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Little Drug, Big Sales

Huge increases in revenue usually drive stock prices upward, but Abraxis BioScience's (Nasdaq: ABBI  ) stock has fallen 15% from its high last week, despite releasing a stellar earnings report. It appears that investors -- myself included -- are having trouble determining the future value of the company after its breakup later this year.

For the quarter, revenue rose 51% year over year, to $242.5 milllion. Much of that increase was due to Abraxis' nanoparticle drug ABRAXANE, which saw a 117% increase in revenue, including deferred revenue of $9.1 million from a $200 million upfront payment from marketing partner AstraZeneca (NYSE: AZN  ) . According to June's IntrinsQ data, ABRAXANE is now the leading taxane given to metastatic breast cancer patients, surpassing Bristol-Myers Squibb's (NYSE: BMY  ) Taxol and Sanofi-Aventis' (NYSE: SNY  ) Taxotere.

Abraxis' hospital-based products didn't fair too poorly, either. Revenues of the division climbed 33% year over year for the quarter. Most of that increase came from products it acquired from AstraZeneca last year, but some of the increase was due to newly launched drugs, including a generic equivalent of Pfizer's (NYSE: PFE  ) Cleocin. New products are the key to growth for generic-drug businesses, and Abraxis looks on track to increase growth. It recently announced FDA approval of generic versions of Bristol-Myers Squibb's (NYSE: BMY  ) Cafcit, Pfizer's Cerebyx, and a larger vial of King Pharmaceuticals' Pitocin.

The large increases in revenue translated into a nice income of $0.14 per share, compared with a loss of $0.57 per share in the year-ago quarter. But profits may not be as high in future quarters; the company plans to start three phase III trials for ABRAXANE in the latter half of the year. Those costs will eat into its income, but if Abraxis can get ABRAXANE approved for first-line metastatic breast cancer, non-small-cell lung cancer, and melanoma, it will be able to expand sales immensely.

In June the company announced that it was splitting up its two divisions. From recent quarters' results, it's clear that the oncology division has bigger growth potential than the hospital-based products. Of course, with that potential comes bigger expenses -- in the form of clinical trial costs -- for the new Abraxis BioScience.

When the companies' division closes in the fourth quarter, investors will trade in each of their current shares for one share apiece of both new companies. It's hard to know how the stock price of the two new companies will tease out after the split. Investors who don't currently own the stock would be wise to stay away from Abraxis until after the split. That  may mean forgoing a quarter or two of substantial growth, but buying before you know the values assigned to each resultant company is too risky for this Fool.

Want to discover the latest drug stock we've picked for the Fool's market-beatingRule Breakers newsletter? See all our recommendations with a free 30-day trial.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is anInside Value newsletter pick. The Fool's disclosure policy prefers makeups to breakups.

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