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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 25, 2004

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, as of the last business day of the registrant’s most recently completed second fiscal quarter was: $806,362,914

As of March 3, 2005, 58,774,255 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 25, 2004, are incorporated by reference into Part III.

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Nabi Biopharmaceuticals

TABLE OF CONTENTS

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Nabi Biopharmaceuticals

PART I

ITEM 1. BUSINESS

OVERVIEW

We leverage our experience and knowledge in powering the immune system to develop and market products that fight serious medical conditions. We are poised to capture large, commercial opportunities in our four core business areas: Gram-positive bacterial infections; hepatitis; kidney disease (nephrology); and nicotine addiction. We have four products on the market today and a number of products in various stages of clinical and preclinical development. We invest the gross margins we earn from sales of our marketed products toward funding the development of our product pipeline.

This business model has allowed us to largely self-fund the application of our clinical, regulatory, commercial and manufacturing expertise in developing innovative new products. We believe these products will not only save lives and improve clinical outcomes for patients, but at the same time will make an important contribution to reducing the increasing financial burden on the healthcare system.

As an example, our lead product in development, StaphVAX (Staphylococcus aureus Polysaccharide Conjugate Vaccine), is positioned to become a new standard of preventative care for patients at risk of contracting life-threatening S. aureus bacterial infections. In the U.S. alone, $5 billion in additive patient-care costs are incurred annually because of bacterial infections. S. aureus and other Gram-positive bacteria are the cause of a majority of these infections and have become serious public health challenges that plague millions of patients around the world. Current approaches do not adequately prevent or treat the most prevalent and dangerous strains of S. aureus bacteremia that are becoming increasingly resistant to antibiotic treatments. To combat this problem, thought leaders in government and academic arenas favor preventative approaches to combat bacterial infections. This is based on a belief that prevention is better for patients and less costly than treatment.

In December 2004, we submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMEA, under the Centralized Registration Procedure for approval to market StaphVAX within the European Union. The indication sought under this initial license application is for the prevention of S. aureus bacteremia in patients with end-stage kidney disease on hemodialysis for up to 40 weeks. These patients are at a particularly high risk for S. aureus infections; approximately 6% of these patients will develop a S. aureus infection each year. In 2005, following completion of a confirmatory Phase III clinical trial, we intend to file a Biologics License Application for marketing clearance of StaphVAX in the U.S.

StaphVAX is also an important component of our focus in kidney disease (nephrology). Kidney disease is a growing, global public health problem driven by the increasing incidence of diabetes, obesity and hypertension around the world. In the U.S. alone, the annual direct medical costs for end-stage renal disease, or ESRD, are nearly $23 billion. Our currently marketed product, PhosLo (calcium acetate), is indicated for the treatment of hyperphosphatemia, or elevated serum phosphate levels, among patients suffering from ESRD. We believe that, combined, StaphVAX and PhosLo will position us as a leader in the large and growing global nephrology market.

Furthermore, we plan to broaden the application of StaphVAX beyond kidney disease patients to prevent a number of dangerous and prevalent Gram-positive bacterial infections in other high-risk patient groups. Globally, our Gram-positive bacterial infections program could represent a $1 - $2 billion market opportunity.

In addition to our biopharmaceutical business, we also collect specialty and non-specific antibodies for use in our products and sell the excess production to pharmaceutical and diagnostic customers for the subsequent manufacture of their products.

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We are incorporated in Delaware. Our U.S. operations are headquartered in Boca Raton, Florida and our European headquarters are located in Bray, Ireland. We maintain our commercial and manufacturing operations in Boca Raton and our research and development operations in Rockville, Maryland.

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The following table shows our currently marketed and development products:

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PRODUCTS

GRAM-POSITIVE INFECTIONS

Within the approximately 5,400 acute care hospitals in the U.S., S. aureus is the leading cause of hospital-acquired bloodstream infections. In addition, the U.S. Centers for Disease Control, or CDC, estimates that 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 the EU’s approximately 7,600 acute care hospitals, SENTRY reports S. aureus to be the cause of blood stream infections 19% of the time, which is nearly as frequent as in the U.S. where S. 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, S. aureus has become a critically dangerous pathogen and a global health concern. S. 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 virulent and often resistant to antibiotics. The rise of antibiotic resistance as reported by the CDC in the 2003 National Nosocomial Infections Surveillance Systems report has markedly curtailed options for treating these infections. Methicillin-resistant S. aureus, or MRSA, from all sites of infection has risen from 22% in 1995 to 57% in 2002 in the U.S. The European Antimicrobial Resistance Surveillance System reported significant increases in MRSA infections throughout Europe from 1998 to 2002. The greatest relative increases were found in Belgium, Germany, Ireland, The Netherlands and the United Kingdom, or UK, with MRSA in the UK increasing from 33% in 1999 to 43% in 2003. And, according to the SENTRY Antimicrobial Surveillance Program in the Asia-Pacific region, similar trends have been described in the Asia-Pacific region with a rate of MRSA of 73% in Japan, and similar rates in certain other Asian countries.

