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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended September 25, 2004

OR

For the transition period from              to             .

Commission File Number: 000-04829

Nabi Biopharmaceuticals

(Exact name of registrant as specified in its charter)

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)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    x  Yes     ¨  No

The number of shares outstanding of the registrant’s common stock, par value $0.10 per share, at October 19, 2004 was 58,422,696 shares.

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Nabi Biopharmaceuticals

INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Nabi Biopharmaceuticals

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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Nabi Biopharmaceuticals

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to condensed consolidated financial statements.

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Nabi Biopharmaceuticals

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to condensed consolidated financial statements.

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Nabi Biopharmaceuticals

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 OVERVIEW

We apply our knowledge of the human immune system to develop and commercialize products that address serious, unmet medical needs. Our focus is in the areas of infectious, autoimmune and addictive diseases. In addition to four marketed products (PhosLo^®, Nabi-HB^®, WinRho SDF^® and Aloprim^™), we have four products in clinical trials. We expect to file a Marketing Authorization Approval, or MAA, for StaphVAX^® in the European Union, or EU, in the fourth quarter of 2004 based on existing clinical data. For U.S. licensure, we have advanced StaphVAX to a confirmatory Phase III clinical trial and completed enrollment in this trial in August of 2004. We anticipate filing a Biologics License Application, or BLA, for StaphVAX by the end of 2005. StaphVAX is designed to prevent the most dangerous and prevalent strains of Staph aureus bacterial infections, which are a major cause of hospital infections. Staph aureus bacteria are becoming increasingly resistant to antibiotics. Our other products in development are Altastaph^™, an antibody based product for prevention and treatment of Staph aureus infections, Civacir^™, an antibody based product for preventing hepatitis C re-infection in liver transplant patients and NicVAX^™, a vaccine for nicotine addiction. Altastaph is currently in a Phase II clinical trial and NicVAX recently completed a Phase II clinical trial in the U.S. Civacir has completed a Phase I/II clinical trial. We have a state-of-the-art fractionation facility for the manufacture of Nabi-HB and our investigational antibody products, Altastaph and Civacir, and for contract manufacturing. In addition, we have commenced construction of a vaccine manufacturing facility within our Boca Raton, Florida plant for the manufacture of StaphVAX, NicVAX and our other vaccines in pre-clinical development. We are also developing contract manufacturing capacity at Cambrex Bio Science Baltimore, Inc., or Cambrex Bio Science, so that Cambrex Bio Science can manufacture StaphVAX for us. Cambrex Bio Science has successfully completed the manufacture of three consistency lots of StaphVAX that will be included in the MAA we intend to file in the fourth quarter of 2004. Our supply contract with the manufacturer of Autoplex T^® ended on May 11, 2004. Future sales of Autoplex T will be limited to inventory on hand at September 25, 2004. We also collect specialty and non-specific antibodies for use in our products and supply pharmaceutical and diagnostic customers our excess production for the subsequent manufacture of their products.

Our corporate headquarters is in Boca Raton, Florida and we maintain our research and development facilities in Rockville, Maryland. We have established wholly owned subsidiaries in Ireland and Luxembourg for the purpose of facilitating the regulatory approval, sales and marketing of our products in Europe.

The condensed consolidated financial statements include the accounts of Nabi Biopharmaceuticals and its subsidiaries. All significant intercompany accounts and transactions were eliminated during consolidation. These statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 27, 2003.

In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our consolidated financial position as of September 25, 2004 and December 27, 2003, the consolidated results of our operations for the three and nine months ended September 25, 2004 and September 27, 2003 and our cash flows for the nine months then ended. The interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year.

NOTE 2 ACCOUNTING POLICIES

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

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Basis of presentation: Certain items in the 2003 consolidated financial statements have been reclassified to conform to the current year’s presentation.

