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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 29, 2001
Commission File Number: 0-4829-03
NABI BIOPHARMACEUTICALS
(Exact name of registrant as specified in its charter)
Delaware 59-1212264
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5800 Park of Commerce Boulevard N.W., Boca Raton, FL 33487
(Address of principal executive offices, including zip code)
(561) 989-5800
(Registrant's telephone number, including area code)
NABI
(Former name)
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 22, 2002, 38,554,061 shares of common stock were
outstanding, of which 38,079,014 shares were held of record by non-affiliates.
The aggregate market value of shares held by non-affiliates was approximately
$215,527,220 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 29, 2001, are incorporated by reference
into Part III.
NABI BIOPHARMACEUTICALS
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TABLE OF CONTENTS
Page No.
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Part I.
Item 1. Business.......................................................3
Item 2. Properties....................................................26
Item 3. Legal Proceedings.............................................26
Item 4. Submission of Matters to a Vote of Security Holders...........26
Item 4a. Executive Officers of the Registrant..........................27
Part II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...........................................29
Item 6. Selected Financial Data.......................................29
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................31
Item 7a. Quantitative and Qualitative Disclosures about Market Risk....36
Item 8. Financial Statements and Supplementary Data...................39
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...........................63
Part III.
Item 10. Directors and Executive Officers of the Registrant............64
Item 11. Executive Compensation........................................64
Item 12. Security Ownership of Certain Beneficial Owners and
Management....................................................64
Item 13. Certain Relationships and Related Transactions................64
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K...................................................65
Signatures ..............................................................69
2
NABI BIOPHARMACEUTICALS
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PART I
ITEM 1. BUSINESS
OVERVIEW
Nabi Biopharmaceuticals (formerly known as "Nabi") is a vertically integrated
biopharmaceutical company committed to unlocking the power of the human immune
system to help people with serious, unmet medical needs. We have a broad product
portfolio and significant research capabilities focused on the development and
commercialization of drugs that prevent and treat infectious, autoimmune and
addictive diseases. We have four marketed biopharmaceutical products,
Nabi-HB(TM) [Hepatitis B Immune Globulin (Human)] for the prevention of
hepatitis B infections, WinRho SDF(R) [Rho (D) Immune Globulin Intravenous
(Human)] for the treatment of acute, chronic and HIV-related immune
thrombocytopenia purpura, Autoplex(R) T [Anti-Inhibitor Coagulant Complex, Heat
Treated] and Aloprim(TM) [(Allopurinol sodium) for injection], and a vigorous
clinical trials program. We have a state of the art fractionation plant for our
own manufacturing of biopharmaceutical products and for contract manufacturing.
Further, we also collect specialty and non-specific antibodies for use in our
products as well as to supply pharmaceutical and diagnostic customers for the
subsequent production of their products.
PRODUCTS
CURRENTLY MARKETED BIOPHARMACEUTICAL PRODUCTS
Sales of our biopharmaceutical products, Nabi-HB, WinRho SDF, Autoplex T and
Aloprim, totaled $73.4 million in 2001 compared to $73.0 million in 2000. In
2001, biopharmaceutical products accounted for 32% of our sales and 77% 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 affecting
approximately 350 million people worldwide. One out of 20 people in the U.S. has
been infected with HBV. 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, 80,000 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. HBV is 100 times more
infectious than the human immunodeficiency virus ("HIV") and approximately half
of new hepatitis B infections are caused by sexual exposures. The CDC estimates
that HBV costs at least $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. Nabi-HB replaced a predecessor product, H-BIG. In
October 2001, we received approval from the FDA to manufacture Nabi-HB in our
biopharmaceutical manufacturing facility in Boca Raton, Florida. We completed
the in-patient phases of clinical studies in 2001 of Nabi-HB to evaluate its
ability to prevent HBV reinfection in liver transplant patients. See also
"Strategic Alliance" and "Supply and Manufacturing."
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
3
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.
Rh blood group antigen D expression on red blood cells is responsible for the
designation of blood as either Rh-positive or Rh-negative. 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 a number of clinical studies under Investigational New Drug
Applications ("IND") 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 A is a blood clotting disorder characterized by a lack of functional
coagulation factor, factor VIII. Physicians typically treat hemophilia A by
replacing the deficient factor with either recombinant clotting factor or
antibodies derived human factor VIII. 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 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 DSM Catalytica
Pharmaceuticals (formerly Catalytica Pharmaceuticals) ("Catalytica") in June
1999. See also "Strategic Alliances" and "Supply and Manufacturing."
4
CURRENTLY MARKETED ANTIBODIES AND INTERMEDIATE PRODUCTS
On September 6, 2001, we sold the operating assets of a majority of our antibody
collection centers and our testing laboratory for $153.0 million in cash. By
retaining nine antibody collection centers, we expect to generate sufficient raw
materials for the manufacture of our own antibody-based therapeutic products in
our Boca Raton, Florida manufacturing facility while continuing to supply
pharmaceutical and diagnostic customers specialty and non-specific antibodies
and intermediates for the subsequent manufacture of their products. In
connection with the sale, we agreed to sell to the purchaser antibodies
collected at the centers we retained for a period of four years. This agreement
has now been amended to permit us, beginning in 2002, to sell non-specific
antibodies to third parties at market prices.
SPECIALTY ANTIBODIES
Specialty antibodies, containing high concentrations of a specific antibody, are
used primarily to manufacture antibody-based therapeutic products. These
specialty antibodies are used in products to treat chronic immune disorders as
well as to prevent and treat viral and bacterial 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 antibodies production into the production of specialty antibodies
used in the manufacture of our own antibody-based therapeutic products as well
as continuing to sell specialty antibody products to third parties. Currently,
certain of the specialty antibodies produced in our antibody collection centers
are used in the production of our own biopharmaceutical products.
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
antibody collection capabilities, our operational expertise in donor
immunization programs, our clinical and medical experience in conducting medical
trials under IND, and our access to a diverse antibody donor base, we believe we
have a strategic advantage over competitors in our ability to produce specialty
antibodies.
Our principal specialty antibody products include:
o RHO(D) ANTIBODIES. Antibodies to RhoD antigen have long been used to
prevent Rh-D isoimmunization 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.
Antibodies containing Rh-D antigen are used in the manufacture of
WinRho SDF, our biopharmaceutical product for the treatment of ITP.
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 antibodies to HBV to produce Nabi-HB, our hepatitis
B biopharmaceutical product.
o CMV ANTIBODIES. Antibodies to CMV are supplied to manufacturers to
enhance intravenous immune globulin ("IVIG") products and to produce
CMV-specific immune globulin therapeutic products.
o RABIES ANTIBODIES. Antibodies to rabies are used by our customers to
make therapeutic products that provide short-term protective
antibody-based immunity to patients exposed to the rabies virus.
o TETANUS ANTIBODIES. Antibodies to tetanus toxin are used to produce
therapeutic products to provide short-term protective immunity to
patients exposed to tetanus.
o DIAGNOSTIC PRODUCTS AND SERVICES. We supply infectious disease quality
assurance and specialty antibody-based products to our customers, which
include IN-VITRO diagnostic manufacturers, regulatory agencies and
testing laboratories.
5
During 2001, sales of specialty antibodies were $46.8 million, a 19% decrease
from 2000 sales of $58.0 million. Specialty antibody sales decreased during
2001, due primarily to the sale of the majority of our antibody collection
centers in September 2001. Specialty antibody sales accounted for 20% of total
sales in 2001 and 25% of total sales in 2000.
NON-SPECIFIC ANTIBODIES
Our nine FDA licensed antibody collection centers supply non-specific human
antibodies from normal healthy donors to our customers in the pharmaceutical and
diagnostic industries.
Although non-specific antibodies lack high levels of antibodies to specific
antigens, such antibodies are used by our customers to manufacture standard
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. Subfractions derived from non-specific antibodies are also
provided to our customers for the manufacture of other pharmaceutical products
such as albumin.
In 2001, we derived sales of $114.5 million from sales of non-specific
antibodies as compared to 2000 levels of $97.8 million. Increased sales from
non-specific antibodies reflect increased sales prices to our non-specific
antibody customers in 2001 offset by the effect of the sale of the majority of
our antibody collection centers in September 2001.
The following is a summary of our currently marketed biopharmaceutical and
antibody products:
Products Indications or Potential Applications Status
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NABI-HB Post exposure prevention of hepatitis B infection CURRENTLY MARKETED
WINRHO SDF Treatment of ITP; CURRENTLY MARKETED;
Rho (D) isoimmunization in clinical studies
AUTOPLEX T Treatment of patients with CURRENTLY MARKETED
inhibitors to Factor VIII
ALOPRIM Treatment of patients with chemotherapy-induced CURRENTLY MARKETED
hyperuricemia
SPECIALTY ANTIBODIES Intermediate for production of antibody based CURRENTLY MARKETED
biopharmaceutical products (e.g., tetanus, rabies,
HBV, CMV 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 and human
polyclonal antibody products for immediate short-term protection from blood
infections 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 of infectious diseases, including the prevention and
treatment of nicotine addiction, where our conjugate vaccine technologies may
also be applied successfully.
6
NABI GRAM-POSITIVE PROGRAM
EPIDEMIOLOGY
According to the CDC, more than two million patients in the U.S. each year
contract an infection as a result of exposure while receiving healthcare in a
hospital. S. AUREUS is among the most common causes of these hospital-acquired
infections and is reportedly associated with a death rate of 10% to 25% because
of its capacity to cause serious complications. S. AUREUS can spread from the
blood (bacteremia), to the bones (osteomyelitis), or the inner lining of the
heart and its valves (endocarditis), or cause abscesses in internal organs such
as the lungs and kidneys. Most at risk for these infections are surgical
patients, trauma or burn victims, newborns whose immune systems are not yet
developed and people with such chronic illnesses as diabetes, cancer, lung
diseases or kidney diseases. People whose immune systems are suppressed due to
disease, drugs or radiation therapy also are more susceptible to these bacterial
infections.
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 methicillin-sensitive infections had similar
direct medical costs, but resistant infections caused more deaths (21% versus
8%).
These infections are difficult to treat because the bacteria that cause them 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, hospital-acquired infections of the bloodstream may
represent the eighth leading cause of death in the U.S. The rise of antibiotic
resistance has markedly curtailed options for treating these infections.
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
We are using a dual approach to developing products to combat Gram-positive
infections: StaphVAX(R) (STAPHYLOCOCCUS AUREUS Polysaccharide Conjugate Vaccine)
and Altastaph(TM) [STAPHYLOCOCCUS AUREUS Immune Globulin Intravenous (Human)].
StaphVAX, an investigational polysaccharide conjugate vaccine, is a novel
approach to the prevention of S. AUREUS infections. 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. StaphVAX targets primarily
hospitalized adult, chronically ill or long-term care facility patients that are
at high risk of developing S. AUREUS infection. StaphVAX is intended to
stimulate a patient's immune system to produce antibodies to S. AUREUS that
provide active, long-term protection from the bacteria. 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.
7
Altastaph is an investigational human polyclonal antibody product that is being
developed to prevent S. AUREUS infections in patients who are at immediate risk
of infection or cannot produce their own antibodies when given a vaccine. It may
also be used to treat an existing infection. Altastaph is purified from the
antibodies of donors who have been immunized with StaphVAX and who have
responded to the immunization with high levels of antibodies to the S. AUREUS
bacteria. Altastaph can be provided to a patient by infusion. Based on the
circulation half-life of the administered antibodies, the protection and/or
therapy provided by a single injection of Altastaph is expected to last a number
of weeks, but may be extended by giving repeated doses.
StaphVAX contains molecules found in the polysaccharide outer coating
(polysaccharide capsule or CP) of two strains of S. AUREUS, which account for
about 85% of all S. AUREUS types. The polysaccharide molecules were joined, or
conjugated, in the vaccine with a non-toxic, carrier protein derived from the
bacteria PSEUDOMONAS AERUGINOSA. Once given the vaccine, the patients' immune
systems produce proteins, called antibodies, which bind to S. AUREUS on
subsequent exposure to the bacteria. These antibodies help the immune system to
identify the staph bacteria while it is still in the blood and eliminate it.
