to
reduce borrowings and increase availability under our existing bank line of
credit. In connection with the offering, we issued a five-year warrant to
purchase 133,333 shares of common stock at an exercise price of $7.50 per share
to the placement agent. The shares of common stock and warrant were issued in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended, pursuant to Section 4(2) thereof and Regulation D. All of the
purchasers represented that they were acquiring the securities for investment
purposes and were furnished with all requisite information. The offering did not
involve any general advertising or solicitation
WARRANTS
In November 1995, we issued a warrant to purchase 100,000 shares of our common
stock to an affiliate of our principal bank lender in connection with an
agreement whereby we had the right to issue up to $20.0 million in subordinated
notes. The warrant has an exercise price of $9.82 per share and expired on
December 31, 2000. No subordinated notes were issued under this agreement.
In July 2000, we issued a warrant to purchase 133,333 shares of common stock to
the placement agent in connection with the private placement of $9.3 million,
net of issuance costs. The warrant has an exercise price of $7.50 and expires in
July 2005. The estimated fair value of the warrant at the date of grant was
$0.9 million. This fair value was calculated using the Black-Scholes model with
the following assumptions: expected term of five years, expected volatility of
104% and expected risk-free interest rate of 6%.
STOCK OPTIONS
We maintain four stock option plans for our employees. Under these plans, we
have granted options to certain employees entitling them to purchase shares of
common stock within ten years. The options vest over periods ranging from six
months to four years from the date of grant and have been granted at exercise
prices equal to the fair market value of the underlying common stock on the date
of grant.
We also maintain a Stock Plan for Non-Employee Directors, under which we have
granted options to certain directors entitling them to purchase shares of common
stock within five years, vesting at six months after the date of grant and at an
exercise price equal to the fair market value of the underlying common stock at
the date of grant.
At December 30, 2000, there were options outstanding under all of our stock
plans to acquire 7.0 million shares of its common stock of which 2.9 million are
exercisable. Additionally, 2.6 million shares of common stock are reserved for
future grants under the plans.
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Stock options granted and outstanding under these plans as of December 30, 2000
are presented below:
Exercise Price Per Weighted Average
Options Share Exercise Price
-------------- ------------------ ----------------
(In Thousands)
BALANCE AT DECEMBER 31, 1997 3,773 $ .19 - $ 13.75 $ 8.46
Granted 1,959 2.63 - 4.06 3.38
Exercised or canceled (741) .19 - 13.75 6.74
------ ---------------
BALANCE AT DECEMBER 31, 1998 4,991 .19 - 13.75 8.63
Granted 1,999 2.69 - 5.94 2.86
Exercised or canceled (754) .19 - 13.75 6.35
------ ---------------
BALANCE AT DECEMBER 31, 1999 6,236 .19 - 13.75 8.53
Granted 2,303 3.25 - 11.00 6.91
Exercised or canceled (1,499) .19 - 13.75 5.59
------ ---------------
BALANCE AT DECEMBER 30, 2000 7,040 $ .19 - $ 13.75 $ 8.59
====== ===============
Outstanding Exercisable
----------------------------------------------------------------------------------
Average Average Average
Options Years Exercise Options Exercise
Exercise Price Range (In Thousands) Remaining Price (In Thousands) Price
- -------------------- ------------- --------- -------- ------------- --------
$ .19 - $ 4.25 2,871 7.2 $ 3.03 1,090 $ 3.11
$ 4.44 - $ 7.59 2,947 7.7 6.80 781 6.66
$ 8.39 - $ 11.125 682 5.9 10.82 517 10.88
$ 12.97 - $ 13.75 540 5.0 13.73 540 13.73
----- -----
Total 7,040 6.5 $ 8.59 2,928 $ 8.59
===== =====
The following information reflects our pro forma loss information as if
compensation expense associated with our stock plans had been recorded under the
provisions of SFAS 123. Pro forma compensation expense has been determined based
upon the estimated fair market value of the options at the date of grant.
Dollars in Thousands Except Per Share Data 2000 1999 1998
------------------------------------------ ------- --------- ---------
Net loss $ (675) $ (1,744) $ (25,779)
Basic and diluted loss per share $ (0.02) $ (0.05) $ (0.74)
The estimated fair value of each option grant is determined using the
Black-Scholes option-pricing model with the following ranges of assumptions:
expected term of two to five years; expected volatility of 57-99%; and expected
risk-free interest rates of 4-7%. The weighted-average estimated fair value of
options granted during 2000, 1999 and 1998 was $4.95, $1.90 and $2.32,
respectively.
