UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2007
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-33407
Abraxis BioScience Inc. Savings and
Retirement Plan
(Full title of the plan)
APP Pharmaceuticals, Inc.
(Name of issuer of the securities held)
| 1501 E Woodfield Dr. Suite 300E Schaumburg, IL |
60173 | |
| (Address of principal executive offices) | (Zip Code) |
Abraxis BioScience, Inc. Savings and Retirement Plan
| 3 | ||
| Financial Statements: |
||
| 4 | ||
| 5 | ||
| 6 | ||
| Supplemental Schedules: |
||
| Schedule H, Line 4a – Schedule of Delinquent Participant Contributions |
11 | |
| Schedule H, Line 4i – Schedule of Assets (Held at End of Year) |
12 | |
2
Report of Independent Registered Public Accounting Firm
Plan Trustees
Abraxis BioScience, Inc. Savings and Retirement Plan
We have audited the accompanying statements of net assets available for benefits of the Abraxis BioScience, Inc. Savings and Retirement Plan as of December 31, 2007 and 2006, and the related statement of changes in net assets available for benefits for the year ended December 31, 2007. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2007 and 2006, and the changes in its net assets available for benefits for the year ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets (held at end of year) as of December 31, 2007, and delinquent participant contributions for the year then ended, are presented for purposes of additional analysis and are not a required part of the financial statements, but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements as a whole.
/s/ Ernst & Young LLP
Chicago, Illinois
June 30, 2008
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Abraxis BioScience, Inc. Savings and Retirement Plan
Statements of Net Assets Available for Benefits
| December 31 | ||||||
| 2007 | 2006 | |||||
| Assets |
||||||
| Investments, at fair value |
||||||
| Mutual funds |
$ | 79,035,894 | $ | 66,105,215 | ||
| Group annuity contract |
9,791,705 | 8,807,911 | ||||
| Pooled separate account |
6,143,537 | 5,134,366 | ||||
| Participant loans |
2,707,804 | 2,344,485 | ||||
| Self-directed brokerage account |
1,732,791 | 1,924,108 | ||||
| Common stock |
443,308 | 432,835 | ||||
| Total Investments |
$ | 99,855,039 | $ | 84,748,920 | ||
| Receivables |
||||||
| Company contributions |
— | 43,537 | ||||
| Participant contributions |
— | 52,805 | ||||
| Total receivables |
— | 96,342 | ||||
| Total Assets |
$ | 99,855,039 | $ | 84,845,262 | ||
| Liabilities |
||||||
| Refund of excess contributions |
9,201 | 2,963 | ||||
| Total assets available for benefits at fair value |
99,845,838 | 84,842,299 | ||||
| Adjustment from fair value to contract value |
515,353 | 463,574 | ||||
| Net assets available for benefits |
$ | 100,361,191 | $ | 85,305,873 | ||
See accompanying notes.
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Abraxis BioScience, Inc. Savings and Retirement Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2007
| Additions |
|||
| Interest and dividend income |
$ | 1,486,025 | |
| Contributions: |
|||
| Participants |
8,530,103 | ||
| Employer |
3,544,691 | ||
| Rollovers |
1,796,016 | ||
| Total contributions |
13,870,810 | ||
| Total additions |
15,356,835 | ||
| Deductions |
|||
| Benefits paid to participants |
9,539,601 | ||
| Administrative expenses |
46,159 | ||
| Total deductions |
9,585,760 | ||
| Net appreciation in fair value of investments |
5,690,493 | ||
| Transfer of assets from affiliated plans |
3,593,750 | ||
| Net increase |
15,055,318 | ||
| Net assets available for benefits: |
|||
| Beginning of year |
85,305,873 | ||
| End of year |
$ | 100,361,191 | |
See accompanying notes.
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Abraxis BioScience, Inc. Savings and Retirement Plan
Notes to Financial Statements
December 31, 2007
1. Description of Plan
The following description of the Abraxis BioScience, Inc. Savings and Retirement Plan (the Plan), provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
Effective January 1, 2007, the American BioScience, Inc. 401(k) Plan, or ABI Plan, merged into the American Pharmaceutical Partners, Inc. Savings and Retirement Plan, and the Plan name was changed to the Abraxis BioScience, Inc. Savings and Retirement Plan. Participants eligible to participate in the ABI Plan on December 31, 2006 were eligible to participate in the Plan effective January 1, 2007. Approximately $3.6 million of assets from the ABI Plan were transferred into the Plan on March 1, 2007.
