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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q

(Mark One)



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

For the quarterly period ended March 31, 2006



| ̈ | 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 0-33407

Abraxis BioScience, Inc.

(Exact name of registrant as specified in its charter)



|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|Delaware                                       |  | 68-0389419                          
|(State of Incorporation)                       |  | (I.R.S. Employer Identification No.)
|                                               | 
|11777 San Vicente Blvd., #550, Los Angeles, CA |  | 90049                               
|(Address of principal executive offices)       |  | (Zip Code)                          

(310) 826-8505

(Registrants telephone number, including area code)

American Pharmaceutical Partners, Inc.

(Registrants former name)

1501 East Woodfield Road, Suite 300 East Schaumburg, IL 60173-5837

(Registrants former
address)

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  þ    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated
filer  þ                Accelerated Filer ̈Non-Accelerated Filer ̈

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

As of May 9, 2006, the registrant had 158,776,053 shares of $0.001 par value common stock outstanding.



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Abraxis BioScience, Inc.

(Formerly Known as American Pharmaceutical Partners, Inc.)

INDEX



|                              |  |                                                                                                    |  |     
|----------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                    |  | Page
|PART I. Financial Information |  | 3                                                                                                 
|                              |  |                                                                                                   
|Item 1.                       |  | Financial Statements (Unaudited)                                                                   |  | 3   
|                              |  |                                                                                                   
|                              |  | Condensed consolidated balance sheets  March 31, 2006 and December 31, 2005                       |  | 3   
|                              |  |                                                                                                   
|                              |  | Condensed consolidated statements of income  Three month period ended March 31, 2006 and 2005     |  | 4   
|                              |  |                                                                                                   
|                              |  | Condensed consolidated statements of cash flows  Three month period ended March 31, 2006 and 2005 |  | 5   
|                              |  |                                                                                                   
|                              |  | Notes to condensed consolidated financial statements  March 31, 2006                              |  | 6   
|                              |  |                                                                                                   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations              |  | 19  
|                              |  |                                                                                                   
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                         |  | 30  
|                              |  |                                                                                                   
|Item 4.                       |  | Controls and Procedures                                                                            |  | 32  
|                              | 
|PART II. Other Information    |  | 33                                                                                                
|                              |  |                                                                                                   
|Item 1.                       |  | Legal Proceedings                                                                                  |  | 33  
|                              |  |                                                                                                   
|Item 1A.                      |  | Risk Factors                                                                                       |  | 33  
|                              |  |                                                                                                   
|Item 6.                       |  | Exhibits                                                                                           |  | 42  
|                              | 
|Signatures                    |  | 45                                                                                                



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PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

Abraxis BioScience, Inc.

(Formerly Known as American Pharmaceutical Partners, Inc.)

Condensed Consolidated Balance Sheets



|                                                                                                                                      |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|(in thousands, except share data)                                                                                                     |  | March 31,2006 |         |   | December 31,2005 |  
|                                                                                                                                      |  | (Unaudited)   |         |   | (Note 1)         |  
|Assets                                                                                                                                |  |               |         |   |                  |   |         |  
|Current assets:                                                                                                                       |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                             |  | $             | 49,711  |   |                  | $ | 26,739  |  
|Short-term investments                                                                                                                |  |               | 100,292 |   |                  |   | 54,455  |  
|Accounts receivable, net                                                                                                              |  |               | 19,594  |   |                  |   | 61,701  |  
|Inventories                                                                                                                           |  |               | 179,821 |   |                  |   | 175,282 |  
|Prepaid expenses and other current assets                                                                                             |  |               | 14,766  |   |                  |   | 12,286  |  
|Deferred income taxes                                                                                                                 |  |               | 15,758  |   |                  |   | 16,850  |  
|                                                                                                                                      |  |               |         |   |                  |   |         |  
|Total current assets                                                                                                                  |  |               | 379,942 |   |                  |   | 347,313 |  
|Property, plant and equipment, net                                                                                                    |  |               | 143,845 |   |                  |   | 141,941 |  
|Investment in Drug Source Co., LLC                                                                                                    |  |               | 3,310   |   |                  |   | 2,728   |  
|Product license rights and other non-current assets, net                                                                              |  |               | 23,738  |   |                  |   | 23,465  |  
|                                                                                                                                      |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                          |  | $             | 550,835 |   |                  | $ | 515,447 |  
|                                                                                                                                      |  |               |         |   |                  |   |         |  
|Liabilities and stockholders equity                                                                                                  |  |               |         |   |                  |   |         |  
|Current liabilities:                                                                                                                  |  |               |         |   |                  |   |         |  
|Accounts payable                                                                                                                      |  | $             | 22,436  |   |                  | $ | 29,280  |  
|Accrued expenses                                                                                                                      |  |               | 44,824  |   |                  |   | 42,399  |  
|                                                                                                                                      |  |               |         |   |                  |   |         |  
|Total current liabilities                                                                                                             |  |               | 67,260  |   |                  |   | 71,679  |  
|Deferred income taxes                                                                                                                 |  |               | 1,629   |   |                  |   | 1,629   |  
|                                                                                                                                      |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                                     |  |               | 68,889  |   |                  |   | 73,308  |  
|Stockholders equity                                                                                                                  |  |               |         |   |                  |   |         |  
|Common stock - $.001 par value; 100,000,000 shares authorized, 79,511,196 and 79,107,821 shares issued in 2006 and 2005,
respectively |  |               | 80      |   |                  |   | 79      |  
|Additional paid-in capital                                                                                                            |  |               | 279,490 |   |                  |   | 269,127 |  
|Amounts due from American BioScience, Inc.                                                                                            |  |               | (19,669 | ) |                  |   | (21,096 | )
|Retained earnings                                                                                                                     |  |               | 276,221 |   |                  |   | 248,674 |  
|Accumulated other comprehensive income                                                                                                |  |               | 2,098   |   |                  |   | 1,629   |  
|Less treasury stock at cost, 6,646,398 common shares in 2006 and 2005                                                                 |  |               | (56,274 | ) |                  |   | (56,274 | )
|                                                                                                                                      |  |               |         |   |                  |   |         |  
|Total stockholders equity                                                                                                            |  |               | 481,946 |   |                  |   | 442,139 |  
|                                                                                                                                      |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                            |  | $             | 550,835 |   |                  | $ | 515,447 |  
|                                                                                                                                      |  |               |         |   |                  |   |         |  

See notes to condensed consolidated financial statements.



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Abraxis BioScience, Inc.

(Formerly Known as American Pharmaceutical Partners, Inc.)

Condensed Consolidated Statements of Income

(Unaudited)



|                                                                                    |  |                                       |         |   |      |   |         |  
|----------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                    |  | Three Months EndedMarch 31,           |        
|                                                                                    |  | 2006                                  |         |   | 2005 |  
|                                                                                    |  | (in thousands, except per share data) |        
|Net sales                                                                           |  | $                                     | 143,754 |   |      | $ | 120,681 |  
|Cost of sales                                                                       |  |                                       | 63,655  |   |      |   | 46,219  |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|Gross profit                                                                        |  |                                       | 80,099  |   |      |   | 74,462  |  
|Operating expenses:                                                                 |  |                                       |         |   |      |   |         |  
|Research and development                                                            |  |                                       | 6,890   |   |      |   | 5,926   |  
|Selling, general and administrative                                                 |  |                                       | 32,589  |   |      |   | 32,828  |  
|Equity in net income of Drug Source Co., LLC                                        |  |                                       | (476    | ) |      |   | (539    | )
|                                                                                    |  |                                       |         |   |      |   |         |  
|Total operating expenses                                                            |  |                                       | 39,003  |   |      |   | 38,215  |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|Income from operations                                                              |  |                                       | 41,096  |   |      |   | 36,247  |  
|Interest income                                                                     |  |                                       | 1,105   |   |      |   | 585     |  
|Interest expense and other                                                          |  |                                       | 179     |   |      |   | 15      |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|Income before income taxes                                                          |  |                                       | 42,380  |   |      |   | 36,847  |  
|Provision for income taxes                                                          |  |                                       | 14,833  |   |      |   | 14,002  |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|Net income                                                                          |  | $                                     | 27,547  |   |      | $ | 22,845  |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|Income per common share:                                                            |  |                                       |         |   |      |   |         |  
|Basic                                                                               |  | $                                     | 0.38    |   |      | $ | 0.32    |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|Diluted                                                                             |  | $                                     | 0.37    |   |      | $ | 0.31    |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|Interest income includes interest earned from American BioScience, Inc. as follows: |  | $                                     | 390     |   |      | $ | 266     |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|The composition of stock-based compensation included above is as follows:           |  |                                       |         |   |      |   |         |  
|Cost of sales                                                                       |  | $                                     | 728     |   |      | $ | 829     |  
|Research and development                                                            |  |                                       | 155     |   |      |   | 176     |  
|Selling, general and administrative                                                 |  |                                       | 1,849   |   |      |   | 2,104   |  
|                                                                                    |  |                                       |         |   |      |   |         |  
|                                                                                    |  | $                                     | 2,732   |   |      | $ | 3,109   |  
|                                                                                    |  |                                       |         |   |      |   |         |  

See notes to condensed consolidated financial statements.



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Abraxis BioScience, Inc.

(Formerly Known as American Pharmaceutical Partners, Inc.)

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                            |  |                              |         |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                            |  | Three Months Ended March 31, |        
|                                                                                            |  | 2006                         |         |   | 2005 |  
|                                                                                            |  | (in thousands)               |        
|Cash flows from operating activities:                                                       |  |                              |         |  
|Net income                                                                                  |  | $                            | 27,547  |   |      | $ | 22,845  |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                              |         |   |      |   |         |  
|Depreciation                                                                                |  |                              | 3,794   |   |      |   | 3,375   |  
|Amortization                                                                                |  |                              | 726     |   |      |   | 756     |  
|Stock-based compensation                                                                    |  |                              | 2,732   |   |      |   | 3,109   |  
|Excess tax benefit from stock based compensation                                            |  |                              | (817    | ) |      |   | (3,793  | )
|Loss on disposal of property, plant and equipment                                           |  |                              | 6       |   |      |   |        |  
|Deferred income taxes                                                                       |  |                              | 1,092   |   |      |   |        |  
|Equity in net income of Drug Source Company, LLC, net of dividends received                 |  |                              | (582    | ) |      |   | (900    | )
|Changes in operating assets and liabilities:                                                |  |                              |         |   |      |   |         |  
|Accounts receivable, net                                                                    |  |                              | 42,106  |   |      |   | (24,805 | )
|Inventories                                                                                 |  |                              | (4,539  | ) |      |   | (28,849 | )
|Prepaid expenses and other current assets                                                   |  |                              | (2,480  | ) |      |   | (1,277  | )
|Accounts payable and accrued expenses                                                       |  |                              | (3,260  | ) |      |   | 23,079  |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Net cash provided by (used in) operating activities                                         |  |                              | 66,325  |   |      |   | (6,460  | )
|Cash flows from investing activities:                                                       |  |                              |         |   |      |   |         |  
|Purchases of property, plant and equipment                                                  |  |                              | (5,703  | ) |      |   | (8,272  | )
|Purchase of other non-current assets                                                        |  |                              | (577    | ) |      |   | (15,318 | )
|Net (purchase) sale of short-term investments                                               |  |                              | (45,837 | ) |      |   | 35,740  |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Net cash (used in) provided by investing activities                                         |  |                              | (52,117 | ) |      |   | 12,150  |  
|Cash flows from financing activities:                                                       |  |                              |         |   |      |   |         |  
|Proceeds from the exercise of stock options                                                 |  |                              | 4,808   |   |      |   | 4,270   |  
|Proceeds from the sale of stock under employee retirement and stock purchase plans          |  |                              | 1,665   |   |      |   | 1,508   |  
|Excess tax benefit from stock based compensation                                            |  |                              | 817     |   |      |   | 3,793   |  
|Increase (decrease) in amounts due from American BioScience, Inc.                           |  |                              | 1,427   |   |      |   | (400    | )
|                                                                                            |  |                              |         |   |      |   |         |  
|Net cash provided by financing activities                                                   |  |                              | 8,717   |   |      |   | 9,171   |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Effect of foreign currency translation                                                      |  |                              | 47      |   |      |   | 90      |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Increase in cash and cash equivalents                                                       |  |                              | 22,972  |   |      |   | 14,951  |  
|Cash and cash equivalents at beginning of period                                            |  |                              | 26,739  |   |      |   | 1,154   |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $                            | 49,711  |   |      | $ | 16,105  |  
|                                                                                            |  |                              |         |   |      |   |         |  



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ABRAXIS BIOSCIENCE, INC.

(Formerly known as American Pharmaceutical Partners, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2006

(Unaudited)



|(1) | Basis of Presentation
|--- | ---------------------

On April 18, 2006, we completed a merger
with American BioScience, Inc., or ABI, our former parent, pursuant to the terms of the Agreement and Plan of Merger dated November 27, 2005 that we entered into with ABI and certain shareholders of ABI. On April 18, 2006, our certificate of
incorporation was amended to change our name to Abraxis BioScience, Inc.

The unaudited condensed consolidated financial statements include the
assets, liabilities, and results of operations of Abraxis BioScience, Inc. (formerly known as American Pharmaceutical Partners, Inc.), our wholly owned subsidiary Pharmaceutical Partners of Canada, Inc. and our investment in Drug Source Company,
LLC, which is accounted for using the equity method, but do not take into account the assets, liabilities and results of operations of ABI or its wholly owned subsidiaries.

For accounting purposes, the merger between ABI and us is referred to as a downstream merger with ABI viewed as the surviving entity rather than us, although we are the surviving entity for legal purposes. As such,
the merger will be accounted for in ABIs consolidated financial statements as an implied acquisition of our minority interest using the purchase method of accounting. Under this accounting method, our accounts, including goodwill, will be
adjusted to reflect the minority interests share of any differences between their fair values and book values as of the merger closing date. Our total fair value would be based on the weighted average market price of our common stock for the
period three days prior to and three days subsequent to the merger announcement date.

Furthermore, because ABI will be treated as the continuing reporting
entity for accounting purposes, our filed reports, as the surviving corporation in the merger, after the date of the merger would parallel the financial reporting required under generally accepted accounting principles in the United States and SEC
reporting rules as if ABI were the legal successor to its reporting obligation as of the date of the merger. Accordingly, our financial statements, for all periods prior to the date of the merger, will be revised to reflect this basis of accounting.

The accompanying unaudited condensed consolidated financial statements of Abraxis BioScience, Inc. 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 accounting
principles generally accepted 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-month period ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ended December 31, 2006. The balance sheet information at December 31, 2005 has been derived from
the audited financial statements at that date, as restated for Statement of Financial Accounting Standards No. 123 (revised 2004), share-based payment, or FAS 123(R), 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.

One of our wholly owned subsidiaries holds a 50% interest in Drug Source Company, LLC. Drug Source Company is a joint venture with three other partners established in June 2000 to purchase raw materials for resale to pharmaceutical
companies, including us. Because our 50% interest in Drug Source Company does not provide financial or operational control of the entity, we account for our interest in Drug Source Company under the equity method. Our equity in the net income of
Drug Source Company, net of intercompany profit on purchases in ending inventory, is classified in operating expenses in the accompanying condensed consolidated statements of income. Research and development expense includes raw material purchases
from Drug Source Company of $0.1 million and $0.7 million for the three-month periods ended March 31, 2006 and 2005, respectively. Ending inventory included raw material purchased from Drug Source Company of $5.4 million at March 31, 2006
and $3.8 million at December 31, 2005.

Equity - Based Compensation

We account for stock based compensation in accordance with FAS 123(R), which requires the recognition of compensation cost for all share-based payments (including
employee stock options) at fair value. Effective January 1, 2006, we adopted the provisions of FAS 123(R) using a modified version of retrospective application. As a result, the fair value of stock-based employee compensation was recorded
as an expense in the current year, in addition, our prior year results have been restated as if we had used the fair value method during previous periods. The company uses the straight-line attribution method to recognize share-based compensation
expenses over the vesting period of the award. Options currently granted by the



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company generally expire ten years from the grant date. Options granted to existing and newly hired employees generally vest ratably over a four year period.

