Abraxis BioScience (ABII)

Litigation

In December 2004, a former officer and employee and a former director of ABI filed a demand for arbitration with the American Arbitration Association against us and our Chief Executive Officer. In the arbitration, this individual asserted that we improperly terminated his employment and that the defendants breached various promises allegedly made to him. This individual sought various forms of relief, including monetary damages and equity interests in our common stock. In addition, in May 2006, this same former officer filed an action against us, ABI and certain of our directors in Cook County, Illinois relating to the 2006 merger between us and ABI alleging that the defendants breached fiduciary duties to our stockholders by causing us to enter into the merger agreement. In July 2007, the Court dismissed this action on the grounds of forum non-conveniens. In September 2007, this same individual filed a substantially identical action in Los Angeles Superior Court, County of Los Angeles. The parties entered into a settlement agreement and release in October 2007 with respect to all disputes between the parties. Pursuant to the indemnification provisions of the definitive agreements for the merger between us and ABI, the former ABI shareholders indemnified us for approximately two-thirds of the obligations under the settlement agreement and the amount is recorded as a non-cash legal expense in our condensed financial statements.

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 2006 merger between us and ABI. We were a nominal defendant in the stockholder derivative actions. The lawsuits allege that our directors breached their fiduciary duties to stockholders by causing us to enter into the merger agreement, which, it is alleged unjustly enriched ABI’s stockholders and 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 the rescission of the merger. In May 2007, the plaintiffs voluntarily dismissed the derivative and unjust enrichment claims, and the action is proceeding as a putative class action solely against the individual defendants.

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On July 19, 2006, Élan Pharmaceutical Int’l Ltd. filed a lawsuit against us in the U.S. District Court for the District of Delaware alleging that we willfully infringed upon two of their patents by asserting that Abraxane^® uses technology protected by Élan-owned patents. Élan seeks unspecified damages and an injunction. In August 2006, we filed a response to Élan’s complaint contending that we did not infringe on the Élan patents and that the Élan patents are invalid. The trial has been set to begin in June 2008.

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

We record accruals for contingencies to the extent that we conclude their occurrence is probable and the related damages are estimable. As of September 30, 2007, $11.6 million remained accrued for litigation matters described above. We cannot otherwise reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for the remaining contingencies, nor is it possible to accurately predict or determine the eventual outcome of these matters. These assessments involve complex judgments about future events and rely on estimates and assumptions. Although we believe we have substantial defenses in these matters, litigation is inherently unpredictable and we could in the future incur judgments or enter into settlements that could have a material adverse effect on our results of operations.

Litigation

In December 2004, a former officer and employee and a former director of American BioScience, the former parent of Abraxis BioScience, filed a demand for arbitration with the American Arbitration Association against Abraxis BioScience (then known as American Pharmaceutical Partners), New Abraxis’ Chief Executive Officer and American BioScience. In the arbitration, this individual asserted that Abraxis BioScience improperly terminated his employment and that the defendants breached various promises allegedly made to him. This

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individual sought various forms of relief, including monetary damages and equity interests in Abraxis BioScience common stock. In addition, in May 2006, this same former officer filed an action against Abraxis BioScience, American BioScience and certain of Abraxis BioScience’s directors in Cook County, Illinois relating to the 2006 Merger alleging that the defendants breached fiduciary duties to its stockholders by causing Abraxis BioScience to enter into the merger agreement. The complaint sought $12 million in damages. In July 2007, the Court dismissed this action on the grounds of forum non-conveniens. In September 2007, this same individual filed a substantially identical action in Los Angeles Superior Court, County of Los Angeles. The parties entered into a settlement agreement and release in October 2007 with respect to all disputes between the parties. Pursuant to the indemnification provisions of the definitive agreements for the 2006 Merger, the former ABI shareholders indemnified Abraxis BioScience for approximately two-thirds of its obligations under the settlement agreement.

On or about December 7, 2005, several stockholder derivative and class action lawsuits were filed against Abraxis BioScience (then known as American Pharmaceutical Partners), its directors and American BioScience in the Delaware Court of Chancery relating to the 2006 Merger. Abraxis BioScience was a nominal defendant in the stockholder derivative actions. The lawsuits allege that Abraxis BioScience’s directors breached their fiduciary duties to stockholders by causing Abraxis BioScience (then known as American Pharmaceutical Partners) to enter into the merger agreement, which, it is alleged unjustly enriched American BioScience’s stockholders and caused the value of the shares held by Abraxis BioScience’s public stockholders to be significantly diminished. The lawsuits seek, among other things, an unspecified amount of damages and the rescission of the merger. In May 2007, the plaintiffs voluntarily dismissed the derivative and unjust enrichment claims, and the action is proceeding as a putative class action solely against the individual defendants. New Abraxis will assume any liability of Abraxis BioScience relating to this litigation under the separation and distribution agreement.

On July 19, 2006, Élan Pharmaceutical Int’l Ltd. filed a lawsuit against Abraxis BioScience in the U.S. District Court for the District of Delaware alleging that Abraxis BioScience willfully infringed upon two of their patents by asserting that Abraxane^® uses technology protected by Élan-owned patents. Élan seeks unspecified damages and an injunction. In August 2006, Abraxis BioScience filed a response to Élan’s complaint contending that it did not infringe on the Élan patents and that the Élan patents are invalid. The trial has been set to begin in June 2008. New Abraxis will assume any liability of Abraxis BioScience relating to this litigation under the separation and distribution agreement.

New Abraxis is from time to time subject to claims and litigation arising in the ordinary course of its business. New Abraxis intends to defend vigorously any such litigation that may arise under all defenses that would be available to it. In the opinion of management, the ultimate outcome of proceedings of which management is aware, even if adverse to New Abraxis, will not have a material adverse effect on New Abraxis’ combined financial position or results of operations.

New Abraxis records accruals for contingencies to the extent that it concludes their occurrence is probable and the related damages are estimable. As of June 30, 2007, New Abraxis had accrued a reserve of $19.7 million for the arbitration matter described above. Pursuant to the indemnification provisions of the definitive agreements for the 2006 Merger, the former ABI shareholders will indemnify us for most of our obligations under the settlement agreement. The amount paid by the former ABI shareholders pursuant to the indemnification provisions will be recorded in New Abraxis’ subsequent financial statements. New Abraxis cannot otherwise reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for the remaining contingencies, nor is it possible to accurately predict or determine the eventual outcome of these matters. These assessments involve complex judgments about future events and rely on estimates and assumptions. Although New Abraxis believes it has substantial defenses in these matters, litigation is inherently unpredictable and it could in the future incur judgments or enter into settlements that could have a material adverse effect on its results of operations.

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