Form 10-Q

10-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33657

Abraxis BioScience, Inc.

(Exact name of registrant as specified in its charter)


Delaware		30-0431735
(State of Incorporation)		(I.R.S. Employer Identification No.)

11755 Wilshire Boulevard, Suite 2000 Los Angeles, CA		90025
(Address of principal executive offices)		(Zip Code)

(310) 883-1300

(Registrant’s telephone number, including area code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as determined by rule 12b-2 of the Exchange Act). Yes ¨ No x

As of April 30, 2009, the registrant had 40,117,909 shares of $0.001 par value common stock outstanding.

Abraxis BioScience, Inc.

INDEX


		Page

PART I. Financial Information

Item 1.	Financial Statements (Unaudited)	3

	Condensed consolidated balance sheets – March 31, 2009 and December 31, 2008	3

	Condensed consolidated statements of operations – Three months ended March 31, 2009 and 2008	4

	Condensed consolidated statements of cash flows – Three months ended March 31, 2009 and 2008	5

	Notes to unaudited condensed consolidated financial statements – March 31, 2009	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4.	Controls and Procedures	19

PART II. Other Information

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Submission of Matters to a Vote of Security Holders	30

Item 5.	Other Information	30

Item 6.	Exhibits	30

Signatures		31

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Abraxis BioScience, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)


	March 31, 2009			December 31, 2008
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	302,798		$	306,390
Cash collateral for reacquisition of agreement		—			300,631
Accounts receivable, net of allowance for chargebacks of $1,310 in 2009 and $1,258 in 2008 and credit returns of $1,100 in 2009 and $695 in 2008		38,721			37,011
Related party receivable		2,114			1,915
Inventories		59,314			63,506
Prepaid expenses and other current assets		27,989			33,795
Deferred income taxes		64,882			65,585

Total current assets		495,818			808,833
Property, plant and equipment, net		181,367			166,720
Investment in Drug Source Company, LLC		11,214			10,183
Intangible assets, net of accumulated amortization of $115,960 in 2009 and $105,113 in 2008		165,278			175,291
Goodwill		241,361			241,361
Other non-current assets		35,962			36,196

Total assets	$	1,131,000		$	1,438,584


Liabilities and equity
Current liabilities:
Accounts payable	$	25,269		$	39,142
Accrued liabilities		49,342			53,020
Accrued litigation costs		57,665			57,635
Reacquisition payable		—			268,000
Income taxes payable		796			679
Deferred revenue		3,597			4,209

Total current liabilities		136,669			422,685
Deferred income taxes, non-current		62,594			62,685
Long-term portion of deferred revenue		7,424			8,223
Other non-current liabilities		15,480			15,519

Total liabilities		222,167			509,112
Equity
Stockholders’ equity:
Common stock—$0.001 par value; 100,000,000 shares authorized; 40,117,678 and 40,066,451 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively		40			40
Additional paid-in capital		1,205,685			1,203,092
Accumulated deficit		(295,610	)		(272,689	)
Accumulated other comprehensive loss		(902	)		(971	)

Total stockholders’ equity		909,213			929,472
Noncontrolling interest		(380	)		—

Total equity		908,833			929,472

Total liabilities and equity	$	1,131,000		$	1,438,584

See notes to condensed consolidated financial statements.

Abraxis BioScience, Inc.

Condensed Consolidated Statements of Operations


	Three Months Ended March 31,
	2009			2008
	(unaudited)
	(in thousands, except per share data)
Abraxane revenue	$	70,618		$	79,932
Other revenue		1,964			2,210

Net revenue		72,582			82,142
Cost of sales		9,127			8,607

Gross profit		63,455			73,535
Operating expenses:
Research and development		34,977			20,822
Selling, general and administrative		42,503			45,300
Amortization of intangible assets		9,950			9,653
Equity in net (income) loss of Drug Source Company, LLC		(1,031	)		248

Total operating expenses		86,399			76,023

Loss from operations		(22,944	)		(2,488	)
Interest income		1,146			6,535
Other (expense) income		(1,440	)		287

(Loss) income before income taxes		(23,238	)		4,334
Provision for income taxes		63			25

Net (loss) income	$	(23,301	)	$	4,309

Net loss attributable to noncontrolling interest		(380	)		—

Net (loss) income attributable to common shareholders	$	(22,921	)	$	4,309

Basic and diluted net (loss) income per common share	$	(0.57	)	$	0.11


Stock-based compensation is included above in the following classification:
Cost of sales	$	103		$	51
Research and development		1,192			1,190
Selling, general and administrative		3,119			1,753

	$	4,414		$	2,994

See notes to condensed consolidated financial statements.

Abraxis BioScience, Inc.

Condensed Consolidated Statements of Cash Flows


	Three Months Ended March 31,
	2009			2008
	(unaudited)
	(in thousands)
Cash flows from operating activities:
Net (loss) income	$	(23,301	)	$	4,309
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation		3,885			3,404
Amortization of intangible assets		9,950			9,653
Amortization of deferred revenue		(1,412	)		(10,309	)
Other than temporary loss on marketable securities		2,944			—
Gain on derivatives		(436	)		—
Equity-based compensation		4,413			2,994
Deferred income taxes		638			—
Equity in net (income) loss of Drug Source Company, LLC, net of dividends received		(1,031	)		248
Gain on sale of marketable securities		(792	)		—
Gain on sale of subsidiary		(2,667	)		—
Changes in operating assets and liabilities:
Accounts receivable, net		(1,542	)		2,598
Cash collateral for reacquisition of agreement		300,631			—
Related party, net		(199	)		(10,061	)
Inventories		4,138			2,564
Prepaid expenses and other current assets		2,112			3,006
Accounts payable and accrued expenses		(20,414	)		(9,570	)
Reacquisition payable		(268,000	)		—
Other non-current assets and liabilities		450			581

Net cash provided by (used in) operating activities		9,367			(583	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(18,963	)		(1,859	)
Purchases of investments and marketable securities		—			(4,492	)
Proceeds from sale of subsidiary		2,046			—
Proceeds from sale of marketable securities		3,676			—

Net cash used in investing activities		(13,241	)		(6,351	)

Cash flows from financing activities:
Proceeds from the exercise of stock options		269			28

Net cash provided by financing activities		269			28
Effect of exchange rates on cash and cash equivalents		13			25

Net decrease in cash and cash equivalents		(3,592	)		(6,881	)
Cash and cash equivalents, beginning of period		306,390			705,125

Cash and cash equivalents, end of period	$	302,798		$	698,244

See notes to condensed consolidated financial statements

ABRAXIS BIOSCIENCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2009

(Unaudited)

(1) Summary of Significant Accounting Policies

Basis of Presentation

Abraxis BioScience, Inc. (formerly known as New Abraxis, Inc.) is a Delaware corporation that was formed in June 2007. We are a biotechnology company, with a proprietary marketed product (Abraxane^®), global ownership of our proprietary technology platform and clinical pipeline, and dedicated nanoparticle manufacturing capabilities for worldwide supply integrated with seasoned in-house capabilities, including discovery, clinical drug development, regulatory and sales and marketing.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information and notes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ended December 31, 2009 or other future periods. The balance sheet information at December 31, 2008 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. All material intercompany balances and transactions have been eliminated in consolidation.

Basis of Consolidation

The accompanying condensed consolidated financial statements reflect the consolidated operations of Abraxis BioScience, Inc. and its subsidiaries. The condensed consolidated financial statements include the assets, liabilities and results of operations of our wholly-owned and majority-owned operating subsidiaries and variable interest entities which we are the primary beneficiary. Additionally, the condensed consolidated statements include our investment in Drug Source Company, LLC, which is accounted for using the equity method. All material intercompany balances and transactions were eliminated in consolidation.

For variable interest entities, we assess the terms of our interest in the entity to determine if we are the primary beneficiary as prescribed by FASB Interpretation 46R, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (FIN 46R). The primary beneficiary of a variable interest entity is the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable interest. Variable interests are ownership, contractual, or other pecuniary interests in an entity that change with changes in the fair value of the entity’s net assets excluding variable interests. We have one variable interest entity and since we are the primary beneficiary, the variable interest entity is consolidated in our financial statements.

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentations. The reclassifications did not impact net income or total stockholders’ equity.

Cash and Cash Equivalents

It is our policy to include cash and investments having maturity of three months or less at the time of acquisition in cash and cash equivalents.

Cash Collateral for Reacquisition of Agreement

In November 2008, we entered into an agreement with AstraZeneca UK Limited under which, subject to the terms and conditions of the agreement, we re-acquired the exclusive rights to market Abraxane^® in the United States. As part of the agreement, we provided $286 million ($268 million for termination payment and $18 million for estimated final payments due under the Co-Promotion Agreement) in irrevocable standby letters of credit to secure the future payments under the agreement. The letters of credits were collateralized by $300.6 million of cash, which was included in “Cash collateral for reacquisition of agreement” in the balance sheet as of December 31, 2008. In March 2009, we made the final payments under the agreement and were released from our obligation to maintain the cash collateral.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates may also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investments

We review quarterly, our available-for-sale securities and cost method investments for other than temporary declines in fair value and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance and the creditworthiness of the issuer. For the three months ended March 31, 2009 and 2008, we realized other than temporary losses of $2.9 million and $0, respectively, on available for sale securities whose values, based on market quotation, had declined significantly below their carrying value. The loss is included in “Other income and expense” in the condensed consolidated statements of operations.

