The Biotech Stock Blog raised some noteworthy concerns about the recent announcement by American Pharmaceutical Partners, Inc. that it will acquire its largest shareholder, American Bioscience, Inc., creating a biopharmaceutical company “Abraxis Bioscience.” If you did not read BioBlogger’s blogpost Bait and Switch: American Pharmaceutical Partners’ Proposed Acquisition of American BioScience (APPX) , you should check it out.

The terms of the acquistion provide for American Pharmaceutical to issue 86 million additional shares to American Bioscience, raising American Bioscience’s ownership of American Pharmaceutical’s shares from 64.4% to 83.5%. Abraxis Bioscience will own the global rights to Abraxane, a cancer treatment marketed in the United States for metastatic breast cancer, and American Pharmaceutical chairman and American BioScience CEO Patrick Soon-Shiong will become the chairman and CEO of the new Abraxis Bioscience.

It is this last point that caught the attention of BioBlogger, who said of the acquisition:

The rationale behind the transaction is to simplify the corporate structure while acquiring all the rights to the cancer drug, Abraxane, and a pipeline of development stage drugs. The question is: Is this transaction being done in the best interests of shareholders? In my opinion, the only person that will be enriched by the deal is American Pharmaceutical Partners’ (APP) Chairman and CEO, Patrick Soon-Shiong, who also happens to own over 80% of American BioScience (ABI) and is its President and Chief Financial Officer. . . . The most disquieting fact pertains to Patrick Soon-Shiong who owns more than 80% of ABI and is its President, Chief Financial Officer, and a Director while also serving as APP’s Chairman and CEO. Since ABI owns almost 48 million shares of APP, Mr. Soon-Shiong is a de facto shareholder in APP to the tune of about 40 million shares. The relationship between ABI and APP isn’t what one would define as “arm’s length.” Mr. Soon-Shiong’s interests are clearly not aligned with APP’s minority shareholders. The proposed merger of APP and ABI illustrates this point…

BioBlogger further explains his concerns:

As a consequence of the merger, existing shareholders, in addition to their shares being diluted, will sacrifice 50% of their interest in the profitable generics business in exchange for ABI’s early stage pipeline. The majority shareholder in ABI, and as a result the de facto majority shareholder in APP, Patrick Soon-Shiong, will increase his APP interest from about 40 million shares to about 130 million shares. In the process, Mr. Soon-Shiong gets a top valuation for is private stake in ABI and converts the aforementioned stake into publicly traded APP shares. He accomplishes all this while also pawning off ABI’s product development risk to APP shareholders and gaining exposure to APP’s profitable generic business. It’s easy to see how this benefits Mr. Soon-Shiong, but how does it benefit APP shareholders?

Clearly, BioBlogger raises serious concerns regarding the underlying reasons for this acquisition, including even the rationale for the $4 billion valuation for Abraxane. It goes without saying that many people are going to be watching Mr. Soon-Shiong as this deal closes.