Abraxis BioScience (ABII)

Research and Development

Our research and development efforts are based on the tight integration and rapid translation of discovery from the bench to the clinic among its chemistry, biology, pharmaceutical, regulatory and clinical development groups. We have recruited seasoned discovery scientists, medicinal chemists, formulation scientists and integrated these talents with a team of clinical development and regulatory experts. Our approach is based on the integration of various capabilities and resources, including:

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Natural Product Drug Discovery Platform

Almost half of today’s best-selling drugs originate from natural products or their derivatives. A key feature of natural products is their enormous structural and chemical diversity that is not represented in combinatorial libraries of synthetic compounds. This makes natural products a fertile resource for finding novel compounds that interact with new targets for drug discovery. In addition, we believe our nab^® tumor targeting technology platform is ideally suited to the formulation and delivery of natural products, which tend to be more water insoluble, larger and more complex than typical synthetic drugs.

We have established a proprietary natural product library of large chemical diversity for drug discovery. The library currently represents more than 100,000 semi-purified screening samples derived from microorganisms (over 65,000 strains of actinomycetes, fungi and bacteria) retrieved from over 38,000 soil samples representing geographic, habitat and genetic diversity from all over the world. New strains of microorganisms are continuously being added from our soil sample collection, and we believe the millions of microorganisms in each soil sample provide us with an almost limitless resource for continuing to create new and targeted libraries of natural product chemical diversity for drug discovery. The natural product library continues to provide chemical diversity for our ongoing high throughput screening activities. Natural products are an important component of our drug discovery strategy and, with the capability to overcoming water insolubility through the use of our nab^® technology, we believe we have the unique opportunity to translate water insoluble compounds discovered from our natural product libraries into clinical applications.

Multi-functional Chemistry Capabilities. We possess a full range of chemistry capabilities, including organic and medicinal chemistry, analytical chemistry, formulation, process development and natural product isolation chemistry. Our approach, which involves chemistry-driven discovery combined with biology-driven validation and integration with our nab^® technology, has been applied successfully on many drug discovery programs.

Internal Clinical Trial and Regulatory Competencies. We have established key internal clinical development and regulatory competencies to execute rapid clinical translation of our technology in the most cost-efficient manner. Clinical Operations, Safety Reporting, Data Management and Biostatistics are located in our Durham, North Carolina office. Clinical Operations manages all of our company-sponsored clinical trials by overseeing the study conduct at each site and verifying data integrity. Data Management enters all clinical trial data into an in-house database, which is then analyzed by our biostatistics team who produce reports for FDA submissions. Safety reporting and post-marketing safety surveillance are carried out using a Drug Safety Reporting System. The regulatory operations team is responsible for making submissions to the FDA and global regulatory authorities. This seasoned team accomplished the first electronic submission of a New Drug Application (NDA) with the FDA of an oncology product, resulting in FDA approval of Abraxane^®. An important strategy underway is the development of informatics and electronic systems to streamline our clinical trial management processes, including establishing alliances to enhance patient accrual and provide efficient methods to capture data.

Research and Development

Research and development expense for the year ended December 31, 2009 increased $55.6 million, or 56.2%, to $154.6 million as compared to $99.0 million in 2008. Spending on Phase III clinical trials for non-small cell lung cancer, pancreatic cancer and melanoma accounted for a majority of the increase. The remainder of the increase was attributable to investments in early stage discovery and other research and development projects.

Research and development expense for the year ended December 31, 2008 increased $13.6 million, or 15.9%, to $99.0 million as compared to $85.4 million in 2007. The increase was primarily due to increased investments in research and development companies, and increased spending in clinical and investigator sponsored studies, offset partially by reductions in stock compensation expense.

Our research and development expenses are comprised primarily of costs related to our drug discovery efforts, drug development efforts, clinical trials, and other research and development activities. We do not track total research and development expenses separately for each of our product development programs. Drug discovery and drug development expenses mostly include personnel expense, lab supplies, non-refundable upfront payments, consulting fees, occupancy costs and other third-party costs.