EMPLOYEE STOCK PURCHASE PLAN
In May 2000, the stockholders approved the 2000 Employee Stock Purchase Plan
("ESPP"). The terms of the ESPP allow for qualified employees (as defined) to
participate in the purchase of up to 500,000 shares of our common stock at a
price equal to 85% of the lower of the closing price at the beginning or end of
each semi-annual stock purchase period. We issued 76,973 shares of common stock
during 2000, pursuant to this plan at an average price per common share of
$4.04.
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SHAREHOLDERS RIGHTS PLAN
Effective July 1997, our Board of Directors adopted a shareholders rights plan
under which a dividend of one preferred share purchase right (the "Right") was
distributed for each outstanding share of common stock. Each right entitles the
holder to purchase one one-hundredth of a share of Series One Preferred Stock at
a price of $70, subject to adjustment. The Rights expire in August 2007, and are
exercisable only if an individual or group has acquired or obtained the right to
acquire, or has announced a tender or exchange offer that if consummated would
result in such individual or group acquiring beneficial ownership of 15% or more
of the common stock. Such percentage may be lowered at the Board's discretion.
If the Rights become exercisable, the holder may be entitled to receive upon
exercise shares of our common stock having a market value of two times the
exercise price of the Rights, or the number of shares of the acquiring company
which have a market value of two times the exercise price of the Rights. The
Rights separate from the common stock if they become exercisable. We are
entitled to redeem the Rights in whole for $0.01 per Right under certain
circumstances.
SHARES OF COMMON STOCK
As of December 30, 2000, 15,936,236 shares of common stock in the aggregate were
reserved for issuance related to stock options, warrants and employee benefit
plans.
NOTE 10 NON-RECURRING CHARGES
During 1998, we recorded a non-recurring charge that included $13.2 million
related to a strategic plan to sell or close certain antibody collection centers
and actions to reduce pre-clinical product development activities at our
Rockville, Maryland facility. During 1999, we reduced staff levels at our
Rockville facility, closed or sold seven U.S. antibody collection centers out of
the eight centers specified in the original plan, and transferred our four
German antibody collection centers and related operations to a third party.
Based on the positive results from the Nabi StaphVAX Phase III trial announced
in September 2000 and the approval of a plan in 2000 to increase the level of
research and development activities in the future at our Rockville, Maryland
facility, we reversed $3.0 million of the remaining non-recurring charge accrual
into income. This was reported as a non-recurring credit in our income
statement.
The balance of the restructuring accrual, after reversal of the $3.0 million
previously described, was comprised of anticipated shut-down and severance costs
related to the closure of an antibody collection center scheduled for closure in
the original plan. However, the center continues in operation and in the third
quarter of 2000 we determined that operations would continue at this center for
the foreseeable future. Based on this change to the original operating plan, the
remaining accrual of $0.9 million was reversed into income during the third
quarter of 2000 and reported as a non-recurring credit.
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A summary of our restructuring activity for the years ended December 30, 2000
and December 31, 1999 is presented below:
Dollars in Thousands
- --------------------
BALANCE AT DECEMBER 31, 1998 $13,214
Activity during 1999:
Non-recurring credit (1,935)
Termination benefit payments (957)
Non-cancelable lease obligation payments and other cash outflows (467)
Non-cash write down of fixed and intangible assets (5,018)
Non-cash write down related to German operations transfer (754)
-------
BALANCE AT DECEMBER 31, 1999 4,083
Activity during 2000:
Termination benefit payments (208)
Non-recurring credit (3,875)
-------
BALANCE AT DECEMBER 30, 2000 $ --
=======
NOTE 11 INCOME TAXES
Income (loss) before income taxes was taxed under the following jurisdictions:
For the Years Ended
--------------------------------------------
December 30, December 31, December 31,
Dollars in Thousands 2000 1999 1998
- -------------------- ------------ ------------ ------------
Domestic $ 4,106 $ 933 $(16,595)
Foreign -- 2,454 (5,115)
-------- -------- --------
TOTAL $ 4,106 $ 3,387 $(21,710)
======== ======== ========
The provision for income taxes consists of the following state income taxes
currently payable of $87 thousand, $43 thousand and $47 thousand for December
30, 2000, December 31, 1999 and December 31, 1998, respectively.