Stock-based compensation recognized in 2006 as a result of the adoption of FAS 123(R), as well as expense associated with the retrospective application,
use the Black-Scholes option pricing model for estimating the fair value of options granted under the our equity incentive plans and rights to acquire stock granted under our stock participation plan. Pre-tax stock-based employee compensation costs
for the three-month periods ended March 31, 2006 and 2005 were $2.7 million and $3.1 million, respectively. Also in connection with the retrospective application, our December 31, 2005 balance sheet presented reflects an increase in the
deferred tax benefit of $2.1 million, an increase in additional paid-in capital of $18.9 million and a decrease in retained earnings of $18.0 million. The cash flow statement reflects a decrease in cash flow from operating activities and a
corresponding increase to cash provided by financing activities of $3.8 million.

Refer to Note 8, Stock Options and Restricted Stock, in the footnotes to
the condensed consolidated financial statements for a detail of financial statement changes caused by the retrospective application.



|(2) | Quarterly Periods
|--- | -----------------

Beginning in 2006, we use a 52-week fiscal year
that ends on December 31, with quarters ending on March 31, June 30 and September 30. In previous years we used a 52-week or 53-week fiscal year that ended on the Saturday nearest to December 31 with quarters ending on
the Saturday nearest the end of the calendar quarter. For clarity of presentation, the comparative period is presented as if the quarter ended on March 31. Each of the three-month periods ended March 31, 2006 and 2005 included 13 weeks.
The change in quarterly periods is not expected to have a material impact on the comparability of reported quarterly results.



|(3) | Earnings Per Share Information
|--- | ------------------------------

The following tables set forth the
computation of basic and diluted earnings per share for the periods indicated with the prior year restated to reflect the impact of FAS 123(R):



|                                                     |  |                                       |        |      |   |       
|---------------------------------------------------- |  | ------------------------------------- | ------ | ---- | - | ------
|                                                     |  | Three Months Ended March 31,         
|                                                     |  | 2006                                  |        | 2005
|                                                     |  | (in thousands, except per share data)
|Basic and dilutive numerator:                        |  |                                       |        |      |   |       
|Net income                                           |  | $                                     | 27,547 |      | $ | 22,845
|                                                     |  |                                       |        |      |   |       
|Denominator:                                         |  |                                       |        |      |   |       
|Weighted-average common shares outstanding - basic   |  |                                       | 72,606 |      |   | 70,894
|Net effect of dilutive securities:                   |  |                                       |        |      |   |       
|Stock options and restricted stock awards            |  |                                       | 1,296  |      |   | 3,025 
|                                                     |  |                                       |        |      |   |       
|Weighted-average common shares outstanding - diluted |  |                                       | 73,902 |      |   | 73,919
|                                                     |  |                                       |        |      |   |       
|Income per common share - basic                      |  | $                                     | 0.38   |      | $ | 0.32  
|                                                     |  |                                       |        |      |   |       
|Income per common share - diluted                    |  | $                                     | 0.37   |      | $ | 0.31  
|                                                     |  |                                       |        |      |   |       



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Employee stock options for which the exercise price exceeded the average market price of our common stock were excluded
from the computation of diluted income per common share as follows:



|                          |  |                                       |  |                
|------------------------- |  | ------------------------------------- |  | ---------------
|                          |  | Three Months Ended March 31,         
|                          |  | 2006                                  |  | 2005           
|                          |  | (in thousands, except per share data)
|Number of shares excluded |  | 987                                   |  | 52             
|Range of exercise prices  |  | $32.89 - $56.02                       |  | $49.20 - $51.66



|(4) | Transactions with American BioScience, Inc.
|--- | -------------------------------------------

Product License and
Manufacturing Agreements

Prior to the closing of the merger with ABI on April 18, 2006, we licensed the exclusive North American marketing rights
and the worldwide manufacturing rights for Abraxane®from ABI. Abraxane®is licensed from ABI, which is responsible for conducting the clinical studies of and obtaining
regulatory approval for Abraxane®. Following the closing of our merger with ABI, the
license agreement effectively ceased to exist. The FDA approved Abraxane®, for the filed
indication on January 7, 2005 and Abraxane®was launched on February 7, 2005.

In November 2001, we signed a perpetual license agreement with ABI under which we acquired the exclusive rights to market and sell Abraxane®in North America for indications relating to breast, lung, ovarian, prostate and other cancers. Under
the agreement, we made an initial payment to ABI of $60.0 million and committed to future milestone payments contingent upon achievement of specified regulatory, publication and sales objectives for licensed indications. Prior to the closing of the
merger, ABI was responsible for conducting the clinical studies in support of Abraxane®and for substantially all costs associated with the development and obtaining regulatory approval for Abraxane®. We are now responsible for these costs.

Under the license agreement, profit on our sales of Abraxane®in North America was shared equally between ABI and us. The license agreement defines profit as
Abraxane®net sales less cost of goods sold, selling expenses (including pre-launch
production and other expenses which we have expensed as incurred, but which were charged against first profit under the agreement) and an allocation of related general and administrative expenses. We expensed ABIs share of any profit earned in
our statements of income as an element of cost of sales. During the first-quarter of 2006 we expensed $5.7 million of profit sharing fees related to Abraxane®. No profit sharing fees were expensed in the first quarter of 2005.

The terms of the license agreement were negotiated to reflect the value of the licensed product rights acquired, then in late-stage development, ABIs remaining obligation to complete the NDA filing and the
potential sales of the product under licensed clinical indications. The license agreement was a product of several months of extensive negotiation with ABI involving outside counsel, investment banks and a nationally recognized valuation firm. Based
upon the analysis and recommendations of our advisors, we believe that the overall terms of the agreement were fair to us, including in comparison to similar licenses between unrelated parties. The agreement was unanimously approved by the
disinterested members of our Board of Directors, with those directors who also have an affiliation with ABI recusing themselves from the vote. There are no restrictions on how ABI would use payments made under the license agreement and we understand
such payments have been and will be used both to fund the development of Abraxane®in
relation to our licensed product rights and for other purposes.

In December 2001, in conjunction with our initial public offering, we recorded an initial
payment due ABI of $60.0 million. In our financial statements, the license agreement was accounted for as an asset contributed by a principal shareholder using the shareholders historical cost basis, which was zero, and the $60.0 million
payment was accounted for as a distribution of stockholders equity. For income tax purposes, the payment was recorded as an asset and is being amortized over a 15-year period. Because there was no corresponding charge to income, the income tax
benefit of this payment is being credited to stockholders equity as realized.

Under the license agreement, ABI earned milestone payments upon the
filing and approval of Abraxane®for metastatic breast cancer indication. The first such
milestone of $10.0 million was achieved in May 2004 when the FDA accepted ABIs NDA for the metastatic breast cancer indication. This payment was expensed and paid in the second quarter of 2004. The FDA then approved Abraxane®for the filed indication in January 2005, triggering a $15.0 million milestone payment in the first
quarter of 2005, which has been capitalized and is being amortized over the expected life of the product, subject to periodic review for impairment.



8



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##### Table of Contents

In November 2001, along with the license agreement for Abraxane®, we also entered into a manufacturing agreement with ABI under which we agreed to manufacture Abraxane®for ABI and its licensees for sales outside North America. Under this agreement, we had the right to
manufacture Abraxane®worldwide. For sales outside of our licensed territories, we would
charge ABI and its licensees a customary margin on our manufacturing costs based on whether the product would be used for clinical trials or commercial sale. The initial term of this agreement was ten years and could be extended for successive
two-year terms by ABI.

Loan to ABI

Prior to our 2001
licensing of Abraxane®, we made loans to ABI, our majority shareholder, to support
development of Abraxane®. Subsequent to formalization of the license and manufacturing
agreements in November 2001, we received a demand promissory note, which replaced prior notes, from ABI for the outstanding loan balance, or Demand Note. The Demand Note is capped at $23.0 million and the terms of our September 2004 credit facility
cap the note at such amount. The Demand Note bears interest at a rate equal to the rate of interest on our credit facility, which is LIBOR plus 75 basis points. At March 31, 2006, the interest rate for loans under the credit facility was 5.65%.
ABI was required to repay any amounts outstanding under the Demand Note by the earlier of November 20, 2006 or our cumulative payment of $75.0 million of profit on Abraxane®to ABI under the license agreement. As security for ABIs obligations under the Demand Note, ABI pledged and granted to us a
security interest in shares of our common stock held by ABI having a fair market value equal to 120% of the balance of the Demand Note.

The charges that
we incurred on ABIs behalf related to labor and other costs directly associated with Abraxane®product development, income taxes, interest and an agreed allocation of administrative costs to the ABI loan account and credits un-remitted Abraxane® profit sharing under the license agreement. A summary of activity in the amounts due from ABI, which is classified as a
reduction of stockholders equity in the accompanying consolidated balance sheets, follows:



|                                                  |  |                |        |   |                  |   |        |  
|------------------------------------------------- |  | -------------- | ------ | - | ---------------- | - | ------ | -
|                                                  |  | March 31,2006  |        |   | December 31,2005 |  
|                                                  |  | (in thousands) |       
|Balance at beginning of year                      |  | $              | 21,096 |   |                  | $ | 21,603 |  
|Abraxane® profit sharing due ABI, net of payments |  |                | (2,658 | ) |                  |   | (3,278 | )
|Payments on behalf of ABI:                        |  |                |        |   |                  |   |        |  
|New product development                           |  |                | 714    |   |                  |   | 1,408  |  
|Other                                             |  |                | 127    |   |                  |   | (474   | )
|Interest charged to ABI                           |  |                | 390    |   |                  |   | 1,271  |  
|Reductions in lieu of income tax liability        |  |                |       |   |                  |   | 566    |  
|                                                  |  |                |        |   |                  |   |        |  
|                                                  |  | $              | 19,669 |   |                  | $ | 21,096 |  
|                                                  |  |                |        |   |                  |   |        |  

Each of our agreements with ABI terminated on April 18, 2006, the effective date of the merger in which ABI
merged into us.



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|(5) | Inventories
|--- | -----------

Inventories consisted of the following:



|                |  |                |         |                           |   |                |  |          |         |                           |   |                |  |   |       |  |   |        
|--------------- |  | -------------- | ------- | ------------------------- | - | -------------- |  | -------- | ------- | ------------------------- | - | -------------- |  | - | ----- |  | - | -------
|                |  | March 31, 2006 |         | December 31, 2005        
|                |  | Approved       |         | PendingRegulatoryApproval |   | TotalInventory |  | Approved |         | PendingRegulatoryApproval |   | TotalInventory
|                |  | (in thousands)
|Finished goods  |  | $              | 34,795  |                           | $ |               |  | $        | 34,795  |                           | $ | 31,768         |  | $ |      |  | $ | 31,768 
|Work in process |  |                | 18,866  |                           |   | 271            |  |          | 19,137  |                           |   | 11,613         |  |   | 2,987 |  |   | 14,600 
|Raw materials   |  |                | 121,787 |                           |   | 4,102          |  |          | 125,889 |                           |   | 122,449        |  |   | 6,465 |  |   | 128,914
|                |  |                |         |                           |   |                |  |          |         |                           |   |                |  |   |       |  |   |        
|                |  | $              | 175,448 |                           | $ | 4,373          |  | $        | 179,821 |                           | $ | 165,830        |  | $ | 9,452 |  | $ | 175,282
|                |  |                |         |                           |   |                |  |          |         |                           |   |                |  |   |       |  |   |        

Inventories consist of products currently approved for marketing and may include certain products pending
regulatory approval. From time to time, 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. If final regulatory approval for such products is denied or delayed, we may need to provide for and expense such inventory.

At March 31, 2006, inventory included $4.4 million in cost relating to generic products pending FDA approval on that date. At March 31, 2006 inventory included 24 items that were awaiting approval and
individually no specific items were greater than 1% of total inventory. In the event that the FDA approval is unduly delayed or denied we may have to provide for and expense all, or a portion of, such inventory. At December 31, 2005, inventory
included $9.5 million in cost relating to generic products pending FDA approval on that date. Included in the amount pending approval at December 31, 2005 was $7.4 million of Ceftriaxone, which was approved by the FDA in February 2006.

We routinely review our inventory and establish reserves when the cost of the inventory is not expected to be recovered or our product cost exceeds
realizable market value. In instances where inventory is at or approaching expiry, is not expected to be saleable based on our 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. In evaluating the market value of inventory pending regulatory approval as compared to its cost, we consider the market, pricing and demand for competing products, our anticipated selling
price for the product and the position of the product in the regulatory review process. Provisions for inventory reserves are reflected in the financial statements as an element of cost of sales with inventories presented net of related reserves.



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|(6) | Accrued Expenses
|--- | ----------------

Accrued expenses consisted of the following:



|                              |  |                |        |                  |   |       
|----------------------------- |  | -------------- | ------ | ---------------- | - | ------
|                              |  | March 31,2006  |        | December 31,2005
|                              |  | (in thousands)
|Sales and marketing           |  | $              | 19,077 |                  | $ | 18,728
|Payroll and employee benefits |  |                | 12,305 |                  |   | 12,458
|Accrued income taxes          |  |                | 10,090 |                  |   | 7,265 
|Legal and insurance           |  |                | 2,423  |                  |   | 2,515 
|Other                         |  |                | 929    |                  |   | 1,433 
|                              |  |                |        |                  |   |       
|                              |  | $              | 44,824 |                  | $ | 42,399
|                              |  |                |        |                  |   |       



|(7) | Credit Facility
|--- | ---------------

In September 2004, we entered into a $100 million
three-year unsecured revolving credit and letter of credit facility. The new credit facility was extended to $150 million in August 2005, the term was extended by one year and reductions were made to the margins for Eurodollar Rate Loans and future
commitment fees. Debt acquisition fees of approximately $0.5 million for the new facility are being amortized over the life of the facility.

As of
March 31, 2006, no amounts were outstanding under the facility and we were in compliance with all of its covenants.

Interest rates under our new
credit facility vary depending on the type of loan made and our leverage ratio. The interest rate under the credit facility is LIBOR plus 75 basis points. At March 31, 2006, the interest rate for loans under the credit facility was 5.65%. The
credit facility limits the amount of and assesses a 0.125% fee on the face amount of outstanding letters of credit. With respect to the capital stock held by ABI, the credit facility prohibits us from declaring or paying any cash dividends or making
any other such cash distributions. Additionally, the terms of our August 2005 credit facility limit the principal amount of the intercompany demand note received from ABI to $23.0 million, among various other covenants and restrictions.

No interest expense was capitalized during the three-month periods ended March 31, 2006 or 2005.

On April 18, 2006, in connection with the closing of our merger with ABI, the $150 million credit facility was replaced with a new three year $450 million unsecured credit facility, with a sub-limit for up to $10
million for standby and commercial letters of credit and $20 million for swing line loans. Interest rates under the new facility vary depending on the type of loan made and our leverage ratio as defined in the agreement, which is identical to the
terms of our prior agreement. The agreement contains various restrictive covenants pertaining to the maintenance of minimum net worth, leverage and interest coverage ratios. In addition, the agreement restricts our ability to declare or pay
dividends, make future loans to third parties and incur other indebtedness. Fees of $1.7 million associated with the new agreement will be capitalized and amortized over the term of the agreement and the remaining $0.3 million in unamortized debt
acquisition costs on the old agreement will be written off.



11



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##### Table of Contents

|(8) | Stock Options and Restricted Stock
|--- | ----------------------------------

We administer the following
stock compensation plans:

1997 Stock Option Plan

During 1998, our Board of Directors authorized the 1997 Stock Option Plan, or the 1997 Plan. Under the 1997 Plan, options to purchase shares of our common stock were granted to certain employees and the directors with an exercise price to
the estimated fair market value of our common stock on the date of grant. The 1997 Plan vested immediately upon completion of our initial public offering in December 2001.