The scope and magnitude of our future research and development expenses are difficult to predict at this time given the number of studies that will need to be conducted for any of our potential product candidates. In general, biotechnology product development involves a series of steps. The process begins with discovery and preclinical research leading up to the submission of an Investigational New Drug (IND) application to the U.S. Food and Drug Administration (FDA), which allows for the initiation of the clinical evaluation of a potential drug candidate in humans. Clinical trials are typically comprised of three phases of study: Phase 1, Phase 2 and Phase 3. Generally, the majority of a drug candidate’s total development costs are incurred during Phase 3, which consists of trials that are typically both the longest and largest conducted during the drug development process. The length of time to complete clinical trials may take as many as seven to ten years. However, the length of time may vary substantially according to factors relating to the particular clinical trial, such as the type and intended use of the drug candidate, the clinical trial design and the ability to enroll suitable patients.

The estimation of completion dates or costs to complete our research and development projects would be highly speculative and subjective due to the numerous risks and uncertainties associated with developing biotechnology products. These risks could include (i) significant changing government regulation, (ii) the uncertainty of future preclinical and clinical study results, (iii) uncertainties associated with developing biotechnology products and (iv) uncertainties associated with process development and manufacturing. Our research and development expenses can vary from period to period given the rate at which clinical trial materials are acquired and utilized and the rate at which we are successful in enrolling suitable patients. The following table summarizes our research and development expenses for the years ended December 31, 2009, 2008 and 2007:

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Research and Development

Research and development expense for the three months ended March 31, 2009 increased $14.2 million, or 68.0%, to $35.0 million as compared to $20.8 million for the same period in 2008. The increase related primarily to increased spending in clinical studies and investments in research and development projects.

Research and Development

Our research and development efforts are based on the tight integration and rapid translation of discovery from the bench to the clinic among its chemistry, biology, pharmaceutical, regulatory and clinical development groups. We have recruited seasoned discovery scientists, medicinal chemists, formulation scientists and integrated these talents with a team of clinical development and regulatory experts. Our approach is based on the integration of various capabilities and resources, including:

Natural Product Drug Discovery Platform

Almost half of today’s best-selling drugs originate from natural products or their derivatives. A key feature of natural products is their enormous structural and chemical diversity that is not represented in combinatorial libraries of synthetic compounds. This makes natural products a fertile resource for finding novel compounds that interact with new targets for drug discovery. In addition, we believe our nab^® tumor targeting technology platform is ideally suited to the formulation and delivery of natural products, which tend to be more water insoluble, larger and more complex than typical synthetic drugs.

We have established a proprietary natural product library of large chemical diversity for drug discovery. The library currently represents approximately 100,000 semi-purified screening samples derived from microorganisms (over 65,000 strains of actinomycetes, fungi and bacteria) retrieved from over 38,000 soil

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samples representing geographic, habitat and genetic diversity from all over the world. New strains of microorganisms are continuously being added from our soil sample collection, and we believe the millions of microorganisms in each soil sample provide us with an almost limitless resource for continuing to create new and targeted libraries of natural product chemical diversity for drug discovery. For example, nab^®-17AAG was developed based on extracts from our natural product library.

Natural products are an important component of our drug discovery strategy and, with the capability to overcoming water insolubility through the use of our nab^® technology, we believe we have the unique opportunity to translate water insoluble compounds discovered from our natural product libraries into clinical applications.

Multi-functional Chemistry Capabilities. We possess a full range of chemistry capabilities, including organic and medicinal chemistry, analytical chemistry, formulation, process development and natural product isolation chemistry. Our approach, which involves chemistry-driven discovery combined with biology-driven validation and integration with our nab^® technology, has been applied successfully on many drug discovery programs.

Internal Clinical Trial and Regulatory Competencies. We have established key internal clinical development and regulatory competencies to execute rapid clinical translation of our technology in the most cost-efficient manner. Clinical Operations, Safety Reporting, Data Management and Biostatistics are located in our Durham, North Carolina office. Clinical Operations manages all of our company-sponsored clinical trials by overseeing the study conduct at each site and verifying data integrity. Data Management enters all clinical trial data into an in-house database, which is then analyzed by our biostatistics team who produce reports for FDA submissions. Safety reporting and post-marketing safety surveillance are carried out using a Drug Safety Reporting System. The regulatory operations team is responsible for making submissions to the FDA and global regulatory authorities. This seasoned team accomplished the first electronic submission of an NDA with the FDA of an oncology product, resulting in FDA approval of Abraxane^®. An important strategy underway is the development of informatics and electronic systems to streamline our clinical trial management processes, including establishing alliances to enhance patient accrual and provide efficient methods to capture data.

