Nabi Biopharmaceuticals is a company focused on immune-based diseases. The company started in 1995 when North American Biologicals, a specialty blood and plasma processing company, and Univax Biologics, a research-intensive company developing vaccines and therapeutic immune globulin preparations, merged to form Nabi Biopharmaceuticals. Accordingly, Nabi has several marketed plasma based products and a drug pipeline rich in vaccines and immune globulin-based therapeutics. The company is currently focused on building a vaccine and antibody franchise.

In addition to plasma based products, Nabi currently has three FDA approved drugs: Aloprim, PhosLo and Nabi- HB. The company also has several drugs in the pipeline including two drugs for the prevention of Staphylococcus Aureus (StaphVAX and Altastaph) infections and a vaccine for smoking cessation (NicVAX). Of the drugs in development, we believe that StaphVAX is the company’s core product and value-driver in the near future.

MARKETED DRUGS

PhosLo (Calcium acetate)

PhosLo is a formulation of calcium that is designed to bind to phosphate, which lowers blood phosphate levels. PhosLo received FDA approval in 1990 for the treatment of end-stage renal disease (ESRD) which is a condition typically characterized by hyperphosphatemia (high phosphorus levels in the blood). Hyperphosphatemia in these patients can lead to renal osteodystrophy, a collection of bone diseases that causes bone pain, brittle bones, skeletal deformities and fractures. Recent evidence also suggests that hyperphosphatemia can also lead to cardiovascular disease, which accounts for 50% of mortality in ESRD patients. Sales of PhosLo have declined in recent years due to competition from other phosphate-binders.

Aloprim (Allopurinol)

Aloprim is an inhibitor of xanthine oxidase, an enzyme essential for making uric acid. Allopurinol is indicated for the reduction of uric acid in patients with hyperuricemia (high uric acid levels) and gout. Uric acid, the end product of purine metabolism necessary for cell turnover, is excreted by the kidneys as a waste product. Uric acid levels require regulation as high uric acid levels can lead to kidney damage and kidney failure. Aloprim was approved by the FDA in 1996 for the treatment of hyperuricemia in chemotherapy-treated cancer patients. A complication that can arise from chemotherapy treatment, particularly in patients with lymphoma or leukemia, is tumor lysis syndrome (TLS). TLS is a serious and sometimes life-threatening complication that arises from the release of metabolic factors into the blood. It is characterized by hyperuricemia (from the breakdown of DNA), hyperkalemia (from the breakdown of the cytosol) and hyperphosphatemia (from the breakdown of proteins). Therefore, Aloprim is indicated for the treatment associated with hyperuricemia in these patients to prevent renal failure.

Nabi- HB (Hepatitis B Immune Globulin)

Nabi-HB is a formulation containing human antibodies against the Hepatitis B virus (HBV). Hepatitis B is the most common and serious liver infection in the world and is the leading cause of liver disease and liver transplants. Nabi-HB was approved in 1999 by the FDA as an intramuscular injection that protects people at immediate risk of Hepatitis B infections, such as infants born to HBV-positive mothers. Since an HBV vaccine has been available since 1986, Nabi-HB is only indicated for patients at immediate risk of HBV infection, thus limiting the drug’s market potential.

DRUGS IN DEVELOPMENT

Nabi- HB Intravenous (Hepatitis B Immune Globulin - Intravenous)

Nabi has developed a second generation, intravenous formulation of Nabi-HB called Nabi- HB Intravenous. This Intravenous formulation is designed to provide protection against HBV infection of transplanted livers given to HBV-positive liver transplant patients. A Biologic Licence Application (BLA) was filed with the FDA in 2002 for Nabi-HB Intravenous, however, the application has been delayed by requests for more data by the FDA. While Nabi has responded to these requests by providing supplemental data, the FDA has issued more questions and concerns. The company is currently still in discussions with the FDA and a response from the FDA is expected by the end of 2005. Due to the small number of HBV- positive patients undergoing liver transplantation, we do not expect this product to significantly impact the company.

