Abraxis Initiation Merriman Sept 09

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD
BiotechnologyLife Sciences
Buy
September 15, 2009 Michael G. King, Jr. Managing Director (646) 292-1424 mking@mcfco.com
The Billion Dollar Cancer Company the Street Forgot; Initiating Coverage With a Buy Rating
Key Metrics
Price: Rating: $27.07 Buy
Investment Conclusion
Shares of Abraxis BioScience have lost more than half their value over the past 12 months. This is attributable to several factors, including a split with former marketing partner, Astra-Zeneca, and flat U.S. sales of, Abraxane. In our view, the worst is behind the company and the tide is about to turn for the shares. Fundamentals have begun to improve, new management is in place, and pivotal Phase III Abraxane data in NSCLC should read out by the end of 2009. The U.S. sales machine is being fixed, and Abraxane is launching in China and the EU. Meanwhile, the stock trades with an enterprise value of approximately $800M, or 2.4x FY09 annualized sales. Abraxis owns all the worldwide rights to Abraxane.
52-Week Range: Cash (M): Debt (M): Debt/Capital: Book Value/Share:
$24.52-74.50 $258 $0 0% $22.17
Market Data
Market Cap (M): Enterprise Value (M): Shares Out. (M): Float (M): 10-Day Avg. Vol.: $1,086 $807 40.1 26.6 60,741
Summary Abraxis
BioScience has been off the Streets radar screen for several years, due to a number of factors, including a controversial shareholder with a dominant equity position, a split with former marketing partner, AstraZeneca and flat U.S. sales of Abraxane. As a result, the shares are down by more than 50% year to date, and average daily volume is a mere 40,000 shares. The stock has zero sell-side coverage. The good news: new management is in place, ex-U.S. territories are coming on stream, and additional Abraxane indications should be forthcoming. In April of 2009, Abraxis named Lonnie Moulder to the position of President and CEO. Moulders previous company, MGI Pharma, successfully developed and launched the anti-nausea drug, Aloxi. MGI was then sold for $3.9B in cash in 2008.
Institutional Ownership: 55.4%
Stock Performance
Despite
Source: BigCharts.com
Valuation (FY09E) MERRIMAN CURHAN FORD

EV/Sales: PE Ratio: N/M N/M
600 California Street 9th Floor San Francisco, CA 94108 (415) 248-5600 Main (415) 248-5690 Fax (800) 909-7897 Trading www.mcfco.com NASDAQ: MERR Member FINRA/SIPC
the companys past turmoil, we believe the stocks valuation more than accounts for past transgressions, and the future looks interesting to us. In our opinion, operational execution could double Abraxane sales by 2013 as the EU and China territories come on line. In addition, Abraxis is conducting three ongoing registration trials of Abraxane; a read-out of the NSCLC study should happen before year end. In the meantime, the stock has a technology value of approximately $750M, 3x annualized sales, and 1x the product NPV. The company ended 2Q09 with $258M in cash, sufficient to fund operations for the foreseeable future. Finally, Abraxis owns 100% of the worldwide rights to Abraxane, and would be an attractive acquisition candidate for a large pharma or biotech company looking to augment its anti-cancer drug portfolio. We are therefore initiating coverage with a Buy rating and are establishing a price target range of $30-33 based on our FY13 EPS estimate of $0.74, fully taxed, fully diluted, and discounted back by 9% for three periods. FY08A FY09E FY10E
Company Description
Abraxis BioScience, Inc., a biotechnology company, engages in the discovery, development and delivery of nextgeneration therapeutics and core technologies that offer treatments for cancer and other critical illnesses. The companys product pipeline includes clinical oncology and cardiovascular product candidates in various stages of testing and development. Its principal product includes Abraxane, a nanoparticle chemotherapeutic compound that is based on its proprietary tumor targeting nab technology platform for the treatment of metastatic breast cancer. The company was formerly known as New Abraxis, Inc. and changed its name to Abraxis Bioscience, Inc. in November 2007. Abraxis BioScience is based in Los Angeles, California.
MCF Estimates
SALES (M) 1Q 2Q 3Q 4Q FY (Dec) EV/S EPS 1Q 2Q 3Q 4Q FY (Dec) P/E $0.09 (2.13) (0.40) (4.56) ($6.93) N/M ($0.63) (0.56)A (0.53) (0.47) ($2.20) N/M ($0.50) (0.44) (0.42) (0.42) ($1.77) N/M $82.1 77.6 93.4 92.2 $345.3 2.3X $72.6 85.1 A 84.6 88.3 $330.6 2.4X $93.1 97.5 102.0 106.5 399.1 2.0X
Please see Important Disclosures on the last page of this report.
Buy
Table of Contents Investment ThesisThe Billion Dollar Company the Street Forgot.....3 Company Background: The Cult of Personality.. 3 Investment Risks.. 3 Upcoming Milestones... 4 Company Background.... 5 History is History, The Next Twelve Months Should be Critical.... 5 Abraxane: Why Use Anything Else?................................................................. 6 Breast Cancer: Where Abraxane Earned its Stripes... 6 Abraxane Again Proves its Worth in a Head-to-Head Trial Against Taxotere... 9 Data Equals Market Share in Cancer Therapy... 12 Let The Data Flow: Abraxane Has a Busy Clinical Trials Calendar.. 19 Abraxane Phase III Trials: One Ace in the Hole, Two Wildcards.... 19 Abraxis PipelineLots Going On Internally and Externally.19 NAB Technology Platform-Big things Come in Small Packages. 11 Valuation... 22 Summary and Conclusion. 22 Appendices: A. Senior Management. 23 B. Disease Overview.. 25 C. Compendia Listings.. 27 Figures: 1. Response Rates in Abraxane vs Paclitaxel in Metastatic Breast Cancer.. 7 2. Time to Progression in Abraxane vs Paclitaxel in Metastatic Breast Cancer. 7 3. Patient Survival in Abraxane vs Paclitaxel in Metastatic Breast Cancer.. 8 4. Adverse Events in Phase III Trial of Abraxane vs Standard Paclitaxel.. 9 5. Confirmed ORR and DCR in Abraxane vs Docetaxel. 10 6. Progression-Free Survival in Abraxane vs Docetaxel.. 11 7. Kaplan Meier of PFS curve in Abraxane vs Docetaxel..11 8. Annual Taxane Treatments... 12 8. Estimated Number of Patients on Abraxane in July 2009. 13 9. Estimated Number of Patients on Abraxane on Rolling 12-Month Average Basis. 13 10. Abraxane Revenue Model... 14 11. Abraxane Revenue Build in Metastatic Breast Cancer in the United States.. 15 12. Abraxane Revenue Build in Metastatic Breast Cancer in the European Union. 16 13. Abraxane Revenue Build in Metastatic Breast Cancer in China. 17 14. Abraxane Revenue Build in Metastatic Breast Cancer in Rest of World. 18 15. Abraxis BioScience Pipeline. 20 16. nab-Particle Diagram.. 21 17. nab-Platform.. 21 18. Newly Diagnosed Pancreatic Cancer Cases by Stage.. 26 Income Statement.. 29 Balance Sheet.. 30
September 15, 2009
Buy
Investment Thesis Abraxis BioScience is a commercial biopharmaceutical company that markets its only commercial compound, Abraxane, in 36 countries around the world. The product was approved in the US in January of 2005 for the treatment of metastatic breast cancer. The shares are undervalued, in our opinion, based on investor disappointment with managements prior performance and essential control over the company by principal shareholder, Patrick Soon-Shiong, who owns over 80% of the equity. However, we believe the company has a product that is fundamentally sound and is approaching several key sales and clinical catalysts. Moreover, a new management team is in place that has a demonstrated track record of execution and eventual sale of a previous company (MGI Pharma). When juxtaposed against the undervalued nature of the stock (trading at approximately 1x the Abraxane NPV) and lack of Street following, we find the Abraxis story compelling. We are therefore initiating coverage with a Buy rating and a price target range of $30-33. In our view, the key to the stocks appreciation will be operational execution, as well as clarity on the strategic risks and benefits of the soon-to-be-spin-off company, Abraxis Health. We also anticipate that Lonnie Moulder, recently-appointed CEO, will increase the companys visibility in the eyes of the investment community, thereby highlighting the opportunity in the companys stock. Furthermore, the upcoming spin off of Abraxis Health should help investors get a clearer picture of the true operations of Abraxis BioScience, and potentially result in a higher valuation.
Company Background: The Cult of Personality In the biotechnology space, there are companies that are controversial, and then there are companies that are controversial. We would submit that Abraxis BioScience falls into the latter category. Until recently, Abraxis was run by the enigmatic Patrick Soon-Shiong. Dr. Soon-Shiong is the son of a family doctor from a rural Chinese village. The family immigrated to South Africa during World War II. He finished high school by age 16 and became a doctor himself by age 23. He took American Pharmaceuticals Partners public in 2001. After the successful development of Abraxane, he split the company in two in 2007; APP Pharmaceuticals sold hospital-based products while Abraxis BioScience developed proprietary drugs (mostly Abraxane). APP Pharmaceuticals was sold to Fresenius in 2007 for $5.6 billion in a transaction that netted Soon-Shiong $3 billion. When the shares of American Pharmaceuticals Partners (also referred to as Old Abraxis) were split in 2007, shareholders of APP received one share of Abraxis BioScience for every four shares of Old Abraxis. A heated debate accompanied the terms of the split of Abraxis from APP for the minority shareholders, as Soon-Shiong was the majority shareholder in both the old and the new company. The transaction ultimately was approved and closed in 2007. Despite concerns that arose over the objectivity of the value placed on both assets, the sale of APP to Fresenius resulted in the creation of significant value for all. Soon-Shiong has now stepped aside as Chairman and CEO of Abraxis and turned these duties over to Lonnie Moulder, who investors may recall was President and CEO of MGI Pharma. MGI was sold to Eisai Pharmaceuticals of Japan, with the transaction closing in early 2008. Moulder joined Abraxis in April of 2009; subsequently, three members of Moulders former MGI Pharma management team, Marty Duvall, Rick Rodgers, and Mary Lynne Hedley, have also come on board.
Investment Risks
Shares of Abraxis are closely-held, and there is a single dominant shareholder. As mentioned, Patrick Soon-Shiong owns more than 80% of the equity of Abraxis. Therefore, he controls essentially the companys entire decision making process. Shareholder approval is a fait accompli for all major strategic decisions. Further, despite his move to Abraxis Health, Soon-Shiong may still influence the decisions made at Abraxis BioScience. The shares of Abraxis BioScience are illiquid, and therefore can be volatile in both directions. Recent data indicates that average daily volume is just over 40,000 shares per day. Our understanding is that much of the downward pressure on the shares so far this year stems from a small number of share-
September 15, 2009
Buy
holders seeking to reduce their positions. The downward price movement may be exacerbated by the lack of liquidity in the stock.
Abraxis is a single-product company. Despite our enthusiasm over the outlook for Abraxane growth, the fortunes of the company rise and fall with Abraxane. The taxane market is highly competitive, and Taxol (paclitaxel) is now a generic drug with multiple suppliers. The cancer field is under tremendous economic pressure to reduce the use of expensive therapies, and the current cost of a cycle of Abraxane could come under scrutiny. Alternative formulations of paclitaxel are being explored. While none have passed Phase III trials and a proprietary vitamin-E based formulation of paclitaxel from Sonus Pharmaceuticals failed a Phase III trial, there are still a number of novel taxane formulations are under development by a number of parties. Investor due-diligence will likely turn up few key opinion leaders with a favorable point of view of Abraxane. While our due diligence checks have never turned up a negative comment on Abraxane from a member of the thought-leader community, the reaction has been more of a ho-hum response. Thought leaders find the science behind Abraxane to be mundane, and are usually more interested in novel cytotoxic or targeted therapy compounds. This clearly has not stopped the widespread adoption of Abraxane amongst community oncologists, who find its tolerability and ease of infusion to be a significant benefit to their patients. Abraxis Health spin-off could raise concerns about BioSciences financial commitment to the corporate offspring. In addition to providing Abraxis Health with $25 million of its cash, BioScience will also provide Abraxis Health with access to a $200 million line of credit. This may raise concerns regarding whether BioScience is taking on too much financially or managerially, or may raise concerns about the use of BioSciences cash which has been reduced to approximately $225 million from $700 million in 2007. Operating margins are well below industry norms. Please see our full margin analysis for additional detail. However, despite gross margins that are in line with those seen at other major biotechnology companies, Abraxiss operating margins are well below the norm. This is because the companys SG&A levels are double or triple the norm for the industry. If the company cannot succeed in bringing these more in line with those in the industry, the shares may continue to lag. Litigation overhang. In June of 2008, Abraxis announced that it intended to appeal a jury verdict that found Abraxis as infringing a patent held by Elan that covers nanoparticle anticancer agents (U.S. patent number 5,399,363) . The jury awarded Elan damages of $55 million, and Abraxis has accrued $57.4 million to meet this liability if the appeal ultimately fails.
Upcoming Milestones According to managements projections:

Launch Abraxane in China and Korea Continue Abraxane rollout throughout Europe Complete Phase III trial of Abraxane in non-small cell lung cancer and report top-line results Complete enrollment in registration trials of Abraxane in melanoma and pancreatic cancer Complete spin-out of Abraxis Health
September 15, 2009
Buy
Company Background There are some stocks that have stories, and there are others that have STORIES. Abraxis is a company in the latter category. Charismatic and controversial Executive Chairman, Patrick Soon-Shiong, MD, built the company nearly single-handedly over the last decade. Started as a manufacturer of generic drugs (the two predecessor companies to Abraxis were known as American Bioscience and American Pharmaceutical Partners), the turning point in the companys history came with the licensure of Abraxane, an albumin-bound taxane molecule that received approval in January of 2005 for the treatment of metastatic breast cancer. Many investors were skeptical at the time of Abraxanes approval, as the study was designed for noninferiority to Taxol (paclitaxel), a design that the FDA typically discourages. Abraxane did, however, produce a significantly higher response rate compared to conventional paclitaxel, and had a superior side effect profile, and the drug was approved under the FDAs 505 (b)2 pathway. The company has also had fits and starts with previous CEOs and corporate partner relationships. Moulder was proceeded by at least three other erstwhile CEOs with large pharma experience, who subsequently left the company. As we mentioned previously, the Abraxane marketing relationship with Astra-Zeneca was short-lived. There has also been investor speculation that a sale process of Abraxis may have taken place within the past years time. If this is true, the lack of a buyer at a significant premium may be the reason the shares have been so severely punished since late February.
History is History, the Next Twelve Months Should be Critical Given the drama in the companys past, why would we in good conscience recommend the purchase of ABII shares at this point in time? Two words: value and change. We enumerate our reasons for our positive outlook on the stock.
Valuation is compelling by most metrics. As a loss-making enterprise, Abraxis BioScience cannot be measured on a P/E or PEG basis like its large-cap peers. However, by other traditional biotech market valuation metrics, we find the shares compelling. At current prices, Abraxis has a market cap of approximately $1.1 billion. After deducting net cash (cash minus debt, or in this case $258 million in cash vs. zero debt), the enterprise value is $807 million. If we annualize the companys revenue run-rate to date of approximately $300 million, this leaves us with an enterprise value to revenue ratio of less than 3. This compares favorably to the large cap peer group from the Merriman Biotech Balance Sheet which current trades at and EV/Sales ratio of 6.5. According to our analysis of M&A transactions over the past five years suggests product and company acquisitions in the 5-6x sales on average and values as high as 10x sales in certain transactions that were highly competitive. Change in management critical to unlocking unrealized value. In our view, one of the keys to the unlocking of unrealized value in Abraxis shares is through the recent changes in management. Our perspective on why this time the change in Abraxis may be different this is time is based on two factors: first, Patrick Soon-Shiong is devoting his entire management time to Abraxis Health; second, Lonnie Moulder has joined the company and brought members of his previous team from MGI Pharma along with him. The assemblage of this team is reminiscent of those that ran Peninsula Pharmaceuticals as well as Allos Therapeutics, both of whom sold their companies to large pharma/biotech acquirers. Abraxane has franchise value. While Abraxane is not the sexiest product from a technology perspective, what is attractive to large pharma and biotechnology companies is an established sales base and a worldwide reach. One company that comes to mind is Johnson and Johnson, which owns worldwide rights to Doxil, a liposome-encapsulated version of the generic drug, doxorubicin. J&J acquired these rights when it acquired Alza, a specialty pharmaceutical company with novel drug-delivery technology. J&J also has ex-U.S. rights to Velcade, the proteasome inhibitor developed by Millennium Pharmaceuticals, now owned by Takeda. We would submit that Abraxane is analogous to both products; Abraxane is a unique formulation of a generic drug, with differentiated therapeutic properties like those of a proprietary drug.
September 15, 2009
Buy
We believe operating margins have nowhere to go but up. We point out that Abraxiss SG&A levels are amongst the highest as a percentage of revenue of nearly any company with which we are familiar, with the exception of those that are in launch mode. In contrast, Abraxis is a company with a product that is well past this stage, although is by no means mature (please see our comparative margin analysis below). The good news is that, for every 1% improvement in SG&A expense, approximately $0.15 can be added to Abraxiss bottom line. We urge management to do all in its power to reduce expenses and permit a greater percentage of Abraxane revenue to flow to the bottom line. Abraxis Health spin-off could result in a higher multiple for BioScience. While it is still early and we will not spend a lot of time in this report discussing it, the proposed spin-off of Abraxis Health may ultimately have a beneficial impact on how investors value Abraxis BioScience. Since BioScience will be more of a pure-play after the spin-off, the shares may be afforded a higher multiple of sales and earnings (assuming eventual profitability). The full set of Abraxis Health documents that have been produced to date can be found at the following url: http://www.sec.gov/cgi-bin/browseedgar?action=getcompany&CIK=0001452016&owner=exclude&count=40
Abraxane: Why Use Anything Else? Abraxane, formerly referred to as ABI-007 and nab-paclitaxel, uses Abraxiss proprietary nano-particle technology to improve both the safety and efficacy of paclitaxel (Taxol). Because it obviates the need to use the solvent, Cremophor EL, the drug can be infused rapidly, generally within 30 minutes, compared to three hours for conventional paclitaxel. Unlike paclitaxel, which requires special tubing, Abraxane uses conventional iv tubing for the drugs administration. Further, Cremophor EL is formulated with ethanol and together they form the vehicle in which the Taxol is carried. Data has begun to emerge that the solvent is the source of much of Taxols toxicity. Head to head clinical data suggests that Abraxane not only lacks much of the toxicity of the taxanes, but in many cases has been shown to have superior efficacy as well. We will discuss these data below.
Breast Cancer: Where Abraxane Earned its Stripes The pivotal clinical trial that supported the FDA approval of Abraxane was published in the November 1, 2005, Journal of Clinical Oncology. The principal investigator of the trial was William Gradishar from Northwestern University in Chicago. Dr. Gradishar is one of the more widely-accomplished clinicians in the breast cancer space, having done work with hormone therapy and Herceptin in the past. He has also proven to be a great champion for Abraxane. The study was unusual in the sense that it took multiple sub-types of patients with metastatic breast cancer. There were approximately an equal proportion of patients who were treated in the study for first and second line MBC, and patients with multiple lines of prior therapy were also allowed in the study (42% first line, 41% second line, 10% third line and 7% beyond third line). The study successfully achieved its primary endpoint of a superior response rate to that of polyethylated castor-oil (Cremophor) based paclitaxel (please see Table 1 for details). Overall, 33% of patients achieved a response to Abraxane, while 19% did so to conventional paclitaxel. Use of Abraxane was also associated with a statistically significant improvement in time to tumor progression (TTP), 23 vs. 17 weeks). Despite the fact that patients were receiving a 49% higher dose of paclitaxel in the Abraxane arm, the side effect of Grade 4 neutropenia (low white blood cell count) was skewed significantly in favor of the Abraxane patients (9% vs. 22%). Grade 3 sensory neuropathy (tingling and numbness in the extremities) was the most significant side effect that went against Abraxane; however, the symptoms typically resolved within three weeks. Finally, no hypersensitivity reactions were seen despite the absence of pre-medication in the Abraxane-treated arm of the trial. We discuss each of these aspects below.
September 15, 2009
Buy
Figure 1: Response Rates in Abraxane vs. Paclitaxel in Metastatic Breast Cancer

ABI-007 (260 mg/m2) # of patients/ Total # of patients % 95% CI (%) 76/229 41/97 35/132 60/176 31/115 59/176 17/50 68/199 8/30 33 42 27 34 27 34 34 34 27 27.09 to 39.29 32.44 to 52.10 18.98 to 34.05 27.09 to 41.09 18.85 to 35.07 26.55 to 40.50 20.87 to 47.13 27.58 to 40.76 10.84 to 42.49 Standard Paclitaxel (175 mg/m2) # of patients/ Total # of patients % 95% CI (%) 42/225 24/89 18/136 32/175 18/130 34/182 8/43 36/193 6/32 19 27 13 18 14 19 19 19 19 13.58 to 23.76 17.75 to 36.19 7.54 to 18.93 12.56 to 24.01 7.91 to 19.78 13.02 to 24.34 6.97 to 30.24 13.16 to 24.16 5.23 to 32.27
Response Complete and partial response All Patients First-line therapy Second-line or greater therapy Prior anthracycline therapy Adjuvant and/or metastatic Metastatic only Dominant metatstatic organ site Visceral Nonvisceral Age, years < 65 65
p 0.001 0.029 0.006 0.002 0.01 0.002 NS <.001 NS
Source: Gradishar et al. Phase III Trial of Nanoparticle Albumin-Bound Paclitaxel Compared with Polyethylated Castor Oil-Based Paclitaxel in Women with Breast Cancer, J Clin Oncol. 2005
As can be seen, the Abraxane-treated patient population achieved superior response rates irrespective of which line of therapy they received. In fact, we highlight the fact that Abraxane produced responses in the second line setting that equaled those of paclitaxel in the front-line setting. The response benefit was also consistently seen irrespective of whether anthracycline drugs had been previously received, dominant metastatic organ site, or age. The statistics in some subgroups did not achieve significance because of small numbers. Figure 2: Time to Progression in Abraxane vs. Paclitaxel in Metastatic Breast Cancer
Source: Gradishar et al. Phase III Trial of Nanoparticle Albumin-Bound Paclitaxel Compared with Polyethylated Castor Oil-Based Paclitaxel in Women with Breast Cancer, J Clin Oncol. 2005
The TTP numbers clearly favor Abraxane and are highly significant. The curves separate early (between weeks 16 and 24, and stay separated even way out in the tail of the Kaplan-Meier curve.
September 15, 2009
Buy
Figure 3: Patient Survival in Abraxane vs Paclitaxel in Metastatic Breast Cancer
Source: Gradishar et al. Phase III Trial of Nanoparticle Albumin-Bound Paclitaxel Compared with Polyethylated Castor Oil-Based Paclitaxel in Women with Breast Cancer, J Clin Oncol. 2005 Notes: (A) Patient survival over time (B) Patient Survival over time in patients who received second-line or greater therapy. P values from log-rank test. Survival indicates time from first dose of study drug to date of death.
The administration of Abraxane produces a robust improvement in patient survival (p=0.024) in patients receiving the drug in the second-line MBC setting. The magnitude of benefit is clearly less in the first line setting; however, this may be due to the paradox seen in trials of agents in first-line MBC, as patient crossover to second-line therapies tends to have a confounding effect on mortality outcomes (e.g., Avastin).
September 15, 2009
Buy
Figure 4: Adverse Events in Phase III Trial of Abraxane vs Standard Paclitaxel
Source: Gradishar et al. Phase III Trial of Nanoparticle Albumin-Bound Paclitaxel Compared with Polyethylated Castor Oil-Based Paclitaxel in Women with Breast Cancer, J Clin Oncol. 2005 Notes: (A) Adverse events (all grades) reported in more than 20% of patients in either treatment group. ANC, absolute neutrophil count. (B) Treatment-related grade 3 and 4 adverse events reported in 5% of patients in either group. Data are based on adverse event reporting. (*) P < .05, Cochran-Mantel-Haenszel test. GGT - gamma glutamyl transferase
The adverse event profile of Abraxane is clearly superior to that of conventional paclitaxel, as illustrated by the chart above. Abraxane clearly produces lower neutropenia, with less than half the rate of Grade 4 neutropenia. Abraxane appears to be somewhat worse on the CNS-mediate side effects such as sensory neuropathy, fatigue, arthralgia and myalgia. However, as we pointed out before, sensory neuropathy resolves within three weeks (see Figure 4 above). The incidence of the other side effects, while greater than those of paclitaxel, occur at relatively low rates and were transient in nature. From a product label perspective, Abraxis is only able to cite its response rate relative to paclitaxel from an efficacy standpoint. The side effect profile of both drugs is described in great detail, providing the Abraxis salesforce with a compelling safety data set over which to engage treating physicians.
Abraxane Again Proves its Worth In a Head-to Head Trial Against Taxotere In June of 2009, Abraxis and its clinical investigators, led by Dr. Gradishar, published the results of a Phase II head-to-head trial of three different doses and two regimens (100mg/m2 or 150mg/m2 or every week or 300mg/m2 every three weeks) of Abraxane against Taxotere (docetaxel) given at the conventional dose of 100mg/m2 every three weeks. These results were published in the August 1, 2009, edition of the Journal of Clinical Oncology. Again, this was a metastatic breast cancer patient population; however, this study was restricted to only those patients who were previously untreated. The results demonstrated that the 150mg/m2 dose arm of the trial provided a statistically significant improvement in progression-free survival (PFS). This result was seen whether progression was measured at the clinical site or by an independent radiologist. Response rates as measure by the independent radiologist in both the 100mg/m2 and the 150mg/m2 were higher than those of docetaxel, but failed to achieve statistical significance. However, the investigatorassessed response rates seen with both weekly doses favored Abraxane. Finally, the 300mg/m2 every three weeks dose regimen failed to show any difference between itself and docetaxel. As was seen in the registration trials, Grade 3/4 neutropenia was lower in the Abraxane arm compared to the docetaxel arm.
September 15, 2009
Buy
Figure 5: Confirmed ORR and DCR in Abraxane vs Docetaxel

