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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 27, 2003

Commission File Number: 000-04829

Nabi Biopharmaceuticals

(Exact name of registrant as specified in its charter)

5800 Park of Commerce Boulevard N.W., Boca Raton, FL 33487

(Address of principal executive offices, including zip code)

(561) 989-5800

(Registrant’s telephone number, including area code)

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.  x

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was: $259,119,484

As of February 18, 2004, 57,169,065 shares of the registrant’s common stock were outstanding.

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 27, 2003, are incorporated by reference into Part III.

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Nabi Biopharmaceuticals

TABLE OF CONTENTS

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Nabi Biopharmaceuticals

PART I

OVERVIEW

We apply our knowledge of the human immune system to commercialize and develop products that address serious, unmet medical needs. We have a portfolio of five marketed biopharmaceutical products with growing revenues that generate cash flow to support the development of our clinical product candidates and our research programs. Our clinical product pipeline is composed of novel vaccines and antibody based biopharmaceutical products that are designed to prevent and treat infectious and addictive diseases, such as Staphylococcus aureus or, Staph aureus infections, hepatitis B and hepatitis C, and nicotine addiction. We have exclusive rights to commercialize all of our clinical development candidates.

Through our own specialty sales force we market five biopharmaceutical products: PhosLo^® (calcium acetate) for the control of hyperphosphatemia, or elevated blood phospherous levels, in end-stage renal failure patients, 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 immune thrombocytopenia purpura, or ITP, Aloprim^™[(Allopurinol sodium) for injection] for the treatment of chemotherapy-induced hyperuricemia, or high uric acid levels, and Autoplex^® T (Anti-Inhibitor Coagulant Complex, Heat Treated) for the treatment of hemophilia A patients who have developed inhibitors to factor VIII. After May 11, 2004, we will no longer market Autoplex T except for sales from existing inventory, if any. We have filed a Biologics License Application or BLA for the use of an intravenous formulation of Nabi-HB to prevent re-infection with hepatitis B disease in HBV-positive liver transplant patients. Further, during 2004 we anticipate filing for approval to market PhosLo and Nabi-HB in Europe utilizing the Mutual Recognition Process.

We have four product candidates in clinical development: StaphVAX^® (Staphylococcus aureus Polysaccharide Conjugate Vaccine), Altastaph^™ [Staphylococcus aureus Immune Globulin (Human)], Civacir^™ [Hepatitis C Immune Globulin (Human)] and NicVAX^™ (Nicotine Conjugate Vaccine). Our lead clinical candidate is StaphVAX, a vaccine designed to prevent Staph aureus infections. We plan to file a Marketing Authorization Approval, or MAA, with the European Union, or EU, by the end of 2004 for regulatory approval to market StaphVAX for the prevention of Staph aureus bacteremia for up to 40 weeks in end-stage renal disease patients on hemodialysis. This filing will be based on efficacy data obtained from our previously completed Phase III clinical trial for StaphVAX completed in 2000. In addition, we initiated a confirmatory Phase III clinical trial of StaphVAX in September 2003. We expect to file a BLA in the U.S. for StaphVAX by the end of 2005.

We have a state-of-the-art fractionation facility for the manufacture of Nabi-HB, our investigational antibody products, Altastaph and Civacir, and contract manufacturing. We also collect specialty and non-specific antibodies for use in our products and sell our excess production to pharmaceutical and diagnostic customers for the subsequent manufacture of their products.

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The following table shows our currently marketed and development products:

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PRODUCTS

Currently Marketed Biopharmaceutical Products

Sales of our biopharmaceutical products totaled $109.5 million in 2003 compared to $89.5 million in 2002. In 2003, biopharmaceutical products accounted for 62% of our sales and 94% of our gross margin. Each of our five currently marketed biopharmaceutical products is described below:

PhosLo^® (calcium acetate)

Sales of PhosLo were $12.9 million for the period of August 4, 2003, the date at which we acquired the worldwide rights to PhosLo, through December 27, 2003.

PhosLo is a prescription phosphate binder indicated for the control of elevated blood phosphorus levels, or hyperphosphatemia in end-stage renal failure patients. When given with food, PhosLo combines with dietary phosphorus to form insoluble calcium-phosphate complexes that are eliminated from the body, thereby reducing phosphorus absorption and lowering blood phosphorus levels. The Kidney Disease Outcome Quality Initiative, or K/DOQI guidelines specify that controlling elevated phosphorus levels in dialysis patients with chronic kidney disease is critical because these patients are unable to eliminate excess phosphorus on their own. Elevated levels of phosphorus are associated with significant increases in illness including calcification of the arterial walls, heart valves and joints, renal osteodystrophy, bone pain and bone deformity and may result in death. We currently market PhosLo in the U.S. and plan to seek PhosLo registration and commercialization outside the U.S., initially in the EU and Canada. We anticipate filing for approval to market PhosLo in Europe utilizing the Mutual Recognition Process during 2004.