PhosLo (Calcium Acetate)

While PhosLo has been approved for end-stage renal disease for over 2 decades, the drug is currently in label-expanding studies in patients with chronic renal disease. Chronic renal or kidney disease (CKD) is a progressive disease which ultimately leads to kidney failure (otherwise known as end-stage renal disease). There are 5 stages of CKD, with Stage V being end-stage renal disease. Stages I-III represents mild disease and are not typically treated beyond blood pressure control. By Stage IV, more severe symptoms of disease appear such as hyperphosphatemia. Nabi is currently pursuing phase III studies for PhosLo to reduce hyperphosphatemia in patients with Stage IV CKD. These studies are ongoing and we expect them to be successful given that PhosLo has already established a good track record in treating hyperphosphatemia in more severe CKD.

Antibacterials

There are currently three drugs in clinical studies for the prevention of infection by bacteria of the Staphylococcus family. These are StaphVAX and Altastaph, which are designed to protect against Staphylococcus aureus (S. aureus), and S. epidermidis vaccine, which protects against Staphylococcus epidermidis (S. epidermidis). Of these, StaphVAX is furthest along in clinical development and is considered the main revenue driver for the company. To understand how these drugs work, a background on S. aureus infections is given below.

Staphylococcus aureus

Staphylococcus Aureus (S. aureus) is the arguably the most important cause of life- threatening bacterial infections in the developed world. S. aureus is the most common cause of nosocomial (hospitalized) infections, accounting for approximately 60% of all Gram-positive hospital infections. S. aureus is the leading cause of nosocomial pneumonia and surgical site infections and the second leading cause of nosocomial bloodstream infections such as bacteremia and endocarditis.

S. aureus is typically treated with penicillin or ampicillin. However, in recent years, the treatment of S. aureus has becoming increasingly difficult due to the emergence of drug- resistant strains and it is now estimated that 95% of S. aureus infections worldwide no longer respond to these first-line agents. Serious drug-resistant strains that have become more prevalent in recent years include methicillin-resistant S. aureus (MRSA), vancomycin- intermediate S. aureus (VISA), and vancomycin-resistant S. aureus (VRSA). While MRSA has become endemic in many hospitals and has become a big challenge to treat, the emergence of VISA and VRSA strains pose the greatest concern as they are resistant to the antibiotic of last resort, Vancocin (Vancomycin; ViroPharma). For this reason, S. aureus is sometimes called the “superbug”.

In the last 5 years, several new antibacterial drugs have become available to treat these superbugs and a number of drugs in late stage clinical development also look promising. While these drugs are currently effective at treating drug-resistant S. aureus, there are concerns that the bacteria can mutate to become resistant to these newer agents as well. Nabi has chosen a different route to treat S. aureus infections by designing vaccines or antibodies that prevent S. aureus infections as oppose to treating the infection. These vaccines and antibodies could potentially protect patients from developing S. aureus infections. Nabi currently has one vaccine in clinical development, StaphVAX, and one antibody-based product called Altastaph, both of which are designed to protect patients from S. aureus infections.

StaphVAX (S. aureus polysaccharide conjugate vaccine)

StaphVAX is a vaccine that targets S. aureus type 5 and 8 capsular polysaccharides. Capsular polysaccharides are expressed on the surface of S. aureus and appear to promote bacterial survival against host defense mechanisms (immune response). S. aureus has 13 capsular polysaccharides with types 5 and 8 being the most clinically important types. Together, type 5 and 8 account for approximately 85% of all clinically significant S. aureus infections. The third most clinically significant type was recently identified by Nabi, type 336, which accounts for approximately 10-12% S. aureus infections.

StaphVAX consists of type 5 and 8 capsular polysaccharide bound to a carrier protein (conjugated to recombinant exoprotein A from Pseudomonas aeruginosa). The carrier protein is a nontoxic variant designed to bolster the immunogenicity (elicit an immune response) of the vaccine. The vaccine is designed to stimulate the patient’s immune system to produce antibodies against type 5 and 8 S. aureus, thus protecting these patients from the majority of S. aureus infections. StaphVAX is currently being investigated in patients at high risk of developing S. aureus infections including patients with end stage renal disease (ESRD) and more recently, in patients undergoing cardiothoracic and orthopedic surgery.