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Deferred tax assets (liabilities) are comprised of the following:
December 30, December 31,
Dollars in Thousands 2000 1999
- -------------------- ------------ ------------
DEFERRED TAX ASSETS:
NOL carryforward $ 22,990 $ 22,255
Capitalized research and development 4,859 6,235
Non-recurring charge -- 2,186
Research tax credit 4,329 3,248
Inventory reserve and capitalization 1,575 1,180
Amortization 2,511 2,277
Bad debt reserve 155 22
Depreciation 1,041 913
Alternative minimum tax credit 900 900
Other 2,587 2,273
-------- --------
40,947 41,489
Valuation allowance (34,307) (34,886)
-------- --------
Deferred tax assets 6,640 6,603
DEFERRED TAX LIABILITIES:
Amortization (922) (885)
Other -- --
-------- --------
Deferred tax liabilities (922) (885)
-------- --------
Net deferred tax assets $ 5,718 $ 5,718
======== ========
The tax benefit associated with nonqualified stock options and disqualifying
dispositions of incentive stock options decreased income taxes payable by $3.1
million in 2000 resulting in a net loss for income tax reporting for 2000. Such
benefits were recorded as an increase to additional paid in capital.
In November 1995, Univax, a publicly traded biopharmaceutical company, was
merged with and into Nabi. The merger qualified as a tax-free reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended. Univax's pre-merger deferred tax assets are available to offset our
future taxable income, subject to certain annual and change of control
limitations. The Univax pre-merger deferred tax assets primarily include NOL
carryforwards, capitalized research and development expense and research tax
credit carryforwards. Additionally, we have research tax credit carryforwards of
$4.3 million that expire in varying amounts through 2020.
The ultimate realization of the remaining deferred tax assets is largely
dependent on our ability to generate sufficient future taxable income. We
believe that the valuation allowance of $34.3 million at December 30, 2000 is
appropriate, given our historical loss experience and other factors. The change
in the valuation allowance during 2000 and 1999 was $0.6 million and $1.6
million, respectively.
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The significant elements contributing to the difference between the federal
statutory tax rate and the effective tax rate are as follows:
For the Years Ended
--------------------------------------------
December 30, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
Federal statutory rate 35.0% 35.0% (35.0)%
State income taxes, net of federal benefit 1.4 0.8 0.1
Goodwill and other amortization 7.1 4.6 0.8
Transfer of German operations -- (37.7) --
Merger transaction cost (1.1) (1.1) --
Increase (decrease) in valuation allowance (14.1) (4.7) 37.7
Tax credits (25.2) -- (3.1)
Other (1.0) 4.4 (0.3)
---- ---- ----
Total 2.1% 1.3% 0.2%
==== ==== ====
NOTE 12 EARNING PER SHARE
The following is a reconciliation between basic and diluted earnings per share
for the years ended December 30, 2000, December 31, 1999 and December 31,1998:
Effect of
Basic Dilutive Securities: Diluted
Dollars in Thousands Except Per Share Data EPS Stock Options EPS
- ------------------------------------------ -------- --------------------- -------
2000
Income (Loss) Before Extraordinary Item $ 4,019 -- $ 4,019
Shares 36,604 1,135 37,739
Per Share $ 0.11 -- $ 0.11
-------- ----- --------
1999
Income (Loss) Before Extraordinary Item $ 3,344 -- $ 3,344
Shares 34,934 907 35,841
Per Share $ 0.10 -- $ 0.09
-------- ----- --------
1998
Income (Loss) Before Extraordinary Item $(21,757) -- $(21,757)
Shares 34,885 -- 34,885
Per Share $ (0.62) -- $ (0.62)
-------- ----- --------
The diluted share base for the twelve months ended December 31, 1998 excludes
incremental shares of 115,029 related to stock options. These shares are
excluded due to their antidilutive effect as a result of our loss from
continuing operations during 1998.
NOTE 13 EMPLOYEE BENEFIT PLANS
We have two defined contribution plans. The plans permit employees to contribute
up to 15% of pre-tax annual compensation with a discretionary match by the
company equal to 50% of each participant's contribution, up to an amount equal
to 2% of the participant's earnings. Our matching contributions to the plans
were approximately $0.5 million in each of the years 2000, 1999 and 1998.
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NOTE 14 LEASES
We conduct a majority of our operations under operating lease agreements. The
majority of the related lease agreements contain renewal options which enable us
to renew the leases for periods of two to ten years at the then fair rental
value at the end of the initial lease term.
Rent expense was approximately $7.2 million, $6.1 million and $6.9 million for
the years ended December 30, 2000, December 31, 1999 and December 31, 1998,
respectively.