Within the EU, Germany, France, Italy, Spain and the United Kingdom alone currently have approximately 200,000 patients undergoing chronic renal dialysis. According to Kalorama, this patient population is expected to grow to greater than 300,000 by 2009 due to increased incidence of diabetes, hypertension and the aging of the population. Consistent with treatment practices in the U.S., where we currently market PhosLo, European nephrologists utilize phosphate binders on a regular basis. Currently, the phosphate binder market in the five largest European markets exceeds 200 million Euros and is served by a number of prescription calcium carbonate based products and Renagel (sevelamer).

According to the U.S. Renal Disease Service, or USRDS, at December 2000, 382,000 patients in the U.S. met the criteria for end-stage renal disease, or ESRD. The USRDS also projects that the population of ESRD patients in the U.S. will grow to over 650,000 patients in the U.S. by 2010. This growth in the number of chronic ESRD is largely attributable to increases in patients with diseases such as diabetes and hypertension, the primary causes of kidney failure, the overall aging of the U.S. population and increased life expectancy for dialysis patients. Based on our interviews with nephrologists, we believe chronic dialysis patients are likely to experience elevated phosphorus levels at some point during each year of their treatment and therefore will require phosphate binder therapy to control their blood phosphorus levels for a period of time.

Commencing in 2004, we expect to conduct a clinical trial in support of PhosLo titled the Prevention of Cardiovascular Calcification in End-Stage Renal Disease, or PRECISE study. The study is expected to be a double-blinded, controlled 210 patient study measuring serum phosphorus, calcium and phosphorus product, cholesterol levels and cardiovascular calcification in ESRD patients using PhosLo plus a statin. The statin will be administered in at least two dosages within separate arms of the study. Initial results from this clinical trial for serum phosphorus, calcium and phosphorus product and cholesterol levels are expected to be reported

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by the end of 2004 and results related to cardiovascular calcification are expected to be reported by the end of 2005.

In November 2003, the study: Treatment of Hyperphosphatemia in Hemodialysis Patients: The Calcium Acetate Renagel Evaluation (CARE study) was presented at the American Society for Nephrology annual meeting in San Diego, California. This was the first double-blinded, randomized controlled comparison of PhosLo and Renagel, a competitive product to PhosLo. The results of the trial showed that patients treated with PhosLo were able to control blood phosphorus levels more effectively than patients treated with Renagel throughout the study period. Specifically, the CARE study showed that patients treated with PhosLo achieved target phosphorus and calcium-phosphorus product levels more often and for longer periods of time than patients treated with Renagel. In addition, the CARE study identified there were significant differences in the cost of treatment between PhosLo and Renagel. The mean daily cost of treatment with PhosLo, based on the level of treatment provided to patients in the study at the end of the study period, was $2.14 compared to $11.70 for Renagel. Based on average wholesaler prices in January 2004, on an annualized basis, assuming continuous use, this would translate into $753 in projected treatment costs for PhosLo compared to $4,319 for Renagel, a potential cost-savings of $3,566 per year for patients treated with PhosLo.

PhosLo is distinct from calcium carbonate products, typically prescription calcium carbonate products in the EU or over-the-counter products such as TUMS in the U.S. Although many ESRD patients in the U.S. use over-the-counter calcium carbonate products to treat elevated phosphorus levels for reasons of cost, calcium carbonate products do not appear to meet the K/DOQI guidelines issued by the National Kidney Foundation, or NKF, due to the comparatively lower phosphate binding activity of calcium carbonate. As a result of this reduced activity, calcium carbonate products would be expected to result in calcium loads that fail to meet K/DOQI guidelines for non-dietary calcium absorption. In addition, due to the lower calcium binding activity, calcium carbonate products are not expected to meet the K/DOQI guidelines with regard to serum phosphorus control or control of the calcium/phosphorus product.

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

Sales of Nabi-HB were $37.6 million in 2003 compared to $41.2 million in 2002.

Nabi-HB is a human polyclonal antibody product indicated to prevent hepatitis B following accidental exposure to hepatitis B virus, or HBV. We believe the majority of our Nabi-HB sales are for use to prevent re-infection with hepatitis B disease in HBV-positive liver transplant patients. Currently, Nabi-HB is not labeled for this use.

