Back to GetFilings.com

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 28, 2002

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.10 per share

     Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). [X] Yes [  ] No

     As of February 21, 2003, 38,983,682 shares of common stock were outstanding, of which 38,345,802 shares were held of record by non-affiliates. The aggregate market value of shares held by non-affiliates was approximately $199,398,000 based on the closing price per share of such common stock on such date as reported by the Nasdaq Stock Market.

Table of Contents

Documents Incorporated by Reference

     Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders, which will be filed within 120 days after the close of the Registrant’s fiscal year ended December 28, 2002, are incorporated by reference into Part III.

2

Table of Contents

Nabi Biopharmaceuticals

TABLE OF CONTENTS

3

Table of Contents

Nabi Biopharmaceuticals

PART I

ITEM 1. BUSINESS

OVERVIEW

Nabi Biopharmaceuticals discovers, develops, manufactures and markets products that power the immune system to help people with serious, unmet medical needs. We have a broad product portfolio and significant research capabilities focused on developing and commercializing novel vaccines and antibody-based biopharmaceutical products that prevent and treat infectious, autoimmune and addictive diseases, such as hepatitis B, hepatitis C and Staphylococcus aureus infections, immune thrombocytopenia purpura (“ITP”) and nicotine addiction. We have four marketed products, Nabi-HB® [Hepatitis B Immune Globulin (Human)] for the prevention of hepatitis B infections, WinRho SDF® [Rh_o(D) Immune Globulin Intravenous (Human)] for the treatment of acute, chronic and HIV-related ITP, Autoplex® T [Anti-Inhibitor Coagulant Complex, Heat Treated] and Aloprim™ [(Allopurinol sodium) for injection]. We have a significant clinical trials program including clinical trials of our lead investigational products, StaphVAX® (Staphylococcus aureus Polysaccharide Conjugate Vaccine), Altastaph™ [Staphylococcus aureus Immune Globulin (Human)], Civacir™ [Hepatitis C Immune Globulin (Human)], and NicVAX™ (Nicotine Conjugate Vaccine). We have a state-of-the-art fractionation facility for the manufacture of Nabi-HB and our investigational antibody 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 manufacture of their products.

PRODUCTS

Currently Marketed Biopharmaceutical Products

Sales of our biopharmaceutical products, Nabi-HB, WinRho SDF, Autoplex T and Aloprim, totaled $89.5 million in 2002 compared to $73.4 million in 2001. In 2002, biopharmaceutical products accounted for 46% of our sales and 86% of our gross margin. Each of our four currently marketed biopharmaceutical products is described below:

Nabi-HB® [Hepatitis B Immune Globulin (Human)]

Sales of Nabi-HB were $41.2 million in 2002 compared to $30.3 million in 2001.

The hepatitis B virus (“HBV”) is a major health concern globally. According to the World Health Organization (“WHO”) data from 2000, of the 2 billion people who have been infected with HBV, more than 350 million have chronic infections. The Hepatitis B Foundation currently estimates that one out of 20 people in the U.S. has been infected with HBV, and reports that HBV is 100 times more infectious than the human immunodeficiency virus (“HIV”). The U.S. Center for Disease Control (“CDC”) currently estimates that in the U.S. alone there are an estimated 1.25 million chronic hepatitis B carriers, 78,000 new hepatitis B infections per year, and 5,000 individuals who die annually from hepatitis B or its complications. Approximately half of new hepatitis B infections are caused by sexual exposures. The most recent CDC estimates, measured in 1991 dollars, are that HBV costs the U.S. economy at least $700 million annually in medical expenses and lost work time.

Nabi-HB is a human polyclonal antibody product indicated to prevent hepatitis B following sexual or other exposure, including needle sticks and transmission from hepatitis B antigen-positive mothers to their newborns. In October 2001, we received approval from the U.S. Food and Drug Administration (“FDA”) to manufacture Nabi-HB in our biopharmaceutical manufacturing facility in Boca Raton, Florida and we began manufacturing all of our requirements of Nabi-HB at this facility in the fourth quarter of 2001. As the initial phase of our international sales strategy for Nabi-HB, during 2002 we entered into four

4

Table of Contents

international distribution agreements that are expected to introduce this product into Turkey, Singapore and Malaysia over the coming two years as well as in up to forty-three countries on a named patient basis through our distribution agreement with IDIS World Medicines. Plans are underway to obtain regulatory approval for Nabi-HB to be introduced into Europe and other developed markets.

In November 2002, we submitted a Biologics License Application (“BLA”) to the FDA for the use of an intravenous (“IV”) formulation of Nabi-HB to prevent liver transplant patients from suffering re-infection with HBV. Nabi-HB® Intravenous [Hepatitis B Immune Globulin (Human)] has received Orphan Drug Designation from the FDA. In January 2003, we received notification that the FDA had accepted our IV BLA for priority review. A priority review means that the FDA commits to responding to this BLA within six months, instead of the statutorily required ten months.

WinRho SDF® [Rh_o(D) Immune Globulin Intravenous (Human)]

Sales of WinRho SDF were $34.0 million in 2002 compared to $34.8 million in 2001.