STAPHVAX(R) (STAPHYLOCOCCUS AUREUS POLYSACCHARIDE CONJUGATE VACCINE)
StaphVAX is being developed for the 9 to 11 million patients at high risk of
infection and who are able to respond to a vaccine by producing their own
antibodies. Potential at-risk patient populations for StaphVAX include: (a)
patients such as the elderly and those suffering chronic diseases including end
stage renal disease ("ESRD"), 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.
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 Phase III placebo controlled
clinical trial for StaphVAX in hemodialysis patients with ESRD. A total of 1,809
patients were included in the study. Approximately half were vaccinated with
StaphVAX and half received a placebo. The clinical trial population was followed
for a year to evaluate vaccine safety and S. AUREUS infection rates. The results
of the trial showed that a single injection of 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%. Reaction in these patients to
receiving the vaccine was mild to moderate and was generally resolved within
36-48 hours following vaccination. The most commonly occurring adverse event was
minor pain at the intramuscular injection site.
We have been advised by the FDA that because the reduction in infections in the
previous trial was not statistically significant at twelve months
post-vaccination, the primary endpoint of the trial, the FDA will require a
confirmatory Phase III clinical trial for StaphVAX with an agreed to efficacy
endpoint. This endpoint is expected to be 8-10 months post-vaccination based on
results from the previous trial. We are currently in discussion with the FDA to
determine the trial design for the second Phase III clinical trial and
anticipate finalizing this trial design during 2002. We anticipate initiating
the confirmatory Phase III clinical trial for StaphVAX in 2003 using material
manufactured by Dow Biopharmaceutical Contract Manufacturing Services' (formerly
Collaborative BioAlliance) ("Dow") at its facility in Smithfield, Rhode Island,
the expected commercial manufacturing facility for StaphVAX.
In 2001 we initiated a boosting trial with StaphVAX in hemodialysis patients who
received StaphVAX in the Phase III trial completed in 2000. The trial is
intended to measure antibodies generated in response to vaccination over a six
month period to determine whether those antibodies return to high levels
8
observed following the first vaccination. The investigators will also determine
if the booster dose of vaccine changes the rate at which antibody levels
decrease over time in these immune-compromised patients. In addition, the trial
will evaluate the safety of the booster dose of the vaccine. We anticipate
obtaining results from this booster trial in the second quarter of 2002.
ALTASTAPH(TM) [STAPHYLOCOCCUS AUREUS IMMUNE GLOBULIN INTRAVENOUS (HUMAN)]
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 collected from the antibodies of normal healthy donors who have
been vaccinated with StaphVAX at our antibody collection centers. The collected
antibodies are purified into Altastaph at our biopharmaceutical manufacturing
facility in Boca Raton, Florida. In contrast to StaphVAX, which is intended to
provide long-term protection against S. AUREUS infection, 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. High-risk
populations include low birth weight newborns, trauma patients and emergency
surgical patients. Altastaph is also being developed as a therapeutic agent for
use in those patients with diagnosed S. AUREUS infections. This type of
protection or treatment is likely to be cost-effective because antibodies in a
single dose of Altastaph persist in the bloodstream for a number of weeks to
provide protection for the entire risk period.
In 1999, we successfully completed a multi-dose safety and pharmacokinetic (the
drug's profile in the body or "PK") Phase I-II trial of Altastaph 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
Altastaph resulted in antibody titers that pre-clinical models and clinical
trials with StaphVAX indicate may be protective against infection. We expect to
initiate a larger second Phase I-II clinical trial in low birth weight newborns
in 2002.
We plan to evaluate the use of Altastaph as a therapeutic product for the
treatment of diagnosed S. AUREUS infections. As a therapeutic product, 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
Altastaph in a hospital-intensive care unit for trauma patients with diagnosed
S. AUREUS is in the planning stages and we anticipate initiating this trial in
2002. This blinded study will help define the safety and PK of Altastaph in
adults in combination with traditional antibiotics for the treatment of serious
S. AUREUS infections in a hospitalized patient population.
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 or 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 second generation of StaphVAX is expected to contain type 336
antigen of S. AUREUS 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 FAECALIS are the two other clinically
significant Gram-positive bacteria causing hospital-acquired infections. We
intend to extend product coverage to these two Gram-positive bacteria in
subsequent generations of StaphVAX and Altastaph. We have filed patent
applications on selected S. EPIDERMIDIS and 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 elimination of bacteria by
human phagocytes.
9
ANTI-VIRAL PROGRAM:
NABI-HB(TM) [HEPATITIS B IMMUNE GLOBULIN (HUMAN)]
In October 2001, we received an approval letter from the FDA to manufacture
Nabi-HB in our biopharmaceutical manufacturing facility in Boca Raton, Florida.
The initial production lots of Nabi-HB manufactured at our Boca Raton facility
have been submitted to the FDA for approval and we anticipate that this product
will be released by the FDA and launched to the market in the first quarter of
2002. In 2001, we completed the in-patient phases of the clinical studies for
the use of Nabi-HB to prevent the reinfection of transplanted livers in HBV
positive patients.
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 severe
illness and death in later stages of the disease. Chronic HCV infection is a
frequent cause of end-stage liver disease in North America and Europe and is
present in approximately one third of patients undergoing liver transplants. 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
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 clinical lots 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"). The Phase I-II trial is expected to begin in the
first half of 2002.
RENS AND RENT (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
Biopharmaceuticals 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 Biopharmaceuticals and UMBC were issued a U.S. patent with claims
encompassing certain RENs and RENt compounds. We have an exclusive license from
UMBC for the patented technology, 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
10
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.
NICOTINE ADDICTION PROGRAM:
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 47 million adults aged 18 years and older currently
smoke in the U.S. In the U.S., there are an estimated 4.1 million adolescent
smokers between the ages of 12 - 17, and more than 3,000 people under the age of
18 become new regular smokers each day. Economically, smoking is reported to be
responsible each year for an estimated $50 billion of direct medical costs and
$47 billion in indirect non-medical costs (lost work time and disability).
According to the CDC, 430,000 deaths annually are attributable to cigarette
smoking in the U.S. alone - more than alcohol, cocaine, heroin, homicide,
suicide, car accidents, fire, and AIDS combined. On a worldwide basis, the
statistics are even more significant as at least 1.1 billion people (one-third
of the global adult population) uses tobacco.
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. NicVAX is an experimental vaccine to prevent and treat nicotine
addiction. NicVAX has been developed to induce the production of high levels of
nicotine-specific antibodies in the vaccinated individual. Our researchers have
shown that it is possible to link haptens, usually small, sub-antigenic
molecules, to carrier proteins, thereby making the haptens able to induce
antibodies (immunogenic). Vaccination with NicVAX has been shown to generate
high levels of nicotine-specific antibodies in animals. Results with 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 believed to be the source of positive reinforcement from smoking.
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. The antibodies induced by the vaccine have been shown to be
able to ease nicotine dependence in rats, reduce nicotine levels in the brains
of rats by 64% compared to controls, prevent nicotine-induced blood pressure
increases, and reduce the hyperactivity induced in rats in response to nicotine
injections.
NicVAX uses the same technology for conjugate vaccines developed for StaphVAX.
The result is a vaccine with a significantly greater immunogenicity than
experimental vaccines derived by more classical conjugation technologies. We
believe that antibodies to NicVAX are highly specific to nicotine and are of
higher affinity than has been achievable with other conjugation technologies. In
May 2001, the U.S. Patent and Trademark Office issued a U.S. Patent to Nabi for
NicVAX titled "Hapten-Carrier Conjugates for Treating and Preventing Nicotine
Addiction" that covers the binding of nicotine to a protein carrier for use as a
vaccine for treating and preventing nicotine addiction. Patent applications on
this technology, on the resultant nicotine vaccine and its use to prevent and
treat nicotine addiction have been granted outside the U.S.
In 2000, we and our 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 NicVAX for a period up to four years. Funding for the second year
under this grant was approved for 2001. In November 2001, we announced the
successful completion of toxicology studies for NicVAX which were also funded by
NIDA. We anticipate commencing Phase I and Phase I-II clinical trials of NicVAX
in 2002.
OTHER PROGRAMS:
STAPHYLOCOCCUS AUREUS VACCINE FOR MASTITIS
S. AUREUS is the most frequent cause of mastitis, one of the most common
diseases affecting dairy and beef cattle. This disease results in significantly
higher costs for producers of dairy and beef products
11
due to discarded milk, decreased productivity, treatment expense, and the
inability of infected cows to suckle calves.
In October 2001, the U.S. Patent and Trademark Office issued a patent entitled
"STAPHYLOCOCCUS AUREUS antigen-containing whole cell vaccine." This patent
covers the composition of a S. AUREUS vaccine, the method of vaccine
preparation, and its use as a therapeutic or prophylactic agent to protect
animals against infection. We consider this whole cell vaccine technology to be
an out-licensing candidate.
12
The following is a summary of our products under development:
Products Intended Use Status
-------- ------------ ------
GRAM-POSITIVE PROGRAM:
StaphVAX Vaccine to provide long-term protection Completed Phase III efficacy trial in
against onset of S. AUREUS infections ESRD patients. Boosting trial in ESRD
patients to be completed in 2002
Expect to initiate confirmatory Phase III
clinical trial in 2003.
Altastaph Purified human polyclonal antibodies to Completed Phase I-II safety and PK
provide treatment or immediate protection clinical trial in low birth weight
against S. AUREUS infections newborns; expect to begin two Phase II
trials in 2002: one in adult trauma
patients with diagnosed Gram-positive
infections and one in low birth weight
newborns.
Next Generation Products Combat S. AUREUS 336, S. EPIDERMIDIS, and Research and pre-clinical development.
(vaccines and antibody-based Enterococcal bacterial infections
therapeutic products)
ANTI-VIRAL PROGRAMS:
Nabi-HB Antibodies administered post exposure for Received approval letter in October 2001
prevention of HBV infection to manufacture Nabi-HB in our Boca
Raton, Florida facility.
Prevention of HBV reinfection in liver Completed clinical studies in 2001.
transplant patients
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 2002.
chronic hepatitis C virus infections
RENs and RENt Small molecule nucleoside and nucleotide Research
analog technology to treat viral infections
and cancer.
NICOTINE ADDICTION
PROGRAMS:
NicVAX Vaccine and prevention and treatment of Phase I and Phase I-II clinical trials
nicotine addiction anticipated to begin in 2002.
OTHER PROGRAMS:
S. AUREUS Vaccine for Prevention and treatment of S. AUREUS Out-licensing candidate
Mastitis mastitis in cattle
13
STRATEGIC ALLIANCES
We are actively pursuing strategic alliances to assist in the development of
some of the products in our pipeline and to expand our biopharmaceutical
business. 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 2001, we continued to meet
these goals.
Cangene also manufactured Nabi-HB for us. This agreement terminates in March
31,2002. 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 terminates
in March 2002.
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.
DSM 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,
GlaxoSmithKline ("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.
BAXTER HEALTHCARE CORPORATION
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 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 second twelve-month
extension beginning in May 2001. 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 2002 or by a later date agreed to by the FTC. We anticipate that
the period Baxter manufactures
14
Autoplex T under the terms of the consent order from the FTC will be extended
for the twelve-month period through May 2003. If the rights revert to Baxter and
Baxter later sells these rights, Nabi Biopharmaceuticals 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 principal supplier of
antibody collection supplies to Nabi Biopharmaceuticals.
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 StaphVAX. The license terminates
with respect to each country it applies to on the date that the patent rights
expire in such country.
CUSTOMER RELATIONSHIPS
We sell our biopharmaceutical products to wholesalers, distributors, hospitals
and home healthcare companies and sell our antibody products to pharmaceutical
and diagnostic product manufacturers.
In connection with the sale of the majority of the antibody collection business,
we entered into an agreement for the purpose of assuring that each party would
have the ability to meet supply commitments to third parties arising in
connection with the sale. Under this agreement, we agreed to sell to the
purchaser antibodies collected at the nine centers we retained at our cost plus
an administrative margin for a period of four years. This agreement has now been
amended to permit us, beginning in 2002, to sell non-specific antibodies to
third parties at market prices.