In November 2002, we submitted a BLA to the U.S. Food and Drug Administration, or FDA for an intravenous formulation of Nabi-HB to prevent hepatitis B disease in HBV-positive liver transplant patients. Nabi-HB Intravenous has received Orphan Drug Designation from the FDA, entitling us to marketing exclusivity for this indication for a period of seven years post licensure. In January 2003, we received notification that the FDA had accepted our BLA for Nabi-HB Intravenous for priority review. We received a complete response letter from the FDA in May 2003 requesting supplemental data and information but no additional clinical trials. We responded to the complete response letter in August 2003. In addition, we have provided longer-term follow-up data from previously completed clinical trials to the FDA in early 2004. We anticipate a response on our BLA filing from the FDA during the first half of 2004. We have also submitted a briefing document to European regulators for Nabi-HB Intravenous, and we plan to seek regulatory approval for Nabi-HB Intravenous in certain European countries using the mutual recognition process. We plan to submit our first license application for Nabi-HB Intravenous in Europe in mid 2004.

HBV is a major global health concern. The Hepatitis B Foundation currently estimates that one out of 20 people in the U.S. has been infected with HBV. In the January 2004 issue of the

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Morbidity and Mortality Weekly Report, it was reported that the U.S. Centers for Disease Control, or CDC, estimated that in the U.S. alone there are approximately 1.2 million chronic hepatitis B carriers, 8,500 new hepatitis B infections per year, and 5,000 individuals who die annually from hepatitis B or its complications. Rates of HBV infection throughout Europe are reported as similar to those in the U.S. Chronic HBV infection is a frequent cause of end-stage liver disease and is present in approximately 10%-15% of liver transplant patients. Moreover, during surgery and in the period immediately following transplant surgery patients do not have any other licensed treatment options to prevent re-infection of the transplanted liver. Re-infection of the transplanted liver is almost inevitable after surgery in HBV-positive patients without treatment.

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

Sales of WinRho SDF were $50.0 million in 2003 compared to $34.0 million in 2002.

WinRho SDF is a human polyclonal antibody based product approved and marketed for the treatment of ITP, an autoimmune disease that manifests itself in abnormally low platelet levels, or thrombocytopenia, that can result in excessive bleeding. We began exclusive marketing of WinRho SDF in the U.S. in 1995 under a license and distribution agreement with Cangene Corporation, or Cangene. We pay a royalty to Cangene equal to approximately half of the net profits from sales of WinRho SDF after accounting for cost of production and marketing and sales expense. Our license and distribution agreement with Cangene extends through March 2005.

ITP is recognized by the appearance of purple patches on the body caused by bleeding into the skin and mucus 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 increases. In certain cases, such as severe trauma or spontaneous intracranial hemorrhage, the bleeding can be fatal. The Platelet Disorder Support Association currently estimates that approximately 30,000 people develop ITP in the U.S. each year. In children, the disease is usually acute at onset and is often resolved with treatment within six months. In adults, the onset is gradual and rarely resolves itself without treatment. ITP can occur as either a primary disease or secondary to another underlying disease such as HIV or lupus. Chronic thrombocytopenia is currently estimated to occur in about 10% of HIV-infected patients and in about one third of patients with AIDS.

Other Biopharmaceutical Products

Other biopharmaceutical products are primarily comprised of Aloprim and Autoplex T. Sales of other biopharmaceutical products were $9.0 million in 2003 compared to $14.3 million in 2002.

Aloprim^™ [(Allopurinol sodium) for injection]

Aloprim is indicated for the treatment of chemotherapy-induced hyperuricemia, or elevated uric acid levels, for patients with leukemia, lymphoma or solid organ tumors who cannot tolerate oral therapy. Complications associated with chemotherapy-induced hyperuricemia in these patients include renal failure. 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, or DSM, in June 1999 and currently have the exclusive right to distribute Aloprim in the U.S. We pay a royalty to DSM equal to a percentage of the net profits from sales of Aloprim. The royalty rate varies based on the level of annual sales. Under terms of our distribution agreement with DSM, we have the right to acquire the rights to Aloprim in the U.S. before June 2004 for payment of $0.8 million.

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Autoplex^® T (Anti-Inhibitor Coagulant Complex, Heat Treated)

Autoplex T is a blood clotting agent used to treat hemophilia A patients who have developed inhibitors to factor VIII. 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. After May 11, 2004 we will no longer market Autoplex T except from existing inventories, if any.

Currently Marketed Antibodies and Intermediate Products

Sales of our antibody products totaled $67.1 million in 2003 compared to $106.5 million in 2002. The decrease was expected due to the conclusion of a single supply contract that generated no gross margin in April 2003. We retained this contract after the sale of the majority of our antibody collection business and testing laboratory in September 2001. Additionally, sales of specialty antibodies decreased reflecting decreased sales of rabies, tetanus, hepatitis B and Rh_oD antibodies. In 2003, antibody products accounted for 38% of our sales and 6% of our gross margin. Our operating strategy for these products is to sell our excess production under contracts that provide a consistent operating cash flow. 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.

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 the ability to produce specialty antibodies.

Our specialty antibody products include hepatitis B, Rh_oD, tetanus, cytomegalovirus or CMV, Varicella Zoster Virus or VZV and rabies antibodies as well as other plasma products sold to diagnostic customers. Hepatitis B antibodies are used in the manufacture of Nabi-HB and Rh_oD antibodies are used in the manufacture of WinRho SDF.