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 purple patches on the body caused by bleeding into the skin and mucous membranes. In ITP, the body’s immune system produces antibodies that attach to platelets causing them to be removed from circulation, primarily by the spleen. Because platelets are required for blood clotting, as platelet counts decrease, the incidence of bleeding episodes increase. In certain cases, such as severe trauma or spontaneous intracranial hemorrhage, the bleeding can be life threatening. The Platelet Disorder Support Association currently estimates that in the U.S., up to 125 cases per million people (children and adults) develop ITP each year. In children, the disease is usually acute at onset and is often resolved with treatment in six months. In adult ITP, the onset is gradual and rarely resolves itself without treatment. 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. In 2002, as published in Blood Reviews, chronic thrombocytopenia is currently estimated to occur in about 10% of HIV-infected patients and in about a third of patients with AIDS.

WinRho SDF is a human polyclonal antibody product approved and marketed for the treatment of ITP. We began exclusive marketing of WinRho SDF in the U.S. in mid-1995 under a license and distribution agreement with Cangene Corporation (“Cangene”) focused on the ITP market. Under our agreement with Cangene, which ends in March 2005, Cangene manufactures WinRho SDF for us. We are currently conducting two clinical studies under Investigational New Drug Applications (“IND”) involving WinRho SDF, (1) a comparison of WinRho SDF versus IVIG for the treatment of ITP, and (2) an evaluation of WinRho SDF in the treatment of ITP during pregnancy. See also “Strategic Alliances,” “Supply and Manufacturing” and “Government and Industry Regulation — Orphan Drug Act.”

Orphan Drug Designation for WinRho SDF for the treatment of ITP expired in March 2002.

Autoplex® T [Anti-Inhibitor Coagulant Complex, Heat Treated]

Hemophilia A is a blood clotting disorder characterized by a lack of functional coagulation factor VIII. Physicians typically treat hemophilia A by replacing the deficient factor with either recombinant clotting factor VIII or 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. In 1998, the CDC estimated that there were approximately 13,000 hemophilia A patients in the U.S. As published in a 1995 publication, Inhibitors: A Complicating Factor, approximately 10-20% of them suffer from the production of inhibitors to outside sources of factor VIII.

Autoplex T is a coagulation complex used to treat patients who have developed inhibitors to factor VIII. We acquired exclusive rights to distribute Autoplex T in the U.S., Canada and Mexico from Baxter

5

Table of Contents

Healthcare Corporation (“Baxter”) in May 1997. Our current agreement to distribute Autoplex T expires in May 2003, although we believe it will be extended until May 2004. Baxter supplies Autoplex T to us. See also “Strategic Alliances” and “Supply and Manufacturing.”

Aloprim™ [(Allopurinol sodium) for injection]

Aloprim is indicated for the treatment of chemotherapy-induced hyperuricemia in patients with leukemia, lymphoma, or solid organ tumors. Complications associated with chemotherapy-induced hyperuricemia in these patients include renal failure. Aloprim is targeted to those patients who develop chemotherapy-induced hyperuricemia and are not treatable by oral therapies. Based on 2002 data from the American Cancer Society, there are approximately 90,000 patients annually suffering from leukemia and lymphoma in the U.S. that could potentially be at risk for developing chemotherapy-induced hyperuricemia. We acquired certain rights to distribute Aloprim from DSM Pharmaceuticals (formerly Catalytica Pharmaceuticals) (“DSM”) in June 1999 and currently have the exclusive right to distribute Aloprim in the U.S. and Canada. Our current agreement with DSM expires in 2004. Under the terms of the distribution agreement with DSM, we have the option to acquire the rights to manufacture and distribute Aloprim from DSM prior to expiration of the agreement. DSM is obligated to supply Aloprim to us through the expiration date of the distribution agreement. Aloprim has received Orphan Drug Designation for treatment of chemotherapy-induced hyperuricemia through May 2003. See also “Strategic Alliances”, “Supply and Manufacturing” and “Governmental and Industry Regulation — Orphan Drug Act.”

Currently Marketed Antibodies and Intermediate Products

In September 2001, we sold the operating assets of a majority of our antibody collection centers and our testing laboratory for $156.3 million in cash. By retaining nine antibody collection centers, we expect to generate sufficient raw materials for the manufacture of our own antibody-based biopharmaceutical products in our Boca Raton, Florida manufacturing facility. We also supply pharmaceutical and diagnostic customers with specialty and non-specific antibodies for the manufacture of their products.

Sales of our antibody products totaled $106.5 million in 2002 compared to $161.4 million in 2001. The decrease was expected due to the sale of the majority of our antibody collection business and testing laboratory in September 2001. In 2002, antibody products accounted for 54% of our sales and 14% of our gross margin. As we are able to achieve licensure for antibody-based biopharmaceutical products in our research and development pipeline, we anticipate a strategic shift in our antibody segment of converting production of non-specific antibodies into the production of specialty antibodies which we will use to manufacture our own antibody-based biopharmaceutical products. Currently, specialty antibodies produced in our antibody collection centers are used in the production of Nabi-HB and WinRho SDF. Our specialty antibodies and non-specific antibody products are described below.

Specialty Antibodies

Specialty antibody products contain high concentrations of a specific antibody and are used primarily to manufacture antibody-based biopharmaceutical products to treat chronic immune disorders and to prevent and treat viral and bacterial diseases as well as to develop diagnostic 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. We believe that our antibody collection capabilities, our operational expertise in donor immunization programs, our clinical and medical experience in conducting clinical trials under IND, and our access to a diverse antibody donor base provides us with a strategic advantage over competitors in our ability to produce specialty antibodies.