300mg/m2 q3w ORR and DCR (n=76) Independent radiologist assessment Confirmed ORR No. 28 % 37 95% CI 26.0 to 47.7 PR No. 27 % 36 CR No. 1 % 1 DCR No. 52 % 68 95% CI 58.0 to 78.9 SD 16 weeks No. 24 % 32 Investigator assessment Confirmed ORR No. 35 % 46 95% CI 34.8 to 57.3 PR No. 34 % 45 CR No. 1 % 1 DCR No. 55 % 72 95% CI 62.3 to 82.4 SD 16 weeks No. 20 % 26
ORR: Overall Response Rate DCR: Disease Controll Rate q3w: every 3 weeks
nab - Paclitaxel 100mg/m2 Weekly (n=76)
150mg/m2 Weekly (n=74)
Docetaxel 100mg/m2 q3w (n=74) Overall: .224
34 45 33.6 to 55.9 34 45 0 0 57 75 65.3 to 84.7 23 30
36 49 37.3 to 60.0 36 49 0 0 50 80 70.6 to 88.9 23 31
26 35 24.3 to 46.0 26 35 0 0 43 58 46.9 to 69.3 17 23 Overall: <.001; 150 mg/m2 v D: <.001; 100 mg/m2 v D: .002; 300 mg/m2 v 150 mg/m2: .002; 300 mg/m2 v 100 mg/m2: .024
Overall: .027; 100 mg/m2 v D: .009; 150 mg/m2 v D: .017
48 63 52.3 to 74.0 46 61 2 3 63 83 74.4 to 91.4 15 20

PR: Partial Response CR: Complete Response D: Docetaxel
55 74 64.4 to 84.3 53 72 2 3 67 91 83.9 to 97.2 12 16
29 39 28.1 to 50.3 27 36 2 3 51 69 58.4 to 79.5 22 30

SD: Stable Disease
Overall: .007; 150 mg/m2 v D: .005; 100 mg/m2 v D: .009; 300 mg/m2 v 150 mg/m2: .014
NOTE: DCR includes patients with confirmed overall response or SD 16 weeks. ORR was evaluated per Response Evaluation Criteria in Solid Tumors.
Source: Gradishar et al. Significantly Longer Progression-Free Survival With nab-Paclitaxel Compared with Docetaxel as First-Line Therapy for Metastatic Breast Cancer, J Clin Oncol. 2009
In this data set we highlight the impressive disease control rate (DCR) of the 150mg/m2 weekly Abraxane dose of 80%, or greater than a 35% improvement vs. docetaxel. Further, nearly one-third of patients experienced stable disease for 16 weeks or greater, nearly a 35% improvement vs. docetaxel. It is generally recognized in the cancer field that stable disease, in addition to response rates, is predictive of survival.
September 15, 2009
10
Buy
Figure 6: Progression-Free Survival in Abraxane vs Docetaxel

300mg/m2 q3w (n=76) nab- Paclitaxel 100mg/m2 Weekly (n=76) 150mg/m2 Weekly (n=74) Docetaxel 100mg/m2 q3w (n=74)
Variable Independent radiologist assessment Patients who died or experienced progression No. % Median progression-free survival, mos. 95% CI Investigator assessment Patients who died or experienced progression No. % Median progression-free survival, mos. 95% CI Notes : q3w: Every 3 Weeks HR: Hazard ratio
HR
32 42 11.0
32 42 12.8
34 46 12.9
33 45 7.5
Overall .0498; 150 mg/m2 v D: .0065
150 mg/m2 v D: 0.495
44 57 10.9 8.9 to 14.6 D: docetaxel
59 68 7.5 7.2 to 9.3
36 49 14.6 10.0 to 18.9
44 59 7.8 6.3 to 11.0
Overall: .008; 100 mg/m2 v 150 mg/m2: .001; 150 mg/m2 v D: 0.12
100 mg/m2 v 150 mg/m2: 1.972; 150 mg/m2 v D: 0.568
The 150mg/m2 weekly Abraxane dose produces a PFS benefit that is both highly significant and clinically relevant. The associated p value of 0.0065 of the comparison to docetaxel is impressive, as is the hazard ration (HR) of 0.495, indicating a greater than 50% reduction in events in the Abraxane-treated patient population vs. that in the doectaxel arm.
Figure 7: Kaplan Meier of PFS curve in Abraxane vs Docetaxel
Here the curves separate early and stay separated throughout the 24 months of follow-up.
September 15, 2009
11
Buy
Data Equals Market Share In Cancer Therapy
Figure 8: Annual Taxane Treatments (Data in 000s)

USA
Europe
76 159 34
68
141 63
25 78
22
38
ROW
44 105 34
16 52
Breast
NSCLC
Ovarian
Prostate
Other
Source: Company reports, Plan A, IMS Global Health Oncology Analyzer; IntrinsiQ Research, ROW extrapolation from IMS.
Recent market data indicates that docetaxel (Taxotere) had the highest share amongst the various conventional chemotherapeutic regimens used for first line metastatic breast cancer. In contrast, Abraxane held market share in the mid-teens overall and the low-teens in first line MBC. These numbers have been relatively static over the past 18 months. Within the taxane space (paclitaxel and docetaxel), we can look at Abraxanes market share in two different ways. In the month of July, data provided to us by the company indicates that 35% of patients treated with a taxane received Abraxane (4795/13727). Breaking these numbers down further by treatment line, we find the following:
September 15, 2009
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Figure 9: Estimated Number of Patients on Abraxane in July 2009
Line # of Patients 1st Line 1,589 2nd Line 1,343 3rd Line 1,863
Source: IntrinsiQ.
On a rolling 12-month average basis (August 2008-July 2009), there were just over 54,000 patients treated with a taxane through all lines of therapy. Of these, just over 17,000 patients (32%) received Abraxane. Breaking these figures down again as before, we find the following:
Figure 10: Estimated Number of Patients on Abraxane on Rolling 12-Month Average Basis
Line # of Patients 1st Line 5,197 2nd Line 4,528 3rd Line 7,399
Source: IntrinsiQ.
Given that the market share numbers for Abraxane have stayed relatively stable, why then do we project growth in the U.S. market? The answer is straightforward: data and promotion. As we mentioned earlier, we believe the Gradishar article will help reinforce in the minds of treating physicians that Abraxane is a truly differentiated taxane from the others. Therefore, we would expect Abraxane to see increased use in the first line MBC setting despite the fact that the drug is neither labeled nor promoted for that indication. Second, the recent management changes have brought about stability after a tumultuous two-plus years of its copromotion agreement with AstraZeneca. In the brief period of time since the announcement of Abraxiss reacquisition of the marketing rights to Abraxane in November of 2008, the size of the salesforce promoting the drug has gone from 135 down to a low of 75, and only recently returned to a more normal level of 95. In our view, a focused, motivated salesforce with a great product to promote is elemental for success. Parenthetically, we would add that it is commendable that Abraxane sales have remained flat during the time that the salesforce was undergoing this turmoil. Please see our full Abraxane model for our projected growth rates.
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Figure 11: Abraxane Revenue Model

