No. of Recommendations: 4
There was a recent article on the TMF homepage about the potential profitability of NABI. NABI is developing a a vaccine for staph Aureus infections. Staph represents a hazard to hospitalized patients who are infected while hospitalized. Since staph is now resistant, in the hospital based setting, to the common antiobiotics and the former big gun, Vancomycin, it represents a very real death threat to infected patients. Its hard to stay ahead of staph and other nosocomial(hospital acquired ) infections by developing new antibiotics, so NABI has developed the novel idea of vaccinating against staph. Vaccinations raise antibody levels and the immune system is then capable of taking care of the bacteria instead of depending on antibiotics.

There are two obvious obstacles to blockbuster profitability:

1)This is not a vaccination that will become widely used in the general population. It may be proven to be highly effective in the hospital based setting, but this is not the giant market of a vaccine like measles, DPT or even H.flu.

2)Vaccines are just not very profitable, even on a large scale. The following article outlines some of the problems.

Provided by: Canadian Press

Every time there is a vaccine shortage, doctors lament how public health is dependent on for-profit companies. That reliance is considered especially problematic for vaccines, since drugs help individuals but vaccines protect the public.

Part of the problem is that low profit margins, complex manufacturing and a challenging regulatory environment have driven vaccine makers from the business.

"There are a whole array of barriers keeping companies from the business," said Dr. William Schaffner, chairman of the department of preventive medicine at Vanderbilt University Medical Center.

"And there are no simple solutions," Schaffner added.

Vaccine production is a difficult business because immunizations are made from live viruses or bacteria, which are trickier to work with than the chemicals used to make most drugs. Vaccines have low profit margins and don't offer repeat business, like drugs.

The risk of litigation also is higher. Unlike drugs, vaccines are given to healthy people. So while a cancer patient may be willing to endure side effects from a drug, the same doesn't hold true for someone getting a flu vaccine.

In 1986, the U.S. government set up the National Childhood Vaccine Injury Compensation Program, which compensated people for injuries or conditions that might have been caused by vaccines recommended for children. The program was intended to provide an incentive for manufacturers to continue making vaccines. Yet the vaccines for polio, chicken pox and measles/mumps/rubella have only a single manufacturer each, because the government buys 56 per cent of childhood vaccines and caps the prices it pays.

Public health officials worry about what would happen if a company making one of those vaccines quit the business or experienced production mishaps.

Drug company executives say adding more manufacturers, even if intellectual property wasn't an issue, isn't a solution.

Aventis Pasteur spokesman Len Lavenda admited the company makes more money from the flu vaccine than it did a few years ago when there were five manufacturers. Now there are three, and two are new.

Chiron Corp. entered the flu vaccine market earlier this year when it purchased PowderJect Pharmaceuticals PLC, a U.K.-based company that makes 30 vaccines but markets only two in the United States.

"We want to be a fuller player in the United States, but it is expensive and it takes a long time to conduct clinical trials," said Chiron spokesman Martin Forrest.

The other new entrant is FluMist, a nasal inhalant made by MedImmune Inc. and marketed by Wyeth, which stopped making its own flu vaccine last year.

FluMist's struggles illustrate why it is so difficult to enter the vaccine industry. MedImmune believed patients and insurers would be willing to ante up $46 US a dose for a vaccine that would let people avoid a pinch in the arm. It was wrong.

Earlier this year, MedImmune downgraded its outlook for 2003 based largely on sagging FluMist sales. That may change now that there is a shortage, but the company is still offering a $25 US rebate to those who buy the product.

Part of the information regarding NABI is found below. The rest is at the following link:

NABI Products

This company has four products that are generating enough revenue to keep NABI in positive earnings territory. The company is primarily a specialist in antibody therapy. Antibodies are cells carried in the blood stream that are active against bacteria and other foreign invaders in the body and help fight or clear infection. They have two antibody drugs and two other unrelated products.