Our principal specialty antibody products include:

•

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

6

Table of Contents

		utilizing our collection of these antibodies to HBV to manufacture Nabi-HB, our hepatitis B antibody-based biopharmaceutical product.
•		RhoD Antibodies. Antibodies to RhoD antigen (anti-D) have long been used to prevent Rho(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 to RhoD antigen are used in the manufacture of WinRho SDF, our antibody-based biopharmaceutical product for the treatment of ITP.
•		Tetanus Antibodies. Antibodies to tetanus toxin are used by our customers to produce therapeutic products to provide short-term protective immunity to patients exposed to tetanus.
•		Cytomegalovirus (“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.
•		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.
•		Diagnostic Products and Services. We opportunistically commercialize and manufacture control reagents and specialty antibody-based products for use by in-vitro diagnostic manufacturers, regulatory agencies, testing laboratories, and diagnostic distributors.

Sales of specialty antibodies were $32.7 million in 2002 and $46.8 million in 2001. Specialty antibody sales decreased during 2002, due primarily to the sale of the majority of our antibody collection business and testing laboratory in September 2001.

Non-specific Antibodies

Our nine FDA licensed antibody collection centers also 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.

In 2002, we derived sales of $73.8 million from sales of non-specific antibodies as compared to 2001 levels of $114.5 million. Non-specific antibody sales have decreased in 2002 from 2001 as a result of the sale of the majority of the antibody collection business and testing laboratory in September 2001. Non-specific antibody sales include shipments to a single customer under a supply contract that expires in May 2003, which was retained by us following the sale of the majority of the antibody collection business and testing laboratory in September 2001. The purchaser of the majority of the antibody collection business and testing laboratory continues to supply us with non-specific antibodies which we did not collect at our centers, to fulfill this obligation at the selling price under this contract. Because we retain the risk of credit loss with this customer, we record revenues but no margin on these sales. Such sales totaled $55.6 million in 2002. In 2002, sales of non-specific antibodies collected at our retained antibody collection centers totaled $18.2 million.

7

Table of Contents

The following is a summary of our currently marketed biopharmaceutical and antibody products:

Research and Development Product Pipeline

We have a significant pipeline of biopharmaceutical products under development. Our research and development product pipeline consists of vaccines for long-term protection and antibody-based biopharmaceutical products for immediate short-term protection from blood infections caused by Gram-positive bacteria (e.g., S. aureus, S. epidermidis, and Enterococci) as well as antibody-based biopharmaceutical products for the treatment and/or prevention of various diseases, including hepatitis B and hepatitis C and a vaccine for treating and preventing nicotine addiction.

8

Table of Contents

The following table provides the estimated amounts spent during the last three fiscal years on our research and development programs:

Research and development expenses of approximately $1.2 million and $1.1 million relating to the NicVAX program were reimbursed by the National Institute of Drug Abuse (“NIDA”) for the years ended December 28, 2002 and December 29, 2001, respectively. There was no reimbursement from NIDA for the year ended December 30, 2000.

The National Institute of Allergy and Infectious Diseases (“NIAID”), an institute of the National Institutes of Health (“NIH”), has directly funded costs related to the Civacir clinical trial initiated in 2002.

Gram-positive Infections Program

Epidemiology

According to current estimates from the CDC, more than two million patients in the U.S. each year contract an infection as a result of exposure to a pathogen while receiving healthcare in a hospital. Within our nation’s 5,400 acute care hospitals, S. aureus is one of the three leading causes of hospital-acquired bloodstream infections, with a crude mortality rate of 25%. With its capacity to cause serious complications and its increasing antibiotic-resistance, S. aureus has become a critically dangerous pathogen. 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. Patients who are most at risk for these infections include surgical patients, trauma or burn victims, newborns whose immune systems are not yet developed and people with chronic illnesses such as chronic skin diseases, diabetes, cancer and 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.

In 1997, the Lewin Group, an independent consulting group, published data from a 1995 study 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 the total direct medical costs incurred as a result of S. aureus infections was estimated at $32,110 per patient (in 1995 dollars). In addition, S. aureus associated hospitalizations resulted in more than twice the length of hospitalization, twice the deaths and twice the medical costs compared to an average hospital stay.

Staphylococcal infections are difficult to treat because the bacteria that cause them are highly virulent (severe) and resistant to many currently available antibiotics.

9

Table of Contents

The rise of antibiotic resistance has markedly curtailed options for treating Gram-positive bacterial 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. According to the National Nosocomial Infections Surveillance System, in large, urban U.S. hospitals, 53.5% of S. aureus pathogens associated with nosocomial infections in ICU patients are resistant to methicillin. In 1996, the CDC reported that the first S. aureus strains with notably reduced sensitivity to vancomycin (so-called, vancomycin intermediate sensitive S. aureus — VISA strains) were discovered in Japan. In July of 2002, the first case of S. aureus fully resistant to vancomycin (VRSA) was reported by the CDC. This VRSA infection occurred in a 40-year-old, diabetic, hemodialysis patient in the U.S.

Dual Approach to Gram-positive bacterial infections

We are using a dual approach to developing products to combat Gram-positive bacterial infections: StaphVAX and Altastaph.