S. aureus infection rates in patient populations at high-risk for S. aureus infection can be as high as up to 40%. These infections result in longer hospital stays, higher death rates, increased illness and significantly higher medical costs. A retrospective study completed at the Duke University Medical Center determined that dialysis-dependent patients hospitalized with MRSA had a mean in-patient stay of 14.2 days. These patients also incurred mean costs of treatment of $32,655 and had a 35% mortality rate at 12 weeks.

In 2004, investigators from Duke Clinical Research Institute, Duke University Medical Center, Durham, North Carolina and Health Economics Consulting, Annapolis, Maryland completed a study evaluating heart disease patients with implanted cardiovascular devices such as prosthetic valves, pacemakers and defibrillators, ventricular assist devices, intra-aortic balloon pumps and non-hemodialysis intravascular stents/grafts who developed S. aureus bacteremia that was sponsored by us. In this study, 44% of the patients evaluated experienced serious complications as a result of their infection and 35% died within 12 weeks. The study also demonstrated that S. aureus bacteremia was associated with substantial medical costs with individual patients incurring a mean cost of $82,300 for a hospital-acquired infection.

StaphVAX

StaphVAX, our lead product in clinical development, seeks to address this global healthcare issue. StaphVAX represents a new approach in the available clinical tools against S. aureus infections. It is focused on prevention rather than treatment. We are developing StaphVAX for patients who are at high risk of S. aureus infection and who are able to respond to a vaccine by producing their own antibodies.

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StaphVAX is an investigational polysaccharide conjugate vaccine based on patented vaccine technology licensed on an exclusive basis from the Public Health Service/NIH. StaphVAX represents a novel approach to the prevention of S. aureus infections. StaphVAX contains surface polysaccharides found in the outer coating of Types 5 and 8 S. aureus. The polysaccharide molecules are linked, or conjugated, to a non-toxic, carrier protein derived from the bacteria Pseudomonas aeruginosa (Pseudomonas exoprotein A) that causes a strong response by the immune system to the conjugated complex. Once given the vaccine, the patient’s immune system produces proteins, called antibodies, to the polysaccharides, which bind to S. aureus on subsequent exposure to the bacteria. These antibodies help the immune system to identify the S. aureus bacteria while it is in the blood and eliminate it before significant damage can be inflicted. Since these antibodies bind to several sites on the bacteria’s surface polysaccharides, we believe that it will be much more difficult for the bacteria to develop resistance to the antibodies, contrary to what has been observed with most antibiotics in the treatment of S. aureus bacteria.

The initial formulation of StaphVAX is intended to stimulate a patient’s immune system to produce antibodies to S. aureus Types 5 and 8, which are responsible for approximately 85% of S. aureus infections.

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

In December 2004, we filed a MAA in the EU using the Centralized Registration Procedure. This MAA submission is based on efficacy data obtained from our first Phase III clinical trial. Based on the results of this trial, we are seeking an initial indication that StaphVAX prevents S. aureus bacteremia for up to 40 weeks in ESRD patients on hemodialysis. The MAA submission included manufacturing conformance data generated at Cambrex Bio Science Baltimore, Inc., or Cambrex Bio Science, 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 25 member states within the EU. Following receipt of regulatory approval, we would then seek reimbursement approval in specific EU country markets. We also plan to file a supplement to the MAA dossier in the EU upon approval of the initial application incorporating safety and immune

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response data from immunogenicity clinical trials that are being conducted in the U.S. and the EU in patients undergoing orthopedic and cardiothoracic surgery as well as data from a confirmatory Phase III clinical trial in dialysis patients currently underway in the U.S. The purpose of this supplemental filing is to expand the indication to the prevention of S. aureus bacteremia and secondary infections caused by bacteremia in at-risk adults.

In general, reimbursement by government payer systems requires demonstration of the cost-effectiveness of new products and treatments. We will initially seek reimbursement for StaphVAX in the EU. We are currently conducting country specific pharmacoeconomic studies for StaphVAX to comply with requirements for pharmacoeconomic data in reimbursement dossiers. Based on our understanding of the costs of treating S. aureus infections in hospital settings, we believe that these studies will demonstrate the cost-effectiveness of vaccination of at-risk patients with StaphVAX.