2001 Stock Incentive Plan

In December 2001, our Board of Directors authorized the 2001 Stock Incentive Plan,
or the 2001 Plan. The 2001 Plan provides for the grant of incentive stock options and restricted stock to employees, including officers and employees directors, non-qualified stock options to employees, directors and consultants, and restricted
stock and other types of awards. At March 31, 2006, there were 16,091,898 options available for grant and 19,537,225 common shares reserved for the exercise of stock option under the 2001 Plan. The number of shares reserved for issuance increases
annually on the first day of each fiscal year by an amount equal to the lesser of a) 6,000,000 shares, b) 5% of the total number of shares outstanding as of that date, or c) a number of shares as determined by our Board of Directors.

Our Board of Directors, or a committee designated by the Board of Directors, administers the 2001 Plan and has the authority to determine the terms and conditions of
awards, including the types of awards, the number of shares subject to each award, the vesting schedule of the awards and the selection of the grantees. The exercise price of all options granted under the Plan 2001 will be determined by our Board of
Directors or a committee designated by our Board of Directors, but in no event will this price be less than the fair market value of our common stock on the date of grant, unless otherwise determined by the Board of Directors with respect to
non-qualified stock options.

The exercise price of all options granted under the 2001 plan will be determined by our Board of Directors or a committee
designated by our Board of Directors, but in no event will this price be less than the fair market value of our common stock on the date of grant, unless otherwise determined by the board of directors with respect to non-qualified stock options.

2001 Non-Employee Director Stock Option Program

The 2001 Non-Employee Director Stock Option Program, or the 2001 Program, was adopted as part, and as subject to terms and conditions, of the 2001 Plan. The 2001 program establishes an automatic option grant program for the grant of awards
to non-employee directors.

The 2001 Program is administrated by our Board of Directors, or a committee designated by our Board of Directors, which
determines the terms and conditions of awards, and constitute and interpret the terms of the programs and awards granted under the program

Restricted Stock

At March 31, 2006, 8,125 restricted shares were outstanding with market values ranging from $14.69 to $34.03 and
vesting dates ranging from January 2006 to June 2011. Compensation expense related to restricted stock grants is based upon the market price on date of grant and charged to earnings on straight-line basis over the vesting periods.

Employee Stock Purchase Plan

Under the 2002 Employee Stock
Purchase Plan, or ESPP, eligible employees may contribute up to 10% of their base earning toward the semi-annual purchase of our common stock. The employees purchase price is the lesser of 85% of the fair market value of the stock on the first
business day of offer period or 85% of the fair market value of the stock on the last business day of the semi-annual purchase period. Employees can purchase no more than 625 shares of our common stock within any given purchase period. No
compensation expense is recorded in connection with the shares issued from the ESPP. An aggregate of 8,167,301 shares of our common stock were reserved for issuance under the ESPP at March 31, 2006. The ESPP provides for annual increases in the
number of shares of our common stock issuable under the ESPP equal to the lesser of: a) 3,000,000 shares b) a number of shares equal to 2% of the total of the total number of shares outstanding or c) a number of shares as determined by our Board of
Directors. In the first quarter of 2006, 96,642 shares were issued under the ESPP for an aggregate purchase price of $2.0 million.

We account for
stock-based compensation in accordance with FAS 123(R), which requires the recognition of compensation cost for all share-based payments (including employee stock options) at fair value. Effective January 1, 2006, we adopted the provisions of
FAS 123(R) using a modified version of retrospective application. As a result, the fair value of stock-based employee compensation was recorded as an expense in the current year, in addition, our prior year results have been restated as if we had
used the fair value method during previous periods. The company uses the straight-line attribution method to recognize share-based compensation expenses over the vesting period of the award. Options currently granted by the company generally expire
ten years from the grant date. Options granted to existing and newly hired employees generally vest ratably over a four year period.

Stock based
compensation recognized in 2006 as a result of the adoption of FAS 123(R), as well as expense associated with the retrospective application, use the Black-Scholes option pricing model for estimating the fair value of options granted under our equity
incentive plans and rights to acquire stock granted under the companys stock participation plan. The impact of compensation expense and the adoption of FAS 123(R) on the income statement for the three months ended March 31, 2006, was as
follows:



|                                                 |  |   |        |  
|------------------------------------------------ |  | - | ------ | -
|(In thousands, Except for per share information) |  |   |       
|Cost of sales                                    |  | $ | 728    |  
|                                                 |  |   |        |  
|Gross profit                                     |  |   | (728   | )
|Operating expenses:                              |  |   |        |  
|Research and Development                         |  |   | 155    |  
|Selling, general and administrative              |  |   | 1,849  |  
|                                                 |  |   |        |  
|Total operating expenses                         |  |   | 2,004  |  
|                                                 |  |   |        |  
|Income from operations                           |  |   | (2,732 | )
|                                                 |  |   |        |  
|Income before income taxes                       |  |   | (2,732 | )
|Provision for income taxes                       |  |   | (956   | )
|                                                 |  |   |        |  
|Net Income                                       |  | $ | (1,776 | )
|                                                 |  |   |        |  
|Income per common share:                         |  |   |        |  
|Basic                                            |  | $ | (0.02  | )
|                                                 |  |   |        |  
|                                                 |  |   |        |  
|Diluted                                          |  | $ | (0.02  | )
|                                                 |  |   |        |  
|                                                 |  |   |        |  



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The following is a summary of the line items impacted by the restatement for the 2005 consolidated income statement and
statement of cash flows and the December 31, 2005 balance sheet:

FAS 123(R) Restatement

(in thousands, except per share data)

Income Statement

Three-months ended March 31, 2005



|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------- | - | ------- | --------------- |  | - | ------- | -
|                                                                                  |  | As originallyReported |         |   | AsAdjusted |   |         | Effect ofChange | 
|Net sales                                                                         |  | $                     | 120,681 |   |            | $ | 120,681 |                 |  | $ |        |  
|Cost of sales                                                                     |  |                       | 45,390  |   |            |   | 46,219  |                 |  |   | 829     |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Gross profit                                                                      |  |                       | 75,291  |   |            |   | 74,462  |                 |  |   | (829    | )
|Operating expenses:                                                               |  |                       |         |   |            |   |         |                 |  |   |         |  
|Research and development                                                          |  |                       | 5,750   |   |            |   | 5,926   |                 |  |   | 176     |  
|Selling, general and administrative                                               |  |                       | 30,724  |   |            |   | 32,828  |                 |  |   | 2,104   |  
|Stock-based compensation                                                          |  |                       | 759     |   |            |   |        |                 |  |   | (759    | )
|Equity in net income of Drug Source Co., LLC                                      |  |                       | (539    | ) |            |   | (539    | )               |  |   |        |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Total operating expenses                                                          |  |                       | 36,694  |   |            |   | 38,215  |                 |  |   | 1,521   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Income from operations                                                            |  |                       | 38,597  |   |            |   | 36,247  |                 |  |   | (2,350  | )
|Interest income                                                                   |  |                       | 585     |   |            |   | 585     |                 |  |   |        |  
|Interest expense and other                                                        |  |                       | 15      |   |            |   | 15      |                 |  |   |        |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Income before income taxes                                                        |  |                       | 39,197  |   |            |   | 36,847  |                 |  |   | (2,350  | )
|Provision for income taxes                                                        |  |                       | 14,895  |   |            |   | 14,002  |                 |  |   | (893    | )
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Net income                                                                        |  | $                     | 24,302  |   |            | $ | 22,845  |                 |  | $ | (1,457  | )
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Income per common share:                                                          |  |                       |         |   |            |   |         |                 |  |   |         |  
|Basic                                                                             |  | $                     | 0.34    |   |            | $ | 0.32    |                 |  | $ | 0.02    |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Diluted                                                                           |  | $                     | 0.33    |   |            | $ | 0.31    |                 |  | $ | 0.02    |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|                                                                                  |  |                       |        
|Balance Sheet                                                                     |  |                       |         |   |            |   |         |                 |  |   |         |  
|                                                                                  |  |                       |        
|December 31, 2005                                                                 |  |                       |         |   |            |   |         |                 |  |   |         |  
|                                                                                  |  |                       |        
|Deferred income taxes                                                             |  |                       | 14,785  |   |            |   | 16,850  |                 |  |   | 2,065   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Total current assets                                                              |  |                       | 345,248 |   |            |   | 347,313 |                 |  |   | 2,065   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Total assets                                                                      |  | $                     | 513,382 |   |            | $ | 515,447 |                 |  | $ | 2,065   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Accrued expenses                                                                  |  |                       | 41,678  |   |            |   | 42,399  |                 |  |   | 721     |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Total current liabilities                                                         |  |                       | 70,958  |   |            |   | 71,679  |                 |  |   | 721     |  
|Total liabilities                                                                 |  |                       | 72,587  |   |            |   | 73,308  |                 |  |   | 721     |  
|Additional paid-in capital                                                        |  |                       | 250,202 |   |            |   | 269,127 |                 |  |   | 18,925  |  
|Deferred stock-based compensation                                                 |  |                       | (400    | ) |            |   |        |                 |  |   | 400     |  
|Retained earnings                                                                 |  |                       | 266,655 |   |            |   | 248,674 |                 |  |   | (17,981 | )
|Total stockholders equity                                                        |  |                       | 440,795 |   |            |   | 442,139 |                 |  |   | 1,344   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Total liabilities and stockholders equity                                        |  | $                     | 513,382 |   |            | $ | 515,447 |                 |  | $ | 2,065   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|                                                                                  |  |                       |        
|Statement of Cash Flows                                                           |  |                       |         |   |            |   |         |                 |  |   |         |  
|                                                                                  |  |                       |        
|March 31, 2005                                                                    |  |                       |         |   |            |   |         |                 |  |   |         |  
|                                                                                  |  |                       |        
|Cash flows from operating activities:                                             |  |                       |         |   |            |   |         |                 |  |   |         |  
|Net income                                                                        |  | $                     | 24,302  |   |            | $ | 22,845  |                 |  | $ | (1,457  | )
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                       |         |   |            |   |         |                 |  |   |         |  
|Stock-based compensation                                                          |  |                       | 759     |   |            |   | 3,109   |                 |  |   | 2,350   |  
|Excess tax benefit from stock based compensation                                  |  |                       | 4,686   |   |            |   | (3,793  | )               |  |   | (8,479  | )
|Accounts payable and accrued expenses                                             |  |                       | 19,286  |   |            |   | 23,079  |                 |  |   | 3,793   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Net cash used in operating activities                                             |  |                       | (2,667  | ) |            |   | (6,460  | )               |  |   | (3,793  | )
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Cash flows from financing activities:                                             |  |                       |         |   |            |   |         |                 |  |   |         |  
|Excess tax benefit from stock based compensation                                  |  |                       |        |   |            |   | 3,793   |                 |  |   | 3,793   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Net cash provided by financing activities                                         |  |                       | 5,378   |   |            |   | 9,171   |                 |  |   | 3,793   |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Increase in cash and cash equivalents                                             |  |                       | 14,951  |   |            |   | 14,951  |                 |  |   |        |  
|Cash and cash equivalents at beginning of period                                  |  |                       | 1,154   |   |            |   | 1,154   |                 |  |   |        |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                     | 16,105  |   |            | $ | 16,105  |                 |  | $ |        |  
|                                                                                  |  |                       |         |   |            |   |         |                 |  |   |         |  



13



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##### Table of Contents

In accordance with FAS 123(R), we will adjust stock based compensation on a quarterly basis for changes to the estimate
of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization after January 1, 2005 is recognized in the period the forfeiture estimate is changed. The
effect of the forfeiture adjustments in the first quarter of 2006 and 2005 was insignificant.

As of March 31, 2006, there was $20.9 million of total
unrecognized compensation expense related to stock options granted under the companys equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.4 years.

The fair values of options granted during the three months ended March 31, 2006 and 2005 were determined using the Black-Scholes option pricing model, which incorporates
various assumptions. The risk-free rate of interest for the average contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is zero as we do not anticipate paying any dividends. The
expected term of awards granted is based upon the historical exercise patterns of the participants in our plans, and expected volatility is based on the historical volatility of our stock, commensurate with the expected term of the respective
awards. The weighted average estimated values of employee stock option grants and rights granted under our employee stock purchase plan as well as the weighted average assumptions that were used in calculating such values during the first quarter of
2006 and 2005 were based on estimates at the date of grant as follows:



|                                                          |  |                         |         |   |      |   |           |  
|--------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | --------- | -
|                                                          |  | Quarter Ended March 31, |        
|                                                          |  | 2006                    |         |   | 2005 |  
|Stock Options                                             |  |                         |         |   |      |   |           |  
|Risk-free rate                                            |  |                         | 4.5     | % |      |   | 3.9       | %
|Dividend yield                                            |  |                         |        |   |      |   |          |  
|Expected life in years                                    |  |                         | 5       |   |      |   | 5         |  
|Volatility                                                |  |                         | 55      | % |      |   | 46        | %
|Fair value of options granted                             |  | $                       | 703,768 |   |      | $ | 8,917,894 |  
|Weighted average grant date fair value of options granted |  | $                       | 16.27   |   |      | $ | 21.08     |  
|Employee Stock Purchase Plan                              |  |                         |         |   |      |   |           |  
|Risk-free rate                                            |  |                         | 2.8     | % |      |   | 2.2       | %
|Dividend yield                                            |  |                         |        |   |      |   |          |  
|Expected life in years                                    |  |                         | 1.2     |   |      |   | 1.2       |  
|Volatility                                                |  |                         | 36      | % |      |   | 46        | %

Options outstanding that have vested and are expected to vest as of March 31, 2006 are as follows:



|                 |  |                  |  |                                 |  |                                         |  |                            |           
|---------------- |  | ---------------- |  | ------------------------------- |  | --------------------------------------- |  | -------------------------- | ----------
|                 |  | Number of Shares |  | Weighted Average Exercise Price |  | WeightedAverageRemainingContractualTerm |  | AggregateIntinsic Value(1)
|Vested           |  | 1,727,106        |  | 12.30                           |  | 5.25                                    |  | $                          | 31,056,729
|Expected to Vest |  | 1,467,618        |  | 33.45                           |  | 8.04                                    |  |                            | 4,809,548 
|                 |  |                  |  |                                 |  |                                         |  |                            |           
|                 |  |                  |  |                                 |  |                                         |  |                            |           
|Total            |  | 3,194,724        |  | 21.87                           |  | 6.53                                    |  | $                          | 35,866,277
|                 |  |                  |  |                                 |  |                                         |  |                            |           
|                 |  |                  |  |                                 |  |                                         |  |                            |           



|(1) | These amounts represent the difference between the exercise price and $28.49, the closing price of APP stock on March 31, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------

Options outstanding that are expected to vest are net of estimated future option forfeitures in accordance with the provisions of FAS 123(R), which are estimated when
compensation expense is recognized. Options with a fair value of $ 2.7 million and $3.1 million completed vesting during the first quarter of 2006 and 2005, respectively.