Research and Development

Research and development expense for the year ended December 31, 2008 increased $14.9 million, or 16.8%, to $103.6 million as compared to $88.7 million in 2007. The increase was primarily due to increased investments in research and development companies, and increased spending in clinical and investigator sponsored studies, offset partially by reductions in stock compensation expense.

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Research and development expense increased by $25.6 million, or 40.7%, in 2007 to $88.7 million as compared to $63.1 million in 2006. The increase was primarily due to increased spending in biosimilar development, stock compensation expense, legal costs and costs associated with the start-up of our Phoenix, Arizona manufacturing facility, partially offset by decreased clinical trial spending as a result of the timing of Phase III clinical trials.

Research and Development

Research and development expense for the nine months ended September 30, 2008 increased $5.2 million, or 8.5%, to $66.6 million as compared to $61.4 million for the same period in 2007. The increase was primarily due to pre-launch costs related to our

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Phoenix, Arizona manufacturing facility acquired in July 2007 and increased regulatory and research project spending, partially offset by a licensing payment for an unapproved biosimilar product, which was recognized in 2007.

Research and Development

Research and development expense for the six months ended June 30, 2008 increased $9.9 million, or 30.2%, to $42.5 million as compared to $32.7 million for the same period in 2007. The increase was primarily due to pre-launch costs related to our Phoenix, Arizona manufacturing facility acquired in July 2007 and increased regulatory and research project spending.

Research and Development

Research and development expense for the three months ended March 31, 2008 increased $5.1 million, or 32.5%, to $20.8 million as compared to $15.7 million for the same period in 2007. The increase was primarily due to costs related to the Phoenix plant acquired from Watson Laboratories in July 2007.

RESEARCH AND DEVELOPMENT

As of March 31, 2008, approximately 30 company-sponsored clinical studies and approximately 90 investigator-initiated studies were planned or underway, of which more than 36 have active patient enrollment. The company expects to have five Phase III trials active or initiated in 2008. These trials are designed to expand the number of oncology indications in which ABRAXANE may be used. The Phase III trials are focused in the areas of non-small cell lung cancer (NSCLC), melanoma, first-line metastatic breast cancer (MBC) and pancreatic cancer. These are all expected to be superiority trials utilizing weekly dosing schedules of ABRAXANE.

Abraxis intends to leverage its nab^™ tumor targeting technology and internal clinical development and regulatory expertise to develop numerous drug candidates for the treatment of cancer and other critical illnesses. The drug candidates which have achieved Phase I or IND status include ABI-008 (nab^™-docetaxel), ABI-009 (nab^™ -rapamycin), ABI-010 (nab^™-17AAG) and COROXANE^™.

In its clinical development program, Abraxis initiated enrollment in its Phase II clinical trial to evaluate the efficacy and safety of COROXANE for the prevention and reduction of restenosis following revascularization of the superficial femoral artery (SFA). COROXANE (ABRAXANE

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Abraxis BioScience, Inc.

2008 First Quarter Financial Results

under the trade name COROXANE) is a novel, solvent free, albumin-bound form of paclitaxel used for cardiovascular applications. The company currently is seeking a strategic partner for the development and marketing of COROXANE.

At the European Breast Cancer Conference (EBCC) in April 2008, the company had 10 clinical and three preclinical poster presentations. Additionally, at the American Association for Cancer Research (AACR) in April 2008, 13 poster presentations were made. Highlights include a preclinical study using ABRAXANE in combination with Avastin^® (bevacizumab) to eradicate large-sized (up to 600 mm³) orthotopic breast tumors and lymphatic and systematic metastasis. The findings presented suggest a novel mechanism through which ABRAXANE can overcome a newly discovered phenomenon of reactionary angiogenesis. The company also reported data from a Phase I trial showing clinical benefit of ABRAXANE in combination with Gemzar^® (gemcitabine) in more than 70 percent of patients with advanced pancreatic cancer.

At the upcoming American Society of Clinical Oncology (ASCO) in May 2008, 23 submissions have been accepted. The studies to be presented include the use of ABRAXANE as mono-therapy and in combination therapy in breast cancer and other tumor types, including melanoma, pancreatic, prostate and ovarian.