In August 2004, we completed enrollment in our confirmatory Phase III clinical trial for StaphVAX in the U.S. with a prospectively defined primary efficacy end point at eight months post-vaccination. This double-blinded, placebo-controlled, randomized trial is being conducted in ESRD patients undergoing hemodialysis, the same patient population in which we conducted our initial Phase III clinical trial of StaphVAX. A total of 3,976 patients were enrolled in the trial, exceeding our target enrollment of 3,600 patients and a total of 3,447 patients have been randomized for injection with either StaphVAX or placebo, also exceeding our target of 3,240 patients. As enrolled, the study is powered to demonstrate a 50% reduction in infection with 90% power. 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 enrolled in the trial will be followed for at least 12 months in total. The study will remain blinded during the entire period of the trial. If we achieve positive results from this efficacy trial, we plan to file a BLA for StaphVAX with the U.S. Food and Drug Administration, or 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 as well as safety and immune response data from immunogenicity trials being conducted in the U.S. and in the EU in patients undergoing orthopedic and cardiothoracic surgery.

Our initial Phase III double-blinded, placebo-controlled and randomized clinical trial for StaphVAX was conducted in hemodialysis patients with ESRD. We targeted these patients because of their high infection rate and they were 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. All patients were evaluated at intervals for up to a year for vaccine safety and S. aureus infection rates. Some patients were followed for up to 36 months. The results of the trial demonstrated that a single injection of StaphVAX was safe and showed a 57% reduction in the incidence of S. aureus bacteremia through 10 months post-vaccination. The highest effect was seen after 8 months, where a 63% reduction in S. aureus event rate was observed. After the 8-month time point, the cumulative reduction in infections started to wane as antibody levels on average began to fall below what are believed to be protective levels. The reduction in bacteremia one-year after vaccination, the prospectively defined efficacy end-point of the trial, was 26% and was not statistically significant. No significant side effects attributable to the vaccine were noted. The results in ESRD patients are especially significant 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 S. aureus infections are expected to respond 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 evaluate the immune response to a booster dose, for patients at long-term risk for infection, we conducted a booster trial in 2001, giving a second dose of StaphVAX to 77 hemodialysis patients who had previously received an initial dose of the vaccine in the first Phase III clinical trial. On average the booster was dosed 36 months after the initial vaccination. The trial demonstrated that a booster dose of the vaccine

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given to previously vaccinated hemodialysis patients significantly increased the concentration of the vaccine-specific antibodies against S. 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 S. aureus infection. The average antibody concentrations reached in this trial were above what were demonstrated to be protective in the Phase III clinical trial, although the levels were not as high as those following the first dose of vaccine. However, the decline of antibody levels over time was slower after the booster vaccination than following the initial vaccination.

The FDA has awarded StaphVAX Fast Track Designation for the prevention of S. aureus bacteremia in ESRD patients.

Altastaph. [Staphylococcus aureus Immune Globulin Intravenous (Human)]

Altastaph is an investigational human polyclonal antibody product that contains high levels of S. aureus Types 5 and 8 specific antibodies. These antibodies are collected from the plasma of healthy donors who have been vaccinated with StaphVAX at our FDA approved antibody collection centers. Altastaph is also being developed to treat patients with active S. aureus infections in conjunction with standard of care therapy including antibiotic treatment. Altastaph can also provide a prevention option for patients who cannot respond to vaccines due to their compromised immune system or who do not have the 10 to 14 days time-period necessary to respond to the vaccine, prior to being at-risk of infection.

The mechanism of action for Altastaph is the same as for StaphVAX. The S. aureus Types 5 and 8 specific antibodies included in Altastaph bind to the polysaccharide capsule of the bacteria at several sites upon exposure to in the bloodstream, and help the body’s immune system to eliminate it in the bloodstream.

High-risk patient populations that could benefit from Altastaph include patients with persistent S. aureus infections, very low birth-weight newborns, emergency surgery patients, trauma patients and patients in intensive care and burn units.

Patients with active S. aureus infections could also benefit from a combination therapy of Altastaph plus StaphVAX at the conclusion of their treatment to reduce the otherwise high risk for re-infection. Re-infection with S. aureus following initial treatment and release from hospital has been reported in up to 30% of patients within 18 months after discharge.