ABRAXANE Total Growth Metatstatic Breast Cancer Total Growth y/y United States % of total MBC Growth y/y Cost Per Vial First Line % of total MBC % of US Sales Growth y/y Second Line % of total MBC % of US Sales Growth y/y Third Line % of total MBC % of US Sales Growth y/y Europe % of total MBC Growth y/y Cost Per Vial First Line % of total MBC % of Europe Sales Growth y/y Second Line % of total MBC % of Europe Sales Growth y/y Third Line % of total MBC % of Europe Sales Growth y/y China % of total MBC Growth y/y Cost Per Vial First Line % of total MBC % of China Sales Growth y/y Second Line % of total MBC % of China Sales Growth y/y Third Line % of total MBC % of China Sales Growth y/y MBC (Partnered) ROW % of total MBC Growth y/y Cost Per Vial First Line % of total MBC % of China Sales Growth y/y Second Line % of total MBC % of China Sales Growth y/y Third Line % of total MBC % of China Sales Growth y/y Royalty Rate ROW Royalty Revenue Off Label Sales Total % of total Abraxane rev Growth y/y 1Q09 $71.8 2Q09 $77.2 3Q09 $82.6 4Q09 $86.1 2009FY $322.2 1Q10 $90.6 26% 1Q10 $72.5 22% $65.0 90% 14% $840 24.1 33% 37% 21% 22.0 30% 34% 15% 18.8 26% 29% 6% $2.0 3% 196% $368 0.8 1% 40% 201% 0.8 1% 40% 184% 0.4 1% 20% 210% $5.5 8% 214% $473 2.6 4% 48% 302% 2.0 3% 35% 148% 0.9 1% 17% 198% 1Q10 $2.4 3% $420 0.9 1% 17% 0.9 1% 17% 0.6 1% 10% 20% $0.5 1Q10 $18.1 20% 46% 2Q10 $94.8 23% 2Q10 $75.9 20% $66.6 88% 11% $840 24.9 33% 37% 18% 22.6 30% 34% 11% 19.1 25% 29% 5% $2.5 3% 277% $368 1.1 1% 42% 302% 1.0 1% 39% 255% 0.5 1% 19% 272% $6.7 9% 127% $473 3.3 4% 49% 151% 2.3 3% 35% 99% 1.1 1% 16% 132% 2Q10 $3.5 5% $420 1.6 2% 23% 1.2 2% 17% 0.7 1% 11% 20% $0.7 2Q10 $19.0 20% 38% 3Q10 $99.0 20% 3Q10 $79.2 20% $68.3 86% 10% $840 25.7 32% 38% 15% 23.2 29% 34% 11% 19.3 24% 28% 4% $3.1 4% 358% $368 1.3 2% 43% 402% 1.2 1% 39% 326% 0.6 1% 18% 334% $7.9 10% 126% $473 3.9 5% 50% 201% 2.7 3% 34% 74% 1.2 2% 16% 99% 3Q10 $4.7 6% $420 2.2 3% 28% 1.6 2% 21% 0.9 1% 12% 20% $0.9 3Q10 $19.8 20% 20% 4Q10 $103.3 20% 4Q10 $82.6 20% $69.9 85% 10% $840 26.5 32% 38% 14% 23.8 29% 34% 10% 19.5 24% 28% 4% $3.6 4% 439% $368 1.6 2% 44% 503% 1.4 2% 38% 397% 0.6 1% 17% 397% $9.1 11% 94% $473 4.6 6% 50% 134% 3.1 4% 34% 59% 1.4 2% 15% 79% 4Q10 $6.0 7% 468% $420 2.8 3% 31% 804% 2.1 3% 23% 459% 1.1 1% 12% 198% 20% $1.2 4Q10 $20.7 20% 20% 2010FY $387.7 20% 2010FY $310.2 20% $269.7 87% 11% $840 101.3 33% 38% 17% 91.8 30% 34% 12% 76.7 25% 28% 5% $11.1 4% 317% $368 4.8 2% 43% 352% 4.3 1% 39% 290% 2.0 1% 18% 303% $29.3 9% 126% $473 14.5 5% 49% 176% 10.1 3% 35% 84% 4.7 2% 16% 113% 2010FY $16.7 5% 1472% $420 7.5 2% 26% 2311% 5.8 2% 20% 1452% 3.3 1% 11% 794% 20% $3.3 2010FY $77.5 20% 20% 2011FY $477.5 23% 2011FY $386.8 25% $301.2 78% 12% $882 113.5 29% 38% 12% 102.5 27% 34% 12% 85.2 22% 28% 11% $27.0 7% 142% $386 11.7 3% 43% 145% 10.4 3% 39% 141% 4.9 1% 18% 138% $58.6 15% 100% $496 29.0 8% 50% 101% 20.7 5% 35% 104% 9.0 2% 15% 91% 2011FY $39.0 10% 134% $441 19.4 5% 33% 157% 12.3 3% 21% 112% 7.4 2% 13% 121% 20% $7.8 2011FY $90.7 19% 17% 2012FY $562.7 18% 2012FY $461.4 19% $333.8 72% 11% $926 130.3 28% 39% 15% 114.8 25% 34% 12% 88.7 19% 27% 4% $48.3 10% 79% $405 20.9 5% 43% 79% 19.8 4% 41% 90% 7.6 2% 16% 56% $79.3 17% 35% $521 40.4 9% 51% 39% 27.4 6% 34% 32% 11.6 3% 15% 30% 2012FY $55.5 12% 42% $463 27.5 6% 35% 42% 18.3 4% 23% 49% 9.8 2% 12% 32% 20% $11.1 2012FY $101.3 18% 12% 2013FY $652.4 16% 2013FY $541.5 17% $366.0 68% 10% $954 143.4 26% 39% 10% 128.7 24% 35% 12% 94.0 17% 26% 6% $74.2 14% 54% $417 37.3 7% 50% 79% 25.8 5% 35% 30% 11.1 2% 15% 46% $101.3 19% 28% $547 47.7 9% 47% 18% 37.7 7% 37% 38% 15.8 3% 16% 36% 2013FY $79.0 15% 42% $486 39.0 7% 39% 42% 26.7 5% 26% 46% 13.3 2% 13% 37% 20% $15.8 2013FY $110.9 17% 9% 2014FY $740.6 14% 2014FY $622.1 15% $397.6 64% 9% $982 150.9 24% 38% 5% 151.9 24% 38% 18% 94.8 15% 24% 1% $96.6 16% 30% $430 47.4 8% 49% 27% 35.1 6% 36% 36% 14.1 2% 15% 27% $127.8 21% 26% $574 62.4 10% 49% 31% 46.2 7% 36% 23% 19.2 3% 15% 21% 2014FY $97.4 16% 23% $511 49.5 8% 39% 27% 32.4 5% 25% 21% 15.5 2% 12% 17% 20% $19.5 2014FY $118.5 16% 7% 2015FY $827.3 12% 2015FY $703.2 13% $425.4 60% 7% $1,012 165.6 24% 39% 10% 157.0 22% 37% 3% 102.8 15% 24% 8% $127.6 18% 32% $443 61.0 9% 48% 29% 47.1 7% 37% 34% 19.6 3% 15% 39% $150.2 21% 17% $603 72.2 10% 48% 16% 55.1 8% 37% 19% 22.8 3% 15% 19% 2015FY $120.2 17% 23% $536 63.6 9% 42% 29% 37.7 5% 25% 17% 18.9 3% 13% 21% 20% $24.0 2015FY $124.1 15% 5%
1Q09 $59.4
2Q09 $63.5
3Q09 $66.1
4Q09 $68.9
2009FY $257.8
$57.0 96% $800 20.0 34% 35% 19.2 32% 34% 17.8 30% 31% $0.7 1% $350 0.3 0% 40% 0.3 0% 42% 0.1 0% 19% $1.8 3% $450 0.7 1% 37% 0.8 1% 45% 0.3 1% 18%
$59.8 94% $800 21.2 33% 35% 20.4 32% 34% 18.2 29% 30% $0.7 1% $350 0.3 0% 40% 0.3 0% 42% 0.1 0% 19% $3.0 5% $450 1.3 2% 44% 1.2 2% 40% 0.5 1% 16%
$61.9 94% $800 22.4 34% 36% 21.0 32% 34% 18.5 28% 30% $0.7 1% $350 0.3 0% 40% 0.3 0% 42% 0.1 0% 19% $3.5 5% $450 1.3 2% 37% 1.6 2% 45% 0.6 1% 18%
$63.5 92% $800 23.2 34% 37% 21.6 31% 34% 18.7 27% 29% $0.7 1% $350 0.3 0% 40% 0.3 0% 42% 0.1 0% 19% $4.7 7% $450 2.0 3% 42% 2.0 3% 42% 0.8 1% 17%
$242.2 94% $800 86.8 34% 36% 82.2 32% 34% 73.2 28% 30% $2.7 1% $350 1.1 0% 40% 1.1 0% 42% 0.5 0% 19% $12.9 5% $450 5.2 2% 40% 5.5 2% 43% 2.2 1% 17%
1Q09 $0.0 0% $400 0.0 0% 0% 0.0 0% 0% 0.0 0% 0% 20% $0.0 1Q09 $12.4 17%
2Q09 $0.0 0% $400 0.0 0% 0% 0.0 0% 0% 0.0 0% 0% 20% $0.0 2Q09 $13.7 18%
3Q09 $0.0 0% $400 0.0 0% 0% 0.0 0% 0% 0.0 0% 0% 20% $0.0 3Q09 $16.5 20%
4Q09 $1.1 2% $400 0.3 0% 7% 0.4 1% 8% 0.4 1% 8% 20% $0.2 4Q09 $17.2 20%
2009FY $1.1 0% $400 0.3 0% 2% 0.4 0% 3% 0.4 0% 3% 20% $0.2 2009FY $64.4 20%
Source: Company reports and Merriman Curhan Ford estimates.
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Figure 12: Abraxane Revenue Build in Metastatic Breast Cancer in the United States
2009 1Q09 $1.8 1Q09 280,000 224,000 5.5% 12,320 86.0% 10,595 1.0% 106 2.0 $450 6.9 $6,181 $1 1Q09 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 2.0% 127 2.0 $450 6.9 $6,181 $1 1Q09 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 2.0% 51 2.0 $450 6.9 $6,181 $0 2Q09 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 3.0% 76 2.0 $450 6.9 $6,181 $0 3Q09 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 4.0% 102 2.0 $450 6.9 $6,181 $1 4Q09 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 5.0% 127 2.0 $450 6.9 $6,181 $1 2009FY 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 3.5% 89 8.0 $450 6.9 $24,725 $2 1Q10 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 6.0% 141 2.0 $473 6.9 $6,620 $1 2Q10 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 7.0% 165 2.0 $473 6.9 $6,620 $1 3Q10 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 8.0% 189 2.0 $473 6.9 $6,620 $1 4Q10 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 9.0% 212 2.0 $473 6.9 $6,620 $1 2Q09 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 3.0% 191 2.0 $450 6.9 $6,181 $1 3Q09 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 4.0% 254 2.0 $450 6.9 $6,181 $2 4Q09 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 5.0% 318 2.0 $450 6.9 $6,181 $2 2009FY 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 3.5% 222 8.0 $450 6.9 $24,725 $6 1Q10 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 5.0% 295 2.0 $473 6.9 $6,620 $2 2Q10 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 6.0% 354 2.0 $473 6.9 $6,620 $2 3Q10 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 7.0% 413 2.0 $473 6.9 $6,620 $3 4Q10 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 8.0% 472 2.0 $473 6.9 $6,620 $3 2010FY 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 6.5% 383 8.2 $473 6.9 $26,480 $10 2010FY 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 7.5% 177 8.2 $473 6.9 $26,480 $5 2011FY 233,050 186,440 5.0% 75.0% 6,991 86.0% 6,013 12.0% 722 8.4 $496 6.9 $28,638 $21 2011FY 233,050 186,440 5.0% 30.0% 2,797 86.0% 2,405 13.0% 313 8.4 $496 6.9 $28,638 $9 2012FY 237,711 190,168 4.5% 75.0% 6,418 86.0% 5,520 16.0% 883 8.7 $521 6.9 $30,972 $27 2012FY 237,711 190,168 4.5% 30.0% 2,567 86.0% 2,208 17.0% 375 8.7 $521 6.9 $30,972 $12 2013FY 242,465 193,972 4.5% 75.0% 6,547 86.0% 5,630 20.0% 1,126 8.9 $547 6.9 $33,497 $38 2013FY 242,465 193,972 4.5% 30.0% 2,619 86.0% 2,252 21.0% 473 8.9 $547 6.9 $33,497 $16 2Q09 280,000 224,000 5.5% 12,320 86.0% 10,595 2.0% 212 2.0 $450 6.9 $6,181 $1 3Q09 280,000 224,000 5.5% 12,320 86.0% 10,595 2.0% 212 2.0 $450 6.9 $6,181 $1 4Q09 280,000 224,000 5.5% 12,320 86.0% 10,595 3.0% 318 2.0 $450 6.9 $6,181 $2 2009FY 280,000 224,000 5.5% 12,320 86.0% 10,595 2.0% 212 8.0 $450 6.9 $24,725 $5 1Q10 285,600 228,480 5.0% 11,424 87.0% 9,939 4.0% 398 2.0 $473 6.9 $6,620 $3 2Q10 285,600 228,480 5.0% 11,424 87.0% 9,939 5.0% 497 2.0 $473 6.9 $6,620 $3 3Q10 285,600 228,480 5.0% 11,424 87.0% 9,939 6.0% 596 2.0 $473 6.9 $6,620 $4 4Q10 285,600 228,480 5.0% 11,424 87.0% 9,939 7.0% 696 2.0 $473 6.9 $6,620 $5 2010FY 285,600 228,480 5.0% 11,424 87.0% 9,939 5.5% 547 8.2 $473 6.9 $26,480 $14 2011FY 291,312 233,050 5.0% 11,652 87.0% 10,138 10.0% 1,014 8.4 $496 6.9 $28,638 $29 2012FY 297,138 237,711 4.5% 10,697 87.0% 9,306 14.0% 1,303 8.7 $521 6.9 $30,972 $40 2013FY 303,081 242,465 4.5% 10,911 87.0% 9,492 15.0% 1,424 8.9 $547 6.9 $33,497 $48 $3.0 $3.5 $4.7 $12.9 $5.5 $6.7 $7.9 $9.1 $29.3 $58.6 $79.3 $101.3 $127.8 2014FY 309,143 247,314 4.0% 9,893 87.0% 8,607 20.0% 1,721 9.2 $574 6.9 $36,227 $62 2014FY 247,314 197,851 4.0% 75.0% 5,936 86.0% 5,105 25.0% 1,276 9.2 $574 6.9 $36,227 $46 2014FY 247,314 197,851 4.0% 30.0% 2,374 86.0% 2,042 26.0% 531 9.2 $574 6.9 $36,227 $19 2Q09 3Q09 4Q09 2009FY 1Q10 2Q10 3Q10 4Q10 2010FY 2010 2011 2011FY 2012 2012FY 2013 2013FY 2014 2014FY 2015 2015FY $150.2 2015FY 315,325 252,260 4.0% 10,090 87.0% 8,779 21.0% 1,844 9.5 $603 6.9 $39,179 $72 2015FY 252,260 201,808 4.0% 75.0% 6,054 86.0% 5,207 27.0% 1,406 9.5 $603 6.9 $39,179 $55 2015FY 252,260 201,808 4.0% 30.0% 2,422 86.0% 2,083 28.0% 583 9.5 $603 6.9 $39,179 $23
September 15, 2009 MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Source: Company reports and Merriman Curhan Ford estimates. BiotechnologyLife Sciences
China - Metastatic Breast Cancer Incidence Based Model
China Revenue ($ in millions)
First Line Breast Cancer Incidence Total HER2 Negative (80%) % Presenting Metastatic at Diagnosis Total Available for Treatment % Receiving Chemotherapy Total Receiving Treatment Abraxane Penetration Total Treated with Abraxane Duration of Therapy (Months) Cost per Vial Dosing per Month Total Cost per Patient Total First Line Abraxane Sales in MBC
Second Line Breast Cancer Incidence Total HER2 Negative (80%) % Presenting Metastatic at Diagnosis % Progressing to Second Line Total Available for Treatment % Receiving Chemotherapy Total Receiving Treatment Abraxane Penetration Total Treated with Abraxane Duration of Therapy (Months) Cost per Vial Dosing per Month Total Cost per Patient Total Second Line Abraxane Sales in MBC
Third Line Breast Cancer Incidence Total HER2 Negative (80%) % Presenting Metastatic at Diagnosis % Progressing to Third Line Total Available for Treatment % Receiving Chemotherapy Total Receiving Treatment Abraxane Penetration Total Treated with Abraxane Duration of Therapy (Months) Cost per Vial Dosing per Month Total Cost per Patient Total Third Line Abraxane Sales in MBC
Buy
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Figure 13: Abraxane Revenue Build in Metastatic Breast Cancer the European Union
2009 1Q09 $0.7 1Q09 290,000 232,000 5.5% 12,760 86.0% 10,974 0.5% 55 2.0 $350 6.9 $4,808 $0 1Q09 290,000 232,000 5.5% 75.0% 9,570 86.0% 8,230 0.7% 58 2.0 $350 6.9 $4,808 $0 1Q09 290,000 232,000 5.5% 30.0% 3,828 86.0% 3,292 0.8% 26 2.0 $350 6.9 $4,808 $0 2Q09 290,000 232,000 5.5% 30.0% 3,828 86.0% 3,292 0.8% 26 2.0 $350 6.9 $4,808 $0 3Q09 290,000 232,000 5.5% 30.0% 3,828 86.0% 3,292 0.8% 26 2.0 $350 6.9 $4,808 $0 4Q09 290,000 232,000 5.5% 30.0% 3,828 86.0% 3,292 0.8% 26 2.0 $350 6.9 $4,808 $0 2009FY 290,000 232,000 5.5% 30.0% 3,828 86.0% 3,292 0.8% 26 8.0 $350 6.9 $19,230 $1 1Q10 295,800 236,640 5.0% 30.0% 3,550 86.0% 3,053 2.5% 76 2.0 $368 6.9 $5,149 $0 2Q10 295,800 236,640 5.0% 30.0% 3,550 86.0% 3,053 3.0% 92 2.0 $368 6.9 $5,149 $0 3Q10 295,800 236,640 5.0% 30.0% 3,550 86.0% 3,053 3.5% 107 2.0 $368 6.9 $5,149 $1 4Q10 295,800 236,640 5.0% 30.0% 3,550 86.0% 3,053 4.0% 122 2.0 $368 6.9 $5,149 $1 2010FY 295,800 236,640 5.0% 30.0% 3,550 86.0% 3,053 3.3% 99 8.2 $368 6.9 $20,596 $2 2Q09 290,000 232,000 5.5% 75.0% 9,570 86.0% 8,230 0.7% 58 2.0 $350 6.9 $4,808 $0 3Q09 290,000 232,000 5.5% 75.0% 9,570 86.0% 8,230 0.7% 58 2.0 $350 6.9 $4,808 $0 4Q09 290,000 232,000 5.5% 75.0% 9,570 86.0% 8,230 0.7% 58 2.0 $350 6.9 $4,808 $0 2009FY 290,000 232,000 5.5% 75.0% 9,570 86.0% 8,230 0.7% 58 8.0 $350 6.9 $19,230 $1 1Q10 295,800 236,640 5.0% 75.0% 8,874 86.0% 7,632 2.0% 153 2.0 $368 6.9 $5,149 $1 2Q10 295,800 236,640 5.0% 75.0% 8,874 86.0% 7,632 2.5% 191 2.0 $368 6.9 $5,149 $1 3Q10 295,800 236,640 5.0% 75.0% 8,874 86.0% 7,632 3.0% 229 2.0 $368 6.9 $5,149 $1 4Q10 295,800 236,640 5.0% 75.0% 8,874 86.0% 7,632 3.5% 267 2.0 $368 6.9 $5,149 $1 2010FY 295,800 236,640 5.0% 75.0% 8,874 86.0% 7,632 2.8% 210 8.2 $368 6.9 $20,596 $4 2011FY 301,716 241,373 5.0% 75.0% 9,051 86.0% 7,784 6.0% 467 8.4 $386 6.9 $22,274 $10 2011FY 301,716 241,373 5.0% 30.0% 3,621 86.0% 3,114 7.0% 218 8.4 $386 6.9 $22,274 $5 2012FY 307,750 246,200 4.5% 75.0% 8,309 86.0% 7,146 11.5% 822 8.7 $405 6.9 $24,090 $20 2012FY 307,750 246,200 4.5% 30.0% 3,324 86.0% 2,858 11.0% 314 8.7 $405 6.9 $24,090 $8 2013FY 313,905 251,124 4.5% 75.0% 8,475 86.0% 7,289 14.0% 1,020 8.8 $417 6.9 $25,309 $26 2013FY 313,905 251,124 4.5% 30.0% 3,390 86.0% 2,916 15.0% 437 8.8 $417 6.9 $25,309 $11 2014FY 320,183 256,147 4.0% 75.0% 7,684 86.0% 6,609 20.0% 1,322 9.0 $430 6.9 $26,589 $35 2014FY 320,183 256,147 4.0% 30.0% 3,074 86.0% 2,643 20.0% 529 9.0 $430 6.9 $26,589 $14 2Q09 290,000 232,000 5.5% 12,760 86.0% 10,974 0.5% 55 2.0 $350 6.9 $4,808 $0 3Q09 290,000 232,000 5.5% 12,760 86.0% 10,974 0.5% 55 2.0 $350 6.9 $4,808 $0 4Q09 290,000 232,000 5.5% 12,760 86.0% 10,974 0.5% 55 2.0 $350 6.9 $4,808 $0 2009FY 290,000 232,000 5.5% 12,760 86.0% 10,974 0.5% 55 8.0 $350 6.9 $19,230 $1 1Q10 295,800 236,640 5.0% 11,832 87.0% 10,294 1.5% 154 2.0 $368 6.9 $5,149 $1 2Q10 295,800 236,640 5.0% 11,832 87.0% 10,294 2.0% 206 2.0 $368 6.9 $5,149 $1 3Q10 295,800 236,640 5.0% 11,832 87.0% 10,294 2.5% 257 2.0 $368 6.9 $5,149 $1 4Q10 295,800 236,640 5.0% 11,832 87.0% 10,294 3.0% 309 2.0 $368 6.9 $5,149 $2 2010FY 295,800 236,640 5.0% 11,832 87.0% 10,294 2.3% 232 8.2 $368 6.9 $20,596 $5 2011FY 301,716 241,373 5.0% 12,069 87.0% 10,500 5.0% 525 8.4 $386 6.9 $22,274 $12 2012FY 307,750 246,200 4.5% 11,079 87.0% 9,639 9.0% 867 8.7 $405 6.9 $24,090 $21 2013FY 313,905 251,124 4.5% 11,301 87.0% 9,832 15.0% 1,475 8.8 $417 6.9 $25,309 $37 2014FY 320,183 256,147 4.0% 10,246 87.0% 8,914 20.0% 1,783 9.0 $430 6.9 $26,589 $47 $0.7 $0.7 $0.7 $2.7 $2.0 $2.5 $3.1 $3.6 $11.1 $27.0 $48.3 $74.2 $96.6 2Q09 3Q09 4Q09 2009FY 1Q10 2Q10 3Q10 4Q10 2010FY $127.6 2015FY 326,587 261,270 4.0% 10,451 87.0% 9,092 24.0% 2,182 9.2 $443 6.9 $27,935 $61 2015FY 326,587 261,270 4.0% 75.0% 7,838 86.0% 6,741 25.0% 1,685 9.2 $443 6.9 $27,935 $47 2015FY 326,587 261,270 4.0% 30.0% 3,135 86.0% 2,696 26.0% 701 9.2 $443 6.9 $27,935 $20 2010 2011 2011FY 2012 2012FY 2013 2013FY 2014 2014FY 2015 2015FY

