Abraxis BioScience (ABII)

Other Revenue

Other revenue generally consists of revenue earned from the sales of raw material products, contract manufacturing, and amounts earned from development and research to advance the commercial application of pharmaceutical compounds for third parties. Such research revenue may include up-front license fees, milestone payments and reimbursement of development and other costs, and royalties. Non-refundable up-front license fees under which we have continuing involvement in the form of development, manufacturing or commercialization are recognized as revenue ratably over either: the development period if the development risk is significant; or the estimated product useful life if the development risk has been substantially eliminated. Achievement-based milestone payments are recognized as revenue when the milestone objective is attained because the earnings process relating to such payments is complete upon attainment and because the payments are non-refundable and are not dependent upon future activities or the achievement of future objectives. These milestone payments are at risk and require substantive activity to achieve. Reimbursement of development and other costs are recognized as revenue as the related costs are incurred. Royalties are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectability is reasonably assured. Royalty estimates are made in advance of amounts collected using historical and forecasted trends.

On May 27, 2005, American BioScience, Inc. (“ABI”), the former parent of Old Abraxis, licensed the rights to Abraxane^® in Japan to Taiho Pharmaceutical Co., Ltd, (“Taiho”), a subsidiary of Otsuka Pharmaceutical Ltd. Under the agreement, we and Taiho established a steering committee, comprised of three representatives from each of us and Taiho, to oversee the preclinical and clinical development of Abraxane^® in Japan for the treatment of breast, lung, gastric, and other solid tumors. The steering committee is required to meet at least once annually. In addition, under the agreement, the steering committee established a development working group, comprised of an equal number of representatives from both us and Taiho, who is required to meet at least once quarterly until regulatory approval of Abraxane^® is first obtained in Japan. The license provides for a non-refundable $20.0 million up-front payment, $38.5 million in potential milestone payments contingent upon the achievement of various clinical, regulatory and sales objectives, royalties based on net sales under the agreement; and an agreement under which we will supply Taiho with Abraxane^®. Due to our continuing involvement under the agreement through the steering committee and the development working group, the $20.0 million non-refundable up-front payment has been deferred. At the time the up-front payment was made, we estimated that it would take approximately five years to receive regulatory approval for the first indication of Abraxane^® in Japan (following which approval, the steering committee’s responsibilities would be substantially diminished) and that Abraxane^® could begin to face competition in Japan as early as seven years after entering into the agreement. We believe these estimates remain accurate. Accordingly, the up-front payment is being recognized as research revenue ratably over seven years.

We recognized deferred revenue of $3.2 million, $3.1 million and $2.9 million in 2009, 2008 and 2007, respectively, for the amortization of the $22.0 million in deferred up-front payments, of which $20.0 million related to the Taiho up-front payment. Additionally, in 2007 we recorded revenue of $3.0 million relating to milestone payments received from Taiho. We did not receive a milestone payment from Taiho in 2008 and 2009. At December 31, 2009 and 2008, we had deferred revenue of $8.0 million and $12.4 million, respectively, recorded in our balance sheet.

Other Revenue

Other revenue generally consists of amounts earned from the development and research to advance the commercial application of pharmaceutical compounds for third parties. Such research revenue may include up-front license fees, milestone payments and reimbursement of development and other costs, and royalties. Non-refundable up-front license fees under which we have continuing involvement in the form of development, manufacturing or commercialization are recognized as revenue ratably over either: the development period if the development risk is significant; or the estimated product useful life if the development risk has been substantially eliminated. Achievement-based milestone payments are recognized as revenue when the milestone objective is attained because the earnings process relating to such payments is complete upon attainment and because the payments are non-refundable and are not dependent upon future activities or the achievement of future objectives. These milestone payments are at risk and require substantive activity to achieve. Reimbursement of development and other costs are recognized as revenue as the related costs are incurred. Royalties are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured. Royalty estimates are made in advance of amounts collected using historical and forecasted trends.