In January 2005, we announced results from our U.S. Phase I/II clinical trial using Altastaph to treat adult in-hospital patients with persistent S. aureus bloodstream infections, or bacteremia. The study was a double-blinded, placebo-controlled, randomized trial in 40 patients designed to evaluate the safety of Altastaph and to measure S. aureus specific antibody levels. Patients were randomly allocated to receive two intravenous doses of Altastaph or saline placebo in combination with standard-of-care treatment, which included treatment with antibiotics. The results of the study demonstrated that Altastaph was well tolerated and no drug-related, serious adverse events were reported. Patients were able to maintain antibody titers at or above levels previously demonstrated to be protective against S. aureus infections in patients with ESRD. In this study there was an observed 36% reduction in median time from administration of the study drug to hospital discharge in the Altastaph-treated patients as compared to the placebo-treated patients, representing nine days in the Altastaph group versus 14 days in the placebo group. Because this overall result in a small safety/immunogenicity trial approached statistical significance, we believe this reduction in the length of hospital stay for the Altastaph-treated group indicates that the S. aureus antibodies in Altastaph could be associated with a measurable medical benefit in the treatment of persistent S. aureus infections.

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In November 2004, we announced the results of our Phase II clinical trial for the prevention of S. aureus infections in very low birth-weight newborns, defined as newborns with birth weights between 500 and 1500 grams. This randomized, double-blinded, placebo-controlled Phase II clinical trial was conducted in approximately 200 newborns at 20 neonatology centers throughout the U.S. Newborns were 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. The results from this study showed that Altastaph was safe and was able to elevate Types 5 and 8 S. aureus specific antibodies to what are believed to be protective levels, the primary endpoints of the trial. However, the rate of serious S. aureus infections reported in each arm of this trial was 3%, too low to allow us to make any inferences about the efficacy of Altastaph as administered in this study. In order to maximize the clinical and commercial potential for Altastaph in preventing bacterial infections in very low birth-weight neonates, we plan to advance development of a next generation Altastaph product, or Altastaph NxG which could prevent a majority (up to two-thirds) of bacterial infections observed in neonates, specifically S. aureus Types 5 and 8 plus Type 336 and S. epidermidis. S. epidermidis is one of the most prevalent and dangerous bacteria to infect very low birth-weight neonates.

Altastaph for prevention of S. aureus in very low birth-weight neonates has been designated an Orphan Drug by the FDA, entitling us to marketing exclusivity for this indication for a period of seven years post licensure, and has received Fast Track Designation from the FDA for this indication.

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 S. aureus. Based on all isolates we have tested to date, Type 336 accounts for 15% to 20% of all clinically significant S. 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. In 1998, we were issued a U.S. patent for the Type 336 antigen. Included in the patent were claims relating to vaccines made from Type 336 antigen as well as the corresponding monoclonal and polyclonal antibodies reactive to the antigen. Patents for Type 336 antigen and its use are being pursued worldwide. Next generation StaphVAX and Altastaph products are expected to contain S. aureus Type 336 antigen in addition to S. aureus Types 5 and 8 antigens. We expect the next-generation StaphVAX and Altastaph products to provide protection against virtually all clinically significant S. aureus infections today.

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 18 patents containing claims covering both a S. epidermidis vaccine as well as the corresponding 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. We have prepared a clinical lot of S. epidermis conjugate vaccine and plan to initiate a Phase I/II clinical trial using this material during 2005.

KIDNEY DISEASE

PhosLo (calcium acetate)

PhosLo is a prescription calcium acetate phosphate binder indicated for the control of elevated blood, or serum, phosphorus levels, or hyperphosphatemia in ESRD patients. The Kidney Disease Outcome Quality Initiative, or K/DOQI, guidelines issued by the National Kidney Foundation, or NKF, specifies that controlling elevated phosphorus levels in dialysis patients 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, bone pain and bone deformity and may result in death.

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We acquired the worldwide rights to PhosLo in August 2003 as our initial step to establish our commercial presence in the nephrology market and with the physicians who treat ESRD patients. This will be an important early market for our lead product in clinical development, StaphVAX. We currently market PhosLo in the U.S. In October 2004, we filed a MAA in the EU under the Mutual Recognition Procedure, or MRP, for PhosLo. The MRP provides that following approval of a product in one country, other countries within the EU may approve a product on the basis of the initial approval. The filing used the Common Technical Document, or CTD, format, which is widely accepted on a global basis. Under this format, the filing can be readily submitted in other countries around the world, facilitating our ability to expand the marketing of PhosLo in key ESRD markets beyond the U.S. and the EU.

When given with food, the calcium acetate in PhosLo combines with dietary phosphorus to form insoluble calcium-phosphate complexes that are eliminated from the body, thereby reducing phosphorus absorption and lowering serum phosphorus levels.