Research and Development

Research and development expense for the year ended December 31, 2007 increased $25.6 million, or 40.7%, to $88.7 million as compared to $63.1 million in 2006. The increase was primarily due to increased spending in biosimilar development, stock compensation expense, legal costs and costs associated with the start-up of our Phoenix, Arizona manufacturing facility, partially offset by decreased clinical trial spending as a result of the timing of Phase III clinical trials.

Research and development expense increased by $12.9 million, or 26%, in 2006 to $63.1 million as compared to $50.1 million in 2005. The increase was primarily due to increased Abraxane^® and Coroxane^™

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clinical trial activity, ongoing development of our discovery product candidates and Abraxane^® scale-up activity toward EU-compliant production in the Grand Island facility. These costs were partially offset by the cessation of development spending in our Switzerland facility, which began commercial production in the first quarter of 2006.

Research and Development

Research and Development

Research and development expense for the nine months ended September 30, 2007 increased $12.3 million, or 25%, to $61.4 million as compared to $49.1 million for the same period in 2006. The increase was primarily due to increased spending in biosimilar development and costs associated with the start-up of our Phoenix, Arizona manufacturing facility, partially offset by decreased clinical trial spending as a result of the timing of Phase III clinical trials.

Research and Development

Our research and development efforts are based on the tight integration and rapid translation of discovery from the bench to the clinic among its chemistry, biology, pharmaceutical, regulatory and clinical development groups. We have recruited seasoned discovery scientists, medicinal chemists, formulation scientists and integrated these talents with a team of clinical development and regulatory experts. Our approach is based on the integration of various capabilities and resources, including:

Natural Product Drug Discovery Platform

Almost half of today’s best-selling drugs originate from natural products or their derivatives. A key feature of natural products is their enormous structural and chemical diversity that is not represented in combinatorial libraries of synthetic compounds. This makes natural products a fertile resource for finding novel compounds that interact with new targets for drug discovery. In addition, our nab^™ tumor targeting technology platform is ideally suited to the formulation and delivery of natural products, which tend to be more water insoluble, larger and more complex than typical synthetic drugs.

We have established a proprietary natural product library of large chemical diversity for drug discovery. The library currently represents approximately 100,000 semi-purified screening samples derived from microorganisms (over 65,000 strains of actinomycetes, fungi and bacteria) retrieved from over 30,000 soil samples representing geographic, habitat and genetic diversity from all over the world. New strains of microorganisms are continuously being added from our soil sample collection, and we believe the millions of microorganisms in each soil sample provide us with an almost limitless resource for continuing to create new and

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Table of Contents

targeted libraries of natural product chemical diversity for drug discovery. For example, nab^™-17AAG was developed based on extracts from our natural product library.

Natural products are an important component of our drug discovery strategy and, with the capability to overcoming water insolubility through the use of our nab™ technology, we believe we have the unique opportunity to translate water insoluble compounds discovered from our natural product libraries into clinical applications.

Multi-functional Chemistry Capabilities. We possess a full range of chemistry capabilities, including organic and medicinal chemistry, analytical chemistry, formulation, process development and natural product isolation chemistry. Our approach, which involves chemistry-driven discovery combined with biology-driven validation and integration with our nab™ technology, has been applied successfully on many drug discovery programs.

Internal Clinical Trial and Regulatory Competencies. We have established key internal clinical development and regulatory competencies to execute rapid clinical translation of our technology in the most cost-efficient manner. Clinical Operations, Safety Reporting, Data Management and Biostatistics are located in our Raleigh, North Carolina office and consisted of approximately 55 employees at June 30, 2007. Clinical Operations manages all of our company-sponsored clinical trials by overseeing the study conduct at each site and verifying data integrity. Data Management enters all clinical trial data into an in-house Oracle^® Clinical database that is used to produce reports for FDA submissions. Safety reporting and post-marketing safety surveillance are carried out using the ArisGlobal^® Drug Safety Reporting System. The regulatory operations team is responsible for making submissions to the FDA and global regulatory authorities. This seasoned team accomplished the first electronic submission of an NDA with the FDA of an oncology product, resulting in FDA approval of Abraxane^®. An important strategy underway is the development of an informatics and electronic systems to streamline our clinical trial management processes, including establishing alliances to enhance patient accrual and provide efficient methods of data capture.