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##### Table of Contents

Additional information with respect to stock option activity is as follows:



|                                 |  |                     |   |                     |                                  |  |           |  |                                 |      
|-------------------------------- |  | ------------------- | - | ------------------- | -------------------------------- |  | --------- |  | ------------------------------- | -----
|                                 |  | Options Outstanding |   | Exercisable Options
|                                 |  | Shares              |   |                     | Weighted- Average Exercise Price |  | Shares    |  | Weighted-Average Exercise Price
|Outstanding at December 31, 2005 |  | 3,571,997           |   |                     | 21.38                            |  | 1,774,537 |  | $                               | 11.31
|                                 |  |                     |   |                     |                                  |  |           |  |                                 |      
|Granted                          |  | 43,250              |   |                     | 32.64                            |  |           |  |                                 |      
|Exercised                        |  | (347,853            | ) |                     | 13.82                            |  |           |  |                                 |      
|Forfeited                        |  | (126,670            | ) |                     | 33.66                            |  |           |  |                                 |      
|                                 |  |                     |   |                     |                                  |  |           |  |                                 |      
|Outstanding at March 31, 2006    |  | 3,140,724           |   |                     | 21.87                            |  | 1,727,106 |  | $                               | 12.30
|                                 |  |                     |   |                     |                                  |  |           |  |                                 |      

The following table summarizes information about fixed stock options outstanding at March 31, 2006:



|                      |  |                     |  |                                            |  |                                 |       |                 |           |                                 |   |      
|--------------------- |  | ------------------- |  | ------------------------------------------ |  | ------------------------------- | ----- | --------------- | --------- | ------------------------------- | - | -----
|                      |  | Options Outstanding |  | Options Exercisable                       
|Exercise Price Ranges |  | Number ofShares     |  | Weighted- Average RemainingContractualLife |  | Weighted- Average ExercisePrice |       | Number ofShares |           | Weighted-Average Exercise Price
|$2.00$5.60           |  | 813,343             |  | 3.8                                        |  | $                               | 2.91  |                 | 813,343   |                                 | $ | 2.91 
|$5.61$11.20          |  | 331,078             |  | 5.7                                        |  |                                 | 8.65  |                 | 277,675   |                                 |   | 8.50 
|$11.21$16.81         |  | 453,909             |  | 6.8                                        |  |                                 | 12.97 |                 | 280,073   |                                 |   | 12.83
|$16.82$22.41         |  | 83,625              |  | 8.3                                        |  |                                 | 21.32 |                 | 12,900    |                                 |   | 21.16
|$22.41$28.01         |  | 262,458             |  | 7.8                                        |  |                                 | 25.28 |                 | 68,082    |                                 |   | 25.30
|$28.02$33.61         |  | 318,749             |  | 8.1                                        |  |                                 | 30.54 |                 | 67,346    |                                 |   | 30.36
|$33.62$39.21         |  | 153,425             |  | 7.5                                        |  |                                 | 36.01 |                 | 66,111    |                                 |   | 35.94
|$39.22$44.82         |  | 167,625             |  | 8.1                                        |  |                                 | 41.31 |                 | 16,250    |                                 |   | 41.55
|$44.83$50.42         |  | 566,599             |  | 8.2                                        |  |                                 | 46.40 |                 | 122,265   |                                 |   | 46.45
|$50.43$56.03         |  | 43,913              |  | 8.8                                        |  |                                 | 53.11 |                 | 3,061     |                                 |   | 51.49
|                      |  |                     |  |                                            |  |                                 |       |                 |           |                                 |   |      
|                      |  | 3,194,724           |  | 6.5                                        |  |                                 | 22.02 |                 | 1,727,106 |                                 |   | 12.30
|                      |  |                     |  |                                            |  |                                 |       |                 |           |                                 |   |      



|(9) | Litigation
|--- | ----------

In December 2004, one of our former officers and
employees and a former director of ABI filed a demand for arbitration with the American Arbitration Association against us and Dr. Soon-Shiong, our Chief Executive Officer. In August 2005, this individual filed an amended arbitration demand
adding ABI as a defendant. In the arbitration, this individual asserts that we improperly terminated his employment and that the defendants breached various promises allegedly made to him. This individual is seeking various forms of relief,
including monetary damages and equity interests in us and ABI. We have filed a counterclaim in the arbitration, claiming that the former employee breached his duties and obligations to us and was negligent in the performance of his duties. We are
seeking unspecified damages. The arbitration has been set to begin in late 2006. We intend to vigorously defend this claim and do not believe that this claim will have a material adverse effect on us.

On or about December 7, 2005 several stockholder derivative and class action lawsuits were filed against us, our directors and ABI in the Delaware Court of Chancery
relating to the recently completed merger between us and ABI. We are a nominal defendant in the stockholder derivative actions. The lawsuits allege that our directors breached their fiduciary duties to our stockholders by causing us to enter into
the merger agreement and for not providing full and fair disclosure to our stockholders, regarding the recently completed merger, which it is alleged caused the value of the shares held by our public stockholders to be significantly diminished. The
lawsuits seek, among other things, an unspecified amount of damages and rescinding the merger. We intend to vigorously defend these actions and do not believe that these actions will have a material adverse effect on us.

We are from time to time subject to claims and litigation arising in the ordinary course of business. These claims have included assertions that our products infringe
existing patents and also claims that the use of our products has caused personal injuries. 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, will not have a material adverse effect on our consolidated financial position or results of operations.



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|(10) | Net Sales by Product Line
|---- | -------------------------

Net
sales by product line is as follows:



|                       |  |                              |         |      |   |        
|---------------------- |  | ---------------------------- | ------- | ---- | - | -------
|                       |  | Three Months Ended March 31,
|                       |  | 2006                         |         | 2005
|                       |  | (in thousands)              
|Anti-infective         |  | $                            | 52,846  |      | $ | 40,861 
|Critical care          |  |                              | 45,274  |      |   | 34,610 
|Oncology               |  |                              | 43,986  |      |   | 45,090 
|Contract manufacturing |  |                              | 1,648   |      |   | 120    
|                       |  |                              |         |      |   |        
|                       |  | $                            | 143,754 |      | $ | 120,681
|                       |  |                              |         |      |   |        



|(11) | Comprehensive Income
|---- | --------------------

Elements of comprehensive income, net of
income taxes, is as follows:



|                                                                  |  |                              |        |      |   |        |  
|----------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------ | -
|                                                                  |  | Three Months Ended March 31, |       
|                                                                  |  | 2006                         |        | 2005 |  
|                                                                  |  | (in thousands)               |       
|Foreign currency translation adjustments                          |  | $                            | 47     |      | $ | 89     |  
|Unrealized gain (loss) on marketable equity securities            |  |                              | 422    |      |   | (465   | )
|                                                                  |  |                              |        |      |   |        |  
|Other comprehensive gain (loss), net of tax                       |  |                              | 469    |      |   | (376   | )
|Net income                                                        |  |                              | 27,547 |      |   | 22,845 |  
|                                                                  |  |                              |        |      |   |        |  
|Comprehensive income                                              |  | $                            | 28,016 |      | $ | 22,469 |  
|                                                                  |  |                              |        |      |   |        |  
|Supplemental comprehensive income information, net of tax:        |  |                              |        |      |   |        |  
|Cumulative foreign currency translation gain adjustments          |  | $                            | 47     |      | $ | 240    |  
|Cumulative unrealized gain (loss) on marketable equity securities |  |                              | 2,051  |      |   | (98    | )



|(12) | Subsequent Events
|---- | -----------------

Merger with ABI

On April 18, 2006, we completed a merger with ABI, our former parent, pursuant to the terms of the Agreement and Plan of Merger dated November 27, 2005 that we
entered into with ABI and certain shareholders of ABI. On April 18, 2006, our certificate of incorporation was amended to change our name to Abraxis BioScience, Inc. and to increase to 350,000,000 the number of shares of our common stock
that we are authorized to issue.

In connection with the merger, we issued to the shareholders of ABI 133,868,443 shares of our common stock, of which
8,609,652 shares were placed into escrow pursuant to the terms of an escrow agreement entered into between us, a representative of the ABI shareholders and Fifth Third Bank, as escrow agent. The escrow agreement sets forth the mechanism for
disbursement of the escrow funds. The 47,984,160 shares of our common stock that had been held by ABI prior to the closing of the merger were cancelled.

In addition and as contemplated by the merger agreement, we entered into a corporate governance and voting agreement and a registration rights agreement with certain shareholders of ABI. The corporate governance and voting agreement sets
forth certain agreements with the controlling shareholder and his affiliated entities regarding governance and voting matters relating to our company after the consummation of the merger. The registration rights agreement sets forth certain
registration obligations by us with respect to our common stock received by the former ABI shareholders in connection with the merger.

As a part of the
merger, we also assumed two restricted unit plans established by ABI prior to the closing of the merger. Under the terms of first restricted unit plan or RSU Plan I, the units granted under that plan vested upon the completion of the merger. As a
result, the holders of these units received the right to acquire an aggregate 212,239 shares of our common stock upon the closing of the merger. The 212,239 shares of our common stock issuable upon the vesting of these units reduced the number of
shares otherwise issuable to the shareholders of ABI at the effective time of the merger under the terms of the merger agreement. Under the terms of the second restricted unit plan assumed by us in connection with the merger, the RSU Plan II, the
units granted thereunder will vest one-half on the second anniversary of the merger and the balance on the fourth anniversary of the merger. The units convert into the right to receive a number of our shares of common stock determined on each
vesting date determined by the notional price that vests on such date divided by our average trading price over the three days prior to vesting; except that if the average trading price of our stock price is less than $28.27, then the notional price
is divided by $28.27. The maximum number of our shares that may be issuable under this restricted unit plan is 3,325,080 shares.



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On April 18, 2006, we entered into an agreement with RSU Plan LLC, or the RSU LLC, an entity that is beneficially
owned and controlled by the ABI shareholders existing prior to the merger, including entities controlled by Dr. Soon-Shiong and owns a sufficient number of shares of our common stock to satisfy our obligations under the RSU Plan II. Under the
terms of this agreement, the RSU LLC has agreed that prior to the date on which restricted stock units issued pursuant to the RSU Plan II become vested, RSU LLC will deliver, or cause to be delivered, to us the number of our shares of common stock
or cash, or a combination thereof, in an amount sufficient to satisfy the obligations to participants under the RSU Plan II of the vested restricted units. We are required to satisfy our obligations under the RSU Plan II by paying to the
participants in the RSU Plan II cash and/or shares of our common stock in the same proportion as was delivered by the RSU LLC. The intention of this agreement is to have RSU LLC satisfy our obligations under RSU Plan II so that there would not be
any further dilution to our stockholders as a result of our assumption of the RSU Plan II.

We intend to file with the SEC the March 31, 2006
financial statements and pro-forma financial information of ABI as soon as practicable, but in any event no later that 75 calendar days after the closing of the merger.

New Credit Facility

On April 18, 2006, in connection with the closing of our merger with American BioScience,
Inc., or ABI, the $150 million credit facility was replaced with a new three year $450 million unsecured credit facility, with a sub-limit for up to $10 million for standby and commercial letters of credit and $20 million for swing line loans.
Interest rates under the new facility vary depending on the type of loan made and our leverage ratio as defined in the agreement, which is substantially similar to the terms of our prior agreement. The agreement contains various restrictive
covenants pertaining to the maintenance of minimum net worth, leverage and interest coverage ratios. In addition, the agreement restricts our ability to declare or pay dividends, make future loans to third parties and incur other indebtedness. Fees
of $1.7 million associated with the new agreement will be capitalized and amortized over the term of the agreement and the remaining $0.3 million in unamortized debt acquisition costs on the old agreement will be written off.

Acquisition of Manufacturing Plant

On April 25, 2006 we entered
into a definitive purchase agreement with Pfizer Inc., in which we agreed to purchase Pfizers Cruce Dávila manufacturing facility in Barceloneta, Puerto Rico. The purchase includes a 53-acre site which consists of a 172,000 square foot
validated manufacturing plant with capabilities of producing EU and US compliant injectable pharmaceuticals, as well as protein based biologics and metered dosed inhalers. In addition, the acquisition includes a state-of-the-art, computer-controlled
90,000 square foot active pharmaceutical ingredients manufacturing plant and two support facilities with quality assurance and laboratories, totaling 262,000 square feet. This facility is expected to employ 400 to 500 people when fully operational
and will provide a third manufacturing site using our proprietary nanoparticle albumin bound, NAB, technology to produce chemotherapeutics such as Abraxane®. Under the terms of the agreement, we will lease a portion of the manufacturing facility back to Pfizer.

Abraxane® Co-Promotion and Product Acquisition Agreement

On April 26, 2006, we entered into a
Co-Promotion and Strategic Marketing Services Agreement with AstraZeneca UK Limited, a wholly owned subsidiary of AstraZeneca PLC. Under the Agreement, we and AstraZeneca will co-promote Abraxane®, our proprietary taxane oncology product in the United States for a term of five and
one-half years beginning July 1, 2006. The Agreement provides for an up-front signing fee of $200 million payable by AstraZeneca. We and AstraZeneca will equally share in the costs associated with advertising and promoting Abraxane® in the U. S. and certain clinical trials that are part
of the products overall clinical development program. Further milestone payments will be made to us upon the achievement of new indication approvals within pre-specified timelines. AstraZeneca will receive a 22% commission on U.S. net sales of
Abraxane® during the term of the agreement, with a
trailing commission of ten percent for the first year and five percent for the second year following the five year term. We will be entitled to receive certain milestone payments from AstraZeneca in the event of FDA approvals for new indications for
Abraxane® are obtained within specific timelines.

Under the terms of this agreement, we also granted AstraZeneca a right of first offer to license or co-promote Abraxane®, outside the U.S., other than selected countries, should we seek to co-license
or promote Abraxane®, outside of the U.S. and a
right of first offer to license or co-promote nab-Docetaxel in the U.S. and other selected countries should we seek to license or co-promote nab-Docetaxel in those countries.

In addition, we also
entered into an asset purchase agreement with AstraZeneca UK Limited on April 26, 2006 to acquire AstraZenecas U.S. anesthetics and analgesic products portfolio, which include Diprivan® (propofol), Naropin®



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(ropivacaine), as well as a variety of local anesthetics including EMLA® (Eutectic Mixture of Lidocaine and Prilocaine), Xylocaine® (lidocaine), Polocaine® (mepivacaine), Nesacaine® (chloroprocaine HCl Injection, USP), Sensorcaine® (bupivacaine), and Astramorph® (morphine sulfate injection, USP). Under the Agreement, we will pay to AstraZeneca $275
million at closing and $75 million on the first anniversary of closing. At the closing, AstraZeneca will also enter into an exclusive supply agreement with us under which AstraZeneca will supply these products to us for an initial term of five years
from closing. Closing of this acquisition transaction is subject to customary conditions, including, expiration or termination of the Hart-Scott-Rodino Act waiting period and obtaining certain third-party contractual consents. In addition,
AstraZeneca has agreed that we will be its preferred partner for consideration of certain proprietary injectable products when patents on these products expire. Under the terms of the Agreement, AstraZeneca has also granted us a right of first offer
to purchase or license AstraZenecas anesthetics and analgesics portfolio outside of the U.S. should AstraZeneca decide to divest these assets.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Note Regarding Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q, which are not
historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, whether expressed or implied, 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 success of our merger with ABI;
| | - |  | -----------------------------------



| |  |  | the market adoption of and demand for our existing and new pharmaceutical products, including Abraxane®and the U.S. branded products to be acquired from AstraZeneca;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the amount and timing of costs associated with Abraxane®;
| | - |  | ---------------------------------------------------------



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



| |  |  | the impact of competitive products and pricing;
| | - |  | -----------------------------------------------



| |  |  | the ability to successfully manufacture products in an efficient, time-sensitive and cost effective manner and to successfully validate, operationalize and integrate our new Puerto
Rican manufacturing facility;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | 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 our products;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | the ability to successfully integrate recent and future acquisitions;
| | - |  | ---------------------------------------------------------------------



| |  |  | the availability and price of acceptable raw materials and component from third-party suppliers;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | evolution of the fee-for-service arrangements being adopted by our major wholesale customers;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | inventory reductions or fluctuations in buying patterns by wholesalers or distributors;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | the impact of recent legislative changes to the governmental reimbursement system.
| | - |  | ----------------------------------------------------------------------------------



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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,
continue, 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. Readers
should carefully review the factors described in Item 1A: Risk Factors of Part II of this Form 10-Q, Item 1A of our Form 10-K for the period ended December 31, 2006 entitled Business: Factors that May Affect Future Results
of Operations and other documents we file from time to time with the Securities and Exchange Commission, including future Quarterly Reports on Form 10-Q to be filed by us in fiscal year 2006.

