Despite a recent spate of positive drug news, Wall Street skeptics are continuing to take a wait-and-see approach with Abraxis BioScience Inc., which plans to separate into two companies only about 18 months after its creation in a merger.

Shares are up more than 17 percent since early July, when the Los Angeles biotech announced it would spin off its suburban Chicago-based generic drug business. But shares are still down nearly 39 percent from prior to the June 2006 merger.

Megan Murphy at Lazard Capital Markets LLC lauds Abraxis for being on track to gross $288 million in sales of its propriety cancer drug Abraxane but is nevertheless critical of the planned spinoff since founder Patrick Soon-Shiong will remain firmly in control with 80 percent of the shares of both the biotech firm and the generic drugmaker.

“We still believe that the separation of these two businesses is little more than financial engineering,” wrote Murphy in a recent investor’s note. “The ownership structure has not been resolved and the same CEO and chairman will preside over both companies.”

Murphy and other analysts following the company have the equivalent of hold recommendations on shares pending the deal’s close.

In response to the criticism, Soon-Shiong has told investors that although he will serve as chairman and chief executive of both companies for the time being, he will eventually turn over the CEO role at the generics company.

Wall Street reacted sharply to the initial merger, suspecting that the generics business that had provided steady and reliable growth would be milked to fund expensive clinical trials for the biotech unit, which had been privately held prior to the deal.

That concern remains despite the separation, especially since an expanded credit facility announced in July makes APP responsible for servicing around $1 billion in debt that will fund Abraxis’ growth. But that’s also an added incentive for APP shareholders to hang on to their Abraxis shares.

Under the separation agreement announced this summer, Abraxis shareholders will receive a share each of the generics business, to be called APP Pharmaceuticals Inc., which will retain an extensive portfolio of anti-infectives, critical care, oncology and anesthetic/analgesic medications.

The deal doesn’t have to be approved by shareholders, but does have to undergo some regulatory review. The company also wants the Internal Revenue Service to certify that there won’t be negative tax implications for shareholders.

At least some of the current company’s larger institutional holders say privately that they’ll hold on to their stakes in both reformulated companies for now. That’s in large part because of recent advances in both the generic injectable drug and proprietary biotech units.

The U.S. Food and Drug Administration this summer began releasing a logjam of generic drug applications whose approvals had been delayed while Abraxis dealt with safety concerns at a plant in suburban Chicago.

At least eight approvals have been announced since August, including last week when the company said it has been given the go-ahead to sell a version of Pfizer Inc.’s Ellence chemotherapy drug, which had $64 million in sales last year. The week before, regulators granted similar permission for another Pfizer chemo drug, Camptosar, whose patent expires in February. That drug had sales of $903 million last year.

The generics unit reported sales of $326 million last year and 33 percent growth in the second quarter. Despite those gains, revenue growth for the full year is only expected to increase 9 percent to 11 percent because of the plant safety issue, which lead the company to temporarily halt sales of certain products.

The company’s proprietary drug business also had good news. Abraxane, which got off to a slow start in its early 2006 launch, has been picking up the pace in recent months and in the second quarter saw a 116.7 increase in revenue to $78.7 million.

And last week the company said Abraxane had been approved for sale in India, and has received positive feedback from European regulators about its application there.

In addition, U.S. regulators have approved the design of a clinical trial that could lead to the drug also being marketed as a lung cancer treatment domestically. The company also is launching trials on another experimental drug that would treat both breast and prostate cancers.

If both companies do well in their respective niches, existing shareholders stand to benefit even more than had the company stayed whole. Biotech drugs have high margins, and generic drugs are becoming increasingly sexy as health care reform efforts place a premium on the cost-savings that those products represent.