Sales of specialty antibodies were $21.4 million in 2003 and $32.7 million in 2002.

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.

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In 2003, we derived sales of $45.7 million from sales of non-specific antibodies as compared to 2002 levels of $73.8 million. Non-specific antibody sales have decreased in 2003 from 2002 levels as a result of the conclusion in April 2003 of a supply contract with a single customer. The contract was retained by us following the sale of the majority of the antibody collection business and testing laboratory in September 2001. The purchaser supplied us with non-specific antibodies to satisfy our supply obligations under this contract at the sales price under this contract. Because we retained the risk of credit loss with this customer, we recorded revenues but no margin on these sales. Such sales totaled $18.6 million in 2003 compared to $55.6 million in 2002. Commencing in 2004, we will supply Bayer Corporation with non-specific antibodies produced at our antibody collection centers under a long-term contract. The contract will allow us to continue to utilize the current capacity in excess of our own production requirements at our antibody collection centers. Our long-term strategy for the antibody segment is to convert production of non-specific antibodies into the production of specialty antibodies for use in the manufacture of our own antibody-based biopharmaceutical products. In 2003, sales of non-specific antibodies collected at our antibody collection centers totaled $27.1 million compared to $18.2 million in 2002.

Research and Development Programs

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 $1.3 million, $1.2 million and $1.1 million related to the NicVAX program were reimbursed by the National Institute of Drug Abuse or NIDA for fiscal years 2003, 2002 and 2001, respectively.

CLINICAL DEVELOPMENT PRODUCTS

We have a significant pipeline of biopharmaceutical products under development. Our research and development pipeline products consist of vaccines for long-term protection and antibody based biopharmaceutical products for immediate short-term protection from blood infections caused by Gram-positive bacteria such as S. aureus, S. epidermis and Enterococci, 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.

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Gram-positive Infections Program

Within the approximately 5,400 acute care hospitals in the U.S., Staph aureus is the leading cause of hospital-acquired bloodstream infections. In addition, the CDC estimates more than two million patients in the U.S. each year contract an infection as a result of exposure to a pathogen while receiving care in a hospital. In Europe’s 7,600 acute care hospitals, SENTRY reports Staph aureus to be the cause of blood stream infections 19% of the time, which is nearly as frequent as in the U.S. where Staph aureus is reported to cause 25% of blood stream infections acquired in acute care hospitals. With its capacity to cause serious complications and its increasing resistance to most antibiotics, Staph aureus has become a critically dangerous pathogen. Staph aureus can spread from the blood to the bones or the inner lining of the heart and its valves, or cause abscesses in internal organs such as the lungs, kidneys and brain.

Staphylococcal infections are difficult to treat because the bacteria that cause them are highly virulent and, in many cases, resistant to currently available antibiotics. The rise of antibiotic resistance has markedly curtailed options for treating Staph aureus infections since methicillin-resistant Staph aureus, or MRSA from all sites of infection has risen to 34% in the U.S. and 26% in Europe.

Staph aureus infection rates in patient populations at high risk for Staph aureus infection range from 1-30%, and result in longer hospital stays, higher death rates, increased illness and significantly higher medical costs. A recently completed, retrospective study, completed at the Duke University Medical Center determined that in 143 dialysis-dependent patients hospitalized with Staph aureus bacteremia, patients with MRSA had a mean in-patient stay of 14.2 days versus 7.9 days for patients with Methicillin-Sensitive Staph aureus, or MSSA. The patients suffering MRSA infections also incurred higher mean costs of $32,462 compared to $13,706 for patients with MSSA and were more likely to die by 12 weeks.

StaphVAX. We are developing StaphVAX for patients who are at high risk of Staph aureus infection and who are able to respond to a vaccine by producing their own antibodies. In the U.S. alone there are estimated to be 12 million at risk patients. The initial formulation of StaphVAX is intended to stimulate a patient’s immune system to produce antibodies to Staph aureus that provide active, long-term protection from the bacteria. StaphVAX targets Staph aureus types 5 and 8, which are responsible for approximately 85% of Staph aureus infections.

StaphVAX is an investigational polysaccharide conjugate vaccine based on patented vaccine technology licensed from the Public Health Service/NIH on terms that provide exclusively for seven years following FDA approval, or the term of the patent, whichever is shorter. StaphVAX represents a novel approach to the prevention of Staph aureus infections. StaphVAX contains surface polysaccharides found in the outer coating of Staph aureus types 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 patient’s immune system produces proteins, called antibodies, which bind to Staph aureus on subsequent exposure to the bacteria. These antibodies help the immune system to identify the Staph aureus bacteria while it is in the blood causing a blood stream infection, or 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.