EU - Metastatic Breast Cancer Incidence Based Model
EU Revenue ($ in millions)
Buy
16
Figure 14: Abraxane Revenue Build in Metastatic Breast Cancer in China

2009 1Q09 $1.8 1Q09 280,000 224,000 5.5% 12,320 86.0% 10,595 1.0% 106 2.0 $450 6.9 $6,181 $1 1Q09 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 2.0% 127 2.0 $450 6.9 $6,181 $1 1Q09 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 2.0% 51 2.0 $450 6.9 $6,181 $0 2Q09 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 3.0% 76 2.0 $450 6.9 $6,181 $0 3Q09 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 4.0% 102 2.0 $450 6.9 $6,181 $1 4Q09 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 5.0% 127 2.0 $450 6.9 $6,181 $1 2009FY 224,000 179,200 5.5% 30.0% 2,957 86.0% 2,543 3.5% 89 8.0 $450 6.9 $24,725 $2 1Q10 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 6.0% 141 2.0 $473 6.9 $6,620 $1 2Q10 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 7.0% 165 2.0 $473 6.9 $6,620 $1 3Q10 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 8.0% 189 2.0 $473 6.9 $6,620 $1 4Q10 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 9.0% 212 2.0 $473 6.9 $6,620 $1 2010FY 228,480 182,784 5.0% 30.0% 2,742 86.0% 2,358 7.5% 177 8.2 $473 6.9 $26,480 $5 2Q09 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 3.0% 191 2.0 $450 6.9 $6,181 $1 3Q09 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 4.0% 254 2.0 $450 6.9 $6,181 $2 4Q09 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 5.0% 318 2.0 $450 6.9 $6,181 $2 2009FY 224,000 179,200 5.5% 75.0% 7,392 86.0% 6,357 3.5% 222 8.0 $450 6.9 $24,725 $6 1Q10 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 5.0% 295 2.0 $473 6.9 $6,620 $2 2Q10 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 6.0% 354 2.0 $473 6.9 $6,620 $2 3Q10 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 7.0% 413 2.0 $473 6.9 $6,620 $3 4Q10 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 8.0% 472 2.0 $473 6.9 $6,620 $3 2010FY 228,480 182,784 5.0% 75.0% 6,854 86.0% 5,895 6.5% 383 8.2 $473 6.9 $26,480 $10 2011FY 233,050 186,440 5.0% 75.0% 6,991 86.0% 6,013 12.0% 722 8.4 $496 6.9 $28,638 $21 2011FY 233,050 186,440 5.0% 30.0% 2,797 86.0% 2,405 13.0% 313 8.4 $496 6.9 $28,638 $9 2012FY 237,711 190,168 4.5% 75.0% 6,418 86.0% 5,520 16.0% 883 8.7 $521 6.9 $30,972 $27 2012FY 237,711 190,168 4.5% 30.0% 2,567 86.0% 2,208 17.0% 375 8.7 $521 6.9 $30,972 $12 2013FY 242,465 193,972 4.5% 75.0% 6,547 86.0% 5,630 20.0% 1,126 8.9 $547 6.9 $33,497 $38 2013FY 242,465 193,972 4.5% 30.0% 2,619 86.0% 2,252 21.0% 473 8.9 $547 6.9 $33,497 $16 2Q09 280,000 224,000 5.5% 12,320 86.0% 10,595 2.0% 212 2.0 $450 6.9 $6,181 $1 3Q09 280,000 224,000 5.5% 12,320 86.0% 10,595 2.0% 212 2.0 $450 6.9 $6,181 $1 4Q09 280,000 224,000 5.5% 12,320 86.0% 10,595 3.0% 318 2.0 $450 6.9 $6,181 $2 2009FY 280,000 224,000 5.5% 12,320 86.0% 10,595 2.0% 212 8.0 $450 6.9 $24,725 $5 1Q10 285,600 228,480 5.0% 11,424 87.0% 9,939 4.0% 398 2.0 $473 6.9 $6,620 $3 2Q10 285,600 228,480 5.0% 11,424 87.0% 9,939 5.0% 497 2.0 $473 6.9 $6,620 $3 3Q10 285,600 228,480 5.0% 11,424 87.0% 9,939 6.0% 596 2.0 $473 6.9 $6,620 $4 4Q10 285,600 228,480 5.0% 11,424 87.0% 9,939 7.0% 696 2.0 $473 6.9 $6,620 $5 2010FY 285,600 228,480 5.0% 11,424 87.0% 9,939 5.5% 547 8.2 $473 6.9 $26,480 $14 2011FY 291,312 233,050 5.0% 11,652 87.0% 10,138 10.0% 1,014 8.4 $496 6.9 $28,638 $29 2012FY 297,138 237,711 4.5% 10,697 87.0% 9,306 14.0% 1,303 8.7 $521 6.9 $30,972 $40 2013FY 303,081 242,465 4.5% 10,911 87.0% 9,492 15.0% 1,424 8.9 $547 6.9 $33,497 $48 2014FY 309,143 247,314 4.0% 9,893 87.0% 8,607 20.0% 1,721 9.2 $574 6.9 $36,227 $62 2014FY 247,314 197,851 4.0% 75.0% 5,936 86.0% 5,105 25.0% 1,276 9.2 $574 6.9 $36,227 $46 2014FY 247,314 197,851 4.0% 30.0% 2,374 86.0% 2,042 26.0% 531 9.2 $574 6.9 $36,227 $19 $3.0 $3.5 $4.7 $12.9 $5.5 $6.7 $7.9 $9.1 $29.3 $58.6 $79.3 $101.3 $127.8 2Q09 3Q09 4Q09 2009FY 1Q10 2Q10 3Q10 4Q10 2010FY $150.2 2015FY 315,325 252,260 4.0% 10,090 87.0% 8,779 21.0% 1,844 9.5 $603 6.9 $39,179 $72 2015FY 252,260 201,808 4.0% 75.0% 6,054 86.0% 5,207 27.0% 1,406 9.5 $603 6.9 $39,179 $55 2015FY 252,260 201,808 4.0% 30.0% 2,422 86.0% 2,083 28.0% 583 9.5 $603 6.9 $39,179 $23 2010 2011 2011FY 2012 2012FY 2013 2013FY 2014 2014FY 2015 2015FY

China - Metastatic Breast Cancer Incidence Based Model
China Revenue ($ in millions)
Buy
17
Figure 15: Abraxane Revenue Build in Metastatic Breast Cancer in Rest of World
2009 1Q09 $0.0 1Q09 300,000 240,000 5.5% 13,200 86.0% 11,352 0.0% 2.0 $400 6.9 $5,494 $0 1Q09 300,000 240,000 5.5% 75.0% 9,900 86.0% 8,514 0.0% 2.0 $400 6.9 $5,494 $0 1Q09 300,000 240,000 5.5% 30.0% 3,960 86.0% 3,406 0.0% 2.0 $400 6.9 $5,494 $0 2Q09 300,000 240,000 5.5% 30.0% 3,960 86.0% 3,406 0.0% 2.0 $400 6.9 $5,494 $0 3Q09 300,000 240,000 5.5% 30.0% 3,960 86.0% 3,406 0.0% 2.0 $400 6.9 $5,494 $0 4Q09 300,000 240,000 5.5% 30.0% 3,960 86.0% 3,406 2.0% 68 2.0 $400 6.9 $5,494 $0 2009FY 300,000 240,000 5.5% 30.0% 3,960 86.0% 3,406 0.5% 17 8.0 $400 6.9 $21,978 $0 1Q10 306,000 244,800 5.0% 30.0% 3,672 86.0% 3,158 3.0% 95 2.0 $420 6.9 $5,885 $1 2Q10 306,000 244,800 5.0% 30.0% 3,672 86.0% 3,158 4.0% 126 2.0 $420 6.9 $5,885 $1 3Q10 306,000 244,800 5.0% 30.0% 3,672 86.0% 3,158 5.0% 158 2.0 $420 6.9 $5,885 $1 4Q10 306,000 244,800 5.0% 30.0% 3,672 86.0% 3,158 6.0% 189 2.0 $420 6.9 $5,885 $1 2Q09 300,000 240,000 5.5% 75.0% 9,900 86.0% 8,514 0.0% 2.0 $400 6.9 $5,494 $0 3Q09 300,000 240,000 5.5% 75.0% 9,900 86.0% 8,514 0.0% 2.0 $400 6.9 $5,494 $0 4Q09 300,000 240,000 5.5% 75.0% 9,900 86.0% 8,514 0.8% 68 2.0 $400 6.9 $5,494 $0 2009FY 300,000 240,000 5.5% 75.0% 9,900 86.0% 8,514 0.2% 17 8.0 $400 6.9 $21,978 $0 1Q10 306,000 244,800 5.0% 75.0% 9,180 86.0% 7,895 2.0% 158 2.0 $420 6.9 $5,885 $1 2Q10 306,000 244,800 5.0% 75.0% 9,180 86.0% 7,895 2.5% 197 2.0 $420 6.9 $5,885 $1 3Q10 306,000 244,800 5.0% 75.0% 9,180 86.0% 7,895 3.5% 276 2.0 $420 6.9 $5,885 $2 4Q10 306,000 244,800 5.0% 75.0% 9,180 86.0% 7,895 4.5% 355 2.0 $420 6.9 $5,885 $2 2010FY 306,000 244,800 5.0% 75.0% 9,180 86.0% 7,895 3.1% 247 8.2 $420 6.9 $23,538 $6 2010FY 306,000 244,800 5.0% 30.0% 3,672 86.0% 3,158 4.5% 142 8.2 $420 6.9 $23,538 $3 2011FY 312,120 249,696 5.0% 75.0% 9,364 86.0% 8,053 6.0% 483 8.4 $441 6.9 $25,456 $12 2011FY 312,120 249,696 5.0% 30.0% 3,745 86.0% 3,221 9.0% 290 8.4 $441 6.9 $25,456 $7 2012FY 318,362 254,690 4.5% 75.0% 8,596 86.0% 7,392 9.0% 665 8.7 $463 6.9 $27,531 $18 2012FY 318,362 254,690 4.5% 30.0% 3,438 86.0% 2,957 12.0% 355 8.7 $463 6.9 $27,531 $10 2013FY 324,730 259,784 4.5% 75.0% 8,768 86.0% 7,540 12.0% 905 8.8 $486 6.9 $29,486 $27 2013FY 324,730 259,784 4.5% 30.0% 3,507 86.0% 3,016 15.0% 452 8.8 $486 6.9 $29,486 $13 2Q09 300,000 240,000 5.5% 13,200 86.0% 11,352 0.0% 2.0 $400 6.9 $5,494 $0 3Q09 300,000 240,000 5.5% 13,200 86.0% 11,352 0.0% 2.0 $400 6.9 $5,494 $0 4Q09 300,000 240,000 5.5% 13,200 86.0% 11,352 0.5% 57 2.0 $400 6.9 $5,494 $0 2009FY 300,000 240,000 5.5% 13,200 86.0% 11,352 0.1% 14 8.0 $400 6.9 $21,978 $0 1Q10 306,000 244,800 5.0% 12,240 87.0% 10,649 1.5% 160 2.0 $420 6.9 $5,885 $1 2Q10 306,000 244,800 5.0% 12,240 87.0% 10,649 2.5% 266 2.0 $420 6.9 $5,885 $2 3Q10 306,000 244,800 5.0% 12,240 87.0% 10,649 3.5% 373 2.0 $420 6.9 $5,885 $2 4Q10 306,000 244,800 5.0% 12,240 87.0% 10,649 4.5% 479 2.0 $420 6.9 $5,885 $3 2010FY 306,000 244,800 5.0% 12,240 87.0% 10,649 3.0% 319 8.2 $420 6.9 $23,538 $8 2011FY 312,120 249,696 5.0% 12,485 87.0% 10,862 7.0% 760 8.4 $441 6.9 $25,456 $19 2012FY 318,362 254,690 4.5% 11,461 87.0% 9,971 10.0% 997 8.7 $463 6.9 $27,531 $27 2013FY 324,730 259,784 4.5% 11,690 87.0% 10,171 13.0% 1,322 8.8 $486 6.9 $29,486 $39 2014FY 331,224 264,979 4.0% 10,599 87.0% 9,221 17.0% 1,568 9.0 $511 6.9 $31,579 $50 2014FY 331,224 264,979 4.0% 75.0% 7,949 86.0% 6,836 15.0% 1,025 9.0 $511 6.9 $31,579 $32 2014FY 331,224 264,979 4.0% 30.0% 3,180 86.0% 2,735 18.0% 492 9.0 $511 6.9 $31,579 $16 $0.0 $0.0 $1.1 $1.1 $2.4 $3.5 $4.7 $6.0 $16.7 $39.0 $55.5 $79.0 $97.4 2Q09 3Q09 4Q09 2009FY 1Q10 2Q10 3Q10 4Q10 2010FY 2010 2011 2011FY 2012 2012FY 2013 2013FY 2014 2014FY 2015 2015FY $120.2 2015FY 337,849 270,279 4.0% 10,811 87.0% 9,406 20.0% 1,881 9.2 $536 6.9 $33,821 $64 2015FY 337,849 270,279 4.0% 75.0% 8,108 86.0% 6,973 16.0% 1,116 9.2 $536 6.9 $33,821 $38 2015FY 337,849 270,279 4.0% 30.0% 3,243 86.0% 2,789 20.0% 558 9.2 $536 6.9 $33,821 $19