PhosLo is distinct from calcium carbonate containing phosphate binder products, typically prescription products in the EU or over-the-counter products such as TUMS in the U.S., due to its higher phosphate binding activity. Hence, PhosLo achieves control of serum phosphorus levels as well as calcium-phosphorus product in accordance with the K/DOQI guidelines to a greater extent than calcium carbonate products. Many ESRD patients in the U.S. use over-the-counter calcium carbonate based products to treat elevated phosphorus levels for reasons of cost despite its inferior activity.

According to the U.S. Renal Disease Service, or USRDS, at December 2001, 406,000 patients in the U.S. met the criteria for ESRD. The USRDS also projects that the population of ESRD patients will grow to over 2.2 million patients by 2030. This growth in the number of ESRD patients is largely attributable to increases in the incidence of 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 market research, we believe ESRD patients undergoing chronic dialysis 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.

Kidney disease is the ninth leading cause of death in the U.S. It has been estimated in the Morbidity and Mortality Weekly Report that approximately 19 million people in the U.S. suffer from chronic kidney failure. According to the American Journal of Kidney Disease, of these patients, an estimated 5.9 million individuals suffer from level 1 kidney failure, the lowest level of kidney failure, 5.3 million individuals were estimated to be at level 2 kidney failure, 7.6 million individuals were estimated at level 3 kidney failure, 400,000 individuals were estimated at level 4 kidney failure and 300,000 individuals had level 5 kidney failure. Level 5 kidney failure typically requires dialysis treatment.

According to national renal associations, in Germany, France, Italy, Spain and the UK alone, there are currently approximately 176,000 patients undergoing chronic renal dialysis. This figure increases to nearly 230,000 patients when Europe is looked at in total. This patient population is expected to grow due to increased incidence of diabetes, hypertension and the overall aging of the EU population. Consistent with treatment practices in the U.S., 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 primarily served by Renagel (sevelamer hydrochloride) as well as a number of calcium acetate and calcium carbonate products.

In the U.S., dialysis providers are primarily reimbursed by the Federal government through the ESRD Program. The Federal government reimburses approved providers for 80% of allowed

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dialysis costs. The remainder is paid by other sources, including Medicaid, private insurers and through state renal programs. Reimbursement for dialysis services is made via the Composite Rate, which includes all dialysis services and supplies, including certain drugs, but excluding oral products such as PhosLo and other phosphate binders. Effective January 1, 2006, The Medicare Prescription Drug Improvement and Modernization Act, or MMA, will include an outpatient prescription drug benefit, under a new Part D that will incorporate PhosLo and other prescription phosphate binders.

For those patients who meet defined qualification for financial assistance, PhosLo is available at no charge under our Patient Assistance Program.

In the EU, the Reference Pricing System, or RPS, is typically applied to pharmaceutical products that derive from the same therapeutic class as an alternative pharmaceutical product for which the patent has expired. Using the RPS, prices may be set at the average of prices in effect for the same class of pharmaceutical products currently available or prices may be set within a range below the price of the most expensive product in the group and above the least expensive product in the group. Patients have to pay the difference if the price charged exceeds the reference price. The RPS is expected to be applied to PhosLo following regulatory approval in the EU as certain EU countries currently reimburse for calcium acetate products that would compete with PhosLo.

In the May 2004 issue of Kidney International, the study: Treatment of Hyperphosphatemia in Hemodialysis Patients: The Calcium Acetate Renagel Evaluation, or CARE, was published as a full original paper. This is the only double-blinded, randomized controlled comparison study of PhosLo and Renagel. The results of the study showed that patients treated with PhosLo were able to control serum phosphorus levels more effectively than patients treated with Renagel throughout the 8-week study period. Specifically, patients in the CARE study treated with PhosLo achieved K/DOQI guideline targets for 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, and assuming continuous use, on an annualized basis, 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.