New accounting pronouncements: In January 2003, the Financial Accounting Standards Board, or FASB, issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, or FIN 46. FIN 46 addresses the consolidation of entities whose equity holders have either (a) not provided sufficient equity at risk to allow the entity to finance its own activities or (b) do not possess certain characteristics of a controlling financial interest. FIN 46 requires the consolidation of these entities, known as variable interest entities, or VIE’s, by the primary beneficiary entity. The primary beneficiary is the entity, if any, that is subject to a majority of the risk of loss from the VIE’s activities, entitled to receive a majority of the VIE’s residual returns, or both. FIN 46 applies immediately to variable interests in VIEs created or obtained after January 31, 2003. As amended by FASB Staff Position No. FIN 46-6, FIN 46 is effective for variable interests in a VIE created before February 1, 2003 at the end of the first interim or annual period ending after December 15, 2003 (the end of fiscal 2003, December 27, 2003, for us). We have no interests in VIEs and accordingly, the adoption of FIN 46 had no impact on our financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standards, or SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how companies classify and measure certain financial instruments with characteristics of both liabilities and equity. It requires companies to classify a financial instrument that is within its scope as a liability, or an asset, in some circumstances. SFAS No. 150 is effective beginning with the second quarter of fiscal 2004. We do not currently have financial instruments with characteristics of both liabilities and equity, and therefore, the adoption of SFAS No. 150 did not have an impact on our financial condition, results of operations or cash flows.

Comprehensive Loss: We follow SFAS No. 130, Reporting Comprehensive Income, which computes comprehensive income as the total of net income and all other changes in shareholders’ equity. For the three and nine months ended September 25, 2004, comprehensive loss included our net loss and the effect of foreign currency translation adjustments. As of September 25, 2004, $30 thousand of foreign currency loss was included on our balance sheet in addition to net loss.

Stock-Based Compensation: On December 31, 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure. This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of that Statement to require prominent disclosure about the effects on reported net loss of an entity’s accounting policy decisions with respect to stock-based employee compensation. Finally, this Statement amends Accounting Principles Board, or APB Opinion No. 28, Interim Financial Reporting, to require disclosure about those effects in interim financial information. We continue to account for stock-based compensation based on the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees.

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The following table summarizes our results as if we had recorded stock-based compensation expense for the three months and nine months ended September 25, 2004 and September 27, 2003, respectively, based on the provisions of SFAS No. 123, as amended by SFAS No. 148:

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NOTE 3 INVENTORIES

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

Work in process inventory includes $1.5 million of inventory related to StaphVAX that is not yet approved by either the U.S. Food and Drug Administration or the European Evaluation Agency medicines FDA. During the third quarter of 2004, $0.5 million of the StaphVAX intermediate product manufactured at Cambrex Bio Science and accounted for as inventory at June 26, 2004 will be utilized in the validation process at our vaccine facility in development in Boca Raton, Florida. This material was expensed as research and development in the third quarter of 2004.

NOTE 4 (LOSS) INCOME PER SHARE

Basic loss per share is computed by dividing our net (loss) by the weighted average number of shares outstanding during the period. When the effects are not anti-dilutive, diluted earnings per share is computed by dividing our net income by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options. The dilutive impact of stock options is determined by applying the “treasury stock” method.

A total of 1,584,139 common stock equivalents have been excluded from the calculation of net loss per share in the three months ended September 25, 2004 because their inclusion would be anti-dilutive. In addition, a total of 2,163,870 and 920,496 common stock equivalents have been excluded from the calculation of net loss per share in the nine months ended September 25, 2004 and September 27, 2003, respectively, because their inclusion would be anti-dilutive.

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NOTE 5 OPERATING SEGMENT INFORMATION

The following table presents information related to our two reportable segments:

Selling and marketing expense and research and development expense are allocated almost fully to the biopharmaceutical products segment based on the allocation of effort within those functions. General and administrative expenses are allocated to each segment based primarily on relative sales levels.

The loss generated ex-U.S. results from our initial commercialization activities to expand our biopharmaceutical products business to the EU, and has been allocated wholly to our biopharmaceutical business.

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The following table reconciles reportable segment operating (loss) income to (loss) income before (provision) benefit for income taxes:

NOTE 6 STOCK OPTIONS AND WARRANTS

The following table summarizes the stock option activity under our 2004 Stock Plan for Non-Employee Directors, our 2000 Equity Incentive Plan and our 1998 Non-Qualified Employee Stock Option Plan for the nine months ended September 25, 2004 and the year ended December 27, 2003.

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On April 15, 2004, the holder of a warrant to purchase 133,333 shares of our common stock at $7.50 per share exercised the warrant using the net exercise provision of the warrant. As a result of the net exercise, we issued 74,070 shares of our common stock to the holder of the warrant. The warrant had been issued in conjunction with the private placement of common stock in 2000 from which we realized $9.3 million, net of issuance costs. As of September 25, 2004, we had no outstanding warrants to purchase our common stock.