ROW - Metastatic Breast Cancer Incidence Based Model
ROW Revenue ($ in millions)
Buy
18
Buy
Let the Data Flow: Abraxane Has a Busy Clinical Trials Calendar A quick search using the term Abraxane on ClinicalTrials.gov returns 38 trials that include the term and are currently enrolling patients (the number balloons to more than 63 if all trials are included). Even if one narrows the search by including the term Phase III, 13 studies still pop up. As impressive as this is, clearly Abraxis must focus on those studies that are most likely to provide the greatest return for dollar invested. Those studies conducted beyond the aegis of Abraxis can serve multiple purposes: first, they may help form the hypothesis for Abraxis-sponsored trials; second, they may be the material for publication and eventual compendia listing (see Appendix C), and; third, they may be the subject of presentations and abstracts at medical conferences that could drive off-label use. According to Abraxis, the company is sponsoring three Phase III studies, 15 Phase II studies and 11 Phase I/II studies. In addition, over there are over 60 investigator-sponsored studies for which the company is providing assistance. For our purposes, we will focus on those studies that Abraxis can control. The totality of this clinical trial portfolio can have a meaningful benefit on the companys commercial prospects.
Abraxane Phase III Trials: One Ace in the Hole, Two Wildcards The three most important trials Abraxis has ongoing are in melanoma, panreatic cancer and non-small cell lung cancer (NSCLC). Given that paclitaxel is already a standard of care in conjunction with platinum agents (either carboplatin or cisplatin) for the treatment of newly diagnosed Stage IIIB/IV metastatic NSCLC, we view this trial as the one with the highest probability of success. Multiple trials with both carbo- and cisplatin have demonstrated survival improvement in this setting, and, at least in the U.S., platinum-based therapies are still the standard of care for first line therapy (although Alimta-based regimens may make further inroads against platinum-based therapies). Abraxiss other two registration-directed studies in melanoma and pancreatic cancers are based on provocative data from single-arm trials. However, it has not yet been established that taxanes can provide clinical benefit in these two tumor settings. Thus, we have only built a model for the potential use of Abraxane in NSCLC, but are not incorporating our estimates into our projections at this time. However, to give the reader a sense of the commercial opportunity for Abraxane in NSCLC, we would make the following points: 1. Non-Small Cell Lung Cancer is one of the largest of all tumor types, with the patient population approximately equal to the sum of both breast and colorectal cancer.
2. Use of the combination of a platinum-based drug (carboplatin) with paclitaxel accounts for approximately one-quarter of all regimens used in first-line NSCLC. Addition of Avastin (bevacizumab) to carbotaxol adds another 8-10% of patients, while carboplatin with Taxotere (docetaxel) add an additional 3-5%. 3. Despite recent therapeutic advances, mortality from NSCLC remains high. Further, the concept of maintenance therapy, i.e., use of an active regimen beyond the standard number of cycles typically used to achieve a response. In our view, the activity and tolerability of Abraxane, although as yet unproven, makes it an ideal candidate for such therapy.
Abraxis Pipeline-Lots Going on Internally and Externally In addition to the registration studies that Abraxis is undertaking in NSCLC, melanoma and pancreatic cancer, there are a number of ongoing trials sponsored both by Abraxis and others that may drive additional use of Abraxane in various settings. Abraxis is sponsoring two late-stage studies we find interesting: one that examines the use of Abraxane in breast cancer in the adjuvant setting, while the other examines the use of Abraxane in a taxane-refractory patient population ( a true acid-test of Abraxanes activity). As we previously mentioned, a search on www.clinicaltrials.gov using the terms Abraxane, nab-paclitaxel, or ABI-007, turn up hundreds of references (between 425 and 1200 depending on whether one wants to look at all trials or only those that are currently open to enrollment). Amongst the more interesting of these are combination studies with targeted therapies such as Avastin, Erbitux, Herceptin (we point out that the NCCN guidelines recommend paclitaxel as the preferred background chemotherapy in HER 2+ breast cancer treated with Her-
September 15, 2009
19
Buy
ceptin) and Sutent, amongst others, including experimental targeted agents. These studies will likely be the subject of future publications and presentations that may drive additional use and inform the design of registration-quality studies. Beyond Abraxane, we would highlight two development candidates with significant commercial potential (the full Abraxis pipeline can be viewed in the diagram below. Figure 16: Abraxis BioScience Pipeline
Drug and Indication ABI-007 (nab -paclitaxel) Breast (metastatic) Lung (Advanced NSCLC) Malignant Melanoma (Stage IV) Pancreatic (Advanced) ABI-008 (nab -docetaxel) Microtubule Stabilizer Prostate (Hormone Refractory) ABI-009 (nab- rapamycin) mTOR inhibitor - Solid Tumors ABI-010 (nab -17AAG) Hsp90 inhibitor - Solid Tumors ABII-011 (nab- 5404) Dual Microtubule and Topoisomerase-1 inhibitor - Solid Tumors ABI-011 (nab- CY196)
Preclinical
Phase I
Phase II
Phase III
Marketed
Source: Company reports.
ABI-008 is a nano-particle version of Sanofi-Aventiss Taxotere (docetaxel). The drug is in Phase II trials for the treatment of chemotherapy-nave metastatic, hormone-refractory prostate cancer. We remind the reader that Taxotere is the current standard of care for this indication. According to the trial information on ClinicalTrials.gov, the study should read out sometime in mid-2010. Another intriguing, yet early, compound is ABI013 (CY196), a microtubule inhibitor that is optimized for the nab platform.
NAB Technology Platform-Big things Come in Small Packages The key to the Abraxis product platform is the companys nab albumin-based drug delivery technology. Albumin is the most abundant protein in the human body, and Abraxis has harnessed its properties to create a valuable and versatile drug delivery platform. When albumin is used as the key protein in the ProtoSphere technology, the resulting vehicle is referred to as a nab (naoparticle albumin-bound) particle. Albumin has multiple capabilities that make it well-suited for use as a delivery vehicle. These properties include:

Albumin can carry water insoluble molecules, including nutrients, vitamins and hormones Given their increased metabolic rate, tumors exhibit an increased appetite for nutrients, which are carried to the tumor by albumin Albumin can carry substances across the endothelial barrier (the layer of cells that constitute the vascular system) Albumin binds to the gp60 receptor on endothelial cells, forming caveolae (indentations in the cell membrane that get pinched off and form small vesicles inside the cell) that transports albumin and its payload
September 15, 2009
20
Buy
across the cell membrane
Albumin binds to SPARC (secreted protein acidic and rich in cysteine), a protein that binds albumin and concentrates nutrients in the interstitium. Tumors secrete this protein at abnormally high levels
In effect, the nab technology functions as a Trojan horse that facilitates the escape of paclitaxel from the vasculature and into the tissue compartment. Once in the tissue space, SPARC proteins concentrate the paclitaxel payload that is then sopped up preferentially by cells of the tumor. The nab platform is exceptionally versatile, and can be applied to a variety of compounds (please see the Abraxis BioScience product platform below). Figure 17: nab-Particle Diagram
Figure 18: nab-Platform
1.
Albumin-bound paclitaxel disaasociates in the blood stream.
2.
Binds to gp60 on endothelial cell wall.
3.
Caveolae transport drug to tumor interstitium.
4.
Surface SPARC binds albumindrug complex.
September 15, 2009
21
Buy
Valuation As mentioned previously, we find the valuation of the shares of Abraxis BioScience to be extremely compelling. At a recent price in the $26 range, the companys market cap is just over $1 billion. Subtracting $258 million in net cash (the company has zero debt) leaves a technology (enterprise) value of approximately $800 million. On a trailing 12-month (TTM) basis, the shares trade at a modest 2.4 times TTM EV/Revenue. Book value is $889 million, giving an Price/BV of 1.2x. On a standard discounted future earnings basis, we arrive at a one year price target range of $30-33. Please see our detailed financial models for all estimates and projections. Please note that our financial projection do not account for any changes in the cost structure as a result of the Abraxis Health spin-off.
Summary and Conclusion In sum, we find the shares of Abraxis BioScience to be extremely attractive at current levels, the companys past notwithstanding. Valuation is compelling, the new management is competent and motivated, and the lead product has a worldwide franchise which the company controls. Abraxane roll-out in ex-U.S. territories should drive strong comparative numbers throughout the course of 2010. As operational improvements are realized and the spin-off of Abraxis Health places more of the BioScience operations in the limelight, valuation should increase accordingly, in our view. We are therefore initiating coverage with a Buy rating and a target range of $30-33.
September 15, 2009
22
Buy
Appendix A: Management Team According to information from the company: Lonnie Moulder, Vice Chairman, President and Chief Executive Officer Mr. Moulder joined Abraxis BioScience in 2009. Previously, he was vice chairman of Eisai Corporation of North America following its acquisition of MGI PHARMA, INC., where he served as president and chief executive officer since 2003. Mr. Moulder joined MGI PHARMA in 1999 as executive vice president and was subsequently promoted to president and chief operating officer. Prior to that, he was a member of the founding management team and vice president business development and commercial affairs of Eligx, Inc., a venturestage biomedical company. Mr. Moulder served for 16 years in a number of commercial roles for Hoechst Marion Roussel (now Sanofi Aventis) and its predecessor companies. He began his career as a clinical pharmacist. Mr. Moulder was a board member of the Biotechnology Industry Organization (BIO) and is a member of the Board of Visitors of the Temple University school of Pharmacy. He earned a bachelor of science degree in pharmacy from Temple University and a master of business administration degree from the University of Chicago. Patrick Soon-Shiong, M.D. Executive Chairman Dr. Soon-Shiong is the Executive Chairman and Chief Executive Officer of Abraxis Health. He was recently appointed Executive Director of the UCLA Wireless Health Institute, and is Professor of Microbiology, Immunology, and Molecular Genetics Professor of Bioengineering at UCLA. Dr. Soon-Shiong holds a degree in Medicine from the University of the Witwatersrand, Johannesburg, South Africa, and a Master of Science from the University of British Columbia. He is a fellow of the American College of Surgeons and the Royal College of Physicians and Surgeons of Canada. Dr. Soon-Shiong performed the worlds first encapsulated islet transplant in a diabetic patient. He developed the first FDA approved protein nanoparticle delivery technology for the treatment of metastatic breast cancer and this drug is being developed for lung, melanoma, gastric and pancreatic cancer. He is a co-inventor of over 50 issued U.S. patents, has published more than 100 scientific papers, and founder of two publicly traded pharmaceutical companies, American Pharma Partners and Abraxis Bioscience. Dr. Soon-Shiongs research has been recognized by national and international awards such as the Association for Academic Surgery Award for Research, the American College of Surgeons Schering Scholar, the Royal College Physicians and Surgeons Research Award, the Peter Kiewit Distinguished Membership in Medicine Award, and the International J.W. Hyatt Award for Service to Mankind. Dr. Soon-Shiong received the 2006 Gilda Club Award for the advancement of cancer medicine and is a recipient of a 2007 Ellis Island Medal of Honor as well as the St. Mary Medical Center Life Achievement Award in 2007 and the St. Johns Health Center Caritas Award in 2007. In 2008, he received the Medical Visionary Award from the Pancreatic Cancer Action Network for his work in pancreatic cancer. Dr. Soon-Shiong currently serves on the Board of Directors for the National Institute of Transplantation as well as the Technology Council for the new Center for Cancer Nanotechnology Excellence at Northwestern University which is part of the National Cancer Institutes (NCI) five-year initiative for nanotechnology in cancer research. He also serves on two advisory boards for the RAND Corporation, the RAND Center for Asia Pacific Policy and the RAND Health Board of Advisors. Dr. Soon-Shiong recently joined the Board of Trustees for the Saint Johns Health Center in Los Angeles, California and the Advisory Board of the California NanoSystems Institute at UCLA. He also recently joined the Advisory Board for the Institute for Technology Advancement (ITA) at UCLA School of Engineering & Applied Science, as well as the Board of Councilors of the USC Viterbi School of Engineering. In 2009 he was appointed to the Presidents Council at RAND Corporation, Chairman of the Steering Committee of Life Sciences of the X-Prize Foundation and Founding Board member to Dossia Foundation.
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Buy
Mary Lynne Hedley, Ph.D., Executive Vice President and Chief Scientific Officer Dr. Hedley most recently served as Executive Vice President of Eisai Corporation of North America following Eisais acquisition of MGI PHARMA, INC. where she had served as Executive Vice President and Chief Scientific Officer since 2005. She joined MGI PHARMA in 2004 as Senior Vice President and General Manager. Previously, Dr. Hedley co-founded ZYCOS, Inc., a biotechnology company, and held roles of progressively greater responsibility ultimately leading to her serving as the companys President and Chief Executive Officer. Dr. Hedleys early research career consisted of two consecutive postdoctoral fellowships at Harvard University from 1989 through 1996. She earned her bachelor of science degree in Microbiology from Purdue University and her doctorate degree in Immunology from the University of Texas, Southwestern Medical Center. She is a named inventor on multiple patents in the field of immunology, and has been widely published in a variety of peer-reviewed journals. Dr. Hedley is the recipient of multiple awards and fellowships, is a frequent guest lecturer, and an active volunteer in educational as well as local community organizations. Rick Rodgers, Senior Vice President and Chief Financial Officer Mr. Rodgers joined Abraxis BioScience in 2009. Previously, he was Senior Vice President, Controller and Chief Accounting Officer of MGI Pharma until the companys acquisition by Eisai Corporation in 2008. In 2003, Mr. Rodgers was Corporate Controller of MedSource Technologies and from 1997 to 2002, he held various senior positions at ADC Telecommunications Inc. Prior to that, he held finance and accounting positions at several private and public companies. Mr. Rodgers began his financial career in accounting at Arthur Anderson & Co. Mr. Rodgers earned his bachelor of science degree in Financial Accounting from St. Cloud State University, Minn., and his master of business administration degree in Finance from the University of Minnesota, Carlson School of Business. Bruce Wendel, Executive Vice President, Corporate Development Mr. Wendel became executive vice president of corporate development of Abraxis BioScience in May 2006. Mr. Wendel joined American Pharmaceutical Partners (APP) in 2004 as vice president of corporate development. He began his 14 years with Bristol-Myers Squibb as in-house counsel before shifting to business and corporate development. While at Bristol-Myers Squibb, as vice president, corporate development international medicines, he led teams that completed several major acquisitions, divestitures and alliances around the world. These transactions included a $225 million divestiture of Bristol's U.S. diagnostic division as well as the acquisition of three pharmaceutical firms in Argentina, South Korea, and Peru, and a co-promotion alliance with SmithKline Beecham for Avandia. Before joining APP, he served as vice president, business development and licensing for IVAX Corporation, a generic drug manufacturer, where late last year he completed the company's acquisition of 3M's European respiratory business. Previously, Mr. Wendel served in the legal departments of Playtex and Combe. He earned a Juris Doctorate degree from Georgetown University Law School where he was an editor of Law & Policy in International Business, and a B.S. from Cornell University. Marty J. Duvall, Senior Vice President, Global Marketing and International Commercial Operations Mr. Duvall joined Abraxis BioScience in 2009. Mr. Duvall most recently served as Chief Business Officer, Morphotek, a subsidiary of Eisai Corporation of North America, following Eisais acquisition of MGI PHARMA, INC., where he served as Sr. Vice President, Commercial Operations (2004-2006) and Sr. Vice President, Commercial Strategy and Development (2007-2008). Previously, Mr. Duvall served for nearly 19 years in a number of commercial roles at Sanofi-Aventis and its predecessor companies. During that tenure, his responsibilities included Vice President, Global Medical and Marketing, with a focus on Taxotere, and Vice President, Marketing for the U.S. Oncology Business Unit. He earned a bachelor of science degree in chemistry from Muhlenberg College, a master degree in chemistry from The Johns Hopkins University, and a master of business administration degree from the University of Kansas.
September 15, 2009
24
Buy
Appendix B: Diseases Overview Breast Cancer According to the American Cancer Society, breast cancer is the leading site for new cases and deaths among women worldwide. According to SEER estimates, more than 193,000 women will be newly diagnosed in 2009. It is estimated that 40,000 Americans will die from breast cancer in 2009. There are over 2.5 million women in the United States that have a history of breast cancer. The overall five year survival rate is 89.1%, though the rate decreases to 27% if the cancer has metastasized at diagnosis. 85% of breast cancer cases begin in the mammary ducts. 60% of diagnosed cases are in a localized stage, another 33% have already spread to regional lymph nodes, and 5% have already metastasized. The two main divisions of breast cancer are invasive and Ductal Carcinoma in Situ (DCIS). Invasive occurs when abnormal cells from inside lobules or ducts break out into nearby breast tissue allowing cancer cells to spread to lymph nodes and metastasize to other organs in advanced stages. DCIS is when the abnormal cells grow inside mammary ducts without spreading to other sites. Metastatic breast cancer is an advanced stage of breast cancer. Of all such cases in the US, most are reoccurrences. The five year survival rate is lower than earlier stages and treatment goals are to prolong life and reduce symptoms to improve quality of life. Hormone therapy may be used on tumors with positive hormone receptors (ER+) and works to shrink tumors throughout the body. When it is not an option, chemotherapy is usually considered which can stop the growth of the tumor, kill cancer cells that have spread to other parts of the body and reduce symptoms. According to the National Comprehensive Cancer Network (NCCN) guidelines for breast cancer, the preferred single agents to treat metastatic breast cancer are anthracyclines, taxanes, anti-metabolites and other microtubule inhibitors. The preferred taxanes are paclitaxel, docetaxel and albumin-bound paclitaxel (Abraxane).
Melanoma A Killer in the Sun Cutaneous melanoma continues to challenge the medical establishment, proving to be quite difficult to manage. Approximately 68,000 patients are diagnosed with cutaneous melanoma each year, nearly 9,000 will die from the disease. According to the National Cancer Institute Surveillance, Epidemiology and End Results (SEER) database, there has been a 619% increase in annual diagnoses from 1950 to 2000, and a 165% increase in annual mortality from this cancer. Of all the cancers, it is the fifth most common in men, and the seventh in women. It is also the second most common cancer in women ages 20-29 years. This is despite an effort to reduce the incidence by earlier screening and increased education. However, certain genetic predispositions such as blond or red hair, blue eyes, presence of freckles, and inability to tan, combined with lifestyle choices such as sun tanning, outdoor activities leading to sunburn and infrequent use of sunblock contribute to the growing problem. In addition, certain people have been found to have mutations in the melanocortin-1 gene, which may predispose them to melanoma. Other implicated mutations occur in the CDKN2A and CDK4 genes, prevalently found in families with hereditary melanoma. Additional risk factors include prior primary cutaneous melanoma, family history of melanoma, and multiple clinically atypical moles. While UV-light has been historically thought to cause cancer, some recent research suggests that it may have a role in attenuating the bodys immune system, allowing these other de novo mutations to survive. Screening and education remain the best hope for melanoma sufferers. ABCD evaluations of early lesions check for asymmetry, border irregularity, color variegation and diameter greater than 6mm or increased size. In a mass screening study from 1992 to 1994, about 2% of 282,000 patients screened had suspicious lesions, of which 8% turned out to be melanoma. Despite increased awareness, direct reduction in mortality has not been realized.
September 15, 2009
25
Buy
Non-Small Cell Lung Cancer (NSCLC) According to the World Health Organization (WHO), there are over 1.2 million cases of lung and bronchial cancer world wide each year, causing approximately 1.1 million deaths annually. It is estimated that more than 219,000 people will be diagnosed with lung cancer in the United States in 2009. According to the National Cancer Institute, lung cancer is the single largest cause of cancer deaths in the United States, and is responsible for nearly 30 percent of cancer deaths in this country. The overall five-year survival rate from 1999-2005 from 17 SEER (Surveillance, Epidemiology, and End Results) geographic areas was 15.6%. The median survival of patients with untreated metastatic non-small cell lung cancer is only four to five months, with a survival rate of one year of only 10%. (Rapp E. Pater JL, Willan A., et al. Chemotherapy can prolong survival in patients with advanced non-small cell-lung cancer. JClin Oncol 1988; 6:633-41) NSCLC is the most common form of the disease and accounts for almost 80% of all lung cancers, with an estimated market opportunity of over $2 billion. There are three sub-types of NSCLC. Squamous cell carcinoma makes up 25-30% of NSCLC cases, adenocarcinoma accounts for 40%, and large-cell carcinoma makes up 10-15% and tends to grow and spread quickly making it harder to treat. Standard therapeutic strategies such as surgery, chemotherapy or radiotherapy have reached a plateau (Yang, et al. Non-small cell lung cancer: epidemiology, risk factors, treatment and survivorship. Mayo Clinic Proc 2008;83:584^94). Current standard of advanced NSCLC are now commonly stratified into bevacizumab-eligible (Avastin, Genentech/Roche) and bevacizumab-ineligible patients. Under the National Comprehensive Cancer Network (NCCN) Guidelines for NSCLC, albumin-bound paclitaxel can be substituted for paclitaxel or docetaxel for patients who experienced hypersensitivity reactions after receiving paclitaxel or docetaxel despite premedication or 2) for patients in whom the standard premedications (dexamethasone, H2 blockers, H1 blockers) are contraindicated.
Pancreatic Cancer Cancer of the pancreas is the fourth leading cause of cancer-related deaths in the United States with over 35,000 deaths estimated in 2009 and over 42,000 new cases are expected to be diagnosed in 2009. The pancreas consists mostly of exocrine glands and a small percentage (5%) of endocrine glands. Tumors formed in exocrine glands are more common, nearly all of which (95%) are adenocarcinomasa cancer that starts in gland cells. Adenocarcinomas usually begin in the ducts of the pancreas. Figure 19: Newly Diagnosed Pancreatic Cancer Cases by Stage
Stage Localized Regional Distant Unstaged
% # 7% 2,973 26% 11,042 53% 22,509 14% 5,946
Source: National Cancer Institute Surveillance Epidemiology and End Results
Pancreatic cancer typically spreads rapidly and is often goes undiagnosed until the cancer has spread beyond the primary site thus making it difficult to treat. According to SEER estimates, 53% of newly diagnosed cases are already metastasized. According to the American Cancer Society (ACS), about 20% of cases live at least one year after diagnosis, while less than 4% will be alive after five years. The National Comprehensive Cancer Network (NCCN) Panel currently recommends gemcitabine monotherapy as standard front-line therapy for patients with metastatic disease.
September 15, 2009
26
Buy
Appendix C: Compendia Listings
Single Agent Single Agent & Combination Single Agent Single Agent
Indication 1st Line MBC 1st Line Advanced NSCLC Head and Neck Anal
Compendia DrugPoints/DrugDex NCCN DrugDex DrugPoints/DrugDex DrugPoints/DrugDex
Date 2007 October 2008 January 2009 2006 2006
September 15, 2009
27
Buy
Public Companies Mentioned in this Report AstraZeneca (LSE:AZN, $27.40, Not Rated) Elan (ELN, $7.58, Not Rated) Johnson and Johnson (JNJ, $60.29, Not Rated) Takeda (TSE:4502, JPY 3,820.00, Not Rated) Sanofi-Aventis (SNY, $35.40, Not Rated)
September 15, 2009
28
September 15, 2009