For our other antibody product contracts, pricing for product deliveries is
generally mutually agreed to prior to the beginning of the contract and fixed
for the contract term, generally one year or less. The contracts generally
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.
Customers to which sales exceeded 10% of our annual consolidated sales in the
last three fiscal years ending December 29, 2001, December 30, 2000 and December
31, 1999 were Baxter and Bayer Corporation. Sales to Cardinal Health, Inc.
exceeded 10% for the years ended December 29, 2001 and December 30, 2000.
Aggregate sales to these customers were approximately $131.3 million, $119.3
million and $112.4 million, or 53%, 52% and 47% of total sales for the years
ended December 29, 2001, December 30, 2000 and December 31, 1999, respectively.
SUPPLY AND MANUFACTURING
BIOPHARMACEUTICAL PRODUCTS
In October 2001, we received an approval letter from the FDA to manufacture
Nabi-HB in our biopharmaceutical manufacturing facility in Boca Raton, Florida.
Initial production lots of Nabi-HB manufactured at our Boca Raton facility have
been submitted to the FDA for approval. We anticipate that this product will be
released by the FDA and launched to the market in the first quarter of 2002. We
have manufactured clinical lots of the Nabi-HB, Altastaph and Civacir in this
facility.
Previously, Cangene manufactured Nabi-HB for us under an agreement which will
terminate in March 31,2002. We collected and supplied the anti-HBs antibodies
necessary for the manufacture of Nabi-HB.
In December 2001, we signed a 10-year agreement with Inhibitex, Inc. to
manufacture its lead investigational antibody-based therapy in our Boca Raton
biopharmaceutical facility.
15
In April 2001, we signed an agreement with Acambis to produce specialty
antibodies at our antibody collection centers under an IND to be submitted by
Acambis to the FDA and manufacture their antibody-based therapeutic product.
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. We collected and supplied a
portion of the anti-D antibodies necessary for the manufacture of Nabi-HB.
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 second twelve-month extension beginning in May
2001. 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 2002 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 2003. If the rights revert
to Baxter and Baxter later sells these rights, we 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. We continue to make progress in the
transfer of the manufacture of Autoplex T to 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 that terminates in June 2004.
We manufacture both pre-clinical and clinical lots of vaccine products at our
pilot facility in Rockville, Maryland and antibody-based therapeutic products at
our Boca Raton, Florida and our Miami, Florida facilities.
In May 2000, we completed an agreement with Dow for the contract production and
commercial supply of 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 2001. We expect to complete the manufacturing transfer
in 2002 and complete scale-up of manufacturing in 2003. We expect to use
StaphVAX manufactured at Dow for the confirmatory Phase III trial expected to be
initiated in 2003.
ANTIBODY COLLECTION PROCESS
We currently collect and process antibodies from 9 collection centers located
across the U.S. Each center is licensed and regulated by the FDA. Most of our
centers are located in urban areas and some 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.
In September 2001, in connection with the sale of a majority of our antibody
collection business, we entered into a Laboratory Testing Services Agreement
with the purchaser to provide at cost certain laboratory testing services for
antibodies collected at our retained collection centers. This agreement may be
terminated with one year's notice by either party.
In 2001, we entered into an Antibody Purchase Agreement with the acquirer of the
majority of the antibody business. Under terms of the Agreement, we agreed to
purchase non-specific antibodies at our contracted selling price to meet
commitments under one supply agreement.
16
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 IND 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. Phase IV trials monitor for adverse effects and are undertaken
post-licensure as additional large-scale, long-term studies of morbidity and
mortality. 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 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 and that the prospective manufacturer submit three
conformance lots in support of the application. 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 antibodies and antibody based products
derived from antibodies are strictly regulated by the FDA. In order to operate
in the U.S., an antibody 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.
17
We hold Biologics License No. 1022 covering all Nabi Biopharmaceutical-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 antibody 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 antibodies 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 December 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."
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
antibodies produced at our antibody collection centers are currently used in the
manufacture 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 therapies include the use of
steroids, IVIG, and splenectomy (a surgical procedure to remove the spleen).
WinRho SDF has Orphan Drug status through March 2002 and may be subject to new
competition in the future.
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 therapeutic option for patients that cannot tolerate oral allopurinol
therapy. Currently, Aloprim has no direct competitors. Aloprim has Orphan Drug
status through May 2003.
18
ANTIBODY PRODUCTS
We and other independent suppliers of antibodies sell these raw materials
principally to pharmaceutical companies that process this raw material into
finished products. Although these pharmaceutical 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 pharmaceutical companies that obtain antibodies for
their own use through their own collection centers, other commercial collectors
of antibodies, 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 donors
for fund raising purposes and by improving the attractiveness of our collection
facilities.
EMPLOYEES
We employed 615 persons at December 29, 2001. 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.
RISK WITH RESPECT TO CERTAIN EXISTING PRODUCTS
Our rights to WinRho SDF and Aloprim expire in 2005 and 2004, respectively.
There can be no assurance that our rights to these products will be extended on
the same terms as now exist or at all.
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 2002 or a later
date agreed to by the FTC. We will not obtain FDA approval to manufacture
Autoplex T by May 2002 and will be 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.
WinRho SDF and Aloprim currently enjoy Orphan Drug status expiring in March 2002
and December 2003, respectively. Expiration of Orphan Drug status likely will
lead to increased competition for these products and could adversely affect
their sales or profitability.
19
DEPENDENCE UPON THIRD PARTIES TO MANUFACTURE PRODUCTS
We do not currently manufacture three of our four currently marketed
biopharmaceutical products and are dependent upon third parties to manufacture
these products. The failure by these manufacturers to meet our needs 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. In both 2000 and 2001, our ability to market
Autoplex T has been adversely affected by the inability of the manufacturer of
this product to reliably supply us with necessary quantities of this product at
desired potency levels.
LIMITED MANUFACTURING CAPABILITY AND EXPERIENCE; ADVERSE IMPACT OF
UNDER-UTILIZATION
In October 2001, we received an approval letter from the FDA to manufacture
Nabi-HB in our biopharmaceutical manufacturing facility in Boca Raton, Florida.
Initial production lots of Nabi-HB manufactured at our Boca Raton facility have
been submitted to the FDA for approval. There can be no assurance as to whether
or when we will receive this approval. 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. Initially,
we will not utilize the full manufacturing capacity of the facility and there
can be no assurance that we will have sufficient product to manufacture so that
the facility can be operated efficiently and profitably. Further, there can be
no assurance 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.
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 conditions 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.
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 to completion. 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. Our
ability to continue to fund our ongoing research and development activities is
currently dependent on our ability to generate sales from our biopharmaceutical
and antibody 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 level required to commercialize our biopharmaceutical product development
programs, and if we are required to reduce the funding for our research and
development activities, this could have a material adverse effect on our future
prospects.
20
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, changes in government
regulation and funding. 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 operations. In particular, our failure
to obtain FDA approval for StaphVAX on a timely basis could adversely affect 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 we do. We
may need to supplement our own sales efforts with the resources 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.
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 and non-U.S. regulatory authorities. 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 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.
21
Most of the antibodies we collect, process and sell to our customers is 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 antibodies.
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 antibodies 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 antibodies 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 BUSINESS ON A SMALL NUMBER OF CUSTOMERS, EFFECT OF
EXISTING CONTRACTS
Our antibody sales are currently concentrated among a few large pharmaceutical
companies. During the 2001, 2000 and 1999 fiscal years, antibody sales to our
top two customers collectively accounted for approximately 66%, 60%, and 51%,
respectively, of our antibody sales. Our contract to sell antibodies to one of
these customers, Baxter, was assigned in September 2001 in connection with the
sale of a majority of our antibody collection centers. We do not believe that
this assignment will have a material adverse effect on our profitability. The
loss of any remaining 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 antibodies are sold under contracts which extend for a period up to
one year. Certain of these contracts do not permit us to increase prices during
the year except to reflect changes in customer specifications and new
governmental regulations. If our costs of collecting antibodies under these
certain contracts rise 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, our existing contracts do not generally 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 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
22
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.
Although we do not have material sales of our biopharmaceutical products outside
the U.S., our goal is to expand our non-U.S. presence for these products.
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, labeling, storage and distribution activities also
are subject to strict regulation and licensing by the FDA. Our antibody
collection centers in the U.S. are subject to periodic inspection by the FDA,
and from time to time we may receive notices of deficiencies from the FDA as a
result of such inspections. Our failure or the failure of our antibody
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 antibody collection centers and fines or penalties. 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
Antibodies collected by us and antibody-based products manufactured by our
customers run the risk of being HIV-contaminated or contaminated with another
virus. As a result, suits may be filed against our customers and us claiming
that the plaintiffs became infected with HIV or other viruses as a result of
using the contaminated products. Such suits have been filed in the past related
to HIV-contaminated antibodies, 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 or other viruses will
not be brought against us by persons who have become infected with HIV or other
viruses from antibody 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.
LIMITED INSURANCE
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 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.
23
LIMITED PROPERTY INSURANCE
We maintain significant real property assets in Florida. Property insurance for
companies with a high concentration of property assets in Florida is generally
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 value of our property increases.
ADDITIONAL FINANCING REQUIREMENTS AND ACCESS TO CAPITAL
We may need to raise additional capital to increase funding of our product
research, development and marketing activities. We may 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 may 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.
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, our ability to continue to develop our products under development
may be adversely affected. 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 biopharmaceutical 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 ours. 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
24
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.
INTENSE COMPETITION; UNCERTAINTY OF TECHNOLOGICAL CHANGE
Competition in the development of biopharmaceutical products is intense, both
from biopharmaceutical and biotechnology 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 pharmaceutical 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
donors and improving the attractiveness of our antibodies collection facilities.
We also compete with other independent antibody suppliers that sell antibodies
principally to pharmaceutical 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.
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.
25
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.
ITEM 2. PROPERTIES
We own an 87,300 square foot facility that houses our executive offices and our
licensed biopharmaceutical manufacturing facility in Boca Raton, Florida. We
received an approval letter from the FDA in October 2001 to manufacture Nabi-HB
in our biopharmaceutical manufacturing facility.
We occupy space primarily used to collect antibodies and leased from
non-affiliates under leases expiring through 2009. 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.
Our antibody collection centers range in size from approximately 4,200 to 20,800
square feet.
We lease office, laboratory, warehouse and pilot manufacturing space in Miami,
Florida and Rockville, Maryland with terms expiring through May of 2005 with
various options for lease extensions.
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.
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 29, 2001.
26
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Nabi Biopharmaceuticals are as follows:
Name Age Position
- ---- --- --------
DAVID J. GURY 63 Chairman of the Board, President and
Chief Executive Officer
THOMAS H. MCLAIN 44 Executive Vice President and
Chief Operating Officer
ROBERT B. NASO, PH.D. 57 Senior Vice President, Quality, Regulatory
and Product Development
MARK L. SMITH 40 Senior Vice President, Finance,
Chief Financial Officer, Chief Accounting Officer
and Treasurer
C. THOMAS JOHNS 55 Senior Vice President, Manufacturing
Operations
GARY A. SISKOWSKI 56 Senior Vice President, Sales and
Marketing
27
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 served as
President and Chief Operating Officer for Nabi Biopharmaceuticals. Mr. Gury has
been a director of Nabi Biopharmaceuticals since 1984. From July 1977 until his
employment by Nabi Biopharmaceuticals, Mr. Gury was employed by Alpha
Therapeutic Corporation (formerly Abbott Scientific Products) as Vice President,
Plasma Supply (through May 1984), General Manager, Plasma Operations (through
October 1981) and Director of Plasma Procurement (through October 1980). In
these capacities, Mr. Gury had executive responsibilities for antibody
procurement and operation of plasmapheresis centers.
THOMAS H. MCLAIN has served as Executive Vice President and Chief Operating
Officer since April 2001. From 1998 to April 2001 Mr. McLain served Nabi
Biopharmaceuticals as Senior Vice President, Corporate Services and Chief
Financial Officer. 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. During his tenure with Bausch & Lomb, Mr. McLain held various
positions of increasing responsibility, 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.
