Nabi Pharmaceuticals Plunges On Phase III Data

Investors who own shares in Nabi Biopharamaceuticals were likely quite distraught this morning. The company opened today worth almost a full 4 dollars less than its closing value yesterday, down a staggering 66.43%. Nabi Biopharamaceuticals is a bio-pharama company which develops vaccines to address needs in nicotine addiction and infectious diseases. The company has been developing a Nicotine Conjugate Vaccine called NicVax since Dec 31, 2009, and phase II study results were due out this morning. The fall in share value came as a result of the smoking-cessation treatment failing to meet the goal set for phase III studies. Tests showed that NicVaxonly elicited an 11% abstinence rate. This was essentially comparable to that of a placebo in the study. The company now faces re-developing and re-testing the drug or outright dropping its development. This shook investor sentiment and sent the NABI share value plummeting Nabi has not announced how it will be handling the NicVAX study results, but it will continue to develop its other offering, the PentaStaph vaccine candidate. PentaStaph's development was sold to GlaxoSmithKline GSK in November 2009 for $46M. Part of that $46M was to be paid out at milestones. As of July 13 Nabi finished the phase III study for PentaStaph and has earned all of the $26M in milestone payments promised by GSK. The issue now facing the company is developing a drug that can pass trail phases and generate a new revenue stream. ACTION ITEMS:

Bullish:
Investors who believe that Nabi can and will monetize a new pharmaceutical candidate might want to consider the following trades:

• Purchase shares in NABI while they are very cheap, shares may not recover a ton soon, but one could still see gains

• A long play on NABI shares could pay off quite well if the NicVAX drug is successfully modified to increase effectiveness

Bearish:
Traders who believe that prices are headed lower in the name, may consider alternate positions:

• Despite the huge fall in the stock price, a short sale may make sense in NABI. Frequently, biotech stocks will continue to fall farther after negative clinical data.

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