OVERVIEW

The overview section of Managements
Discussion and Analysis of Financial Conditions and Results of Operations (MD&A) is designed to provide the reader with summary level information on: our history, highlights of our 2006 first three months and our outlook for 2006.
Following this overview, the first-quarter 2006 MD&A is organized as follows:



| |  |  | a discussion of our operating results,
| | - |  | --------------------------------------



| |  |  | a review of factors impacting our liquidity and cash flow,
| | - |  | ----------------------------------------------------------



| |  |  | a discussion of accounting policies and estimates critical to an understanding of the assumptions and judgments incorporated in our financial results, and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | information on the license and manufacturing agreements relating to our proprietary oncology product, Abraxane®.
| | - |  | ----------------------------------------------------------------------------------------------------------------

The MD&A should be read in conjunction with our 2005 Annual Report on Form 10-K, including Item 1: Business; Item 6: Selected Financial Data; and Item 8: Financial Statements and Supplemental Data.

Background

We are a pharmaceutical company that
develops, manufactures and markets injectable pharmaceutical products. We believe that we are the only independent U.S. public company with a primary focus on the injectable oncology, anti-infective and critical care markets, and we further believe
that we offer one of the most comprehensive injectable product portfolios in the pharmaceutical industry. We manufacture products in each of the three basic forms in which injectable products are sold: liquid, powder and lyophilized, or
freeze-dried. We hold the exclusive North American right to sell Abraxane®, a proprietary
nanoparticle injectable oncology product that is a patented formulation of paclitaxel. Our wholly owned subsidiary, Pharmaceutical Partners of Canada, Inc., markets generic injectable pharmaceutical products in Canada.

We began in 1996 with an initial focus on U.S. marketing and distribution of generic pharmaceutical products manufactured by others. In June 1998, we acquired Fujisawa
USA, Inc.s generic injectable pharmaceutical business including manufacturing facilities in Melrose Park, Illinois and Grand Island, New York and our research and development facility in Melrose Park, Illinois. We also acquired additional
assets in this transaction, including inventories, plant and equipment and abbreviated new drug applications that were approved by or pending with the FDA.

Our products are generally used in hospitals, long-term care facilities, alternate care sites and clinics within North America. Unlike the retail pharmacy market for oral products, the injectable pharmaceuticals marketplace is largely made
up of end users who have relationships with group purchasing organizations, or GPOs, and/or specialty distributors who distribute products within a particular end-user market, such as oncology clinics. GPOs and specialty distributors generally enter
into collective product purchasing agreements with pharmaceutical suppliers in an effort to secure more favorable drug pricing on behalf of their members.

We are a Delaware corporation that was formed in 2001 as successor to a California corporation formed in 1996.



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Merger

On April 18,
2006, we completed a merger with American BioScience, Inc., or ABI, our former parent, pursuant to the terms of the Agreement and Plan of Merger dated November 27, 2005 that we entered into with ABI and certain shareholders of ABI. On April 18,
2006, our certificate of incorporation was amended to change our name to Abraxis BioScience, Inc. and to increase to 350,000,000 the number of shares of our common stock that we are authorized to issue.

The unaudited condensed consolidated financial statements include the assets, liabilities, and results of operations of Abraxis BioScience, Inc. (formerly known as
American Pharmaceutical Partners, Inc.), our wholly owned subsidiary Pharmaceutical Partners of Canada, Inc. and our investment in Drug Source Company, LLC, which is accounted for using the equity method, but do not take into account the assets,
liabilities and results of operations of ABI or its wholly owned subsidiaries.

For accounting purposes, the merger between ABI and us is referred to as a
downstream merger with ABI viewed as the surviving entity rather than us, although we are the surviving entity for legal purposes. As such, the merger will be accounted for in ABIs consolidated financial statements as an implied acquisition of
our minority interest using the purchase method of accounting. Under this accounting method, our accounts, including goodwill, will be adjusted to reflect the minority interests share of any differences between their fair values and book
values as of the merger closing date. Our total fair value would be based on the weighted average market price of our common stock for the period three days prior to and three days subsequent to the merger announcement date.

Furthermore, because ABI will be treated as the continuing reporting entity for accounting purposes, our filed reports, as the surviving corporation in the merger, after
the date of the merger would parallel the financial reporting required under generally accepted accounting principles in the United States and SEC reporting rules as if ABI were the legal successor to its reporting obligation as of the date of the
merger. Accordingly, our financial statements, for all periods prior to the date of the merger, will be revised to reflect this basis of accounting.

In
connection with the merger, we issued to the shareholders of ABI 133,868,443 shares of our common stock, of which 8,609,652 shares were placed into escrow pursuant to the terms of an escrow agreement entered into between us, a representative of the
ABI shareholders and Fifth Third Bank, as escrow agent. The escrow agreement sets forth the mechanism for disbursement of the escrow funds. The 47,984,160 shares of our common stock that was previously held by ABI prior to the closing of the merger
were cancelled.

In addition and as contemplated by the merger agreement, we entered into a corporate governance and voting agreement and a registration
rights agreement with certain shareholders of ABI. The corporate governance and voting agreement sets forth certain agreements with the controlling shareholder and his affiliated entities regarding governance and voting matters relating to our
company after the consummation of the merger. The registration rights agreement sets forth certain registration obligations by us with respect to our common stock received by the former ABI shareholders in connection with the merger.

As a part of the merger, we also assumed two restricted unit plans established by ABI prior to the closing of the merger. Under the terms of first restricted unit plan
or RSU Plan I, the units granted under that plan vested upon the completion of the merger. As a result, the holders of these units received the right to acquire an aggregate 212,239 shares of our common stock upon the closing of the merger. The
212,239 shares of our common stock issuable upon the vesting of these units reduced the number of shares otherwise issuable to the shareholders of ABI at the effective time of the merger under the terms of the merger agreement. Under the terms of
the second restricted unit plan assumed by us in connection with the merger, The RSU Plan II, the units granted thereunder will vest one-half on the second anniversary of the merger and the balance on the fourth anniversary of the merger. The units
convert into the right to receive a number of our shares of common stock determined on each vesting date determined by the notional price that vests on such date divided by our average trading price over the three days prior to vesting; except that
if the average trading price of our stock price is less than $28.27, then the notional price is divided by $28.27. The maximum number of our shares that may be issuable under this restricted unit plan is 3,325,080 shares.

On April 18, 2006, we entered into an agreement with RSU Plan LLC, or the RSU LLC, an entity that is beneficially owned and controlled by the ABI shareholders existing
prior to the merger, including entities controlled by Dr. Soon-Shiong and owns a sufficient number of shares of our common stock to satisfy our obligations under the RSU Plan II. Under the terms of this agreement, the RSU LLC has agreed that prior
to the date on which restricted stock units issued pursuant to the RSU Plan II become vested, RSU LLC will deliver, or cause to be delivered, to us the number of our shares of common stock or cash, or a combination thereof, in an amount sufficient
to satisfy the obligations to participants under the RSU Plan II of the vested restricted units. We are required to satisfy our obligations under the RSU Plan II by paying to the participants in the RSU Plan II cash and/or shares of our common stock
in the same proportion as was delivered by the RSU LLC. The intention of this agreement is to have RSU LLC satisfy our obligations under RSU Plan II so that there would not be any further dilution to our stockholders as a result of our assumption of
the RSU Plan II.

We intend to file with the SEC the March 31, 2006 financial statements and pro-forma financial information of ABI as soon as practicable,
but in any event no later that 75 calendar days after the closing of the merger.



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2006 Outlook - Forward Looking Information

Our outlook for 2006 is as follows, including the impact of the recent AstraZeneca transaction:



| |  |  | Net sales and operating expenses of the core generic injectable business are expected to increase approximately 15 percent over 2005 levels;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The acquired AstraZeneca U.S. branded injectable business is expected to contribute an additional $75 million of revenue to the injectable business for the second half of 2006 with
margins of approximately 60 percent;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net sales of Abraxane® are expected to be in excess of $200 million;
| | - |  | --------------------------------------------------------------------



| |  |  | Overall gross margin is anticipated to be in the low 60 percent range relative to net sales;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | Selling and marketing expenses related to Abraxane® are expected to approximate $50 million for the full year 2006 including the impact of the cost sharing agreement with AstraZeneca;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating expenses related to Abraxis Research division activities are expected to approximate $60 million; and
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Incremental cash merger-related costs are expected to total $10 to 15 million.
| | - |  | ------------------------------------------------------------------------------

Additionally, as illustrated in the Pro Forma Condensed Consolidated Financial Statements provided in the Information Statement that we filed with the U.S. Securities and Exchange Commission on March 13, 2006, our 2006 operating
results will be impacted by various merger-related accounting items.



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RESULTS OF OPERATIONS

Three Months Ended March 31, 2006 and March 31, 2005

The table below sets forth the results of our operations for
the periods indicated, and forms the basis for the following discussion of our first quarter operating activities:



|                                             |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|-------------------------------------------- |  | ----------------------------------------------------- | ------- | - | ----------------------------- | - | ------- | - |  | - | ------- | - |  | --- | -
|                                             |  | Three Months Ended March 31,                          |         |   | Change Favorable(Unfavorable) |  
|                                             |  | 2006                                                  |         |   | 2005                          |   |         | $ |  |   | %       |  
|                                             |  | (in thousands, except per share data and percentages) |        
|Consolidated statement of income data:       |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Net sales                                    |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Anti-infective                               |  | $                                                     | 52,846  |   |                               | $ | 40,861  |   |  | $ | 11,985  |   |  | 29  | %
|Critical care                                |  |                                                       | 45,274  |   |                               |   | 34,610  |   |  |   | 10,664  |   |  | 31  | %
|Oncology                                     |  |                                                       | 43,986  |   |                               |   | 45,090  |   |  |   | (1,104  | ) |  | -2  | %
|Contract manufacturing and other             |  |                                                       | 1,648   |   |                               |   | 120     |   |  |   | 1,528   |   |  |     |  
|                                             |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Total net sales                              |  |                                                       | 143,754 |   |                               |   | 120,681 |   |  |   | 23,073  |   |  | 19  | %
|Cost of sales                                |  |                                                       | 63,655  |   |                               |   | 46,219  |   |  |   | (17,436 | ) |  |     |  
|                                             |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Gross profit                                 |  |                                                       | 80,099  |   |                               |   | 74,462  |   |  |   | 5,637   |   |  | 8   | %
|Percent to net sales                         |  |                                                       | 55.7    | % |                               |   | 61.7    | % |  |   |         |   |  |     |  
|Operating expenses:                          |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Research and development costs               |  |                                                       | 6,890   |   |                               |   | 5,926   |   |  |   | (964    | ) |  | -16 | %
|Percent to net sales                         |  |                                                       | 4.8     | % |                               |   | 4.9     | % |  |   |         |   |  |     |  
|Selling, general and administrative expenses |  |                                                       | 32,589  |   |                               |   | 32,828  |   |  |   | 239     |   |  | 1   | %
|Percent to net sales                         |  |                                                       | 22.7    | % |                               |   | 27.2    | % |  |   |         |   |  |     |  
|Equity in net income of Drug Source Co., LLC |  |                                                       | (476    | ) |                               |   | (539    | ) |  |   | (63     | ) |  | -12 | %
|                                             |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Total operating expenses                     |  |                                                       | 39,003  |   |                               |   | 38,215  |   |  |   | (788    | ) |  | -2  | %
|                                             |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Percent to net sales                         |  |                                                       | 27.1    | % |                               |   | 31.7    | % |  |   |         |   |  |     |  
|Operating income                             |  |                                                       | 41,096  |   |                               |   | 36,247  |   |  |   | 4,849   |   |  | 13  | %
|Percent to net sales                         |  |                                                       | 28.6    | % |                               |   | 30.0    | % |  |   |         |   |  |     |  
|Interest income                              |  |                                                       | 1,105   |   |                               |   | 585     |   |  |   | 520     |   |  | 89  | %
|Interest expense and other                   |  |                                                       | 179     |   |                               |   | 15      |   |  |   | 164     |   |  |     |  
|                                             |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Income before income taxes                   |  |                                                       | 42,380  |   |                               |   | 36,847  |   |  |   | 5,533   |   |  | 15  | %
|Provision for income taxes                   |  |                                                       | 14,833  |   |                               |   | 14,002  |   |  |   | (831    | ) |  |     |  
|                                             |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Net income                                   |  | $                                                     | 27,547  |   |                               | $ | 22,845  |   |  | $ | 4,702   |   |  | 21  | %
|                                             |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Income per common share:                     |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Basic                                        |  | $                                                     | 0.38    |   |                               | $ | 0.32    |   |  |   |         |   |  |     |  
|Diluted                                      |  | $                                                     | 0.37    |   |                               | $ | 0.31    |   |  |   |         |   |  |     |  
|Weighted-average common shares outstanding:  |  |                                                       |         |   |                               |   |         |   |  |   |         |   |  |     |  
|Basic                                        |  |                                                       | 72,606  |   |                               |   | 70,894  |   |  |   |         |   |  |     |  
|Diluted                                      |  |                                                       | 73,902  |   |                               |   | 73,919  |   |  |   |         |   |  |     |  

Net Sales

Net sales in the 2006 first quarter increased $23.1 million, or 19%, to $143.8 million as compared to the same 2005 quarter. Net sales of our core generic injectable products were $113.7 million, an increase of 32%,
versus $85.9 million as compared with the first quarter of 2005, due to strong demand, newly launched products and better availability of products from our Melrose Park facility.

Our 2006 first quarter, as compared to our 2005 first quarter saw growth in all three of our generic product categories. Net sales of anti-infective
products increased $12.0 million, or 29%, compared to the prior year first quarter driven by recently launched antibiotics. Net sales of oncology products, excluding Abraxane®, increased $2.9 million, or 27%, due to stronger demand for Melrose Park products and increased sales through the specialty oncology
distributor channels. Net



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first quarter sales of critical care products increased $10.7 million, or 31% as a result of continued strong demand and improved economics for certain
products. Abraxane® net sales for the quarter were
$30.1 million as compared to $34.1 million in the 2005 first quarter in which Abraxane® was launched. The 32% increase in first quarter 2006 core generic net sales over the prior year quarter, excluding Abraxane®, was comprised of a 8% unit volume increase and a 3% overall increase in price.

Gross Profit

As compared to the 2005
first quarter, gross profit increased $5.6 million, or 8%, due primarily to the higher volume in the current year quarter, partially offset by $5.7 million of profit sharing expense relating to Abraxane®. As a percentage of sales, gross profit was 55.7% in the first quarter of 2006 as
compared to 61.7% in the 2005 first quarter. The decrease can be attributed to Abraxane® profit sharing expense as well as product mix, as generic products were a greater portion of the 2006 first quarter sales. Gross margin as a percentage of net sales on our core generic injectable business
increased to 54.5% in the first quarter of 2006 versus 52.8% in the first quarter in 2005. The increase was a result of more favorable manufacturing variances as a result of higher volume, in addition to the introduction of new, higher margin
products late in 2005 and in the first quarter of 2006.

Research and Development (R&D)

First quarter 2006 R&D expense increased $1.0 million, or 16%, as compared to the 2005 first quarter due primarily to increased products in generic
development and Abraxane® scale-up toward EU
compliant production in the Grand Island facility, partially offset by lower spending in our Switzerland facility, which began production in the first quarter.

Selling, General and Administrative (SG&A)

As compared to the 2005 first quarter,
SG&A expense decreased $0.2 million, or 1%, as lower Abraxane® sales and marketing costs versus the 2005 launch quarter were offset by $1.2 million of merger related professional service fees.

Other Expenses

Drug Source Company, LLC, is 50% owned by one of our wholly owned subsidiaries, and
is a selling agent of raw material to the pharmaceutical industry, including us. Our investment in Drug Source Company is intended to both generate a return on our investment and to strengthen our strategic sourcing capabilities over time. Because
our 50% ownership interest in Drug Source Company does not provide financial or operational control of Drug Source Company, we account for our interest in Drug Source Company under the equity method. Our first quarter equity income in Drug Source
Company was $0.5 million in the respective 2006 and 2005 first quarters. Research and development expense includes raw material purchases from Drug Source Company of $0.1 million and $0.7 million for the three-month periods ended March 31, 2006
and 2005, respectively. Ending inventory included raw material purchased from Drug Source Company of $5.4 million at March 31, 2006 and $3.8 million at December 31, 2005.