ROBERT B. NASO, PH.D. has served as Senior Vice President Quality, Regulatory
and Product Development, since August 1998. From 1995 to August 1998, Dr. Naso
served Nabi Biopharmaceuticals as Senior Vice President, Research and
Development and General Manager, Rockville Operations. From 1992 to 1995 Dr.
Naso served as Vice President of Research and Development (through 1995) and
Vice President of Research (through 1994) of Univax Biologics, Inc. 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 Senior Vice President of Finance, Chief Financial
Officer and Chief Accounting Officer since April 2001. From August 1999 to April
2001, Mr. Smith served Nabi Biopharmaceuticals as Vice President of Finance and
Chief Accounting Officer and as Senior Director of Finance and Chief Accounting
Officer. Prior to joining Nabi Biopharmaceuticals, 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 Inc., Mr. Smith
practiced with the accounting firm of PricewaterhouseCoopers LLP in both
Australia and the U.S.
C. THOMAS JOHNS has served as Senior Vice President, Manufacturing Operations
since October 2001. From 1997 to October 2001, Mr. Johns served Nabi
Biopharmaceuticals as Vice President of Laboratory Services and Diagnostic
Products and as Senior Director of Laboratory Services. Prior to joining Nabi
Biopharmaceuticals, Mr. Johns served as General Manager of MRL Reference
Laboratory from 1993 to 1997. From 1978 to 1993, Mr. Johns was employed at
Nichols Institute Regional Laboratory where he held various positions of
increasing responsibility in operations.
GARY A. SISKOWSKI has served as Senior Vice President, Sales and Marketing since
October 2001. From June 1998 to October 2001, Mr. Siskowski served Nabi
Biopharmaceuticals as Vice President of New Business Development. Prior to
joining Nabi Biopharmaceuticals, Mr. Siskowski co-founded Advanced Biologics, a
clinical research organization specializing in anti-infectives and served as
Vice President of Business Development. From 1988 to 1994, Mr. Siskowski was
employed at Ortho-McNeil to develop and launch products with the Anti-Infectives
Franchise. From 1969 to 1988, Mr. Siskowski was employed at Roche Laboratories
where he held various positions of increasing responsibility, ultimately holding
the position of Product Director for the Anti-Infectives Franchise.
28
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Nabi Biopharmaceuticals' 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
------ ------
2001
First Quarter 6.375 3.875
Second Quarter 8.500 5.125
Third Quarter 7.740 4.850
Fourth Quarter 11.080 5.450
2000
First Quarter 12.000 4.125
Second Quarter 8.625 3.750
Third Quarter 10.063 5.313
Fourth Quarter 6.938 2.500
The closing price of our common stock on February 22, 2002 was $5.660 per share.
The number of record holders of our common stock at December 29, 2001 was 1,138.
No cash dividends have been previously paid on our common stock and none are
anticipated in 2002. Our credit agreement also prohibits dividend payments.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the five
years ended December 29, 2001 that were derived from our audited consolidated
financial statements.
The data should be read in conjunction with, and are qualified by reference to,
Nabi Biopharmaceuticals' 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.
29
For the Twelve Months Ended
-----------------------------------------------------------------------------------
(Amounts in Thousands, December 29, December 30, December 31, December 31, December 31,
Except Per Share Data) 2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
Statements of Operations Data:
Sales $ 234,829 $ 228,783 $ 233,603 $ 243,087 $ 228,744
Costs of products sold 152,613 160,766 163,407 178,366 180,533
Royalty expense 12,093 11,175 13,739 10,946 6,617
Selling, general and administrative
expense 40,501 37,168 33,282 31,151 25,012
Research and development expense 15,330 14,266 15,469 21,822 19,126
Other operating expenses, principally
freight and amortization 1,500 1,827 1,905 2,169 3,087
Gain on disposition of assets (104,219) -- -- -- --
Other non-recurring items -- (3,875) (1,935) 14,605 5,680
--------- --------- --------- --------- ---------
Operating income (loss) 117,011 7,456 7,736 (15,972) (11,311)
--------- --------- --------- --------- ---------
Interest income 1,204 33 74 48 272
Interest Expense (2,128) (3,581) (4,313) (5,681) (4,712)
Other (expenses) income, net (28) 198 (110) (105) (70)
--------- --------- --------- --------- ---------
Income (loss) before (provision)
benefit for income taxes
and extraordinary item 116,059 4,106 3,387 (21,710) (15,821)
--------- --------- --------- --------- ---------
(Provision) benefit for income taxes (11,377) (87) (43) (47) 4,668
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item 104,682 4,019 3,344 (21,757) (11,153)
Extraordinary item -- 340 -- -- --
--------- --------- --------- --------- ---------
Net income (loss) $ 104,682 $ 4,359 $ 3,344 $ (21,757) $ (11,153)
========= ========= ========= ========= =========
Basic Earnings (Loss) Per Share:
Income (loss) before
extraordinary item $ 2.76 $ 0.11 $ 0.10 $ (0.62) $ (0.32)
Extraordinary item -- 0.01 -- -- --
--------- --------- --------- --------- ---------
Net income (loss) $ 2.76 $ 0.12 $ 0.10 $ (0.62) $ (0.32)
========= ========= ========= ========= =========
Diluted earnings (loss) per share:
Income (loss) before
extraordinary item $ 2.36 $ 0.11 $ 0.09 $ (0.62) $ (0.32)
Extraordinary item -- 0.01 -- -- --
--------- --------- --------- --------- ---------
Net income (loss) $ 2.36 $ 0.12 $ 0.09 $ (0.62) $ (0.32)
========= ========= ========= ========= =========
Balance Sheet Data:
Working capital $ 148,650 $ 39,594 $ 35,999 $ 41,964 $ 63,933
Total assets 310,309 224,487 214,564 218,300 225,906
Notes payable, including current
maturities 78,500 109,535 112,998 118,044 121,081
Total stockholders' equity 187,206 77,394 58,177 54,189 75,663
30
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 29, 2001, December 30,
2000 and December 31, 1999, 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 Biopharmaceuticals is a vertically integrated biopharmaceutical company
committed to unlocking the power of the human immune system to help people with
serious, unmet medical needs. We have a broad product portfolio and significant
research capabilities focused on the development and commercialization of drugs
that prevent and treat infectious, autoimmune and addictive diseases. We have
four marketed biopharmaceutical products, Nabi-HB(TM) [Hepatitis B Immune
Globulin (Human)] for the prevention of hepatitis B infections, WinRho SDF(R)
[Rho (D) Immune Globulin IntravenouS (Human)] for the treatment of acute,
chronic and HIV-related immune thrombocytopenia purpura, Autoplex(R) T
[Anti-Inhibitor Coagulant Complex, Heat Treated] and Aloprim(TM) [(Allopurinol
sodium) for injection], and a vigorous clinical trials program. We have a state
of the art fractionation plant for our own manufacturing of biopharmaceutical
products and for contract manufacturing. Further, we also collect specialty and
non-specific antibodies for use in our products as well as to supply
pharmaceutical and diagnostic customers for the subsequent production of their
products.
RESULTS OF OPERATIONS
Information concerning Nabi Biopharmaceuticals' 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 29, 2001 December 30, 2000 December 31, 1999
- ------- ------------------------------------------------------------------------------------
Biopharmaceutical Products $ 73,439 31.3% $ 72,985 31.9% $ 71,112 30.4%
Antibody Products:
-Specialty antibodies 46,846 19.9 58,037 25.4 53,175 22.8
-Non-specific antibodies 114,544 48.8 97,761 42.7 109,316 46.8
-------- ------- -------- ------- -------- -------
161,390 68.7 155,798 68.1 162,491 69.6
-------- ------- -------- ------- -------- -------
TOTAL $234,829 100.0% $228,783 100.0% $233,603 100.0%
======== ======= ======== ======= ======== =======
2001 AS COMPARED TO 2000
SALES. Biopharmaceutical sales increased in 2001 by approximately $0.5 million
or 1% from 2000 sales. Sales increases for WinRho SDF, which increased more than
35% from prior year levels, and Aloprim, were offset by decreased sales of
Nabi-HB. Sales of Nabi-HB in 2001 decreased approximately 20% from 2000 levels.
Sales of WinRho SDF were limited in 2000 due to product supply issues from the
manufacturer of this product in that year. Patient use survey data reports
growth in patient use of our major products, Nabi-HB and WinRho SDF, in 2001
compared to 2000. During 2001, this increased patient use of Nabi-HB resulted in
lower inventory levels of this product at our pharmaceutical wholesaler
customers. In addition, we have sought to reduce wholesaler inventory levels of
Nabi-HB in anticipation of the launch of this product manufactured at our Boca
Raton, Florida biopharmaceutical manufacturing facility in the first quarter of
2002. Our Boca Raton, Florida biopharmaceutical manufacturing facility received
U.S. Food and Drug Administration ("FDA") approval to manufacture Nabi-HB in
October 2001.
31
Sales of Autoplex T in 2001 and 2000 were limited by contractual product supply
shortfalls from the manufacturer of that product.
Total antibody sales in 2001 increased by $5.6 million from 2000 levels driven
by higher pricing for non-specific antibody products. These increased sales were
achieved despite the sale of the majority of the antibody business in September
2001. Sales of specialty antibodies were approximately 19% lower in 2001 than in
2000 due primarily to the impact of the sale of the majority of the antibody
business.
GROSS PROFIT MARGIN AFTER ROYALTY EXPENSE. Gross profit and related margin after
royalty expense for 2001 was $70.1 million, or 30% of sales, compared to $56.8
million or 25% of sales in 2000. The increase was due primarily to increased
gross profit margin from antibody sales reflecting increased pricing for
non-specific antibody products. Gross profit margin after royalty expense for
the biopharmaceutical business was essentially even in each of 2001 and 2000.
Gross margin from biopharmaceutical sales in 2001 reflects the operating costs
of bringing the Boca Raton biopharmaceutical manufacturing facility on line
following FDA licensure in October 2001. In its initial operation, the
manufacturing capacity of the Boca Raton facility was not fully utilized and
costs related to excess manufacturing capacity were expensed as cost of goods
sold. In 2001, we recorded approximately $1.2 million of excess capacity costs.
Gross profit margin in each of 2001 and 2000 also benefited from non-performance
penalty payments of $6.1 million and $5.1 million, respectively, due to us as a
result of contractual delivery shortfalls by the supplier of Autoplex T.
Royalty expense in 2001 was $12.1 million, or 16% of biopharmaceutical product
sales, compared to $11.2 million, or 15% of biopharmaceutical sales in 2000.
Increased royalty expense in 2001 primarily reflected increased sales of WinRho
SDF in 2001 compared to 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $40.5 million or 17% of sales in 2001, compared to $37.2 million or
16% of sales in 2000. The increase primarily reflects certain one time costs
related to contractual severance payments, management consulting and legal
expenses related to strategic initiatives and incentive compensation. Our sales
and marketing expense relates primarily to the biopharmaceutical business and
was not impacted by the sale of the majority of the antibody business in
September 2001.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $15.3
million or 7% of sales in 2001, compared to $14.3 million or 6% of sales in
2000. The increase in research and development expense primarily reflects
increased support of our Gram Positive program including a boosting trial of
StaphVAX in approximately 70 end stage renal disease patients who received
StaphVAX during the pivotal Phase III trial reported in 2000, increased spending
for Civacir including manufacture of Civacir clinical material in our
biopharmaceutical manufacturing facility in Boca Raton in preparation for human
clinical trials and increased spending for Autoplex T as we continue to evaluate
the steps needed to transfer the manufacture of this product from its current
manufacturer to us. During 2001, other significant research and development
programs included Nabi-HB, primarily related to additional studies, and NicVAX,
as we filed patent applications outside the U.S. In 2001 and 2000, approximately
48% and 47%, respectively, of the total research and development expense were
expended to support advancing our Gram Positive program, including StaphVAX and
Altastaph.