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Potential at-risk populations who may benefit from the use of StaphVAX include

After a series of discussions with six EU regulatory agencies, we expect to file an MAA with the EU by the end of 2004 using the centralized registration procedure. This MAA submission will be based on efficacy data obtained from our previously completed Phase III clinical trial discussed below. Based on the results of those discussions, we will seek an initial indication that StaphVAX may be used for the prevention of Staph aureus bacteremia for up to 40 weeks in end-stage renal disease patients on hemodialysis. The MAA submission will include manufacturing conformance data generated at Cambrex BioScience of Baltimore, Inc. or Cambrex BioScience, our contract manufacturer for StaphVAX. If the MAA is approved, we will be granted simultaneous regulatory approval to market StaphVAX for this indication throughout the EU. We also plan to file a supplement to the MAA dossier with the EU in the fourth quarter of 2005. This supplement to the MAA dossier will incorporate safety and immune response data from immunogenicity clinical trials to be conducted in the United Kingdom in 2004 in patients undergoing orthopedic or cardiothoracic surgery as well as data from the confirmatory Phase III clinical trial currently underway in the U.S. discussed below. The purpose of the supplement to the MAA dossier is to apply for an expansion of the initial proposed indication to an indication for the prevention of Staph aureus bacteremia and secondary infections caused by bacteremia in at-risk adults.

In September 2003, we began enrollment in a confirmatory Phase III clinical trial for StaphVAX with a prospectively defined primary efficacy end point at eight months post-vaccination. This double-blinded, placebo-controlled and randomized trial will be conducted in ESRD patients undergoing hemodialysis, the same patient population in which we conducted our initial Phase III clinical trial of StaphVAX. Enrollment for this trial is expected to be complete by mid-2004. The 3,600 patient study is designed to demonstrate statistical significance with a clinical reduction of 50% or more in types 5 and 8 Staph aureus infections. We estimate that we will incur outside clinical trial costs of approximately $36 million over the period from initiation of the trial through its conclusion scheduled in the third quarter of 2005. At the eight month primary end point of this trial, we will administer a booster dose of the vaccine and subjects will be monitored for antibody levels and infection rates for at least an additional four months as secondary end points. Consequently, patients will be followed for at least 12 months in total. If we achieve positive results from this efficacy trial, we plan to file a BLA for StaphVAX with the FDA by the end of 2005. Our BLA filing will incorporate the efficacy data from both the current Phase III trial of StaphVAX and the initial Phase III clinical trial described below as well as safety and immune response data from the European immunogenicity trials being conducted in patients undergoing orthopedic and cardiothoracic surgery.

In September 2003, we also announced the completion of a clinical study in 40 healthy volunteers to compare the immune system’s response, or immunogenicity to vaccine manufactured at a

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contract manufacturer’s site with the response achieved in previous clinical trials using vaccine manufactured in our research and development pilot plant. The study showed immunogenicity and safety at least equivalent to the immunogenicity seen in those previous studies. This result demonstrated that the manufacturing process for StaphVAX is both reproducible and scalable. In October 2003 we entered into a contract manufacturing agreement with Cambrex BioScience for the manufacture of StaphVAX at commercial scale and started the process of transferring the StaphVAX manufacturing process to Cambrex BioScience. In January 2004 we began manufacturing the StaphVAX consistency lots. Following laboratory analysis of these lots, the data is expected to be incorporated into our MAA submission to the EU.

We completed our initial Phase III double-blinded, placebo-controlled and randomized clinical trial for StaphVAX in hemodialysis patients with ESRD in late 2000. We targeted this patient population because of its relatively high infection rate and because it is at long-term risk of infection. A total of 1,804 patients were included in the clinical trial. Half the enrolled patients were vaccinated with StaphVAX and half received a placebo. The clinical trial population was evaluated at intervals for up to a year to evaluate vaccine safety and Staph aureus infection rates. The results of the trial showed that a single injection of StaphVAX was safe and showed a statistically significant reduction in the incidence of Staph aureus bacteremia by almost 60% through 10 months post-vaccination. The reduction in bacteremia one-year after vaccination was 26%. The decrease in effect from 10 to 12 months was associated with declining levels of antibodies. No significant side effects attributable to the vaccine were noted. The results in ESRD patients are especially relevant because these patients are severely immune-compromised and generally respond poorly to vaccines. Based upon previous clinical trials in healthy volunteers, immune-competent patients who are at risk for Staph 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 our previous Phase III clinical trial completed in 2000, we conducted a booster trial in 2001, giving a second dose of StaphVAX to 77 hemodialysis patients who had received an initial dose of the vaccine on average 3 years earlier. The booster trial was designed to evaluate whether patients at long-term risk for Staph aureus infections could respond to a booster dose of the vaccine. The trial demonstrated that a booster dose of the vaccine given to previously vaccinated hemodialysis patients significantly increased the concentration of the vaccine-specific antibodies against Staph aureus. Hence, 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 Staph 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 vaccination.

