Abraxis BioScience (ABII)

Abraxane^® 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, customer or Medicaid rebates, product returns and customer credits and cash discounts. Our methodology used to estimate and provide for these sales provisions was consistent across all periods presented. Accruals for sales provisions are presented in our consolidated financial statements as a reduction of net revenue and accounts receivable and, for customer or Medicaid rebates, an increase in accrued liabilities. Our sales provisions totaled $41.0 million, $32.8 million and $30.5 milllion for the years ended December 31, 2009, 2008 and 2007, respectively, and related reserves totaled $13.8 million and $9.2 million at December 31, 2009 and 2008, respectively. The increase in reserves is primarily the result of an increase in performance related rebates. We regularly review information related to these estimates and adjust our reserves accordingly if, and when, actual experience differs from estimates.

We have internal historical information on chargebacks, rebates and customer returns and credits, which we use as the primary factor in determining the related reserve requirements. Due to the nature of our product and its primary use in hospital and clinical settings with generally consistent demand, we 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.

Abraxane^® 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, customer or Medicaid rebates, product returns and customer credits and cash discounts. Our methodology used to estimate and provide for these sales provisions was consistent across all periods presented. Accruals for sales provisions are presented in our combined financial statements as a reduction of net revenue and accounts receivable and, for customer or Medicaid rebates, an increase in accrued liabilities. Our sales provisions totaled $32.8 million, $30.5 million and $18.5 million for the years ended December 31, 2008, 2007 and 2006, respectively, and related reserves totaled $9.2 million and $7.9 million at December 31, 2008 and 2007, respectively. The increase in reserves is primarily the result of increased sales of Abraxane^®, as well as the timing of the related payments. We regularly review information related to these estimates and adjust our reserves accordingly if, and when, actual experience differs from estimates.

We have internal historical information on chargebacks, rebates and customer returns and credits which we use as the primary factor in determining the related reserve requirements. Due to the nature of our product and its primary use in hospital and clinical settings with generally consistent demand, we 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.

Abraxane^® 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 Medicaid rebates. Our methodology used to estimate and provide for these sales provisions was consistent across all periods presented. Accruals for sales provisions are presented in our consolidated and combined 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 internal historical information on chargebacks, rebates and customer returns and credits which we use as the primary factor in determining the related reserve requirements. Due to the nature of our product and its primary use in hospital and clinical settings with generally consistent demand, we 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.

Abraxane ^® 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 these sales provisions was consistent across all periods presented. Accruals for sales provisions are presented in our consolidated and combined 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 internal historical information on chargebacks, rebates and customer returns and credits which we use as the primary factor in determining the related reserve requirements. Due to the nature of our product and its primary use in hospital and clinical settings with generally consistent demand, we 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.

Abraxane^® 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 these sales provisions was consistent across all periods presented. Accruals for sales provisions are presented in our combined 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 internal historical information on chargebacks, rebates and customer returns and credits which we use as the primary factor in determining the related reserve requirements. Due to the nature of our product and its primary use in hospital and clinical settings with generally consistent demand, we 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.

Abraxane^® 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 these sales provisions was consistent across all periods presented. Accruals for sales provisions are presented in our combined 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 internal historical information on chargebacks, rebates and customer returns and credits which we use as the primary factor in determining the related reserve requirements. Due to the nature of our product and its primary use in hospital and clinical settings with generally consistent demand, we 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.

Abraxane^® Revenue Recognition

New Abraxis recognizes Abraxane^® revenue from the sale of a product when title and risk of loss have transferred to the customer, collection is reasonably assured and New Abraxis has no further performance obligation. This is typically when the product is received by the wholesalers. At the time of sale, as further described below, New Abraxis reduces sales and provides for estimated chargebacks, contractual allowances, customer or Medicaid rebates, product returns and customer credits. New Abraxis’ methodology used to estimate and provide for theses sales provisions was consistent across all periods presented. Accruals for sales provisions are presented in New Abraxis’ financial statements as a reduction of sales and accounts receivable and, for contractual allowances, in accrued liabilities. New Abraxis regularly reviews information related to these estimates and adjusts its reserves accordingly if, and when, actual experience differs from estimates.

New Abraxis has, internal historical information on chargebacks, rebates and customer returns and credits, which its uses as the primary factor in determining the related reserve requirements. New Abraxis believes that this internal historical data, in conjunction with periodic review of available third-party data (as described below) and updated for any applicable changes in available information, provides a reliable basis for such estimates.

Four wholesalers collectively, represented approximately 85% and 90% of New Abraxis revenue in year 2006 and 2005, respectively. New Abraxis periodically, as it believes is warranted, reviews the wholesale supply levels of its product by reviewing inventory reports purchased or available from wholesalers, evaluating its unit sales volume and incorporating data from third-party market research firms. Based on these activities, New Abraxis attempts to keep a consistent wholesale stocking level of approximately two- to six-weeks. From time to time New Abraxis enters into inventory management agreements with its wholesale customers which requires it to pay a fee in connection with their distribution of New Abraxis’ product or other services, possibly including sales data and other services and contractual rights for New Abraxis. In addition, New Abraxis may be required to enter into such agreements in the future in order to maintain its relationships with other such wholesalers. New Abraxis is unable to ascertain the potential impact of any such future agreements on its sales, but does not believe that such agreements would result in a substantial change in wholesale stocking levels of its product as compared to current levels.

New Abraxis’ sales provisions totaled $18.4 million and $26.5 million in 2006, and 2005 respectively. Related reserves totaled $3.7 million and $6.1 million at December 31, 2006 and 2005, respectively.

Co-Promotion Agreement: On April 26, 2006, New Abraxis entered into a Co-Promotion and Strategic Marketing Services Agreement with AstraZeneca UK Limited, a wholly owned subsidiary of AstraZeneca PLC (see “Note 4—Acquisition of Assets”).

During the year ended December 31, 2006, New Abraxis recorded revenue of $18.2 million relating to deferred revenue associated with the co-promotion agreement. At December 31, 2006, unearned revenue associated with the co-promotion agreement of $181.8 million was recorded as deferred revenue on the balance sheet. The remaining deferred revenue will be recorded as revenue ratably over the remainder of the 5.5 year term.