GAIN ON DISPOSITION OF ASSETS. The gain on sale of assets reported in the third
quarter of 2001 represents the excess of proceeds received from the sale of the
majority of the antibody business assets compared to their carrying values as of
September 6, 2001, the effective date of the transaction.
NON-RECURRING CREDIT. During 2000, we reversed restructuring accruals totaling
$3.9 million into income. This was reported as a non-recurring credit.
INTEREST INCOME. Interest income for 2001 was $1.2 million compared to $33
thousand in 2000. Increased interest income reflects interest income from the
net cash proceeds received from the sale of the majority of the antibody
business in September 2001. After elimination of bank debt, we had approximately
$131.0 million in cash and cash equivalents on hand at September 29, 2001.
32
INTEREST EXPENSE. Interest expense for 2001 was $2.1 million, compared to $3.6
million in 2000. The decrease in interest expense is attributable to the
elimination of bank debt in September 2001 as a result of the sale of the
majority of the antibody business and lower bank interest rates offset by the
reduction in capitalized interest during 2001. Capitalized interest relating
primarily to construction of our biopharmaceutical manufacturing facility in
Boca Raton, Florida was $5.2 million for 2001 as compared to $5.8 million for
2000. We received licensure to manufacture Nabi-HB at our Boca Raton facility in
October 2001 and ceased capitalization of interest and other costs at that time.
OTHER FACTORS. The provision for income taxes was $11.4 million for 2001,
compared to $87 thousand in 2000. The provision for income taxes in 2001
included changes in the estimated values of deferred tax assets and liabilities
and the impact of stock option exercises during the year. The 10% effective tax
rate for 2001 differs from the statutory rate due primarily to the reduction in
the valuation allowance associated with utilization of net operating loss
carryforwards.
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.
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 were
manufactured for us by Cangene Corporation ("Cangene") in 2000 and 1999. 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 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 after
royalty expense 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
33
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 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 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 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. This
antibody collection center was included in the centers sold in conjunction with
the sale of the majority of the antibody collection business in September 2001.
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. We received licensure to
manufacture Nabi-HB at our Boca Raton facility in October 2001 and ceased
capitalization of interest and other costs at that time.
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.
LIQUIDITY AND CAPITAL RESOURCES
As of December 29, 2001, cash and cash equivalents were $131.2 million and total
debt which consisted of convertible debt totaled $78.5 million. Current assets
exceeded current liabilities by $148.7 million as of December 29, 2001. Cash
provided from operations in 2001 was $24.1 million as compared to $9.8 million
in 2000.
In September 2001, we announced the completion of the sale of the majority of
the operating assets of the antibody business for $153.0 million in cash. After
paying professional fees, we received net cash of
34
$152.2 million. This cash received from the sale is reported in cash from
investing activities. These proceeds were used to eliminate bank debt and will
be used to fund further development of our research and development product
pipeline and grow our biopharmaceutical business.
At December 29, 2001, our credit agreement provided for a revolving credit
facility of up to $45.0 million, subject to certain borrowing base restrictions,
and a $5.0 million term loan. The credit agreement matures in September 2002. We
had no borrowings under the revolving credit and term loan agreement at December
29, 2001 and availability under this credit facility was $25.6 million at
December 29, 2001. The credit agreement is secured by substantially all of our
assets, requires the maintenance of certain financial covenants and prohibits
the payment of dividends.
At December 29, 2001 we had $78.5 million of 6.5% Convertible Subordinated
Notes due February 1, 2003 ("Notes"). 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 prior to February 1, 2003.
In 2002, we plan to make capital expenditures of up to $20.0 million, including
a $3.0 million capital commitment to Dow Biopharmaceutical Contract
Manufacturing (formerly Collaborative BioAlliance)("Dow") in connection with the
transfer to Dow of the manufacturing process for StaphVAX. Except for the
commitment to Dow, our planned capital expenditures may be cancelled without
material costs or penalties.
We believe that cash flow from operations and cash and cash equivalents on hand
will be sufficient to meet our anticipated cash requirements for 2002.
Set fourth below is a schedule of our current contractual obligations and
commercial commitments for the specified fiscal years:
CONTRACTUAL OBLIGATIONS
After
(Dollars in Thousands) 2002 2003 2004 2005 2006 2006 Total
------- ------- ------- ------- ------- ------- -------
Long-term debt $ -- $78,500 $ -- $ -- $ -- $ -- $78,500
Operating leases 2,391 2,108 1,070 689 430 497 7,185
Dow commitment 2,987 -- -- -- -- -- 2,987
------- ------- ------- ------- ------- ------- -------
Total $ 5,378 $80,608 $ 1,070 $ 689 $ 430 $ 497 $88,672
======= ======= ======= ======= ======= ======= =======
SIGNIFICANT ACCOUNTING POLICIES
Property, Plant and Equipment and Depreciation
We incurred $90.3 million to construct our biopharmaceutical manufacturing
facility in Boca Raton, Florida and received approval to manufacture our own
antibody-based therapy, Nabi-HB, at this facility from the FDA in October 2001.
In constructing the facility for its intended use, we incurred approximately
$26.8 million in direct costs of acquiring the building, building systems,
manufacturing equipment and computer systems. We also incurred a total of $63.5
million of costs related to validation of the facility to operate in a FDA
approved environment and capitalized interest. Costs related to validation and
capitalized interest have been allocated to the building, building systems,
manufacturing equipment and computer systems. Buildings and building systems are
depreciated on a straight-line basis over 39 years and 20 years, respectively,
the estimated useful lives of these assets. The specialized manufacturing
equipment and computer systems are depreciated using the units-of-production
method
35
of depreciation. The units-of-production method of depreciation is based on
management's estimate of production levels. Management believes the
units-of-production method is appropriate for these specialized assets. Use of
the units-of-production method of depreciation may result in significantly
different financial results of operation than straight-line depreciation in
periods of lower than average or higher than average production levels.
Intangible Assets
In 2000 we entered into a contract manufacturing agreement with Dow to establish
commercial manufacturing capability for StaphVAX. The manufacturing process for
StaphVAX is being transferred to Dow from our pilot manufacturing plant in
Rockville, Maryland. The contract manufacturing agreement requires us to make
certain payments to Dow to prepare the Dow facility for the future manufacture
of StaphVAX and to ensure that we have access to commercial vaccine
manufacturing capacity. These payments are recorded as a Manufacturing Right and
included in Intangible Assets. Amortization of the Manufacturing Right will
commence when commercial manufacture of StaphVAX commences at Dow. As of
December 29, 2001, the Manufacturing Right was $4.7 million.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," (SFAS No. 141)
and No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 141
eliminated the pooling of interest method of accounting for business
combinations initiated after June 30, 2001. Under SFAS No. 142, goodwill and
indefinite lived intangible assets are no longer amortized but are reviewed
annually (or more frequently if impairment indicators arise) for impairment. The
amortization provisions of SFAS No. 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangibles acquired
prior to July 1, 2001, companies are required to adopt SFAS No. 142 in their
fiscal year beginning after December 15, 2001. In conjunction with the sale of
the majority of our antibody business, disclosed in Note 10, we disposed of all
goodwill reflected on our balance sheet.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not engage in trading market risk sensitive instruments or purchasing
hedging instruments or "other than trading" instruments that are likely to
expose us to significant market risk, whether interest rate, foreign currency
exchange, commodity price or equity price risk.
INTEREST RATE RISK. Our primary market risk exposure is that of interest rate
risk on borrowings under our credit facility, which are subject to interest
rates based on the bank's base rate. Our outstanding revolving credit facility
and term loan are sensitive to changes in U.S. interest rates, specifically the
U.S. prime lending rate, and expire in September 2002. Outstanding variable rate
debt under the revolving credit facility at December 29, 2001 was zero.
At December 29, 2001, we had outstanding debt in the form of convertible
subordinated notes in the amount of $78.5 million, which are due February 1,
2003. The notes bear interest at a fixed rate of 6.5% and have no interest rate
risk.
At December 29, 2001, we had cash and cash equivalents in the amount of $131.2
million. Cash equivalents consist of money market funds and auction rate
securities with maturities of three months or less placed with major financial
institutions.
Our exposure to market risk is confined to our cash and investments. We maintain
an investment portfolio of money market funds, qualified purchaser funds, and
auction rate securities. The securities in our investment portfolio are not
leveraged, and are, due to their very short-term nature, subject to minimal
interest rate risk. We currently do not hedge interest rate exposure. Because of
the short-term
36
maturities of our investments, we do not believe that a change in market rates
would have a significant negative impact on the value of our investment
portfolio.
The primary objective of our investment activities is to preserve principal
while at the same time maximizing yields without significantly increasing risk.
To achieve this objective, we invest our excess cash in debt instruments of the
U.S. Government and its agencies, bank obligations, repurchase agreements and
high-quality corporate issuers, and, by policy, restrict our exposure to any
single corporate issuer by imposing concentration limits. To minimize the
exposure due to adverse shifts in interest rates, we maintain investments at an
average maturity of generally less than one month.