NOTE 7 TREASURY STOCK

In separate transactions on April 5, 2004, June 19, 2003 and February 24, 2003, a former officer of the Company exercised stock options for 6,250, 355,735 and 67,627 shares of our common stock, respectively. In addition, on May 6, 2003, a member of our Board of Directors exercised stock options for 4,500 shares of our common stock. The purchases were paid for by delivery of 3,496 shares of common stock, 190,683 shares of common stock, 38,358 shares of common stock and 2,371 shares of common stock, respectively, valued at $0.1 million, $1.4 million, $0.2 million and $16 thousand for the respective transactions. In each of the transactions, the former officer and the member of our Board of Directors had acquired the shares delivered more than six months earlier. These shares have been accounted for as treasury stock.

On September 19, 2001, our Board of Directors approved the buy back 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 stock purchase programs. During the first nine months of 2004 and 2003 we did not purchase any shares of our common stock under this program. We have acquired 345,883 shares of our common stock for a total of $1.9 million since the inception of this buy back program. Repurchased shares have been accounted for as treasury stock.

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NOTE 8 INTANGIBLE ASSETS

The components of our intangible assets are as follows:

On August 4, 2003, we acquired the worldwide rights to PhosLo. See Note 10. Under the terms of the acquisition, we purchased patent rights, trade secrets, the PhosLo trademarks, regulatory approvals and licenses, certain customer and regulatory data and finished product inventory. All assets purchased, except for inventory, have been recorded at their estimated fair value, adjusted by a pro rata portion of the excess of purchase price, and are included in intangible assets.

The estimated remaining useful lives of the PhosLo related intangible assets are as follows:

In October 2003, we entered into a contract manufacturing agreement with Cambrex Bio Science to acquire the right to commercial manufacturing capacity for StaphVAX. Vaccine manufactured at Cambrex Bio Science will be used to support our MAA for StaphVAX in the EU that we expect to file by the end of 2004. During the nine months ended September 25, 2004, we capitalized as a manufacturing right $2.7 million of costs paid to Cambrex to ready its facility to manufacture StaphVAX at commercial scale in future periods.

NOTE 9 RELATED PARTY TRANSACTIONS

In October 2001, we engaged Stonebridge Associates, LLC, or Stonebridge, an investment banking firm, the president of which is a member of our Board of Directors, to provide financial advisory services in connection with our review and implementation of a corporate expansion strategy. The agreement, as amended in October 2002, provided for a monthly retainer of $30 thousand plus hourly charges. If the engagement resulted in transactions by us involving aggregate consideration paid in excess of a specified

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level, Stonebridge would receive additional fees based upon the consideration paid. Stonebridge acted as our financial adviser in connection with our acquisition of the worldwide rights to PhosLo in August 2003 and received a fee of approximately $0.3 million for its services upon consummation of this transaction. See Note 10. We believe that the terms of the engagement of Stonebridge were no less favorable to us than would have been obtained from an unrelated party. Upon successful completion of the PhosLo transaction, we concluded our agreement with Stonebridge.

NOTE 10 PRODUCT ACQUISITIONS

In a transaction dated June 29, 2004, we exercised our right under our distribution agreement to acquire Aloprim from DSM Pharmaceuticals, Inc., or DSM. We paid a total of $1.0 million for the acquisition of Aloprim including payment of $0.8 million for the Aloprim product license at the closing of the purchase. We had previously paid $0.2 million in the fourth quarter of 2003. As a result of acquiring the Aloprim product license, future product royalties will be reduced to 15% of net sales for five years. Previously, we were obligated to share net profits, as defined, equally with DSM from net sales of Aloprim up to $4.0 million and to pay DSM 40% of net profits from net sales in excess of $4.0 million. In conjunction with acquiring Aloprim, we entered into a manufacturing agreement with DSM for DSM to continue to supply product to us for a term of up to five years.