On May 27, 2005, American BioScience, Inc. (“ABI”), the former parent of Old Abraxis, licensed the rights to Abraxane^® in Japan to Taiho Pharmaceutical Co., Ltd, or Taiho, a subsidiary of Otsuka Pharmaceutical Ltd. Under the agreement, we and Taiho established a steering committee, comprised of three representatives from each of us and Taiho, to oversee the preclinical and clinical development of Abraxane^® in Japan for the treatment of breast, lung, gastric, and other solid tumors. The steering committee is required to meet at least once annually. In addition, under the agreement, the steering committee established a development working group, comprised of an equal number of representatives from both us and Taiho, who is required to meet at least once quarterly until regulatory approval of Abraxane^® is first obtained in Japan. The license provides for a non-refundable $20.0 million up-front payment, $38.5 million in potential milestone payments contingent upon the achievement of various clinical, regulatory and sales objectives, royalties based on net sales under the agreement; and an agreement under which we will supply Taiho with Abraxane^®. Due to our continuing involvement under the agreement through the steering committee and the development working group, the $20.0 million non-refundable up-front payment has been deferred. At the time the up-front payment was made, we estimated that it would take approximately five years to receive regulatory approval for the first indication of Abraxane^® in Japan (following which approval, the steering committee’s responsibilities would be substantially diminished) and that Abraxane^® could begin to face competition in Japan as early as seven years after entering into the agreement. We believe these estimates remain accurate. Accordingly, the up-front payment is being recognized as research revenue ratably over seven years.

In each of 2007 and 2006, we recorded revenue of $3.0 million relating to milestone payments received from Taiho. We did not receive a milestone payment in 2008. In addition, we recognized deferred revenue of $3.1 million in 2008 and $2.9 million in each of 2007 and 2006 for the amortization of the $22.0 million in deferred up-front payments, of which $20.0 million related to the Taiho up-front payment. At December 31, 2008 and 2007, we had deferred revenue of $11.4 million and $14.5 million, respectively, recorded in our balance sheet.

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Other Revenue

FACE="Times New Roman" SIZE="2">Other revenue generally consists of amounts earned from the development and research to advance the commercial application of pharmaceutical compounds for third parties. Such research revenue may include up-front
license fees, milestone payments and reimbursement of development and other costs, and royalties. Non-refundable up-front license fees under which we have continuing involvement in the form of development, manufacturing or commercialization are
recognized as revenue ratably over either: the development period if the development risk is significant; or the estimated product useful life if the development risk has been substantially eliminated. Achievement-based milestone payments are
recognized as revenue when the milestone objective is attained because the earnings process relating to such payments is complete upon attainment and because the payments are non-refundable and are not dependent upon future activities or the
achievement of future objectives. These milestone payments are at risk and require substantive activity to achieve. Reimbursement of development and other costs are recognized as revenue as the related costs are incurred. Royalties are recognized as
earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured. Royalty estimates are made in advance of amounts collected using historical and forecasted trends.

On May 27, 2005, American BioScience, Inc. (“ABI”), the former
parent of Old Abraxis, licensed the rights to Abraxane^® in Japan to Taiho Pharmaceutical Co., Ltd, or Taiho, a subsidiary of Otsuka Pharmaceutical Ltd. Under the agreement, we and Taiho
established a steering committee, comprised of three representatives from each of us and Taiho, to oversee the preclinical and clinical development of Abraxane^® in Japan for the treatment
of breast, lung, gastric, and other solid tumors. The steering committee is required to meet at least once annually. In addition, under the agreement, the steering committee established a development working group, comprised of an equal number of
representatives from both us and Taiho, who is required to meet at least once quarterly until regulatory approval of Abraxane^® is first obtained in Japan. The license provides for a
non-refundable $20.0 million up-front payment, $38.5 million in potential milestone payments contingent upon the achievement of various clinical, regulatory and sales objectives, royalties based on net sales under the agreement; and an agreement
under which we will supply Taiho with Abraxane^®. Due to our continuing involvement under the agreement through the steering committee and the development working group, the $20.0 million
non-refundable up-front payment has been deferred. At the time the up-front payment was made, we estimated that it would take approximately five years to receive regulatory approval for the first indication of AbraxaneSIZE="1">^® in Japan (following which approval, the steering committee’s responsibilities would be substantially diminished) and that Abraxane^® could begin to face
competition in Japan as early as seven years after entering into the agreement. We believe these estimates remain accurate. Accordingly, the up-front payment is being recognized as research revenue ratably over seven years.