The table below presents the principal amounts and weighted-average interest
rates by year of maturity for our investment portfolio:
Fair Value at
(Dollars in Millions) December 29, 2001
- --------------------- -----------------
Assets:
Cash equivalents $ 126.388
Average interest rate 2.62%
Liabilities:
6.5% convertible subordinated notes due in 2003 $ 78.500
Average interest rate 6.5%
37
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of Nabi Biopharmaceuticals
We have audited the accompanying consolidated balance sheets of Nabi
Biopharmaceuticals (f/k/a "Nabi") as of December 29, 2001 and December 30, 2000,
and the related consolidated statements of operations, changes in stockholder's
equity, and cash flows for each of the three years in the period ended December
29, 2001. 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
Biopharmaceuticals as of December 29, 2001 and December 30, 2000, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 29, 2001 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 6, 2002,
except for Note 21 as to which the date is March 15, 2002
38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
December 29, December 30,
(Amounts in Thousands, Except Per Share Data) 2001 2000
- --------------------------------------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 131,192 $ 1,554
Trade accounts receivable, net 36,039 38,315
Inventories, net 18,138 32,602
Prepaid expenses and other current assets 7,694 5,405
--------- ---------
TOTAL CURRENT ASSETS 193,063 77,876
PROPERTY AND EQUIPMENT, NET 107,866 120,188
OTHER ASSETS:
Goodwill -- 12,509
Intangible assets, net 6,859 7,091
Other, net 2,521 6,823
--------- ---------
TOTAL ASSETS $ 310,309 $ 224,487
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 20,654 $ 15,923
Accrued expenses 23,759 21,359
Notes payable -- 1,000
--------- ---------
TOTAL CURRENT LIABILITIES 44,413 38,282
NOTES PAYABLE 78,500 108,535
OTHER LIABILITIES 190 276
--------- ---------
TOTAL LIABILITIES 123,103 147,093
--------- ---------
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; 38,445 and 37,833 shares issued,
respectively 3,845 3,783
Capital in excess of par value 158,687 152,642
Treasury stock, 174 shares at cost (977) --
Retained earnings (deficit) 25,651 (79,031)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 187,206 77,394
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 310,309 $ 224,487
========= =========
See accompanying notes to consolidated financial statements
39
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Twelve Months Ended
--------------------------------------------------------
(Amounts in Thousands, Except Per Share Data) December 29, 2001 December 30, 2000 December 31, 1999
- --------------------------------------------- ----------------- ----------------- -----------------
SALES $ 234,829 $ 228,783 $ 233,603
COSTS AND EXPENSES:
Costs of products sold 152,613 160,766 163,407
Royalty expense 12,093 11,175 13,739
Selling, general and administrative expense 40,501 37,168 33,282
Research and development expense 15,330 14,266 15,469
Other operating expenses, principally freight 1,500 1,827 1,905
and amortization
Gain on disposition of assets (104,219) -- --
Other non-recurring items -- (3,875) (1,935)
--------- --------- ---------
OPERATING INCOME 117,011 7,456 7,736
--------- --------- ---------
INTEREST INCOME 1,204 33 74
INTEREST EXPENSE (2,128) (3,581) (4,313)
OTHER (EXPENSES) INCOME, NET (28) 198 (110)
--------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME 116,059 4,106 3,387
TAXES AND EXTRAORDINARY ITEM
PROVISION FOR INCOME TAXES (11,377) (87) (43)
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 104,682 4,019 3,344
EXTRAORDINARY ITEM -- 340 --
--------- --------- ---------
NET INCOME $ 104,682 $ 4,359 $ 3,344
========= ========= =========
BASIC EARNINGS PER SHARE:
INCOME BEFORE EXTRAORDINARY ITEM $ 2.76 $ 0.11 $ 0.10
EXTRAORDINARY ITEM -- 0.01 --
--------- --------- ---------
NET INCOME $ 2.76 $ 0.12 $ 0.10
========= ========= =========
DILUTED EARNINGS PER SHARE:
INCOME BEFORE EXTRAORDINARY ITEM $ 2.36 $ 0.11 $ 0.09
EXTRAORDINARY ITEM -- 0.01 --
--------- --------- ---------
NET INCOME $ 2.36 $ 0.12 $ 0.09
========= ========= =========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 37,980 36,604 34,934
========= ========= =========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 44,872 37,739 35,841
========= ========= =========
See accompanying notes to consolidated financial statements
40
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumu-
lated
Capital other
Common Stock in Compre-
Common Stock Warrants Excess Retained hensive Stock-
--------------- --------------- of Par Treasury Earnings Income holders'
(In Thousands) Shares Amount Shares Amount Value Stock (Deficit) (Loss) Equity
- -------------- ------ ------ ------ ------ ------- -------- --------- ----------- --------
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
------ --------- --- ---- --------- --------- --------- --------- ---------
Stock options exercised 475 48 -- -- 1,808 -- -- -- 1,856
Compensation expense related to
modified stock options -- -- -- -- 1,756 -- -- -- 1,756
Tax benefit from stock options
exercised -- -- -- -- 1,871 -- -- -- 1,871
Net income for the year -- -- -- -- -- -- 104,682 -- 104,682
Stock issued under Employee
Stock Purchase Plan 130 13 -- -- 573 -- -- -- 586
Purchase of treasury
stock at cost -- -- -- -- -- (977) -- -- (977)
Other 7 1 -- -- 37 -- -- -- 38
------ --------- --- ---- --------- --------- --------- --------- ---------
BALANCE AT DECEMBER 29, 2001 38,445 $ 3,845 233 $ -- $ 158,687 $ (977) $ 25,651 $ -- $ 187,206
====== ========= === ==== ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements
41
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twelve Months Ended
----------------------------------------------------
December 29, December 30, December 31,
(Dollars in Thousands) 2001 2000 1999
- ---------------------- ------------ ------------ ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 104,682 $ 4,359 $ 3,344
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,491 9,838 10,128
Provision for doubtful accounts 627 380 (136)
Provision for slow moving or obsolete inventory 3,514 2,625 2,235
Non-cash compensation 1,153 -- --
Deferred income taxes 4,258 -- --
Gain on sale of assets (104,219) -- --
Other 117 132 116
Non-recurring item -- (3,875) (1,935)
Extraordinary item -- (340) --
Changes in assets and liabilities:
Decrease (increase) in trade accounts receivable 1,648 (4,676) 6,146
(Increase) decrease in inventories (3,318) 706 35
(Increase) decrease in prepaid expenses and
other assets (2,519) 2,745 (1,297)
Increase in other assets 27 (177) (43)
Increase (decrease) in accounts payable and
accrued liabilities 6,719 (1,906) 4,671
Increase in income taxes payable 1,871 -- --
--------- --------- ---------
Total adjustments (80,631) 5,452 19,920
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,051 9,811 23,264
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of assets, net of closing
costs 152,182 -- 2,518
Capital expenditures (13,052) (18,983) (21,036)
Expenditures for other assets (3,387) (1,809) --
--------- --------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 135,743 (20,792) (18,518)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Repayments under line of credit, net (26,702) (759) (5,002)
Repayments of term debt (4,333) (667) --
Other debt repayments -- (37) (43)
Purchase of treasury stock (977) -- --
Proceeds from exercise of employee stock options 1,846 3,940 89
Issuance of common stock, net -- 9,252 --
--------- --------- ---------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (30,156) 11,729 (4,956)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 129,638 $ 748 $ (210)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,554 806 1,016
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 131,192 $ 1,554 $ 806
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
INTEREST PAID, NET OF CAPITALIZED INTEREST $ 2,042 $ 2,966 $ 3,576
========= ========= =========
INCOME TAXES PAID (REFUNDED) $ 4,386 $ (38) $ (103)
========= ========= =========
NON-CASH EXTINGUISHMENT OF CONVERTIBLE SUBORDINATED
DEBENTURES IN EXCHANGE FOR COMMON STOCK $ -- $ 2,000 $ --
========= ========= =========
See accompanying notes to consolidated financial statements
42
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BUSINESS AND ORGANIZATION
Nabi Biopharmaceuticals (formerly known as "Nabi") is a vertically integrated
biopharmaceutical company committed to unlocking the power of the human immune
system to help people with serious, unmet medical needs. We have a broad product
portfolio and significant research capabilities focused on the development and
commercialization of drugs that prevent and treat infectious, autoimmune and
addictive diseases. We have four marketed biopharmaceutical products,
Nabi-HB(TM) [Hepatitis B Immune Globulin (Human)] for the prevention of
hepatitis B infections, WinRho SDF(R) [Rho (D) Immune Globulin Intravenous
(Human)] for the treatment of acute, chronic and HIV-related immune
thrombocytopenia purpura, Autoplex(R) T [Anti-Inhibitor Coagulant Complex, Heat
Treated] and Aloprim(TM) [(Allopurinol sodium) for injection], and a vigorous
clinical trials program. We have a state of the art fractionation plant for our
own manufacturing of biopharmaceutical products and for contract manufacturing.
Further, we also collect specialty and non-specific antibodies for use in our
products as well as to supply pharmaceutical and diagnostic customers for the
subsequent production of their products.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Nabi Biopharmaceuticals 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 2000 and 1999 consolidated financial
statements have been reclassified to conform to the current year's presentation.
REVENUE RECOGNITION: Revenue from product sales is recognized when products are
shipped and 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.
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. Funding from third party grants are
applied directly to related expenses.
ADVERTISING EXPENSES: We account for advertising costs under guidance set forth
in Statement of Position 93-7, "Reporting on Advertising Costs" with advertising
costs expensed as incurred. Advertising expenses for the years ended December
29, 2001, December 30, 2000 and December 31, 1999 amounted to $3.4 million, $5.0
million and $3.4 million, respectively.
EARNINGS PER SHARE: Basic earnings per share are 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
43
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 29, 2001 and December
30, 2000, because of the relatively short maturity of these instruments.
Information regarding long-term debt is included in Note 8.
Cash equivalents consist of money market funds and auction rate securities with
maturities of three months or less placed with major financial institutions.
We sell a significant portion of our products through third-party resellers and
major pharmaceutical companies and, as a result, maintain individually
significant receivable balances with major customers. If the financial condition
or operations of these customers were to deteriorate, our results could be
adversely affected. Credit terms to these customers generally range from 30 to
60 days. We evaluate and monitor the credit worthiness of each customer on a
case-by-case basis. Allowances are maintained for potential credit losses.
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 generally recognized on the straight-line method over the
estimated useful lives of the assets.
Depreciation for certain specialized production equipment in our Boca Raton,
Florida biopharmaceutical manufacturing facility is calculated over their
remaining useful lives using the units-of-production method. We evaluate the
remaining lives and recoverability of this equipment periodically based on the
appropriate facts and circumstances.
Depreciable lives of property and equipment are as follows:
Asset Life
- ----- ----
Buildings 35 - 39 Years
Building systems 20 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.
INTANGIBLE ASSETS: Intangible assets represent the fair values of certain assets
acquired in product acquisitions including trademarks and trademark
registrations and the cost of the right to use manufacturing capacity at our
contract manufacturer 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 at least annually.
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
44
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be fully recoverable or at least
annually. 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 contains a summary of the pro forma effects to reported
net income and earnings per share for 2001, 2000 and 1999 as if we had elected
to recognize compensation expense based on the fair market value of the options
granted at grant date as prescribed by SFAS No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION."
NEW ACCOUNTING PRONOUNCEMENTS: In July 2001, the Financial Accounting Standards
Board issued Statements of Financial Accounting Standards No. 141, "Business
Combinations," (SFAS No. 141) and No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142). SFAS No. 141 eliminated the pooling of interest method
of accounting for business combinations initiated after June 30, 2001. Under
SFAS No. 142, goodwill and indefinite lived intangible assets are no longer
amortized but are reviewed annually (or more frequently if impairment indicators
arise) for impairment. The amortization provisions of SFAS No. 142 apply to
goodwill and intangible assets acquired after June 30, 2001. With respect to
goodwill and intangibles acquired prior to July 1, 2001, companies are required
to adopt SFAS No. 142 in their fiscal year beginning after December 15, 2001. In
conjunction with the sale of the majority of our antibody business, disclosed in
Note 10, we disposed of all of goodwill reflected on our balance sheet.
NOTE 3 TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are comprised of the following:
December 29, December 30,
Dollars in Thousands 2001 2000
-------------------- ------------ ------------
Trade accounts receivable $ 37,001 $ 38,732
Allowance for doubtful accounts (962) (417)
-------- --------
TOTAL $ 36,039 $ 38,315
======== ========
NOTE 4 INVENTORES
The components of inventories are as follows:
December 29, December 30,
Dollars in Thousands 2001 2000
-------------------- ------------ ------------
Finished goods $ 13,919 $ 28,852
Work in process 3,265 1,055
Raw materials 954 2,695
-------- --------
TOTAL $ 18,138 $ 32,602
======== ========
45
NOTE 5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and related allowances for depreciation and
amortization are summarized below:
December 29, December 30,
Dollars in Thousands 2001 2000
-------------------- ------------ ------------
Information systems $ 21,968 $ 32,392
Leasehold improvements 6,625 17,155
Machinery and equipment 47,425 9,845
Land and buildings 47,572 8,628
Building systems 5,639 --
Furniture and fixtures 3,078 4,360
Construction in progress 480 83,249
--------- ---------
Total property, plant and equipment 132,787 155,629
Less accumulated depreciation and amortization (24,921) (35,441)
--------- ---------
TOTAL $ 107,866 $ 120,188
========= =========
We received U.S. Food and Drug Administration ("FDA") licensure to manufacture
Nabi-HB at our biopharmaceutical manufacturing facility in Boca Raton, Florida
in October 2001. Capitalization of interest and other costs ceased at that time
and the facility was placed into service. Total costs of construction the Boca
Raton facility, including the building, building systems, plant equipment and
information systems were approximately $90.3 million. Validation costs and
capitalized interest related directly to preparing the facility for its intended
use totaled $63.5 million. Interest capitalized in association with the
manufacturing facility and systems development projects amounted to $5.2
million, $5.8 million and $4.7 million during 2001, 2000 and 1999, respectively.
Depreciation and amortization expense during 2001, 2000 and 1999 includes
depreciation and amortization of property, plant and equipment of $7.8 million
for all three years.
46
NOTE 6 OTHER ASSETS
Other assets consist of the following:
December 29, December 30,
Dollars in Thousands 2001 2000
-------------------- ------------ ------------
Goodwill $ -- $ 18,452
Less accumulated amortization -- (5,943)
-------- --------
TOTAL $ -- $ 12,509
======== ========
Intangible assets $ 4,853 $ 11,526
Manufacturing right 4,721 1,484
Less accumulated amortization (2,715) (5,919)
-------- --------
TOTAL $ 6,859 $ 7,091
======== ========
Other, primarily deferred tax assets and
deferred loan costs $ 6,667 $ 10,263
Less accumulated amortization (4,146) (3,440)
-------- --------
TOTAL $ 2,521 $ 6,823
======== ========
NOTE 7 ACCRUED EXPENSES
Accrued expenses consist of the following:
December 29, December 30,
Dollars in Thousands 2001 2000
-------------------- ------------ ------------
Accrued royalties and product costs $ 8,558 $ 9,892
Employee compensation and benefits 6,829 7,346
Accrued contract settlement 3,191 --
Accrued interest 2,165 2,448
Accrued taxes 1,287 805
Accrued research and development 406 --
Other 1,323 868
------- -------
TOTAL $23,759 $21,359
======= =======
47
NOTE 8 NOTES PAYABLE
Notes payable consist of the following:
December 29, December 30,
Dollars in Thousands 2001 2000
-------------------- ------------ ------------
Bank indebtedness:
Revolving credit facility $ -- $ 26,702
Term loan -- 4,333
--------- ---------
Total bank indebtedness -- 31,035
6.5% Convertible Subordinated Notes 78,500 78,500
Other -- --
--------- ---------
Total notes payable 78,500 109,535
Current maturities -- (1,000)
--------- ---------
Notes payable, long-term $ 78,500 $ 108,535
========= =========
At December 29, 2001, the annual maturity of debt is $78.5 million in 2003.