Recent Accounting Pronouncements

In December 2007, the FASB issued Statement No. 141(R), Business Combination (SFAS 141R) and Statement No. 160, Accounting and Reporting of Noncontrolling Interest in Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS 160). These new standards will change the accounting for and reporting of business combination transactions and noncontrolling (minority) interests in consolidated financial statements. SFAS 141R and SFAS 160 are required to be adopted simultaneously and were effective for us beginning on January 1, 2009. The adoption of SFAS 141R could have a significant impact on our accounting for future business combinations. SFAS 160 did not have a significant impact on our consolidated financial statements.

In December 2007, the FASB ratified EITF No. 07-1, Accounting for Collaborative Agreements (EITF 07-1). EITF 07-1 provides guidance regarding financial statement presentation and disclosure of collaborative arrangements. EITF 07-1 will be applicable to arrangements we may enter into regarding development and commercialization of products and product candidates. EITF 07-1 was effective for us beginning on January 1, 2009. The adoption of EITF 07-1 did not have a significant impact on our consolidated results of operations or financial position.

(2) Earnings Per Share Information

Basic (loss) income per common share is computed by dividing net (loss) income attributable to common shareholders by the weighted-average number of common shares outstanding during the reporting period. Diluted (loss) income per common share is computed by dividing net (loss) income attributable to common shareholders by the weighted-average number of common shares used for the basic calculations plus the weighted average dilutive shares, unless the impact of including the dilutive shares are anti-dilutive. Calculations of basic and diluted loss per common share information are based on the following (in thousands, except per share data):


	Three Months Ended March 31,
	2009			2008
Basic and dilutive numerator:
Net (loss) income attributable to common shareholders	$	(22,921	)	$	4,309

Denominator:
Weighted average common shares outstanding—basic		40,081			39,997
Net effect of weighted average dilutive stock options and restricted stock awards		—			199

Weighted average common shares outstanding—diluted		40,081			40,196

Net (loss) income per common share—basic	$	(0.57	)	$	0.11

Net (loss) income per common share—diluted	$	(0.57	)	$	0.11

Potentially dilutive shares not included		271			—

(3) Inventories

Inventories are valued at the lower of cost or market as determined under the first-in, first-out, or FIFO, method, as follows:


	March 31, 2009		December 31, 2008
	(in thousands)
Finished goods	$	16,329	$	14,477
Work in process		8,597		9,615
Raw materials		34,388		39,414

	$	59,314	$	63,506

Inventories consist of products currently approved for marketing and may, from time to time, include certain products pending regulatory approval. Occasionally, we capitalize inventory costs associated with products prior to regulatory approval based on our judgment of probable future commercial success and realizable value. Such judgment incorporates our knowledge and best judgment of where the product is in the regulatory review process, our required investment in the product, market conditions, competing products and our economic expectations for the product post-approval relative to the risk of manufacturing the product prior to approval. In evaluating the market value of inventory pending regulatory approval as compared to its cost, we considered the market, pricing and demand for competing products, its anticipated selling price for the product and the position of the product in the regulatory review process. If final regulatory approval for such products is denied or delayed, we may need to provide for and expense such inventory. No inventory held at March 31, 2009 or December 31, 2008 was pending regulatory approval.

We routinely review our inventory and establish reserves when the cost of the inventory is not expected to be recovered or its product cost exceeds realizable market value. In instances where inventory is at or approaching expiry, is not expected to be saleable based on quality and control standards or for which the selling price has fallen below cost, we reserve for any inventory impairment based on the specific facts and circumstances. Provisions for inventory reserves are reflected in the financial statements as an element of cost of sales with inventories presented net of related reserves.

(4) Financial Instruments

We adopted the provisions of the Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS 157), effective January 1, 2008, for our financial assets and liabilities. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The adoption of SFAS 157 did not have a material impact on our consolidated financial statements.

SFAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:


Level 1	–	Valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2	–	Valuations based on quoted prices in markets that are not active, or financial instruments for which all significant inputs are observable; either directly or indirectly; and

Level 3	–	Valuations based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable; thus, reflecting assumptions about the market participants.

The following fair value hierarchy table presents information about each major category of our financial assets measured at fair value on a recurring basis as of March 31, 2009. All of the investments below reflect strategic investments.


	Basis of fair value measurements
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Balance as of March 31, 2009
	(in thousands)
Marketable equity securities	$	2,917	$	—	$	—	$	2,917
Marketable debt securities		—		—		9,162		9,162
Derivatives		—		1,188		—		1,188

Total	$	2,917	$	1,188	$	9,162	$	13,267

Gains or losses considered to be temporary are included in accumulated other comprehensive loss at each measurement date. Other than temporary losses are included in other expense in the statement of operations.

The Level 3 assets represent convertible notes that were purchased in May and November 2008. The value of the convertible notes at March 31, 2009 approximates their purchase price.

There were no re-measurements to fair value during the three months ended March 31, 2009 of financial assets and liabilities that were not measured at fair value on a recurring basis.

(5) Related Party Transactions

Receivables from related parties totaled $2.1 million and $1.9 million at March 31, 2009 and December 31, 2008, respectively. Receivables from related parties at March 31, 2009 included $1.8 million in receivables from Drug Source Company and $0.3 million in receivables from APP Pharmaceuticals, Inc. (APP). At December 31, 2008, we had receivables of $1.6 million from Drug Source Company and $0.3 million from APP.

Transactions with APP Pharmaceuticals

In connection with the separation of APP Pharmaceuticals, Inc. (APP) and us on November 13, 2007, we entered into a number of agreements that govern the relationship between APP and us for a period of time after the separation. The agreements were entered into while we were still a wholly owned subsidiary of Old Abraxis. These agreements include (i) a tax allocation agreement, (ii) an employee matters agreement, (iii) a transition services agreement, (iv) a manufacturing agreement and (v) various real estate leases. Transactions relating to these agreements recorded in our condensed consolidated statements of operations are summarized in the following table:


	Three Months Ended March 31,
	2009		2008
	(in thousands)
Other revenue:
Net rental income	$	769	$	647
Cost of sales:
Manufacturing and distribution costs		300		307
Facility management fees		500		750
Selling, general and administrative
Net general and administrative costs		363		(375	)

(6) Accrued Liabilities

Accrued liabilities consisted of the following at:


	March 31, 2009		December 31, 2008
	(in thousands)
Sales and marketing	$	14,693	$	13,125
Payroll and employee benefits		11,366		14,797
Legal and insurance		21,324		17,632
Milestone		—		3,950
Other		1,959		3,516

	$	49,342	$	53,020

(7) Income Taxes

Our effective tax rate for the three months ended March 31, 2009 was 0.3%. The rate was computed based on special state tax rules that were used to compute our taxable base on our gross receipts. The effective tax rate for the three months ended March 31, 2009 is different from the statutory rate primarily as a result of the application of a valuation allowance against the net income tax benefit for the year.

As of March 31, 2009, we had $5.5 million of gross unrecognized tax benefits for uncertain tax positions taken in our income tax return. This tax benefit is included in “Other non-current liabilities” in the accompanying condensed consolidated balance sheet. During the three months ended March 31, 2009, the gross amount of our unrecognized tax benefits did not change from the amount included in our balance sheet at December 31, 2009. The majority of the unrecognized tax benefits, if and when recognized, would affect our effective tax rate. We do not anticipate that any of the unrecognized tax benefits will reverse in the next twelve months.

We recognize interest and penalties related to unrecognized tax benefits in our income tax expense. At March 31, 2009, we had no accruable interest or penalties. We do not have any returns currently subject to examination by tax authorities or any open audits.

(8) Comprehensive (Loss ) Income

Elements of comprehensive (loss) income, net of income taxes, were as follows:


	Three Months Ended March 31,
	2009			2008
	(in thousands)
Foreign currency translation adjustments	$	(2,025	)	$	2,425
Unrealized gain (loss) on marketable equity securities		2,094			(2,494	)

Other comprehensive income (loss)		69			(69	)
Net (loss) income		(23,301	)		4,309

Comprehensive (loss) income	$	(23,232	)	$	4,240


Comprehensive loss attributable to noncontrolling interest	$	(380	)	$	—

Comprehensive (loss) income attributable to common shareholders	$	(22,852	)	$	4,240

At March 31, 2009 and 2008, we had cumulative foreign currency translation loss adjustments of $0.7 million and gain adjustments of $2.6 million, respectively. In addition, at March 31, 2009 and 2008, we had cumulative unrealized losses on marketable securities of $0.2 million and $1.9 million, respectively.

(9) Sale of Assets

In March 2009, we sold the shares of our wholly owned subsidiary, Abraxis BioScience Switzerland GmbH, which held the plant, property and equipment located in Barbengo, Switzerland. We received $2.0 million in proceeds from the sale and recorded a gain of approximately $2.7 million, of which $0.6 million was gains from foreign currency exchange. The gain is included in selling, general and administrative expenses in the condensed consolidated statements of operations for the three months ended March 31, 2009. We initially recorded an impairment charge of $9.2 million for these assets in the third quarter of 2008.

(10) Proposed Spin-off

In January 2009, we announced that our board of directors approved a plan to spin-off its newly-formed subsidiary, Abraxis Health, Inc. as a new independent, stand-alone company holding our drug discovery, pilot manufacturing and development business. If the spin-off occurs, our stockholders would own (i) shares of Abraxis Health and (ii) shares of our common stock, and we would continue to operate our existing business, excluding the drug discovery, pilot manufacturing and development business to be held by Abraxis Health. In connection with the proposed spin-off, Abraxis Health would enter into several agreements with us related to, among other things, manufacturing, transition services, product development and research, tax allocations, clinical development and a number of ongoing commercial relationships.

The proposed spin-off is subject to a number of closing conditions, including final approval by our board of directors and the effectiveness of the registration statement registering the common stock of Abraxis Health to be distributed to our stockholders in connection with the spin-off. Approval by our stockholders is not required as a condition to the consummation of the proposed spin-off. In connection with the proposed spin-off, Abraxis Health will re-file a registration statement on Form 10 with the SEC. Stockholders are urged to read Abraxis Health’s Form 10 registration statement carefully because it will contain important information about the proposed spin-off.