As of December 30, 2000, the aggregate future minimum lease payments under all
non-cancelable operating leases with initial or remaining lease terms in excess
of one year are as follows:
Year Ending Dollars in Thousands
----------- --------------------
2001 $ 6,031
2002 4,349
2003 3,671
2004 2,366
2005 2,711
Thereafter 6,607
-------
Total minimum lease commitments $25,735
=======
NOTE 15 RELATED PARTY TRANSACTIONS
At December 30, 2000, notes receivable from corporate officers aggregated $337
thousand, bear interest at the prime rate and mature on December 31, 2001. At
December 30, 1999, notes receivable from corporate officers aggregated $315
thousand at an interest rate equal to prime.
NOTE 16 STRATEGIC ALLIANCES, LICENSES AND ROYALTY AGREEMENTS
In connection with an exclusive licensing and distribution agreement with
Cangene Corporation ("Cangene") to market and distribute WinRho SDF in the U.S.
through March 2005, we agreed to loan Cangene fifty percent (50%) of the cost of
capital improvements to its manufacturing facility up to $3.0 million, of which
$2.4 million was advanced at December 31, 1999. The advance of $2.4 million was
repaid in March of 2000. The Cangene agreement which terminates in 2005 requires
us, among other things, to meet specified annual sales goals or make specified
annual payments. During 2000, we met these goals.
Effective April 1999, we entered into a manufacturing agreement with Cangene for
the manufacture of Nabi-HB which superseded an agreement entered into in 1997.
The manufacturing agreement requires us to purchase a specified minimum amount.
In addition, Cangene has exclusive marketing rights for Nabi-HB in Canada
provided it meets specified sales goals. We will share in the profits from sales
of Nabi-HB in Canada. The term of the Canadian marketing agreement with Cangene
for Nabi-HB is co-extensive with the term of the manufacturing agreement for
Nabi-HB.
In 1997, we acquired from Baxter Healthcare Corporation ("Baxter") the exclusive
rights to Autoplex T in the U.S., Canada and Mexico. In connection with the
acquisition, Baxter agreed to manufacture Autoplex T until May 2000 or such
later time as may be determined under the terms of a consent order entered into
between Baxter and the Federal Trade Commission ("FTC"), but in any event four
months
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53
after we receive approval from the FDA to manufacture Autoplex T. At the
discretion of the FTC, the period Baxter manufactures Autoplex T can be extended
for up to four twelve-month intervals. The FTC approved the first twelve-month
extension beginning in May 2000. The FTC could require us to return our rights
to Autoplex T to Baxter if we do not obtain FDA approval to manufacture the
product by May 2001 or by a later date agreed to by the FTC. We anticipate that
the period Baxter manufactures Autoplex T under the terms of the consent order
from the FTC will be extended for the twelve-month period through May 2002. If
the rights revert to Baxter and Baxter later sells these rights, Nabi and Baxter
will share equally the proceeds of any such sale, and under certain
circumstances Baxter will be required to make a specified payment to us. Upon
FDA licensure to manufacture the product, we are obligated to pay $1.0 million
to Baxter, subject to recovery of fifty percent (50%) of expenditures incurred
to license the product in excess of $6.0 million. Baxter is also a significant
antibody product customer and a principal supplier of antibody collection
supplies to Nabi.
In 1999, we entered into a five-year agreement with Catalytica Pharmaceuticals
("Catalytica") for exclusive distribution rights in the U.S. and Canada for
Aloprim. Under this agreement, we sell and Catalytica manufactures the product
and both companies share in profits from the sale of the product. In addition to
the U.S. and Canada, we can purchase Aloprim in territories where the license
holder prior to Catalytica, Glaxo Smithkline ("GSK") has not commercialized the
product within five years from the effective date of the agreement. Globally, we
have the rights to purchase the product from GSK, former license holder prior to
Catalytica.
NOTE 17 COMMITMENTS AND CONTINGENCIES
We are a party to litigation in the ordinary course of business. In addition, we
are a co-defendant with various other parties in one suit filed in the U.S. by,
or on behalf of, individuals who claim to have been infected with HIV as a
result of either using HIV-contaminated products made by the defendants other
than us or having familial relations with those so infected. We do not believe
that any such litigation will have a material adverse effect on our business,
financial position or results of operations.
During July 1999, we entered into an agreement with Baxter to purchase antibody
collection materials and related collection equipment. The purchase agreement
requires us to purchase stated minimum quantities of specified supplies or a
minimum percentage of total supplies of the specified types purchased by us,
whichever is the greater. The purchase agreement ends December 31, 2004.
At December 30, 2000, we had outstanding purchase commitments in the normal
course of business with various suppliers.