There is no short-term indebtedness outstanding at December 29, 2001. Short-term
indebtedness at December 30, 2000 had a weighted-average interest rate of
approximately 6.55%.
At December 29, 2001, our credit agreement provided for a revolving credit
facility of up to $45.0 million subject to certain borrowing base restrictions,
and a $5.0 million term loan. The credit agreement matures in September 2002.
There were no borrowings under the revolving credit and term loan agreement at
December 29, 2001 as compared to $31.0 million at December 30, 2000, and
availability was approximately $25.6 million at December 29, 2001. 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 29, 2001,
we had outstanding letters of credit for approximately $0.5 million that reduce
our availability under the revolving credit facility.
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 29, 2001, the fair value of our Notes was
approximately $76.2 million as compared to $54.5 million at December 30, 2000.
The fair value was estimated using an independently quoted market price.
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
48
placement were used to reduce borrowings and increase availability under our
existing bank line of credit. The shares of common stock and a warrant to the
placement agent 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 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%.
TREASURY STOCK
In September 2001, our Board of Directors approved the repurchase of up to $5.0
million of our common stock in the open market or in privately negotiated
transactions. Repurchases will allow us to have treasury stock available to
support our stock option and employee stock purchase programs. During 2001, we
acquired 174,400 shares of Nabi Biopharmaceuticals stock for approximately $1.0
million under this program and have accounted for the acquired stock as treasury
stock.
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 zero
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.
Related to the sale of the operating assets of a majority of our antibody
collection business and our testing laboratory in September 2001, the Board of
Directors approved the extension of the exercise period after termination of
employment from 90 days to four years for vested options held by employees whose
positions were terminated by us in the transaction. As a result of this
modification, we recognized a compensation expense against the gain on the sale
of $1.2 million reflecting the difference between the fair market value on the
date of modification and the exercise price of the vested options.
We also maintain a Stock Option 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 six months after the date of grant at an
exercise price equal to the fair market value of the underlying common stock at
the date of grant.
At December 29, 2001, there were options outstanding under all of our stock
plans to acquire 7.4 million shares of our common stock of which 4.1 million are
exercisable. Additionally, 1.5 million shares of common stock are reserved for
future grants under the plans.
49
Stock options granted and outstanding under these plans as of December 29, 2001
are presented below:
Exercise Price Weighted Average
Options Per Share Exercise Price
-------------- ---------------- ----------------
(In Thousands)
BALANCE AT DECEMBER 31, 1998 4,991 $ .19 - $ 13.75 7.05
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 5.77
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 6.18
Granted 1,952 4.50 - 9.99 5.06
Exercised or canceled (1,600) .19 - 13.75 5.68
------ ----------------
BALANCE AT DECEMBER 29, 2001 7,392 $ .19 - 13.75 5.99
====== ================
Outstanding Exercisable
---------------------------------------- ---------------------------
Options Average Average Options
(In Years Exercise (In Exercise
Exercise Price Range Thousands) Remaining Price Thousands) Price
- -------------------- ---------- --------- -------- ---------- --------
$ .19 - $ 4.25 2,321 6.1 3.02 1,565 3.05
$ 4.44 - $ 7.97 4,007 7.6 6.12 1,537 6.65
$ 8.00 - $ 11.125 616 5.2 10.76 568 10.90
$ 12.97 - $ 13.75 448 4.0 13.73 449 13.73
----- -----
TOTAL 7,392 4,119
===== =====
The following information reflects our pro forma income and 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 2001 2000 1999
------------------------------------------- ------- -------- --------
Net income (loss) $98,552 $ (675) $(1,744)
Basic earnings (loss) per share $ 2.59 $ (0.02) $ (0.05)
Diluted earnings (loss) per share $ 2.22 $ (0.02) $ (0.05)
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%;
50
and expected risk-free interest rates of 4-7%. The weighted-average estimated
fair value of options granted during 2001, 2000, and 1999 was $3.58, $4.95 and
$1.90, 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 130,001 and 76,973 shares of
common stock during 2001 and 2000, respectively, pursuant to this plan at an
average price per common share of $4.51 and $4.04.
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 29, 2001, 9,322,981 shares of common stock in the aggregate were
reserved for issuance related to stock options, warrants and employee benefit
plans and 5,607,143 shares were reserved for issuance related to convertible
debt.
NOTE 10 SALE OF ASSETS
On September 6, 2001, we sold the operating assets of a majority of our antibody
collection business and our testing laboratory for $153.0 million in cash. The
assets sold were certain real estate, leasehold interests, fixtures, furniture,
tools, machinery and equipment, other fixed assets, antibody inventories and
related supplies, contracts, agreements, arrangements and/or commitments,
licenses and permits, business and financial records, intellectual property and
goodwill related to the operation of the 47 antibody collection centers and our
testing laboratory included in the transaction.
The following is a summary of the components of the gain on the sale of assets:
Dollars in Thousands
--------------------
Gross proceeds from sale $ 152,997
Net investment in transferred operations:
Fixed assets (17,423)
Goodwill/intangibles (15,024)
Inventory (13,291)
Other working capital adjustments 2,709
Transaction costs (5,749)
---------
Gain on sale of assets before tax $ 104,219
=========
51
Transaction costs include $2.4 million of cash closing costs.
We were advised in the transaction by an investment bank, the president of which
is a member of our Board of Directors. The investment bank's services were
utilized due to its specific experience in our industry. We believe the
professional fees paid of $1.5 million were commensurate with market rates for
such services in this type of transaction.
NOTE 11 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 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 continued in operation and was later sold
in the transaction described above in Note 10. 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. This antibody collection center was
included in the centers sold as part of the sale of the majority of the antibody
collection business in September 2001. Refer to Note 10.
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 $ --
========
52
NOTE 12 INCOME TAXES
Income before income taxes was taxed under the following jurisdictions:
For the Years Ended
-----------------------------------------------------
December 29, December 30, December 31,
Dollars in Thousands 2001 2000 1999
- -------------------- ----------- ------------ ------------
Domestic $116,059 $ 4,106 $ 933
Foreign -- -- 2,454
-------- -------- --------
TOTAL $116,059 $ 4,106 $ 3,387
======== ======== ========
The provision for income taxes consists of the following:
For the Years Ended
---------------------------------------------------
December 29, December 30, December 31,
Dollars in Thousands 2001 2000 1999
- -------------------- ----------- ------------ ------------
Current:
Federal $ (4,119) $ -- $ --
State (3,000) (43) (47)
-------- -------- --------
SUBTOTAL $ (7,119) $ (43) $ (47)
Deferred:
Federal $ (4,169) $ -- $ --
State (89) -- --
-------- -------- --------
SUBTOTAL $ (4,258) $ -- $ --
-------- -------- --------
TOTAL $(11,377) $ (43) $ (47)
======== ======== ========
53
Deferred tax assets (liabilities) are comprised of the following:
December 29, December 30,
Dollars in Thousands 2001 2000
-------------------- ------------ ------------
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 1,040 $ 22,990
Capitalized research and development 3,473 4,859
Research tax credit 4,296 4,329
Inventory reserve and capitalization 2,174 1,575
Amortization 2,178 2,511
Bad debt reserve 350 155
Depreciation 709 1,041
Alternative minimum tax credit 3,148 900
Deferred income 1,119 39
Other 1,556 2,548
-------- --------
20,043 40,947
Valuation allowance -- (34,307)
-------- --------
Deferred tax assets 20,043 6,640
DEFERRED TAX LIABILITIES:
Depreciation (17,141) (922)
Other (1,442) --
-------- --------
Deferred tax liabilities (18,583) (922)
-------- --------
Net deferred tax assets $ 1,460 $ 5,718
======== ========
During the year ended December 29, 2001, we recognized tax benefits related to
the exercise of employee stock options in the amount of $1.9 million. This
benefit was recorded to capital in excess of par value.
In November 1995, Univax, a publicly traded biopharmaceutical company, was
merged with and into Nabi Biopharmaceuticals. 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
net operating loss carryforwards, capitalized research and development expense
and research tax credit carryforwards.
We have research tax credit carryforwards of $4.3 million that expire in varying
amounts through 2020. We have alternate minimum tax credit carryforwards of $3.1
million that are available to offset future regular tax liabilities, and do not
expire. We also have net operating loss carryforwards of approximately $2.9
million that expire at various dates beginning in 2010.
The ultimate realization of the remaining deferred tax assets is largely
dependent on our ability to generate sufficient future taxable income. The
change in the valuation allowance during 2001 and 2000 was $34.3 million and
$0.6 million, respectively.
54
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 29, December 30, December 31,
2001 2000 1999
------------ ------------ ------------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 2.8 1.4 0.8
Goodwill and other amortization 2.6 7.1 4.6
Transfer of German operations -- -- (37.7)
Merger transaction cost -- (1.1) (1.1)
Decrease in valuation allowance (30.2) (14.1) (4.7)
Tax credits (0.4) (25.2) --
Other -- (1.0) 4.4
---- ---- ----
Total 9.8% 2.1% 1.3%
==== ==== ====
NOTE 13 EARNINGS PER SHARE
The following is a reconciliation between basic and diluted earnings per share
for income before extraordinary item for the years ended December 29, 2001,
December 30, 2000 and December 31, 1999:
Effect of Dilutive
Securities:
----------------------------
Stock
options
and other
Amounts in Thousands, Except Basic dilutive Convertible Diluted
Per Share Data EPS Securities notes EPS
- ---------------------------- ----- ---------- ----------- --------
2001
Income before extraordinary item $104,682 -- 1,176 $105,858
Shares 37,980 1,285 5,607 44,872
Per-share amount $ 2.76 -- 0.21 $ 2.36
2000
Income before extraordinary item $ 4,019 -- -- $ 4,019
Shares 36,604 1,135 -- 37,739
Per-share amount $ 0.11 -- -- $ 0.11
1999
Income before extraordinary item $ 3,344 -- -- $ 3,344
Shares 34,934 907 -- 35,841
Per-share amount $ 0.10 -- -- $ 0.09
55
NOTE 14 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. Effective December 31, 2001, our two
defined contribution plans were merged into a single contribution plan and the
discretionary company match was increased up to 4% of the participant's earnings
commencing in 2002. Our matching contributions to the plans were approximately
$0.4 million in 2001 and $0.5 million in each of the years 2000 and 1999.
NOTE 15 LEASES
We conduct certain 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 $6.6 million, $7.2 million and $6.1 million for
the years ended December 29, 2001, December 30, 2000 and December 31, 1999,
respectively.
As of December 29, 2001, 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
- ----------- --------------------
2002 $ 2,391
2003 2,108
2004 1,070
2005 689
2006 430
Thereafter 497
--------
Total minimum lease commitments $ 7,185
========
NOTE 16 RELATED PARTY TRANSACTIONS
At December 29, 2001, notes receivable from corporate officers aggregated
$162,000, which bear interest at the applicable federal rates and mature on
December 31, 2002. Notes receivable from corporate officers are expected to be
paid in full by the end of February 2002. At December 30, 2000, notes receivable
from corporate officers aggregated $337,000 at an interest rate equal to prime.
Repayment is expected in the first quarter of 2002.