Cardiac illness is a leading cause of death among ESRD patients. Training and education recommendations issued by the American Society of Nephrology in their NEPHSAP publication during the first quarter of 2004 focused on a number of factors instrumental to the ESRD patient’s cardiac health, including the control of serum phosphorus, calcium phosphorus product and lipid levels in the blood. We believe any difference in cardiac calcification between patients treated with PhosLo versus patients treated with Renagel is due to the lipid lowering benefit associated with Renagel. During 2004 we initiated the CARE 2 study that will compare the efficacy, safety and arterial calcification in patients treated with PhosLo plus Lipitor (atorvastatin calcium), and Renagel plus Lipitor. Lipitor will be added to patients in each treatment regimen as appropriate to secure Low Density Lipoprotein, or LDL, levels in accordance with the guidelines recently issued by the National Cholesterol Education Program. These guidelines recommend that LDL levels in very high-risk patients such as ESRD patients should be at or below 70mg/dL of blood. The goal of the CARE 2 study is to demonstrate that when patients with ESRD treated with either PhosLo or Renagel achieve the same level of lipid control, there will be no significant difference in the development of coronary artery calcification thereby refuting the hypothesis that calcium intake as part of the PhosLo treatment is associated with cardiovascular calcification. The study is further designed to demonstrate that the combination of PhosLo and Lipitor will achieve superior control of serum phosphorus levels and calcium phosphorus product. It is expected that the total annual cost of PhosLo plus Lipitor in combination will be significantly less than the cost of Renagel alone. Preliminary data evaluating serum phosphorus levels, serum calcium levels, calcium phosphorus product and lipid levels are expected to be available in the second half of 2005. Final data evaluating arterial calcification using electron beam computer tomography, or EBCT, is expected in the second half of 2006.

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In line with recommendations included in the K/DOQI guidelines that pre-dialysis chronic kidney disease, or CKD, patients may benefit from phosphate binder therapy, we expect to initiate a study using PhosLo in CKD patients in the first half of 2005 entitled Effect of PhosLo in Chronic Kidney Disease, or EPICK. PhosLo is well positioned for the CKD patient, as it is likely to control serum phosphorus and a secondary endpoint of parathyroid hormone levels without causing very low calcium levels, or hypocalcemia, or high levels of acidity in the blood, or metabolic acidosis. The EPICK trial will seek to demonstrate that PhosLo can safely and effectively control parathyroid hormone levels, serum phosphorus levels and calcium phosphorus product in CKD patients. This possible extension of the labeled use for PhosLo is significant because of estimates that there are approximately 400,000 CKD patients suffering level IV kidney failure in the U.S. alone.

HEPATITIS

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

Nabi-HB is a human polyclonal antibody product indicated to prevent hepatitis B following accidental exposure to hepatitis B virus, or HBV. However, 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. In November 2002, we filed a BLA with the FDA for Nabi-HB Intraveneous, to prevent re-infection with hepatitis B disease in HBV-positive liver transplant patients. In June 2004 we filed a MAA in Europe for regulatory approval for Nabi-HB Intravenous under the MRP.

Nabi-HB reflects the application of our clinical, regulatory, manufacturing and commercial expertise in antibody technology to the treatment of patients exposed to HBV and HBV liver transplant patients. We produce the anti-HBV plasma raw material at our FDA approved antibody collection centers, manufacture Nabi-HB in our state of the art fractionation and purification facility and make medical education materials available to physicians through our medical liaison activities.

Nabi-HB is a purified human polyclonal antibody product collected at our FDA approved antibody collection centers from plasma donors, which have been previously vaccinated with a hepatitis B vaccine. Hepatitis B vaccines contain the hepatitis B surface antigen, which is known to provide protection against HBV. When administered, the anti-hepatitis B antibody contained in Nabi-HB binds to the Hepatitis B virus and triggers its clearance by the body’s immune system.

HBV is a major global health concern. In a January 2004 issue of the Morbidity and Mortality Weekly Report, the CDC estimated that in the U.S. alone there are approximately 1.3 million chronic hepatitis B carriers, 73,000 new hepatitis B infections per year, and 5,000 individuals who die annually from hepatitis B or its complications. Rates of HBV infection throughout the EU are reported as similar to those in the U.S. Chronic HBV infection is a frequent cause of end-stage liver disease and according to the United Network for Organs Sharing, or UNOS, over 4% of liver transplants through November 2004 were due to underlying hepatitis B liver disease. Moreover, during surgery and in the period immediately following transplant surgery, patients do not have any 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 with a hepatitis B immunoglobulin product such as Nabi-HB.

When used peri-operatively in liver transplantation, Nabi-HB is administered in the in-patient hospital setting and included in the Diagnosis Related Group, or DRG, reimbursement amount for the procedure. When Nabi-HB is administered as part of the patient’s follow-up care in a physician office setting, the MMA establishes the reimbursement rate to average sales price plus 6% from January 2004. Beginning in January 2006, the MMA will allow physicians to choose to

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purchase and store pharmaceutical products in their offices, or to order the product from a distributor who will be responsible for securing reimbursement from the government or other third party payers.

