Nabi Biopharmaceuticals (NASDAQ: NABI) actually finds itself in a strange situation after Monday’s awful news that its NicVAX nicotine conjugate immunotherapeutic failed to meet its primary endpoint in the first of two confirmatory Phase III clinical trials.  The company said that the 1,000 trial subjects treated with NicVAX quit smoking at about 11%.  That is the same as the placebo rate.  The portion of the trial’s safety and tolerability profile being acceptable doesn’t really matter.  All we care about at this time is one thing: CAN NABI SURVIVE?

Yesterday’s drop was a whopping 66% down to $1.89 on more than 18 million shares.  While you know that this is an awful drop, Nabi would now have to jump by 200% just to get back to where it was on Friday.

A firm called C.K. Cooper was on the wrong end of this one as its rating was cut to Hold from Buy on the news.

The March 31, 2011 data showed that the company claimed $59 million in cash and equivalents, as well as $41.4 million in short-term investments, and another $1.99 million in ‘long-term’ investments.  The company’s market cap is $78 million.

Nabi’s revenues are still extremely sporadic and it seems as though the earnings estimates are going to be altered quite a bit ahead.

The company lists a gram-positive program for EnteroVAX… This is against Enterococcus, a clinically significant Gram-positive bacterium that causes hospital-acquired infections, representing approximately 10-12% of all bloodstream infections. Nabi has identified and patented three polysaccharide antigens that cover both E. faecalis and E. faescium that comprise almost 100% of vancomycin resistant strains.  This is unfortunately still in the Research stage, so it is not even technically into the pre-clinical trial sector as of yet.

What is good news is that the Enterococcus segment is a rather large market and it is rather well-known that the hospital-acquired infection segment is a huge market.  The big fear is that perhaps one poor study result implies that other study results will be poor as well.

Nabi’s site noted that the company no longer distributes PhosLo as of November 14, 2006.

Here is a breakdown of its revenues.  The first quarter 2011 revenue was $9.2 million, which was said to reflect $3.3 million that was from initial payments received from GlaxoSmithKline (NYSE: GSK) that is associated with the PentaStaph sale and NicVAX(R) option and license agreements, $5 million for completion of the final PentaStaph milestone and $0.9 million for services provided to GSK under the PentaStaph and NicVAX agreements.  Unfortunately, this failure is going to likely kill the NicVAX figures ahead.

General and Administrative expenses were $1.3 million for the first quarter, down from $1.8 million in the prior year as it has trimmed expenses.  Research and Development expenses were $5.3 million in the first quarter of 2011.

It seems that perhaps Nabi could have tried one more method of getting people to stop smoking.  It could have offered a $10,000 bonus for those who show up tobacco-free after the alloted study time.  All the company has to do is charge more for the drug and then offer back a bonus to those who actually quit smoking.  Certainly that would not be legal, but no reason to let facts get in the way of good theory.  NicVAX was supposed to work, in theory.

Our take is that Nabi still has ample breathing room from a financial standpoint as it stands today.  The problem is that it now seems to lack catalysts that will propel shares unless a research breakthrough comes on the EnteroVAX research then there may be a very long slow wait.  That implies that Nabi can continue surviving, and we see an ability to continue operating for at least two years or more as a base-case even if deferred liabilities no longer get deferred and if it has to increase spending around certain items.  If there are no penalties and if no accelerated payments are demanded, then Nabi can survive without new cash even longer.

Keep in mind that Nabi’s short interest was 2,344,589 as of the June 30, 2011 settlement date and it had been as much as 3 million shares short as of last September.

JON C. OGG

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