Altastaph. Altastaph is an investigational human polyclonal antibody product that contains high levels of specific antibodies to Staph aureus types 5 and 8. These antibodies are collected from the plasma of healthy donors who have been vaccinated with StaphVAX at our FDA approved antibody collection centers. In contrast to StaphVAX, which is intended to provide long-term protection against Staph aureus infection, we are initially developing Altastaph to provide short-term protection to patients at immediate risk of infection, or who have compromised immune systems and cannot respond effectively to a vaccine. High-risk populations that could benefit from a product such as Altastaph include very low birth-weight newborns, emergency surgery patients, trauma patients and patients in intensive care and burn units. 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 patients with Staph aureus infections.

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In July 2003, we initiated a randomized, double-blinded, placebo-controlled Phase II clinical trial for short-term protection against Staph aureus types 5 and 8 in very low birth-weight newborns defined as newborns with birth weights between 500 and 1500 grams. This Phase II trial is being conducted in approximately 200 newborns at up to 20 neonatology centers throughout the U.S. Newborns will be randomly selected to receive Altastaph at one of two dose levels or placebo and followed for up to 42 days for safety and incidence of infections. In January 2004, Altastaph received Orphan Drug Designation from the FDA for use in very low birth-weight newborn patient populations.

In 1999, we successfully completed a multi-dose Phase I/II clinical trial of Altastaph in very low birth-weight newborns that demonstrated its safety and the presence of measurable antibodies to Staph aureus at a variety of dosage levels. The trial indicated that titers of the specific anti-staph antibodies are dose-related. Even the lowest dose of 500 mg/kg of Altastaph resulted in antibody titers that pre-clinical models and clinical trials with StaphVAX indicate may be protective against infection.

Next Generation Products and Other Anti-Bacterial Vaccines in Development. We have identified and patented an antigen, called type 336, found on a serotype of Staph aureus, that accounts for more than 90% of non-type 5 and non-type 8 Staph aureus clinical infections, or about 10-12% of all clinically significant Staph aureus infections. We have 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 an 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 StaphVAX and Altastaph products are expected to contain Staph aureus type 336 antigen in addition to Staph aureus types 5 and 8 antigens. We expect the second-generation StaphVAX and Altastaph products to provide coverage for greater than 95% of all clinically significant Staph aureus infections.

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 eighteen patents containing claims covering both a S. epidermidis vaccine and human monoclonal and polyclonal antibodies and have filed patent applications on selected enterococcal antigens. Prototypical 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.

Other Programs

Civacir [Hepatitis C Immune Globulin (Human)]. Civacir is an investigational human polyclonal antibody product that contains antibodies to hepatitis C virus, or HCV. Pre-clinical studies indicate that Civacir contains antibodies that are neutralizing to HCV. We are developing Civacir to prevent hepatitis C disease in HCV-positive liver transplant patients.

HCV is a major cause of acute hepatitis C and chronic liver disease, including cirrhosis and liver cancer. The World Health Organization, or WHO estimates that about 170 million people, or 3% of the world’s population are chronically infected with HCV and 3 to 4 million people are newly infected each year. The CDC currently estimates there are approximately 2.7 million individuals in the U.S. chronically infected with HCV.

HCV has significant social impact because it causes chronic infections in a large percentage of those infected and often results in severe illness and death in later stages of the disease. Chronic HCV infection is a frequent cause of end-stage liver disease resulting in the need for liver transplantation. In the U.S. and Europe approximately 40% of liver transplants are due to

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HCV infection. Moreover, during surgery and in the period immediately following, these patients have no treatment options to prevent re-infection of the transplanted liver. Re-infection of the transplanted liver is almost inevitable 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 NIAID, a part of the NIH, has funded a Phase I/II clinical trial of Civacir in HCV-positive liver transplant patients. The trial was conducted by the NIAID sponsored Collaborative Anti-Viral Study Group at four study sites in the U.S. This trial was a three-armed, randomized, controlled clinical study evaluating two dose levels of Civacir in a total of 18 patients undergoing liver transplantation. In this trial the NIH evaluated the safety of dosing patients with Civacir during and after transplant surgery. The NIH also evaluated the level of HCV-specific antibodies in trial subjects following dosing, as well as liver enzyme levels, a measure of liver damage, and HCV levels in the transplanted livers. Although this trial was not powered to show efficacy, the results 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 clinical trials. Preliminary results from this trial were released in February 2004. The results showed that Civacir was well tolerated at both dose levels. In addition, the results showed a trend towards a reduction in ALT levels, an important liver enzyme that measures liver function was observed. There also appeared to be a reduction in viral levels in liver tissue in the group receiving high dose Civacir. This data will be used to define our continued development strategy for Civacir. Civacir has received Orphan Drug Designation from the FDA.