In the EU, RPS is expected to be applied to Nabi-HB Intravenous as certain EU countries currently reimburse for hepatitis immune globulin products that would compete with Nabi-HB Intravenous.

Nabi-HB Intravenous has received Orphan Drug Designation from the FDA for prevention of re-infection of hepatitis B disease in HBV-positive liver transplant patients, entitling us to marketing exclusivity in the U.S. for this indication for a period of seven years post licensure.

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 re-infection with hepatitis C disease in HCV-positive liver transplant patients, an unmet medical need among these patients. During surgery and in the period immediately following transplant surgery, patients do not have any licensed treatment options to prevent re-infection of the transplanted liver. Re-infection of the transplanted liver is 100% after surgery in HCV-positive patients.

Civacir aligns with our commercial model for Nabi-HB, focused on infectious disease and the organ transplant market. The product applies our clinical, regulatory, manufacturing and commercial expertise in antibody technology to the treatment of HCV liver transplant patients. We intend to manufacture Civacir in our state-of-the-art fractionation and purification facility and market the product through our own sales force.

Civacir is derived from human plasma enriched with HCV antibodies collected from screened donors at our nine FDA licensed antibody collection centers. Using the process of fractionation we purify and concentrate the antibodies that neutralize HCV. The antibodies in Civacir have been shown in animal studies to neutralize HCV. It is believed that the antibodies against HCV in Civacir bind to the virus in the blood stream and help the body’s immune system to clear these viruses before they re-infect critical organs, such as a transplanted liver in a HCV-positive patient.

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 2 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 EU, approximately 40% of liver transplants are due to 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 100% 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.

In 2004, we announced results from a Phase I/II clinical trial of Civacir in HCV-positive liver transplant patients funded by The National Institute of Allergy and Infectious Diseases, or NIAID, which is a part of the NIH. 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 different dose levels of Civacir in a total of 18 patients undergoing liver transplantation. In this trial, the NIH

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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 designed to show efficacy, the results contributed to supporting the safety of Civacir in this patient population and will assist us in defining 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, a trend towards a reduction in ALT levels, an important indicator of improved 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 for use in prevention of re-infection with HCV in HCV-positive liver transplant patients, entitling us to seven years marketing exclusivity post licensure for this indication.

NICOTINE ADDICTION

NicVAX (Nicotine Conjugate Vaccine)

NicVAX is an investigational vaccine designed as an aid to smoking cessation, as well as an aid to prevent relapses of a treated smoker.

NicVAX represents an opportunistic application of our conjugate vaccine technology that allows us to address a significant medical need. We believe that broad commercialization of NicVAX will be in conjunction with a marketing partner that has a demonstrated expertise in executing large scale sales and marketing programs because the physician audience will be very broadly and focused outside the hospital setting.

Nicotine is a small molecule that upon inhalation into the body quickly passes into the bloodstream and subsequently reaches the brain by crossing the blood-brain barrier. Once in the brain, the nicotine binds to specific nicotine receptors that result in the release of stimulants, such as dopamine, providing the smoker with a positive sensation, which causes addiction. NicVAX is designed to stimulate the immune system to produce antibodies that bind to nicotine in the bloodstream and prevent it from crossing the blood-brain barrier and entering the brain. The net effect is that the brain does not produce the positive sensation stimulants as a response to nicotine. Pre-clinical animal studies with NicVAX have shown that vaccination 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.

According to the World Health Organization, or WHO, there are approximately 1.3 billion smokers worldwide, including 65 million in the U.S. Among the 65 million smokers in the U.S., 70% have an expressed desire to quit. However, of smokers who do attempt to quit, up to 90% relapse. In addition, according to CDC estimates, smoking is directly responsible for approximately 440,000 deaths in the U.S. each year, which makes it one of the largest causes of preventable death in the U.S. The financial implications are equally staggering and it is estimated that smoking results in an annual health-related economic cost of approximately $157 billion. According to the WHO, tobacco use is expected to kill 4 million people worldwide within the next year.

Nicotine addiction is difficult to treat effectively. We believe NicVAX has advantages over existing treatment therapies because NicVAX’s effect is irreversible for potentially six to 12 months following vaccination as antibodies to nicotine continue to be produced by the body’s immune system. This is important due to the extremely high relapse rate that has been observed when a smoker attempts to quit smoking. Currently, the smoker is being treated for nicotine addiction can stop using the therapy and resume their addiction.