StaphVAX for end-stage renal disease (ESRD)
End stage renal disease (ESRD), as the name implies, is the end result of chronic renal failure in which the kidneys can no longer function adequately (less than 10% of baseline) and the patient requires hemodialysis or a kidney transplant for survival. ESRD patients are immunocompromised and along with implanted devices typically used for hemodialysis, which can serve as a source of infections, are at increased risk of S. aureus infections. In fact, an estimated 15-40% of deaths in ESRD patients are due to infections.

StaphVAX is currently in phase III studies for protection against infections in ESRD patients. In the first a phase III study, a single vaccine injection of StaphVAX reduced the incidence of S. aureus bacteremia, an often fatal infection in the blood. StaphVAX reduced the incidence of bacteremia by 57% compared to a placebo injection. However, this protection was only seen until week 40 (10 months). By the end of the 12 month study, the level of protection afforded by StaphVAX reduced to 23% and was no longer statistically significant. Consequently, the study missed its primary endpoint of statistically significant protection (60%) against bacteremia at 12 months. While the study missed its endpoint, the reduction in bacteremia is very encouraging, especially given the immunocompromised nature of ERSD patients.

To determine whether StaphVAX could provide protection against S aureus infections for longer than 10 months, Nabi initiated a booster study. In this study, ESRD patients who were previously given StaphVAX (2 to 3 years previously) were given a booster dose of StaphVAX. To measure effectiveness, the study monitored StaphVAX-generated antibodies in the blood of these patients for 6 months following booster injection. The antibody level in the blood is thought to parallel the level of protection against S. aureus infections. The antibody level achieved after the booster dose appeared to be within a therapeutic range although it was lower than that seen with the first dose of StaphVAX. This suggests that a booster dose may help to prolong the protective benefits of StaphVAX. While addressing antibody production, this booster study does not address the clinical effectiveness of the booster dose and thus it is not yet known whether this booster dose can prevent S. aureus bacteremia.

Due to the first phase III study not meeting its primary endpoint and following recommendations by the FDA, the company initiated a second (confirmatory) phase III study. In order to carry out this second, and much larger study, the company transferred the manufacturing of the vaccine to a contract manufacturer. Consequently, a new study evaluating the efficacy of the new batch of StaphVAX relative to the old batch was necessary. This study was completed in 2003 which demonstrated that the new vaccine produced by a contract manufacturer produced the same level of antibodies as the vaccines produced by Nabi which was used in the first phase III study (again, efficacy studies were not performed).

Following the completion of vaccine bioequivalence study, the confirmatory phase III study was initiated at the end of 2003. Similar to the first phase III study, this study enrolled patients with ESRD. However, unlike the first study, this study’s primary endpoint is protection against S aureus at 8 months, the peak of protection seen in the first phase III study. Furthermore, this study will include a booster dose of StaphVAX at 8 months after the first injection. The study will evaluate S. aureus infections as well as serum antibody levels at 6, 10, 12, and 14 months post first injection and will help to address whether the booster dose can protect against S. aureus bacteremia at 12 months (the secondary endpoint of the study). Given that ESRD patients are at long-term risks of S. aureus infections, the study meeting its secondary endpoint of protection at 12 months may prove to be an important endpoint for FDA approval.

In 2003, this confirmatory trial was amended following discussions with the FDA. The trial increased the number of patients from 3,000 to 3,600 in order to detect a 50% reduction in bacteremia at 8 months, which is less than the 60% required for the first phase III study. This study completed enrollment in August 2004 and primary endpoint data are expected in the third quarter of 2005. Pending positive data, a BLA filing for StaphVAX in ESRD patients is expected by the end of 2005.

Given that the bar is lower for this second phase III study, and that the primary endpoint is protection against bacteremia at 8 months, we believe the study has a good chance of success. While a 50% reduction in S. aureus is less than the first study’s endpoint of 60%, this magnitude of reduction is still clinically significant since S. aureus bacteremia is a prevalent cause of hospitalization and/or death in ESRD patients. Thus, reducing the likelihood of these infections and the subsequent complications and mortality with a single vaccine injection will likely to be viewed positively by clinicians and patients alike (assuming that adverse effects are tolerable).