NicVAX (Nicotine Conjugate Vaccine). NicVAX is an investigational vaccine to prevent and treat nicotine addiction that uses a conjugate vaccine technology similar to StaphVAX and other anti-bacterial vaccines in our pipeline. NicVAX is designed to cause the immune system to produce antibodies that bind to nicotine and prevent it from entering the brain. The stimulus in the brain that is caused by nicotine is therefore no longer present. Pre-clinical studies showed that vaccination with NicVAX could prevent nicotine from reaching the brain and block the effects of nicotine, including effects that can lead to addiction or can reinforce and maintain addiction.

In August 2003, we announced the initiation of a Phase II dose response, double-blinded, placebo-controlled, randomized clinical trial in 63 smokers who have expressed a desire to quit smoking. The trial, which is designed to observe safety, specific nicotine antibody levels and the rate of smoking cessation in trial participants in response to vaccination with NicVAX, is being conducted at three sites in the U.S. This trial is funded in part by a grant from NIDA. In addition, in February 2003 we initiated a placebo controlled, double-blinded Phase I/II clinical trial of NicVAX in smokers, ex-smokers and non-smokers in collaboration with researchers at the University of Maastricht in The Netherlands. The primary intent of this trial is to evaluate the development of nicotine specific antibody levels and safety of the vaccine in study participants. The U.S. study is fully enrolled and we expect to report the full results from this trial in the second half of 2004. The results from The Netherlands trial were reported in February 2004 and showed that multiple injections of NicVAX were well tolerated and resulted in a rapid and boosted immune response that generated substantial amounts of nicotine specific antibodies.

In 2002, we completed a placebo-controlled, double-blinded Phase I clinical trial of a single dose of NicVAX in healthy, non-smoking volunteers with the assistance of funding from NIDA. The intent of the trial was to evaluate the safety and immunogenicity of the vaccine. 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.

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STRATEGIC ALLIANCES

We enter into strategic alliances for the manufacture and commercialization of some of our marketed and pipeline products. Our current key strategic alliances are discussed below.

Cambrex BioScience of Baltimore, Inc.

In October 2003, we entered into a contract manufacturing agreement with Cambrex BioScience to produce commercial quantities of StaphVAX. The manufacturing process for StaphVAX is being transferred to Cambrex BioScience from a previous contract manufacturer, as well as from our pilot research and development plant in Rockville, Maryland. We began production of consistency lots of StaphVAX in January 2004 and expect to complete the transfer of the manufacturing process to Cambrex BioScience in 2004. The contract manufacturing agreement requires us to make certain payments to Cambrex BioScience to secure future access to commercial vaccine manufacturing capacity and to enable Cambrex BioScience to ready its facility for the future commercial scale manufacture of StaphVAX. 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 Cambrex BioScience.

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 and marketing expenses. The current license and distribution agreement concludes in March 2005.

Public Health Services/National Institutes of Health

Under a license agreement with the Public Health Services/National Institute of Health, or PHS/NIH, we have exclusive rights to a U.S. patent relating to a carbohydrate/protein conjugate vaccine against Staphylococcus for a period of seven years following FDA approval or the term of the patent, whichever is shorter, 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.

Chiron Corporation

We have an agreement with Chiron Corporation, or Chiron 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 a vaccine 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.

Pfizer

In April 2003, we licensed the worldwide rights to our whole cell vaccine technology for the prevention and treatment of Staphylococcus aureus infections in cattle to Pfizer. Under the license agreement, Pfizer made a non-refundable initial cash payment and will make future cash payments if certain milestones are met. Pfizer will also pay royalties based upon future product sales once regulatory approval to market the veterinary vaccine is obtained.

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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 to the purchaser Rh_oD antibodies at our cost plus a handling fee in order that the purchaser may fulfill its obligations under a contract it assumed. This agreement, which ends in December 2004, limited our ability to sell these antibodies to other customers at higher margins during 2003 and we will be limited in our ability to sell these antibodies to other customers throughout 2004.

Pricing for product deliveries under our antibody contract products is fixed for the contract term, generally one year or less, although the contracts generally provide for price increases/decreases during the contract term to reflect changes in customer specifications and new governmental regulations. In addition, in 2004 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.

Sales for the year ended December 27, 2003 included three customers of our biopharmaceutical products segment, AmerisourceBergen, Cardinal Health, Inc. and McKesson Drug Co., and one customer of our antibody products segment, Bayer Corporation, representing 20%, 19%, 18% and 21% 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 manufacture clinical lots of our investigational products, Altastaph and Civacir, in this facility. We intend to modify an unused portion of our Boca Raton, Florida facility during 2004 to manufacture commercial quantities of StaphVAX. In addition, we have a ten year agreement with Cambrex BioScience for the contract manufacturing and commercial supply of StaphVAX.