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In September 2004, we announced the results of a Phase II dose response, double-blinded, placebo-controlled, randomized clinical trial in 63 smokers. The objectives of the study, which were met, were to demonstrate that NicVAX was able to safely generate nicotine-specific antibodies in smokers, and to assess its potential use as an aid in smoking cessation among smokers who wanted to quit. The effect of the vaccine in the limited number of smokers included in the trial, and therefore not statistically significant, indicated a 33% quit rate in smokers who received NicVAX at the highest dose level versus 9% in the placebo group. The results represented a vaccine-only effect, as patients were only given NicVAX without any supplemental treatments, behavioral support or counseling. This trial was funded in part by a grant from the National Institute of Drug Abuse, or NIDA. Based on these results, we have initiated a second Phase II clinical trial in the EU dosing NicVAX at doses equal to and higher than those administered in the first Phase II clinical trial and at more frequent intervals. The clinical end points of this trial are also to assess safety, measure nicotine specific antibody titers and measurement of smoking cessation.

In February 2004, we announced the results of 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 end point of this trial was to evaluate the development of nicotine specific antibody levels and safety of the vaccine in study participants. The results showed that multiple injections of NicVAX were well tolerated and resulted in a rapid and boosted immune response that generated nicotine specific antibodies.

OTHER - HEMATOLOGY AND ONCOLOGY

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

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 market WinRho SDF in the U.S. 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 the cost of production and marketing and sales expense. Our license and distribution agreement with Cangene ends on March 24, 2005 and we will no longer market WinRho SDF after that date.

WinRho SDF is generally administered as a part of the patients care in a physician office setting. The MMA establishes the reimbursement rate to average sales price plus 6% from January 2004. Beginning in January 2006, the MMA will allow physicians to choose to purchase and store pharmaceutical products in their offices or to order the product from a distributor who will be responsible for securing reimbursement from the government or third party payers.

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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 that cannot tolerate oral therapy. Complications associated with chemotherapy-induced hyperuricemia in these patients include renal failure.

The Leukemia and Lymphoma Society estimates that approximately 96,000 patients will be diagnosed with leukemia and lymphoma in the U.S. in 2004. These patients could potentially be at-risk for developing chemotherapy-induced hyperuricemia.

Aloprim is generally administered in the in-patient hospital setting. When administered as part of in-patient care in a hospital, Aloprim is included in the DRG reimbursement amount for the related procedure.

In 2004, we exercised our right under our distribution agreement to acquire Aloprim from DSM Pharmaceuticals, Inc., or DSM. In conjunction with acquiring Aloprim, we entered into a manufacturing agreement with DSM for DSM to continue to supply product to us for a term of up to five years.

CONTRACT MANUFACTURING

We have a state-of-the-art facility for the fractionation and purification of human immunoglobulin. Our facility was designed to accommodate manufacture of Nabi-HB, as well as our antibody-based products in clinical development, Altastaph and Civacir. Based on current utilization forecasts, we have available manufacturing capacity for the manufacture of the antibody-based products of other companies on a contract basis. Although we do not consider contract manufacturing to be a core operating strategy, we utilize contract manufacturing to partially offset the fixed costs for maintaining the facility.

Potential contract manufacturing customers are primarily research and development stage companies that do not possess their own manufacturing capacity or companies that possess mature products that are being manufactured in older facilities that would require significant capital expenditure to upgrade to current compliance requirements.

Our facility has been licensed by the FDA since 2001 and, as such, is among the most recently licensed fractionation and purification facilities in the U.S.

CURRENTLY MARKETED ANTIBODIES

We operate nine FDA licensed antibody collection centers located in six states within the U.S. that supply specialty antibodies and non-specific antibodies to our customers in the pharmaceutical and diagnostic industries. 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.

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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, operational expertise in donor immunization programs, clinical and medical experience in conducting clinical trials under Investigational New Drug Applications, or IND’s, and 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 the primary raw material in the manufacture of Nabi-HB.

Non-specific Antibodies

Our nine FDA licensed antibody collection centers also supply non-specific human antibodies from normal healthy donors to our customers.

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.

Sales and Segment Sales

Sales of our biopharmaceutical products totaled $131.8 million in 2004 compared to $109.5 million in 2003 and $89.5 million in 2002. In 2004, biopharmaceutical products accounted for 73% of our sales and 96% of our gross margin.

Total sales of our antibody products were $48.0 million in 2004 compared to $67.1 million in 2003 and $106.5 million in 2002. These decreases were expected due to the conclusion in April 2003 of a single supply contract that generated no gross margin. We retained this contract after the sale of the majority of our antibody collection business and testing laboratory in September 2001. In 2004, antibody products accounted for 27% of our sales and 4% of our gross margin.

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Research and Development Programs

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