On August 4, 2003, we acquired the worldwide rights to PhosLo from Braintree Laboratories, Inc., or Braintree. PhosLo is currently approved in the U.S. for the control of elevated blood phosphate levels, or hyperphosphatemia, in patients with end-stage renal (kidney) failure. Under the terms of the agreement, we acquired the worldwide rights to PhosLo for payment of $60.3 million in cash, issuance of 1.5 million shares of our common stock at the closing date valued at $8.4 million and the payment of $30.0 million in cash over the period ending March 1, 2007. In addition, we paid total professional fees and closing costs of $0.9 million in connection with the acquisition. The discounted value of the future payment obligation on September 25, 2004 was $22.9 million and has been reported as Notes Payable, PhosLo acquisition, net. The future payment obligation was discounted at 4.5%, our estimated rate of interest under our credit facility in effect on August 4, 2003, the date of the closing of the agreement. Braintree will continue to manufacture the product for us under a long-term manufacturing agreement with an initial term of 7 years. At our option, we may extend the manufacturing agreement for an additional 8 years. Stonebridge, an investment banking firm, the president of which is a member of our Board of Directors, acted as our financial adviser in connection with the acquisition of PhosLo and received a fee of approximately $0.3 million for its services upon consummation of this transaction. See Note 9.

The following table reconciles the notes payable related to the acquisition of PhosLo:

NOTE 11 CONTINGENT LIABILITIES, LEGAL PROCEEDINGS AND CAPITAL COMMITMENTS

In May 2004, we entered into an agreement with an engineering and design firm to construct a commercial scale vaccine manufacturing facility in available space within our Boca Raton, Florida manufacturing plant. Under the terms of the agreement, we have a remaining commitment of $6.0 million as of September 25, 2004. As of September 25, 2004, we have incurred a total of $12.2 million to construct this vaccine manufacturing facility, including $9.3 million under our construction commitment.

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In October 2003, we entered into an agreement to have StaphVAX manufactured for us at Cambrex Bio Science for up to ten years. Under the terms of the agreement we have a remaining commitment to pay $0.4 million at September 25, 2004, including costs to acquire the right to future commercial manufacturing capacity for StaphVAX and activities related to the transfer of the StaphVAX manufacturing process to Cambrex Bio Science. Through September 25, 2004, we had incurred $9.6 million under this agreement, of which $3.0 million has been recorded as acquisition of a Manufacturing Right asset. See Note 8.

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.

NOTE 12 CREDIT FACILITY

On March 26, 2004, we terminated our credit agreement with Wells Fargo Foothill, Inc., part of Wells Fargo & Company. The credit agreement had an original term through June 2006. As a result of terminating the credit agreement we incurred an early termination penalty of $0.6 million that has been included in interest expense in the accompanying statement of operations for the nine-month period ended September 25, 2004. By terminating the credit agreement we are avoiding unused credit fees and other credit charges that would have been incurred during the remaining term of the agreement through June 2006. In addition, included in interest expense in the accompanying statement of operations for the nine-month period ended September 25, 2004, is the write-off of previously capitalized loan origination fees of approximately $0.5 million recorded at the time of entering into the credit agreement.

NOTE 13 INCOME TAXES

During the second quarter of 2004, as part of our planned expansion into European markets, we entered into an agreement to license StaphVAX and PhosLo product rights in the EU to our wholly owned subsidiary. The value of the licenses was either developed by us through our research and development activities to date or acquired by us in a product acquisition. In recognition of the value of the EU product rights developed and acquired by us, we realized a gain of approximately $55 million in the U.S. for income tax purposes in 2004 and expect to generate future license use fees based on net sales following product licensure in the EU. For the quarter and nine-month periods ended September 25, 2004, we have recorded income tax expense of $2.0 million and $10.8 million, respectively, as a result of this taxable gain. Although on a generally accepted accounting principle basis we reported a consolidated operating loss during the quarter and nine month periods ended September 25, 2004 and anticipate reporting a loss for the remainder of the year, we nevertheless expect to incur income tax expense due to this taxable gain. We anticipate realizing deferred tax assets related to net operating loss carryforwards incurred in prior periods and the exercise of employee stock options to offset future cash payments for the reported U.S. tax gain in 2004.

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Deferred tax assets (liabilities) are comprised of the following:

The reduction of deferred tax assets from net operating loss carryforwards recorded at December 27, 2003 is due to the use of such assets to offset the gain from the license of intangible assets to our subsidiary in June 2004.

At December 25, 2004 we expect to have net operating loss carryforwards of approximately $8.9 million that expire at various dates through 2023. All of the net operating loss carryforwards are related to the exercise of employee stock options, and we will record a tax benefit of approximately $3.3 million through capital in excess of par value in future periods if such net operating loss carryforwards are realized.

We have research and development tax credit carryforwards of $12.8 million that expire in varying amounts through 2023. We have alternative minimum tax credit carryforwards of $0.9 million that are available to offset future regular tax liabilities, and do not expire.

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NOTE 14 SUPPLEMENTAL CASH FLOW INFORMATION