Interest income consists primarily of interest earned on invested cash and interest earned on the intercompany note from American BioScience. Interest
income increased to $1.1 million in the first quarter of 2006 from $0.6 million for the first quarter of 2005 as a result of higher cash and short-term investment balances and higher interest rates. Interest expense and other consists primarily of
miscellaneous interest expense, the impact of foreign currency charges on intercompany trading accounts and other financing costs.

Provision for Income Taxes

Our effective income tax rate in the 2006 first quarter was 35.0% versus 38.0% in the prior year
quarter reflecting the continued benefit of various state and federal tax planning strategies and increased availability of tax credits.



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##### Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

Overview

The following table summarizes key elements of our financial position and sources and
(uses) of cash and cash equivalents for the periods identified:



|                                                                            |  |                             |         |   |                  |   |         |  
|--------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---------------- | - | ------- | -
|                                                                            |  | March 31,2006               |         |   | December 31,2005 |  
|                                                                            |  | (in thousands)              |        
|Summary Financial Position:                                                 |  |                             |         |   |                  |   |         |  
|Cash, cash equivalents and short-term investments                           |  | $                           | 150,003 |   |                  | $ | 81,194  |  
|                                                                            |  |                             |         |   |                  |   |         |  
|Working capital                                                             |  | $                           | 312,682 |   |                  | $ | 275,634 |  
|                                                                            |  |                             |         |   |                  |   |         |  
|Total assets                                                                |  | $                           | 550,835 |   |                  | $ | 515,447 |  
|                                                                            |  |                             |         |   |                  |   |         |  
|Total stockholders equity                                                  |  | $                           | 481,946 |   |                  | $ | 442,139 |  
|                                                                            |  |                             |         |   |                  |   |         |  
|                                                                            | 
|                                                                            |  | Three Months EndedMarch 31, |        
|                                                                            |  | 2006                        |         |   | 2005             |  
|                                                                            |  | (in thousands)              |        
|Summary of Sources and (Uses) of Cash and Cash Equivalents:                 |  |                             |         |   |                  |   |         |  
|Operating activities                                                        |  | $                           | 66,325  |   |                  | $ | (6,460  | )
|                                                                            |  |                             |         |   |                  |   |         |  
|Purchase of property, plant and equipment, product license rights and other |  | $                           | (6,280  | ) |                  | $ | (23,590 | )
|                                                                            |  |                             |         |   |                  |   |         |  
|Financing activities                                                        |  | $                           | 8,717   |   |                  | $ | 9,171   |  
|                                                                            |  |                             |         |   |                  |   |         |  

Capital Requirements

Our capital requirements depend on numerous factors, which will encompass the operations of ABI going forward, including:



| |  |  | working capital requirements and production, sales, marketing and development costs required to support Abraxane®, and our core injectable products;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | R&D spending to develop further product candidates, including clinical trials previously funded by ABI;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the need for manufacturing expansion and improvement;
| | - |  | -----------------------------------------------------



| |  |  | the cost to upgrade and expand our product development facilities;
| | - |  | ------------------------------------------------------------------



| |  |  | 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 presently anticipate that our 2006 capital expenditure requirements will approximate $50 million, excluding the acquisition of the Puerto Rico
facility from Pfizer.

Adequate funds for these and other purposes may not be available when needed or on terms acceptable to us, and we
may need to raise capital that may not be available on terms favorable or acceptable to us, if at all. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive or undesirable
covenants and costs. If we cannot raise money when needed, we may have to reduce or slow Abraxane®activity, reduce capital expenditures or scale back development of new products.



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Sources of Financing

We believe that our current cash and short-term investments, cash generated from operations, funds available under our revolving line of credit and the potential ability to issue debt or equity securities under our
shelf registration will be sufficient to finance our operations, product development and capital expenditures for at least the next 12 months. In the event we engage in future acquisitions we may have to raise additional capital through additional
borrowings or the issuance of debt or equity securities or otherwise.

Sources and Uses of Cash

Operating Activities

In the first
three months of 2006, net cash provided by operating activities was $66.3 million as compared to the $6.5 million of cash used in operations in the first three months of 2005. The increase in cash provided by operations for the first three months of
2006 was due primarily to a $42.1 million reduction in year end accounts receivable and strong first quarter earnings, partially offset by increased inventory and a reduction of accounts payable.

Investing Activities

Our investing
activities have consisted principally of capital expenditures necessary to expand and maintain our manufacturing capabilities and infrastructure and, to a lesser extent, outlays necessary to acquire various product or intellectual property rights.

Also included in investing activities in the first three months of 2006 and 2005 were a use of $45.8 million and a source of $35.8
million, respectively, related to our net purchases or sales of short-term, highly liquid, available for sale, municipal variable rate demand notes. These investments are recorded at cost, and may generally be redeemed upon seven days notice.

Net cash used for the acquisition of property, plant and equipment totaled $5.7 million and $8.3 million in the first three months of 2006
and 2005, respectively, and in both periods was due primarily to investment in our core manufacturing and development capabilities. In the first quarter of 2005, purchase of product license rights included a $15.0 million license payment to American
BioScience resulting from the FDAs January 2005 approval of Abraxane®. The $15.0 million Abraxane®milestone payment has been capitalized
and is being amortized over seven years.

Financing Activities

Financing activities generally include cash flows from the proceeds from the exercise of employee stock options, the issuance or repurchase of our common
stock and transactions with American BioScience. Net cash provided by financing activities totaled $8.7 million in the first three months of 2006 as compared to $9.3 million in the same period last year, and in each period consisted primarily of
cash proceeds from the exercise of employee stock options and sale of stock through our employee stock purchase program.

ABRAXANE®LICENSE AND MANUFACTURING AGREEMENT

Prior to the closing of the merger with ABI on April 18, 2006, we licensed the exclusive North American marketing rights and the worldwide
manufacturing rights for Abraxane®from ABI. Following the closing of our merger with ABI,
the license agreement effectively ceased to exist. The FDA approved Abraxane®, for the
filed indication on January 7, 2005 and Abraxane®was launched on February 7,
2005.

In November 2001, we signed a perpetual license agreement with ABI under which we acquired the exclusive rights to market and sell
Abraxane®in North America for indications relating to breast, lung, ovarian, prostate and
other cancers. Under the agreement, we made an initial payment to ABI of $60.0 million and committed to future milestone payments contingent upon achievement of specified regulatory, publication and sales objectives for licensed indications. Prior
to the closing of the merger, ABI was responsible for conducting the clinical studies in support of Abraxane®and for substantially all costs associated with the development and obtaining regulatory approval for Abraxane®. We are now responsible for these costs.

Under the license agreement, profit on our sales
of Abraxane®in North America was shared equally between ABI and us. The license agreement
defined profit as Abraxane®net sales less cost of goods sold, selling expenses (including
pre-launch production and other expenses which we have expensed as incurred, but which were charged against first profit under the agreement) and an allocation of related general and administrative expenses. We expensed ABIs share of any
profit



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earned in our statements of income as an element of cost of sales. During the first quarter we expensed $5.7 million of profit sharing fees related to
Abraxane®.

The terms of the license agreement were negotiated to reflect the value of the licensed product rights acquired, then in late-stage development, ABIs remaining obligation to complete the NDA filing and the
potential sales of the product under licensed clinical indications. The license agreement was a product of several months of extensive negotiation with ABI involving outside counsel, investment banks and a nationally recognized valuation firm. Based
upon the analysis and recommendations of our advisors, we believe that the overall terms of the agreement were fair to us, including in comparison to similar licenses between unrelated parties. The agreement was unanimously approved by the
disinterested members of our Board of Directors, with those directors who also have an affiliation with ABI recusing themselves from the vote. There are no restrictions on how ABI would use payments made under the license agreement and we understand
such payments have been and will be used both to fund the development of Abraxane®in
relation to our licensed product rights and for other purposes.

In December 2001, in conjunction with our initial public offering, we
recorded an initial payment due ABI of $60.0 million. In our financial statements, the license agreement was accounted for as an asset contributed by a principal shareholder using the shareholders historical cost basis, which was zero, and the
$60.0 million payment was accounted for as a distribution of stockholders equity. For income tax purposes, the payment was recorded as an asset and is being amortized over a 15-year period. Because there was no corresponding charge to income,
the income tax benefit of this payment is being credited to stockholders equity as realized.

Under the license agreement, ABI earned
milestone payments upon the filing and approval of Abraxane®for metastatic breast cancer
indication. The first such milestone of $10.0 million was achieved in May 2004 when the FDA accepted ABIs NDA for the metastatic breast cancer indication. This payment was expensed and paid in the second quarter of 2004. The FDA then approved
Abraxane®for the filed indication in January 2005, triggering a $15.0 million milestone
payment in the first quarter of 2005, which has been capitalized and is being amortized over the expected life of the product, subject to periodic review for impairment.

In November 2001, along with the license agreement for Abraxane®, we also entered into a manufacturing agreement with ABI under which we agreed to manufacture Abraxane®for ABI and its licensees for sales outside North America. Under this agreement, we had the right to manufacture Abraxane®worldwide. For sales outside of our licensed territories, we would charge ABI and its licensees a customary margin on our
manufacturing costs based on whether the product would be used for clinical trials or commercial sale. The initial term of this agreement was ten years and could be extended for successive two-year terms by ABI.

CRITICAL ACCOUNTING POLICIES AND 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in our consolidated financial statements are discussed below.
Actual results could vary from those estimates.

Revenue Recognition

We recognize revenue from the sale of a product when title and risk of loss have transferred to the customer, collection is reasonably assured and we have
no further performance obligation. This is typically when the product is received by the customer. At the time of sale, as further described below, we reduce sales and provide for estimated chargebacks, contractual allowances or customer rebates,
product returns and customer credits and cash discounts. Our methodology used to estimate and provide for theses sales provisions was consistent across all periods presented. Historically, Medicaid rebates issued have not been material; however we
anticipated and in 2005 have provided for, an increase in Medicaid rebates as a result of the February 2005 launch of Abraxane®. Accruals for sales provisions are presented in our financial statements as a reduction of net revenue and accounts receivable and, for contractual allowances, an increase in accrued liabilities. We
regularly review information related to these estimates and adjust our reserves accordingly if, and when, actual experience differs from estimates.

We have extensive, internal historical information on chargebacks, rebates and customer returns and credits which we use as the primary factor in determining the related reserve requirements. As further described below, due to the nature of
our generic injectable products and their primary use in hospital and clinical settings with generally consistent demand, we



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believe that this internal historical data, in conjunction with periodic review of available third-party data and updated for any applicable changes in
available information provides a reliable basis for such estimates.

Sales to our three major wholesale customers comprised 69% of our 2006
net sales. We periodically review the wholesale supply levels of our significant products by reviewing inventory reports purchased or available from wholesalers, evaluating our unit sales volume, and incorporating data from third-party market
research firms and periodic visits to wholesalers warehouses. Based on these activities, we attempt to keep a consistent wholesale stocking level of approximately two- to six-weeks across our generic products. The buying patterns of our
customers do vary from time to time, both from customer to customer and product to product, but we believe that historic wholesale stocking or speculative buying activity in our generic distribution channel has not had a significant impact on our
historic sales comparisons or sales provisions.

To date we have not entered into any inventory management agreements with any of our
wholesale customers which would require us to pay a fee in connection with their distribution of our products or other services, possibly including sales data and other services and contractual rights for us, but we may be required to enter into
such agreements in the future in order to maintain our relationships with such wholesalers. We are unable to ascertain the potential impact of any such agreements on our cost of sales, but do not believe that such agreements would result in a
substantial change in wholesale stocking levels of our products as compared to current levels.

Our sales provisions totaled $145.8 million
and $132.2 million in the first three months of 2006 and 2005, respectively, and related reserves totaled $88.0 million and $84.7 million at March 31, 2006 and December 31, 2005, respectively.

Chargebacks

Following industry
practice, we typically sell our products to independent pharmaceutical wholesalers at wholesale list price. The wholesaler in turn sells our products to an end user, normally a hospital or alternative healthcare facility, at a lower contractual
price previously established between us and the end user via a group purchasing organization, or GPO. GPOs enter into collective purchasing contracts with pharmaceutical suppliers to secure more favorable product pricing on behalf of their end-user
members.

Our initial sale to the wholesaler, and the resulting receivable, are recorded at our wholesale list price. However, as most of
these selling prices will be reduced to a lower end-user contract price, at the time of sale revenue is reduced by, and a provision recorded for, the difference between the list price and estimated end-user contract price multiplied by the estimated
wholesale units outstanding pending chargeback that will ultimately be sold under end-user contracts. When the wholesaler ultimately sells the product to the end user at the end-user contract price, the wholesaler charges us, a chargeback, for the
difference between the list price and the end-user contract price and such chargeback is offset against our initial estimated contra asset. The most significant estimates inherent in the initial chargeback provision relate to wholesale units pending
chargeback and the ultimate end-user contract-selling price. We base our estimation for these factors primarily on internal, product-specific sales and chargeback processing experience, estimated wholesaler inventory stocking levels, current
contract pricing and our expectation for future contract pricing changes.

Our net chargeback reserve totaled $49.4 million and $47.9
million at March 31, 2006 and December 31, 2005, respectively. The methodology we used to estimate and provide for chargebacks was consistent across all periods presented. Due to information constraints in the distribution channel, it has
not been practical, and has not been necessary, for us to capture and quantify the impact of current versus prior year activity on the chargeback provision. We do review current year chargeback activity to determine whether material changes in the
provision relate to prior period sales; such changes have not been material. A one percent decrease in our estimated end-user contract-selling prices would reduce first quarter 2006 net sales by $0.5 million and a one percent increase in wholesale
units pending chargeback at March 31, 2006 would decrease 2006 net sales by $0.6 million.



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Contractual Allowances, Returns and Credits, Cash discounts and Bad Debts

Contractual allowances, generally rebates or administrative fees, are offered to certain wholesale customers, GPOs and end-user customers, consistent with
pharmaceutical industry practices. Settlement of rebates and fees may generally occur from one to 15 months from date of sale. We provide a general provision for contractual allowances at the time of sale based on the historical relationship between
sales and such allowances. Upon receipt of chargeback, due to the availability of product and customer specific information on these programs, we then establish a specific provision for fees or rebates based on the specific terms of each agreement.
Our reserve for contractual allowances totaled $14.0 million at March 31, 2006, comparable to the $12.2 million balance at December 31, 2005. A one-percent increase in the estimated rate of contractual allowances to sales at March 31,
2006 would increase the provision for contractual allowances by $2.2 million at that point in time. Contractual allowances are reflected in the financial statements as a reduction of net sales and as a current accrued liability.

Consistent with industry practice, our return policy permits our customers to return products within a window of time before and after the expiration of
product dating. We provide for product returns and other customer credits at the time of sale by applying historical experience factors generally based on our historic data on credits issued by credit category or product, relative to related sales
and we provide specifically for known outstanding returns and credits. Our reserve for customer credits and product returns totaled $18.2 million and $16.3 million at March 31, 2005 and December 31, 2005, respectively. At March 31,
2006, a one percent increase in the estimated reserve requirements for customer credits and product returns would have decreased net sales for the first three months of 2006 by $1.1 million.

We generally offer our customers a standard cash discount on generic injectable products for prompt payments and, from time-to-time, may offer a greater
discount and extended terms in support of product launches or other promotional programs. Our wholesale customers typically pay within terms and a provision for cash discount is established at the time of sale based on the terms of sale.

We establish a reserve for bad debts based on general and identified customer credit exposure. Our historic bad debt losses have been insignificant.

Inventories

Inventories consist of products currently approved for marketing and may include certain products pending regulatory approval. From time to time, 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. If final regulatory approval for such products is denied or delayed, we may need to provide for and
expense such inventory.