StaphVAX for surgical patients
Nabi has initiated phase II studies of StaphVAX in other patient populations that are also at risk of developing S. aureus infections, notably cardiovascular and orthopedic surgery patients receiving implanted devices. There are currently two ongoing studies (one in the U.S. and one in Europe) in patients undergoing orthopedic surgery involving the implantation of devices, such as hip or knee replacements. Results from the U.S study are expected in the third quarter of 2005. A study in cardiovascular surgery patients receiving implanting devices was also initiated and results from this study are also expected in the third quarter of 2005.

These studies are primarily immunogenicity studies aimed at determining whether StaphVAX can induce a similar antibody response in these patients over a 6 month period. Given that these surgical patients are less likely to be immunocompromised than ESRD patients, we believe that this study should show an adequate, or perhaps better, antibody response. Indeed, recent results from the immunogenicity study in cardiovascular patients indicated that 93% of these patients produced anti-staph antibodies above the suggested protective levels. This compares well to the 80-85% seen in patients with ESRD and suggests that StaphVAX may be effective in these patients, however, the exact level of antibodies required for protection has not yet been confirmed by a study. Upon completion of this study, we expect Nabi to initiate a phase III study in these patients to evaluate vaccine efficacy.

While we expect surgical patients to respond better to StaphVAX than ESRD patients due to their intact immune systems, we project that a bigger level of protection against S. aureus infections (greater than a 50% reduction in risk) may be needed for the vaccine to be approved or widely adopted in these patients, particularly if adverse events are an issue. Therefore, we remain cautious on the drug’s likelihood of approval in these healthier patient populations.

Altastaph

Like StaphVAX, Altastaph is designed to protect patients from S. aureus infections by bacteria with type 5 and 8 capsular polysaccharides. Unlike StaphVAX, in which the patient’s immune system produces antibodies against S. aureus bacteria, Altastaph is a formulation of these anti-staph antibodies. Altastaph is produced by vaccinating healthy volunteers with StaphVAX and then harvesting the anti-S. aureus antibodies produced by these volunteers. Consequently, while Altastaph has the same mechanism of action as StaphVAX, it can provide immediate protection against type 5 and 8 S. aureus bacteria. Accordingly, Altastaph may provide protection against S. aureus infections in patients at immediate risk of infection or in patients with underdeveloped immune systems at risk of infections, such as neonates (newborns).

Altastaph is currently in phase II studies in premature, low birth weight babies (who are at risk of infections due to their underdeveloped nature) for which Altastaph received both orphan drug status and fast track designation. In a placebo-controlled phase II study in 200 premature babies, Altastaph was shown to be well tolerated with a good pharmacokinetic profile, the primary endpoints of the study. Interestingly, the rate of S. aureus infections seen in the placebo group in this study was rather low compared to historical values making it difficult to determine whether Altastaph actually protected the neonates from infection (3 infections were seen in each arm of the study). Consequently, it is still unclear whether Altastaph is of benefit to these premature babies.

Altastaph is also in phase I/II studies in hospitalized adults at risk of S. aureus infections, such as those in intensive care units. In this study in 40 patients, Altastaph treatment resulted in a 37% reduction in hospital stay relative to the placebo control patients. While the reduction in hospital stay is encouraging, the patient sample in this study is very small and it is not yet known whether Altastaph prevented S. aureus infections in these patients.

It is still too early to gauge Altastaph’s effectiveness in both neonatal and adult patients at risk of infections. While Nabi has previously indicated that they will no longer pursue the current formulation of Altastaph but instead refocus their efforts on a second-generation Altastaph product, they appear to be willing to continue development of Altastaph if recommended to do so by the FDA. The company expects to conduct a post phase II meeting with the FDA in the near future which will determine whether this program will continue. In addition, the company indicated earlier this year that they are seeking external funding for this program. Therefore, the Altastaph program appears to be stalled until the meeting with the FDA and/or extra funding.

