Abraxis BioScience (ABII)

Contractual Allowances, Returns and Credits 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

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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 $6.0 million and $6.2 million at June 30, 2008 and December 31, 2007, respectively. A one percent increase in contractual allowances for the six months ended June 30, 2008 would decrease net sales by $0.4 million. Contractual allowances are reflected in the condensed consolidated and combined financial statements as a reduction of net revenue and as a current accrued liability.

Consistent with industry practice, our return policy permits our customers to return product 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 $0.1 million and $0.4 million at June 30, 2008 and December 31, 2007, respectively. At June 30, 2008, a one percent increase in the estimated reserve requirements for customer credits and product returns would have decreased net revenue for the six months ended June 30, 2008 by less than $0.1 million.

We establish a reserve for bad debts based on general and identified customer credit exposure. Our historic bad debt losses are not significant.

Contractual Allowances, Returns and Credits 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 $6.2 million at both March 31, 2008 and December 31, 2007. A one percent increase in contractual allowances for the three months ended March 31, 2008 would decrease net sales by $0.1 million. Contractual allowances are reflected in the condensed consolidated and combined financial statements as a reduction of net revenue and as a current accrued liability.

Consistent with industry practice, our return policy permits our customers to return product 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 $0.2 million and $0.4 million at March 31, 2008 and December 31, 2007, respectively. At March 31, 2008, a one percent increase in the estimated reserve requirements for customer credits and product returns would have decreased net revenue for the three months ended March 31, 2008 by less than $0.1 million.

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

Contractual Allowances, Returns and Credits 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

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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 $6.2 million and $3.3 million at December 31, 2007 and 2006, respectively. A one percent increase in contractual allowances for the year ended December 31, 2007 would decrease net sales by $0.2 million. Contractual allowances are reflected in the combined financial statements as a reduction of net revenue and as a current accrued liability.

Consistent with industry practice, our return policy permits our customers to return product 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 $0.4 million and $0.5 million at December 31, 2007 and 2006, respectively. At December 31, 2007, a one percent increase in the estimated reserve requirements for customer credits and product returns would have decreased net revenue for the year ended December 31, 2007 by $0.3 million.

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

Contractual Allowances, Returns and Credits 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 $6.9 million at September 30, 2007 and $3.2 million at December 31, 2006. A one percent increase in the estimated rate of contractual allowances to net revenue at September 30, 2007 would decrease net sales by $0.3 million at that point in time. Contractual allowances are reflected in the combined financial statements as a reduction of total revenue and as a current accrued liability.

Consistent with industry practice, our return policy permits our customers to return product 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 $0.3 million and $0.5 million at September 30, 2007 and December 31, 2006, respectively. At September 30, 2007, a one percent increase in the estimated reserve requirements for customer credits and product returns would have decreased total revenue for the nine months ended September 30, 2007 by $0.3 million.

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

Contractual Allowances, Returns and Credits 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. New Abraxis provides 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, New Abraxis establishes a specific provision for fees or rebates based on the specific terms of each

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agreement. A one percent increase in the estimated rate of contractual allowances to revenue for the twelve months ended December 31, 2006 would reduce net revenue by $0.2 million. Contractual allowances are reflected in the financial statements as a reduction of net revenue and as a current accrued liability. The accrual for customer credits and product returns is presented in the financial statements as a reduction of net revenue and accounts receivable. New Abraxis’ provision for contractual allowances during each of the three years ended was as follows:

Consistent with industry practice, New Abraxis’ return policy permits its customers to return product within a window of time before and after the expiration of product dating. New Abraxis provides 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 New Abraxis provides specifically for known outstanding returns and credits. At December 31, 2006, a one percent increase in the estimated reserve requirements for customer credits and product returns would have decreased 2006 net revenue by $0.2 million. New Abraxis’ provision for customer credits and product returns during each of the three years ended was as follows:

New Abraxis establishes a reserve for bad debts based on general and identified customer credit exposure. New Abraxis’ actual loss due to bad debts in each of the period in the three-year period ending December 31, 2006 was less than $0.1 million.