(11) Contingencies

On July 19, 2006, Élan Pharmaceutical Int’l Ltd. filed a lawsuit against Old Abraxis in the U.S. District Court for the District of Delaware alleging that Old Abraxis willfully infringed upon two of their patents by asserting that Abraxane^® uses technology protected by Élan-owned patents. Élan sought unspecified damages and an injunction. In August 2006, Old Abraxis filed a response to Élan’s complaint contending that it did not infringe on the Élan patents and that the Élan patents are invalid. On June 13, 2008, the jury ruled that we infringed upon one of Élan’s patents, which runs until 2011, and awarded Élan $55.2 million in damages for sales of Abraxane^® through the judgment date. We have filed various post-trial motions and will appeal the jury ruling. We assumed any liability of Old Abraxis relating to this litigation in connection with the separation. As of March 31, 2009, we had accrued litigation costs of $57.7 million for this matter, which included $2.4 million of interest expense.

We are from time to time subject to claims and litigation arising in the ordinary course of business. We intend to defend vigorously any such litigation that may arise under all defenses that would be available to us. In the opinion of management, the ultimate outcome of proceedings of which management is aware, even if adverse to us, would not have a material adverse effect on our consolidated financial position or results of operations.

We record accruals for contingencies to the extent that we conclude their occurrence is probable and the related damages are estimable. These assessments involve complex judgments about future events and rely on estimates and assumptions. Although we believe we have substantial defenses in these matters, litigation is inherently unpredictable and we could in the future incur judgments or enter into settlements that could have a material adverse effect on our results of operations.

(12) Subsequent Events

Stock Repurchase Program

On April 20, 2009, we announced that our board of directors authorized a program to repurchase up to $100 million of the company’s common stock. Share repurchases, if any, will be funded by internal cash resources and will be made through open market purchases. The timing, volume and nature of share repurchases are subject to market prices and conditions, applicable securities laws and other factors, and are at the discretion of management. Share repurchases may be commenced, suspended or discontinued at any time without prior notice.

Property Purchase

On April 24, 2009, we completed the purchase of certain real property in Costa Mesa, California for an aggregate purchase price of $30.5 million. The acquisition included a 15 acre site with an approximately 180,000 square foot three-story building, including approximately 70,000 square feet of laboratory space.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other materials filed or to be filed by us with the Securities and Exchange Commission, or the SEC, as well as information included in oral statements or other written statements made or to be made by us, contain forward-looking statements within the meaning of federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the federal securities laws. These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections about our industry, our beliefs and assumptions. These risks and uncertainties include those described in “Part II, Other Information, Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Forward-looking statements, whether express or implied, are not guarantees of future performance and are subject to risks and uncertainties, which can cause actual results to differ materially from those currently anticipated, due to a number of factors, which include, but are not limited to:

•

the amount and timing of costs associated with the continuing global launch of Abraxane^®;

•

our ability to maintain and/or improve sales and earnings performance;

•

the actual results achieved in further clinical trials of Abraxane^® may or may not be consistent with the results achieved to date;

•

the market adoption of any new pharmaceutical products;

•

the difficulty in predicting the timing or outcome of product development efforts and regulatory approvals;

•

our ability and that of our suppliers to comply with laws, regulations and standards, and the application and interpretation of those laws, regulations and standards, that govern or affect the pharmaceutical industry, the non-compliance with which may delay or prevent the sale of their products;

•

the availability and price of acceptable raw materials and components from third-party suppliers;

•

any adverse outcome in litigation;

•

general economic, political and business conditions that adversely affect our company or our suppliers, distributors or customers;

•

changes in costs, including changes in labor costs, raw material prices or advertising and marketing expenses;

•

inventory reductions or fluctuations in buying patterns by wholesalers or distributors;

•

the impact on our products and revenues of patents and other proprietary rights licensed or owned by us, our competitors and other third parties;

•

the ability to successfully manufacture our products in an efficient, time-sensitive and cost effective manner;

•

the impact of recent legislative changes to the governmental reimbursement system; and

•

risks inherent in acquisitions, divestitures and spin-offs, including the capital resources required for acquisitions, business risks, legal risks and risks associated with the tax and accounting treatment of such transactions.

Forward-looking statements also include the assumptions underlying or relating to any of the foregoing or other such statements. When used in this report, the words “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict” and similar expressions are generally intended to identify forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, whether as a result of new information, changes in assumptions, future events or otherwise. Readers should carefully review the factors described in “Item 1A: Risk Factors” of Part II of this Quarterly Report on Form 10-Q and other documents we file from time to time with the Securities and Exchange Commission. Readers should understand that it is not possible to predict or identify all such factors. Consequently, readers should not consider any such list to be a complete set of all potential risks or uncertainties.

OVERVIEW

The following management’s discussion and analysis of financial condition and results of operations, or MD&A, is intended to assist the reader in understanding our company. The MD&A is provided as a supplement to, and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2008, including “Item 1: Business”; “Item 1A: Risk Factors”; “Item 6: Selected Financial Data”; and “Item 8: Financial Statements and Supplementary Data.”

Background

We are one of the few fully integrated global biotechnology companies, with a breakthrough marketed product (Abraxane^®), global ownership of our proprietary technology platform and clinical pipeline, and dedicated nanoparticle manufacturing capabilities for worldwide supply integrated with seasoned in-house capabilities, including discovery, clinical drug development, regulatory and sales and marketing.

We are dedicated to the discovery, development and delivery of next-generation therapeutics and core technologies that offer patients safer and more effective treatments for cancer and other critical illnesses. Our portfolio includes the world’s first and only protein-based nanometer-sized chemotherapeutic compound (Abraxane^®) which is based on our proprietary tumor targeting technology known as the nab^® technology platform. This nab^® technology platform is the first to exploit the tumor’s biology against itself, taking advantage of an albumin-specific, receptor-mediated transport system and allowing the delivery of a drug from the vascular space across the blood vessel wall to the underlying tumor tissue. Abraxane^® is the first clinical and commercial validation of our nab^® technology platform. From the discovery and research phase to development and commercialization, we are committed to rapidly enhancing our product pipeline and accelerating the delivery of breakthrough therapies that will transform the lives of patients who need them.

We own the worldwide rights to Abraxane^®, a next generation, nanometer-sized, solvent-free taxane that was approved by the U.S. Food and Drug Administration, or the FDA, in January 2005 for its initial indication in the treatment of metastatic breast cancer and launched in February 2005. We believe the successful launch of Abraxane ^® validates our nab^® tumor targeting technology, a novel biologically interactive (receptor-mediated) system to deliver chemotherapeutic agents in high concentrations preferentially to all tumors secreting a protein called SPARC, which attracts and binds to albumin.

Proposed 2009 Spin-Off

In January 2009, we announced that our board of directors approved a plan to spin-off a newly-formed subsidiary, Abraxis Health, Inc., as a new independent, stand-alone company holding our drug discovery, pilot manufacturing and development business. If the spin-off occurs, our stockholders would own (i) shares of Abraxis Health and (ii) shares of our common stock, and we would continue to operate our existing business, excluding the drug discovery, pilot manufacturing and development business to be held by Abraxis Health. In connection with the proposed spin-off, Abraxis Health would enter into several agreements with us related to, among other things, manufacturing, transition services, product development and research, tax allocations, clinical development and a number of ongoing commercial relationships.

Stock Repurchase Program

On April 20, 2009, we announced that our board of directors approved a program to repurchase up to $100 million of the company’s common stock. Share repurchases, if any, will be funded by internal cash resources and will be made through open market purchases. The timing, volume and nature of share repurchases are subject to market prices and conditions, applicable securities laws and other factors, and are at the discretion of management. Share repurchases may be commenced, suspended or discontinued at any time without prior notice.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2009 and March 31, 2008

The following table sets forth the results of our operations for the three months ended March 31, 2009 and 2008, and forms the basis for the following discussion of our operating activities:


	Three Months Ended March 31,						Change Favorable (Unfavorable) 2009 vs. 2008
	2009			2008			$			%
	(unaudited, in thousands, except per share data)
Consolidated statements of operations data:
Revenue:
Abraxane	$	70,618		$	79,932		$	(9,314	)	(12	)%
Other		1,964			2,210			(246	)	(11	)%

Net revenue		72,582			82,142			(9,560	)	(12	)%
Cost of sales		9,127			8,607			(520	)	(6	)%

Gross profit		63,455			73,535			(10,080	)	(14	)%
Operating expenses:
Research and development		34,977			20,822			(14,155	)	(68	)%
Selling, general and administrative		42,503			45,300			2,797		6	%
Amortization of intangible assets		9,950			9,653			(297	)	(3	)%
Equity in net (income) loss of Drug Source Co., LLC		(1,031	)		248			1,279		516	%

Total operating expenses		86,399			76,023			(10,376	)	(14	)%

Loss from operations		(22,944	)		(2,488	)		(20,456	)	(822	)%
Interest income		1,146			6,535			(5,389	)	(82	)%
Other (expense) income		(1,440	)		287			(1,727	)	(602	)%

(Loss) income before income taxes		(23,238	)		4,334			(27,572	)	(636	)%
Provision for income taxes		63			25			(38	)	(152	)%

Net (loss) income	$	(23,301	)	$	4,309		$	(27,610	)	(641	)%

Net loss attributable to non controlling interest		(380	)		—			(380	)	—

Net (loss) income attributable to controlling interest	$	(22,921	)	$	4,309		$	(27,230	)	(632	)%

Basic and diluted net (loss) income per common share	$	(0.57	)	$	0.11
Weighted-average common shares outstanding:
Basic		40,081			39,997
Diluted		40,081			40,196

Net Revenue

Net revenue for the three months ended March 31, 2009 decreased by $9.5 million, or 11.6% to $72.6 million as compared to $82.1 million for the same period in 2008. Included in net revenue for the three months ended March 31, 2009 was $0.8 million of recognized deferred revenue as compared to $10.2 million in the prior year period.