NOTE 18 INDUSTRY SEGMENT INFORMATION
We manage our operations in two reportable segments, the antibody products and
biopharmaceutical products segments. The antibody products segment consists of
the collection and sale of non-specific and specialty antibody products to other
biopharmaceutical manufacturers, the production and sale of antibody-based
control and diagnostic products and laboratory testing services. The
biopharmaceutical products segment consists of the production and sale of
proprietary biopharmaceutical products and research and development efforts for
the biopharmaceutical product line.
The accounting policies for each of the segments are the same as those described
in the summary of significant accounting policies. There are no intersegment
sales. We evaluate the performance of each segment based on operating profit or
loss; interest expense and income taxes are not allocated.
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Information regarding our operations and assets for the two industry segments is
as follows:
For the Years Ended
--------------------------------------------------
December 30, December 31, December 31,
Dollars in Thousands 2000 1999 1998
- -------------------- ------------ ------------ ------------
SALES:
Biopharmaceutical products $ 72,985 $ 71,112 $ 54,983
Antibody products 155,798 162,491 188,104
--------- --------- ---------
$ 228,783 $ 233,603 $ 243,087
========= ========= =========
OPERATING INCOME (LOSS):
Biopharmaceutical products $ 17,614 $ 5,434 $ (11,499)
Antibody products (10,158) 2,302 (4,473)
--------- --------- ---------
$ 7,456 $ 7,736 $ (15,972)
========= ========= =========
DEPRECIATION AND AMORTIZATION EXPENSE:
Biopharmaceutical products $ 1,926 $ 2,159 $ 2,427
Antibody products 7,166 7,281 8,340
--------- --------- ---------
$ 9,092 $ 9,440 $ 10,767
========= ========= =========
NON-RECURRING CHARGE:
Biopharmaceutical products $ (3,012) $ -- $ 8,750
Antibody products (863) (1,935) 5,855
--------- --------- ---------
$ (3,875) $ (1,935) $ 14,605
========= ========= =========
CAPITAL EXPENDITURES
Biopharmaceutical products $ 16,351 $ 15,866 $ 14,147
Antibody products 2,609 5,170 4,377
--------- --------- ---------
$ 18,960 $ 21,036 $ 18,524
========= ========= =========
ASSETS:
Biopharmaceutical products $ 118,808 $ 99,691
Antibody products 98,357 106,506
--------- ---------
$ 217,165 $ 206,197
========= =========
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A reconciliation of reportable segment selected financial information to the
total combined amounts of the selected financial information is as follows:
For the Years Ended
----------------------------------------------
December 30, December 31, December 31,
Dollars in Thousands 2000 1999 1998
- -------------------- ------------ ------------ -----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM:
Reportable segment operating income $ 7,456 $ 7,736 $(15,972)
Unallocated interest expense (3,581) (4,313) (5,681)
Unallocated other income and expense, net 231 (36) (57)
-------- -------- --------
Consolidated income (loss) before
income taxes and extraordinary item $ 4,106 $ 3,387 $(21,710)
======== ======== ========
DEPRECIATION AND AMORTIZATION EXPENSE:
Reportable segment depreciation & amortization expense $ 9,092 $ 9,440 $ 10,767
Unallocated (corporate) depreciation & amortization expense 746 688 735
-------- -------- --------
Consolidated depreciation & amortization
expense $ 9,838 $ 10,128 $ 11,502
======== ======== ========
CAPITAL EXPENDITURES:
Reportable segment capital expenditures $ 18,960 $ 21,036 $ 18,524
Unallocated (corporate) capital expenditures 23 -- 407
-------- -------- --------
Consolidated capital expenditures $ 18,983 $ 21,036 $ 18,931
======== ======== ========
December 30, December 31,
2000 1999
------------ ------------
ASSETS:
Reportable segment assets $217,165 $206,197
Unallocated (corporate) assets 7,322 8,367
-------- --------
Consolidated assets $224,487 $214,564
======== ========
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Information regarding sales and long-lived assets by geographic area for the
years ended December 30, 2000 is as follows:
For the Years Ended
--------------------------------------------------
December 30, December 31, December 31,
Dollars in Thousands 2000 1999 1998
- -------------------- ------------ ------------ ------------
SALES:
Domestic $183,995 $177,463 $177,870
Foreign 44,788 56,140 65,217
-------- -------- --------
TOTAL $228,783 $233,603 $243,087
======== ======== ========
LONG-LIVED ASSETS:
Domestic $146,612 $135,658
Foreign -- --
-------- --------
TOTAL $146,612 $135,658
======== ========
Foreign sales are determined based upon customer location. The majority of our
sales are generated from the U.S. Our principal foreign markets are the United
Kingdom, Korea and Germany.