StaphVAX, an investigational polysaccharide conjugate vaccine, is a novel approach to the prevention of S. aureus infections. This product is designed for use in patients who are immune competent and who have the time and ability to respond to a vaccination by making their own antibodies (usually about two weeks) before they are at increased risk for infection (e.g. an elective surgery patient). StaphVAX targets S. aureus serotypes, type 5 and type 8, which are responsible for approximately 85% of S. aureus infections. While traditional vaccines typically target pediatric populations or healthy adults and entail mass vaccination, StaphVAX will be targeted to adult patients who are hospitalized, chronically ill or in a long-term care facility and therefore at high risk of developing a 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, patients generate antibodies specific to S. aureus (serotypes 5 and 8) that may last for several years in non-immune compromised patients and almost a year in patients with partially compromised immune systems. Based on results from clinical studies, these levels of antibody appear to provide protection against S. aureus bacteremia, which can lead to potentially life-threatening and costly infections.

StaphVAX contains surface polysaccharides found in the outer coating (capsular polysaccharide or CP) of S. aureus serotypes 5 and 8. The polysaccharide molecules are linked, 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 (bacteremia) and eliminate it. Since these antibodies bind to several sites on the bacteria’s surface polysaccharides, we believe that the bacteria will be unable to develop resistance to the antibodies as it has to antibiotics.

Altastaph is an investigational human polyclonal antibody product being developed to prevent S. aureus infections in patients who are at immediate risk of infection or who cannot produce their own antibodies when given a vaccine. Some examples of patients that could benefit from Altastaph include low birth weight newborns, trauma patients and emergency surgical patients. We are also exploring the potential to use Altastaph to treat an existing infection. Altastaph is made from purified antibodies from donors who have been immunized with StaphVAX and who have responded to the vaccine by generating high levels of antibodies to the S. aureus bacteria. Altastaph can be provided to a patient by infusion. Given the circulating half-life of such antibodies, the protection provided by a single injection of Altastaph is expected to last a number of weeks, and can be potentially extended by giving repeated doses.

StaphVAX® (Staphylococcus aureus Polysaccharide Conjugate Vaccine)

StaphVAX is being developed for the 12 million patients estimated to be at high risk of infection and who are able to respond to a vaccine by producing their own antibodies. Potential at-risk patient populations who may benefit from the use of StaphVAX include: (a) patients such as the elderly and those suffering chronic diseases including end stage renal disease (“ESRD”), congestive heart failure, chronic

10

Table of Contents

obstructive pulmonary disease and diabetics 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 who are at long-term risk of staph infections due to their implants; (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 1997 Lewin Group study discussed above, S. aureus infections 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 Service (“PHS”)/ NIH. See also “Strategic Alliances.” In late 2000, we completed a Phase III placebo controlled clinical trial for StaphVAX in hemodialysis patients with ESRD. We targeted this patient population because of the relatively high infection rate and because they are at long-term risk of infection and could maximally benefit from the protection that a vaccine may afford. A total of 1,804 patients were included in the study. Half the enrolled patients 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 bacteremia by almost 60% through 10 months post-vaccination. The reduction in bacteremia one year after vaccination was 26%. Side effects in those patients receiving the vaccine were generally mild to moderate and generally resolved within 36 to 48 hours following vaccination. The most commonly occurring side effect was minor pain at the intramuscular injection site. The results in ESRD patients are especially relevant because these patients are severely immune-compromised, and therefore, generally respond poorly to vaccines. Based upon previous clinical studies in normal, healthy volunteers, immune-competent patients who are at risk for S. aureus infections are expected to respond more favorably with higher levels of antibody to StaphVAX than ESRD patients. The significance of the results of this trial was confirmed by publication in the New England Journal of Medicine in February 2002.

To build on the results of the Phase III trial, we initiated a booster trial in 2001, giving a second dose of StaphVAX to 77 hemodialysis patients who received an initial dose of the vaccine in the Phase III trial completed in 2000. The booster trial was designed to provide an indication that patients at long-term risk could respond to a booster dose of the vaccine. Results from the trial were reported in May 2002. The trial demonstrated that a booster dose of the vaccine given to previously vaccinated hemodialysis patients increased the concentration of the vaccine-specific antibodies against S. aureus. The trial results suggest that periodic booster doses of StaphVAX can be administered to increase and sustain antibody levels for patients at chronic risk of S. aureus infection. The average antibody concentrations reached after the booster vaccination were above what our scientists believe to be a protective level, although not as high as those following the first dose of vaccine. In addition, antibody levels decreased more gradually over time after the booster vaccination than following the initial dose.

Dow Biopharmaceutical Contract Manufacturing Services (formerly Collaborative BioAlliance) (“Dow”) is planned to be the commercial manufacturer for StaphVAX. During 2002, Dow successfully completed manufacture of the first clinical lot of vaccine at their facility. We plan to begin a clinical study to compare the immune system response (immunogenicity) to the Dow-manufactured vaccine with the response achieved in previous trials using the vaccine manufactured in our pilot plant. With good results, we would expect to begin a confirmatory Phase III clinical trial during the second half of 2003.

Because the reduction in infections in the initial Phase III trial was not statistically significant at the primary endpoint of the trial, twelve months post-vaccination, we have planned a confirmatory Phase III clinical trial for StaphVAX with primary efficacy endpoint at 8 months post-vaccination. The size of the trial will be increased to approximately 3,000 subjects to increase its statistical power. In the Phase III trial, we will also administer a booster dose eight months following the initial vaccination and subjects will be followed to track the reduction in infections monitored for an additional four to six months as secondary endpoints. After a series of productive discussions with the FDA, we submitted the final design for the agency’s review in February 2003.