Abraxane revenue for the three months ended March 31, 2009 decreased $9.3 million to $70.6 million compared to $79.9 million for the same period of 2008. The decrease was primarily due to a decrease in deferred revenue of $9.1 million related to the reacquisition of Abraxane marketing rights in the U.S. effective in January 2009. Excluding the recognition of deferred revenue, total Abraxane revenue for the three months ended March 31, 2009 decreased by $0.2 million, or 0.3%, to $70.6 million as compared to $70.8 million for the previous year’s comparable period.

Gross Profit

Gross profit for the three months ended March 31, 2009 was $63.5 million, or 87.4% of net revenue, as compared to $73.5 million, or 89.5% of net revenue for the same period of 2008. Excluding recognized deferred revenue, gross profit as a percentage of net revenue for the three months ended March 31, 2009 was 87.3% as compared to 88.2% in 2008.

Research and Development

Research and development expense for the three months ended March 31, 2009 increased $14.2 million, or 68.0%, to $35.0 million as compared to $20.8 million for the same period in 2008. The increase related primarily to increased spending in clinical studies and investments in research and development projects.

Selling, General and Administrative

Selling, general and administrative expense for the three months ended March 31, 2009 decreased $2.8 million to $42.5 million, or 58.6% of net revenue, from $45.3 million, or 55.1% of net revenue, for the same period in 2008. The reacquisition of Abraxane marketing rights in the U.S. yielded savings due to the elimination of costs associated with the co-promotion agreement. Partially offsetting this reduction was increased spending related to the international launch of Abraxane, increased spending on information systems infrastructure and an increase in sales and marketing costs.

Amortization of Intangible Assets

Amortization of intangible assets for the three months ended March 31, 2009 was $9.9 million compared to $9.7 million for the same period in the prior year.

Equity Income in Drug Source Company, LLC

Income from Drug Source Company in the first quarter of 2009 was higher than the corresponding period in 2008 due to sales of higher margin products and lower operating costs.

Other Non-Operating Items

Interest income consisted primarily of interest earned on invested cash. The decrease in interest income for the three months ended March 31, 2009 of $5.4 million was due to lower interest rates and lower investment balances in 2009 as compared to 2008. For the three months ended March 31, 2009, the average yield on cash investments was 1.4%.

Other expense increased $1.7 million for the three months ended March 31, 2009 primarily due to $2.9 million of other than temporary loss on marketable securities offset by $0.8 million gain on sale of marketable securities and $0.4 million increase in fair value of derivatives.

Provision for Income Taxes

Our effective tax rate for the three months ended March 31, 2009 was approximately 0.3%. The rate is computed based on special state tax rules that were used to compute our taxable base on our gross receipts in certain states. The effective tax rate for the three months ended March 31, 2009 is different from the statutory rate primarily as a result of the application of a valuation allowance against the net income tax benefit for the year.

LIQUIDITY AND CAPITAL RESOURCES

Overview

The following table summarizes key elements of our financial position and sources and (uses) of cash and cash equivalents as follows:


	March 31, 2009			December 31, 2008
	(unaudited)
	(in thousands)
Summary Financial Position
Cash and cash equivalents	$	302,798		$	306,390
Cash collateral for reacquisition of agreement		—			300,631
Working capital		359,149			386,148
Total assets		1,131,000			1,438,584
Total stockholders’ equity		908,833			929,472

	Three Months Ended March 31,
	2009			2008
	(unaudited, in thousands)
Summary of Sources and (Uses) of Cash and Cash Equivalents:
Operating activities	$	9,367		$	(583	)
Purchases of property, plant and equipment		(18,963	)		(1,859	)
Purchases of investments and marketable securities		—			(4,492	)
Proceeds from sale of subsidiary		2,046			—
Proceeds from sale of marketable securities		3,676			—
Financing activities		269			28

Sources and Uses of Cash

Operating Activities

Net cash provided by operating activities was $9.4 million for the three months ended March 31, 2009 compared to net cash used in operating activities of $0.6 million for the same period in 2008. The increase in cash provided by operations of $10.0 million was primarily due to a decrease, in excess of accruals, for cash collateral for reacquisition of agreement, and a decrease in related party receivable, which are offset by an increase in accounts receivable and a net loss for the three months ended March 31, 2009.

Investing Activities

Our investing activities have included capital expenditures necessary to expand and maintain our manufacturing capabilities and infrastructure and to acquire various intellectual property rights.

Net cash used for the acquisition of property, plant and equipment for the three months ended March 31, 2009 totaled $19.0 million. The majority of this amount related to expenditures for the modernization of our Melrose Park, Illinois and Phoenix, Arizona manufacturing facilities. For the three months ended March 31, 2009, we had proceeds from the sale of marketable securities of $3.7 million. Additionally, in 2009, we received net proceeds of $2.0 million from the sale of our subsidiary in Barbengo, Switzerland.

Net cash used for acquisition of property, plant and equipment for the three months ended March 31, 2008 was $1.9 million. Additionally, we purchased $4.5 million in marketable securities and other investments during the first quarter of 2008.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2009 represented cash received upon the exercise of stock options.

Sources of Financing and Capital Requirements

We have historically funded our research and development activities through product license fees, including milestones, and borrowings, whereas our primary sources of liquidity have been cash flow from operations and funding from Old Abraxis with which we had inter-company transactions prior to the separation. We received a $700 million cash contribution in connection with our separation from APP Pharmaceuticals, Inc. in November 2007.

Capital Requirements

Our future capital requirements will depend on numerous factors, including:

•

expansion of product sales into international markets;

•

working capital requirements and production, sales, marketing and development costs required to support Abraxane^®;

•

research and development, including clinical trials, spending to develop further product candidates and ongoing studies;

•

the need for manufacturing expansion and improvement;

•

the allocation of cash resources between us and Abraxis Health if the proposed spin-off occurs;

•

the requirements of any potential future acquisitions, asset purchases or equity investments; and

•

the amount of cash generated by operations, including potential milestone and license revenue.

We believe our cash and cash equivalents on hand, together with any cash generated from operations, will be sufficient to finance our operations for at least the next twelve months. In the event we engage in future acquisitions or significant capital projects or significantly reduce our available cash resources in connection with the proposed spin-off of Abraxis Health, we may have to raise additional capital through additional borrowings or the issuance of debt or equity securities.

RECENT ACCOUNTING PRONOUNCEMENTS

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks associated with changes in interest rates and foreign currency exchange rates. Interest rate changes affect primarily our investments in marketable securities and our debt obligations. Changes in foreign currency exchange rates can affect our operations outside of the United States.

Foreign Currency Risk: We have operations in Canada, Europe, South Africa and other parts of the world; however, both revenue and expenses of those operations are typically denominated in the currency of the country of operations, providing a partial hedge. Nonetheless, these foreign operations are presented in our consolidated and combined financial statements in U.S. dollars and can be impacted by foreign currency exchange fluctuations through both (i) translation risk, which is the risk that the financial statements for a particular period or as of a certain date depend on the prevailing exchange rates of the various currencies against the U.S. dollar, and (ii) transaction risk, which is the risk that the currency impact of transactions denominated in currencies other than the functional currency may vary according to currency fluctuations.

With respect to translation risk, even though there may be fluctuations of currencies against the U.S. dollar, which may impact comparisons with prior periods, the translation impact is included in accumulated other comprehensive income, a component of stockholders’ equity, and does not affect the underlying results of operations. Gains and losses related to transactions denominated in a currency other than the functional currency of the countries in which we operate are included in the consolidated statements of operations. As of March 31, 2009, there were no outstanding hedge arrangements.

Investment Risk: The primary objectives of our investment program are the safety and preservation of principal, maintaining liquidity to meet operating and projected cash flow requirements, and maximizing return on invested funds, while diversifying risk. Some of the securities that we invest in may have interest rate risk. This means that a change in prevailing interest rates may cause the fair value of the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the prevailing rate and the prevailing rate later rises, the fair value of the principal amount of our investment will probably decline.

To minimize this risk, we maintain an investment portfolio of cash equivalents and short-term investments consisting of high credit quality securities, including money market funds, commercial paper, government and non-government debt securities. We do not use derivative financial instruments.

We are also exposed to equity price risks on marketable equity securities included in our portfolio of investments entered into for the promotion of business and strategic objectives. These investments are generally in small capitalization stocks in the biotechnology industry sector. We regularly review the market prices of these investments for impairment purposes. For the three months ended March 31, 2009 and 2008, we realized other than temporary losses of $2.9 million and $0, respectively, on available for sale securities whose values, based on market quotation, had declined below their carrying value.

Interest Rate Risk: As of March 31, 2009, we had no debt obligations outstanding. Consequently, we have minimal current exposure to changes in interest rates on borrowings.

ITEM 4.

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures, as such term is defined under Exchange Act Rules 13a-15(e) and 15d-15(e), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance we necessarily are required to apply judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the quarterly period covered by this report. We relied in part on the system of internal controls over financial reporting performed by APP on behalf of our company in accordance with the terms and conditions of the transition services agreement executed between the parties in connection with the separation. Based on their evaluation and subject to the foregoing, management has concluded that our disclosure controls and procedures were effective as of March 31, 2009.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

ITEM 1A.