Other Revenue

Other revenue generally consists of amounts earned from the development and research to advance the commercial application of pharmaceutical compounds for third parties. Such research revenue may include up-front license fees, milestone payments and reimbursement of development and other costs, and royalties. Non-refundable up-front license fees under which we have continuing involvement in the form of development, manufacturing or commercialization are recognized as revenue ratably over either: the development period if the development risk is significant; or the estimated product useful life if the development risk has been substantially eliminated. Achievement-based milestone payments are recognized as revenue when the milestone objective is attained because the earnings process relating to such payments is complete upon attainment and because the payments are non-refundable and are not dependent upon future activities or the achievement of future objectives. These milestone payments are at risk and require substantive activity to achieve. Reimbursement of development and other costs are recognized as revenue as the related costs are incurred. Royalties are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured. Royalty estimates are made in advance of amounts collected using historical and forecasted trends.

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On May 27, 2005, American BioScience, Inc. (“ABI”), the former parent of Old Abraxis, licensed the rights to Abraxane^® in Japan to Taiho Pharmaceutical Co., Ltd, or Taiho, a subsidiary of Otsuka Pharmaceutical Ltd. Under the agreement, we and Taiho established a steering committee, comprised of three representatives from each of us and Taiho, to oversee the preclinical and clinical development of Abraxane^® in Japan for the treatment of breast, lung, gastric, and other solid tumors. The steering committee is required to meet at least once annually. In addition, under the agreement, the steering committee established a development working group, comprised of an equal number of representatives from both us and Taiho, who is required to meet at least once quarterly until regulatory approval of Abraxane^® is first obtained in Japan. The license provides for a non-refundable $20.0 million up-front payment, $38.5 million in potential milestone payments contingent upon the achievement of various clinical, regulatory and sales objectives, royalties based on net sales under the agreement; and an agreement under which we will supply Taiho with Abraxane^®. Due to our continuing involvement under the agreement through the steering committee and the development working group, the $20.0 million non-refundable up-front payment has been deferred. At the time the up-front payment was made, we estimated that it would take approximately five years to receive regulatory approval for the first indication of Abraxane^® in Japan (following which approval, the steering committee’s responsibilities would be substantially diminished) and that Abraxane^® could begin to face competition in Japan as early as seven years after entering into the agreement. We believe these estimates remain accurate. Accordingly, the up-front payment is being recognized as research revenue ratably over seven years.

In each of 2007 and 2006, we recorded revenue of $3.0 million relating to milestone payments received from Taiho. We did not receive a milestone payment in 2005. In addition, we recognized revenue of $2.9 million in each of 2007 and 2006 and $1.7 million in 2005 for the amortization of the $20.0 million up-front payment. At December 31, 2007 and 2006, unearned revenue associated with the Taiho agreement of $12.6 million and $15.5 million, respectively, was recorded as deferred revenue on the balance sheet.

Other
Revenue

Other revenue generally consists of amounts earned from the development and research to advance the commercial application
of pharmaceutical compounds for third parties. Such research revenue may include up-front license fees, milestone payments and reimbursement of development and other costs, and royalties. Non-refundable up-front license fees under which we have
continuing involvement in the form of development, manufacturing or commercialization are recognized as revenue ratably over either: the development period if the development risk is significant; or the estimated product useful life if the
development risk has been substantially eliminated. Achievement-based milestone payments are recognized as revenue when the milestone objective is attained because the earnings process relating to such payments is complete upon attainment and
because the payments are non-refundable and are not dependent upon future activities or the achievement of future objectives. These milestone payments are at risk and require substantive activity to achieve. Reimbursement of development and other
costs are recognized as revenue as the related costs are incurred. Royalties are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured. Royalty
estimates are made in advance of amounts collected using historical and forecasted trends.

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On May 27, 2005, American BioScience, Inc.
(“ABI”), the former parent of Old Abraxis, licensed the rights to Abraxane^® in Japan to Taiho Pharmaceutical Co., Ltd, or Taiho, a subsidiary of Otsuka Pharmaceutical Ltd. Under
the agreement, we and Taiho established a steering committee, comprised of three representatives from each of us and Taiho, to oversee the preclinical and clinical development of Abraxane^®
in Japan for the treatment of breast, lung, gastric, and other solid tumors. The steering committee is required to meet at least once annually. In addition, under the agreement, the steering committee established a development working group,
comprised of an equal number of representatives from both us and Taiho, who is required to meet at least once quarterly until regulatory approval of Abraxane^® is first obtained in Japan.
The license provides for a non-refundable $20.0 million up-front payment, $38.5 million in potential milestone payments contingent upon the achievement of various clinical, regulatory and sales objectives, royalties based on net sales under the
agreement; and an agreement under which we will supply Taiho with Abraxane^®. Due to our continuing involvement under the agreement through the steering committee and the development working
group, the $20.0 million non-refundable up-front payment has been deferred. At the time the up-front payment was made, we estimated that it would take approximately five years to receive regulatory approval for the first indication of AbraxaneFACE="Times New Roman" SIZE="1">^® in Japan (following which approval, the steering committee’s responsibilities would be substantially diminished) and that Abraxane^®
could begin to face competition in Japan as early as seven years after entering into the agreement. We believe these estimates remain accurate. Accordingly, the up-front payment is being recognized as research revenue ratably over seven
years.