Effective November 13, 2007, Abraxis Bioscience Inc. (Old Abraxis) was separated into two independent publicly-traded companies: our company, APP Pharmaceuticals, Inc., (which we refer to as “The Company”, “APP” or “New APP” following the separation) and our spin-off entity, “New Abraxis,” which subsequently changed its name to Abraxis BioScience, Inc.
Under the employee matters agreement dated November 13, 2007, New APP assumed administration of the Plan, until December 31, 2007. The employees of New Abraxis continued to be eligible to participate in the Plan, through January 1, 2008. The New Abraxis Plan assets were transferred to New Abraxis in the first quarter of 2008 (see “Note 8 – Subsequent Events” for further discussion).
General
The Plan is a defined-contribution plan covering eligible employees of the former Abraxis BioScience, Inc. (Old Abraxis). The Plan is administered by the Company; record-keeping responsibilities are provided by the Principal Life Insurance Company; and trustee services are provided by Delaware Charter Guarantee and Trust Company (d/b/a Principal Trust Company).
Employees are eligible to participate on the first day of the month after completing one month of service with the Company. Eligible employees can participate if they are not subject to a collective bargaining agreement, not a nonresident alien, or not a leased employee. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Upon completing one month of service with the Company, an eligible employee automatically becomes a participant in the Plan and his compensation is reduced by 3% and treated as a before-tax contribution until the participant elects a different percentage or elects not to participate in the Plan. A participant may elect to defer from 0% to 80% of his compensation, as defined, each pay period, subject to Internal Revenue Service (IRS) annual limitations. In addition, an eligible employee may make a rollover contribution from another qualified plan.
The Company makes a qualified, nonelective contribution to eligible, active participants each pay period in the amount of 3% of compensation.
Investment Options
Upon enrollment, a participant may direct employee and Company contributions to any of the Plan’s fund options. The Plan also provides for a self-directed feature whereby participants may direct a portion of their current account balance, subject to certain restrictions, to various mutual funds, bonds, and stocks.
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of: (a) the Company’s contributions, and (b) the Plan’s earnings, and is charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. Forfeited balances of terminated participants’ nonvested accounts are used to reduce the Company’s contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
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Participant Loans
Participants may obtain loans from their account balances of a minimum of $1,000, up to a maximum of 50% of the vested account balance or $50,000, whichever is less. Such loans bear interest at the prime rate plus 1% and are due and payable in full if regular repayments stop, the participant terminates employment with the Company, or the participant dies. Loans are secured by the participant’s account. Loans are repaid over a five-year period or longer for the purchase of a principal residence, through payroll deductions.
Vesting
Participants’ and qualified, nonelective contributions and earnings thereon are always fully vested. Effective January 1, 2005, Company matching contributions and discretionary profit—sharing contributions are always fully vested.
Prior to January 1, 2003 Company discretionary, profit-sharing contributions vested over continuous years of service. A participant was 100% vested after six years of credited service.
From January 1, 2003 to December 31, 2004, employer-matching contributions and discretionary profit-sharing contributions vested according to the following schedule:
| Years of Service |
Vested Percentage |
||
| Less than 1 year |
30 | % | |
| At least 1 year but less than 2 years |
50 | ||
| At least 2 years but less than 3 years |
80 | ||
| 3 years or more |
100 |
Prior to January 1, 2007, employer-matching contributions and discretionary profit-sharing contributions for former American BioScience employees (who became part of the Plan on January 1, 2007) vested according to the schedule above.
A participant also becomes 100% vested upon normal retirement age, death, or permanent disability.
Benefit Payments
Benefits are payable upon normal, early, or late retirement, as defined, disability, death, and termination. Participants may elect various payment options, including installment lump-sum payments and annuity payments. A participant may withdraw all or a portion of his account for hardship reasons before benefits become payable, as permitted under current tax law.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right to terminate the Plan subject to the provisions of the Plan and ERISA. In the event of plan termination, participants will become 100% vested in their accounts and will be entitled to their entire account balance.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared using the accrual basis of accounting.
Investment Valuation and Income Recognition
Investments are stated at fair value based on the quoted market prices or redemption prices reported by the issuer. Redemption prices generally are based on the fair values of the fund’s underlying investments. Participant loans are stated at their outstanding balances, which approximate fair value.
The fair value of the group annuity contract with Principal is measured by the contract value less early withdrawal fees.
Purchases and sales of investments are recorded on the trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date.