11

Table of Contents

Altastaph™ [Staphylococcus aureus Immune Globulin (Human)]

Altastaph is an investigational human polyclonal antibody product that contains high levels of specific antibodies against S. aureus serotypes 5 and 8. These antibodies are collected from 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 being developed to provide short-term protection to patients at immediate risk of infection, or who are immunocompromised and cannot respond effectively to a vaccine. High-risk populations that could benefit from a product such as Altastaph include low birth weight newborns, trauma patients and emergency surgical patients. This type of protection or treatment may be cost-effective because antibodies in a single dose of Altastaph persist in the bloodstream for a number of weeks and can be available to provide protection for the entire risk period. We are also exploring the use of Altastaph as a therapeutic agent for use in patients with persistent S. aureus infections.

In 1999, we successfully completed a multi-dose safety and pharmacokinetic (the measure of the drug’s interaction 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 PK analysis indicated 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. A larger Phase II clinical trial of Altastaph in low birth weight newborns is planned to commence in 2003.

In 2002, we initiated a placebo controlled, blinded clinical trial at a number of clinical sites to evaluate the safety and PK of Altastaph in adults with S. aureus infections. Enrollment for this trial has commenced. As a therapeutic product, Altastaph may be expected to act synergistically, or additively, with antibiotics given the different mechanisms of these therapies.

Next Generation Products and Other Anti-Bacterial Vaccines in Development

We have also identified and patented an antigen (type 336) found on a serotype of S. aureus, 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 the type 336 antigen and have prepared a prototype conjugate vaccine that is capable of protecting animals from challenge with clinical isolates of the serotype. During 1998, we were issued a U.S. patent on the type 336 antigen. Included in the patent were claims relating to vaccines made from type 336 antigen and monoclonal and polyclonal antibodies reactive to the antigen. Patents for type 336 antigen and its use are being pursued worldwide. The second generation of StaphVAX and Altastaph is expected to contain type 336 antigen in addition to S. aureus types 5 and 8 antigens. This second-generation vaccine is expected to provide coverage for greater than 95% of all clinically significant S. aureus bacteria.

S. epidermidis and Enterococcus faecalis are the two other clinically significant Gram-positive bacteria that cause hospital-acquired infections. We intend to extend product coverage to these two Gram-positive bacteria in subsequent generations of StaphVAX and Altastaph. We have been issued two patents containing claims covering both a S. epidermidis vaccine and human polyclonal antibodies and have filed patent applications on selected enterococcal antigens. Prototypic S. epidermidis and enterococcal vaccines produced by us have been shown to induce antibodies that are protective in animal models and facilitate elimination of bacteria by the same type of immune system response as StaphVAX.

Anti-Viral Program:

Nabi-HB® Intravenous [Hepatitis B Immune Globulin (Human)]

In November 2002, we submitted a BLA to the FDA for the use of an IV formulation of Nabi-HB to prevent liver transplant patients from suffering re-infection

12

Table of Contents

with HBV. Nabi-HB Intravenous has received Orphan Drug Designation from the FDA. In January 2003, we received notification that the FDA accepted our IV BLA for priority review. A priority review means that the FDA commits to responding to this BLA within six months, instead of the statutorily required ten months.

Civacir™ [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. Moreover, during surgery and in the period immediately following transplant surgery, these patients have no treatment options to prevent re-infection of the transplanted liver. Re-infection of the transplanted liver is almost universal within weeks to months after surgery and can occur within days of transplantation. HCV infection also contributes to frequent hospitalizations and failure of the transplanted liver when it occurs in transplant patients. The CDC currently estimates that there are approximately 2.7 million individuals in the U.S. chronically infected with HCV, and the WHO estimates 170 million individuals worldwide are 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 re-infection of transplanted livers in patients infected with HCV.

In 2000, we completed a series of animal studies of Civacir, using chimpanzees, in collaboration with the CDC under a Cooperative and Research Development Agreement. The results from these animal studies suggest that the elevated level of HCV-specific antibodies in serum maintained by multiple infusions of Civacir over a period of months is associated with prevention of acute hepatitis and the possible elimination of HCV antigen from liver cells after HCV infection. 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 “Evaluation of the Safety and Pharmacokinetics of Hepatitis C Immune Globulin (Human), Civacir, in Liver Transplant Patients” with the NIAID.

In March 2002 under an IND, we commenced a Phase I/II trial of Civacir in HCV-positive liver transplant patients at six study sites in the U.S. This NIAID funded trial is a three-armed, randomized, controlled clinical study evaluating two dose levels of Civacir versus a control. In this trial we are also evaluating the safety of dosing patients with Civacir during and after transplant surgery. We will also evaluate the PK of HCV specific antibody in trial subjects following dosing, as well as HCV levels in the transplanted livers. Patients participating in the trial are being followed for six months post initial dosing. The results of this trial will help us determine the safety of Civacir in this patient population and define the efficacy markers that may be important in subsequent Phase II and III trials. In December 2002, we announced that the Civacir trial was fully enrolled and we anticipate reporting initial results from the trial in 2003. Civacir received Orphan Drug Designation from the FDA in November 2002.