S. epidermidis Vaccine

Nabi initiated phase I studies of the S. epidermidis Vaccine in May of this year. S. epidermis accounts for approximately 20% of all Staphylococcus infections in hospitals and represents a large health risk to patients. The S. epidermidis Vaccine follows the same principle and mechanism of action as StaphVAX and while it is still too early to tell whether this vaccine is efficacious, we are fairly optimistic of its potential.

NicVAX (Nicotine Conjugate Vaccine)

Nabi has extended their vaccine program beyond infectious diseases and has developed a nicotine vaccine called NicVAX. NicVAX is designed to prevent and treat nicotine addiction and promote smoking cessation. NicVAX causes the immune system to produce antibodies against nicotine and the binding of these antibodies to nicotine prevents this large nicotine complex from crossing the blood-brain barrier. Since nicotine can no longer enter the brain, patients can no longer get a “kick” out of smoking, thus reducing or halting patient addiction.

In a dose finding phase II study of NicVAX in which 68 smokers were randomized to receive NicVAX or placebo, the highest dose of NicVAX (200 mcg) increased the number of smokers who quit. The highest dose of NicVAX resulted in a 33% of smokers quitting (defined as no smoking for at least 30 consecutive days) compared to 9% in the placebo control. These results are highly encouraging but given the small patient sample a larger study is required for confirmation. In addition, it is unclear as to whether the 200 mcg dose is optimal and thus another dose-finding study may be needed. Nabi is currently optimizing the dose and the dosing schedule for NicVAX in a European study that is evaluating higher doses of NicVAX. A pivotal phase III study is expected to be initiated by the end of 2005.

We speculate that NicVAX will need to show more than a 3-fold improvement in the ability to help smokers quit in order to successfully compete in the smoking cessation market. Our reasoning for this lies in the fact that NicVAX is an injectable agent that must compete with easier to administer products such as nicotine gums and patches. However, if the vaccine administration schedule in the phase II study was found to be optimal, then NicVAX is only administered once a month in the early stage of treatment, which may not pose a big inconvenience for patients.

Civacir (Hepatitis C Immune Globulin)

Civacir is designed to provide protection against Hepatitis C (HCV) re-infection in Hepatitis C patients undergoing liver transplantation. The drug is similar to Nabi-HB Intravenous except that it targets HCV. Civacir contains a mixture of antibodies that neutralizes HCV and thus prevents HCV infections. Hepatitis C, in combination with Hepatitis B, accounts for 75% of liver diseases worldwide.

While the drug is currently in early phase I/II clinical studies for HCV-positive liver transplant patients, the drug has the potential to expand to patients who are at immediate risk of HCV infections, such as intravenous drug users and infants born to HCV-positive mothers. With almost 4 million people in the U.S. infected with HCV and over 170 million people infected worldwide, there is an unmet medical need for a vaccine or a preventative treatment for Hepatitis C. Indeed, Civacir was granted orphan drug status by the FDA and by the European Medicines Agency. Based on the effectiveness of Nabi-HB, which is essentially the same as Civacir except for drug target, we are optimistic that Civacir can become an important treatment for patients at risk of HCV infections. As there are currently no vaccine or preventative treatments available for protection against Hepatitis C, the potential for Civacir is huge if the drug can demontrate protection against HCV infections.

Drugs in very early development

Nabi is developing other vaccines and second generation products for Gram-positive bacterial infections. These include a second-generation Altastaph that not only has antibodies against type 5 and 8 S. aureus but also type 336 S. aureus, thus potentially providing protection against 95% of clinically significant S. aureus strains. In a similar vein, the company is also developing a second-generation StaphVAX to also include S. aureus type 336. These vaccines are still very early in development and have not yet entered phase I clinical studies.

PARTNERSHIPS

Cambrex Bio Science Baltimore, Inc.
In October 2003, Nabi entered into a ten-year manufacturing agreement including a renewal term, with Cambrex Bio Science for StaphVAX. The agreement requires Nabi to make certain payments to Cambrex Bio Science.

