FDA approval fails to win American Pharmaceutical support.

News last week that specialty drug maker American Pharmaceutical Partners Inc. had won U.S. regulatory approval to market generic versions of a popular antibiotic wasn't enough to the change the mind of a Wall Street analyst who downgraded its shares.

CIBC World Markets analyst Elliott Wilbur told investors that the stock dilution that would come from Schaumburg, Ill.-based American Pharmaceutical's pending merger with privately-held Santa Monica-based American BioScience Inc. is unlikely to create an upside for current shareholders for several years.

Shares of American Pharmaceutical, which started the week at $33.92 prior to the Feb. 14 downgrade, dipped below $30 during the week, recovering slightly to close at $31.61 on Feb. 16.

The merged Los Angeles-based company, Abraxis BioScience, would combine American Pharmaceutical's prowess in manufacturing complicated genetic drugs, plus a valuable proprietary cancer treatment called Abraxane, with American BioScience's biotech drug pipeline. The all-stock deal was valued at $4.1 billion.

"While the prospects of a sexier biotech story may resonate well with some investors, bottom-line dilution through 2010 and the forced trade-off of over 50 percent interest in the core generic business for a high-risk early stage pipeline assets leave (minority) investors hanging in there for a long time," said Wilbur, referring to the level of financial interest that American Pharmaceutical shareholders now have in its lucrative generic business.

Dr. Patrick Soon-Shiong is the largest individual shareholder of both American Pharmaceutical and American BioScience, both of which he trended in the mid 1990s. American Pharmaceutical went public in 2001.

Analysts estimate that post-merger, Soon-Shiong and a handful of American BioScience insiders would control around 87 percent of shares of the combined company, leaving minority shareholders with just 13 percent of the public company. Minority shareholders now have a 29 percent stake in American Pharmaceutical.

American Pharmaceutical's drug manufacturing business gained a product on Feb. 13 when the U.S. Food and Drug Administration granted approvals enabling the company to start marketing its version of ceftriaxone, the generic equivalent of Roche Pharmaceuticals' Rocephin, which is used for a wide range of infections. Ceftriaxone products had sales of more than $570 million in 2005, according to industry trackers.

"Ceftriaxone is a crucial drug for our customers and one that physicians rely on to treat many serious infections." Soon-Shiong said in a statement. "With the approval of ceftriaxone, APP retains its position with the largest portfolio of anti-infectives in the generic injectables industry and its leadership position in the cephalosporin market."

Also last week, the companies announced the full senior management team of Abraxis BioScience and its four operating divisions.

Soon-Shiong will serve as chairman and chief executive. The board expects to name Nicole S. Williams, currently American Pharmaceutical's chief financial officer, and Anthony E. Maida III, an industry consultant, to be division presidents of American Pharmaceutical Partners and Abraxis BioCapital, respectively. Carlo Montagner, a former Schering A.G. executive, is to serve as president of Abraxis Oncology.