Nicotine Addiction Program:

NicVAX™ (Nicotine Conjugate Vaccine)

Tobacco use is the single leading preventable cause of death in the U.S. According to the CDC, in 2000, an estimated 46.5 million adults were current smokers. Further, in the U.S., per the American Lung Association, there are currently an estimated 4.5 million adolescent smokers between the ages of 12 - 17. The CDC estimates that over 750,000 new youth smokers are being added each year. As reported by the CDC, tobacco use causes more than 400,000 deaths per year, more than AIDS, alcohol, drug abuse, car crashes, murders, suicides, and fires combined. Economically, smoking is reported to

13

Table of Contents

be responsible each year for greater than $75 billion in medical expenditures and $82 billion in indirect costs (lost work time and disability). On a worldwide basis, the statistics are even more significant as at least 1.1 billion people, or one-third of the global adult population, use tobacco, as reported by the World Bank Group in 1999.

Nicotine is a very small molecule, too small to be detected by the immune system (sub-antigenic). Once the molecule enters the bloodstream following nicotine intake, it quickly passes the blood/brain barrier. Once nicotine enters the brain, it binds to and activates neuroreceptors in the brain believed to be the source of positive reinforcement from nicotine. 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 cause the immune system to produce high levels of nicotine-specific antibodies following vaccination. Our researchers have shown that it is possible to link a hapten (a very small molecule like nicotine) to a carrier protein. The carrier protein, which is the same that is used in the manufacture of StaphVAX, is a non-toxic, carrier protein derived from the bacteria Pseudomonas aeruginosa. Once given the vaccine, the subjects’ immune systems produce proteins called antibodies which are specific to nicotine and which nicotine binds to on subsequent exposure to the molecule. 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. One of the potential effects of a nicotine vaccine might be to prevent positive feedback from nicotine should users be exposed to nicotine during an attempt to break their habit. The antibodies resulting from use of the vaccine have been shown to ease nicotine dependence in rats, reduce nicotine levels in the brains of rats by 64% compared to control rats, prevent nicotine-induced blood pressure increases, and reduce the hyperactivity induced in rats in response to nicotine injections.

NicVAX uses a similar conjugate vaccine technology as was developed for StaphVAX and other anti-bacterial vaccines in our pipeline. 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 (“USPTO”) issued a U.S. Patent to us for NicVAX entitled “Hapten-Carrier Conjugates for Treating and Preventing Nicotine Addiction.” This patent covers the binding of nicotine to a protein carrier for use as a vaccine for treating and preventing nicotine addiction. In February 2003, a second U.S. patent covering NicVAX for treatment and prevention of nicotine addiction was granted to us. This patent covers the composition of NicVAX and the use of the vaccine to obtain antibodies and use of antibodies to prevent and treat nicotine addiction. Patent applications on NicVAX technology, on the resultant nicotine vaccine and its use to prevent and treat nicotine addiction have been filed 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 NIDA in the amount of approximately $4 million over four years for the further research and development of NicVAX. Funding for the third year under this grant was approved for 2002 and we anticipate that funding will be approved for the fourth year of the grant. In November 2001, we announced the successful completion of preclinical toxicology studies for NicVAX, which were also funded by NIDA.

In May 2002, we commenced a placebo controlled, double-blinded Phase I clinical trial of NicVAX in normal, healthy, non-smoker volunteers with the assistance of funding from NIDA. The intent of the trial was to evaluate the safety and immunogenicity of the vaccine. Preliminary results of the trial were reported in October 2002. Analysis of blood samples from the participants showed that a single dose of vaccine resulted in a rapid immune response and generated nicotine specific antibodies. Local reactions to vaccination were generally mild to moderate, temporary and required no therapeutic intervention. Antibody levels were detected within 7-14 days of vaccination and were either maintained or continued to increase through at least 60 days post-vaccination. Based on these findings, we plan to initiate additional NIDA funded clinical trials of NicVAX in smokers and ex-smokers in the U.S. in 2003.

14

Table of Contents

In February 2003, we initiated a placebo controlled, double-blinded Phase I/II study of NicVAX in smokers, ex-smokers and non-smokers. The trial, which is being conducted in collaboration with researchers at the University of Maastricht in the Netherlands, represents our first clinical trial conducted outside the U.S. The primary intent of this trial is to evaluate the development of specific nicotine antibody levels and safety of the vaccine in study participants. A total of 30 subjects will be enrolled in this trial, 21 smokers and 9 ex-smokers or non-smokers. They will receive at least three immunizations of NicVAX or placebo.

Other Programs:

RENs and RENt (Ring Expanded Nucleosides and Nucleotides)

Nucleosides and nucleotides are the building blocks of DNA and RNA. Our scientists and scientists at the University of Maryland Baltimore County (“UMBC”) 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 prepared using RENs technology have been shown to possess anti-microbial, anti-viral and anti-tumor activities in vitro. In addition to evaluating RENs compounds as stand-alone drugs, we believe there are opportunities to evaluate use of our current antibody-based biopharmaceutical products targeted at viruses 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 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 UMBC a royalty based on net sales of products utilizing the licensed technology.

Staphylococcus aureus Vaccine for Mastitis

S. aureus is the most frequent cause of mastitis, one of the most common diseases afflicting dairy and beef cattle. This disease results in significantly higher costs for producers of dairy and beef products due to discarded milk, decreased productivity, treatment expense, and the inability of infected cows to suckle calves.

In October 2001, the USPTO 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. In July 2000 we reported on the results of a study in dairy cattle with a prototype of this vaccine as a therapeutic agent. The study, which was the result of research and development collaboration between our researchers and researchers at the U.S. Department of Agriculture and Michigan State University, reported that a trivalent whole-cell vaccine produced by us resulted in a cure rate of 54% as compared to antibiotic alone (4% cure rate). We consider our whole cell vaccine technology to be an out-licensing candidate.