Chiron Corporation
Nabi has an agreement with Chiron Corporation granting Nabi an exclusive supply agreement for four vaccines, including for hepatitis C. Univax had announced the collaboration with Chiron on the same day the merger between Univax and Nabi was announced in 1995. The agreement may apply to the development of the next generation of Civacir. In addition, Nabi has rights to 10 additional Chiron vaccines for use in humans to produce immunotherapeutic products, as well as access to a vaccine adjuvant, MF 59. Nabi will be responsible for all development, manufacturing and worldwide distribution of these products. Under the terms of the agreement, Nabi will make unspecified milestone payments and pay royalties to Chiron based on sales of immune globulin products incorporating Chiron's technologies.

PATENTS

PhosLo
Nabi has two patents granted in the U.S. and one in Canada relating to PhosLo, which expire in April 2007 and in 2012, respectively. Nabi also has another U.S. patent granted for a second-generation, phosphorus-binding capsule formulation, which expires in April 2021.

Nabi has 25 patents issued including six in the U.S., 15 in European countries, four in other countries, and 38 patents pending worldwide relating to its Gram-positive infections program, which expire in September 2016. Nabi also has issued U.S. patents and ex-U.S. patents, including European countries, relating to S. epidermis, of which most expire in 2016.

UPCOMING CATALYSTS

Results from the ongoing confirmatory phase III study of StaphVAX are expected in the third quarter of 2005. We believe this is the most important upcoming catalyst for Nabi as it will determine whether StaphVAX is likely to receive FDA approval. Pending positive data, a BLA for StaphVAX is expected by the end of 2005.

Results from phase II studies of StaphVAX in cardiovascular and orthopedic surgeries are expected in the third quarter of 2005. This can represent a significant upswing to the company since it can expand the eligible patient population for this vaccine significantly.

REVENUE POTENTIAL

Nabi’s approved products have helped the company fuel R&D, but are expected to decline in the coming years and will need international growth to continue providing meaningful revenue for Nabi. While Nabi has several drugs in the pipeline that are focused on the treatment of diseases that affect vast amounts of people, for the most part these drugs are only intended for small subsets of the populations. Nonetheless, over the next five years, we project Nabi’s pipeline to have the potential to reach close to half a billion dollars of revenue in 2010.

NABI- HB & NABI-HB Intravenous (IV) for HBV
We have grouped the NABI HB and NABI-HB-IV formulations together in one model, as we expect the IV formulation to be approved by the end of 2005. NABI-HB sales have flattened and we expect it to lose market share in the U.S. However, because the overall incidence of liver transplants continues to grow, and NABI-HB should gain European approval by the end of 2005, we expect the overall franchise to grow into the future, though not be a huge valuation driver for the company.

We currently project 5 and 10-year U.S. revenues for NABI-HB and NABI-HB-IV of $44.8 million and $72.7 million, with worldwide revenues of $101.7 million and $136.2 million.

PhosLo for Chronic Renal Disease (CRD) and ESRD
Despite a 40% price increase, PhosLo revenues are expected to be down significantly in 2005 from 2004. While the price increase will not be fully recognized in 2005, PhosLo will need to expand into Level 4 CRD patients and the European market to revive the franchise out of decline.

We currently project 5 and 10-year U.S. revenues for the ESRD indication of $23.4 million and $11.8 million, with worldwide revenues of $55.5 million and $49.1 million. For CRD, we project 5 and 10-year U.S. revenues of $36.9 million and $101.2 million, with worldwide revenues of $53.9 million and $179.1 million.

In total, we project 5 and 10-year revenues of the PhosLo franchise of $109.4 million and $228.2 million.

StaphVAX for ESRD and surgical patients
StaphVAX is Nabi’s most compelling valuation diver, as it is late stage and has the potential for upside beyond end-stage renal disease (ESRD) patients. The number of patients with ESRD is expected to grow at an average annual rate of 6% over the next 25 years from 483,000 patients in 2004 to 2.2 million in 2030. Because these patients are at such high- risk for Staph infections, we feel StaphVax should do quite well. We currently model 35% peak market share within ESRD patients, with an average annual price of $800 per patient.

