Shares of American Pharmaceutical Partners ( APPX) are running strong ahead of an expected Jan. 8 approval decision by U.S. drug regulators on the company's breast cancer drug Abraxane.

Whether or not the Food and Drug Administration approves Abraxane has been the focal point of a longstanding war between bulls and bears over American Pharmaceuticals. With the stock up 28% in the past week, bulls are pressing their bets, believing Abraxane's approval is near. Bears, including some diehard short-sellers, haven't given up and continue to raise questions about Abraxane. But in private conversations, some of these critics are worried.

American Pharmaceuticals rose $2.01, or 6%, to $37.20 Tuesday; the stock is now up a whopping 76% since sinking to a 52-week low of $21.28 on Oct. 20. How much of this recent activity can be explained by short-covering is not known, but as of Nov. 30, 10.5 million American Pharmaceutical shares were sold short, or about 50% of the company's freely traded shares, according to Nasdaq.

Recall, American Pharmaceuticals describes Abraxane as an improved version of Bristol Myers Squibb's ( BMY) cancer drug Taxol (also sold generically as paclitaxel); the company claims Abraxane can be administered faster, at higher doses and with less toxicity than Taxol.

There hasn't been any public word from American Pharmaceuticals about Abraxane that could account for the recent rally. But Monday afternoon, Merrill Lynch analyst Gregg Gilbert held a conference call for institutional investor clients to discuss the drug. The featured guest on the call was Dr. Steven Carter, an oncologist and former executive with Bristol Myers, and a Taxol expert. His comments offered a little something for both bulls and bears. (Gilbert has a neutral rating on American Pharmaceuticals and his firm has no banking relationship with the company.)

As I mentioned in's Columnist Conversation, Carter believes the FDA will not approve Abraxane this time around, but will require the drugmaker to conduct additional clinical work. This skepticism is based on the fact that he views Abraxane as an entirely new drug-delivery technology for Taxol and, therefore, it must meet higher regulatory requirements with the FDA.

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