In 2001, we engaged an investment bank, the president of which is a member of
our Board of Directors, to provide certain services to us in connection with our
review and implementation of a corporate expansion strategy. This engagement,
which may be terminated by either party upon thirty days' notice, provides for a
quarterly retainer of $150,000 and additional fees under certain circumstances.
During 2001, we paid this investment bank the sum of $100,000 under this
engagement. We believe the terms of the engagement are no less favorable to us
than would have been obtained from an unrelated party.
56
This investment bank also advised us and received a fee in connection with the
sale of the majority of the antibody business. Refer to Note 10.
NOTE 17 STRATEGIC ALLIANCES, LICENSES AND ROYALTY AGREEMENTS
Effective April 1999, we entered into a manufacturing agreement with Cangene for
the manufacture of Nabi-HB that superseded an agreement entered into in 1997.
The manufacturing agreement requires us to purchase a specified minimum amount
which we met before the end of 2001. 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 agreements
terminate in March 2002. 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 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 second twelve-month
extension beginning in May 2001. 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 2002 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 2003. If
the rights revert to Baxter and Baxter later sells these rights, Nabi
Biopharmaceuticals 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 principal supplier of antibody collection supplies to Nabi
Biopharmaceuticals.
In 1999, we entered into a five-year agreement with DSM Catalytica
Pharmaceuticals (formerly 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, GlaxoSmithKline ("GSK") has not commercialized the product within
five years from the effective date of the agreement.
NOTE 18 COMMITMENTS AND CONTINGENCIES
We are a party to litigation in the ordinary course of business. We do not
believe that any such litigation will have a material adverse effect on our
business, financial position or results of operations.
In May 2000, we completed an agreement with Dow for the contract production and
commercial supply of StaphVAX(R) (STAPHYLOCOCCUS AUREUS Polysaccharide Conjugate
Vaccine). Under terms of the contract production agreement, as of December 29,
2001, the aggregate future commitments are approximately $3.0 million payable in
2002.
57
NOTE 19 INDUSTRY SEGMENT INFORMATION
We manage our operations in two reportable segments, the biopharmaceutical
products and antibody products segments. 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
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 accounting policies for each of the segments are the same as those described
in the summary of significant accounting policies. There are no inter-segment
sales. We evaluate the performance of each segment based on operating profit or
loss. Interest expense and income taxes are not allocated.
58
Information regarding our operations and assets for the two industry segments is
as follows:
For the Years Ended
-----------------------------------------------
December 29, December 30, December 31,
Dollars in Thousands 2001 2000 1999
- -------------------- ------------ ------------ ------------
SALES:
Biopharmaceutical products $ 73,439 $ 72,985 $ 71,112
Antibody products 161,390 155,798 162,491
--------- --------- ---------
$ 234,829 $ 228,783 $ 233,603
========= ========= =========
OPERATING INCOME:
Biopharmaceutical products $ 11,663 $ 17,614 $ 5,434
Antibody products 105,348 (10,158) 2,302
--------- --------- ---------
$ 117,011 $ 7,456 $ 7,736
========= ========= =========
DEPRECIATION AND AMORTIZATION EXPENSE:
Biopharmaceutical products $ 2,282 $ 1,926 $ 2,159
Antibody products 6,477 7,166 7,281
--------- --------- ---------
$ 8,759 $ 9,092 $ 9,440
========= ========= =========
NON-RECURRING ITEM:
Biopharmaceutical products $ -- $ (3,012) $ --
Antibody products -- (863) (1,935)
--------- --------- ---------
$ -- $ (3,875) $ (1,935)
========= ========= =========
CAPITAL EXPENDITURES:
Biopharmaceutical products $ 11,269 $ 16,351 $ 15,866
Antibody products 1,783 2,609 5,170
--------- --------- ---------
$ 13,052 $ 18,960 $ 21,036
========= ========= =========
ASSETS:
Biopharmaceutical products $ 169,974 $ 118,808
Antibody products 132,539 98,357
--------- ---------
$ 302,513 $ 217,165
========= =========
59
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 29, December 30, December 31,
Dollars in Thousands 2001 2000 1999
- -------------------- ------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM:
Reportable segment operating income $ 117,011 $ 7,456 $ 7,736
Unallocated interest expense (2,128) (3,581) (4,313)
Unallocated other income and expense, net 1,176 231 (36)
--------- --------- ---------
Consolidated income before income
taxes and extraordinary item $ 116,059 $ 4,106 $ 3,387
========= ========= =========
DEPRECIATION AND AMORTIZATION EXPENSE:
Reportable segment depreciation and amortization
expense $ 8,759 $ 9,092 $ 9,440
Unallocated (corporate) depreciation and
amortization expense 732 746 688
--------- --------- ---------
Consolidated depreciation and amortization
expense $ 9,491 $ 9,838 $ 10,128
========= ========= =========
CAPITAL EXPENDITURES:
Reportable segment capital expenditures $ 13,052 $ 18,960 $ 21,036
Unallocated (corporate) capital expenditures -- 23 --
--------- --------- ---------
Consolidated capital expenditures $ 13,052 $ 18,983 $ 21,036
========= ========= =========
ASSETS:
Reportable segment assets $ 302,513 $ 217,165
Unallocated (corporate) assets 7,796 7,322
--------- ---------
Consolidated assets $ 310,309 $ 224,487
========= =========
60
Information regarding sales by geographic area for the years ended December 29,
2001, December 30, 2000 and December 31, 1999 and information regarding
long-lived assets for the years ended December 29, 2001 and December 30, 2000 is
as follows:
For the Years Ended
---------------------------------------------------
December 29, December 30, December 31,
Dollars in Thousands 2001 2000 1999
- -------------------- ------------ ------------ ------------
SALES:
Domestic $190,830 $183,995 $177,463
Foreign 43,999 44,788 56,140
-------- -------- --------
TOTAL $234,829 $228,783 $233,603
======== ======== ========
LONG-LIVED ASSETS:
Domestic $117,246 $146,612
Foreign -- --
-------- --------
TOTAL $117,246 $146,612
======== ========
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 29, 2001 included two customers of our
antibody products segment and one customer of our biopharmaceutical product
segment representing 24%, 19% and 10%, respectively. Sales for the year ended
December 30, 2000 included two customers of our antibody products segment and
one customer of our biopharmaceutical product segment representing 22%, 18%, and
11%, respectively. Sales for the year ended December 31, 1999 included two
customers of our antibody products segment each representing 21%.
61
NOTE 20 SELECTED QUARTERLY FINANCIAL DATA
Basic Diluted
Gross Profit Earnings Earnings
Dollar in Tousands Margin After Net Income (Loss) Per (Loss) Per
Except Per Share Data Sales Royalty Expense (Loss) Share Share
- --------------------- --------- --------------- ---------- ---------- ----------
2001
1st Quarter $ 60,178 $ 13,637 $ 685 $ 0.02 $ 0.02
2nd Quarter 65,288 17,411 1,515 0.04 0.04
3rd Quarter 54,603 16,678 101,036 2.66 2.25
4th Quarter 54,760 22,397 1,446 0.04 0.04
--------- --------- -------- -------- --------
YEAR 2001 $ 234,829 $ 70,123 $ 104,682 $ 2.76 $ 2.36
========= ========= ======== ======== ========
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
========= ========= ======== ======== ========
Earnings per share were 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 the twelve months.
The results for the third quarter of 2001 include the gain on the sale of the
majority of the antibody business assets.
The results for the fourth quarter of 2001 include the benefit of the settlement
of an arbitration proceeding with Baxter Healthcare Corporation, and the impact
of changes in the estimated carrying values of deferred tax asset and liability
balances at December 29, 2001 and of stock option exercises during the fourth
quarter of 2001.
NOTE 21 SUBSEQUENT EVENTS
Effective March 5, 2002, Nabi changed its name to Nabi Biopharmaceuticals. Nabi
Biopharmaceuticals will continue to be listed on the Nasdaq National Market
under the trading symbol NABI.
On March 15, 2002, by notification to the holders of our 6.5% Convertible
Subordinated Notes, we called for full redemption of the Notes in the total
amount of $78.5 million on April 8, 2002. The Notes will be redeemed at 100% of
the principal balance paid in cash.
62
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
63
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
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 29, 2001, 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 29, 2001, 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 29, 2001, 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 29, 2001, and such information is incorporated herein by
reference.
64
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
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..................................................38
Consolidated Balance Sheets at December 29, 2001 and December 30, 2000...............................39
Consolidated Statements of Operations for the years ended December 29, 2001,
December 30, 2000 and December 31, 1999..............................................................40
Consolidated Statements of Stockholders' Equity for the years ended
December 29, 2001, December 30, 2000 and December 31, 1999...........................................41
Consolidated Statements of Cash Flows for the years ended December 29, 2001,
December 30, 2000 and December 31, 1999..............................................................42
Notes to Consolidated Financial Statements........................................................43-62
(a) (2) FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts and Reserves.........................................70
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 29, 2001.
(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)
65
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)
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)
66
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
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 & Retirement Plan (incorporated by reference
to Nabi's Registration Statement on Form S-8; Commission File No.
333-38866)
10.33 Nabi Savings & Retirement Plan (incorporated by reference to Nabi's
Registration Statement on Form S-8; Commission File No. 333-38868)
67
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
10.40 Amended and Restated By-Laws of Nabi date May 18, 2001 (incorporated
by reference to Nabi's Quarterly Report Form 10-Q for the quarter
ended June 30, 2001)
10.41* Stonebridge Associates Agreement dated February 15, 2001
10.42* Employment Agreement dated April 1, 2001 between Thomas H. McLain
and Nabi
10.43* Employment Agreement dated April 1, 2001 between Mark L. Smith and
Nabi
10.44* Employment Agreement dated August 1, 2001 between Dr. Robert B. Naso
and Nabi
10.45* Employment Agreement dated October 1, 2001 between C. Thomas Johns
and Nabi
10.46* Employment Agreement dated October 1, 2001 between Gary Siskowski
and Nabi
10.47* Amendment No. 6 dated as of October 10, 2001 to Loan and Security
Agreement as of September 12, 1997
10.48* Stonebridge Associates Agreement dated October 26, 2001
21* Subsidiaries of the Registrant
23.1* Consent of Ernst & Young LLP, Independent Certified Public
Accountants
- ---------------------
* Filed herewith
68
NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
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 25th day of March
2002.
NABI BIOPHARMACEUTICALS
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 25, 2002
- -------------------------------------------- President, Chief Executive Officer
David J. Gury
/s/ Thomas H. Mclain Executive Vice President, Chief March 25, 2002
- -------------------------------------------- Operating Officer
Thomas H. McLain
/s/ Mark L. Smith Senior Vice President, Finance, March 25, 2002
- -------------------------------------------- Chief Financial Officer,
Mark L. Smith Chief Accounting Officer and Treasurer
/s/ David L. Castaldi Director March 25, 2002
- --------------------------------------------
David L. Castaldi
/s/ Geoffrey F. Cox Director March 25, 2002
- --------------------------------------------
Dr. Geoffrey F. Cox
/s/ George W. Ebright Director March 25, 2002
- --------------------------------------------
George W. Ebright
/s/ Richard A. Harvey, Jr. Director March 25, 2002
- --------------------------------------------
Richard A. Harvey, Jr.
/s/ Linda Jenckes Director March 25, 2002
- --------------------------------------------
Linda Jenckes
/s/ Stephen G. Sudovar Director March 25, 2002
- --------------------------------------------
Stephen G. Sudovar
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NABI BIOPHARMACEUTICALS
- --------------------------------------------------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions Deductions
-------------------------- ---------------
Balance at Charged to Charged to Write-Offs
Beginning of Costs and Other Charged Balance at
Classification Period Expenses Accounts Against Reserve End of Period
- -------------- ------------ ---------- ---------- --------------- -------------
YEAR ENDED DECEMBER 29, 2001:
Allowance for doubtful accounts $ 417 $ 627 $ (58) $ 24 $ 962
Deferred tax asset valuation
allowance 34,307 -- (34,307) -- --
Inventory valuation allowance 2,959 3,514 273 2,594 4,152
-------- -------- -------- -------- --------
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
-------- -------- -------- -------- --------
70