Abraxis BioScience (ABII)

Income Taxes

In accordance with the provisions under FASB ASC 740, Income Taxes, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the consolidated and combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the financial statements in the period that includes the legislative enactment date.

During 2009 we allocated an income tax benefit to continuing operations. In accordance with FASB ASC 740, all items should be considered for purposes of determining the amount of tax benefit that results from a loss from continuing operations and that should be allocated to continued operations. FASB ASC 740 is applied by tax jurisdiction and, in periods in which there is a pre-tax loss from continuing operations and pre-tax income in another category, such as other comprehensive income, tax expense is first allocated to the other sources of income, with a related benefit recorded in continuing operations. As a result, we have allocated an income tax benefit to the loss from continuing operations based on the tax rate applicable to other comprehensive income.

We were not a taxable entity prior to the separation on November 13, 2007; however, income taxes are provided in the accompanying consolidated and combined financial statements as if we were filing a separate return. Old Abraxis will indemnify us for all tax liabilities to the extent they relate to the hospital-based generic injectable products business arising prior to the separation date.

(7) Income Taxes

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

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

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

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Income Taxes

In accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the consolidated and combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rates is recognized in the financial statements in the period that includes the legislative enactment date.

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We were not a taxable entity prior to the separation on November 13, 2007; however, income taxes are provided in the accompanying consolidated and combined financial statements as if we were filing a separate return. Old Abraxis will indemnify us for all tax liabilities to the extent they relate to the hospital-based generic injectable products business arising prior to the separation date.

Income Taxes

FACE="Times New Roman" SIZE="2">In accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, deferred tax assets and liabilities are recognized for future tax consequences attributable to
differences between the consolidated and combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and capital loss carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax
rates is recognized in the financial statements in the period that includes the legislative enactment date.

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We were not a taxable entity prior to the separation on November 13, 2007; however, income taxes are
provided in the accompanying consolidated and combined financial statements as if we were filing a separate return. Old Abraxis will indemnify us for all tax liabilities to the extent they relate to the hospital-based generic injectable products
business arising prior to the separation date.

(8) Income Taxes

Our effective tax rate for the nine months ended September 30, 2008 was 0.2%. The rate was computed based on special state tax rules that were used to compute our taxable base on our gross receipts. We also took into consideration the minimum taxes requirement as part of our state tax expense computation as well as our foreign taxes requirements. The effective tax rate for the nine months ended September 30, 2008 is different from the statutory rate primarily as a result of the application of a valuation allowance against the net income tax benefit for the year.

We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), on January 1, 2007. This interpretation clarifies what criteria must be met prior to the recognition of the financial statement benefit of a position taken in a tax return in accordance with FASB Statement No. 109, Accounting for Income Taxes. As of September 30, 2008, we had $5.5 million of gross unrecognized tax benefits, which are included in “Other non-current liabilities” in the accompanying condensed consolidated balance sheet. There were no changes in gross unrecognized tax benefits during the three months ended September 30, 2008. During the nine months ended September 30, 2008, the gross amount of our unrecognized tax benefits increased by approximately $0.3 million as a result of tax positions taken when we were a part of Old Abraxis. The majority of this unrecognized tax benefits, if and when recognized, would affect our effective tax rate. We do not anticipate that any of the unrecognized tax benefits will reverse in the next twelve months.

We recognize interest and penalties related to unrecognized tax benefits in our income tax expense. At September 30, 2008, we had no accruable interest or penalties. We do not have any returns currently subject to examination by tax authorities or any open audits.

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Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the consolidated and combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated financial statements in the period that includes the legislative enactment date.

Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the consolidated and combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated financial statements in the period that includes the legislative enactment date.

Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the consolidated and combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rates is recognized in the financial statements in the period that includes the legislative enactment date.

We were not a taxable entity prior to the separation on November 13, 2007; however, income taxes are provided in the accompanying consolidated and combined financial statements as if we were filing a separate return. Old Abraxis will indemnify us for all tax liabilities to the extent they relate to the hospital-based generic injectable products business arising prior to the separation date.

Income Taxes

FACE="Times New Roman" SIZE="2">Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the consolidated and combined financial statement carrying amounts of existing assets and liabilities
and their respective tax bases as well as net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rates is recognized in the financial statements in the period that includes the legislative enactment date.

Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated financial statements in the period that includes the legislative enactment date.

In 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109” (“FIN 48”), which provides specific guidance on the financial statement recognition, measurement, reporting and disclosure of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 addresses the determination of whether tax benefits, either permanent or temporary, should be recorded in the financial statements. We adopted FIN 48 as of the beginning of our 2007 fiscal year. The adoption of this statement did not have a material impact on our combined results of operations and financial condition.

As of the beginning of our 2007 fiscal year, the total amount of gross unrecognized tax benefits, which are reported in other liabilities in our combined balance sheet, was $1.2 million. Of this amount, approximately $1.0 million would impact our effective tax rate over time, if recognized. In addition, we accrue interest and any necessary penalties related to unrecognized tax positions in our provision for income taxes.

(8) Income Taxes

In 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109” (“FIN 48”), which provides specific guidance on the financial statement recognition, measurement, reporting and disclosure of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 addresses the determination of whether tax benefits, either permanent or temporary, should be recorded in the financial statements. New Abraxis adopted FIN 48 as of January 1, 2007. The adoption of this statement did not have a material impact on New Abraxis’ combined results of operation and financial condition.

As of the six months ended June 30, 2007, the total amount of gross unrecognized tax benefits, which are reported in other liabilities in the condensed combined balance sheet, is $1.0 million. This entire amount would impact New Abraxis’ effective tax rate over time, if recognized. In addition, New Abraxis accrues interest and any necessary penalties related to unrecognized tax positions in its provision for income taxes.

At June 30, 2007, principally due to nondeductible book amortization expense, the deferred tax assets of New Abraxis exceeded its deferred tax liabilities. In the judgment of management, it is more likely than not that the resulting net deferred tax asset will not be realized. Therefore, New Abraxis recorded a valuation allowance of $959,000 against its deferred tax assets at June 30, 2007. As New Abraxis generated taxable income in 2006, the net operating losses incurred in 2007 could be carried back to offset that taxable income. Accordingly, New Abraxis recorded an income tax benefit of 37.5% in the six month period ended June 30, 2007; without the valuation allowance, the benefit would have been 40.5%.

Abraxis BioScience or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the second quarter of 2007, the Internal Revenue Service (IRS) concluded an examination of Abraxis BioScience’s U.S. income tax returns for tax years 2004 and 2005. In addition, Abraxis Bioscience recently received a “no adjustment” closing letter from the IRS in regard to an audit of its previous parent company (ABI) related to a 2002 net operating loss carry back to consolidated tax years 1997, 1998, 1999, 2000 and 2001.

The Illinois Department of Revenue has commenced an audit of Abraxis BioScience’s Combined Unitary Tax Returns for tax years 2003 through 2005. In addition, Abraxis BioScience received notice of intent to examine income tax returns from California (tax years 2004-2006), Massachusetts (2005-2006) and North Carolina (2003-2006). These audits will begin in the fourth quarter of 2007. There are no other open federal, state or foreign government income tax audits of Abraxis BioScience.

The results of the closed federal and state audits above have been reflected in the financial statements of New Abraxis.