RISK FACTORS

You should carefully consider the risks described below before investing in our publicly traded securities. The risks described below are not the only ones facing us. Our business is also subject to the risks that affect many other companies, such as competition and, general economic conditions. Additional risks not currently known to us or that we currently believe are immaterial also may impair our business operations and our liquidity.

Risks Related to our Business and Industry

We are highly dependent upon the strong market acceptance of Abraxane^®.

Our future profitability is highly dependent upon the strong market acceptance of Abraxane^®. For the year ended December 31, 2008 and three months ended March 31, 2009 and 2008, total Abraxane^® revenue was $335.6 million, $70.6 million and $79.9 million, respectively. Because Abraxane^® is our only approved product, Abraxane^® revenue represented approximately 97% of our revenues for the year ended December 31, 2008, and the three months ended March 31, 2009 and 2008. We anticipate that sales of Abraxane^® will remain a substantial portion of our total revenue over the next several years. However, a number of pharmaceutical companies are working to develop alternative formulations of paclitaxel and other cancer drugs and therapies, any of which may compete directly or indirectly with Abraxane^® and which might adversely affect the commercial success of Abraxane^®.

Abraxane^® could lose market share or revenue due to numerous factors, many of which are beyond our control, including:

•

lower prices offered on similar products by other manufacturers, including generic forms of Taxol;

•

substitute or alternative products or therapies;

•

development by others of new pharmaceutical products or treatments that are more effective than Abraxane^®;

•

introduction of other generic equivalents or products which may be therapeutically interchanged with Abraxane^®;

•

interruptions in manufacturing or supply;

•

changes in the prescribing practices of physicians;

•

changes in third-party reimbursement practices; and

•

migration of key customers to other manufacturers or sellers.

In addition, we will continue to make a significant investment in Abraxane^®, including costs associated with conducting clinical trials and obtaining necessary regulatory approvals for the use of Abraxane^® in other indications and settings and in other jurisdictions, expansion of our marketing, sales and manufacturing staff, the acquisition of paclitaxel raw material, expansion of manufacturing facilities and the manufacture of finished product. The success of Abraxane^® in the Phase III trial for metastatic breast cancer and other clinical trials may not be representative of future clinical trial results for Abraxane^® with respect to other clinical indications. The results from clinical, pre-clinical studies and early clinical trials conducted to date may not be predictive of results to be obtained in later clinical trials, including those ongoing at present. Further, the commencement and completion of clinical trials may be delayed by many factors that are beyond our control, including:

•

slower than anticipated patient enrollment;

•

difficulty in finding and retaining patients fitting the trial profile or protocols; and

•

adverse events occurring during the clinical trials.

Proprietary product development efforts may not result in commercial products.

We intend to maintain an aggressive research and development program for proprietary pharmaceutical products. Successful product development in the biotechnology industry is highly uncertain, and statistically very few research and development projects produce a commercial product. Product candidates that appear promising in the early phases of development, such as in early stage human clinical trials, may fail to reach the market for a number of reasons, including:

•

the product candidate did not demonstrate acceptable clinical trial results even though it demonstrated positive pre-clinical trial results;

•

the product candidate was not effective in treating a specified condition or illness;

•

the product candidate had harmful side effects in humans or animals;

•

the necessary regulatory bodies, such as the FDA, did not approve a product candidate for an intended use;

•

the product candidate was not economical to manufacture and commercialize;

•

other companies or people have or may have proprietary rights to a product candidate, such as patent rights, and will not let the product candidate be sold on reasonable terms, or at all; or

•

the product candidate is not cost effective in light of existing therapeutics.

We may be required to perform additional clinical trials or change the labeling of our products if side effects or manufacturing problems are identified after our products are on the market.

If side effects are identified after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and product recalls, reformulation of products, additional clinical trials, changes in labeling of products, and changes to or re-approvals of our manufacturing facilities may be required, any of which could have a material adverse effect on sales of the affected products and on our business and results of operations.

After products are approved for commercial use, we or regulatory bodies could decide that changes to the product labeling are required. Label changes may be necessary for a number of reasons, including the identification of actual or theoretical safety or efficacy concerns by regulatory agencies or the discovery of significant problems with a similar product that implicates an entire class of products. Any significant concerns raised about the safety or efficacy of our products could also result in the need to recall products, reformulate those products, to conduct additional clinical trials, to make changes to the manufacturing processes, or to seek re-approval of the manufacturing facilities. Significant concerns about the safety and effectiveness of a product could ultimately lead to the revocation of our marketing approval. The revision of product labeling or the regulatory actions described above could be required even if there is no clearly established connection between the product and the safety or efficacy concerns that have been raised. The revision of product labeling or the regulatory actions described above could have a material adverse effect on sales of the affected products and on our business and results of operations.

If we or our suppliers are unable to comply with ongoing and changing regulatory standards, sales of our products could be delayed or prevented.

Virtually all aspects of our business, including the development, testing, manufacturing, processing, quality, safety, efficacy, packaging, labeling, record-keeping, distribution, storage and advertising and promotion of our products and disposal of waste products arising from these activities, are subject to extensive regulation by federal, state and local governmental authorities in the United States, including the FDA and the Department of Health and Humans Services Office of Inspector General (OIG). Our business is also subject to regulation in foreign countries. Compliance with these regulations is costly and time-consuming.

Our manufacturing facilities and procedures and those of our suppliers are subject to ongoing regulation, including periodic inspection by the FDA and foreign regulatory agencies. For example, manufacturers of pharmaceutical products must comply with detailed regulations governing current good manufacturing practices, including requirements relating to quality control and quality assurance. We must spend funds, time and effort in the areas of production, safety, quality control and quality assurance to ensure compliance with these regulations. We cannot assure that our manufacturing facilities or those of our suppliers will not be subject to regulatory action in the future.

Our products generally must receive appropriate regulatory clearance before they can be sold in a particular country, including the United States. We may encounter delays in the introduction of a product as a result of, among other things, insufficient or incomplete submissions to the FDA for approval of a product, objections by another company with respect to our submissions for approval, new patents by other companies, patent challenges by other companies which result in a 180-day exclusivity period, and changes in regulatory policy during the period of product development or during the regulatory approval process. The FDA has the authority to revoke drug approvals previously granted and remove from the market previously approved products for various reasons, including issues related to current good manufacturing practices for that particular product or in general. We may be subject from time to time to product recalls initiated by us or by the FDA. Delays in obtaining regulatory approvals, the revocation of a prior approval, or product recalls could impose significant costs on us and adversely affect our ability to generate revenue.

Our inability or the inability of our suppliers to comply with applicable FDA and other regulatory requirements can result in, among other things, warning letters, fines, consent decrees restricting or suspending our manufacturing operations, delay of approvals for new products, injunctions, civil penalties, recall or seizure of products, total or partial suspension of sales and criminal prosecution. Any of these or other regulatory actions could materially adversely affect our business and financial condition.

We depend on third parties to supply raw materials and other components and may not be able to obtain sufficient quantities of these materials, which will limit our ability to manufacture our products on a timely basis and harm our operating results.

The manufacture of Abraxane^® requires, and our product candidates will require, raw materials and other components that must meet stringent FDA requirements. Some of these raw materials and other components are available only from a limited number of sources. We have entered into agreements with Indena SpA and ScinoPharm Taiwan, Ltd. to supply us with paclitaxel, the active pharmaceutical ingredient in Abraxane^®. One of the suppliers is currently in the process of being qualified by the appropriate regulatory authorities. We believe there currently are more than 15 potential commercial suppliers of paclitaxel raw material. We have not historically experienced any paclitaxel supply shortages. Additionally, we maintain a safety stock supply of paclitaxel to mitigate any supply disruption. Our regulatory approvals for each particular product denote the raw materials and components, and the suppliers for such materials, we may use for that product. Obtaining approval to change, substitute or add a raw material or component, or the supplier of a raw material or component, can be time consuming and expensive, as testing and regulatory approval are necessary. If our suppliers are unable to deliver sufficient quantities of these materials on a timely basis or we encounter difficulties in our relationships with these suppliers, the manufacture and sale of our products may be disrupted, and our business, operating results and reputation could be adversely affected.

The injectable pharmaceutical products markets are highly competitive, and if we are unable to compete successfully, our revenue will decline and our business will be harmed.

The markets for injectable pharmaceutical products are highly competitive, rapidly changing and undergoing consolidation. Abraxane^® competes, directly or indirectly, with the primary taxanes in the market place, including Bristol-Myers Squibb’s Taxol^® and its generic equivalents, Sanofi-Aventis’ Taxotere^® and other cancer therapies. Many pharmaceutical companies have developed and are marketing, or are developing, alternative formulations of paclitaxel and other cancer therapies that may compete directly or indirectly with Abraxane^®. Many of our competitors have significantly greater research and development, financial, sales and marketing, manufacturing, regulatory and other resources than us. As a result, they may be able to devote greater resources to the development, manufacture, marketing or sale of their products, receive greater resources and support for their products, initiate or withstand substantial price competition, more readily take advantage of acquisition or other opportunities, or otherwise more successfully market their products.

Any reduction in demand for our products could lead to a decrease in prices, fewer customer orders, reduced revenues, reduced margins, reduced levels of profitability, or loss of market share. These competitive pressures could adversely affect our business and operating results.

Other companies may claim that we infringe on their intellectual property or proprietary rights, which could cause us to incur significant expenses or prevent us from selling our products.

Our success depends in part on our ability to operate without infringing the patents and proprietary rights of third parties. The manufacture, use and sale of new products with conflicting patent rights have been subject to substantial litigation in the pharmaceutical industry. These lawsuits relate to the validity and infringement of patents or proprietary rights of third parties. A number of pharmaceutical companies, biotechnology companies, universities and research institutions may have filed patent applications or may have been granted patents that cover aspects of our products or our licensors’ products, product candidates or other technologies.