Nabi is also looking to expand StaphVAX’s label into patients undergoing cardiac and orthopedic surgeries. While the number of orthopedic surgeries each year is similar to the number of ESRD patients, there are over a million cardiac surgeries performed annually. However, because these patients tend to be much healthier than ESRD patients, we are currently projecting only 10% will be considered for StaphVAX. Since StaphVAX is still early in development for these indications, we have only applied a 20% peak market share within this 10% patient population. Because our patient eligibility number is only 10%, there is the potential for upside in StaphVAX should the data show it to be highly effective and safe way to prevent Staph infections in these patients.

We currently project 5 and 10-year U.S. revenues for StaphVAX of $188.9 million and $262.3 million, with worldwide revenue of $332 million and $496.9 million.

NicVAX for smoking cessation
While there are tens of millions of people who desire to quit smoking, it is unclear how many are actually motivated to the point of trying to quit smoking. Because NicVAX requires an injection, it will most likely be used on a doctor’s recommendation. A study done by the CDC found that as little as 15% of smokers talk to their doctors about quitting smoking and only 3% actually have a follow-up visit with the doctor regarding methods of quitting. Our current assumption is that NicVAX will be used as more of a third-line therapy after such things as nicotine gum, patches, nasal spray and drugs such as Acomplia. These therapies do carry a high relapse and we have modeled 70% may reach the point of considering NicVAX.

We project 5 and 10-year U.S. revenue for NicVAX of $36.4 million and $239.1 million, with worldwide revenues of $46.5 million and $446.5 million.

Civacir for HCV
Civacir in early in development and is targeting the small market of liver transplants due to HCV. In 2004, approximately 40% of liver transplants were due to HCV, representing an eligible patient population of 2,500 patients. We have modeled Civacir to achieve a 50% peak market share in these patients and carry a price of $50,000/year.

We project 5 and 10-year U.S. revenue for Civacir of $18.4 million and $129 million, with worldwide revenues of $29 million and $307.4 million.

Other Revenue
Nabi gets other revenue from sales of Aloprim and its antibody products, which are in decline. For purposes of valuation, we have modeled a 5% annual decline in these revenues going out 10 years.

VALUATION

Nabi’s valuation rests largely on StaphVAX’s approval and uptake in the market. There is the potential for upside to StaphVAX’s revenue if it can gain more traction in the cardiac and orthopedic surgery indications. However Nabi does have downside in our valuation if it cannot succeed in advancing its approved products overseas and into other indications.

We currently value Nabi’s 5 and 10-year pipeline at $16.12/share and $17.41/share. At Nabi’s August 26th closing price of $13.06/share, we currently find its stock to be FAIRLY VALUED to slightly UNDERVALUED, and are cautious with the vaccine companies in general.

Upcoming Catalysts and Valuation

StaphVAX will be Nabi’s main valuation driver and has a number of upcoming catalysts. Several trial data events are set to occur before the end of 2005 and Nabi plans on filing a BLA for StaphVAX in ESRD patients in the fourth quarter. Should StaphVAX gain approval, we would value Nabi’s 5 and 10-year pipeline at $19.03/share and $20.15/share. This does represent close to a 50% return and may offer an interesting late stage play in the vaccine companies.

Nabi Convertible Debt

Currently Nabi has $112.4 million in outstanding convertible senior notes, paying 2.875%, due in April 2025. The notes were issued with an initial conversion premium of 30% making them convertible at $14.32/share. The notes are callable on or anytime after 4/18/2010 at par and also have a put option at par on 4/15/2010, 2012, 2015, and 2020.

Assuming that StaphVax gets FDA approval in October of 2006, we believe that Nabi will become profitable in late 2008 and in for the full year of 2009. Due to the contribution from Nabi’s approved products, it will have no need for an additional money raise. We are currently 2% above the average likelihood of approval for StaphVAX.

Furthermore, given the current price of Nabi stock and the future revenue potential of the StaphVax franchise, we believe that the bonds will be converted into common stock in 2009 after the company becomes profitable. We do not expect the company to redeem the bonds, as this would be a significant drain of its cash reserves. If Nabi is unsuccessful in furthering its approved products, then it will most likely have the need for additional financing, which would further dampen its valuation.