Sales for the year ended December 30, 2000 included two customers of our
antibody products segment and one customer of our biopharmaceutical product
segment and represented 22%, 18%, and 11%, respectively. Sales for the year
ended December 31, 1999 included two customers of our antibody products segment
representing 21% and 19%, respectively. Sales for the year ended December 31,
1998 included two customers of our antibody products segment each representing
18%.
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NOTE 19 SELECTED QUARTERLY FINANCIAL DATA
Dollars in Thousands Except Per Share Data
-----------------------------------------------------------------------------------------------
Gross Profit Basic Diluted
Margin After Net Earnings Earnings
Royalty Income (Loss) (Loss)
Sales Expense (Loss) Per Share Per Share
-------- ------------ ------ --------- ---------
2000
1st Quarter $55,840 $14,457 $ 677 $0.02 $0.02
2nd Quarter 57,581 14,884 1,287 0.04 0.04
3rd Quarter 49,736 9,462 (501) (0.01) (0.01)
4th Quarter 65,626 18,039 2,896 0.08 0.08
YEAR 2000 $228,783 $56,842 $4,359 $0.12 $0.12
1999
1st Quarter $58,023 $10,617 $ (514) $(0.01) $(0.01)
2nd Quarter 62,198 15,615 1,052 0.03 0.03
3rd Quarter 54,181 13,806 1,450 0.04 0.04
4th Quarter 59,201 16,419 1,356 0.04 0.04
YEAR 1999 $233,603 $56,457 $3,344 $0.10 $0.09
Earnings per share was calculated for each three-month and twelve month period
on a stand alone basis. The sum of the earnings per share for four quarters may
not equal the earnings per share for twelve months.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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NABI
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item and not already provided in Item 4A will
be contained in our Proxy statement, which we intend to file within 120 days
following our fiscal year end, December 30, 2000, and such information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item will be contained in our Proxy Statement
which we intend to file within 120 days following our fiscal year end, December
30, 2000, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item will be contained in our Proxy Statement
which we intend to file within 120 days following our fiscal year end, December
30, 2000, and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item will be contained in our Proxy Statement
which we intend to file within 120 days following our fiscal year end, December
30, 2000, and such information is incorporated herein by reference.
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NABI
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
The following consolidated financial statements are filed as part of this
report:
Page No.
--------
Reports of Independent Certified Public Accountants...............................................35-36
Consolidated Balance Sheets at December 30, 2000 and December 31, 1999...............................37
Consolidated Statements of Operations for the years ended December 30, 2000,
December 31, 1999 and December 31, 1998..............................................................38
Consolidated Statements of Stockholders' Equity for the years ended
December 30, 2000, December 31, 1999 and December 31, 1998...........................................39
Consolidated Statements of Cash Flows for the years ended December 30, 2000,
December 31, 1999 and December 31, 1998..............................................................40
Notes to Consolidated Financial Statements........................................................41-57
(a)(2) FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts and Reserves.........................................64
All other schedules omitted are not required, inapplicable or the
information required is furnished in the financial statements or notes
therein.
(b) REPORTS ON FORM 8-K
We did not file any reports on Form 8-K during the fourth quarter of the fiscal
year ended December 30, 2000.
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(c) EXHIBITS
3.1 Restated Certificate of Incorporation of Nabi (incorporated by
reference to Nabi's Annual Report on Form 10-K for the year ended
December 31, 1995)
3.2 By-Laws (incorporated by reference to Nabi's Registration
Statement on Form S-4; Commission File No. 33-63497)
4.1 Specimen Stock Certificate (incorporated by reference to Nabi's
Registration Statement on Form S-2; Commission File No. 33-83096)
4.2 Indenture between Nabi and State Street Bank and Trust Company,
dated as of February 1, 1996 (incorporated by reference to Nabi's
Annual Report on Form 10-K for the year ended December 31, 1995)
4.3 Registration Rights Agreement by and between Nabi and Robertson,
Stephens & Company LLC and Raymond James & Associates, Inc.,
dated as of February 1, 1996 (incorporated by reference to Nabi's
Annual Report on Form 10-K for the year ended December 31, 1995)
10.1 Shareholder Agreement effective as of September 30, 1992 between
Nabi and Abbott Laboratories (incorporated by reference to Nabi's
Annual Report on Form 10-K for the year ended December 31, 1992)
10.2 Plasma Supply Agreement dated January 1, 1994 between Baxter
Healthcare Corporation and Nabi (confidential treatment)
(incorporated by reference to Nabi's Registration Statement on
Form S-2; Commission File No. 33-83096)
10.3 Lease Agreements dated December 11, 1990, as modified on May 23,
1994 between Nabi and Angelo Napolitano, Trustee, for certain
real property located at 16500 N.W. 15th Avenue, Miami, Florida
(incorporated by reference to Nabi's Registration Statement on
Form S-2; Commission File No. 33-83096)
10.4 Lease Agreement dated March 31, 1994 between Nabi and Angelo
Napolitano, Trustee, for certain real property located at 16500
N.W. 15th Avenue, Miami, Florida (incorporated by reference to
Nabi's Registration Statement on Form S-2; Commission File No.