In each of 2007 and 2006, we recorded revenue of $3.0 million relating to milestone payments received from Taiho. We did not
receive a milestone payment in 2005. In addition, we recognized revenue of $2.9 million in each of 2007 and 2006 and $1.7 million in 2005 for the amortization of the $20.0 million up-front payment. At December 31, 2007 and 2006, unearned
revenue associated with the Taiho agreement of $12.6 million and $15.5 million, respectively, was recorded as deferred revenue on the balance sheet.

FACE="Times New Roman" SIZE="2">Chargebacks

Following industry practice, we typically sell our product to independent
pharmaceutical wholesalers at wholesale list price. The wholesaler in turn sells our product 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.

Other Revenue

Taiho Agreement and Revenue: On May 27, 2005, American BioScience, Inc. (“ABI”), the former parent of Abraxis BioScience, licensed the rights to Abraxane^® in Japan to Taiho Pharmaceutical Co., Ltd, or Taiho, a subsidiary of Otsuka Pharmaceutical Ltd. Under the agreement, New Abraxis and Taiho established a steering committee, comprised of three representatives of from each of New Abraxis and Taiho, to oversee the preclinical

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and clinical development of Abraxane^® in Asia for the treatment of breast, lung, gastric, and other solid tumors. The steering committee is required to meet at least once annually. In addition, under the agreement, the steering committee established a development working group, comprised of an equal number of representatives from both New Abraxis and Taiho, who is required to meet at least once quarterly until regulatory approval of Abraxane^® is first obtained in Japan. The license provides for a non-refundable $20.0 million upfront payment, $38.5 million in potential milestone payments contingent upon the achievement of various clinical, regulatory and sales objectives, royalties based on net sales under the agreement; and an agreement under which New Abraxis will supply Taiho with Abraxane^®. Due to New Abraxis’ continuing involvement under the agreement through the steering committee and the development working group, the $20.0 million non-refundable upfront payment has been deferred. At the time the upfront payment was made, New Abraxis estimated that it would take approximately five years to receive regulatory approval for the first indication of Abraxane^® in Japan (following which approval, the steering committee’s responsibilities would be substantially diminished) and that Abraxane^® could begin to face competition in Japan as early as seven years after entering into the agreement. New Abraxis believes these estimates remain accurate. Accordingly, the upfront payment is being recognized as research revenue ratably over seven years.

During 2006, New Abraxis recorded revenue of $3.0 million relating to milestone payments received from Taiho. In addition, the revenue recognized in 2006 as a result of amortization of the $20.0 million upfront payment was $2.9 million. At December 31, 2006, unearned revenue associated with the Taiho agreement of $15.5 million was recorded as deferred revenue on the balance sheet.

Research Revenue Recognition

Research revenue generally consists of amounts earned from the development and research to advance the commercial application of pharmaceutical compounds for third parties. Such research revenue may include upfront license fees, milestone payments and reimbursement of development and other costs, and royalties. Non-refundable upfront license fees under which New Abraxis has continuing involvement in the form of development, manufacturing or commercialization are recognized as revenue ratably over either: the development period if the development risk is significant; or the estimated product useful life if the development risk has been substantially eliminated. Achievement-based milestone payments are recognized as revenue when the milestone objective is attained because the earnings process relating to such payments is complete upon attainment and because the payments are non-refundable and are not dependent upon future activities or the achievement of future objectives. These milestone payments are at risk and require substantive activity to achieve. Reimbursement of development and other costs are recognized as revenue as the related costs are incurred. Royalties are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured. Royalty estimates are made in advance of amounts collected using historical and forecasted trends.