Future or existing patents issued to third parties may contain claims that conflict with our products. We may be subject to infringement claims from time to time in the ordinary course of our business, and third parties could assert infringement claims against us in the future with respect to Abraxane^®, products that we may develop or products that we may license. We are in the process of appealing the jury ruling in the patent infringement lawsuit with Élan Pharmaceutical Int’l Ltd. See “Item 1—Legal Proceedings” above. Litigation or interference proceedings could force us to:

•

stop or delay selling, manufacturing or using products that incorporate or are made using the challenged intellectual property;

•

pay damages; or

•

enter into licensing or royalty agreements that may not be available on acceptable terms, if at all.

Any litigation or interference proceedings, regardless of their outcome, would likely delay the regulatory approval process, be costly and require significant time and attention of key management and technical personnel.

Our inability to protect our intellectual property rights in the United States and foreign countries could limit our ability to manufacture or sell our products.

We rely on trade secrets, unpatented proprietary know-how, continuing technological innovation and patent protection to preserve our competitive position. We have over 100 issued U.S. and foreign patents, including patents relating to Abraxane^®,and the technology surrounding Abraxane^®. The issued patents covering Abraxane^®, and methods of use and preparation of Abraxane^®, currently expire through 2018, but we have additional pending U.S. and foreign patent applications pending that could extend the expiration dates. Our patents and those for which we have licensed or will license rights, including for Abraxane^®, may be challenged, invalidated, infringed or circumvented, and the rights granted in those patents may not provide proprietary protection or competitive advantages to us. We and our licensors may not be able to develop patentable products. Even if patent claims are allowed, the claims may not issue, or in the event of issuance, may not be sufficient to protect the technology owned by or licensed to us. Third-party patents could reduce the coverage of the patents licensed, or that may be licensed to or owned by us. If patents containing competitive or conflicting claims are issued to third parties, we may be prevented from commercializing the products covered by such patents, or may be required to obtain or develop alternate technology. In addition, other parties may duplicate, design around or independently develop similar or alternative technologies.

We may not be able to prevent third parties from infringing or using our intellectual property. We generally control and limit access to, and the distribution of, our product documentation and other proprietary information. Despite our efforts to protect this proprietary information, however, unauthorized parties may obtain and use information that we regard as proprietary. Other parties may independently develop similar know-how or may even obtain access to these technologies.

The laws of some foreign countries do not protect proprietary information to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary information in these foreign countries.

The U.S. Patent and Trademark Office and the courts have not established a consistent policy regarding the breadth of claims allowed in pharmaceutical patents. The allowance of broader claims may increase the incidence and cost of patent interference proceedings and the risk of infringement litigation. On the other hand, the allowance of narrower claims may limit the value of our proprietary rights.

The strategy to license rights to or acquire and commercialize proprietary, biological injectable or other specialty injectable products may not be successful, and we may never receive any return on our investment in these products.

We may license rights to or acquire products or technologies from third parties. Other companies, including those with substantially greater financial and sales and marketing resources, will compete with us to license rights to or acquire these products and technologies. We may not be able to license rights to or acquire these proprietary or other products or technologies on acceptable terms, if at all. Even if we obtain rights to a pharmaceutical product and commit to payment terms, including, in some cases, significant up-front license payments, we may not be able to generate product sales sufficient to create a profit or otherwise avoid a loss.

A product candidate may fail to result in a commercially successful drug for other reasons, including the possibility that the product candidate may:

•

be found during clinical trials to be unsafe or ineffective;

•

fail to receive necessary regulatory approvals;

•

be difficult or uneconomical to produce in commercial quantities;

•

be precluded from commercialization by proprietary rights of third parties; or

•

fail to achieve market acceptance.

The marketing strategy, distribution channels and levels of competition with respect to any licensed or acquired product may be different from those of Abraxane^®, and we may not be able to compete favorably in any new product category.

We may become subject to federal false claims or other similar litigation brought by private individuals and the government.

The Federal False Claims Act allows persons meeting specified requirements to bring suit alleging false or fraudulent Medicare or Medicaid claims and to share in any amounts paid to the government in fines or settlement. These suits, known as qui tam actions, have increased significantly in recent years and have increased the risk that a health care company will have to defend a false claim action, pay fines and/or be excluded from Medicare and Medicaid programs. Federal false claims litigation can lead to civil monetary penalties, criminal fines and imprisonment and/or exclusion from participation in Medicare, Medicaid and other federally funded health programs. Other alternate theories of liability may also be available to private parties seeking redress for such claims. A number of parties have brought claims against numerous pharmaceutical manufacturers, and we cannot be certain that such claims will not be brought against us, or if they are brought, that such claims might not be successful.

We may need to change our business practices to comply with changes to, or may be subject to charges under, the fraud and abuse laws.

We are subject to various federal and state laws pertaining to health care fraud and abuse, including the federal Anti-Kickback Statute and its various state analogues, the federal False Claims Act and marketing and pricing laws. Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, imprisonment and exclusion from participation in federal and state health care programs such as Medicare and Medicaid. We may have to change our advertising and promotional business practices, or our existing business practices could be challenged as unlawful due to changes in laws, regulations or rules or due to administrative or judicial findings, which could materially adversely affect our business.

We face uncertainty related to pricing and reimbursement and health care reform.

In both domestic and foreign markets, sales of our products will depend in part on the availability of reimbursement from third-party payors such as government health administration authorities, private health insurers, health maintenance organizations and other health care-related organizations. Effective January 1, 2006, we received a unique reimbursement “J” code for Abraxane^® from the Centers for Medicare and Medicaid Services. That code allows providers to bill Medicare for the use of Abraxane^®. We believe that most major insurers reimburse providers for Abraxane^® use consistent with the FDA-approved indication, which we believe is consistent with the reimbursement practices of major insurers for other drugs containing paclitaxel for the same indication. However, reimbursement by such payors is presently undergoing reform, and there is significant uncertainty at this time how this will affect sales of certain pharmaceutical products. There is possible U.S. legislation or regulatory action affecting, among other things, pharmaceutical pricing and reimbursement, including under Medicaid and Medicare, the importation of prescription drugs that are marketed outside the U.S. and sold at prices that are regulated by governments of various foreign countries.

Medicare, Medicaid and other governmental reimbursement legislation or programs govern drug coverage and reimbursement levels in the United States. Federal law requires all pharmaceutical manufacturers to rebate a percentage of their revenue arising from Medicaid-reimbursed drug sales to individual states. For Abraxane^® and any other proprietary products, which are marketed and sold under new drug applications, manufacturers are required to rebate the greater of (a) 15.1% of the average manufacturer price or (b) the difference between the average manufacturer price and the lowest manufacturer price for products sold during a specified period.

Both the federal and state governments in the United States and foreign governments continue to propose and pass new legislation, rules and regulations designed to contain or reduce the cost of health care. Existing regulations that affect the price of pharmaceutical and other medical products may also change before any of our products are approved for marketing. Cost control initiatives could decrease the price that we receive for any product we develop in the future. In addition, third-party payers are increasingly challenging the price and cost-effectiveness of medical products and services and litigation has been filed against a number of pharmaceutical companies in relation to these issues. Additionally, significant uncertainty exists as to the reimbursement status of newly approved injectable pharmaceutical products. Our products may not be considered cost effective or adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an adequate return on our investment.

State pharmaceutical marketing compliance and reporting requirements may expose us to regulatory and legal action by state governments or other government authorities.

In recent years, several states, including California, Vermont, Maine, Minnesota, Massachusetts, New Mexico and West Virginia, in addition to the District of Columbia, have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs and file periodic reports on sales, marketing, pricing and other activities. Similar legislation is being considered in other states. Many of these requirements are new and uncertain, and available guidance is limited. We are continuing to assess our compliance with these state laws. Unless we are in full compliance with these laws, we could face enforcement action and fines and other penalties and could receive adverse publicity, all of which could harm our business.

We may be required to defend lawsuits or pay damages for product liability claims.

Product liability is a major risk in testing and marketing biotechnology and pharmaceutical products. We may face substantial product liability exposure in human clinical trials and for products that we sell after regulatory approval. We maintain insurance coverage for product liability claims in the aggregate amount of $100 million, including primary and excess coverages, which we believe is reasonably adequate coverage. Product liability claims, regardless of their merits, could exceed policy limits, divert management’s attention and adversely affect our reputation and the demand for these products.

We depend heavily on the principal members of our management and research and development teams, the loss of whom could harm our business.

We depend heavily on the principal members of our management and research and development teams, including Dr. Patrick Soon-Shiong, Executive Chairman, Leon O. Moulder, Chief Executive Officer and President, David O’Toole, Chief Financial Officer, Bruce Wendel, Executive Vice President of Corporate Operations and Development, Dr. Edward Geehr, Executive Vice President of Operations, Neil P. Desai, Senior Vice President of Global Research and Development, Lex H.T. Van Der Ploeg, Senior Vice President of Integrative Medicine and Translational Science, and Nicholas Everett, Chief Scientist, Drug Discovery. Each of the members of the executive management team is employed “at will.” The loss of the services of any member of the executive management team may significantly delay or prevent the achievement of product development or business objectives.

To be successful, we must attract, retain and motivate key employees, and the inability to do so could seriously harm our business and operations.

To be successful, we must attract, retain and motivate executives and other key employees. We face competition for qualified scientific, technical and other personnel, which may adversely affect our ability to attract and retain key personnel. We also must continue to attract and motivate employees and keep them focused on our strategies and goals.

If we are unable to integrate successfully potential future acquisitions, our business may be harmed.