33-83096)
10.5 Employment Agreement dated January 1, 1993 between Nabi and David
J. Gury (incorporated by reference to Nabi's Annual Report on
Form 10-K for the year ended December 31, 1992)
10.6 1990 Equity Incentive Plan (incorporated by reference to Nabi's
Proxy Statement dated April 22, 1997)
10.7 Amended and Restated Incentive Stock Option Plan adopted in 1993
(incorporated by reference to Nabi's Annual Report on Form 10-K
for the year ended December 31, 1992)
10.8 Stock Plan for Non-Employee Directors (incorporated by reference
to Nabi's Proxy Statement dated April 26, 1995)
10.9 Employment Agreement dated January 1, 1997 between John C.
Carlisle and Nabi (incorporated by reference to Nabi's Annual
Report on Form 10-K for the year ended December 31, 1996)
10.11 $50 Million Loan and Security Agreement dated as of September 12,
1997 between Nabi, certain Financial Institutions and
NationsBank, N.A. (incorporated by reference to Nabi's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997)
10.12 Rights Agreement dated as of August 1, 1997, as Amended between
Nabi and Registrar and Transfer Company (incorporated by
reference to Nabi's Annual Report on Form 10-K for the year ended
December 31, 1997)
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61
10.13 Amendment No. 1 and Waiver dated as of November 14, 1997 to Loan
and Security Agreement dated as of September 12, 1997
(incorporated by reference to Nabi's Annual Report on Form 10-K
for the year ended December 31, 1997)
10.14 Amendment No. 2 and Waiver dated as of March 30, 1998 to Loan and
Security Agreement dated as of September 12, 1997 (incorporated
by reference to Nabi's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998)
10.15 Addendum to Employment Agreement dated January 15, 1998 between
David D. Muth and Nabi (incorporated by reference to Nabi's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998)
10.16 Employment Agreement dated June 1, 1998 between Thomas H. McLain
and Nabi (incorporated by reference to Nabi's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998)
10.17 Employment Agreement dated August 1, 1998 between Dr. Robert B.
Naso and Nabi (incorporated by reference to Nabi's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998)
10.18 Employment Agreement dated August 19, 1996 between David D. Muth
and Nabi (incorporated by reference to Nabi's Annual Report on
Form 10-K for the year ended December 31, 1998)
10.19 Change in Control: Executive Compensation Package Agreement dated
September 28, 1998 between David J. Gury and Nabi (incorporated
by reference to Nabi's Annual Report on Form 10-K for the year
ended December 31, 1998)
