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Apr 27, 2012

Analysts Suggest Nabi Shareholders Would Do Better from Liquidation Rather Than $54M Merger with Biota

  • After Nabi announced earlier this week its intent to merge with Biota for $54 million plus new stock, analysts are suggesting that Nabi shareholders might get more value by liquidating the company, according to the Gazette newspaper. Nabi’s liquidation value is about $80 million, CEO Raafat Fahim told the analysts.

    The company said it will return to its stockholders any cash in excess of the $54 million, after paying off debts and other expenses. Fahim told analysts that excess cash would total between $25 million and $30 million.

    Announcement of the merger comes five months after Nabi retained Piper Jaffray & Co. to explore strategic alternatives. Last summer its antismoking vaccine failed two Phase III trials.

    The newly combined company, to be named Biota Pharmaceuticals, will be headquartered in the U.S. and will be listed on NASDAQ, with the current Biota de-listed from the Australian Stock Exchange. Nabi would acquire all outstanding shares in the current Biota, in exchange for new shares of the new Biota. Current-Biota shareholders will own 74% of the new company’s outstanding common stock, with Nabi’s current common stockholders holding the remainder.

    Following the merger, assets of Biota Pharmaceuticals will include three royalty-producing products: The flu inhalation treatment Relenza marketed by GlaxoSmithKline (GSK), Inavir co-owned by Biota and Daiichi Sankyo, and potentially PhosLyra, which reduces phosphate levels in late-stage kidney failure.

    The combined company will also have a $231 million BARDA contract for advanced development of the neuraminidase inhibitor laninamivir in influenza; it is already marketed in Japan. It will also $100 million in cash to advance its pipeline of preclinical and clinical programs comprising Phase III vapendavir in human rhinovirus program and candidates for respiratory syncytial virus, hepatitis C, and a broad-spectrum antibiotic targeting gyrase. Additionally, the new entity will have interest in NicVAX, a nicotine conjugate vaccine.

    NicVAX, developed in collaboration with GlaxoSmithKline, was designed to aid in smoke cessation by triggering production of antibodies that would attach to nicotine, preventing it from reaching the brain. But in a Phase III trial involving 1,000 patients, the same percentage of people (11%) quit smoking after NicVAX treatment or placebo. During Q1 2010, Nabi granted GSK an option to exclusively license NicVAX worldwide and a license to develop follow-on next-generation nicotine vaccines using Nabi intellectual property combined with GSK technology including GSK's adjuvants.

    Because NicVAX is Nabi’s "sole remaining product currently in development,” according to its 2011 annual report issued last month, speculation among analysts, reported in The Australian and elsewhere, is that the SEC may declare Nabi a shell company and not approve the merger. Nabi has denied operating as a shell company, though even if it were, it could still combine with Biota through a formal registration process.

    NicVAX was developed using $10 million from the National Institute on Drug Abuse, of which $7.9 million was awarded through the American recovery and Reinvestment Act, President Barack Obama’s $814 billion stimulus measure enacted in 2009.

    --
    To read the story from The Australian, click here.
    To read the story from Gazette, click here.


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