As part of our business strategy and growth plan, we may acquire businesses, technologies or products that we believe will complement our business. The process of integrating an acquired business, technology or product may result in unforeseen operating difficulties and expenditures and may require significant management attention that would otherwise be available for ongoing development of our existing business. In addition, we may not be able to maintain the levels of operating efficiency that any acquired company achieved or might have achieved separately. Successful integration of the companies that we may acquire will depend upon our ability to, among other things, eliminate redundancies and excess costs. As a result of difficulties associated with combining operations, we may not be able to achieve cost savings and other benefits that the company might hope to achieve with acquisitions. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities or have an undesirable impact on our financial statements.

We are subject to risks associated with international operations, which could harm both our domestic and international operations.

As part of our business strategy and growth plan, we plan to expand our international sales as we obtain regulatory approvals to market our Abraxane and other product candidates in foreign countries, including countries in the European Union and Asia. Expansion of our international operations could impose substantial burdens on our resources, divert management’s attention from domestic operations and otherwise harm our business. In addition, international operations are subject to risks, including:

•

regulatory requirements of differing nations;

•

inadequate protection of intellectual property;

•

difficulties and costs associated with complying with a wide variety of complex domestic and foreign laws and treaties;

•

legal uncertainties regarding, and timing delays associated with, tariffs, export licenses and other trade barriers; and

•

currency fluctuations.

Any of these or other factors could adversely affect our ability to compete in international markets and our operating results.

Risks Relating to Our Separation from Old Abraxis

We have limited history operating as an independent company, and we may be unable to make the changes necessary to operate successfully as an independent company.

Prior to the separation, our business was operated by Old Abraxis as part of its broader corporate organization rather than as a stand-alone company. Old Abraxis assisted us by providing financing and corporate functions such as human resources, information technology, internal audit, tax and accounting functions. APP has no obligation to provide assistance to us other than certain interim services. These interim services include, among other things, manufacturing services, information technology services, accounting and finance services and human resources support. Because our business has not recently been operated as an independent company, we cannot assure you that we will be able to successfully implement the changes necessary to operate independently or that we will not incur additional costs operating independently that would have a negative effect on our business, results of operations and financial condition.

In addition, prior to the separation, our business was able to leverage Old Abraxis’ size, relationships and purchasing power in procuring goods, services and technology (including office supplies, computer software licenses and equipment), travel and all employee benefits plans for which per employee cost was based on number of lives covered. Our separation from Old Abraxis has had a significant impact on the per employee cost for certain coverage such as health care and disability.

We are in the process of creating our own, or engaging third parties to provide, systems and business functions to replace many of the systems and business functions Old Abraxis provided to us. We will also need to make significant investments to develop our independent ability to operate without Old Abraxis’ existing operational and administrative infrastructure. These initiatives will be costly to implement, and we may not be successful in implementing these systems and business functions.

Our historical financial information may not be representative of our future results as an independent company.

The historical financial information for periods prior to our separation on November 13, 2007 may not reflect what our results of operations, financial position and cash flows would have been had we been an independent company for those periods. This is primarily because:

•

our historical and financial information reflects allocations for services historically provided to us by Old Abraxis, which allocations may not reflect the costs we would have incur for similar services as an independent company; and

•

our historical and financial information does not reflect changes that we incurred or expect to incur as a result of our separation from Old Abraxis, including changes in the cost structure, personnel needs, financing and operations of the contributed business as a result of the separation from Old Abraxis and from reduced economies of scale.

In addition, we are now responsible for the additional costs associated with being an independent public company, including costs related to corporate governance and listed and registered securities. Therefore, our historical financial statements before the separation on November 13, 2007 may not be indicative of our current or future performance as an independent company.

Our separation from Old Abraxis may present significant challenges.

There is a significant degree of difficulty and management distraction inherent in having separated from Old Abraxis. These difficulties include:

•

preserving customer, supplier and other important relationships;

•

the potential difficulty in retaining key officers and personnel; and

•

separating corporate infrastructure, including systems, insurance, accounting, legal, finance, tax and human resources.

We anticipate that it generally will take up to 24 months from the separation date to completely separate from Old Abraxis, with the exception of manufacturing activities which APP will undertake for us and certain lease arrangements, which will last for a period of four or five years. Our separation from Old Abraxis may not be successfully or cost-effectively completed. The failure to do so could have an adverse effect on our business, financial condition and results of operations.

The process of separating operations could cause an interruption of, or loss of momentum in, the activities of one or more of our businesses. Members of our senior management may be required to devote considerable amounts of time to this separation process, which will decrease the time they will have to manage our business, service existing customers, attract new customers and develop new products or strategies. If our senior management is not able to manage effectively the separation process, or if any significant business activities are interrupted as a result of the separation process, our business could suffer.

We may be required to indemnify APP and may not be able to collect on indemnification rights from APP.

Under the terms of the separation and distribution agreement, we have agreed to indemnify APP from and after the distribution with respect to all liabilities of Old Abraxis not related to its hospital-based products business and the use by APP of any trademarks or other source identifiers owned by us. Similarly, APP has agreed to indemnify us from and after the distribution with respect to all liabilities of Old Abraxis related to its hospital-based products business and the use by us of any trademarks or other source identifiers owned by APP.

Under the terms of the tax allocation agreement, we agreed to indemnify APP against all tax liabilities to the extent they relate to the proprietary products business, and APP agreed to indemnify us against all tax liabilities to the extent they relate to the hospital-based products business. The tax allocation agreement also generally allocates between us and APP any liability for taxes that may arise in connection with the distribution. In September, 2008, APP entered into a merger agreement with Fresenius Kabi, a subsidiary of Fresenius SE. Pursuant to the merger agreement, Fresenius acquired all of the outstanding common stock of APP. Pursuant to the tax allocation agreement and the merger agreement, APP received a tax opinion, in form and substance reasonably acceptable to us, that the acquisition should not affect the qualification of the distribution under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code and the nonrecognition of gain to APP in the distribution. Under the terms of the tax allocation agreement, we are generally liable for, and are required to indemnify APP against, any tax liability arising as a result of the distribution failing to qualify for tax-free treatment unless, notwithstanding such tax opinion, such tax liability is imposed as a result of an acquisition of APP, including the acquisition of APP by Fresenius, or certain other specified acts of APP.

Under the terms of the manufacturing agreement, we have agreed to indemnify APP from any damages resulting from a third-party claim caused by or alleged to be caused by (i) our failure to perform our obligations under the manufacturing agreement; (ii) any product liability claim arising from the negligence, fraud or intentional misconduct of us or any of our affiliates or any product liability claim arising from our manufacturing obligations (or any failure or deficiency in our manufacturing obligations) under the manufacturing agreement; (iii) any claim that the manufacture, use or sale of Abraxane^® or our pipeline products infringes a patent or any other proprietary right of a third party; or (iv) any recall, product liability claim or other third-party claim not arising from the gross negligence or bad faith of, or intentional misconduct or intentional breach of the manufacturing agreement by APP, by reason of the $100 million limitation of liability described below. We have also agreed to indemnify APP for liabilities that it becomes subject to as a result of its activities under the manufacturing agreement and for which it is not responsible under the terms of the manufacturing agreement. APP has agreed to indemnify us from any damages resulting from a third-party claim caused by or alleged to be caused by (i) APP’s gross negligence, bad faith, intentional misconduct or intentional failure to perform its obligations under the manufacturing agreement; or (ii) any product liability claim arising from the gross negligence or bad faith of, or intentional misconduct or intentional breach of the manufacturing agreement by APP. APP generally will not have any liability for monetary damages to us or third parties in connection with the manufacturing agreement for damages in excess of $100 million in the aggregate.

There are no time limits on when an indemnification claim must be brought and no other monetary limits on the amount of indemnification that may be provided. These indemnification obligations could be significant. Our ability to satisfy any of these indemnification obligations will depend upon the future financial strength of our company. We cannot determine whether we will have to indemnify APP for any substantial obligations. We also cannot assure you that, if APP becomes obligated to indemnify us for any substantial obligations, APP will have the ability to satisfy those obligations. Any indemnification payment by us, or any failure by APP to satisfy its indemnification obligations, could have a material adverse effect on our business.

We will be dependent upon APP to manufacture Abraxane^® for a remaining term of three or four years, and the manufacture of pharmaceutical products is highly regulated.

In connection with the separation and distribution agreement, we entered into a manufacturing agreement with APP for the manufacture of Abraxane^® and our pipeline products whereby APP agreed to undertake certain of the tasks necessary to manufacture Abraxane^® and our pipeline products until December 31, 2011, with this agreement automatically extended by one year if either APP elects to exercise its option to extend the lease on our Melrose Park manufacturing facility or we elect to exercise our option to extend the lease on APP’s Grand Island manufacturing facility. Accordingly, we will be dependent upon APP to manufacture our products. The amount and timing of resources that APP devotes to the manufacture of our products is not within our direct control. Further, in the event of capacity constraints at the manufacturing facilities, the manufacturing agreement provides that the available capacity will be prorated between us and APP according to the parties’ then current use of manufacturing capacity at the relevant facilities. Any loss in manufacturing capacity pursuant to these proration provisions could be detrimental to our business and operating results. While the manufacturing agreement allows us to override these proration provisions, we may only do so by paying APP additional fees under the manufacturing agreement. If we are forced to pay APP additional fees to retain our capacity rights under the manufacturing agreement, it could be detrimental to our operating results.