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

Nabi-HB is an antibody therapy that is administered after exposure to the hepatitis B virus. It is intended to block the virus from causing infection. Hepatitis B is a highly infectious viral disease that is caused usually by exposure to blood and sexual transmission. Chronic infection can lead to liver cancer. Sales of Nabi-HB were $41.2 million in 2002 compared to $30.3 million in 2001. The U.S. Center for Disease Control (“CDC”) currently estimates that in the U.S. alone there are an estimated 1.25 million chronic hepatitis B carriers, 78,000 new hepatitis B infections per year, and 5,000 individuals who die annually from hepatitis B or its complications. Approximately half of new hepatitis B infections are caused by sexual exposures.

WinRho SDF is the other antibody product. It is directed against a relatively uncommon platelet disorder called ITP. Idiopathic thrombocytopenic purpura (ITP) is a bleeding disorder in which the blood does not clot as it should. The bleeding is due to a low number of platelets (PLATE-lets), which help the blood clot and stop bleeding. People with ITP often have purple bruises that appear on the skin. The bruises mean that bleeding has occurred in small blood vessels under the skin. Treatment traditionally has been with high dose steroids, immunoglobulins and even removal of the spleen. This specific antibody treatment is an improvement over the standard treatments.Sales of WinRho SDF were $34.0 million in 2002 compared to $34.8 million in 2001.

Autoplex T is not an antibody product, but a coagulation complex that gives certain types of hemophiliacs the ability to normally coagulate and stop bleeding. 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. Autoplex T is a coagulation complex used to treat patients who have developed inhibitors to factor VIII. We acquired exclusive rights to distribute Autoplex T in the U.S., Canada and Mexico from Baxter

Aloprim is indicated for the treatment of chemotherapy-induced hyperuricemia in patients with leukemia, lymphoma, or solid organ tumors. It is also not an antibody product. It is a drug that neutralizes high levels of a toxic product called uric acid. High levels of uric acid are released into the blood when cancer patients are treated with chemotherapeutic drugs. Rapid destruction of cancer cells can raise uric acid levels in the blood to toxic levels. It is standard practice to use a medication like Aloprim to prevent this complication.

Other products(most of them antibody products):
Rh o D Antibodies. Antibodies to Rh o D antigen (anti-D) have long been used to prevent Rh o (D) isoimmunization in Rh-negative women and subsequent hemolytic disease (blue baby disease) in Rh-positive infants. These antibodies are also used to treat ITP in children and adults. Antibodies to Rh o D antigen are used in the manufacture of WinRho SDF, our antibody-based biopharmaceutical product for the treatment of ITP.
Tetanus Antibodies. Antibodies to tetanus toxin are used by our customers to produce therapeutic products to provide short-term protective immunity to patients exposed to tetanus.
Cytomegalovirus (“CMV”) Antibodies . Antibodies to CMV are supplied to manufacturers to enhance intravenous immune globulin (“IVIG”) products and to produce CMV-specific immune globulin therapeutic products.
Rabies Antibodies. Antibodies to rabies are used by our customers to make therapeutic products that provide short-term protective antibody-based immunity to patients exposed to the rabies virus.
Sales of specialty antibodies were $32.7 million in 2002 and $46.8 million in 2001. Specialty antibody sales decreased during 2002, due primarily to the sale of the majority of the antibody collection business and testing laboratory in September 2001.

Research and Development Product Pipeline

This is the area of interest from the TMF article. It is of interest as Staph infections are a serious and growing problem for hospitalized patients. The problem lies in the genius of the Staph bacteria. It used to be successfully treated with a number of common antibiotics. Most bacteria are able to change bits of their DNA after repeated exposure to antibiotics and the changes make them resistant to treatment. They don't die. Every new antibiotic
spurs bacteria to change and hospital patients can become infected with the nastiest strains of bacteria that resist all treatment are potentially able to kill the patient.

Dual Approach to Gram-positive bacterial infections:

StaphVAX, an investigational polysaccharide conjugate vaccine, is a novel approach to the prevention of S. aureus infections. This product is designed for use in patients who are immune competent and who have the time and ability to respond to a vaccination by making their own antibodies (usually about two weeks) before they are at increased risk for infection StaphVAX contains surface polysaccharides found in the outer coating (capsular polysaccharide or CP) of S. aureus serotypes 5 and 8. The polysaccharide molecules are linked, or conjugated, in the vaccine with a non-toxic, carrier protein derived from the bacteria Pseudomonas aeruginosa . Once given the vaccine, the patients' immune systems produce proteins, called antibodies, which bind to S. aureus on subsequent exposure to the bacteria.