7
Contributions
Contributions from participants are recognized by the Plan when withheld by the Company through payroll deductions. Contributions from the Company are recognized by the Plan in the year to which they relate.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
Administrative Expenses
Substantially all external plan administration fees incurred in the administration of the Plan, except management fees, are paid by the Company.
New Accounting Pronouncement
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements. The Plan will adopt SFAS 157 effective January 1, 2008. Adoption of SFAS 157 is not expected to have a significant effect on the amounts reported in the statement of assets available for benefits.
3. Investments
During 2007, the Plan’s investments (including investments purchased and sold, as well as held, during the year) appreciated in fair value as follows:
| Net Realized and Unrealized Appreciation in Fair Value of Investments | |||
| Investments at Fair Value: |
|||
| Mutual funds |
$ | 5,252,929 | |
| Pooled separate account |
367,426 | ||
| Self-directed brokerage account |
68,633 | ||
| Common stock |
1,505 | ||
| $ | 5,690,493 | ||
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Investments that represent 5% or more of the Plan’s net assets available for benefits are as follows:
| December 31, | ||||||
| 2007 | 2006 | |||||
| Principal Life Insurance Company |
||||||
| Group annuity contract |
||||||
| Principal Fixed Income |
$ | 10,307,058 | $ | 9,271,485 | ||
| Pooled separate account: |
||||||
| Principal Global Investors Large Cap Stock Index |
6,143,537 | 5,134,366 | ||||
| Mutual funds |
||||||
| Principal Investors Partners Large-Cap Growth Select Fund |
12,303,211 | 10,748,885 | ||||
| American Century Vista Fund |
11,886,118 | 7,680,760 | ||||
| Principal Global Investors International Growth Fund |
11,756,163 | 9,824,499 | ||||
| Principal Global Investors Lifetime 2020 Fund |
7,153,129 | 5,808,706 | ||||
| Principal Investors Partners Mid-Cap Value Select Fund |
7,080,584 | 7,411,234 | ||||
| Principal Investors Partners Large-Cap Value Select Fund |
6,259,157 | 6,268,481 | ||||
| Principal Global Investors Lifetime 2030 Fund |
5,625,615 | 4,110,924 | ||||
4. Investment Contract with Insurance Company
The Plan has a benefit-responsive investment contract with Principal Life Insurance Company (Principal). Principal maintains the contributions in a general account. The account is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The guaranteed investment contract issuer is contractually obligated to repay the principal and a specified interest rate that is guaranteed to the Plan.
As described in Note 2, because the guaranteed investment contract is fully benefit-responsive, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the guaranteed investment contract. Contract value, as reported to the Plan by Principal, represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
There are no reserves against contract value for credit risk of the contract issuer or otherwise. The crediting interest rate is based on a formula agreed upon with the issuer. Such interest rates are reviewed on a semi-annual basis for resetting.
Certain events limit the ability of the Plan to transact at contract value with the issuer. Such events include the following: (1) amendments to the plan documents (including complete or partial plan termination or merger with another plan), (2) changes to plan’s prohibition on competing investment options or deletion of equity wash provisions, (3) bankruptcy of the plan sponsor or other plan sponsor events that cause a significant withdrawal from the plan, or (4) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under Employee Retirement Income Security Act of 1974. The Plan administrator does not believe that the occurrence of any such value event, which would limit the Plan’s ability to transact at contract value with participants, is probable.
The guaranteed investment contract does not permit the insurance company to terminate the agreement.
| 2007 | 2006 | |||||
| Average yields: |
||||||
| Based on actual earnings |
3.18 | % | 3.30 | % | ||
| Based on interest rate credited to participants |
3.18 | % | 3.30 | % |
5. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term, and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.
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6. Income Tax Status
The underlying non-standardized prototype plan has received an opinion letter from the IRS dated September 16, 2003, stating that the form of the plan is qualified under Section 401 of the Internal Revenue Code (Code), and, therefore, the related trust is tax-exempt. In accordance with Revenue Procedure 2006-7 and Announcement 2005-16, the Plan Sponsor has determined that it is eligible to and has chosen to rely on the current IRS prototype plan opinion letter. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Sponsor has indicated that it will take the necessary steps, if any, to bring the Plan’s operations into compliance with the Code.
7. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
| December 31, | |||||||
| 2007 | 2006 | ||||||
| Net assets available for benefits per the financial statements |
$ | 100,361,191 | $ | 85,305,873 | |||
| Add: Refund of excess contributions |
9,201 | 2,963 | |||||
| Less: Adjustment from fair value to contract value for fully benefit responsive investment contract |
— | (463,574 | ) | ||||
| Net assets available for benefits per the Form 5500 |
$ | 100,370,392 | $ | 84,845,262 | |||
8. Subsequent Events
Effective January 1, 2008, Abraxis BioScience Inc. Savings and Retirement Plan changed its name to the APP Pharmaceuticals Savings and Retirement Plan. In the first quarter of 2008, the APP Pharmaceuticals Savings and Retirement Plan transferred to Abraxis BioScience, Inc. Savings and Retirement Plan all qualified plan assets having a value equal to the account balances of, and liabilities with respect to, all New Abraxis employees with account balances. Following the transfer, each member of the New Abraxis plan ceased to be a participating employee in the APP Pharmaceutical Savings and Retirement Plan. Approximately $20.1 million of assets were transferred from the APP Pharmaceuticals Savings and Retirement Plan.
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Abraxis BioScience, Inc. Savings and Retirement Plan
Schedule H, Line 4a – Schedule of Delinquent
Participant Contributions
EIN #68-0389419 Plan #001
Year Ended December 31, 2007
| Total That Constitutes Nonexempt Prohibited Transactions | ||
| Identity of Issuers | Current Value | |
| Participant Contributions Transferred Late to Plan |
Total That Constitutes Nonexempt Prohibited Transaction | |
| $23,988.36 |
$23,988.36 | |
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Abraxis BioScience, Inc. Savings and Retirement Plan
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
EIN #68-0389419 Plan #001
| Identity of Issuer |
Description of Investment |
Shares/ Units |
Current Value | ||||
| Group annuity contract |
|||||||
| Principal Life Insurance Company* |
Principal Fixed Income | 734,792 | $ | 10,307,058 | |||
| Mutual funds |
|||||||
| Princor Financial Services |
Principal Investors Partners Large-Cap Growth Select Fund* |
1,415,790 | 12,303,211 | ||||
| Principal Global Investors International Growth Fund* |
915,589 | 11,756,163 | |||||
| Principal Investors Partners Mid-Cap Value Select Fund* |
538,447 | 7,080,584 | |||||
| Principal Global Investors Lifetime 2020 Fund* | 527,128 | 7,153,129 | |||||
| Principal Investors Partners Large-Cap Value Select Fund* |
461,930 | 6,259,157 | |||||
| Principal Global Investors Lifetime 2030 Fund* | 402,693 | 5,625,615 | |||||
| Principal Global Investors Bond and Mortgage Fund* |
351,403 | 3,689,730 | |||||
| Principal Global Investors Lifetime 2010 Fund* | 226,948 | 2,907,205 | |||||
| Principal Global Investors Lifetime 2040 Fund* | 172,864 | 2,421,820 | |||||
| Principal Global Investors Real Estate Fund* | 98,324 | 1,553,524 | |||||
| Principal Investors Partners Small-Cap Value Select Fund* |
66,213 | 1,009,748 | |||||
| Principal Global Investors Lifetime 2050 Fund* | 64,170 | 873,359 | |||||
| Principal Global Investors S&P 600 Index Fund* | 47,281 | 781,550 | |||||
| Principal Global Investors Lifetime Strategic Income Select Fund* |
20,668 | 245,122 | |||||
| American Century Investments |
American Century Vista Fund | 551,049 | 11,886,118 | ||||
| American Funds Service Company |
American Funds Growth Fund | 67,965 | 2,278,174 | ||||
| T. Rowe Price Funds |
T. Rowe Price New Horizons Fund | 39,714 | 1,211,686 | ||||
| 79,035,894 | |||||||
| Pooled separate account |
|||||||
| Principal Life Insurance Company* |
Principal Global Investors Large Cap Stock Index | 107,447 | 6,143,537 | ||||
| APP Pharmaceuticals, Inc.* |
Common stock | 17,381 | 178,500 | ||||
| Abraxis BioScience Inc, Inc.* |
Common stock | 3,851 | 264,808 | ||||
| Self-directed brokerage account |
— | 1,732,791 | |||||
| Participant loans* |
Interest rates ranging from 5.0% to 10.5% | — | 2,707,804 | ||||
| $ | 100,370,392 | ||||||
| * | Represents a party in interest to the Plan. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| APP | ||
| Abraxis BioScience, Inc. Savings and | ||
| Retirement Plan | ||
| By: | /s/ James Callanan | |
| James Callanan | ||
| Plan Administrator | ||
Date: June 30, 2008
13
EXHIBIT INDEX
| Exhibit |
Description | |
| 23.1* | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm | |
| * | Filed herewith |
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