American BioScience Inc. and its majority-owned subsidiary, American Pharmaceutical Partners Inc., are combining to create a new company, Abraxis BioScience.

The merger is intended to consolidate sales and marketing rights to the breast cancer drug, Abraxane, and bring together APP's commercial and manufacturing experience with ABI's nanoparticle albumin-bound (NAB) development technology and a pipeline that includes continued development of Abraxane in other indications.

It combines "all of APP's manufacturing strengths, portfolio and development breadth with the innovation and clinical development acumens and accomplishments of American BioScience," Patrick Soon-Shiong, CEO of privately owned ABI, and executive chairman of APP, said during a conference call. He is expected to assume the position of chairman and CEO at Abraxis. APP's CEO, Al Heller, has stepped down.

Soon-Shiong calls the merger "a transforming event" that "brings together the best of biotechnology, the best of injectables and the best of big pharma."

Through an all-stock transaction, APP will issue 86 million shares of common stock to ABI shareholders. At Friday's closing price of $47.61 per share, the transaction would be valued at about $4.1 billion. Based on that price, the combined company would have a market value of about $7.5 billion.

Those estimates, however, were not impressive enough to alleviate concerns of the company's share dilution, and APP's stock (NASDAQ:APPX) fell $8.36, 17.6 percent on Monday, to close at $39.25.

Upon completion of the merger, Santa Monica, Calif.-based ABI, which currently holds about 64.4 percent of APP's outstanding stock, will own about 83.5 percent of Abraxis.

The new company will retain worldwide rights to Abraxane, which was approved in the U.S. in January to treat breast cancer after failure of combination chemotherapy for metastatic disease or relapse within six months of adjuvant chemotherapy. ABI developed the drug, and APP handled the manufacturing and marketing. The companies had a 50/50 revenue sharing agreement. The drug was launched in February and recorded U.S. sales of $86.3 million through Sept. 30.

ABI also has filed for approval in Canada and plans to file for marketing authorization in Europe, Mexico and several other countries starting in the first half of next year.

The only exception is the Japanese market. Earlier this month, ABI licensed Abraxane to Tokyo-based Taiho Pharmaceutical Co. Ltd. in exchange for up-front and milestone payments of more than $50 million, in addition to royalties. (See BioWorld Today, Nov. 17, 2005.)

Developed using ABI's NAB technology, Abraxane combines paclitaxel with albumin and is formulated into a nanoparticle, an administration that allows for higher dosing because it does not rely on a toxicity-causing solvent.

As the first marketed product from ABI's pipeline, Abraxane also "validated our platform," Soon-Shiong said, "which opens up the opportunity for us to take many water insoluble compounds and place them inside the nanoparticle delivery system to explore efficacy potential."

In addition to breast cancer, Abraxane is in development for adjuvant breast, lung, ovarian, prostate, melanoma and head and neck cancers. ABI's NAB-based pipeline also includes Coroxane, in Phase II/III trials for peripheral vascular disease, and NAB docetaxel, anticipated to enter the clinic in 2006.

At least six investigational new drug applications are expected to be filed throughout 2006 and 2007.

Though ABI's work has included drugs for some vascular diseases, its primary focus will continue to be oncology. The NAB platform has allowed researchers to develop a class of compounds targeting the tumor-secreted protein SPARC (secreted protein, acidic and rich in cysteine), which has been found in a number of different tumors. The SPARC protein appears to attract albumin-bound nutrients, so ABI's technology is designed to trick tumors into carrying albumin-bound therapeutics into cells.

The NAB technology also finds new chemical entities, Soon-Shiong said, adding that ABI already selected a first compound from its natural product library to begin investigating as a therapeutic.

While ABI is contributing its development-stage pipeline and development technology, APP is bringing to the table an experienced commercial background, with its established injectables franchise focused on oncology, critical care and anti-infectives. The company has 186 approved products, plus more than 20 abbreviated new drug applications pending at the FDA and 40 other products at the development stage.

The Schaumburg, Ill.-based company reported net income of $18.2 million, or 25 cents per share, for the third quarter of 2005. As of Sept. 30, APP had cash and short-term investments of $61.1 million.

The combined company of more than 1,500 employees is expected to be organized along operating divisions. Specific breakdowns will be announced later this year, though it's expected that American Pharmaceutical Partners will be designated as one division, and units will be designated for business and R&D.

The Abraxis board will consist of existing APP board members - David Chen, Stephen Nimer, Leonard Shapiro and Kirk Calhoun - plus other members to be named before the merger closes.