15

Table of Contents

The following is a summary of our products under development:

16

Table of Contents

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 equally in the profits from sales after accounting for the costs of production and selling expenses. The license and distribution agreement concludes in March 2005.

Chiron Corporation

We have an agreement with Chiron Corporation that 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 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 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 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 Pharmaceuticals, Inc.

In 1999, we entered into a five-year agreement with DSM for exclusive distribution rights in the U.S. and Canada for Aloprim. Under this agreement, we sell and DSM manufactures the product and both companies share equally in profits from the sale of the product after accounting for the costs of production and selling expenses for the first $4 million of product sales in any given year. On sales of Aloprim in excess of $4 million in a year, profits are shared 70% to us and 30% to DSM. In the event DSM obtains sales and distribution rights in additional territories to the U.S. and Canada, we can purchase the rights to Aloprim in these additional territories. The current distribution agreement concludes in June 2004. We have the option to purchase the rights to manufacture and distribute Aloprim from DSM prior to expiration of the agreement.

Baxter Healthcare Corporation

In 1997, we acquired exclusive rights to Autoplex T in the U.S., Canada and Mexico from Baxter. 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 third twelve-month extension beginning in May 2002. 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 2003 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 2004. If the rights revert to Baxter and Baxter later sells these rights, we will share equally with Baxter in 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.

17

Table of Contents

Dow Biopharmaceutical Contract Manufacturing Services

In May 2000, we completed agreements with Dow for the contract production and commercial supply of StaphVAX. The manufacturing process for StaphVAX is being transferred to Dow from our pilot manufacturing plant in Rockville, Maryland. We plan to use StaphVAX clinical material from initial clinical lots manufactured at Dow under current Good Manufacturing Practices (“cGMP”) for an immunogenicity study and for the confirmatory Phase III trial planned to commence in 2003. We expect Dow to complete scale-up of manufacturing at the facility and to begin the production of consistency lots of StaphVAX in 2004. The contract manufacturing agreements required us to make certain payments to Dow to secure future access to commercial vaccine manufacturing capacity and to enable Dow to ready its facility for the future commercial scale manufacture of StaphVAX, its intended use. These payments have been recorded as a Manufacturing Right and included in Intangible Assets. Amortization of the Manufacturing Right is expected to commence when commercial manufacture of StaphVAX commences at Dow. The contract to ready the Dow facility to manufacture StaphVAX, which was originally scheduled to expire in October 2002, has been extended to March 2003. We expect to execute amended contracts with Dow to complete readying the facility for its intended use, the commercial manufacture of StaphVAX in March 2003. These contracts are expected to require us to make significant additional payments to Dow to ready its facility for the commercial manufacture of StaphVAX which will also be recorded as a Manufacturing Right.

Public Health Services/National Institutes of Health

Under a license agreement with the PHS/NIH, we have exclusive rights to a U.S. patent relating to a carbohydrate/protein conjugate vaccine against Staphylococcus and are obligated to pay PHS a royalty based on net sales of products using this technology. The licensed patent rights cover staphylococcal vaccines including StaphVAX. The license terminates on the date that the patent rights expire. These patent rights expire in the U.S. in April 2010.

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 our antibody collection business and testing laboratory, we entered into an agreement for the purpose of assuring that each party would have the ability to meet supply commitments to third parties after completion of the sale. Under this agreement we are obligated to provide Rh_oD antibodies at our cost plus a handling fee. This agreement terminates in December 2004. Non-specific antibody sales include shipments to a single customer under a supply contract, which was retained by us following the sale of the majority of the antibody collection business and testing laboratory in September 2001. The purchaser of the majority of the antibody collection business and testing laboratory continues to supply us with non-specific antibodies to fulfill this obligation at the selling price under this contract. Because we retain the risk of credit loss with this customer, we record revenues but no margin on these sales. Such sales totaled $55.6 million in 2002. This agreement ends in May 2003.

For our other antibody product contracts, pricing for product deliveries is generally determined by mutual agreement 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. In addition, in 2003 we expect to sell antibody products in individually negotiated transactions that will be subject to market conditions at the time of negotiation. Our profit margins for these transactions may be adversely or beneficially affected by market conditions for antibody products at those times.

18

Table of Contents

Sales for the year ended December 28, 2002 included one customer of our antibody products segment, Bayer Corporation, and two customers of our biopharmaceutical products segment, Cardinal Health, Inc. and AmerisourceBergen, representing 35%, 15% and 14% of total consolidated sales, respectively.

SUPPLY AND MANUFACTURING

Biopharmaceutical Products

We manufacture Nabi-HB in our biopharmaceutical manufacturing facility in Boca Raton, Florida. Additionally, we have manufactured clinical lots of our investigational products, Altastaph and Civacir, in this facility. In December 2001, we signed a 10-year agreement with Inhibitex, Inc. to manufacture its investigational antibody-based biopharmaceutical product in our Boca Raton, Florida biopharmaceutical manufacturing facility and have produced clinical lots under this agreement in 2002.

In April 2001, we signed an agreement with Acambis to provide specialty antibodies at our antibody collection centers under an IND to be submitted by Acambis to the FDA and to manufacture their antibody-based therapeutic product. In 2002, Acambis advised us that the IND study was withdrawn.

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 that terminates in March 2005. We collected and supplied a portion of the Rh_oD antibodies required for the manufacture of WinRho SDF to Cangene in 2002.