All of our marketed products other than Nabi-HB are manufactured for us by third parties. PhosLo is manufactured for us by Braintree Laboratories, Inc. under an agreement that can be extended until 2018. PhosLo is also manufactured for us by another third-party. WinRho SDF is manufactured for us by Cangene under an agreement that terminates in March 2005. Aloprim is manufactured for us by DSM under an agreement that terminates in June 2004. Baxter supplies Autoplex T to us under a contract that will end on May 11, 2004.

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.

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PATENTS AND PROPRIETARY RIGHTS

Our success depends in part on our ability to maintain our rights to our existing marketed biopharmaceutical products and our ability to obtain patent protection for product candidates in clinical development. Currently, we have over 30 granted patents and over 60 patent applications pending.

Marketed products

We have two patents granted in the U.S., one patent granted in Canada and one patent application pending in the U.S. relating to PhosLo. The granted patents contain claims directed to methods of using calcium acetate in an orally ingested form to inhibit gastrointestinal absorption of phosphorus. The patent claims support the use of PhosLo for our approved application in ESRD patients. Patent coverage for these claims expires in April 2007 in the U.S. and January 2012 in Canada. We also have another U.S. patent granted and an U.S. patent application pending with claims to a second-generation, phosphorus-binding capsule formulation. The next generation capsules are intended to enhanced ease of patient use and, as a result, improve treatment management. The granted U.S. patent relating to the phosphorus-binding capsule formulation expires in April 2021.

Products in development

We have 25 patents issued, including six U.S. patents, 15 patents in European countries and four in other countries and 38 patent applications pending worldwide relating to our Gram-positive infections program. With respect to Staphylococcus, the patents and pending patent applications relate both to polysaccharide antigens—our “336” Staph aureus antigen and “Type I” S. epidermidis antigen—and to a glycopeptide antigen common to S. epidermidis, S. haemolyticus and S. hominis. Our pending patent applications relate to Enterococcus and describe polysaccharide antigens from E. faecalis and E. faecium, respectively.

In addition to the PHS/NIH patent which expires in 2010, our four granted U.S. patents and two ex-U.S. patents in our Staph aureus program contain claims directed to vaccines, antibody based therapies, methods of preparing antigen and diagnostic assays and kits against surface antigens of Staph aureus. The patents all expire in 2016. Additional patent applications still pending include claims directed to the antigens, as well as to compositions, or conjugates, of the antigens, vaccines containing the antigens, antibodies to the antigens, and immunotherapy and diagnostic methods using the antigens and/or the antibodies to the antigens. In addition, we have filed an U.S. patent application covering methods directed to the use of StaphVAX, among other compositions. These two applications, which address a method of protecting a human being with a compromised immune system from Staphylococcal or enterococcal bacterial infection, include claims that prescribe our use of proprietary antigens. The applications also encompass a method for the use of types 5 and 8 Staph aureus antigens. With regard to S. epidermis, we have two issued U.S. patents and 16 ex-U.S. patents, including 15 issues in European countries. The patents contain claims to vaccines and hyperimmune globulins against S. epidermis surface antigen. Most of these patents expire in 2016.

In addition, we have one issued U.S. patent three ex-U.S. patent applications pending that contain claims directed to a pharmaceutical composition containing a glucan and intravenous hyperimmune globulin, which can be specific for a given pathogen like Staph aureus. This combination produces an unexpected antimicrobial effect that is greater than that obtained when either the glucan or the intravenous hyperimmune globulin is used separately.

Our patent portfolio for technology related to the NicVAX product comprehends both compositions and therapeutic methodology for treating or preventing nicotine addiction. In particular, we have three issued patents, including two in the U.S., and over 20 applications

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pending worldwide. Our patent claims are directed to compositions, or conjugates, that comprise nicotine-like molecule linked to a carrier protein and to the methods for the use of these conjugates to treat or prevent nicotine addiction. We also have claims to a pharmaceutical composition that contains nicotine specific antibodies induced by conjugate antibodies, as well as to methods for using those antibodies against nicotine addiction.

Trade Secrets and Trademarks

We rely on unpatented proprietary technologies in the development and commercialization of our products. We also depend upon the un-patentable skills, knowledge and experience of our scientific and technical personnel, as well as those of our advisors, consultants and other contractors. To help protect our proprietary know-how, we often use trade secret protection and confidentiality agreements to protect our interests. We require employees, consultants and advisors to enter into agreements that prohibit the disclosure of confidential information and where applicable require disclosure and assignment to us of the ideas, developments, discoveries and inventions that arise from their activities for us.

We own or license trademarks associated with each of our products, including several international trademark registrations or common law rights, for each of our marketed and development products.

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 including the U.S., United Kingdom, Germany, Spain, Italy, Australia and France. In the U.S. 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 compliance with all relevant material 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 sides. Phase IV clinical trials primarily 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 stop 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 appro