We are a biopharmaceutical company focused on the development of vaccines addressing unmet medical needs in the areas of nicotine addiction and infectious disease. We leverage our experience and knowledge in powering the human immune system to target serious unmet medical needs in these areas. Our sole product currently in development is NicVAX® [Nicotine Conjugate Vaccine], an innovative and proprietary investigational vaccine for treatment of nicotine addiction and prevention of smoking relapse. We recently closed an option and license agreement for NicVAX with GlaxoSmithKline Biologicals S.A. (GSK). In November 2009 we sold our development product PentaStaph™ [Pentavalent S.aureus Vaccine], a new pentavalent vaccine designed to prevent S.aureus infections including those infections caused by the most dangerous antibiotic-resistant strains of S.aureus, to GSK. We are incorporated in Delaware since 1969 and our operations are located in Rockville, Maryland.
NicVAX is an investigational therapeutic vaccine for smoking cessation, based on patented technology. Smoking cessation market is a large unmet medical need that exceeds $4 billion. Nicotine, a non-immunogenic small molecule, can upon inhalation through smoking, cross the blood-brain barrier and reach specific receptors in the brain, causing the release of dopamine thereby leading to the highly addictive pleasure sensation experienced by smokers and users of nicotine products. NicVAX is designed to stimulate the immune system to produce highly specific antibodies that bind to nicotine. A nicotine molecule attached to an antibody is too large to cross the blood-brain barrier, and thus is unable to reach the receptors in the brain and trigger pleasure sensations. In November 2007, we announced the successful completion of a Phase IIb “proof-of-concept” clinical trial for NicVAX that showed statistically significant rates of smoking cessation and continuous long-term smoking abstinence at 6 and 12 months for subjects injected with NicVAX as compared with subjects injected with placebo. In October 2008, we announced the results of a Phase II schedule optimization immunogenicity study assessing the antibody response and safety of a six-dose immunization schedule. This study showed that significantly higher antibody levels can be generated earlier in a higher percentage of subjects than in previous studies and that the revised dose regimen continued to be well tolerated. These key results have confirmed the basis of our design for the NicVAX Phase III trials. In December 2008, we announced that we had reached agreement with the U.S. Food and Drug Administration (FDA) on a Special Protocol Assessment (SPA) for the pivotal Phase III clinical trials for NicVAX. The SPA forms the foundation to support approval of a New Drug Application (NDA). In June 2009, we announced that we received scientific advice from the European Medicines Agency (EMEA) which is well aligned with our SPA agreement with the FDA regarding the design of the trial. In September 2009, we announced that we received a $10 million grant from the National Institute on Drug Abuse, (NIDA) to partially offset the cost of the first of two Phase III studies that we are required to conduct by the FDA in support of NicVAX’s licensure. In October 2009 we also announced the initiation of an investigator initiated clinical trial in the Netherlands to test the efficacy of a combined therapy of NicVAX with varenicline, or Chantix. In November 2009 we announced the initiation of the first of two Phase III efficacy trials in the U.S., which is also the first such trial for an addiction vaccine, confirming NicVAX’s first in class nicotine vaccine in smoking cessation.
In November 2009, we announced that we had signed an exclusive worldwide option and licensing agreement with GSK for NicVAX as well as for the development of a second-generation nicotine vaccine. The agreement required the approval of our shareholders, which we obtained on March 2, 2010; we successfully closed the transaction with GSK on March 5, 2010. Upon closing, we are entitled to receive a $40 million initial payment. Under the terms of the agreement, we granted to GSK (i) an option to obtain an exclusive worldwide license to develop, commercialize and manufacture NicVAX as it currently exists, as well as certain potential alternative forms of NicVAX together with an adjuvant other than a GSK proprietary adjuvant and/or with different presentation, dosage or administration (NicVAX Alternatives), and (ii) an exclusive worldwide license to develop, commercialize and manufacture certain future generation candidate vaccines for the prevention or treatment of nicotine addiction based on our NicVAX intellectual property (other than NicVAX and NicVAX Alternatives). In addition to the $40 million upon closing, the total consideration we may receive under the agreement is more than $460 million in potential option fees and regulatory, development, manufacturing and sales milestones for NicVAX and follow-on nicotine vaccines. We will also receive royalties on global sales of NicVAX should GSK exercise its option and commercialize the product, as well as royalties on global sales of next generation nicotine vaccines. Also in November 2009, Nabi announced the initiation of the first of two phase III efficacy trials required for licensure of the product. The result of the first phase III trial is expected in the second half of 2011. Nabi plans on initiating the second phase III trial in the first half of 2010.
PentaStaph is an investigational vaccine based on patented technology, including technology that we have licensed on an exclusive basis from the National Institutes of Health (NIH). We announced two significant events in 2008 that helped advance the development of PentaStaph. In September 2008, we entered into a collaboration agreement with the National Institute of Allergy and Infectious Diseases (NIAID) to conduct pre-clinical toxicology evaluation of two new antigens designed to protect against two of the most virulent and debilitating toxins produced by the bacteria; this testing was concluded in 2009. In December 2008, we entered into a research and development agreement with the U.S. Department of Defense (DoD) to conduct a series of collaborative clinical trials for PentaStaph. With these agreements in place, we were able to advance the development of PentaStaph much further and faster than we could on our own.
In August 2009 we announced that GSK had signed an Asset Purchase Agreement (APA) for PentaStaph for a total consideration of $46 million including a $20 million upfront payment upon closing and $26 million upon achievement of certain milestones. The PentaStaph sale closed in November 2009, and we received payment from GSK of $21.5 million representing the upfront payment of $20 million, an additional $1 million for the sale of our Staphylococcus epidermidis vaccine program and an additional $0.5 million for transfer of certain specified materials. Under the APA, we agreed to a Transition Services Agreement (TSA) to help GSK advance the program while in parallel transferring the technology to GSK. Under the TSA, GSK will reimburse us for the cost of such activities, and we are eligible to receive up to an additional $26 million for the achievement of milestones related to the TSA. Accordingly, we are continuing to develop PentaStaph under contract for GSK through a Phase I/II clinical trial of two of the antigens, in collaboration with the U.S. military. On December 28, 2009 we received $5 million for the achievement of the first milestone in conjunction with the initiation of a Phase I/II clinical trial of certain PentaStaph antigens. In February 2010 we received $8 million upon completion of a second milestone. We expect to be able to complete our performance obligations under the TSA within the next 12 months.
In 2006, we sold certain assets related to our PhosLo operations. Under the sale agreement, we received $65.0 million in cash at closing and received an additional $13.0 million of milestones as of March 10, 2010. We can also receive up to $72.5 million in milestone payments and royalties. The royalties relate to sales of a new product formulation over a base amount for 10 years after the closing date.
Beginning in 2006 we initiated a strategic alternatives process to enhance shareholder value. With the NicVAX and PentaStaph transactions described above and the other strategic transactions that proceeded them, this strategic alternatives process has resulted in the sale, licensure or grant of an option to acquire all of our marketed products and major pipeline products.