Translation: there are molecules in the vaccine that stimulate the body to produce antibodies to kill the bacteria and decrease the need for antibiotics.

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

Translation: This is the antibody itself that is required to kill the bacteria and can be given to people incapable of mounting their own antibody defense or are already infected and don't have time to generate their own antibodies.

They are also involved with finding similar treatments for 2 other well-known bacteria that are becoming increasingly resistant to treatment and can cause high rates of morbidity and mortality. All of these ventures have a potentially large market.

Pipeline Products  
StaphVAX :Vaccine to provide long-term protection against onset of S. aureus bacteremia. Completed Phase III efficacy trial in ESRD patients in 2001; Completed booster trial in ESRD patients in 2002; Initiation of confirmatory Phase III clinical trial planned for second half of 2003.
Altastaph TM Purified human polyclonal antibodies to provide treatment or immediate protection against S. aureus bacteremia. Completed Phase I/II safety and PK clinical trial in low birth weight newborns; Initiated Phase I/II trial in adults with persistent S . aureus infections in 2002; Phase II trial in low birth weight newborns is planned for 2003.
Next Generation Products (vaccines and antibody-based biopharmaceutical products)   Combat S. aureus 336, S. epidermidis, and Enterococcal bacterial infections   Research and pre-clinical development.
Anti-Viral Programs:        
Nabi-HB® Intravenous IV formulation of Nabi-HB to prevent re-infection of transplanted livers in HBV positive liver transplant patients. Filed BLA with FDA in 2002; FDA has designated the BLA for priority review; Orphan Drug Designation received from the FDA.
Civacir TM Purified human polyclonal antibodies to prevent re-infection of transplanted livers in patients with HCV liver disease and to treat HCV virus infections  Initiated NIH sponsored Phase I/II clinical trial in 2002; Results expected to be reported in 2003; Orphan Drug Designation received from the FDA.
NicVAX TMVaccine for prevention and treatment of nicotine addiction. Phase I trial initiated in 2002; Phase I/II trial initiated in the Netherlands in February 2003; Additional US-based Phase I/II trial planned for 2003.

Selected Financials
Market Cap (intraday): 555.25M
Trailing P/E (ttm): 1,190.00 Meaningless
Price/Sales (ttm): 3.00
Price/Book (mrq): 2.41
Profit Margin (ttm): 0.44% Currently low, but at least they are profitable
Operating Margin (ttm): 0.52%
Return on Assets (ttm): 0.33% Low not surprising due to low returns
Return on Equity (ttm): 0.41% Low
Income Statement
Revenue (ttm): 195.97M
Revenue Per Share (ttm): 4.49
Revenue Growth (lfy): -16.50% Negative and is of concern--will they burn through cash if sales continue to decline? Cash is the best predictor of survivability of biotechs in the midst of bringing potentially profitable products to market
Earnings Growth : -98.00% See above
Total Cash (mrq): 26.25M Positive--at current levels how many years of R&D will it finance? current R&D expense was about
$21 M
Total Debt (mrq): 37.06M fairly low
Total Debt/Equity (mrq): 0.16

From Operations (ttm): 10.46M
Free Cashflow (ttm): -1.24M Negative
V52-Week High (24-Dec-03): 12.37 Trading close to this
52-Week Low (18-Feb-03): 5.00
Shares Outstanding: 46.66M
F% Held by Insiders: 2.49% Low
% Held by Institutions: 56.03%

NABI is a very interesting biotech and has some useful therapies in late stage trials. Since they are close to finishing trials and do make money, they may be able to stay slightly profitable until the pipeline comes to market. They are in a good position compared to many other unprofitable biotechs. However, what if they don't get approval or have to extend trials? Buying a company like NABI is far from a sure a thing and all you can do is make your best guess about the viability of the pipeline and chances for FDA approval. Most of us don't have the luxury of inside information, like Martha Stewart did. We have to rely on our own judgment. I would be tempted to put a small amount into them as pure speculation, but I would prefer them to be down from the 52 week high before doing so.
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