2006 2007 A 2008 A 1Q09 A 2Q09 A 3Q09 E 4Q09 E 2009 E 1Q10 A 2Q10 A 3Q10 E 4Q10 E 2010 E 2011 E 2012 E 2013 E 2014 E 2015 E
ABII Abraxis BioScience, Inc.
Income Statement $ in millions Abraxane Revenue Other revenue Total Revenue Growth 2006 174.9 7.4 182.3 2007 A 324.7 9.0 333.7 83% 34.5 11% 299.2 90% 88.7 27% 230.0 69% 34.8 10% 354.5 (55.3) -17% 5.0 (0.2) (50.5) (279.4) (24.4) (22.2) (20.0) (89.8) (21.1) 18.8 (5.0) 1.1 (1.4) (23.2) 0.7 0.9 0.8 1.0 0.9 1.1 3.6 1.7 1.3 (1.6) 0.8 1.0 (18.5) (293.3) -85% (22.9) -32% (26.1) -31% (24.0) -28% (22.0) -25% (95.0) -29% (20.8) -22% (20.4) -21% (19.8) -19% 0.9 1.1 (17.8) (20.3) -19% 1.0 1.2 (18.0) 103.6 30% 216.8 63% 278.2 81% 599.5 35.0 48% 42.5 59% 8.9 12% 86.4 39.9 47% 47.1 55% 9.6 11% 96.6 38.1 45% 46.5 55% 9.6 11% 94.2 38.0 43% 47.7 54% 9.6 11% 95.3 150.9 46% 183.8 56% 37.8 11% 372.5 39.1 42% 49.3 53% 9.6 10% 98.1 41.0 42% 50.7 52% 9.6 10% 101.3 42.8 42% 52.0 51% 9.6 9% 104.5 44.7 42% 54.3 51% 9.6 9% 108.7 167.6 42% 206.4 52% 38.5 10% 412.5 (81.3) -20% 4.0 1.8 (75.5) 169.9 35% 242.7 50% 38.5 8% 451.0 (43.4) -9% 4.4 2.0 (37.0) 39.1 12% 306.2 89% 9.1 13% 63.5 87% 14.6 19% 70.5 83% 14.4 17% 70.2 83% 15.0 17% 73.3 83% 53.1 17% 277.5 84% 15.8 17% 77.3 83% 16.6 17% 80.9 83% 17.3 18% 84.7 83% 18.1 18% 88.4 83% 67.8 17% 331.2 83% 77.7 16% 407.7 84% 91.8 16% 482.0 84% 177.9 31% 264.0 46% 38.5 7% 480.4 1.7 0% 4.8 2.2 8.7 0% 8.7 $ 8.7 0.21 0.20 40,515 42,071 40,256 41,416 40,718 42,281 40,921 42,492 41,126 42,705 41,332 42,918 41,024 42,599 41,434 43,025 41,849 43,455 100.2 15% 568.0 85% 187.1 28% 300.7 45% 38.5 6% 526.3 41.7 6% 5.3 2.4 49.4 16.8 34% 32.6 $ 2008 A 335.6 9.7 345.3 3% 1Q09 A 70.6 2.0 72.6 -12% 2Q09 A 75.2 10.0 85.1 10% 3Q09 E 82.6 2.0 84.6 -9% 4Q09 E 86.1 2.2 88.3 -4% 2009 E 314.5 16.2 330.6 -4% 1Q10 A 90.6 2.5 93.1 28% 2Q10 A 94.8 2.7 97.5 15% 3Q10 E 99.0 2.9 102.0 21% 4Q10 E 103.3 3.2 106.5 21% 2010 E 387.7 11.3 399.1 21% 2011 E 477.5 7.8 485.3 22% 2012 E 562.7 11.1 573.8 18% 2013 E 652.4 15.8 668.2 16% 21.2 12% 161.1 88% 63.1 35% 119.5 66% 124.7 68% 308.3 (147.2) -81% 0.4 (4.7) (151.5)
2014 E 740.6 19.5 760.0 14% 114.0 15% 646.0 85% 205.2 27% 334.4 44% 38.5 5% 578.1 67.9 9% 5.8 2.7 76.4
2015 E 827.3 24.0 851.3 12% 127.7 15% 723.6 85% 225.6 27% 370.3 44% 38.5 5% 634.4 89.2 10% 6.4 2.9 98.5 26.0 34% 50.4 $ 33.5 34% 65.0
COGS as % of revenue Gross Profit Gross Margin
R&D as % of revenue SG&A as % of revenue Total Other Expenses as % of revenue Total Expenses
Operating Profit Operating Margin
Interest Income Other (expense) income Interest Expense Pre-tax Income
Provision for income taxes Effective Tax Rate Net Income
(26.0) (8.0) (1.9) 0.1 (0.1) (0.1) 17% 16% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% $ (125.6) $ (42.6) $ (277.5) $ (23.3) $ (24.3) $ (22.2) $ (20.0) $ (89.7) $ (21.1) $ (18.5) $ (17.8) $ (18.0) $ (75.5) $ (37.0) $ 2.1 (0.8) 1.2 $ (125.6) $ (42.6) $ (277.5) $ (25.4) $ (23.4) $ (22.2) $ (20.0) $ (90.9) $ (21.1) $ (18.5) $ (17.8) $ (18.0) $ (75.5) $ (37.0) $ $ $ 39,990 39,990 39,991 39,991 40,032 40,032 40,081 40,081 40,113 41,653 40,314 41,861 (3.14) $ (1.06) $ (3.14) $ (1.06) $ (6.93) $ (0.63) $ (0.58) $ (0.55) $ (0.49) $ (2.26) $ (0.52) $ (0.45) $ (0.43) $ (0.44) $ (1.84) $ (0.89) $ (6.93) $ (0.63) $ (0.56) $ (0.53) $ (0.47) $ (2.20) $ (0.50) $ (0.44) $ (0.42) $ (0.42) $ (1.77) $ (0.86) $
Net loss for non-controlling interests Net Loss for Common Shareholders
$ $ $
32.6 0.77 0.74 42,267 43,890
$ $ $
50.4 1.18 1.14 42,690 44,329
$ $ $
65.0 1.51 1.45 43,117 44,772
GAAP Basic EPS GAAP Diluted EPS
Basic Shares Outstanding Diluted Shares Outstanding
Buy
29
Buy
Balance Sheet $ in million Assets Current Assets: Cash and equivalents Cash collateral for reacquistion of agreement Accounts receivable Related party receivable Inventories Prepaid expenses and other current assets Deferred income taxes Total Current Assets PP&E Investment in Drug Source Co Intangible assets Goodwill Other non-current assets Total Assets Liabilities and Equity Current Liabilities: Accounts payable Accrued liabilities Accrued litigation costs Reacquisition payable Related party payable Income taxes payable Deferred revenue Total current liabilities Deferred income taxes, non-current Long-term portion of deferred revenue Other non-current liabilities Total Liabilities Stockholder's Equity Common Stock Additional PIC Accumulated deficit Accumulated other comprehensive loss Parent Company investment Less: treasury stock Total Stockholder's Equity Noncontrolling Interest Total Equity Total L&E
2006 A
2007 A
2008 A
0.5 27.6 0.2 80.1 7.1 21.2 136.8 116.2 5.5 243.4 241.4 21.5 764.8
705.1 43.9 2.0 73.7 18.6 33.7 877.0 145.1 9.3 205.2 241.4 24.3 1,502.3
306.4 300.6 37.0 1.9 63.5 33.8 65.6 808.8 166.7 10.2 175.3 241.4 36.2 1,438.6
24.1 29.9 18.5 39.2 111.7 29.0 158.1 6.9 305.8 0.9 458.2 459.0 459.0 764.8
33.6 54.9 7.0 5.0 41.3 141.8 32.4 121.1 9.5 304.9 0.0 1,192.5 4.1 0.8 1,197.4 1,197.4 1,502.3
39.1 53.0 57.6 268.0 0.7 4.2 422.7 62.7 8.2 15.5 509.1 0.0 1,203.1 (272.7) (1.0) 929.5 929.5 1,438.6
September 15, 2009
30
Buy
IMPORTANT DISCLOSURES
This research has been prepared by Merriman Curhan Ford & Co., a wholly owned subsidiary of Merriman Curhan Ford Group, Inc. Some companies Merriman Curhan Ford & Co. follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Merriman Curhan Ford & Co. research reports may be unsuitable for some investors depending on their specific investment objectives, financial status, risk profile, or particular needs. Investors should consider this report as only a single factor in making their investment decisions and should not rely solely on this report in evaluating whether or not to buy or sell the securities of the subject company. Regulation Analyst Certification (Reg. AC) All of the views expressed in this research report accurately reflect the research analyst's personal views about any and all of the subject securities or issuers. No part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analyst in the subject company of this research report. Research analysts are not directly compensated for specific revenue generated by the firms investment banking transactions/activities. General Disclosures MCF & Co. expects to receive or intends to seek compensation for investment banking services for all of the companies in its research universe in the next three months. Investors should assume that MCF & Co. is soliciting or will solicit investment banking or other business relationships from the companies covered in this report in the next three months. Security prices in this report may either reflect the previous days closing price or an intraday price, depending on the time of distribution. Designated trademarks and brands are the property of their respective owners. Specific Disclosures - MCF & Co. has not received compensation for investment banking services within the last 12 months, and does not expect to receive or intend to seek compensation for investment banking services in the next three months, from Abraxis BioScience, Inc. - Within the last 12 months MCF & Co. has not managed or co-managed a public offering for Abraxis BioScience, Inc. - MCF & Co. makes a market in ABII and as such buys and sells from customers on a principal basis. - Neither Michael King nor a member of his household owns shares of ABII. - Neither MCF & Co. nor its officers, principals, employees, or owners own options, rights, or warrants to purchase ABII. - No MCF & Co. employee serves on the board of directors of Abraxis BioScience, Inc. - Neither Michael King nor a member of his household serves on the board of directors of Abraxis BioScience, Inc. - Neither MCF & Co. nor its affiliates beneficially owns 1% or more of an equity security of Abraxis BioScience, Inc. Key to Investment Rankings (expected total share price return inclusive of dividend reinvestment, if applicable)
Percent of companies under research coverage from which MCF & Co. received compensation for investment banking services provided in the previous 12 months or expects to receive or intends to seek in the next three months 6%
Rating
Percent of Universe
No. of Stocks
Description
Buy
77%
77
MCF & Co. expects the stock price to appreciate 10% or more over the next 12 months. Initiate or MCF & Co believes the stock price is fairly valued at current levels. Maintain position or take no action. MCF & Co. expects the stock price to depreciate over the next 12 months. Sell or decrease position.
Neutral Sell
21% 2%
21 2
0% 0%
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September 15, 2009
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MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

52-Week Range: Cash (M): Debt (M): Debt/Capital: Book Value/Share:

$24.52-74.50 $258 $0 0% $22.17

Institutional Ownership: 55.4%

Valuation (FY09E) MERRIMAN CURHAN FORD

Please see Important Disclosures on the last page of this report.

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

September 15, 2009

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

September 15, 2009

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Upcoming Milestones According to managements projections:

September 15, 2009

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

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MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

September 15, 2009

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Figure 1: Response Rates in Abraxane vs. Paclitaxel in Metastatic Breast Cancer

p 0.001 0.029 0.006 0.002 0.01 0.002 NS <.001 NS

September 15, 2009

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Figure 3: Patient Survival in Abraxane vs Paclitaxel in Metastatic Breast Cancer

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MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Figure 4: Adverse Events in Phase III Trial of Abraxane vs Standard Paclitaxel

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MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Figure 5: Confirmed ORR and DCR in Abraxane vs Docetaxel

nab - Paclitaxel 100mg/m2 Weekly (n=76)

150mg/m2 Weekly (n=74)

Docetaxel 100mg/m2 q3w (n=74) Overall: .224

34 45 33.6 to 55.9 34 45 0 0 57 75 65.3 to 84.7 23 30

36 49 37.3 to 60.0 36 49 0 0 50 80 70.6 to 88.9 23 31

Overall: .027; 100 mg/m2 v D: .009; 150 mg/m2 v D: .017

48 63 52.3 to 74.0 46 61 2 3 63 83 74.4 to 91.4 15 20

55 74 64.4 to 84.3 53 72 2 3 67 91 83.9 to 97.2 12 16

29 39 28.1 to 50.3 27 36 2 3 51 69 58.4 to 79.5 22 30

September 15, 2009

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Figure 6: Progression-Free Survival in Abraxane vs Docetaxel

Overall .0498; 150 mg/m2 v D: .0065

150 mg/m2 v D: 0.495

44 57 10.9 8.9 to 14.6 D: docetaxel

59 68 7.5 7.2 to 9.3

36 49 14.6 10.0 to 18.9

44 59 7.8 6.3 to 11.0

100 mg/m2 v 150 mg/m2: 1.972; 150 mg/m2 v D: 0.568

Figure 7: Kaplan Meier of PFS curve in Abraxane vs Docetaxel

September 15, 2009

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Data Equals Market Share In Cancer Therapy

Figure 8: Annual Taxane Treatments (Data in 000s)

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MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Figure 9: Estimated Number of Patients on Abraxane in July 2009

September 15, 2009

MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

Figure 11: Abraxane Revenue Model

Source: Company reports and Merriman Curhan Ford estimates.

September 15, 2009

September 15, 2009 MERRIMAN CURHAN Abraxis BioScience (ABII) FORD

China - Metastatic Breast Cancer Incidence Based Model

China Revenue ($ in millions)