The manufacture of pharmaceutical products is highly exacting and complex, due in part to strict regulatory requirements and standards which govern both the manufacture of a particular product and the manufacture of these types of products in general. Problems may arise during their manufacture due to a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures and environmental factors. If problems arise during the production of a batch of product, that batch of product may have to be discarded. This could, among other things, lead to loss of the cost of raw materials and components used and lost revenue. If such problems are not discovered before the product is released to the market, recall costs may also be incurred. Under the terms of the manufacturing agreement, we have the final responsibility for release of the products manufactured pursuant to the manufacturing agreement and will bear all expenses in connection with any recall of products, unless the recall is a result of APP’s gross negligence, bad faith, intentional misconduct or intentional breach, in which case APP would bear all costs and expenses related to such product recall, subject to the $100 million limit on liability under the manufacturing agreement. To the extent APP encounters difficulties or problems with respect to the manufacture of our pharmaceutical products, including Abraxane^®, this may be detrimental to our business, operating results and reputation.

Risks Related To An Investment In Our Common Stock

Our executive chairman and entities affiliated with him collectively own a significant percentage of our common stock and could exercise significant influence over matters requiring stockholder approval, regardless of the wishes of other stockholders.

Our executive chairman and entities affiliated with him collectively own approximately 80% of our outstanding common stock. Accordingly, they have the ability to significantly influence all matters requiring stockholder approval, including the election and removal of directors and approval of significant corporate transactions such as mergers, consolidations and sales of assets. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control or impeding a merger or consolidation, takeover or other business combination, which could cause the market price of our common stock to fall or prevent our stockholders from receiving a premium in such a transaction. This significant concentration of stock ownership may adversely affect the market for and trading price of our common stock if investors perceive that conflicts of interest may exist or arise.

Substantial sales of our common stock could depress the market price of our common stock.

All of the shares of our common stock issued in connection with the separation, other than shares issued to our affiliates, are eligible for immediate resale in the public market. Although shares issued to our affiliates are not immediately freely tradable, we have granted registration rights to the former ABI shareholders, including our executive chairman. Under the registration rights agreement, the former ABI shareholders will have the right to require us to register all or a portion of the shares of our common stock they received in connection with the separation. In addition, the former ABI shareholders may require us to include their shares in future registration statements that we file and our executive chairman may require us to register shares for resale on a Form S-3 registration statement. Upon registration, the registered shares generally will be freely tradeable in the public market without restriction. However, in connection with any underwritten offering, the holders of registrable securities will agree to lock up any other shares for up to 90 days and will agree to a limit on the maximum number of shares that can be registered for the account of the holders of registrable securities under so-called “shelf” registration statements.

Substantial sales of our shares, or the perception that such sales might occur, could depress the market price for our shares. Our executive chairman and entities affiliated with him own over 80% of our outstanding common stock. In connection with Old Abraxis requesting from the Internal Revenue Service a private letter ruling regarding the U.S. federal income tax consequences of the transactions, our executive chairman, his wife and certain entities affiliated with him have represented to the Internal Revenue Service that they have no current plan or intention to sell their shares after the separation.

Our stock price may be volatile in response to market and other factors.

The market price for our common stock may be volatile and subject to price and volume fluctuations in response to market and other factors, including the following, some of which are beyond our control:

•

variations in our quarterly operating results from the expectations of securities analysts or investors;

•

revisions in securities analysts’ estimates;

•

announcements of technological innovation or new products by us or our competitors;

•

announcements by us or our competitors of significant acquisition, strategic partnerships, joint ventures or capital commitments;

•

general technological, market or economic trends;

•

investor perception of our industry or our prospects;

•

insider selling or buying;

•

investors entering into short sale contracts;

•

regulatory developments affecting our industry; and

•

additions or departures of key personnel.

We are not subject to the provisions of Section 203 of the Delaware General Corporation Law, which could negatively affect your investment.

We elected in our certificate of incorporation to not be subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns (or, in certain cases, within three years prior, did own) 15% or more of the corporation’s voting stock. Our decision not to be subject to Section 203 will allow, for example, our executive chairman (who with members of his immediate family and entities affiliated with him own approximately 80% of our common stock) to transfer shares in excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203. This may make us more vulnerable to takeovers that are completed without the approval of our board of directors and/or without giving us the ability to prohibit or delay such takeovers as effectively. These provisions could also limit the price that investors would be willing to pay in the future for shares of our common stock.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

The exhibits are as set forth in the Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


ABRAXIS BIOSCIENCE, INC.

By:		/s/ DAVID D. O’TOOLE
		David D. O’Toole
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: May 8, 2009

EXHIBIT INDEX


Exhibit Number		Description
2.1		Separation and Distribution Agreement among APP Pharmaceuticals, Inc., Abraxis BioScience, LLC, APP Pharmaceuticals, LLC and the Registrant (incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

3.2		Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

3.3		Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

4.1		Reference is made to Exhibits 3.1, 3.2 and 3.3

4.2		Specimen Stock Certificate of the Registrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Amendment #2 to Form 10 Registration Statement with the Securities and Exchange Commission on October 24, 2007)

4.3		Registration Rights Agreement by and among the Registrant and certain stockholders of the Registrant as set forth therein (incorporated by reference to Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.1		Separation and Distribution Agreement among APP Pharmaceuticals, Inc., Abraxis BioScience, LLC, APP Pharmaceuticals, LLC and the Registrant (Reference is made to Exhibit 2.1 hereto)

10.2		Tax Allocation Agreement among APP Pharmaceuticals, Inc., Abraxis BioScience, LLC, APP Pharmaceuticals, LLC and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.3		Transition Services Agreement between APP Pharmaceuticals, Inc. and the Registrant (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.4		Employee Matters Agreement among APP Pharmaceuticals, Inc., APP Pharmaceuticals, LLC, Abraxis BioScience, LLC and the Registrant (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)


Exhibit Number		Description
10.5*		Manufacturing Agreement between APP Pharmaceuticals, LLC and the Registrant (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.6		Lease Agreement between APP Pharmaceuticals, LLC and Abraxis BioScience, LLC for the premises located at 2020 Ruby Street, Melrose Park, Illinois (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.7		Lease Agreement between APP Pharmaceuticals, LLC and Abraxis BioScience, LLC for the warehouse facilities located at 2045 N. Cornell Avenue, Melrose Park, Illinois (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.8		Lease Agreement between APP Pharmaceuticals, LLC and Abraxis BioScience, LLC for the research and development facility located at 2045 N. Cornell Avenue, Melrose Park, Illinois (incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.9		Lease Agreement between Abraxis BioScience, LLC and APP Pharmaceuticals, LLC for the premises located at 3159 Staley Road, Grand Island, New York (incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.10		Form of Indemnification Agreement between the Registrant and each of its executive officers and directors (incorporated by reference to Exhibit 10.10 to the Registrant’s Amendment #1 to Form 10 Registration Statement with the Securities and Exchange Commission on October 5, 2007)

10.11		Employment Agreement, dated January 25, 2006, between the Registrant and Carlo Montagner (incorporated by reference to Old Abraxis’ Quarterly Report on Form 10-Q/A filed with the Securities and Exchange Commission on August 10, 2006)

10.12		Standard Form Office Lease, dated March 24, 2006, between the Registrant and California State Teacher’s Retirement System, as amended on May 26, 2006, for the premises located at 11755 Wilshire Boulevard, Los Angeles, California (incorporated by reference to Old Abraxis’ Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2006)

10.13		Co-Promotion Strategic Marketing Services Agreement, dated April 26, 2006, between the Registrant and AstraZeneca UK Limited (incorporated by reference to Old Abraxis’ Quarterly Report on Form 10-Q/A filed with the Securities and Exchange Commission on August 10, 2006)

10.14		Abraxis BioScience, Inc. 2007 Stock Incentive Plan, including forms of agreement thereunder (incorporated by reference to Exhibit 10.15 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)


Exhibit Number		Description
10.15		American BioScience, Inc. Restricted Stock Unit Plan I, including a form of agreement thereunder (incorporated by reference to Old Abraxis’ Registration Statement on Form S-8 (File No. 333-133364) filed with the Securities and Exchange Commission on April 18, 2006)

10.16		American BioScience, Inc. Restricted Stock Unit Plan II, including a form of agreement thereunder (incorporated by reference to Old Abraxis’ Registration Statement on Form S-8 (File No. 333-133364) filed with the Securities and Exchange Commission on April 18, 2006)

10.17		Agreement, dated April 18, 2006, between the Registrant and RSU LLC (incorporated by reference to Old Abraxis’ Quarterly Report on Form 10-Q/A filed with the Securities and Exchange Commission on August 10, 2006)

10.18*		Aircraft Purchase and Sale Agreement (incorporated by reference to Old Abraxis’ Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2006)

10.19		Escrow Agreement, dated April 18, 2006, by and among Abraxis BioScience, our chief executive officer and Fifth Third Bank (incorporated by reference to Old Abraxis’ Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 10, 2006).

10.20*		License Agreement, dated as of May 27, 2005, between the Registrant and Taiho Pharmaceutical Co., Ltd. (incorporated by reference to Exhibit 10.10 to the Registrant’s Amendment #3 to Form 10 Registration Statement with the Securities and Exchange Commission on November 2, 2007)

10.21		Agreement between APP Pharmaceuticals, Inc. and the Registrant (incorporated by reference to Exhibit 10.22 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 20, 2007)

10.22		Employment Agreement, dated as of May 22, 2008, between the Registrant and David O’Toole (incorporated by reference to Exhibit 10.22 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2008)

10.23		Employment Agreement, dated as of October 6, 2008, between the Registrant and Edward Geehr, M.D. (incorporated by reference to Exhibit 10.23 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2008)

10.24		Termination Agreement dated as of November 19, 2008, between Abraxis BioScience, LLC and AstraZeneca UK Limited (incorporated by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2009)

31.1†		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2†		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1†		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

32.2†		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

*	Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

†	Filed herewith.

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