10.20 Employment Agreement dated February 9, 1999 between Bruce K.
Farley and Nabi (incorporated by reference to Nabi's Annual
Report on Form 10-K for the year ended December 31, 1998)
10.21 Amendment No. 3 and Waiver dated as of March 1, 1999 to Loan and
Security Agreement dated as of September 12, 1997 (incorporated
by reference to Nabi's Annual Report on Form 10-K for the year
ended December 31, 1998)
10.22 1998 Non-Qualified Employee Stock Option Plan (incorporated by
reference to Nabi's Annual Report on Form 10-K for the year ended
December 31, 1998)
10.23 Amended and Restated By-Laws of Nabi dated May 28, 1999
(incorporated by Reference to Nabi's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999)
10.24 Employment Agreement dated August 1, 1999 between David D. Muth
and Nabi (incorporated by reference to Nabi's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999)
10.25 Amendment No. 4 dated as of February 1, 2000 to Loan and Security
Agreement dated as of September 12, 1997 (incorporated by
reference to Nabi's Annual Report on Form 10-K for the year ended
December 31, 1999)
10.26* Change in Control: Executive Compensation Package Agreement dated
March 10, 2000 between Dr. Robert B. Naso and Nabi
10.27* Change in Control: Executive Compensation Package Agreement dated
March 10, 2000 between David D. Muth and Nabi
10.28* Change in Control: Executive Compensation Package Agreement dated
March 10, 2000 between Bruce K. Farley and Nabi
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10.29* Change in Control: Executive Compensation Package Agreement dated
March 10, 2000 between Thomas H. McLain and Nabi
10.30 Nabi 2000 Equity Incentive Plan (incorporated by reference to
Nabi's Registration Statement on Form S-8; Commission File
No. 333-38864)
10.31 Nabi 2000 Employee Stock Purchase Plan (incorporated by reference
to Nabi's Registration Statement on Form S-8; Commission File
No. 333-38864)
10.32 Nabi-Rockville Savings and Retirement Plan (incorporated by
reference to Nabi's Registration Statement on Form S-8;
Commission File No. 333-38866)
10.33 Nabi Savings and Retirement Plan (incorporated by reference to
Nabi's Registration Statement on Form S-8; Commission File
No. 333-38868)
10.34* Amendment No. 5 dated as of October 25, 2000 to Loan and Security
Agreement dated as of September 12, 1997
10.35* Change in Control Addendum dated December 11, 2000 between David
J. Gury and Nabi
10.36* Change in Control Addendum dated December 11, 2000 between Dr.
Robert B. Naso and Nabi
10.37* Change in Control Addendum dated December 11, 2000 between David
D. Muth and Nabi
10.38* Change in Control Addendum dated December 11, 2000 between Bruce
K. Farley and Nabi
10.39* Change in Control Addendum dated December 11, 2000 between Thomas
H. McLain and Nabi
21* Subsidiaries of the Registrant
23.1* Consent of Ernst & Young, LLP, Independent Certified Public
Accountants
23.2* Consent of PricewaterhouseCoopers, LLP, Independent Certified
Public Accountants
- -----------------
* FILED HEREWITH
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on this 5th day of March
2001.
NABI
By: /s/ David Gury
------------------------------------
DAVID J. GURY
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ David J. Gury Chairman of the Board, March 5, 2001
- ------------------------------------ President, Chief Executive Officer
David J. Gury
/s/ Thomas H. McLain Senior Vice President, Corporate March 5, 2001
- -------------------------------------------- Services and Chief Financial Officer
Thomas H. McLain
/s/ Mark L. Smith Vice President of Finance, March 5, 2001
- ------------------------------------ Chief Accounting Officer
Mark L. Smith
/s/ David L. Castaldi Director March 5, 2001
- --------------------------------------------
David L. Castaldi
/s/ Geoffrey F. Cox Director March 5, 2001
- --------------------------------------------
Dr. Geoffrey F. Cox
/s/ George W. Ebright Director March 5, 2001
- --------------------------------------------
George W. Ebright
/s/ Richard A. Harvey Director March 5, 2001
- --------------------------------------------
Richard A. Harvey, Jr.
/s/ Linda Jenckes Director March 5, 2001
- ------------------------------------
Linda Jenckes
/s/ David A. Thompson Director March 5, 2001
- --------------------------------------------
David A. Thompson
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Schedule II - Valuation and Qualifying Accounts and Reserves
Additions Deductions
----------------------------- ----------
Write-offs
Balance At Charged to Charged to Charged Balance
Beginning of Costs and Other Against at End
Classification Period Expenses Accounts Reserve of Period
- -------------- ------------ ---------- ---------- -------- ---------
(In Thousands)
YEAR ENDED DECEMBER 30, 2000:
Allowance for doubtful accounts $ 62 $ 380 $ -- $ 25 $ 417
Deferred tax asset valuation allowance $34,886 $ -- $ (579) $ -- $34,307
Inventory valuation allowance $ 3,276 $ 2,625 $(1,122) $ 1,820 $ 2,959
------- ------- ------- ------- -------
YEAR ENDED DECEMBER 31, 1999:
Allowance for doubtful accounts $ 221 $ (136) $ -- $ 23 $ 62
Deferred tax asset valuation allowance $36,508 $ -- $(1,622) $ -- $34,886
Inventory valuation allowance $ 4,508 $ 2,235 $ (802) $ 2,665 $ 3,276
------- ------- ------- ------- -------
YEAR ENDED DECEMBER 31, 1998:
Allowance for doubtful accounts $ 403 $ (20) $ -- $ 162 $ 221
Deferred tax asset valuation allowance $28,324 $ -- $ 8,184 $ -- $36,508
Inventory valuation allowance $ 641 $ 2,936 $ 1,692 $ 761 $ 4,508
------- ------- ------- ------- -------