At March 31, 2006, inventory included $4.3 million in cost relating to generic products pending FDA approval
on that date. At March 31, 2006 inventory included 24 items that were awaiting approval and individually no specific items were great than 1% of total inventory. In the event that the FDA approval is unduly delayed or denied we may have to
provide for and expense all, or a portion of, such inventory. At December 31, 2005, inventory included $9.5 million in cost relating to generic products pending FDA approval on that date. Included in the amount pending approval at
December 31, 2005 was $7.4 million of Ceftriaxone, which was approved by the FDA in February 2006.

We routinely review our inventory
and establish reserves when the cost of the inventory is not expected to be recovered or our product cost exceeds realizable market value. In instances where inventory is at or approaching expiry, is not expected to be saleable based on our 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. In evaluating the market value of inventory pending regulatory approval as compared to
its cost, we consider the market, pricing and demand for competing products, our anticipated selling price for the product and the position of the product in the regulatory review process. Provisions for inventory reserves are reflected in the
financial statements as an element of cost of sales with inventories presented net of related reserves.



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Expense Recognition

Cost of sales represents the costs of the products which we have sold and consists of labor, raw materials, components, packaging, quality assurance and quality control, shipping and manufacturing overhead costs and
the cost of finished products purchased from third parties.

Research and development costs are expensed as incurred or consumed and
consist primarily of salaries and other personnel-related expenses, as well as depreciation of equipment, allocable facility, raw material and production expenses and contract and consulting fees. We have invested and will continue to invest in
research and development to expand our new product offerings, enhance our manufacturing capabilities and grow our business.

Selling,
general and administrative expenses consist primarily of salaries, commissions and other personnel-related expenses, as well as costs for travel, trade shows and conventions, promotional material and catalogs, advertising and promotion, facilities,
risk management and professional fees. We believe that our selling, general and administrative expenses will continue to increase in line with the growth of our core generic and proprietary business.

Stock-Based Compensation

We account
for stock based compensation in accordance with FAS 123(R), which requires the recognition of compensation cost for all share-based payments (including employee stock options) at fair value. Effective January 1, 2006, we adopted the provisions
of FAS No. 123(R) using a modified version of retrospective application. As a result, the fair value of stock-based employee compensation was recorded as an expense in the current year, in addition, our prior year results have been restated as
if we had used the fair value method during previous periods. The company uses the straight-line attribution method to recognize share-based compensation expenses over the vesting period of the award. Options currently granted by the company
generally expire ten years from the grant date. Options granted to existing and newly hired employees generally vest ratably over a four year period.

Stock-based compensation recognized in 2006 as a result of the adoption of FAS 123(R), as well as expense associated with the retrospective application, use the Black-Scholes option pricing model for estimating the
fair value of options granted under our equity incentive plans and rights to acquire stock granted under the companys stock participation plan. Pre-tax stock-based employee compensation costs for the three-month periods ended March 31,
2006 and 2005 were $2.7 million and $3.1 million, respectively. Also in connection with the retrospective application, our December 31, 2005 balance sheet presented reflects an increase in the deferred tax benefit of $2.1 million, an increase
in additional paid-in capital of $18.9 million and a decrease in retained earnings of $18.0 million. The cash flow statement reflects a decrease in cash flow from operating activities and a corresponding increase to cash provided by financing
activities of $3.8 million.

Refer to Note 8, Stock Options and Restricted Stock, in the footnotes to the condensed consolidated financial
statements for a detail of financial statement changes caused by the retrospective application.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our activities without increasing 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
intend to maintain an investment portfolio of cash equivalents and short-term investments consisting of high credit quality securities, including commercial paper, government and non-government debt securities and money market funds. We do not use
derivative financial instruments. The average maturity of the debt securities in which we invest has been less than 90 days and the maximum maturity has been three months. Because our investments are diversified and are of a short-term nature, a
hypothetical one or two percentage point change in interest rates would not have a material effect on our consolidated financial statements.

We have operated primarily in the United States and the majority of our activities with our collaborators outside the United States to date have been conducted in U.S. dollars. Our more significant currency risks are denominated in the
Canadian and Australian dollars and Swiss Franc. We do not believe we have a material exposure to foreign currency risk because of the relative stability of these currencies in relation to the U.S. dollar. A 10% adverse change in currency exchange
rates of the Canadian or Australian dollars or Swiss Franc versus the U.S. dollar would not have a material effect on our consolidated results of operations, financial position, or cash flows. Accordingly, we have not had any material exposure to
foreign currency exchange rate fluctuations.



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|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

(a)Evaluation of disclosure
controls and procedures.

We have carried out an evaluation, under the supervision and with the participation of management, including our chief
executive officer and our chief financial officer of the effectiveness of our internal disclosure controls and procedures as of the end of the period covered by this report. Based on their evaluation, our chief executive officer and chief financial
officer have concluded that our disclosure controls and procedures 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 are functioning effectively to provide reasonable assurance that we can meet our disclosure obligations. Consistent with the SECs recommendations to public companies, we
have formed a disclosure committee consisting of key personnel designed to review the accuracy and completeness of all disclosures made by us.

(b)Changes in internal controls.

There were no changes in our internal controls over financial reporting that occurred during the quarter ended March 31,
2006. Our review of internal controls over financial reporting did not include the internal controls of American BioScience, Inc., a material business that was acquired on April 18, 2006.



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PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

In December 2004, one of our former officers and
employees and a former director of ABI filed a demand for arbitration with the American Arbitration Association against us and Dr. Soon-Shiong, our Chief Executive Officer. In August 2005, this individual filed an amended arbitration demand
adding ABI as a defendant. In the arbitration, this individual asserts that we improperly terminated his employment and that the defendants breached various promises allegedly made to him. This individual is seeking various forms of relief,
including monetary damages and equity interests in us and ABI. We have filed a counterclaim in the arbitration, claiming that the former employee breached his duties and obligations to us and was negligent in the performance of his duties. We are
seeking unspecified damages. The arbitration has been set to begin in June 2006. We intend to vigorously defend this claim and do not believe that this claim will have a material adverse effect on us.

On or about December 7, 2005 several stockholder derivative and class action lawsuits were filed against us, our directors and ABI in the Delaware Court of Chancery
relating to the recently completed merger between us and ABI. We are a nominal defendant in the stockholder derivative actions. The lawsuits allege that our directors breached their fiduciary duties to our stockholders by causing us to enter into
the merger agreement and for not providing full and fair disclosure to our stockholders, regarding the recently completed merger, which it is alleged caused the value of the shares held by our public stockholders to be significantly diminished. The
lawsuits seek, among other things, an unspecified amount of damages and rescinding the merger. We intend to vigorously defend these actions and do not believe that these actions will have a material adverse effect on us.

We are from time to time subject to claims and litigation arising in the ordinary course of business. These claims have included assertions that our products infringe
existing patents and also claims that the use of our products has caused personal injuries. 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, will not have a material adverse effect on our consolidated financial position or results of operations.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

The recently completed merger is expected to
result in benefits, but we may not realize those benefits due to challenges associated with integrating the merged companies or other factors.

The success of the merger will depend in part on the success of our management in integrating our operations, technologies and personnel with those of ABI. Our inability to meet the challenges involved in integrating
successfully these operations or otherwise to realize any of the anticipated benefits of the merger could seriously harm our results of operations. In addition, the overall integration of the two companies may result in unanticipated operations
problems, expenses, liabilities and diversion of managements attention. The challenges involved in integration include:



| |  |  | integrating the two companies operations, technologies and products;
| | - |  | ---------------------------------------------------------------------



| |  |  | coordinating and integrating sales and marketing, research and development and manufacturing functions;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | demonstrating to our customers that the merger will not result in adverse changes in business focus;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | assimilating the personnel of both companies and integrating the business cultures of both companies;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | consolidating corporate and administrative infrastructures and eliminating duplicative operations; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | maintaining employee morale and motivation.
| | - |  | -------------------------------------------

We may not
be able to successfully integrate our operations with that of ABI in a timely manner, or at all, and we may not realize the anticipated benefits of the merger, including synergies or sales or growth opportunities, to the extent or in the time frame
anticipated. The anticipated benefits and synergies of the merger are based on assumptions and current expectations, not actual experience, and assume a successful integration. In addition to the potential integration challenges discussed above, our
ability to realize the benefits and synergies of the business combination could be adversely impacted to the extent that our or ABIs relationships with existing or potential customers, suppliers or strategic partners is adversely affected as a
consequence of the merger, or by practical or legal constraints on its ability to combine operations. Furthermore, financial projections based on these assumptions relating to integration may not be correct if the underlying assumptions prove to be
incorrect.

Our historical financial statements and any pro forma financial statements that we have filed may not be indicative of our future
financial condition or results of operations.

Our historical financial statements and any pro forma financial statements that we
have filed or may file may not be indicative of the combined companys financial condition or results of operations following the merger for several reasons.



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Our historical statements will not be indicative of the future results of operations of the combined
company, which will integrate additional operations and expenses. The pro forma financial statements will be derived from the financial statements of APP and ABI and certain adjustments and assumptions have been made regarding the combined company
after giving effect to the merger. The information upon which these adjustments and assumptions will be made is preliminary, and these kinds of adjustments and assumptions are difficult to make with complete accuracy. Moreover, the pro forma
financial statements will not reflect all costs that were incurred by the combined company in connection with the merger. For example, the impact of any incremental costs incurred in integrating the two companies will not be reflected in the pro
forma financial statements. As a result, the actual financial condition and results of operations of the combined company may not be consistent with, or evident from, the pro forma financial statements.

If Abraxane® does not achieve strong market acceptance, our future profitability could be adversely affected and we would be unable to recoup the investments made to commercialize this product.

We have made and 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, expansion of our marketing, sales and manufacturing staff, the acquisition of paclitaxel raw material, and the manufacture of finished product. The success of Abraxane® in the Phase III trial for metastatic breast cancer may not be representative of the
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
| | - |  | ----------------------------------------------------------------------



| |  |  | adverse events occurring during the clinical trials
| | - |  | ---------------------------------------------------

Although approved by the U.S. Food and Drug Association, or the FDA, for the indication of metastatic breast cancer in January 2005, Abraxane®may not generate sales sufficient to recoup our investment. In the first quarter of 2006 our net sales of Abraxane®was $30.1 million, which represented approximately 21.1% of our total net sales. We anticipate that
sales of Abraxane®will remain a significant portion of our net sales 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®. Our inability to successfully manufacture, market and commercialize Abraxane®could cause us to lose some of the investment we have made and will continue to make to commercialize
this product.

If we are unable to develop and commercialize new products, our financial condition will deteriorate.

Profit margins for a pharmaceutical product generally decline as new competitors enter the market. As a result, our future success will depend on our
ability to commercialize the product candidates we are currently developing, as well as develop new products in a timely and cost-effective manner. We have over 60 new product candidates under development with more than 23 Abbreviated New Drug
Applications for new injectable products currently pending at the FDA. Successful development and commercialization of our product candidates will require significant investment in many areas, including research and development and sales and
marketing, and we may not realize a return on those investments. In addition, development and commercialization of new products are subject to inherent risks, including:



| |  |  | failure to receive necessary regulatory approvals
| | - |  | -------------------------------------------------



| |  |  | difficulty or impossibility of manufacture on a large scale
| | - |  | -----------------------------------------------------------



| |  |  | prohibitive or uneconomical costs of marketing products
| | - |  | -------------------------------------------------------



| |  |  | inability to secure raw material or components from third-party vendors in sufficient quantity or quality or at a reasonable cost
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | failure to be developed or commercialized prior to the successful marketing of similar or superior products by third parties
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | lack of acceptance by customers
| | - |  | -------------------------------



| |  |  | impact of authorized generic competition
| | - |  | ----------------------------------------



| |  |  | infringement on the proprietary rights of third parties
| | - |  | -------------------------------------------------------



| |  |  | grant of new patents for existing products may be granted, which could prevent the introduction of newly-developed products for additional periods of time
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | grant to another manufacturer by the FDA of a 180-day period of marketing exclusivity under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman
Act, as patents or other exclusivity periods for brand name products expire
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The timely and continuous introduction of new products is critical to our business. Our financial
condition will deteriorate if we are unable to successfully develop and commercialize new products.

If sales of our key products decline, our
business may be adversely affected.

Our top ten products, including Abraxane®, comprised approximately 56% of our 2006 first quarter net sales. Our key products
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
| | - |  | ---------------------------------------------------------------



| |  |  | substitute or alternative products or therapies
| | - |  | -----------------------------------------------



| |  |  | development by others of new pharmaceutical products or treatments that are more effective than our products
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | introduction of other generic equivalents or products which may be therapeutically interchanged with our products
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | interruptions in manufacturing or supply
| | - |  | ----------------------------------------



| |  |  | changes in the prescribing practices of physicians
| | - |  | --------------------------------------------------



| |  |  | changes in third-party reimbursement practices
| | - |  | ----------------------------------------------



| |  |  | migration of key customers to other manufacturers or sellers
| | - |  | ------------------------------------------------------------

Any factor adversely affecting the sale of our key products may cause our revenues to decline.

Proprietary product development efforts may
not result in commercial products.

We intend to maintain an aggressive research and development program for our 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.
| | - |  | ------------------------------------------------------------------------------

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 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. 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.



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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.

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, New Mexico and West Virginia, 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. 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 perform additional clinical trials or change the labeling of our products if side effects or manufacturing problems are identified after the
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 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 any of our products are
approved for commercial use, we or regulatory bodies could decide that changes to our 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 reformulate those products, to conduct additional clinical trials, to make changes to our manufacturing processes, or to seek re-approval of our manufacturing facilities. Significant concerns about the safety and effectiveness of a product could
ultimately lead to the revocation of its 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.

The manufacture of our products is highly exacting and complex, and if we or our suppliers encounter production problems, our business may suffer.

All of the pharmaceutical products we make are sterile, injectable drugs. We also purchase some such products from other companies.
Additionally, the process for manufacturing the nano-particle product Abraxane® is relatively new and unique. The manufacture of all our 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, lost revenue, time and expense spent in
investigating the cause, and, depending on the cause, similar losses with respect to other batches or products. If such problems are not discovered before the product is released to the market, recall costs may also be incurred. To the extent we
experience problems in the production of our pharmaceutical products, this may be detrimental to our business, operating results and reputation.

Our
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. Most of our products are generic injectable versions of brand name products that are still being marketed by
proprietary pharmaceutical companies. The first company to market a generic product is often initially able to achieve high sales, profitability and market share with respect to that product. Prices, revenue and market size for a product typically
decline, however, as additional generic manufacturers enter the market.

We face competition from major, brand name pharmaceutical
companies as well as generic manufacturers such as Hospira, Bedford Laboratories, Baxter Laboratories (including Elkin-Sinn), Sicor Inc. (recently acquired by Teva) and Mayne Pharma (Faulding Pharmaceuticals) and, in the future, increased
competition from new, foreign competitors. Smaller and foreign companies may also prove to be significant competitors, particularly through collaboration arrangements with



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large and established companies. Abraxane® competes, directly or indirectly, with the primary taxanes in the market place, including Bristol Myers Taxol® and its generic equivalents, 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.

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. 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.

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. Generic drug manufacturers agreements with federal and state governments provide that the manufacturer will remit to each state Medicaid agency, on a
quarterly basis, 11% of the average manufacturer price for generic products marketed and sold under abbreviated new drug applications covered by the states Medicaid program. For 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, including Abraxane®. 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.

If we are unable to maintain our key
customer arrangements, sales of our products and revenue would decline.