Nabi is also looking to expand StaphVAX’s label into patients undergoing cardiac and orthopedic surgeries. While the number of orthopedic surgeries each year is similar to the number of ESRD patients, there are over a million cardiac surgeries performed annually. However, because these patients tend to be much healthier than ESRD patients, we are currently projecting only 10% will be considered for StaphVAX. Since StaphVAX is still early in development for these indications, we have only applied a 20% peak market share within this 10% patient population. Because our patient eligibility number is only 10%, there is the potential for upside in StaphVAX should the data show it to be highly effective and safe way to prevent Staph infections in these patients.

We currently project 5 and 10-year U.S. revenues for StaphVAX of $188.9 million and $262.3 million, with worldwide revenue of $332 million and $496.9 million.

NicVAX for smoking cessation
While there are tens of millions of people who desire to quit smoking, it is unclear how many are actually motivated to the point of trying to quit smoking. Because NicVAX requires an injection, it will most likely be used on a doctor’s recommendation. A study done by the CDC found that as little as 15% of smokers talk to their doctors about quitting smoking and only 3% actually have a follow-up visit with the doctor regarding methods of quitting. Our current assumption is that NicVAX will be used as more of a third-line therapy after such things as nicotine gum, patches, nasal spray and drugs such as Acomplia. These therapies do carry a high relapse and we have modeled 70% may reach the point of considering NicVAX.

We project 5 and 10-year U.S. revenue for NicVAX of $36.4 million and $239.1 million, with worldwide revenues of $46.5 million and $446.5 million.

Civacir for HCV
Civacir in early in development and is targeting the small market of liver transplants due to HCV. In 2004, approximately 40% of liver transplants were due to HCV, representing an eligible patient population of 2,500 patients. We have modeled Civacir to achieve a 50% peak market share in these patients and carry a price of $50,000/year.

We project 5 and 10-year U.S. revenue for Civacir of $18.4 million and $129 million, with worldwide revenues of $29 million and $307.4 million.

Other Revenue
Nabi gets other revenue from sales of Aloprim and its antibody products, which are in decline. For purposes of valuation, we have modeled a 5% annual decline in these revenues going out 10 years.

VALUATION

Nabi’s valuation rests largely on StaphVAX’s approval and uptake in the market. There is the potential for upside to StaphVAX’s revenue if it can gain more traction in the cardiac and orthopedic surgery indications. However Nabi does have downside in our valuation if it cannot succeed in advancing its approved products overseas and into other indications.

We currently value Nabi’s 5 and 10-year pipeline at $16.12/share and $17.41/share. At Nabi’s August 26th closing price of $13.06/share, we currently find its stock to be FAIRLY VALUED to slightly UNDERVALUED, and are cautious with the vaccine companies in general.

Upcoming Catalysts and Valuation

StaphVAX will be Nabi’s main valuation driver and has a number of upcoming catalysts. Several trial data events are set to occur before the end of 2005 and Nabi plans on filing a BLA for StaphVAX in ESRD patients in the fourth quarter. Should StaphVAX gain approval, we would value Nabi’s 5 and 10-year pipeline at $19.03/share and $20.15/share. This does represent close to a 50% return and may offer an interesting late stage play in the vaccine companies.

Nabi Convertible Debt

Currently Nabi has $112.4 million in outstanding convertible senior notes, paying 2.875%, due in April 2025. The notes were issued with an initial conversion premium of 30% making them convertible at $14.32/share. The notes are callable on or anytime after 4/18/2010 at par and also have a put option at par on 4/15/2010, 2012, 2015, and 2020.

Assuming that StaphVax gets FDA approval in October of 2006, we believe that Nabi will become profitable in late 2008 and in for the full year of 2009. Due to the contribution from Nabi’s approved products, it will have no need for an additional money raise. We are currently 2% above the average likelihood of approval for StaphVAX.

Furthermore, given the current price of Nabi stock and the future revenue potential of the StaphVax franchise, we believe that the bonds will be converted into common stock in 2009 after the company becomes profitable. We do not expect the company to redeem the bonds, as this would be a significant drain of its cash reserves. If Nabi is unsuccessful in furthering its approved products, then it will most likely have the need for additional financing, which would further dampen its valuation.