Baxter currently manufacturers Autoplex T for us under the terms of a consent order entered into between Baxter and the FTC. 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 third twelve-month extension beginning in May 2002. 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 2004.

DSM 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. DSM is obligated to supply Aloprim to us through the expiration date of the distribution agreement. During 2002, we experienced delivery shortfalls of Aloprim from DSM. If delivery shortfalls occur in 2003, product sales of Aloprim will be negatively impacted. We have the option to purchase the rights to manufacture and distribute Aloprim from DSM prior to expiration of the agreement.

We manufacture diagnostic products at our Miami, Florida facility and have manufactured both pre-clinical and clinical lots of vaccine products at our pilot facility in Rockville, Maryland. We are in the process of constructing a laboratory and cold storage facility in Boca Raton, Florida at which we expect to manufacture our diagnostic products in the future. This facility is expected to replace our leased facility in Miami, Florida in 2003.

Antibody Collection Process

We currently collect and process antibodies from our nine 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.

19

Table of Contents

PATENTS AND PROPRIETARY RIGHTS

Our continued success in our biopharmaceutical business 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 “Risk Factors — 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 France. 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, such 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, currently 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. Congress or the FDA in specific situations can modify the regulatory process.

Antibody Products

The collection, storage and testing of antibodies and antibody-based products derived from human plasma 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 product licenses to collect each specialty antibody product.

20

Table of Contents

We hold Biologics License No. 1022 covering all of our centers and the manufacturing plant for antibody-based biopharmaceutical products. We are also subject to and are required to be in compliance with pertinent regulatory requirements of the foreign countries to which 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 operate under the International Quality Plasma Program (“iQPP”) that was initiated by the Plasma Protein Therapeutics Association (formerly known as American Blood Resources Association), an organization that establishes and recommends guidelines for the antibody industry. iQPP imposes standards on antibody collection facilities in addition to those presently required by the FDA. iQPP certification has proven to be increasingly significant and fractionators worldwide now require that the supply of antibodies come only from iQPP certified centers. All collection facilities owned by us are iQPP certified.

Orphan Drug Act

Aloprim has received Orphan Drug Designation for treatment of chemotherapy-induced hyperuricemia through May 2003. Nabi-HB Intravenous has received Orphan Drug Designation under this Act for prevention of hepatitis B re-infection in liver transplant recipients and for which we filed a BLA in November 2002. In November 2002, the FDA also granted our investigational product, Civacir, Orphan Drug Designation for prevention of hepatitis C infection in liver transplant recipients. 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.

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 retain a significant market share. Anti-HBs antibodies produced at our antibody collection centers are currently used in the manufacture of Nabi-HB. There is one antibody-based therapy for prevention of hepatitis B post exposure currently on the market that competes with Nabi-HB. See also “Supply and Manufacturing — Biopharmaceutical Products.” In November 2002, we submitted a BLA to the FDA for the use of an IV formulation of Nabi-HB to prevent liver transplant patients from suffering re-infection with HBV. Nabi-NB Intravenous has received Orphan Drug Designation from the FDA. In January 2003, we received notification that the FDA accepted our IV BLA for priority review. A priority review means that the FDA commits to responding to this BLA within six months, instead of the statutorily required ten months.

WinRho SDF is the first and only Rh_oD antibody-based biopharmaceutical product 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 steroids, IVIG, and splenectomy (a surgical procedure to remove the spleen).

Autoplex T competes in the anti-inhibitor segment of the hemophilia A market. Autoplex T and other competitive agents are used to treat patients that have developed inhibitors (antibodies) to Factor VIII,

21

Table of Contents

the standard therapy for people suffering from hemophilia A. There are two significant biopharmaceutical products currently on the market that compete with Autoplex T.

Aloprim is the first and only IV allopurinol therapy available for the treatment of chemotherapy-induced hyperuricemia. Aloprim provides a therapeutic option for patients that cannot tolerate oral allopurinol therapy. Aloprim has received Orphan Drug Designation for treatment of chemotherapy-induced hyperuricemia through May 2003. In 2002, a new competitive agent using a different mechanism of action was introduced into this market.

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 portion of their antibody requirements from independent suppliers. There is competition among these independent suppliers as well as fractionators who own their own plasmapheresis centers. 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. As we are able to achieve licensure for products in our research and development pipeline, we anticipate a strategic shift in our antibodies segment of converting non-specific antibodies production into the production of specialty antibodies which we will use to manufacture our own antibody-based biopharmaceutical products.

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 incentives 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 722 persons at December 28, 2002. We believe that the relations between our management and our employees are generally good.

FINANCIAL INFORMATION ABOUT SEGMENTS AND GEOGRAPHIC AREAS

We have provided financial information about (i) our industry segments, and (ii) our domestic and foreign operations for each of the last three fiscal years in Note 19 to our consolidated financial statements set forth in Part II of this Annual Report on Form 10-K.

AVAILABLE INFORMATION

Our Internet address is http://www.nabi.com. We make available free of charge through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

22

Table of Contents

RISK FACTORS

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 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.

Our Rights to Three Existing Biopharmaceutical Products May Expire

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 they now exist or at all. DSM has advised us that it does not intend to extend the Aloprim agreement. We have the option to purchase the rights to Aloprim in the territories now covered by the Aloprim agreement.

Pursuant to the terms under which we acquired our rights to Autoplex T from Baxter, the FTC cou