Almost all injectable pharmaceutical products are sold to
customers through arrangements with group purchasing organizations, or GPOs, and distributors. The majority of hospitals contract with the GPO of their choice for their purchasing needs. We currently derive, and expect to continue to derive, a large
percentage of our revenue from customers that are members of a small number of GPOs. Currently, fewer than ten GPOs control a large majority of sales to hospital customers. We have purchasing arrangements with the major GPOs in the United States,
including AmeriNet, Inc., Broadlane Healthcare Corporation, Consorta, Inc., MedAssets Inc., Novation, LLC, Owen Healthcare, Inc., PACT, LLC, Premier Purchasing Partners, LP, International Oncology Network, or ION, National Oncology Alliance, or NOA,
and U.S. Oncology, Inc. In order to maintain these relationships, we believe we need to be a reliable supplier, offer a broad product line, remain price competitive, comply with FDA regulations and provide high-quality products. The GPOs through
which we sell our products also have purchasing agreements with other manufacturers that sell competing products and the bid process for products such as ours is highly competitive. Most of our GPO agreements may be terminated on short notice. If we
are unable to maintain our arrangements with GPOs and key customers, sales of our products and revenue would decline.

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 product candidates.

We may license rights to or acquire products from third parties. Additionally, we are in the process of establishing our capabilities in biologic generic
products so that we may be able to offer such products when regulatory approvals and patents allow for such products. 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. We may not be able to license rights to or



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acquire these proprietary, or other, products 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 our current products, and we may not be able to compete favorably in any new product category.

We are subject to restrictive and negative covenants under our $450 million three-year revolving credit facility, which may prevent us from capitalizing on
business opportunities and taking some actions.

On April 18, 2006, we entered into a credit agreement with a syndicate of
banks for a $450 million three-year unsecured revolving credit facility, with a sublimit for up to $10 million for standby and commercial letters of credit and $20 million for swing line loans. Among other things, the credit agreement restricts the
payment of dividends by us, and restricts our ability to incur indebtedness and make future loans to third parties, other than under circumstances set forth in the credit agreement. In addition, our ability to borrow under this credit facility is
subject to our ongoing compliance with certain financial and other covenants, such as minimum net worth, maximum funded debt to EBITDA ration and maximum EBITDA to interest expense ratio. We cannot assure that these operational and financial
covenants will not hinder our ability to finance future operations or capital needs or to pursue available business opportunities, including the purchase of additional facilities. A breach of any of these covenants or our inability to maintain the
required financial ratios could result in a default under this credit facility. If a default occurs, the relevant lenders could elect to declare the outstanding indebtedness, together with accrued interest and other fees, to be immediately due and
payable. Further, we may require additional capital in the future to expand business operations, acquire businesses or facilities, or replenish cash expended sooner than anticipated and such additional capital may not otherwise be available on
satisfactory terms.

Entities affiliated with our Chief Executive Officer 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.

As of
May 8, 2006, entities affiliated with our chief executive officer owned approximately 84.2% of our 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. Although these entities have executed a corporate governance and voting agreement in connection with the merger, that
agreement will terminate by its terms no later than the 2007 annual stockholders meeting. 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.

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, Each of the members of the executive management team is employed at will. Only Carlo Montagner, president of Abraxis Oncology, a division of our company, has
an employment agreement with us. 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 operations.

To be successful, we must attract, retain and motivate executives and other key employees. Employees of APP and ABI may experience uncertainty about their
future roles with the combined company until or after strategies for the combined company are announced or executed. These circumstances 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, which effort may be adversely affected as a result of the uncertainty and difficulties with integrating APP and ABI.



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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 our products requires 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. Additionally, 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 is necessary. In the past, we have experienced shortages in some of the raw materials and components we purchase. 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.

Other companies may claim that we infringe 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. Infringement litigation is prevalent with respect to generic versions of products for which the patent covering the brand name product is expiring, particularly since many
companies which market generic products focus their development efforts on products with expiring patents. 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 are 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 our current products, products we may develop or products we may license. 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
| | - |  | -----------



| |  |  | 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, in some cases, patent protection to preserve our competitive position. Our patents and those for which we have 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 license, or that may be license 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 our 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



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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.

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 anti-kickback, 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 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 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. Historically we have carried product liability insurance and we expect to continue such policies. Product liability claims, regardless of their merits, could exceed
policy limits, divert managements attention, and adversely affect our reputation and the demand for our products.

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.

Failure to comply with internal control attestation requirements could lead to loss of public confidence in our financial statements and negatively
impact our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in each Annual
Report on Form 10-K, managements assessment of the effectiveness of our internal control over financial reporting. Furthermore, our independent registered public accounting firm is required to attest to whether managements assessment of
the effectiveness of internal controls over financial reporting is fairly stated in all material respects and separately report on whether it believes we maintained, in all material respects, effective internal control over financial reporting. ABI,
as a privately held company, was not required to review or assess its internal control procedures. Following the merger, we are required to modify and apply the disclosure controls and procedures, internal controls and related corporate governance
policies to include the current operations of ABI. If we fail to timely complete the development of the combined companys internal controls and management is unable to make this assessment, or if the independent registered public accounting
firm cannot timely attest to this assessment, we could be subject to regulatory sanctions and a loss of public confidence in its internal control and the reliability of our financial statements, which ultimately could negatively impact our stock
price.

Any future acquisitions and other material changes in our operations likely will require us to expand and possibly revise our
disclosure controls and procedures, internal controls and related corporate governance policies. In addition, the new and changed laws and regulations are subject to varying interpretations in many cases due to their lack of specificity and, as a
result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. If our efforts to comply with new or changed laws and regulations differ from the conduct intended by regulatory or governing
bodies due to ambiguities or varying interpretations of the law, we could be subject to regulatory sanctions, our reputation may be harmed and our stock price may be adversely affected.

Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect its reporting of transactions
completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may
adversely affect our reported financial results or the way it conducts business. For



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example, on December 16, 2004, the Financial Accounting Standards Board, or FASB issued Statement of Financial Accounting Standards, or FAS 123(R).
FAS 123(R) requires that employee stock-based compensation be measured based on its fair-value on the grant date and treated as an expense that is reflected in the financial statements over the related service period. In April 2005, the SEC adopted
an amendment to Rule 4-01(a) of Regulation S-X that delays the implementation of FAS 123(R) until the first interim or annual period of the registrants first fiscal year beginning on or after June 15, 2005. As a result, we have adopted
FAS 123(R) in the first quarter of 2006 using the modified retrospective approach. Under this approach, the fair value of stock-based employee compensation was recorded as an expense in the current year, in addition, our prior year results have been
restated as if we had used the fair value method during previous periods. The adoption of FAS 123(R) is expected to have a material adverse effect on our results of operations for 2006 and subsequent periods. However, we do not believe the
application of FAS 123(R) will have a direct impact on our overall financial position or liquidity.

Our earnings per share may decline as a
result of the merger, which may adversely affect the market price of our common stock

Our merger with ABI is expected to be
dilutive to our earnings per share over the next several years due to the number of our shares of common stock that were issued, the limited amount of current ABI revenue, incremental ABI expenses, ABIs restricted stock unit plan, the
amortization of the purchase price step-up and other acquisition-related changes.

Future sales of substantial amounts of our common stock may
adversely affect our market price.

In connection with the merger, we have issued a significant number of additional shares of our
common stock to a small number of ABI shareholders. Although such shares are not immediately freely tradeable, we have granted registration rights to the ABI shareholders to permit the resale of the shares of our common stock that they have received
in the merger. Future sales of substantial amounts of our common stock into the public market, or perceptions in the market that such sales could occur, may adversely affect the prevailing market price of our common stock.

Our stock price has been volatile in response to market and other factors.

The market price for our common stock has been and may continue to 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:



| |  |  | the increased concentration of the ownership of our shares by a limited number of affiliated stockholders following the merger may limit interest in our securities;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | variations in quarterly operating results from the expectations of securities analysts or investors;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | revisions in securities analysts estimates or reductions in security analysts coverage;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | announcements of technological innovations or new products or services by us or our competitors;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | reductions in the market share of our products;
| | - |  | -----------------------------------------------



| |  |  | the inability to increase the market share of Abraxane® at a sufficient rate;
| | - |  | -----------------------------------------------------------------------------



| |  |  | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | general technological, market or economic trends;
| | - |  | -------------------------------------------------



| |  |  | investor perception of our industry or prospects;
| | - |  | -------------------------------------------------



| |  |  | insider selling or buying;
| | - |  | --------------------------



| |  |  | investors entering into short sale contracts;
| | - |  | ---------------------------------------------



| |  |  | regulatory developments affecting our industry; and
| | - |  | ---------------------------------------------------



| |  |  | additions or departures of key personnel.
| | - |  | -----------------------------------------



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##### Table of Contents

|ITEM 6. | EXHIBITS
|------- | --------

Description



|          |  |                                                                                                                                                                                                                                           
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          | 
|2.1(14)   |  | Agreement and Plan of Merger, dated as of November 27, 2005, by and among American Pharmaceutical Partners, Inc., American BioScience, Inc. and, with respect to specified matters, Patrick
Soon-Shiong and certain other ABI shareholders
|          | 
|3.1(1)    |  | Amended and Restated Certificate of Incorporation of the Registrant                                                                                                                                                                       
|          | 
|3.2(1)    |  | Bylaws of the Registrant                                                                                                                                                                                                                  
|          | 
|3.3       |  | Certificate of Merger of American BioScience, Inc. into American Pharmaceutical Partners, Inc., dated April 18, 2006                                                                                                                      
|          | 
|4.1       |  | Reference is made to Exhibits 3.1, 3.2 and 3.3                                                                                                                                                                                            
|          | 
|4.2       |  | Specimen Stock Certificate of the Registrant                                                                                                                                                                                              
|          | 
|4.3(3)    |  | First Amended Registration Rights Agreement, dated as of June 1, 1998, between the Registrant and certain holders of the Registrants capital stock                                                                                       
|          | 
|4.4       |  | Registration Rights Agreement, dated April 18, 2006, by and among APP, Patrick Soon-Shiong and certain other ABI shareholders set forth therein                                                                                           
|          | 
|4.5       |  | Corporate Governance and Voting Agreement, dated April 18, 2006, by and among APP, Patrick Soon-Shiong and certain other ABI shareholders set forth therein                                                                               
|          | 
|10.1(4)   |  | Form of Indemnification Agreement between the Registrant and each of its executive officers and directors                                                                                                                                 
|          | 
|10.2(3)   |  | 1997 Stock Option Plan                                                                                                                                                                                                                    
|          | 
|10.3(11)  |  | 2001 Stock Incentive Plan, including forms of agreements thereunder                                                                                                                                                                       
|          | 
|10.4(3)   |  | 2001 Employee Stock Purchase Plan, including forms of agreements thereunder                                                                                                                                                               
|          | 
|10.5(3)   |  | Lease Agreement dated December 4, 2000, between the Registrant and AMB Property II, L.P.                                                                                                                                                  
|          | 
|10.6(4)   |  | Tax Sharing and Indemnification Agreement dated July 25, 2001, between the Registrant and American BioScience                                                                                                                             
|          | 
|10.7(4)   |  | Agreement, dated as of July 25, 2001, between the Registrant and American BioScience                                                                                                                                                      
|          | 
|10.8(4)   |  | Agreement, dated as of July 25, 2001, between the Registrant and American BioScience                                                                                                                                                      
|          | 
|10.9(2)   |  | License Agreement, dated as of November 20, 2001, between the Registrant and American BioScience                                                                                                                                          
|          | 
|10.10(2)  |  | License Agreement, dated as of November 20, 2001, between the Registrant and American BioScience                                                                                                                                          
|          | 
|10.11(7)  |  | Compensation Protection Agreement, dated as of August 19, 2002, between the Registrant and Nicole S. Williams                                                                                                                             
|          | 
|10.12(7)  |  | Lease Agreement between Manufacturers Life Insurance Company (U.S.A.) and the Registrant for 1501 E. Woodfield Road, Suite 300 East in Schaumburg, Illinois, known as Schaumburg Corporate
Center                                         
|          | 
|10.13(7)  |  | Agreement dated as of March 11, 2004, between the Registrant and American BioScience                                                                                                                                                      
|          | 
|10.14(8)  |  | Credit Agreement dated September 2, 2004 among the Registrant, Fifth Third Bank, Wachovia Bank, and various lenders                                                                                                                       
|          | 
|10.15(10) |  | Employment Agreement dated November 15, 2004 between the Registrant and Alan Heller                                                                                                                                                       
|          | 
|10.16(9)  |  | Description of the 2005 Corporate Bonus Plan                                                                                                                                                                                              
|          | 
|10.17(9)  |  | 2005 Base Salaries for Named Executive Officers                                                                                                                                                                                           
|          | 
|10.18(12) |  | Description of Non-Employee Director Cash Compensation Program                                                                                                                                                                            
|          | 
|10.19(12) |  | Amended and Restated 2001 Non-Employee Director Option Program                                                                                                                                                                            
|          | 
|10.20(13) |  | Total Commitment Increase Agreement and First Amendment to Credit Agreement, dated August 2, 2005                                                                                                                                         
|          | 
|10.21     |  | Reference is made to Exhibits 2.1, 4.4 and 4.5                                                                                                                                                                                            



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|          |  |                                                                                                                                            
|--------- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|          | 
|10.22(15) |  | American BioScience, Inc. Restricted Stock Unit Plan I, including a form of agreement thereunder                                           
|          | 
|10.23(15) |  | American BioScience, Inc. Restricted Stock Unit Plan II, including a form of agreement thereunder                                          
|          | 
|10.24     |  | Escrow Agreement, dated April 18, 2006, by and among APP, Patrick Soon-Shiong and Fifth Third Bank                                         
|          | 
|10.25     |  | Credit Agreement dated April 18, 2006 among the Registrant, Fifth Third Bank, Wachovia Bank, and various lenders                           
|          | 
|10.26     |  | Purchase and Sale Agreement, dated April 24, 2006, between the Registrant and Pfizer Inc.                                                  
|          | 
|31.1      |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as required by Section 302 of the Sarbanes-Oxley Act of 2002
|          | 
|31.2      |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as required by 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 added 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 added by Section 906 of the Sarbanes-Oxley Act of 2002     

Description



|(1) | Incorporated by reference to Registrants Registration Statement filed on Form S-1/A, file number 333-70900, filed with the Securities and Exchange Commission on
December 11, 2001.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Incorporated by reference to Registrants Registration Statement filed on Form S-1/A, file number 333-70900, filed with the Securities and Exchange Commission on
December 13, 2001.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Incorporated by reference to Registrants Registration Statement filed on Form S-1, file number 333-70900, filed with the Securities and Exchange Commission on October 3,
2001.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Incorporated by reference to Registrants Registration Statement filed on Form S-1/A, file number 333-70900, filed with the Securities and Exchange Commission on
November 20, 2001.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Incorporated by reference to the Registrants report on Form 10-K filed with the Securities and Exchange Commission on April 1, 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------



|(6) | Incorporated by reference to the Registrants report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2002.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------



|(7) | Incorporated by reference to the Registrants report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



|(8) | Incorporated by reference to the Registrants report on Form 8-K filed with the Securities and Exchange Commission on September 9, 2004.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(9) | Incorporated by reference to the Registrants report on Form 8-K filed with the Securities and Exchange Commission on February 23, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(10) | Incorporated by reference to the Registrants report on Form 8-K filed with the Securities and Exchange Commission on September 9, 2004.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(11) | Incorporated by reference to the Registrants report on form 8-K filed with the Securities and Exchange Commission on February 23, 2005.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------



|(12) | Incorporated by reference to the Registrants report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2005.
|---- | --------------------------------------------------------------------------------------------------------------------------------------



|(13) | Incorporated by reference to the Registrants Definitive Proxy Statement on Form 14A filed with the Securities and Exchange Commission on April 29, 2005.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|(14) | Incorporated by reference to the Registrants report on Form 8-K filed with the Securities and Exchange Commission on November 29, 2005.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------



|(15) | Incorporated by reference to Registrants Registration Statement filed on Form S-8, file number 333-133364, filed with the Securities and Exchange Commission on April 18, 2006.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ PATRICK SOON-SHIONGPatrick Soon-ShiongChief Executive Officer(Principal Executive Officer)By:

/s/ NICOLE S. WILLIAMSNicole S. WilliamsExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)


Date: May 10, 2006



44